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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, 2006**

***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) **

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| Large                  accelerated filer o | Accelerated                  filer x | Non-accelerated                  filer o |
|--------------------------------------------|--------------------------------------|------------------------------------------|

**At        April 30, 2006, 7,109,852 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 Sheets March 31, 2006 and December 31,                  2005                                              | 3      |   |
|     |   |   |                                                                                                                                            |   |   |
|     |   |   | Consolidated                  Statements of Income and Comprehensive Income for                  the Three Months Ended March 31, 2006 and 2005 | 4      |   |
|     |   |   |                                                                                                                                            |   |   |
|     |   |   | Consolidated                  Statements of Cash Flows for the Three Months                  Ended March 31, 2006 and 2005                      | 5      |   |
|     |   |   |                                                                                                                                            |   |   |
|     |   |   | Notes                  to Consolidated Financial                  Statements                                                                    | 6      |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 2      |   | Management’s                  Discussion and Analysis of Financial Condition and                  Results of Operations                   | 12     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 3      |   | Quantitative                  and Qualitative Disclosures About Market                  Risk                                                    | 18     |   |
|     |   |        |                                                                                                                                            |   |   |
| Item     | 4      |   | Controls                  and Procedures                                                                                                        | 18     |   |
|     |   |   |                                                                                                                                            |   |   |
|     |   |   |                                                                                                                                            |   |   |
| **PART** | **II** |   | **OTHER                  INFORMATION**                                                                                                          |   |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 1      |   | Legal                  Proceedings                                                                                                              | 19     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 1      | A      | Risk                  Factors                                                                                                                   | 19     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 2      |   | Unregistered                  Sales of Equity Securities and Use of                  Proceeds                                                   | 20     |   |
|     |   |        |                                                                                                                                            |   |   |
| Item     | 3      |   | Defaults                  Upon Senior Securities                                                                                                | 20     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 4      |   | Submission                  of Matters to a Vote of Security                  Holders                                                           | 20     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 5      |   | Other                  Information                                                                                                              | 20     |   |
|     |   |   |                                                                                                                                            |   |   |
| Item     | 6      |   | Exhibits                                                                                                                                        | 20     |   |

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*Table            of Contents*

| **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                  31,2006*(Unaudited)* |      | December                  31,2005                  * |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|-----------|------------------------------------------------------|--------|
| ASSETS                                                                                                                                                                                            |   |                                        |      |                                                 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |
| Cash                  and due from banks                                                                                                                                                          |   | $                                           | 32,616    |                                                 | $      | 27,148 |   |
| Investment                  securities:                                                                                                                                                           |   |                                        |      |                                                 |   |   |   |
| Securities                  available for sale                                                                                                                                                    |   |                                        | 203,824   |                                                 |   | 195,926 |   |
| Federal                  Home Loan Bank and Federal Reserve Bank Stock                                                                                                                            |   |                                        | 6,257     |                                                 |   | 5,964 |   |
| Loans,                  net of allowance for credit losses of $18,665 at March 31, 2006                  and                  $19,142 at December 31, 2005                                        |   |                                        | 736,256   |                                                 |   | 738,825 |   |
| Premises                  and equipment, net                                                                                                                                                      |   |                                        | 14,430    |                                                 |   | 14,307 |   |
| Accrued                  income and other assets                                                                                                                                                  |   |                                        | 26,495    |                                                 |   | 25,236 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Total                  assets                                                                                                                                                                     |   | $                                           | 1,019,878 |                                                 | $      | 1,007,406 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| LIABILITIES                  AND SHAREHOLDERS’ EQUITY                                                                                                                                       |   |                                        |      |                                                 |   |   |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Deposits:                                                                                                                                                                                         |   |                                        |      |                                                 |   |   |   |
| Noninterest                  bearing                                                                                                                                                              |   | $                                           | 89,996    |                                                 | $      | 92,884 |   |
| Interest                  bearing                                                                                                                                                                 |   |                                        | 746,422   |                                                 |   | 731,747 |   |
| Total                  deposits                                                                                                                                                                   |   |                                        | 836,418   |                                                 |   | 824,631 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Federal                  funds purchased and retail repurchase agreements                                                                                                                         |   |                                        | 1,183     |                                                 |   | 27,305 |   |
| Other                  borrowings                                                                                                                                                                 |   |                                        | 100,774   |                                                 |   | 80,774 |   |
| Accrued                  expenses and other liabilities                                                                                                                                           |   |                                        | 12,517    |                                                 |   | 7,462 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Total                  liabilities                                                                                                                                                                |   |                                        | 950,892   |                                                 |   | 940,172 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| 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                  7,045,335 at March 31, 2006 and and 7,038,110 at December 31,                  2005 |   |                                        | 7,045     |                                                 |   | 7,038 |   |
| Paid-in                  capital                                                                                                                                                                  |   |                                        | 22,784    |                                                 |   | 21,957 |   |
| Retained                  earnings                                                                                                                                                                |   |                                        | 42,016    |                                                 |   | 40,483 |   |
| Accumulated                  other comprehensive loss                                                                                                                                             |   |                                        | (2,860    | )                                                    |   | (2,245 | ) |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Total                  shareholders’ equity                                                                                                                                                 |   |                                        | 68,986    |                                                 |   | 67,233 |   |
|                                                                                                                                                                                              |   |                                        |      |                                                 |   |   |   |
| Total                  liabilities and shareholders’ equity                                                                                                                                 |   | $                                           | 1,019,878 |                                                 | $      | 1,007,406 |   |

