----

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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

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**Quarterly        Report Pursuant to Section 13 or 15(d)**

**of        the Securities Exchange Act of 1934**

**For        the quarterly period ended:**

**March        31, 2007**

***Commission        File Number: 000-13086***

**FNB        FINANCIAL SERVICES CORPORATION**

** (Exact        name of Registrant as specified in its Charter)**

|                                                          |                                                      |
|---------------------------------------------------------------|-----------------------------------------------------------|
| **North                  Carolina**                           | **56-1382275**                                            |
| **(State                  of Incorporation)**                 | **(I.R.S.                  Employer Identification No.)** |
|                                                          |                                                      |
| **1501                  Highwoods Boulevard, Suite 400**      |                                                      |
| **Greensboro,                  North Carolina**               | **27410**                                                 |
| **(Address                  of principal executive offices)** | **(Zip                  Code)**                           |

**(336)        369-0900**

**(Registrant's        telephone number, including area code)**

| Large                  accelerated filer  ̈ |   | Accelerated                  filer ý |   | Non-accelerated                  filer  ̈ |
|-------------------------------------------------|--------|-------------------------------------------|--------|-----------------------------------------------|

**At        April 30, 2007, 7,065,123 shares of the registrant's common stock, $1.00        stated        value, were outstanding.**

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**FNB        FINANCIAL SERVICES CORPORATION**

**FORM        10-Q**

**INDEX**

|                 |   |               |   |                                                                                                                                                  |   | Page           |
|----------------------|--------|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|                 |   |               |   |                                                                                                                                                  |   |           |
| **PART**             |   | **I**              |   | **FINANCIAL                  INFORMATION**                                                                                                            |   |           |
|  Item           |   |  1            |   |  Financial                  Statements                                                                                                           |   |           |
|                 |   |               |   |  Consolidated                  Balance SheetsMarch                  31, 2007 and December 31, 2006                                               |   |  3   |
|                 |   |               |   |  Consolidated                  Statements of Income and Comprehensive Income for                  the Three Months Ended March 31, 2007 and 2006 |   |  4   |
|                 |   |               |   |  Consolidated                  Statements of Cash Flows for theThree                  Months Ended March 31, 2007 and 2006                       |   |  5   |
|                 |   |               |   |  Notes                  to Consolidated Financial Statements                                                                                     |   |  6        |
|  Item           |   |  2            |   |  Management’s                  Discussion and Analysis of Financial Condition and                  Results of Operations                   |   |  11  |
|  Item           |   |  3            |   |  Quantitative                  and Qualitative Disclosures About Market                  Risk                                                    |   |  17       |
|  Item           |   |  4            |   |  Controls                  and Procedures                                                                                                        |   |  17       |
|   **PART** |   |   **II** |   |   **OTHER                  INFORMATION**                                                                                                    |   |           |
|  Item           |   |  1            |   |  Legal                  Proceedings                                                                                                              |   |  17       |
|  Item           |   |  1            | A      | Risk                  Factors                                                                                                                         |   |  17       |
|  Item           |   |  2            |   |  Unregistered                  Sales of Equity Securities and Use of                  Proceeds                                                   |   |  17       |
|  Item           |   |  3            |   |  Defaults                  Upon Senior Securities                                                                                                |   |  18       |
|  Item           |   |  4            |   |  Submission                  of Matters to a Vote of Security                  Holders                                                           |   |  18       |
|  Item           |   |  5            |   |  Other                  Information                                                                                                              |   |  18       |
|  Item           |   |  6            |   |  Exhibits                                                                                                                                        |   |  18       |
|                 |   |               |   |                                                                                                                                                  |   |           |
|                 |   |               |   |                                                                                                                                                  |   |           |

----

*INDEX*

| **PART                  I.** | **FINANCIAL                  INFORMATION** |
|------------------------------|--------------------------------------------|

| **Item                  1.** | **Financial                  Statements** |
|------------------------------|-------------------------------------------|

