Prospectus Supplement

This prospectus supplement and the accompanying prospectus relate to the offer and sale from time to time of up to 2,000,000 shares of our common stock, no par value per share. Our common stock to which this prospectus supplement relates will be offered over a period of time and from time to time through Sandler O’Neill + Partners, L.P., as our agent, referred to herein throughout as Sandler O’Neill or our placement agent, in accordance with the terms of the sales agency agreement we have entered into with such placement agent. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act, including without limitation sales made directly on the NASDAQ Capital Market, or NASDAQ, on any other existing trading market for the common stock, or to or through a market maker or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. We will also sell shares, in connection with this offering, to certain existing investors pursuant to their preemptive rights. There is no arrangement for funds to be received in any escrow, trust or similar arrangement.

Our common stock is listed on NASDAQ under the symbol “FNBN.” The last reported sale price of our common stock on May 17, 2012 was $27.50 per share.

We will pay the placement agent a commission equal to 3.0% of the gross proceeds of common stock sold by the placement agent, as our agent, pursuant to this prospectus supplement, and we shall reimburse the placement agent for certain expenses as further described herein. Additionally, we will pay the placement agent a commission equal to 3.0% for any shares sold to our certain of our existing investors pursuant to their preemptive rights, which shares shall be sold pursuant to this offering at price per share equal to the average price of the shares sold pursuant to this offering as determined by us. See “Plan of Distribution (Conflict of Interest)” on page S-23 of this prospectus supplement for further information.

The placement agent will pay a fee to FBR Capital Markets & Co. as compensation for acting as a “qualified independent underwriter” in connection with this offering. This fee will be paid by the placement agent out of the commissions that it receives from any sales of our common stock. Subject to applicable limits on underwriting compensation under the rules of the Financial Industry Regulatory Authority, Inc., or FINRA, such fee shall be equal to (i) $25,000 plus (ii) 10% of the total commissions received by the placement agent for any aggregate gross proceeds of common stock sold by the placement agent in excess of $10,000,000. In connection with the sale of the common stock on our behalf, the placement agent may be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation of the placement agent may be deemed to be underwriting commissions or discounts. The net proceeds we receive from the sale of our common stock to which this prospectus supplement relates will be the gross proceeds received from such sales less the commissions or discounts and any other expenses we may incur in issuing the common stock. See “Use of Proceeds” on page S-22 and “Plan of Distribution (Conflict of Interest)” on page S-23 of this prospectus supplement for further information.

Investing in our common stock involves a high degree of risk. Before making a decision to invest in our securities, you should carefully consider the risks described under “Risk Factors” on page S-10 of this prospectus supplement, and in the documents incorporated by reference herein, including our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, as well as the other information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus.

Neither the Securities and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

These securities will not be savings accounts, deposits or other obligations of any bank or non-bank subsidiary of FNB United Corp., and are not insured or guaranteed by the Federal Deposit Insurance Corporation, or FDIC, the Deposit Insurance Fund, or any other governmental agency or instrumentality.

This prospectus is in two parts. The first part is this prospectus supplement, which describes the specific terms on which we are offering and selling shares of our common stock and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference in the accompanying prospectus. The second part is the accompanying prospectus, which provides more general information, some of which may not apply to this offering. Generally, when we refer only to the “prospectus,” we are referring to both parts combined. If the information varies between this prospectus supplement and the accompanying prospectus, you should rely on the information contained in this prospectus supplement; provided, that if any statement in one of these documents is inconsistent with a statement in another document having a later date—for example, a document incorporated by reference in the accompanying prospectus—the statement in the document having the later date modifies or supersedes the earlier statement in accordance with Rule 412 under the Securities Act.

Unless the context otherwise requires, the terms “Company,” “FNB,” “we,” “us,” or “our” refer to FNB United Corp. and its consolidated subsidiaries on a combined basis. References in this prospectus supplement to “U.S. dollars,” “U.S. $,” or “$” are to the currency of the United States of America.

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus and any related free writing prospectus, as modified and superseded pursuant to Rule 412 under the Securities Act. Neither we nor the placement agent has authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the placement agent is not, making an offer to sell shares of our common stock in any jurisdiction where the offer or sale is not permitted.

The distribution of this prospectus supplement and the accompanying prospectus and the offering of the common stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of the common stock and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any common stock offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference in this prospectus supplement and the accompanying prospectus and any related free writing prospectus that we authorized to be delivered to you is only accurate as of the respective dates of those documents. Our business, financial condition, results of operations and prospects may have changed since those dates.

You should not consider any information in this prospectus supplement or the accompanying prospectus to be investment, legal or tax advice. You should consult your own counsel, accountant and other advisors for legal, tax, business, financial and related advice regarding the purchase of the common stock. We are not making any representation to you regarding the legality of an investment in the common stock by you under applicable investment or similar laws.

You should read this prospectus supplement, the accompanying prospectus, the documents incorporated by reference in this prospectus supplement, the accompanying prospectus and any related free writing prospectus that we authorized to be delivered to you when making your investment decision. You should also read and consider the information in the documents we have referred you to in the section of the accompanying prospectus entitled “Where You Can Find More Information.”

This prospectus supplement incorporates by reference important business and financial information that we file with the SEC and that we are not including in or delivering with this prospectus supplement or the accompanying prospectus. As the SEC allows, incorporated documents are considered part of this prospectus supplement and the accompanying prospectus, and we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus supplement and the accompanying prospectus. We incorporate by reference the following documents or information filed with the SEC (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with SEC rules):

We also incorporate by reference all documents to the extent they have been filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and until this offering has been completed. These additional documents will be deemed to be incorporated by reference, and to be part of, this prospectus from the date of their filing.

On the written or oral request of each person, including any beneficial owner, to whom a copy of this prospectus supplement and the accompanying prospectus is delivered, we will provide, without charge, a copy of any or all of the documents incorporated in this prospectus supplement, the accompanying prospectus or in any further prospectus supplement by reference, except the exhibits to those documents, unless the exhibits are specifically incorporated by reference. Requests may be made by contacting:

Our filings are available on our website, http://www.myyesbank.com. Information contained in or linked to our website is not a part of this prospectus.