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

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*Table            of Contents*

**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, |      |
|------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                   |   | 2006                                                          |      | 2005 |   |
| Interest                  income                                       |   |                                                          |      |   |   |
| Loans                                                                  |   | $                                                             | 15,757    |   | $ | 12,102 |   |
| Federal                  funds sold and overnight deposits             |   |                                                          | 85        |   |   | 66 |   |
| Investment                  securities                                 |   |                                                          |      |   |   |   |   |
| Taxable                                                                |   |                                                          | 1,576     |   |   | 823 |   |
| Tax                  exempt                                            |   |                                                          | 372       |   |   | 319 |   |
| Other                                                                  |   |                                                          | 98        |   |   | 67 |   |
| Total                  interest income                                 |   |                                                          | 17,888    |   |   | 13,377 |   |
|                                                                   |   |                                                          |      |   |   |   |   |
| Interest                  expense                                      |   |                                                          |      |   |   |   |   |
| Deposits                                                               |   |                                                          | 6,519     |   |   | 4,283 |   |
| Short-term                  borrowings                                 |   |                                                          | 57        |   |   | 100 |   |
| Long-term                  debt                                        |   |                                                          | 1,210     |   |   | 481 |   |
| Total                  interest expense                                |   |                                                          | 7,786     |   |   | 4,864 |   |
|                                                                   |   |                                                          |      |   |   |   |   |
| Net                  interest income                                   |   |                                                          | 10,102    |   |   | 8,514 |   |
| Provision                  for credit losses                           |   |                                                          | 755       |   |   | 680 |   |
|                                                                   |   |                                                          |      |   |   |   |   |
| Net                  interest income after provision for credit losses |   |                                                          | 9,347     |   |   | 7,834 |   |
| Noninterest                  income                                    |   |                                                          |      |   |   |   |   |
| Service                  charges on deposit accounts                   |   |                                                          | 873       |   |   | 823 |   |
| Mortgage                  banking fees                                 |   |                                                          | 242       |   |   | 1,004 |   |
| Investment                  services fees                              |   |                                                          | 128       |   |   | 139 |   |
| Net                  gain (loss) on securities available for sale      |   |                                                          | -         |   |   | (2 | ) |
| Net                  gain on disposition of other assets               |   |                                                          | -         |   |   | 11 |   |
| Other                  noninterest income                              |   |                                                          | 89        |   |   | 162 |   |
| Total                  noninterest income                              |   |                                                          | 1,332     |   |   | 2,138 |   |
|                                                                   |   |                                                          |      |   |   |   |   |
| Noninterest                  expense                                   |   |                                                          |      |   |   |   |   |
| Salaries                  and employee benefits                        |   |                                                          | 4,152     |   |   | 3,467 |   |
| Occupancy                  expense                                     |   |                                                          | 415       |   |   | 401 |   |
| Furniture                  and equipment expense                       |   |                                                          | 775       |   |   | 758 |   |
| Telecommunications                  expense                            |   |                                                          | 152       |   |   | 159 |   |
| Marketing                  expense                                     |   |                                                          | 189       |   |   | 263 |   |
| Printing                  and supply expense                           |   |                                                          | 121       |   |   | 174 |   |
| Other                  noninterest expense                             |   |                                                          | 1,254     |   |   | 1,670 |   |
| Total                  noninterest expense                             |   |                                                          | 7,057     |   |   | 6,892 |   |
|                                                                   |   |                                                          |      |   |   |   |   |
| Income                  before provision for income taxes              |   |                                                          | 3,622     |   |   | 3,079 |   |
| Provision                  for income taxes                            |   |                                                          | 1,244     |   |   | 1,036 |   |
| Net                  income                                            |   |                                                          | 2,378     |   |   | 2,043 |   |
| Other                  comprehensive income (loss)                     |   |                                                          | (615      | ) |   | (973 | ) |
|                                                                   |   |                                                          |      |   |   |   |   |
| Comprehensive                  income                                  |   | $                                                             | 1,763     |   | $ | 1,070 |   |
| Per                  share data                                        |   |                                                          |      |   |   |   |   |
| Net                  income, basic                                     |   | $                                                             | 0.34      |   | $ | 0.30 |   |
| Net                  income, diluted                                   |   | $                                                             | 0.33      |   | $ | 0.29 |   |
| Cash                  dividends                                        |   | $                                                             | 0.12      |   | $ | 0.11 |   |
| Weighted                  average shares outstanding, basic            |   |                                                          | 7,040,964 |   |   | 6,880,199 |   |
| Weighted                  average shares outstanding, diluted          |   |                                                          | 7,189,378 |   |   | 7,125,658 |   |

*See        notes to unaudited consolidated financial statements.*

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*Table            of Contents*