**FNB        Financial Services Corporation and        Subsidiary**

**Consolidated        Balance Sheets**

*(Dollars        in thousands except per share data)*

|                                                                                                                                                           |   | March                  31,2007*(Unaudited)* |    |   | December                  31,2006                  * |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------|--------|------------------------------------------------------|--------|
| ASSETS                                                                                                                                                         |   |                                        |    |   |                                                 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |
| Cash                  and due from banks                                                                                                                       |   | $                                           | 22,319  |   |                                                 | $      | 25,665 |   |
| Investment                  securities:                                                                                                                        |   |                                        |    |   |                                                 |   |   |   |
|      Securities                  available for sale                                                                                   |   |                                        | 222,460 |   |                                                 |   | 211,011 |   |
|      Federal                  Home Loan Bank and Federal Reserve Bank Stock                                                           |   |                                        | 5,910   |   |                                                 |   | 6,116 |   |
| Loans,                  net of allowance for credit losses of $12,640 at                                                                                       |   |                                        |    |   |                                                 |   |   |   |
|       March                  31, 2007 and $13,195 at December 31, 2006                                                           |   |                                        | 675,239 |   |                                                 |   | 693,951 |   |
| Premises                  and equipment, net                                                                                                                   |   |                                        | 20,526  |   |                                                 |   | 19,609 |   |
| Investment                  in life insurance                                                                                                                  |   |                                        | 25,169  |   |                                                 |   | 24,899 |   |
| Accrued                  income and other assets                                                                                                               |   |                                        | 25,533  |   |                                                 |   | 29,522 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                Total                  assets                                        |   | $                                           | 997,156 |   |                                                 | $      | 1,010,773 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
| LIABILITIES                  AND SHAREHOLDERS’ EQUITY                                                                                                    |   |                                        |    |   |                                                 |   |   |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
| Deposits:                                                                                                                                                      |   |                                        |    |   |                                                 |   |   |   |
|      Noninterest                  bearing                                                                                             |   | $                                           | 85,447  |   |                                                 | $      | 87,047 |   |
|      Interest                  bearing                                                                                                |   |                                        | 715,691 |   |                                                 |   | 731,521 |   |
|                Total                  deposits                                      |   |                                        | 801,138 |   |                                                 |   | 818,568 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
| Short-term                  borrowings                                                                                                                         |   |                                        | 35,546  |   |                                                 |   | 30,384 |   |
| Long-term                  debt                                                                                                                                |   |                                        | 76,774  |   |                                                 |   | 76,774 |   |
| Accrued                  expenses and other liabilities                                                                                                        |   |                                        | 10,647  |   |                                                 |   | 12,354 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                Total                  liabilities                                   |   |                                        | 924,105 |   |                                                 |   | 938,080 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
| Shareholders’                  Equity:                                                                                                                   |   |                                        |    |   |                                                 |   |   |   |
| Preferred                  stock no stated value; authorized 10,000,000 shares;                                                                                |   |                                        |    |   |                                                 |   |   |   |
|                none                  issued                                         |   |                                        | -       |   |                                                 |   | - |   |
| Common                  stock, $1.00 stated value; authorized 75,000,000                                                                                       |   |                                        |    |   |                                                 |   |   |   |
|                shares;                  outstanding 7,063,952 at March 31, 2007 and |   |                                        |    |   |                                                 |   |   |   |
|                and                  7,060,241 at December 31, 2006                  |   |                                        | 7,064   |   |                                                 |   | 7,060 |   |
| Paid-in                  capital                                                                                                                               |   |                                        | 23,315  |   |                                                 |   | 23,190 |   |
| Retained                  earnings                                                                                                                             |   |                                        | 45,644  |   |                                                 |   | 45,866 |   |
| Accumulated                  other comprehensive loss                                                                                                          |   |                                        | (2,972  | )      |                                                 |   | (3,423 | ) |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                Total                  shareholders’ equity                    |   |                                        | 73,051  |   |                                                 |   | 72,693 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                Total                  liabilities and shareholders’ equity    |   | $                                           | 997,156 |   |                                                 | $      | 1,010,773 |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |
|                                                                                                                                                           |   |                                        |    |   |                                                 |   |   |   |

*See        notes to unaudited consolidated financial        statements.     * Derived from audited consolidated        financial statements.*

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*INDEX*

**FNB        Financial Services Corporation and        Subsidiary**

**Consolidated        Statements of Income and Comprehensive Income**

*(Unaudited;        dollars in thousands, except per share data)*

|                                                                                                                                 |   | Three                  Months EndedMarch                  31, |      |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                                                                                 |   | 2007                                                          |      |   | 2006 |   |
| Interest                  income                                                                                                     |   |                                                          |      |   |   |   |
|      Loans                                                                                                  |   | $                                                             | 14,411    |   |   | $ | 15,757 |   |
|      Federal                  funds sold and overnight deposits                                             |   |                                                          | 89        |   |   |   | 85 |   |
|      Investment                  securities                                                                 |   |                                                          |      |   |   |   |   |   |
|                Taxable                                    |   |                                                          | 1,568     |   |   |   | 1,576 |   |
|                Tax                  exempt                |   |                                                          | 671       |   |   |   | 372 |   |
|      Other                                                                                                  |   |                                                          | 120       |   |   |   | 98 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
|                Total                  interest income     |   |                                                          | 16,859    |   |   |   | 17,888 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Interest                  expense                                                                                                    |   |                                                          |      |   |   |   |   |   |
|      Deposits                                                                                               |   |                                                          | 7,808     |   |   |   | 6,519 |   |
|      Short-term                  borrowings                                                                 |   |                                                          | 93        |   |   |   | 57 |   |
|      Long-term                  debt                                                                        |   |                                                          | 1,339     |   |   |   | 1,210 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
|                Total                  interest expense    |   |                                                          | 9,240     |   |   |   | 7,786 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Net                  interest income                                                                                                 |   |                                                          | 7,619     |   |   |   | 10,102 |   |
| Provision                  for credit losses                                                                                         |   |                                                          | 54        |   |   |   | 755 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Net                  interest income after provision for credit losses                                                               |   |                                                          | 7,565     |   |   |   | 9,347 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Noninterest                  income                                                                                                  |   |                                                          |      |   |   |   |   |   |
|      Service                  charges on deposit accounts                                                   |   |                                                          | 762       |   |   |   | 873 |   |
|      Mortgage                  banking fees                                                                 |   |                                                          | 130       |   |   |   | 242 |   |
|      Investment                  services fees                                                              |   |                                                          | 94        |   |   |   | 128 |   |
|      Other                  noninterest income                                                              |   |                                                          | 302       |   |   |   | 89 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
|                Total                  noninterest income  |   |                                                          | 1,288     |   |   |   | 1,332 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Noninterest                  expense                                                                                                 |   |                                                          |      |   |   |   |   |   |
|      Salaries                  and employee benefits                                                        |   |                                                          | 4,349     |   |   |   | 4,152 |   |
|      Occupancy                  expense                                                                     |   |                                                          | 567       |   |   |   | 415 |   |
|      Furniture                  and equipment expense                                                       |   |                                                          | 761       |   |   |   | 775 |   |
|      Telecommunications                  expense                                                            |   |                                                          | 207       |   |   |   | 152 |   |
|      Marketing                  expense                                                                     |   |                                                          | 349       |   |   |   | 189 |   |
|      Printing                  and supply expense                                                           |   |                                                          | 133       |   |   |   | 121 |   |
|      Other                  noninterest expense                                                             |   |                                                          | 1,484     |   |   |   | 1,254 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
|                Total                  noninterest expense |   |                                                          | 7,850     |   |   |   | 7,057 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Income                  before provision for income taxes                                                                            |   |                                                          | 1,003     |   |   |   | 3,622 |   |
| Provision                  for income taxes                                                                                          |   |                                                          | 306       |   |   |   | 1,244 |   |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Net                  income                                                                                                          |   |                                                          | 697       |   |   |   | 2,378 |   |
| Other                  comprehensive income (loss)                                                                                   |   |                                                          | 451       |   |   |   | (615 | ) |
|                                                                                                                                 |   |                                                          |      |   |   |   |   |   |
| Comprehensive                  income                                                                                                |   | $                                                             | 1,148     |   |   | $ | 1,763 |   |
| Per                  share data                                                                                                      |   |                                                          |      |   |   |   |   |   |
|      Net                  income, basic                                                                     |   | $                                                             | 0.10      |   |   | $ | 0.34 |   |
|      Net                  income, diluted                                                                   |   | $                                                             | 0.10      |   |   | $ | 0.33 |   |
|      Cash                  dividends                                                                        |   | $                                                             | 0.13      |   |   | $ | 0.12 |   |
| Weighted                  average shares outstanding, basic                                                                          |   |                                                          | 7,063,303 |   |   |   | 7,040,964 |   |
| Weighted                  average shares outstanding, diluted                                                                        |   |                                                          | 7,207,494 |   |   |   | 7,189,378 |   |