You should rely only upon the information provided in this document or incorporated in this document by reference. We have not authorized anyone to provide you with different information. You should not assume that the information in this document, including any information incorporated by reference, is accurate as of any date other than the date indicated on the front cover or the date given in the applicable document.

We make statements in this prospectus and the documents incorporated herein by reference, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other financial, business or strategic matters regarding or affecting us that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” , “target”, “plan”, “seek” and other similar words and expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of management and the information available to management at the time that these disclosures were prepared.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from our historical performance. Among the factors that could cause actual results to differ materially from those discussed in forward-looking statements are those discussed under the heading “Risk Factors” and in other sections of (i) our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, (ii) our other reports filed from time to time with the SEC that are incorporated by reference into this prospectus, or (iii) any prospectus supplement to this prospectus. See “Incorporation of Certain Information by Reference” for information about how to obtain copies of those documents.

The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

PROSPECTUS SUPPLEMENT SUMMARY

The following summary highlights material information contained in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference in this prospectus supplement and does not contain all the information you will need in making your investment decision. You should read carefully this entire prospectus supplement, the accompanying prospectus and the documents incorporated by reference in this prospectus supplement before making your investment decision.

FNB UNITED CORP.

Company Overview

We are a bank holding company with two bank subsidiaries: CommunityOne Bank, N.A., or CommunityOne, a national banking association headquartered in Asheboro, North Carolina and, through Bank of Granite Corporation, a Delaware corporation, or Granite, Bank of Granite, a state chartered bank headquartered in Granite Falls, North Carolina. As of March 31, 2012, CommunityOne had 45 branches, $892.9 million in loans and $1.44 billion in deposits. As of March 31, 2012, Bank of Granite had 18 branches, $352.9 million in loans and $682.4 million in deposits.

Through our bank subsidiaries, we offer a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers through operations located in Alamance, Alexander, Ashe, Burke, Caldwell, Catawba, Chatham, Gaston, Guilford, Iredell, Mecklenburg, Montgomery, Moore, Orange, Randolph, Richmond, Rowan, Scotland, Watauga and Wilkes counties in North Carolina. CommunityOne owns three subsidiaries: Dover Mortgage Company, or Dover; First National Investor Services, Inc.; and Premier Investment Services, Inc., or Premier. Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for CommunityOne. Premier is inactive. Through Granite, we also own Granite Mortgage, Inc., which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012. We also own FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate the issuance of trust preferred securities.

Recent Developments

The Recapitalization

On October 21, 2011, we completed the following transactions as part of our recapitalization, or the Recapitalization, in connection with the acquisition of Granite:

•

a capital raise of $310 million in a private placement, or the Private Placement, at a price of $16.00 per share (the per-share price taking into effect the Reverse Stock Split), with investments from (1) affiliates of each of The Carlyle Group, or Carlyle, and Oak Hill Capital Partners, or Oak Hill Capital and, together with Carlyle, referred to in this prospectus as the Anchor Investors, pursuant to investment agreements with each of the Anchor Investors, or collectively, the Investment Agreements, and (2) various other investors, including certain of our directors and officers, or the Additional Investors and, together with the Anchor Investors, the Investors, pursuant to subscription agreements, or the Subscription Agreements, with each of such Additional Investors;

•

an agreement between us and Treasury, or the TARP Exchange and (2) the amendment of the warrant, or the Amended TARP Warrant, issued to Treasury to purchase 22,072 shares of our common stock at an exercise price of $16.00 per share; and

•

the settlement by CommunityOne of the $2.5 million aggregate principal amount of subordinated debt outstanding and held by SunTrust Bank for cash in the amount equal to the sum of 35% of the principal amount thereof plus 100% of the unpaid and accrued interest thereon as of the closing date, and the repurchase by CommunityOne from SunTrust Bank of the shares of nonvoting, nonconvertible, nonredeemable cumulative preferred stock of CommunityOne held by SunTrust Bank and having an aggregate liquidation preference of $12.5 million for cash in an amount equal to the sum of 25% of the aggregate liquidation value.

As part of the Recapitalization, until the later of the second anniversary of the date of the completion of the Recapitalization or the date that an investor no longer owns, together with its affiliates, at least 1.5% of the outstanding shares of stock, we are required to provide certain investors with preemptive rights with respect to public or private offerings of any of our equity securities, or any securities, options or debt that is convertible or exchangeable into equity or that includes an equity component, to enable the investor to maintain its percentage interests of our common stock beneficially owned, with certain specified exceptions generally applicable to issuances of equity securities not related to a capital raising event. These investors are entitled to preemptive rights with respect to this offering. We have provided the investors with the required notice to enable the investors to exercise their preemptive rights if they so choose. If any investors exercise their preemptive rights, they will be entitled to purchase enough shares of common stock that, following this offering and their purchase (and the sales of common stock effected by the exercise of all preemptive rights), such investors maintain their respective percentage interests in our common stock. Following completion of the offering, each investor will be notified as to the number of shares they may purchase to maintain their respective ownership percentage and the purchase price. The purchase price per share of common stock that the investors will pay pursuant to their preemptive rights will be equal to the average sales price of sales of our common stock pursuant to this offering as determined by us. Such investors will have ten business days following receipt of the notice to exercise such rights on a nonbinding basis, and 30 days from such election to purchase the shares pursuant to this offering.

The Merger and Reverse Split

In connection with the Recapitalization, on October 21, 2011, we consummated the acquisition of Granite. Pursuant to the terms and conditions of the Agreement and Plan of Merger, dated as of April 26, 2011 (as amended, the Merger Agreement), by and among us, Gamma Merger Corporation, a Delaware corporation and our wholly owned subsidiary, or Merger Sub, and Granite, Merger Sub merged with and into Granite, with Granite continuing as the surviving corporation and as our wholly owned subsidiary. This transaction is referred to in this prospectus as the Merger.