**FNB        Financial Services Corporation and        Subsidiary**

**Consolidated        Statements of Cash Flows**

*(Unaudited;        dollars in thousands)*

|                                                                                                                |   | Three                  Months EndedMarch                  31, |    |
|---------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|---------|
|                                                                                                                |   | 2006                                                          |    | 2005 |   |
|                                                                                                                |   |                                                          |    |   |   |
| Cash                  flows from operating activities:                                                              |   |                                                          |    |   |   |
| Net                  income                                                                                         |   | $                                                             | 2,378   |   | $ | 2,043 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |                                                          |    |   |   |   |   |
| Depreciation,                  accretion, and amortization                                                          |   |                                                          | 279     |   |   | 311 |   |
| Provision                  for credit losses                                                                        |   |                                                          | 755     |   |   | 680 |   |
| Gain                  on sale of securities available for sale                                                      |   |                                                          | -       |   |   | (2 | ) |
| (Gain)                  loss on disposal of premises, equipment and other real                  estate              |   |                                                          | 40      |   |   | (11 | ) |
| Net                  change in warehouse line of credit                                                             |   |                                                          | 924     |   |   | 3,526 |   |
| Stock                  based compensation expense                                                                   |   |                                                          | 128     |   |   | - |   |
| Changes                  in assets and liabilities:                                                                 |   |                                                          |    |   |   |   |   |
| Increase                  in other assets                                                                           |   |                                                          | (2,062  | ) |   | (2,884 | ) |
| Increase                  (decrease) in other liabilities                                                           |   |                                                          | (1,543  | ) |   | 2,418 |   |
| Net                  cash provided by operating activities                                                          |   |                                                          | 899     |   |   | 6,081 |   |
|                                                                                                                |   |                                                          |    |   |   |   |   |
| Cash                  flows from investing activities:                                                              |   |                                                          |    |   |   |   |   |
| Proceeds                  from sales, maturities, or calls of securities available for                  sale        |   |                                                          | 2,786   |   |   | 5,673 |   |
| Purchase                  of securities available for sale                                                          |   |                                                          | (11,784 | ) |   | (9,649 | ) |
| Purchase                  of premises and equipment                                                                 |   |                                                          | (591    | ) |   | (205 | ) |
| Proceeds                  from disposal of premises and equipment                                                   |   |                                                          | 7       |   |   | - |   |
| Proceeds                  from sale of other real estate owned                                                      |   |                                                          | 168     |   |   | - |   |
| (Increase)                  decrease in other real estate owned                                                     |   |                                                          | (52     | ) |   | 201 |   |
| Net                  (increase) decrease in loans                                                                   |   |                                                          | 1,886   |   |   | (49,688 | ) |
| Net                  cash used in investing activities                                                              |   |                                                          | (7,580  | ) |   | (53,668 | ) |
|                                                                                                                |   |                                                          |    |   |   |   |   |
| Cash                  flows from financing activities:                                                              |   |                                                          |    |   |   |   |   |
| Net                  increase in deposits                                                                           |   |                                                          | 11,788  |   |   | 43,214 |   |
| Net                  decrease in long-term debt                                                                     |   |                                                          | -       |   |   | 15,000 |   |
| Net                  increase (decrease) in short-term borrowings                                                   |   |                                                          | 1,109   |   |   | (5,952 | ) |
| Excess                  tax benefits from share-based payment arrangements                                          |   |                                                          | 25      |   |   | - |   |
| Repurchase                  of common stock                                                                         |   |                                                          | -       |   |   | (518 | ) |
| Proceeds                  from issuance of common stock                                                             |   |                                                          | 72      |   |   | 734 |   |
| Cash                  dividends paid                                                                                |   |                                                          | (845    | ) |   | (781 | ) |
| Net                  cash provided by financing activities                                                          |   |                                                          | 12,149  |   |   | 51,697 |   |
|                                                                                                                |   |                                                          |    |   |   |   |   |
| Net                  increase in cash and cash equivalents                                                          |   |                                                          | 5,468   |   |   | 4,110 |   |
| Cash                  and cash equivalents, January 1                                                               |   |                                                          | 27,148  |   |   | 24,246 |   |
|                                                                                                                |   |                                                          |    |   |   |   |   |
| Cash                  and cash equivalents, March 31                                                                |   | $                                                             | 32,616  |   | $ | 28,356 |   |

*See        notes to unaudited consolidated financial statements.*

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*Table            of Contents*

**FNB        Financial Services Corporation and        Subsidiary**

**Notes        to Consolidated Financial Statements**

*(Unaudited)*

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

| **2.** | **Per                  share data** |
|--------|-------------------------------------|

|                                                                                                                                                  |   | Three                  Months EndedMarch                  31, |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                                                                                                                                  |   | 2006                                                          |      | 2005                  * |   |
|                                                                                                                                                  |   |                                                          |      |   |   |
| Weighted                  average number of shares used in basic EPS                                                                                  |   |                                                          | 7,040,964 |   |   | 6,880,199 |   |
| Effect                  of dilutive stock options                                                                                                     |   |                                                          | 148,414   |   |   | 245,459 |   |
|                                                                                                                                                  |   |                                                          |      |   |   |   |   |
| Weighted                  average number of common shares and dilutive potential common shares                  used                  in dilutive EPS |   |                                                          | 7,189,378 |   |   | 7,125,658 |   |

**        2005 average shares have been restated to reflect the 5-for-4 stock split        effected as a 25% stock dividend, effective May 31, 2005.*

| **3.** | **Stock                  based compensation** |
|--------|-----------------------------------------------|

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*Table            of Contents*

|                                     | **Three                  Months Ended****March                  31, 2005** |
|------------------------------------------|----------------------------------------------------------------------------|
|                                     |                                                                       |
| Dividend                  yield          | 2.29%                                                                      |
| Risk-free                  interest rate | 3.94%                  - 4.47%                                             |
| Volatility                               | 0.18                                                                       |
| Expected                  life           | 7.0 years                                                             |