*See        notes to unaudited consolidated        financial statements.*

----

*INDEX*

** FNB        Financial Services Corporation and        Subsidiary**

**Consolidated        Statements of Cash Flows**

*(Unaudited;        dollars in thousands)*

|                                                                                                                                                           |   | Three                  Months EndedMarch                  31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                                                                                           |   | 2007                                                          |    |   | 2006 |   |
|                                                                                                                                                           |   |                                                          |    |   |   |   |
| Cash                  flows from operating activities:                                                                                                         |   |                                                          |    |   |   |   |
|    Net                  income                                                                                                                  |   | $                                                             | 697     |   |   | $ | 2,378 |   |
|    Adjustments                  to reconcile net income to net cash provided by                                                                 |   |                                                          |    |   |   |   |   |   |
|       operating                  activities:                                                                                     |   |                                                          |    |   |   |   |   |   |
|           Depreciation,                  accretion, and amortization                                         |   |                                                          | 431     |   |   |   | 279 |   |
|           Provision                  for credit losses                                                       |   |                                                          | 54      |   |   |   | 755 |   |
|           Loss                  on disposal of premises, equipment and other real estate                     |   |                                                          | 25      |   |   |   | 40 |   |
|           Decrease                  in deferred tax asset                                                    |   |                                                          | 2,465   |   |   |   | - |   |
|           Increase                  in bank-owned life insurance                                             |   |                                                          | (270    | ) |   |   | - |   |
|           Net                  change in warehouse line of credit                                            |   |                                                          | 1,292   |   |   |   | 924 |   |
|           Stock                  based compensation expense                                                  |   |                                                          | 89      |   |   |   | 128 |   |
|           Changes                  in assets and liabilities:                                                |   |                                                          |    |   |   |   |   |   |
|                (Increase)                  decrease in other assets                 |   |                                                          | 1       |   |   |   | (2,062 | ) |
|                Decrease                  in other liabilities                       |   |                                                          | (1,707  | ) |   |   | (1,543 | ) |
|                Net                  cash provided by operating activities           |   |                                                          | 3,077   |   |   |   | 899 |   |
|                                                                                                                                                           |   |                                                          |    |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                                                         |   |                                                          |    |   |   |   |   |   |
|       Proceeds                  from sales, maturities, or calls of securities available for                  sale               |   |                                                          | 7,787   |   |   |   | 2,786 |   |
|       Purchase                  of securities available for sale                                                                 |   |                                                          | (18,511 | ) |   |   | (11,784 | ) |
|       Purchase                  of premises and equipment                                                                        |   |                                                          | (1,406  | ) |   |   | (591 | ) |
|       Proceeds                  from disposal of premises and equipment                                                          |   |                                                          | 14      |   |   |   | 7 |   |
|       Proceeds                  from sale of other real estate owned                                                             |   |                                                          | 637     |   |   |   | 168 |   |
|       (Increase)                  decrease in other real estate owned                                                            |   |                                                          | 1       |   |   |   | (52 | ) |
|       Net                  decrease in loans                                                                                     |   |                                                          | 18,201  |   |   |   | 1,886 |   |
|                Net                  cash provided by (used in) investing activities |   |                                                          | 6,723   |   |   |   | (7,580 | ) |
|                                                                                                                                                           |   |                                                          |    |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                                                         |   |                                                          |    |   |   |   |   |   |
|       Net                  increase (decrease) in deposits                                                                       |   |                                                          | (17,430 | ) |   |   | 11,788 |   |
|       Net                  increase in short-term borrowings                                                                     |   |                                                          | 5,163   |   |   |   | 1,109 |   |
|       Excess                  tax benefits from share-based payment arrangements                                                 |   |                                                          | -       |   |   |   | 25 |   |
|       Proceeds                  from issuance of common stock                                                                    |   |                                                          | 39      |   |   |   | 72 |   |
|       Cash                  dividends paid                                                                                       |   |                                                          | (918    | ) |   |   | (845 | ) |
|                Net                  cash provided by (used in) financing activities |   |                                                          | (13,146 | ) |   |   | 12,149 |   |
|                                                                                                                                                           |   |                                                          |    |   |   |   |   |   |
| Net                  increase (decrease)in cash and cash equivalents                                                                                           |   |                                                          | (3,346  | ) |   |   | 5,468 |   |
| Cash                  and cash equivalents, January 1                                                                                                          |   |                                                          | 25,665  |   |   |   | 27,148 |   |
|                                                                                                                                                           |   |                                                          |    |   |   |   |   |   |
| Cash                  and cash equivalents, March 31                                                                                                           |   | $                                                             | 22,319  |   |   | $ | 32,616 |   |
|                                                                                                                                                           |   |                                                          |    |   |   |   |   |   |
| **Supplemental                  disclosures**                                                                                                                  |   |                                                          |    |   |   |   |   |   |
| Transfer                  of loans to other real estate                                                                                                        |   | $                                                             | 520     |   |   | $ | 170 |   |
| Increase                  (decrease) in fair value of securities available for sale, net                  of                  tax                              |   |                                                          | 451     |   |   |   | (615 | ) |
| Interest                  paid on deposits and borrowed funds                                                                                                  |   |                                                          | 8,879   |   |   |   | 7,484 |   |