Upon the closing of the Merger, each outstanding share of Granite common stock, par value $1.00 per share, other than shares held by us, Granite or any of their respective wholly owned subsidiaries and other than shares owned in a fiduciary capacity or as a result of debts previously contracted, was converted, on a pre-reverse stock split basis, into the right to receive 3.375 shares of our common stock. As a result of the Merger and as a result of the Reverse Stock Split, we issued approximately 521,595 shares of its common stock to Granite stockholders, in the aggregate.

On October 31, 2011, we affected a one-for-one hundred reverse stock split, or the Reverse Stock Split, of our common stock, for which shareholder approval was obtained on October 19, 2011. The Reverse Stock Split was effective as of the close of business on October 31, 2011 in accordance with the filing of Articles of Amendment to our Articles of Incorporation with the Secretary of State of North Carolina.

Warrant Offering

We intend to distribute, during fiscal year 2012, to each holder of record of our common stock as of the close of business on October 20, 2011, or the business day immediately preceding the closing date of the Merger, non-transferable warrants to purchase common stock from us. As a result of the Reverse Stock Split, each shareholder will receive a warrant to purchase one share of our common stock for every 400 shares of common stock held as of October 20, 2011, at an exercise price of $16.00 per share. Further terms regarding the warrant offering will be set forth in an applicable prospectus supplement.

New Board of Directors and Executive Officers

Immediately following the consummation of the Recapitalization and the Merger, nine members of the Board of Directors resigned. H. Ray McKenney, Jr. and R. Reynolds Neely, Jr. remained on the Board of Directors following the Recapitalization and Merger. Boyd C. Wilson, Jr., formerly a director of Granite Corp.; John Bresnan, a Managing Director of Carlyle; Scott B. Kauffman, a Principal of Oak Hill Capital, Brian E. Simpson, Robert L. Reid, Austin A. Adams, Jerry R. Licari, J. Chandler Martin and Louis A. “Jerry” Schmitt were appointed to the Board of Directors. Each of the newly appointed directors will serve until their election at the next appropriate annual meeting of shareholders and until any of their successors are duly elected and qualified, or until each such individual’s earlier death, resignation or removal.

Additionally, we appointed the following individuals as executive officers upon the completion of the Recapitalization and the Merger: Brian E. Simpson, Chief Executive Officer; Robert L. Reid, President; and David L. Nielsen, Chief Financial Officer. Additionally, our new senior management team includes David C. Lavoie as Chief Risk Officer, Gregory P. Murphy as Chief Workout Officer, and Angus M. McBryde III as Treasurer.

Russell 3000 and Global Indexes

We expect to be added to the Russell 3000 Index and the Russell Global Index as of June 22, 2012. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell Global Index measures the performance of the global equity market based on all investable equity securities. The Russell Global Index includes approximately 10,000 securities in 48 countries and covers 98% of the investable global market.

Conflict of Interest

Carlyle Financial Services Harbor, L.P., an affiliate of Carlyle, holds 23.4% of our outstanding shares of common stock. Because entities affiliated with Carlyle have an interest in Sandler O’Neill + Partners, L.P., or the placement agent, Sandler O’Neill + Partners, L.P. is deemed to have a “conflict of interest” under Rule 5121 of the Financial Industry Regulatory Authority, or FINRA.

Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. This rule requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. FBR Capital Markets & Co. has assumed the responsibilities of acting as a “qualified independent underwriter” within the meaning of FINRA Rule 5121 in connection with this offering. The placement agent will pay a fee to FBR Capital Markets & Co. as compensation for acting as a “qualified independent underwriter” in connection with this offering. This fee will be paid by the placement agent out of its commissions received. Subject to applicable limits on underwriting compensation under the rules of FINRA, such fee shall be equal to (i) $25,000 plus (ii) 10% of the total commissions received by the placement agent for any aggregate gross proceeds of common stock sold by the placement agent in excess of $10,000,000. Sandler O’Neill + Partners, L.P. will not confirm sales of the shares to any account over which it exercises discretionary authority without the prior specific written approval of the customer. We have agreed to indemnify FBR Capital Markets & Co. for

The Offering

Issuer

FNB United Corp.

Common stock offered by us

Up to 2,000,000 shares of common stock, no par value per share.

Common Stock Outstanding After the

23,102,082 shares

Offering (1)

Manner of Offering

Sales of our common stock pursuant to this prospectus supplement, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on NASDAQ, on any other existing trading market for the common stock or to or through a market maker. Sales may be made over a period of time and from time to time through Sandler O’Neill, the placement agent, subject to the terms and conditions of the sales agency agreement. The placement agent will use commercially reasonable efforts to sell the shares of common stock on our behalf. See “Plan of Distribution (Conflict of Interest)” on page S-23 of this prospectus supplement.

Use of proceeds

Conflict of Interest

Carlyle Financial Services Harbor, L.P., an affiliate of Carlyle, holds 23.4% of outstanding shares of our common stock. Because entities affiliated with Carlyle have an interest in the placement agent, Sandler O’Neill is deemed to have a “conflict of interest” under Rule 5121 of the Financial Industry Regulatory Authority. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. This rule requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. FBR Capital Markets & Co. has assumed the responsibilities of acting as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. See “Plan of Distribution (Conflict of Interest)” on page S-23 of this prospectus supplement.

NASDAQ Capital Market symbol

“FNBN”

Risk factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below under the heading “Risk Factors,” beginning on page S-10, as well as the other information included or incorporated by reference into this prospectus supplement and the accompanying prospectus. You should carefully review and consider those risks before you purchase any shares of our common stock.

(1) The number of shares of common stock outstanding immediately after the closing of this offering assumes the sale of all of the shares offered hereby and is based on 21,102,082 shares of common stock outstanding as of April 30, 2012, which does not include 22,072 shares of common stock issuable upon the exercise of warrants held by Treasury and 8,243 shares reserved for issuance under our equity incentive plan.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described in this prospectus supplement and the accompanying prospectus and the other information in this prospectus supplement and the accompanying prospectus. If any of these risks occur, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. As a result, the price of our common stock could decline, and you could lose all or part of your investment.