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*Table            of Contents*

|                                          |   | **Options****Outstanding** |      | **Exercise                  Price** |   | **Weighted****Average****Exercise                  Price** |   |
|-----------------------------------------------|--------|----------------------------|-----------|-------------------------------------|--------|------------------------------------------------------------|--------|
| Balance                  at December 31, 2005 |   |                       | 1,134,471 |                                | $      | 7.04                  - $18.11                             |   | $ | 13.61 |   |
|                                          |   |                       |      |                                |   |                                                       |   |   |   |   |
| Exercised                                     |   |                       | (7,126    | )                                   | $      | 8.33                  - $10.75                             |   |   | 10.12 |   |
|                                          |   |                       |      |                                |   |                                                       |   |   |   |   |
| Authorized                                    |   |                       | -         |                                |   | -                                                          |   |   | - |   |
|                                          |   |                       |      |                                |   |                                                       |   |   |   |   |
| Forfeited                                     |   |                       | (28,849   | )                                   | $      | 8.33                  - $18.11                             |   |   | 15.42 |   |
|                                          |   |                       |      |                                |   |                                                       |   |   |   |   |
| Granted                                       |   |                       | -         |                                |   | -                                                          |   |   | - |   |
|                                          |   |                       |      |                                |   |                                                       |   |   |   |   |
| Balance                  at March 31, 2006    |   |                       | 1,098,496 |                                | $      | 7.04                  - $18.11                             |   | $ | 13.59 |   |

| **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                  - $8.01               |   |                                                     | 112,808   |                                         | $      | 7.70                                                                   |   |                                                     | 2.93   |                                         |   | 112,808 |   | $ | 7.70 |   |
| $8.28                  - $14.52              |   |                                                     | 341,466   |                                         |   | 9.88                                                                   |   |                                                     | 5.11   |                                         |   | 293,749 |   |   | 9.74 |   |
| $15.31                  - $16.16             |   |                                                     | 280,526   |                                         |   | 15.97                                                                  |   |                                                     | 4.75   |                                         |   | 222,025 |   |   | 15.98 |   |
| $16.32                  - $18.11             |   |                                                     | 363,696   |                                         |   | 17.05                                                                  |   |                                                     | 9.15   |                                         |   | 39,210 |   |   | 17.79 |   |
|                                         |   |                                                     |      |                                         |   |                                                                   |   |                                                     |   |                                         |   |   |   |   |   |   |
|                                         |   |                                                     | 1,098,496 |                                         | $      | 13.59                                                                  |   |                                                     | 6.13   |                                         |   | 667,792 |   | $ | 11.94 |   |

| Income                  before income tax expense           |   | $      | (128,000                  | )      |
|-------------------------------------------------------------|--------|--------|---------------------------|--------|
| Net                  income                                 |   | $      | (                  84,000 | )      |
|                                                        |   |   |                      |   |
| Cash                  flow from operating activities        |   | $      | (128,000                  | )      |
| Cash                  flow provided by financing activities |   | $      | 25,000                    |   |
|                                                        |   |   |                      |   |
| Basic                  earnings per share                   |   | $      | (0.01                     | )      |
| Diluted                  earnings per share                 |   | $      | (0.01                     | )      |

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*Table            of Contents*

| *(Dollars                  in thousands, except per share data)*                                                                         |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Net                  income, as reported                                                                                                 |   | $      | 2,043  |   |
| Less:                  Stock based compensation as calculated per fair value method, net                  of tax                  effect |   |   | (367   | ) |
| Proforma                  net income                                                                                                     |   | $      | 1,676  |   |
|                                                                                                                                     |   |   |   |   |
| Earnings                  per share:                                                                                                     |   |   |   |   |
| Basic                  - as reported                                                                                                     |   | $      | 0.30   |   |
| Basic                  - proforma                                                                                                        |   | $      | 0.29   |   |
| Diluted                  - as reported                                                                                                   |   | $      | 0.29   |   |
| Diluted                  - proforma                                                                                                      |   | $      | 0.28   |   |

| **4.** | **Loans** |
|--------|-----------|

***Loan        Category:***

| *(Dollars                  in thousands)*               |   | March                  31, 2006 |    | December                  31, 2005 |   |
|---------------------------------------------------------|--------|---------------------------------|---------|------------------------------------|--------|
|                                                    |   |                            |    |                               |   |
| Real                  estate - commercial               |   | $                               | 165,350 |                               | $      | 177,986 |   |
| Real                  estate - residential              |   |                            | 139,892 |                               |   | 145,972 |   |
| Real                  estate - construction             |   |                            | 237,075 |                               |   | 213,506 |   |
| Commercial,                  financial and agricultural |   |                            | 75,393  |                               |   | 77,007 |   |
| Consumer                                                |   |                            | 139,954 |                               |   | 147,163 |   |
|                                                    |   |                            |    |                               |   |   |   |
| Subtotal                  loans                         |   |                            | 757,664 |                               |   | 761,634 |   |
|                                                    |   |                            |    |                               |   |   |   |
| Less:                  Warehouse line of credit         |   |                            | 2,743   |                               |   | 3,667 |   |
|                                                    |   |                            |    |                               |   |   |   |
| Gross                  Loans                            |   | $                               | 754,921 |                               | $      | 757,967 |   |