*See        notes to unaudited consolidated        financial statements.*

----

*INDEX*

**FNB        Financial Services Corporation and        Subsidiary**

**Notes        to Consolidated Financial Statements**

*(Unaudited)*

| **1.** | **Basis                  of presentation** |
|--------|--------------------------------------------|

| **2.** | **Proposed                  merger** |
|--------|--------------------------------------|

| **3.** | **Recently                  adopted accounting                  pronouncement** |
|--------|---------------------------------------------------------------------------------|

*Accounting        for Uncertainty in Income Taxes*
*Accounting for Income Taxes*

----

*INDEX*

| **4.** | **Per                  share data** |
|--------|-------------------------------------|

|                                                                                                  |   | Three                  Months EndedMarch                  31, |      |
|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                                                  |   | 2007                                                          |      |   | 2006 |   |
|                                                                                                  |   |                                                          |      |   |   |   |
| Weighted                  average number of shares                                                    |   |                                                          |      |   |   |   |
|         used                  in basic EPS                    |   |                                                          | 7,063,303 |   |   |   | 7,040,964 |   |
| Effect                  of dilutive stock options                                                     |   |                                                          | 144,191   |   |   |   | 148,414 |   |
|                                                                                                  |   |                                                          |      |   |   |   |   |   |
| Weighted                  average number of common                                                    |   |                                                          |      |   |   |   |   |   |
|         shares                  and dilutive potential common |   |                                                          |      |   |   |   |   |   |
|         shares                  used in dilutive EPS          |   |                                                          | 7,207,494 |   |   |   | 7,189,378 |   |

| **5.** | **Stock                  based compensation** |
|--------|-----------------------------------------------|

*Share-Based Payment*
*Accounting for Stock Based Compensation*
*Accounting for Stock Issued to Employees*
*Statement of Cash        Flows*

----

*INDEX*

|                                           |   |                                    |
|------------------------------------------------|--------|-----------------------------------------|
|                                           |   | **Three                  Months Ended** |
|                                           |   | **March                  31, 2007**     |
|                                           |   |                                    |
| Dividend                  yield                |   | 3.56%                                   |
| Risk-free                  interest rate       |   | 4.68%                                   |
| Volatility                                     |   | 0.97                                    |
| Expected                  life                 |   | 6.6 years                          |
| Fair                  value of options granted |   | $11.47                                  |

|                                          |   | **Options****Outstanding** |    |   | **Exercise                  Price** |   |                            | **Weighted****Average****Exercise                  Price** |   |
|-----------------------------------------------|--------|----------------------------|---------|--------|-------------------------------------|--------|---------------------------------|------------------------------------------------------------|--------|
| Balance                  at December 31, 2006 |   |                       | 911,706 |   |                                | $      | 7.04                  - $18.11  |                                                       |   | $ | 14.20 |   |
|                                          |   |                       |    |   |                                |   |                            |                                                       |   |   |   |   |
| Exercised                                     |   |                       | (3,711  | )      |                                | $      | 8.33                  - $10.75  |                                                       |   |   | 10.50 |   |
|                                          |   |                       |    |   |                                |   |                            |                                                       |   |   |   |   |
| Authorized                                    |   |                       | -       |   |                                |   | -                               |                                                       |   |   | - |   |
|                                          |   |                       |    |   |                                |   |                            |                                                       |   |   |   |   |
| Forfeited                                     |   |                       | (91,622 | )      |                                | $      | 15.84                  - $18.11 |                                                       |   |   | 16.08 |   |
|                                          |   |                       |    |   |                                |   |                            |                                                       |   |   |   |   |
| Granted                                       |   |                       | 5,000   |   |                                | $      | 14.60                           |                                                       |   |   | 14.60 |   |
|                                          |   |                       |    |   |                                |   |                            |                                                       |   |   |   |   |
| Balance                  at March 31, 2007    |   |                       | 821,373 |   |                                | $      | 7.04                  - $18.11  |                                                       |   | $ | 14.01 |   |

----

*INDEX*

| **Exercise                  Price****Range** |                            |   | **Number                  of****Options****Outstanding** |   |    | **Weighted****Average****Exercise****Price** |   |   | **Weighted****Average****Contractual****Life****Remaining****(Years)** |   |   | **Number                  of****Options****Exercisable** |   |   | **Weighted****Average****Exercise****Price** |   |
|----------------------------------------------|---------------------------------|--------|----------------------------------------------------------|--------|---------|----------------------------------------------|--------|--------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|----------------------------------------------|--------|
| $                                            | 7.04                  - $8.33   |   |                                                     |   | 144,613 |                                         |   | $      | 7.91                                                                   |   |   |                                                     | 3.62   |   |                                         |   | 144,613 |   |   | $ | 7.91 |   |
| $                                            | 10.75                  - $14.52 |   |                                                     |   | 158,134 |                                         |   |   | 10.93                                                                  |   |   |                                                     | 5.11   |   |                                         |   | 158,134 |   |   |   | 10.93 |   |
| $                                            | 14.60                  - $16.16 |   |                                                     |   | 182,970 |                                         |   |   | 15.92                                                                  |   |   |                                                     | 4.77   |   |                                         |   | 149,368 |   |   |   | 15.97 |   |
| $                                            | 16.32                  - $18.11 |   |                                                     |   | 335,656 |                                         |   |   | 17.04                                                                  |   |   |                                                     | 8.16   |   |                                         |   | 105,639 |   |   |   | 17.33 |   |
|                                         |                            |   |                                                     |   |    |                                         |   |   |                                                                   |   |   |                                                     |   |   |                                         |   |   |   |   |   |   |   |
|                                         |                            |   |                                                     |   | 821,373 |                                         |   | $      | 14.01                                                                  |   |   |                                                     | 6.01   |   |                                         |   | 557,754 |   |   | $ | 12.71 |   |