The proceeds received from the Recapitalization may not be sufficient to satisfy our capital and liquidity needs in the future or to satisfy changing regulatory requirements, and we may need to raise additional capital that may not be available on terms acceptable to us.

Proceeds from the Recapitalization have been used to strengthen the capital base of CommunityOne and Bank of Granite. Despite this increase in the capital base, however, if economic conditions continue to be difficult or worsen or fail to improve in a timely manner, or if our operations or financial condition continue to deteriorate or fail to improve, particularly in the residential and commercial real estate markets in which we operate, we may need to raise additional capital. Factors affecting whether additional capital would be required include, among others, additional provisions for loan and lease losses and loan charge-offs, additional write-downs in the carrying value of our OREO, changing requirements of regulators and other risks discussed in this “Risk Factors” section. In addition, neither CommunityOne nor Bank of Granite is currently in compliance with the leverage capital requirement of its respective Order and may be required by the regulators to raise additional capital. Following this offering, we may have to raise additional capital and there can be no assurance that we would be able to do so in the amounts required and in a timely manner, on terms acceptable to us, or at all. Furthermore, any additional capital raised may be significantly dilutive to existing shareholders and may result in the issuance of securities that have rights, preferences and privileges that are senior to our common stock.

We have incurred significant losses and no assurance can be given that we will be profitable in the near term, or at all.

We have incurred significant losses over the past few years, including net losses to common shareholders of approximately $10.9 million for the quarter ended March 31, 2012, $92.7 million for the year ended December 31, 2011, $135.1 million for the year ended December 31, 2010, and $104.6 million for the year ended December 31, 2009. A significant portion of the losses is due to credit costs, including a significant provision for loan losses and significant write-downs in the carrying value of our OREO. Although we have taken a number of steps to reduce our credit exposure, at March 31, 2012, we still had $209.72 million in nonperforming assets, including nonaccrual loans and OREO, and it is possible that we will continue to incur elevated credit costs over the near term, which would adversely affect our overall financial performance and results of operations. No assurance can be given that we will return to profitability in the near term or at all.

We are subject to a number of requirements and prohibitions under the regulatory orders imposed on us, and no assurance can be given as to whether or when such orders will be lifted.

CommunityOne has been subject to the CommunityOne Order by the Office of the Comptroller of the Currency, or the OCC, dated July 22, 2010, which requires it to improve its capital position, asset quality, liquidity and management oversight, among other matters. CommunityOne also is required to achieve and maintain Tier 1 capital at least equal to 9% of adjusted total assets and total capital at least equal to 12% of risk-weighted assets. In addition, the CommunityOne Order requires CommunityOne to, among other things, review and revise various policies and procedures, including those associated with concentration management, the ALL, liquidity management, criticized assets, loan review and credit. Bank of Granite also has been subject to the

Granite Order by the FDIC and the North Carolina Commission of Banks, or NCCOB, dated August 17, 2009, which required Bank of Granite, among other things, to meet and maintain a Tier 1 capital ratio of 8% of total assets and a total risked based capital ratio of 12% of total risk-weighted assets, and to improve its asset quality, liquidity, board and management oversight.

In addition, we are subject to a Written Agreement with the Federal Reserve Bank of Richmond, or FRBR, dated October 21, 2010. Among other matters, the Written Agreement provides that unless we receive the consent of the FRBR, we cannot: (i) pay dividends; (ii) receive dividends or payments representing a reduction in capital from CommunityOne; (iii) make any payments on subordinated debentures or trust preferred securities; (iv) incur, increase or guarantee any debt; or (v) purchase or redeem any shares of our stock. The Written Agreement requires that the Board of Directors fully utilize our financial and managerial resources to ensure that CommunityOne complies with the Community One Order. We are also required to submit to the FRBR an acceptable capital plan and annual cash flow projections. The Written Agreement has been interpreted to also impose the same obligations on us with respect to Bank of Granite.

Although completion of the Merger and the Recapitalization on October 21, 2011 resulted in us being able to increase the banks’ capital initially to comply with the minimum capital requirements set forth in their respective Orders, neither bank currently is in compliance with the leverage capital requirement contained in its respective Order, and these Orders will remain in effect until the appropriate regulatory agency releases the banks from its requirements. Similarly, although we believe that completion of the Recapitalization resulted in us being in substantial compliance with the Written Agreement with the FRBR, the Written Agreement will remain in effect until the FRBR releases us from its requirements. Any material failure to comply with the provisions of the Orders or the Written Agreement could result in further enforcement actions by the OCC, the FDIC, the NCCOB or the FRBR.

We may not be able to effectively work out our nonperforming assets or recommence profitable lending operations, which may adversely affect our results of operations and financial condition.

During 2011, CommunityOne sought to reduce problem assets through loan sales to third-party buyers, workouts, restructurings and foreclosures. Bank of Granite is now undertaking similar actions to reduce its problem assets. When we receive a signed contract for the sale of a loan, the loan is marked down to the contract price less associated selling costs and transferred to loans held for sale. Such marking down to market may ultimately result in a loss to CommunityOne or Granite, as the case may be. After the Recapitalization and Merger, CommunityOne and Bank of Granite recommenced lending operations. Any decrease in the value of the underlying collateral in any loans made, or in borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition. There can be no assurance that we will not experience further increases in nonperforming loans in the future, or that the workout of our current nonperforming assets will not result in further losses in the future. A further downturn in the market areas we serve could increase our credit risk associated with our loan portfolio, as it could have a material adverse effect on both the ability of borrowers to repay loans as well as the value of the real property or other property held as collateral for such loans. Additionally, if we are unable to improve our credit and lending process to minimize our nonperforming loans and reduce credit risk through improved loan approval and monitoring procedures, our business and results of operations could be adversely affected.

The amounts recognized as identifiable net assets as a result of the application of acquisition method accounting to the acquisition of Granite may be revised based on additional information received for up to one year, which may adversely affect our regulatory capital position.