***Allowance        for credit losses:***

|                                                     |   | March                  31, 2006 |   | December                  31, 2005                                                                             |   |
|----------------------------------------------------------|--------|---------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|
|  *(Dollars                  in thousands)*          |   |    Allowance     |   | %                  of Loans in                  Each Category                  to Total                  Loans |   |    Allowance |   | %                  of Loansin                  EachCategory                  toTotal                  Loans |   |
| Balance                  at end of period applicable to: |   |                            |   |                                                                                                           |   |   |   |   |   |
|                                                     |   |                            |   |                                                                                                           |   |   |   |   |   |
| Real                  estate - construction              |   | $                               | 3      |                                                                                                           |   | 31 | % | $ | 3 |   |   | 28 | % |
| Real                  estate - mortgage                  |   |                            | 82     |                                                                                                           |   | 40 |   |   | 81 |   |   | 42 |   |
| Commercial                                               |   |                            | 15,700 |                                                                                                           |   | 10 |   |   | 16,124 |   |   | 10 |   |
| Consumer                                                 |   |                            | 2,880  |                                                                                                           |   | 19 |   |   | 2,934 |   |   | 20 |   |
|                                                     |   |                            |   |                                                                                                           |   |   |   |   |   |   |   |   |   |
| Total                                                    |   | $                               | 18,665 |                                                                                                           |   | 100 | % | $ | 19,142 |   |   | 100 | % |

----

*Table              of Contents*

|  | **4.** | **Loans***(continued)* |
|--|--------|------------------------|

***Rollforward        - allowance for credit losses:***

|                                                                                                                                           |   | Three                  Months EndedMarch                  31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| *(Dollars                  in thousands)*                                                                                                      |   | 2006                                                          |   | 2005 |   |
|                                                                                                                                           |   |                                                          |   |   |   |
| Balance,                  beginning of period                                                                                                  |   | $                                                             | 19,142 |   | $ | 7,353 |   |
| Charge-offs                                                                                                                                    |   |                                                          | 1,309  |   |   | 214 |   |
| Recoveries                                                                                                                                     |   |                                                          | (77    | ) |   | (24 | ) |
| Net                  charge-offs                                                                                                               |   |                                                          | 1,232  |   |   | 190 |   |
| Provision                  for credit losses                                                                                                   |   |                                                          | 755    |   |   | 680 |   |
| Balance,                  end of period                                                                                                        |   | $                                                             | 18,665 |   | $ | 7,843 |   |
|                                                                                                                                           |   |                                                          |   |   |   |   |   |
| Annualized                  net charge-offs during the period to average loans outstanding                  during the                  period |   |                                                          | 0.65   | % |   | 0.11 | % |
| Allowance                  for credit losses to period end loans                                                                               |   |                                                          | 2.47   | % |   | 1.10 | % |

***Nonperforming        assets:***

|  *(Dollars                  in thousands)*                       |   | March                  31,2006 |   | December                  31,2005 |   |
|-----------------------------------------------------------------------|--------|--------------------------------|--------|-----------------------------------|--------|
|                                                                  |   |                           |   |                              |   |
| Nonaccrual                                                            |   | $                              | 8,948  |                              | $      | 10,356 |   |
| Past                  due 90 days or more and still accruing interest |   |                           | 17     |                              |   | 30 |   |
| Other                  real estate                                    |   |                           | 1,527  |                              |   | 1,483 |   |
| Renegotiated                  troubled debt                           |   |                           | 380    |                              |   | - |   |

| **5.** | **Employee                  benefit plans** |
|--------|---------------------------------------------|

|                                            |   | For                  the three monthsended                  March 31, |   |
|-------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
| *(Dollars                  in thousands)*       |   | 2006                                                                  |   | 2005 |   |
| Service                  cost                   |   | $                                                                     | 191    |   | $ | 174 |   |
| Interest                  cost                  |   |                                                                  | 122    |   |   | 109 |   |
| Expected                  return on plan assets |   |                                                                  | (137   | ) |   | (131 | ) |
| Net                  amortization and deferrals |   |                                                                  | 39     |   |   | 33 |   |
| Net                  periodic pension cost      |   | $                                                                     | 215    |   | $ | 185 |   |

| **6.** | **Shareholders’                  equity** |
|--------|-------------------------------------------------|

----

*Table            of Contents*

| **7.** | **Memorandum                  of Understanding** |
|--------|--------------------------------------------------|

|   | § | The                  creation of a Compliance Committee by the Boards of Directors of                  the                  Company and FNB Southeast (the “Bank”) to oversee compliance by the                  Company and the Bank with the MOU. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  engagement of an independent consultant to advise the Boards on                  the                  characteristics, composition, and structure of the Boards and the                  structure and composition of management. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  adoption of a written plan to strengthen the Bank’s loan administration                  capacity through supplementing and improving its lending and credit                  administration staffing, management information systems, reporting                  procedures, lending policies, and internal loan review                  function. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  adoption of a written plan to address its risk position with respect                  to                  certain loans identified by its internal reviews and by its independent                  consultants and also by the Reserve                  Bank. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | An                  increased focus upon compliance with federal regulations concerning                  real                  estate appraisal procedures and federal guidelines concerning loans                  in                  excess of certain loan-to-value                  standards. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Increased                  resources and staffing for the Bank’s internal audit                  function. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