| **6.** | **Loans** |
|--------|-----------|

| ***Loan                Category:***                           |   |                            |    |   |                               |   |
|--------------------------------------------------------------------|--------|---------------------------------|---------|--------|------------------------------------|--------|
| *(Dollars                  in thousands)*                          |   | March                  31, 2007 |    |   | December                  31, 2006 |   |
|                                                               |   |                            |    |   |                               |   |
| Real                  estate – commercial                    |   | $                               | 167,356 |   |                               | $      | 173,203 |   |
| Real                  estate – residential                   |   |                            | 108,074 |   |                               |   | 116,287 |   |
| Real                  estate - construction                        |   |                            | 221,676 |   |                               |   | 225,080 |   |
| Commercial,                  financial and  agricultural |   |                            | 57,191  |   |                               |   | 60,435 |   |
| Consumer                                                           |   |                            | 133,582 |   |                               |   | 132,141 |   |
|                                                               |   |                            |    |   |                               |   |   |   |
| Gross                  Loans                                       |   | $                               | 687,879 |   |                               | $      | 707,146 |   |

| ***Rollforward                – allowance for credit losses:***                                               |   |                                                          |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                                                                                     |   | Three                  Months EndedMarch                  31, |   |
| *(Dollars                  in thousands)*                                                                                |   | 2007                                                          |   |   | 2006 |   |
|                                                                                                                     |   |                                                          |   |   |   |   |
| Balance,                  beginning of period                                                                            |   | $                                                             | 13,195 |   |   | $ | 19,142 |   |
| Charge-offs                                                                                                              |   |                                                          | 713    |   |   |   | 1,309 |   |
| Recoveries                                                                                                               |   |                                                          | (104   | ) |   |   | (77 | ) |
| Net                  charge-offs                                                                                         |   |                                                          | 609    |   |   |   | 1,232 |   |
| Provision                  for credit losses                                                                             |   |                                                          | 54     |   |   |   | 755 |   |
| Balance,                  end of period                                                                                  |   | $                                                             | 12,640 |   |   | $ | 18,665 |   |
|                                                                                                                     |   |                                                          |   |   |   |   |   |   |
| Annualized                  net charge-offs during the period to                                                         |   |                                                          |   |   |   |   |   |   |
|           average                  loans outstanding during the period |   |                                                          | 0.35   | % |   |   | 0.65 | % |
| Allowance                  for credit losses to                                                                          |   |                                                          |   |   |   |   |   |   |
|           period                  end loans                            |   |                                                          | 1.84   | % |   |   | 2.47 | % |

----

*INDEX*

| ***Nonperforming                  assets:***                          |   |                                 |   |   |                              |   |
|-----------------------------------------------------------------------|--------|--------------------------------------|--------|--------|-----------------------------------|--------|
|  *(Dollars                  in thousands)*                       |   | March                  31, 2007 |   |   | December                  31,2006 |   |
|                                                                  |   |                                 |   |   |                              |   |
| Nonaccrual                                                            |   | $                                    | 14,249 |   |                              | $      | 13,042 |   |
| Past                  due 90 days or more and still accruing interest |   |                                 | 211    |   |                              |   | 103 |   |
| Other                  real estate                                    |   |                                 | 741    |   |                              |   | 889 |   |
| Renegotiated                  troubled debt                           |   |                                 | 375    |   |                              |   | 376 |   |

| **7.** | **Employee                  benefit plans** |
|--------|---------------------------------------------|

|                                                                                                                                       |   | For                  the three monthsended                  March 31,    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|
| *(dollars                  in thousands)*                                                                                                  |   | 2007                                                                                    |   |   | 2006 |   |
| Service                  cost                                                                                                              |   | $                                                                                       | 166    |   |   | $ | 191 |   |
| Interest                  cost                                                                                                             |   |                                                                                    | 139    |   |   |   | 122 |   |
| Expected                  return on plan assets                                                                                            |   |                                                                                    | (169   | ) |   |   | (137 | ) |
| Net                  amortization and deferrals                                                                                            |   |                                                                                    | 26     |   |   |   | 39 |   |
| Net                  periodic pension cost                                                                                                 |   | $                                                                                       | 162    |   |   | $ | 215 |   |
|                                                                                                                                       |   |                                                                                    |   |   |   |   |   |   |
| **Weighted-average                  assumptions**                                                                                          |   |                                                                                    |   |   |   |   |   |   |
| Discount                  rate                                                                                                             |   |                                                                                    | 6.25   | % |   |   | 6.00 | % |
| Expected                  return on plan assets                                                                                            |   |                                                                                    | 9.00   | % |   |   | 9.00 | % |
| Rate                  of compensation increase                                                                                             |   |                                                                                    | 5.00   | % |   |   | 5.00 | % |
|                                                                                                                                       |   |                                                                                    |   |   |   |   |   |   |
| For                  the 2007 Plan Year, a maximum tax-deductible contribution of $4,030,000                  is                  allowed. |   |

| **8.** | **Shareholders’                  equity** |
|--------|-------------------------------------------------|

| **9.** | **Subsequent                  event** |
|--------|---------------------------------------|

----

*INDEX*

**Item        2.    Management’s Discussion and Analysis of        Financial Condition and Results of Operations**

**Statement        Regarding Forward-Looking Statements**

|   | • descriptions                  of plans, objectives, agreements, or expectations concerning the                  proposed                  merger with LSB; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • projections                  of the Company’s revenues, income, earnings per share, capital                  expenditures, dividends, capital structure or other financial                  items; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • descriptions                  of plans or objectives of the Company’s management for future operations,                  products or services; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • forecasts                  of the Company’s future economic performance;                  and |
|--------|------------------------------------------------------------------------------------------------------------------|

|   | • descriptions                  of assumptions underlying or relating to any of the                  foregoing. |
|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | • future                  business combinations, including the proposed merger with                  LSB; |
|--------|----------------------------------------------------------------------------------------------------------------------|