We have accounted for the Merger with Granite as a business combination under the acquisition method of accounting. As a result, we have recognized in our financial statements the identifiable net assets acquired and an amount of goodwill (representing the difference between the purchase price and the identifiable net assets).

During the measurement period, the amount of identifiable net assets recognized is subject to further adjustment to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Generally accepted accounting principles, or GAAP, require that the measurement period cannot exceed one year from the acquisition date. Accordingly, there are no assurances that new information received during the measurement period will not result in material changes to the identifiable net assets recognized. If changes are required to be made to the identifiable net assets recognized, then there may be more goodwill generated from the transaction, which may adversely affect our regulatory capital ratios.

Our decisions regarding credit risk could be incorrect, and our allowance for loan losses may be inadequate, which may adversely affect our financial condition and results of operations.

Our largest source of revenue is interest payments on loans made to customers of CommunityOne and Bank of Granite, respectively. Borrowers may not repay their loans according to the terms of those loans, and the collateral securing the payment of the loans may not be sufficient to assure repayment. We may experience significant loan losses, which could have a material adverse effect on our operating results. Management makes various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of the borrowers and the value of the real estate, which is obtained from independent appraisers, and other assets serving as collateral for the repayment of the loans.

We maintain allowance for loan losses, or an ALL, that we consider adequate to absorb losses inherent in the loan portfolio based on our assessment of all available information. In determining the size of the allowance, we rely on an analysis of the loan portfolio based on, among other things, historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and nonaccruals, and general economic conditions, both local and national. If management’s assumptions are wrong, the ALL may not be sufficient to cover actual loan losses, and adjustments may be necessary to allow for different economic conditions or adverse developments in the loan portfolio. Additionally, continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside management’s control, may require an increase in the ALL. Material additions to the allowance would materially decrease our net income.

Banking regulators periodically review our ALL and may require us to increase the allowance or recognize further loan charge-offs based on judgments different from those of management. Any increase in the ALL or loan charge-offs as required by regulatory authorities could have adverse effects on our operating results and financial condition.

The loss of any member of the new senior management may adversely affect us.

Upon the completion of the Recapitalization and the Merger, we appointed new executive management. We have assembled a senior management team that has substantial background and experience in banking and financial services in the markets we serve. We rely heavily on the experience and expertise of our new senior management to resolve problems and deploy new capital to achieve sustainable profitability and satisfactory capital levels. Loss of these key personnel could negatively impact our earnings because of their skills, customer relationships and/or the potential difficulty of promptly replacing them.

We may have difficulties integrating Granite and Bank of Granite’s operations into our operations or may fail to realize the anticipated benefits of the Merger.

The Merger involves the integration of two companies that have previously operated independently of each other. Successful integration of Granite and Bank of Granite’s operations will depend primarily on our ability to consolidate their operations, systems and procedures into ours and to eliminate redundancies and costs. This

process is complex, costly and time-consuming and requires significant attention from senior management, potentially diverting attention from other important aspects of our business plan. We may not be able to integrate the operations without encountering difficulties including, without limitation:

In addition, the integration may be delayed or not undertaken due to bank regulatory agency concerns. Failure to successfully integrate the operations of Granite and Bank of Granite could harm our business, results of operations and cash flows.

Subsequent resales of shares of our common stock in the public market and future purchases of shares of our common stock may cause the market price of our common stock to fall.

We issued a large number of shares of our common stock to the Investors in the Recapitalization, to the stockholders of Granite in the Merger and to the Treasury in the TARP Exchange. We have an effective registration statement that allows the U.S. Treasury and certain of the Investors listed in that registration statement to sell their shares of our common stock. Carlyle and Oak Hill Capital will have certain registration rights with respect to the shares of our common stock held by them following a nine-month lock-up period that commenced on October 21, 2011 and will expire on July 21, 2012. The registration rights for Carlyle and Oak Hill Capital will allow them to sell their shares of our common stock without compliance with the volume and manner of sale limitations under Rule 144 promulgated under the Securities Act. The market value of our common stock could decline as a result of sales by the Investors from time to time of a substantial amount of the shares of our common stock held by them. In addition, pursuant to the terms of the Recapitalization, we are required to offer warrants to purchase shares of our common stock to our shareholders as of the day immediately preceding the closing of the Merger at a purchase price per share (after taking into account the Reverse Split) of $16.00. The exercise of any of these warrants may have a dilutive effect on you and our other shareholders, and negative impact on the market value of our common stock, or both. As a result of this offering, we are also required to offer the investors in the Recapitalization the opportunity to exercise their preemptive rights. If any of these investors exercise their preemptive rights, it may have a dilutive effect on you and our other shareholders, a negative impact on the market value of our common stock, or both.

Each of Carlyle and Oak Hill Capital hold approximately 23% of the outstanding shares of our common stock, and each has a representative on our Board of Directors, and on the boards of directors of each of CommunityOne and Granite. In addition, each of Carlyle and Oak Hill Capital has preemptive rights to maintain their percentage ownership of our common stock in the event of certain issuances of securities by us. Although each of Carlyle and Oak Hill Capital entered into certain passivity and non-affiliation commitments with the Federal Reserve Board in connection with obtaining approval of its proposed investment in us, in pursuing their economic interests, Carlyle and Oak Hill Capital may have interests that are different from the interests of our other shareholders. Additionally, the concentration of ownership by Carlyle and Oak Hill Capital means that they will also exert considerable, ongoing influence over matters subject to shareholder approval, including the election of directors and significant corporate transactions, such as a merger, sale of assets or other business combination or sale of our business. This concentration of ownership may have the effect of delaying, deferring, or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other shareholders.

We may suffer substantial losses due to our agreements to indemnify investors in the Recapitalization against a broad range of potential claims.

In the Investment Agreements with each of Carlyle and Oak Hill Capital and in the Subscription Agreements with the Additional Investors, we agreed to indemnify the Investors for a broad range of claims, including losses resulting from the inaccuracy or breach of our representations or warranties in such agreements and our breach of the performance of our covenants contained in such agreements. While these indemnities are subject to various limitations, if claims were successfully brought against us, it could potentially result in significant losses for us.