----

*Table            of Contents*

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

*Information        set forth below contains various forward-looking statements within the meaning        of Section 27A of the Securities Act of 1933 and Section 21E of the Securities        Exchange Act of 1934, which statements represent the Company’s judgment        concerning the future and are subject to risks and uncertainties that could        cause the Company’s actual operating results to differ materially. Such        forward-looking statements can be identified by the use of forward-looking        terminology, such as “may”, “will”, “expect”, “anticipate”, “estimate”,“believe”, or “continue”, or the negative thereof or other variations thereof or        comparable terminology. The Company cautions that such forward-looking        statements are further qualified by important factors that could cause the        Company’s actual operating results to differ materially from those in the        forward-looking statements.*

**Application        of Critical Accounting Policies**

**Memorandum        of Understanding**

----

*Table            of Contents*

|   | § | The                  creation of a Compliance Committee by the Boards of Directors of                  the                  Company and the Bank to oversee compliance by the Company and the                  Bank                  with the MOU. This committee was established in February                  2006. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  engagement of an independent consultant to advise the Boards on                  the                  characteristics, composition, and structure of the Boards and the                  structure and composition of management. An independent consultant                  to                  perform these functions was engaged by the Boards in November                  2005. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  adoption of a written plan to strengthen the Bank’s loan administration                  capacity through supplementing and improving its lending and credit                  administration staffing, management information systems, reporting                  procedures, lending policies, and internal loan review function.                  The Bank                  began this process in August 2005 as a result of its internal                  investigations and reviews by independent consultants. As a consequence,                  the Company believes that its compliance with the MOU’s requirements in                  these areas will be prompt. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The                  adoption of a written plan to address its risk position with respect                  to                  certain loans identified by its internal reviews and by its independent                  consultants and also by the Reserve Bank. The Bank began this process                  in                  August 2005 and believes that significant progress in reducing                  its risks                  on these loans has been made. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | An                  increased focus upon compliance with federal regulations concerning                  real                  estate appraisal procedures and federal guidelines concerning loans                  in                  excess of certain loan-to-value standards. The Bank adopted policies                  addressing these matters in January                  2006. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Increased                  resources and staffing for the Bank’s internal audit function. The Bank                  has met this requirement. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

**Executive        Summary**

----

*Table            of Contents*

**Financial        Condition**

**Asset        Quality**

**Memorandum        of Understanding**

----

*Table            of Contents*

**Results        of Operations for the Three Months Ended March 31, 2006 and        2005**

*Interest        Income and Interest Expense*

----

*Table            of Contents*

|                                                                 |   |
|----------------------------------------------------------------------|--------|
| **Net                  Interest Income and Rate / Volume Analysis**  |   |
| For                  the Three Months Ended March 31, 2006 and 2005  |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   | Average                  Balance |   | Yield                  / Rate |   | Income                  / Expense |   | **Increase** |   | **Change                  due to** |   |
| *Fully                  Taxable Equivalent - (Dollars in thousands)* |   | **2006** |   | 2005 |   | **2006** |   | 2005 |   | **2006** |   | 2005 |   | **(Decrease)** |   | **Rate** |   | **Volume** |   |
| **Assets**                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities(1):                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                  investment securities                       |   | **$** | **158,279** |   | $ | 103,591 |   |   | **4.04** | **%** |   | 3.23 | % | **$** | **1,576** |   | $ | 824 |   | $ | **752** |   | **$** | **(10,083** | **)** | **$** | **10,835** |   |
| Tax-exempt                  investment securities                    |   |   | **38,438** |   |   | 32,328 |   |   | **5.93** |   |   | 6.06 |   |   | **562** |   |   | 483 |   |   | **79** |   |   | **461** |   |   | **(382** | **)** |
| Other                  securities                                    |   |   | **7,751** |   |   | 6,044 |   |   | **5.13** |   |   | 6.06 |   |   | **98** |   |   | 66 |   |   | **32** |   |   | **(409** | **)** |   | **441** |   |
| Total                  securities                                    |   |   | **204,468** |   |   | 141,963 |   |   | **4.44** |   |   | 3.92 |   |   | **2,236** |   |   | 1,373 |   |   | **863** |   |   | **(10,031** | **)** |   | **10,894** |   |
| Other                  earning assets(2)                             |   |   | **10,092** |   |   | 8,998 |   |   | **3.42** |   |   | 2.97 |   |   | **85** |   |   | 66 |   |   | **19** |   |   | **298** |   |   | **(279** | **)** |
| Loans                  and leases, net(3)(4)                         |   |   | **760,026** |   |   | 691,180 |   |   | **8.41** |   |   | 7.10 |   |   | **15,757** |   |   | 12,102 |   |   | **3,655** |   |   | **45,912** |   |   | **(42,257** | **)** |
| Total                  earning assets                                |   |   | **974,586** |   |   | 842,141 |   |   | **7.52** |   |   | 6.52 |   |   | **18,078** |   |   | 13,541 |   |   | **4,537** |   |   | **36,179** |   |   | **(31,642** | **)** |
| Non-earning                  assets                                  |   |   | **41,211** |   |   | 56,942 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  assets                                        |   | **$** | **1,015,797** |   | $ | 899,083 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders' Equity**            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  deposits:                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  deposits                                    |   | **$** | **52,057** |   | $ | 52,763 |   |   | **0.33** |   |   | 0.15 |   |   | **43** |   |   | 20 |   |   | **23** |   |   | **(17** | **)** |   | **40** |   |
| Money                  market deposits                               |   |   | **143,830** |   |   | 121,043 |   |   | **3.32** |   |   | 2.23 |   |   | **1,178** |   |   | 665 |   |   | **513** |   |   | **6,280** |   |   | **(5,767** | **)** |
| Time                  deposits                                       |   |   | 545,217 |   |   | 486,028 |   |   | **3.94** |   |   | 3.00 |   |   | **5,298** |   |   | 3,598 |   |   | **1,700** |   |   | **18,795** |   |   | **(17,095** | **)** |
| Total                  interest-bearing deposits                     |   |   | **741,104** |   |   | 659,834 |   |   | **3.57** |   |   | 2.63 |   |   | **6,519** |   |   | 4,283 |   |   | **2,236** |   |   | **25,058** |   |   | **(22,822** | **)** |
| Short-term                  borrowings                               |   |   | **8,836** |   |   | 20,217 |   |   | **2.62** |   |   | 0.22 |   |   | **57** |   |   | 11 |   |   | **46** |   |   | **(3,433** | **)** |   | **3,479** |   |
| Long-term                  debt                                      |   |   | **100,774** |   |   | 56,000 |   |   | **4.87** |   |   | 4.13 |   |   | **1,210** |   |   | 570 |   |   | **640** |   |   | **(5,586** | **)** |   | **6,226** |   |
| Total                  interest-bearing liabilities                  |   |   | **850,714** |   |   | 736,051 |   |   | **3.71** |   |   | 2.68 |   |   | **7,786** |   |   | 4,864 |   |   | **2,922** |   |   | **16,039** |   |   | **(13,117** | **)** |
| Demand                  deposits                                     |   |   | **88,585** |   |   | 82,411 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                   |   |   | **8,295** |   |   | 9,801 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'                  equity                                |   |   | **68,203** |   |   | 70,820 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity          |   | **$** | **1,015,797** |   | $ | 899,083 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                  interest rate spread                        |   |   |   |   |   |   |   |   | **3.81** | **%** |   | 3.84 | % |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  yield on earning assets                         |   |   |   |   |   |   |   |   | **4.28** |   |   | 4.18 |   | **$** | **10,292** |   | $ | 8,677 |   | $ | **1,615** |   | **$** | **20,140** |   | **$** | **(18,525** | **)** |
| Taxable                  equivalent adjustment                       |   |   |   |   |   |   |   |   |   |   |   |   |   | **$** | **191** |   | $ | 164 |   |   |   |   |   |   |   |   |   |   |