----

*INDEX*

|   | • future                  credit losses and nonperforming                  assets; |
|--------|-----------------------------------------------------------------------------------------------|

|   | • the                  impact of new accounting standards; |
|--------|-----------------------------------------------------------------------|

|   | • future                  short-term and long-term interest rate levels and their impact                  on the                  Company’s net interest margin, net income, liquidity and capital;                  and |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • future                  capital expenditures. |
|--------|------------------------------------------------------------|

**Application        of Critical Accounting Policies**

**Executive        Summary**

----

*INDEX*

**Financial        Condition**

**Asset        Quality**

----

*INDEX*

**Results        of Operations for the Three Months Ended March 31, 2007 and        2006**

*Interest        Income and Interest Expense*

----

*INDEX*

| **Net                        Interest Income and Rate / Volume Analysis**                          |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| For                        the Three Months Ended March 31, 2007 and 2006                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                            | Average                        Balance |   |   | Yield                        / Rate |   |   | Income                        / Expense |   |   | **Increase** |   |   | **Change                        due to** |   |
| *Fully                        Taxable Equivalent - (Dollars in thousands)*                                                                                                                                                      |   | **2007** |   |   | 2006 |   |   | **2007** |   |   | 2006 |   |   | **2007** |   |   | 2006 |   |   | **(Decrease)** |   |   | **Rate** |   |   | **Volume** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Assets**                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities(1):                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                        investment securities                                                                                                                                                                            |   | **$** | **145,382** |   |   | $ | 158,279 |   |   | ** ** | **4.31** | **%** |   |   | 3.98 | % |   | **$** | **1,568** |   |   | $ | 1,576 |   |   | **$** | **(8** | **)** |   | **$** | **(145** | **)** |   | **$** | **137** |   |
|  Tax-exempt                        investment securities                                                                                                                                                                   |   | ** ** | **66,887** |   |   |   | 38,438 |   |   | ** ** | **6.08** |   |   |   | 5.85 |   |   | ** ** | **1,017** |   |   |   | 562 |   |   |   |  **455** | ** ** | ** ** | ** ** | ** 416** | ** ** | ** ** | ** ** | ** 39** |   |
| Other                        securities                                                                                                                                                                                         |   | ** ** | **9,327** |   |   |   | 7,751 |   |   | ** ** | **5.15** |   |   |   | 5.85 |   |   | ** ** | **120** |   |   | ** ** | **98** |   |   | ** ** | **22** |   |   | ** ** | **20** |   |   | ** ** | **2** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        securities                                                                                                                                                                                         |   | ** ** | **221,596** |   |   |   | 204,468 |   |   | ** ** | **4.88** |   |   |   | 4.37 |   |   | ** ** | **2,705** |   |   |   | 2,236 |   |   | ** ** | **14** |   |   | ** ** | **271** |   |   | ** ** | **176** |   |
| Other                        earning assets(2)                                                                                                                                                                                  |   | ** ** | **9,472** |   |   |   | 10,092 |   |   | ** ** | **3.76** |   |   |   | 3.37 |   |   | ** ** | **89** |   |   |   | 85 |   |   | ** ** | **4** |   |   | ** ** | **(6** | **)** |   | ** ** | **10** |   |
| Loans                        and leases, net(3)(4)                                                                                                                                                                              |   | ** ** | **692,574** |   |   |   | 760,026 |   |   | ** ** | **8.32** |   |   |   | 8.29 |   |   | ** ** | **14,411** |   |   |   | 15,757 |   |   | ** ** | **(1,346** | **)** |   | ** ** | **(1,408** | **)** |   | ** ** | **62** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        earning assets                                                                                                                                                                                     |   | ** ** | **923,642** |   |   |   | 974,586 |   |   | ** ** | **7.45** |   |   |   | 7.42 |   |   | ** ** | **17,205** |   |   |   | 18,078 |   |   | ** ** | **(1,328** | **)** |   | ** ** | **(1,143** | **)** |   | ** ** | **248** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-earning                        assets                                                                                                                                                                                       |   | ** ** | **79,327** |   |   |   | 41,211 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        assets                                                                                                                                                                                             |   | **$** | **1,002,969** |   |   | $ | 1,015,797 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                        and Shareholders' Equity**                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                        deposits:                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                        deposits                                                                                                                                                                                         |   | **$** | **50,949** |   |   | $ | 52,057 |   |   | ** ** | **0.42** |   |   |   | 0.33 |   |   | ** ** | **54** |   |   |   | 43 |   |   | ** ** | **11** |   |   | ** ** | **(1** | **)** |   | ** ** | **12** |   |
| Money                        market deposits                                                                                                                                                                                    |   | ** ** | **143,110** |   |   |   | 143,830 |   |   | ** ** | **4.53** |   |   |   | 3.28 |   |   | ** ** | **1,619** |   |   |   | 1,178 |   |   | ** ** | **441** |   |   | ** ** | **(8** | **)** |   | ** ** | **449** |   |
| Time                        deposits                                                                                                                                                                                            |   | ** ** | **525,722** |   |   |   | 545,217 |   |   | ** ** | **4.67** |   |   |   | 3.89 |   |   | ** ** | **6,135** |   |   |   | 5,298 |   |   | ** ** | **837** |   |   | ** ** | **(235** | **)** |   | ** ** | **1,072** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        interest-bearing deposits                                                                                                                                                                          |   | ** ** | **719,781** |   |   |   | 741,104 |   |   | ** ** | **4.34** |   |   |   | 3.52 |   |   | ** ** | **7,808** |   |   |   | 6,519 |   |   | ** ** | **1,289** |   |   | ** ** | **(244** | **)** |   | ** ** | **1,533** |   |
| Short-term                        borrowings                                                                                                                                                                                    |   | ** ** | **9,123** |   |   |   | 8,836 |   |   | ** ** | **4.08** |   |   |   | 2.58 |   |   | ** ** | **93** |   |   |   | 57 |   |   | ** ** | **36** |   |   | ** ** | **3** |   |   | ** ** | **33** |   |
| Long-term                        debt                                                                                                                                                                                           |   | ** ** | **101,774** |   |   |   | 100,774 |   |   | ** ** | **5.26** |   |   |   | 4.80 |   |   | ** ** | **1,339** |   |   |   | 1,210 |   |   | ** ** | **129** |   |   | ** ** | **13** |   |   | ** ** | **116** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        interest-bearing liabilities                                                                                                                                                                       |   | ** ** | **830,678** |   |   |   | 850,714 |   |   | ** ** | **4.45** |   |   |   | 3.66 |   |   | ** ** | **9,240** |   |   |   | 7,786 |   |   | ** ** | **1,454** |   |   | ** ** | **(228** | **)** |   | ** ** | **1,682** |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          Demand deposits                                                                                                                                                                                   |   | ** ** | **81,534** |   |   |   | 88,585 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          Other liabilities                                                                                                                                                                                 |   | ** ** | **18,792** |   |   |   | 8,295 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          Shareholders' equity                                                                                                                                                                              |   | ** ** | **71,965** |   |   |   | 68,203 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          Total liabilities and                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          shareholders' equity                                                                                                                                                                              |   | **$** | **1,002,969** |   |   | $ | 1,015,797 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                        interest rate spread                                                                                                                                                                             |   |   |   |   |   |   |   |   |   | ** ** | **3.00** | **%** |   |   | 3.76 | % |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        yield on earning assets                                                                                                                                                                              |   |   |   |   |   |   |   |   |   | ** ** | **3.45** |   |   |   | 4.22 |   |   | **$** | **7,965** |   |   | $ | 10,292 |   |   | **$** | **(2,782** | **)** |   | **$** | **(915** | **)** |   | **$** | **(1,434** | **)** |
|                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                        equivalent adjustment                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **$** | **346** |   |   | $ | 191 |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                         |                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ________________________________   |
| (1)                                          | Yields                  related to investment securities, loans and leases exempt from                  both                  federal and state income taxes, federal income taxes only or state                  income                  taxes only are                  stated on a taxable equivalent basis assuming tax rates in effect                  for the                  periods presented. |
| (2)                                          | Includes                  federal funds sold and securities purchased under resale agreements                  or                  similar arrangements.                                                                                                                                                                                                                                                 |
| (3)                                          | Loan                  fees, which are not material for either of the periods shown, have                  been                  included for rate calculation purposes.                                                                                                                                                                                                                                  |
| (4)                                          | Nonaccrual                  loans have been included in the average balances.  Only the                  interest collected on such loans has been included as                  income.  Loans held                  for sale included in balances.                                                                                                                                  |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                     |