Our ability to use net operating loss carryforwards to reduce future tax payments may be limited or restricted or may not exist at all.

We have generated significant net operating losses, or NOLs, as a result of our recent losses. We are generally able to carry NOLs forward to reduce taxable income in future years. However, the ability to utilize the NOLs is subject to the rules of Section 382 of the Internal Revenue Code. Section 382 generally restricts the use of NOLs after an “ownership change.” An ownership change occurs if, among other things, the shareholders (or specified groups of shareholders) who own or have owned, directly or indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% shareholders under Section 382 and U.S. Treasury regulations promulgated thereunder because of an increase of their aggregate percentage ownership of that corporation’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these shareholders over a rolling three-year period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carryforwards. This annual limitation is generally equal to the product of the value of the corporation’s stock on the date of the ownership change, multiplied by the long-term tax-exempt rate published monthly by the Internal Revenue Service. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL carryforwards.

We do not believe that the Recapitalization, the Merger, the TARP Exchange or the Warrant Offering caused or will cause an “ownership change” within the meaning of Section 382. In addition, to reduce the likelihood that future transactions in shares of our common stock will result in an ownership change, on April 15, 2011, we adopted a Tax Benefits Preservation Plan, which provides an economic disincentive for any person or group to become an owner, for relevant tax purposes, of 4.99% or more of our common stock. However, we cannot ensure that our ability to use our NOLs to offset income will not become limited in the future. As a result, we could pay taxes earlier and in larger amounts than would be the case if our NOLs were available to reduce our federal income taxes without restriction.

We are exposed to many types of operational risk, including reputational risk, legal and compliance risk. Operational risk includes the risk of fraud or theft by employees or persons outside FNB, unauthorized transactions by employees or operational errors, including clerical or recordkeeping errors or those resulting from faulty or disabled computer or telecommunications systems, and breaches of the internal control system and compliance requirements. Negative public opinion can result from our actual or alleged conduct in a variety of areas, including lending practices, corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to attract and retain customers and can expose us to litigation and regulatory action. Operational risk also includes potential legal actions that could arise from an operational deficiency or as a result of noncompliance with applicable regulatory standards.

Because the nature of the banking business involves a high volume of transactions, certain errors may be repeated or compounded before they are found and corrected. Our reliance upon automated systems to record and process transactions may further increase the risk that technical flaws or employee tampering or manipulation of

those systems will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (e.g., computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their employees as we are) and to the risk that our or our vendor’s business continuity and data security systems prove to be inadequate.

Our ability to pay dividends is limited, leaving appreciation in the value of our common stock as the sole opportunity for returns on investment.

The holders of our common stock are entitled to receive dividends when and if declared by the Board of Directors out of funds legally available for the payment of dividends. Our ability to pay dividends to its shareholders has been dependent upon the amount of dividends CommunityOne may pay to us. Statutory and regulatory limitations are imposed on the payment of dividends by CommunityOne and Bank of Granite to us, as well as by us to our shareholders. Specifically, under the terms of the CommunityOne Order with the OCC, CommunityOne is generally prohibited from paying any dividends or making any capital distributions. A similar restriction is in place for Bank of Granite under the Granite Order with the FDIC. In addition, under applicable law, CommunityOne must obtain the prior approval of the OCC to pay dividends if the total of all dividends declared by the Bank in any calendar year will exceed the sum of its net income for that year and its retained net income for the preceding calendar years, less certain transfers. Bank of Granite may not pay dividends under North Carolina law unless its capital surplus is at least 50% of its paid-in capital. Our Written Agreement with the FRBR prohibits us from declaring or paying any dividends without the prior written approval of the FRBR and the Federal Reserve’s Director of Supervision and Regulation. The Written Agreement further prohibits us from taking any dividends or any other form of payment representing a reduction in capital from either bank without the prior written approval of the FRBR.

We elected in April 2010 to defer further interest payments on each of the series of junior subordinated debt securities relating to the trust preferred securities of FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II. These interest payments were brought current in order to consummate the Recapitalization, but are again being deferred. We have the right under each indenture for the junior subordinated debt securities to defer interest payments for up to 20 consecutive calendar quarters. The deferral provisions for these securities were intended to provide us with a measure of financial flexibility during times of financial stress due to market conditions, such as the current state of the financial and real estate markets. As a result of our election to exercise our contractual right to defer interest payments on our junior subordinated debt securities, we will also be unable to pay dividends on our common stock until such time as we are current on interest payments on the junior subordinated debt securities.

We are vulnerable to the economic conditions within the relatively small region in which we operate.

Our overall success will depend on the general economic conditions within our market area, which extends from the central and southern Piedmont and Sandhills of North Carolina to the mountains of western North Carolina. The economic downturn in this fairly small geographic region has negatively affected our customers and has adversely affected our results of operations. For example, high levels of unemployment and depressed real estate values have weakened the economy of the region and depressed the earnings and financial condition of each of us and Granite prior to the Merger.

Since 2009, the North Carolina economic environment has been adverse for many households and businesses. These conditions may not improve in the near term. The continuation of these conditions could further adversely affect the credit quality of our loans, the value of collateral securing loans to borrowers, the value of our investment securities and our overall results of operations and financial condition. Until the economic conditions within our geographic footprint improve, our business, financial condition and results of operations could be adversely affected.

Weaknesses in the markets for residential or commercial real estate could reduce our net income and profitability.

Real estate lending (including commercial, construction, land development and residential) is and will continue to be a large portion of CommunityOne’s and Bank of Granite’s combined loan portfolio. These categories constitute $1.1 billion, or approximately 89.4%, of the banks’ total loan portfolio as of December 31, 2011. These categories are generally affected by changes in economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax and other laws and acts of nature. Further downturns in the real estate values in the markets in which we originate, purchase and service mortgage and other loans could hurt our business because these loans are secured by real estate. The softening of the real estate market beginning in 2009 and through 2011 has adversely affected our net income. Further declines in real estate values would diminish our ability to recover on defaulted loans by selling real estate collateral, making it more likely that we would suffer additional losses on defaulted loans. Additionally, a decrease in asset quality could require additions to allowance for loan losses through increased provisions for loan losses, which would negatively impact our future earnings. If there are further declines in the market, they will adversely affect our future earnings.