----

| (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. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Provision        for Credit Losses*

**Memorandum        of Understanding**

*Noninterest        Income and Expense*

----

*Table            of Contents*

*Provision        for Income Taxes*

**Capital        Resources**

|                              |   | Regulatory                  Guidelines |   |                  |   |          |   |
|-----------------------------------|--------|----------------------------------------|--------|-----------------------|--------|---------------|--------|
|                              |   | WellCapitalized                        |   | AdequatelyCapitalized |   |  Company |   | FNBSoutheast |   |
|                              |   |                                   |   |                  |   |          |   |   |   |
| Total                  Capital    |   |                                   | 10.0%  |                  |   | 8.0%          |   |   | 13.35% |   |   | 13.00% |   |
| Tier                  1 Capital   |   |                                   | 6.0    |                  |   | 4.0           |   |   | 11.95 |   |   | 11.73 |   |
| Leverage                  Capital |   |                                   | 5.0    |                  |   | 4.0           |   |   | 9.32 |   |   | 9.13 |   |

**Liquidity        Management**

----

*Table            of Contents*

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

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

**Evaluation        of disclosure controls and procedures**

----

*Table            of Contents*

**Changes        in internal control over financial reporting**

|   | Ø | Strengthened                  the Credit Management Committee of the Board of Directors                  by: |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | u | Adoption                  of a Directors’ Loan Policy which documents the Board’s instruction to                  Management on the purpose of the Loan Portfolio, establishment                  and                  maintenance of Loan Policies, Loans to Board Members and Employees,                  the                  Loan Loss Reserve, Loan Portfolio Quality Goals, Independent Loan                  Review,                  Loan Portfolio Reporting, and Loan                  Authorities; |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Adoption                  of a Loan Review Annual Coverage Plan which includes the addition                  of                  internal loan review personnel; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Adoption                  of a written plan to strengthen the Bank’s loan administration capacity                  through supplementing and improving its lending and credit administration                  staffing, management information systems, reporting procedures,                  lending                  policies, and internal loan review                  function; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | Adoption                  of a written plan to address its risk position with respect to                  certain                  loans identified by its internal reviews, its independent consultants                  and/or the Reserve Bank; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  ̈ | An                  increased focus upon compliance with federal regulations concerning                  real                  estate appraisal procedures and federal guidelines concerning loans                  in                  excess of certain loan-to-value                  standards. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ø | Documentation                  of the methodology for determining the adequacy of the allowance                  for                  credit losses by management and reviewed to be in conformity with                  generally accepted accounting                  principles. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ø | Creation                  of a Compliance Committee of the Board of Directors to oversee                  compliance                  with the MOU. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ø | The                  engagement of an independent consultant to advise the Boards on                  the                  characteristics, composition, and structure of the Boards and the                  structure and composition of                  management. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ø | Increased                  resources and staffing for the Bank’s internal audit                  function. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