----

*INDEX*

*Provision        for Credit Losses*

*Noninterest        Income and Expense*

*Provision        for Income Taxes*

**Capital        Resources**

----

*INDEX*

|                              |   | Regulatory                  Guidelines  |   |                        |   |          |   |             |
|-----------------------------------|--------|----------------------------------------------|--------|-----------------------------|--------|---------------|--------|------------------|
|                              |   | WellCapitalized                         |   | AdequatelyCapitalized  |   | Company  |   |  Bank  |
|                              |   |                                         |   |                        |   |          |   |             |   |   |   |   |
| Total                  Capital    |   |                                         | 10.0   | %                           |   |          | 8.0    | %                |   |   | 14.04 | % |   |   | 13.61 | % |
| Tier                  1 Capital   |   |                                         | 6.0    |                        |   |          | 4.0    |             |   |   | 12.79 |   |   |   | 12.35 |   |
| Leverage                  Capital |   |                                         | 5.0    |                        |   |          | 4.0    |             |   |   | 9.96 |   |   |   | 9.61 |   |

**Liquidity        Management**

----

*INDEX*

| **Item                  3.** | **Quantitative                  and Qualitative Disclosures About Market                  Risk** |
|------------------------------|--------------------------------------------------------------------------------------------------|

| **Item                  4.** | **Controls                  and Procedures** |
|------------------------------|----------------------------------------------|

**Evaluation        of disclosure controls and procedures**

**Changes        in internal control over financial reporting**

| **PART                  II.** | **OTHER                  INFORMATION** |
|-------------------------------|----------------------------------------|

| **Item                  1.** | **Legal                  Proceedings** |
|------------------------------|----------------------------------------|

| **Item                  1.A.** | **Risk                  Factors** |
|--------------------------------|-----------------------------------|

| **Item                  2.** | **Unregistered                  Sales of Equity Securities and Use of                  Proceeds** |
|------------------------------|---------------------------------------------------------------------------------------------------|

----

*INDEX*

| **Item                  3.** | **Defaults                  Upon Senior Securities** |
|------------------------------|------------------------------------------------------|

| **Item                  4.** | **Submission                  of Matters to a Vote of Security                  Holders** |
|------------------------------|-------------------------------------------------------------------------------------------|

| **Item                  5.** | **Other                  Information** |
|------------------------------|----------------------------------------|