Increases in FDIC insurance premiums may adversely affect our net income and profitability.

We are subject to the deposit insurance premiums set by the FDIC. The Dodd-Frank Act imposes additional assessments and costs with respect to our deposit insurance. Regulatory changes and any future increases or required prepayments of FDIC insurance premiums may adversely affect our earnings and financial condition. If there are additional bank or financial institution failures, or if the cost of resolving prior failures exceeds expectations, we may be required to pay even higher FDIC premiums than the recently increased levels. Furthermore, under FDIC regulations, because of the recent capital positions of CommunityOne and Bank of Granite, each institution’s assessment rates have increased from historical levels.

We may experience significant competition in our market area, which may adversely affect our business.

The commercial banking industry within our market area is extremely competitive. In addition, we compete with other providers of financial services, such as savings associations and savings banks, credit unions, insurance companies, consumer finance companies, brokerage firms, the mutual funds industry and commercial finance and leasing companies, some of which are subject to less extensive regulation than us with respect to the products and services they provide. Our larger competitors include large interstate financial holding companies that are among the largest in the nation and are headquartered in North Carolina. These companies have a significant presence in our market area, have greater resources than we do and may offer products and services that we do not offer. These institutions also may be able to offer the same products and services at more competitive rates and prices.

We also compete with a variety of institutions outside of our market area that also offer online banking services. Online competitors could result in the loss of fee income, as well as the loss of customer deposits. In addition, changes in consumer spending and saving habits could adversely affect our operations, and we may be unable to timely develop competitive new products and services in response to these changes.

Changes in interest rates may have an adverse effect on our profitability.

Our earnings and financial condition depend to a large degree upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of the margin between interest rates earned on loans and investments and the interest rates paid on deposits and borrowings could adversely affect our earnings and financial condition. We can neither predict with certainty nor control changes in interest rates. These changes can occur at any time and are affected by many factors, including national, regional and local economic conditions, competitive pressures and monetary policies

of the Federal Reserve. We have ongoing policies and procedures designed to manage the risks associated with changes in market interest rates. Notwithstanding these policies and procedures, changes in interest rates may have an adverse effect on our financial results.

The downgrade of the U.S. government’s sovereign credit rating, any related rating agency action in the future, the ongoing debt crisis in Europe and the downgrade of the sovereign credit ratings for several European nations could negatively impact our business, financial condition and results of operations.

In November 2011, a Congressional committee that was formed to achieve $1.2 trillion in deficit reduction measures announced that it had failed to achieve its stated purpose by the deadline imposed by Congress. Standard & Poor’s Rating Services, which had downgraded the U.S. government’s AAA sovereign credit rating to AA+ with a negative outlook in August 2011, affirmed its AA+ rating following the announcement. Moody’s Investors Services, which changed its U.S. government rating outlook to negative in August 2011, also reaffirmed its rating following the Congressional committee’s announcement. After the announcement Fitch Ratings stated that the failure of the committee to reach an agreement would likely cause it to change its outlook on U.S. government debt to negative. Fitch also stated that a downgrade of the U.S. sovereign credit rating would occur without a credible plan in place by 2013 to reduce the U.S. government deficit. The impact of any additional downgrades to the U.S. government’s sovereign credit rating by any of these rating agencies, as well as the perceived creditworthiness of U.S. government-related obligations, is inherently unpredictable and could adversely affect the U.S. and global financial markets and economic conditions and have a material adverse effect on our business, financial condition and results of operation.

In addition, certain European nations continue to experience varying degrees of financial stress. Despite various assistance packages, worries about European financial institutions and sovereign finances persist. In January 2012, Standard & Poor’s downgraded the credit ratings of France, Italy and seven other European nations in part as a result of the failure of leaders to address systemic stresses in the Eurozone. Market concerns over the direct and indirect exposure of European banks and insurers to these European Union nations and each other have resulted in a widening of credit spreads and increased costs of funding for some European financial institutions. In addition, ongoing concerns about the political crisis in Greece and Greece’s ability to meet the requirements of its debt obligations has had and will likely continue to have a negative impact on global financial markets, including the equity and debt markets in the U.S. Risks related to the European economic crisis have had, and are likely to continue to have, a negative impact on global economic activity and the financial markets. As these conditions persist, our financial condition and results of operations could be materially adversely affected.

The TARP Exchange Agreement imposes restrictions and obligations limiting our ability to access the equity capital markets.

In connection with the Recapitalization, Treasury exchanged all of the preferred stock we had issued to Treasury under the Capital Purchase Program, or CPP, for shares of our common stock, and we amended the terms of the Warrant issued to Treasury. After February 13, 2012, the consent of Treasury is no longer required for us to, among other things, increase quarterly common stock dividends beyond $0.10 per share or effect repurchases of common stock or other equity or capital securities. However, Treasury retains certain “piggyback” registration rights with respect to the shares of our common stock that give it priority to sell the shares it holds in any offering of securities by us. If Treasury exercises its piggyback registration rights in the future, it may have an adverse effect on our ability to raise capital or a negative impact in the market value of our common stock.

Our business could suffer if we fail to attract and retain skilled people.

Our success depends, in large part, on our ability to attract and retain competent, experienced people. As a result of our participation in the CPP, and continuing until such time as Treasury is no longer a holder of our common stock, we are required under applicable federal law to meet certain standards for executive compensation. Furthermore, our financial condition and results of operations caused our Board of Directors to

freeze salaries in 2008 and therefore to become subject to regulatory restrictions on our ability to make certain payments to employees. The imposition of these compensation limits, in addition to other competitive pressures, may have an adverse effect on our ability to attract and retain skilled personnel, resulting in our not being able to hire or retain the best people. The loss of key personnel could have an adverse effect on our future results of operations.