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

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

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

----

*Table              of Contents*

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

| **Stock                  Repurchase Program - Approved July 2004** |   |
|--------------------------------------------------------------------|--------|
|    **Period **                                 |   | **(a)****Total                  Number of****Shares****Purchased** |   | **(b)** **Average                  Price****Paid                  Per Share** |   | **(c)** **Cumulative                  Number of****Shares                  Purchased** |   | **(d)****Maximum                  Number****of                  Shares that May Yet Be****Purchased** |   |
| January                  1, 2006 to January 31, 2006               |   |   | - |   |   | - |   |   | 140,437 |   |   | 203,468 |   |
| February                  1, 2006 to February 28, 2006             |   |   | - |   |   | - |   |   | 140,437 |   |   | 203,468 |   |
| March                  1, 2006 to March 31, 2006                   |   |   | - |   |   | - |   |   | 140,437 |   |   | 203,468 |   |
| Total                                                              |   |   | - |   |   | - |   |   |   |   |   |   |   |

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

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

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

| **Item                  6.** | **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                  (14)   |   | Amended                  and Restated Trust Agreement, regarding Trust Preferred Securities,                  dated                  August 23, 2005.                                                                                                          |
| 4.03                  (14)   |   | Guarantee                  Agreement, regarding Trust Preferred Securities, dated August 23,                  2005.                                                                                                                                            |
| 4.04                  (14)   |   | 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.                                                                                                                                                        |

----

*Table            of Contents*

| 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                  (8)  |   | Employment                  Agreement dated May 18, 1995, between the Registrant, as employer,                  and                  Ernest J. Sewell, former President and Chief Executive Officer                  of the                  Registrant.                                                                |
| 10.11                  (9)  |   | Split-Dollar                  Agreement dated January 27, 1995, between the Registrant and Ernest                  J.                  Sewell.                                                                                                                                                                          |
| 10.12                  (9)  |   | Split-Dollar                  Agreement dated January 27, 1995, between the Registrant and C.                  Melvin                  Gantt.                                                                                                                                                                           |
| 10.13                  (9)  |   | Split-Dollar                  Agreement dated December 8, 1995, between the Registrant and Richard                  L.                  Powell.                                                                                                                                                                         |
| 10.14                  (11) |   | Amendment                  to Benefit Equivalency Plan of the Registrant effective January                  1,                  1998.                                                                                                                                                                                   |
| 10.15                  (9)  |   | Split-Dollar                  Agreement, dated March 20, 1998, between the Registrant and Ernest                  J.                  Sewell.                                                                                                                                                                           |
| 10.16                  (12) |   | Second                  Amendment, dated May 19, 2004, to the Employment Agreement, dated                  May 18,                  1995, between the Registrant, as employer, and Ernest J. Sewell,                  former                  President and Chief Executive Officer of the                  Registrant. |
| 10.17                  (13) |   | Employment                  and Change of Control Agreement dated July 1, 2004, between the                  Registrant, as employer, and Pressley A. Ridgill, Executive Vice                  President                  and Chief Operating Officer of the Registrant.                                                |
| 10.18                  (12) |   | Third                  Amendment to Employment Agreement and First Amendments to Split-Dollar                  Agreements and Collateral Agreements with Ernest J. Sewell effective                  January 1, 2004.                                                                                                   |
| 10.20                  (14) |   | Fourth                  Amendment to Employment Agreement with Ernest J. Sewell, executed                  on                  October 20, 2005 and effective February 1, 2006.                                                                                                                                         |
| 10.21                  (14) |   | Independent                  Contractor Consulting Agreement with Ernest J. Sewell, executed                  October                  20, 2005 and effective February 1, 2006.                                                                                                                                         |
| 10.22                  (15) |   | 2006                  Annual Management Incentive Plan of the Registrant.                                                                                                                                                                                                                                               |
| 10.23                  (15) |   | Long                  Term Incentive Plan of the Registrant for certain senior management                  employees.                                                                                                                                                                                                   |
| 21.01                  (15) |   | 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. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 Securities                  and                  Exchange Commission. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (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 Securities                  and                  Exchange Commission. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 Securities                  and                  Exchange Commission. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table            of Contents*

|   | (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 Securities                  and                  Exchange Commission. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 Securities                  and                  Exchange Commission. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Incorporated                  herein by reference to the Registrant’s Statement on Form S-2 (File No.                  333-47203) filed with the Securities and Exchange Commission 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 Securities                  and                  Exchange Commission. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 Securities                  and                  Exchange Commission |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 Securities                  and                  Exchange Commission. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (12) | Incorporated                  herein by reference to the Registrant’s Annual Report on Form 10-K for the                  fiscal year ended December 31, 2004, filed with the Securities                  and                  Exchange Commission. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (13) | Incorporated                  herein by reference to the Registrant’s Quarterly Report, on Form 10-Qfor                  the fiscal quarter ended September 30, 2004, filed with the Securities                  and                  Exchange Commission. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (14) | 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 Securities                  and                  Exchange Commission. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (15) | 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 Securities                  and                  Exchange Commission. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table            of Contents*

|                          |                                                                        | FNB                  FINANCIAL SERVICES CORPORATION |   |
|-------------------------------|-----------------------------------------------------------------------------|-----------------------------------------------------|--------|
|                          |                                                                        | (Registrant)                                        |   |
|                          |                                                                        |                                                |   |
|                          |                                                                        |                                                |   |
|                          |                                                                        |                                                |   |
| May                  10, 2006 | /s/                  K.                  Dwight Willoughby                  |                                                |
|                          | K.                  Dwight Willoughby                                       |                                                |
|                          | (Vice                  President, Chief Accounting Officer, and Controller) |                                                |

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