| **Item6.** | **Exhibits** |
|------------|--------------|

| Exhibit                  No. | Description                                                                                                                                                                                                                                                           |
|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                                                                                                                                                                  |
| 3.01                  (1)    | Amended                  and Restated Articles of Incorporation.                                                                                                                                                                                                      |
| 3.02                  (1)    | Bylaws                  of Company, as amended.                                                                                                                                                                                                                       |
| 4.01                  (2)    | Specimen                  Common Stock Certificate.                                                                                                                                                                                                                   |
| 4.02                  (12)   | Amended                  and Restated Trust Agreement, regarding Trust Preferred Securities,                  dated                  August 23, 2005.                                                                                                                 |
| 4.03                  (12)   | Guarantee                  Agreement, regarding Trust Preferred Securities, dated August 23,                  2005.                                                                                                                                                   |
| 4.04                  (12)   | Indenture,                  regarding Trust Preferred Securities, dated August 23,                  2005.                                                                                                                                                             |
| 10.01                  (3)   | Stock                  Compensation Plan of the Registrant approved April 11, 1989, by                  the                  shareholders of the Registrant, with forms of stock option and                  stock bonus                  agreements attached.        |
| 10.02                  (4)   | Omnibus                  Equity Compensation Plan of the Registrant.                                                                                                                                                                                                  |
| 10.03                  (5)   | Severance                  Policy for Senior Officers of the Registrant (employed for five                  years or                  more).                                                                                                                          |
| 10.04                  (6)   | Revised                  Severance Plan for Senior Officers of the Registrant (employed                  for five                  years or more).                                                                                                                    |
| 10.05                  (7)   | Severance                  Policy for Senior Officers of the Registrant (employed for less                  than five                  years).                                                                                                                        |
| 10.06                  (1)   | Change                  of Control Severance Plan                                                                                                                                                                                                                     |
| 10.07                  (8)   | Benefit                  Equivalency Plan of the Registrant effective January 1,                  1994.                                                                                                                                                               |
| 10.08                  (8)   | Long                  Term Incentive Plan of the Registrant.                                                                                                                                                                                                          |
| 10.09                  (10)  | Long                  Term Incentive Plan of the Registrant for certain senior management                  employees.                                                                                                                                                 |
| 10.10                  (9)   | Split-Dollar                  Agreement dated December 8, 1995, between the Registrant and Richard                  L.                  Powell.                                                                                                                       |
| 10.11                  (11)  | Amendment                  to Benefit Equivalency Plan of the Registrant effective January                  1,                  1998.                                                                                                                                 |
| 10.12                  (12)  | Independent                  Contractor Consulting Agreement with Ernest J. Sewell, executed                  October                  20, 2005 and effective February 1, 2006.                                                                                       |
| 10.13                  (13)  | 2006                  Annual Management Incentive Plan of the Registrant.                                                                                                                                                                                             |
| 10.14                  (14)  | Long                  Term Stock Incentive Plan of the Registrant                                                                                                                                                                                                     |
| 10.15                  (15)  | Employment                  Agreement dated January 25, 2007, between the Registrant and the                  Bank, as                  employer, and Pressley A. Ridgill, President and Chief Executive                  Officer                  of the Registrant. |
| 10.16                  (16)  | Agreement                  and Plan of Merger by and between Registrant and LSB Bancshares,                  Inc.,                  dated February 26, 2007                                                                                                           |
| 10.17                  (16)  | Agreement                  and Plan of Bank Merger by and among Registrant, the Bank, LSB                  Bancshares,                  Inc. and Lexington State Bank, dated February 26,                  2007                                                       |

----

*INDEX*

| 21.01                  (17) | Schedule                  of Subsidiaries.                                                                    |
|-----------------------------|---------------------------------------------------------------------------------------------------------------|
| 31.01                       | Certification                  of Pressley A. Ridgill                                                         |
| 31.02                       | Certification                  of Michael W. Shelton                                                          |
| 32.01                       | Certification                  of Periodic Financial Report Pursuant to 18 USC Section                  1350. |

|   | (1) | Incorporated                  herein by reference to the Registrant’s Current Report on Form 8-K, dated                  May 25, 2005, filed with the Securities and Exchange Commission                  (“SEC”). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Incorporated                  herein by reference to the Registrant’s Quarterly Report on Form 10-Q for                  the fiscal quarter ended March 31, 1998, filed with the                  SEC. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Incorporated                  herein by reference to the Registrant’s Statement on Form S-8 (No.                  33-33186), filed with the SEC. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-KSB for                  the fiscal year ended December 31, 1996, filed with the                  SEC. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 1989, filed with the                  SEC. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-KSB for                  the fiscal year ended December 31, 1994, filed with the                  SEC. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Incorporated                  herein by reference to the Registrant’s Quarterly Report, on Form 10-QSB                  for the fiscal quarter ended June 30, 1995, filed with the                  SEC. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Incorporated                  herein by reference to the Registrant’s Statement on Form S-2 (File No.                  333-47203) filed with the SEC on March 3,                  1998. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-KSB for                  the fiscal year ended December 31, 1997, filed with the                  SEC. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 2002, filed with the                  SEC |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (11) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 1998, filed with the                  SEC. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (12) | Incorporated                  herein by reference to the Registrant’s Quarterly Report, on Form 10-Q for                  the fiscal quarter ended September 30, 2005, filed with the                  SEC. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (13) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 2005, filed with the                  SEC. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (14) | Incorporated                  herein by reference to the Registrant’s Statement on Form S-8, filed with                  the SEC on September 22, 2006. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (15) | Incorporated                  herein by reference to the Registrant’s Current Report on Form 8-K, dated                  January 30, 2007, filed with the                  SEC. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (16) | Incorporated                  herein by reference to the Registrant’s Current Report on Form 8-K, dated                  February 27, 2007, filed with the                  SEC. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (17) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 2006, filed with the                  SEC. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*INDEX*

|                          |                                                                                                | FNB                  FINANCIAL SERVICES CORPORATION |   |
|-------------------------------|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------|--------|
|                          |                                                                                                | (Registrant)                                        |   |
|                          |                                                                                                |                                                |   |
|                          |                                                                                                |                                                |   |
|                          |                                                                                                |                                                |   |
| May                  10, 2007 |                                                                                                | /s/                  K. DWIGHT WILLOUGHBY           |   |
|                          | K.                  Dwight Willoughby                                                               |
|                          | (Senior                  Vice President, Chief                  Accounting Officer, and Controller) |
|                          |                                                                                                |                                                |   |
|                          |                                                                                                |                                                |   |