The implementation of the Dodd-Frank Act may result in lower revenues and higher costs.

The Dodd-Frank Act includes, among other things, the establishment of strengthened capital and prudential standards for banks and bank holding companies; new limits on interchange fees on debit card transactions; enhanced regulation of financial markets, including derivatives and securitization markets; the elimination of certain trading activities from banks; a permanent increase of the FDIC deposit insurance to $250,000; the elimination of the prohibition on paying interest on demand deposits; the creation of a Financial Stability Oversight Council to identify emerging systemic risks and improve interagency cooperation; implementation of risk retention rules for loans (excluding qualified residential mortgages) that are sold by a bank; and the creation of the Consumer Financial Protection Bureau, which is authorized to promulgate and enforce consumer protection regulations relating to consumer financial products and services.

A number of provisions of the law, which was enacted in 2010, remain to be implemented through the rulemaking process at various regulatory agencies. We are unable to predict what the final form of these rules will be when implemented by the respective agencies, but our management believes that certain aspects of the new law, including, without limitation, the additional cost of higher deposit insurance and the costs of compliance with disclosure and reporting requirements that may be issued by the CFPB, could have a significant impact on our business, financial condition and results of operations.

Changes in laws and regulations and the regulatory environment could have a material adverse effect on us, including our subsidiaries CommunityOne and Granite.

We are extensively regulated under federal and state banking laws and regulations that are intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole. In addition, we are subject to changes in federal and state laws and regulations, and governmental economic and monetary policies. We cannot predict whether any of these changes may adversely and materially affect us. The current regulatory environment for financial institutions, particularly with the enactment of the Dodd-Frank Act, entails significant potential increases in compliance requirements and associated costs, including those related to consumer credit, with a focus on mortgage lending. Federal and state banking regulators also possess broad powers to take supervisory actions as they deem appropriate. These actions may result in higher capital requirements, higher insurance premiums and limitations on our activities that could have a material adverse effect on our business and profitability.

Market developments may adversely affect our industry, business and results of operations.

Significant declines in the housing market, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by many financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other derivative securities, caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. During this time, we experienced significant challenges, our credit quality has deteriorated, and net income and results of operations have been adversely affected. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers, including other financial institutions. Lack of available credit, a lack of confidence in the financial sector, increased volatility in the financial markets and/or reduced business activity could materially adversely affect our business, financial condition and results of operations.

Certain provisions of our articles of incorporation, bylaws and the Tax Benefits Preservation Plan may discourage takeovers.

Our articles of incorporation and bylaws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by our Board of Directors. In particular, our articles of incorporation and bylaws:

In addition, we adopted a Tax Benefits Preservation Plan, which provides an economic disincentive for any one person or group to acquire more than 4.99% of our common stock and for any existing 4.99% shareholder to acquire more than a specific amount of additional shares.

Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates.

Our accounting policies and methods are fundamental to the procedures by which we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner to report our financial condition and results. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet may result in us reporting materially different results than would have been reported under a different alternative.

Certain accounting policies are critical to presenting our financial condition and results. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include: the ALL; the valuation of other real estate; the determination of fair value for financial instruments; business combinations; and the accounting for income taxes. Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the ALL or sustain credit losses that are significantly higher than the reserve provided or both; recognize significant impairment on its financial instruments and other intangible asset balances; or significantly increase its liabilities for taxes or pension and post retirement benefits.

Changes in accounting standards could materially affect our financial statements.

From time to time accounting standards setters change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can materially affect how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results, or a cumulative charge to retained earnings.

We rely on other companies to provide key components of our business infrastructure.

Third party vendors provide key components of our business infrastructure such as internet connections and network access. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused by these third parties, including those which result from their failure to provide services for any

reason or their poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.

We face systems failure risks as well as security risks, including “hacking” and “identity theft.”

The computer systems and network infrastructure used by us and others could be vulnerable to unforeseen problems. These problems may arise in our internal systems or the systems of our third-party vendors or both. Our operations are dependent upon our ability to protect computer equipment against damage from fire, power loss, or telecommunications failure. Any damage or failure that may cause an interruption in our operations could adversely affect our business and financial results. In addition, our computer systems and network infrastructure present security risks, and could be susceptible to hacking or identity theft.

Unpredictable catastrophic events could have a material adverse effect on us.

The occurrence of catastrophic events such as hurricanes, tropical storms, earthquakes, pandemic disease, windstorms, floods, severe winter weather (including snow, freezing rain, ice storms and blizzards), fires and other catastrophes could adversely affect our consolidated financial condition or results of operations. Unpredictable natural and other disasters could have an adverse effect on us in that such events could materially disrupt our operations or the ability or willingness of our customers to access the financial services we offer. The incidence and severity of catastrophes are inherently unpredictable. Although we carry insurance to mitigate our exposure to certain catastrophic events, these events could nevertheless reduce our earnings and cause volatility in our financial results for any fiscal quarter or year and have a material adverse effect on our financial condition or results of operations or both.

The trading volume in our common stock has been low, and the sale of a substantial number of shares in the public market could depress the price of our stock and make it difficult for you to sell your shares.

Our common stock is currently traded on the NASDAQ Capital Market. Our common stock is thinly traded and has substantially less liquidity than the average trading market for many other publicly traded companies, with volume averaging approximately 3,200 shares per day over the three months ended March 31, 2012. Thinly traded stocks can be more volatile than stock trading in an active public market. Our stock price has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future. These factors include: our announcement of developments related to our businesses, operations and stock performance of other bank holding companies deemed to be peers, news reports of trends and concerns and other issues related to the financial services industry. Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance. General market declines or market volatility in the future, especially in the financial institutions sector of the economy, could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices. Therefore, our shareholders may not be able to sell their shares at the volume, prices or times that they desire.

Our management will have broad discretion over the use of the net proceeds from this offering, you may not agree with how we use the proceeds and the proceeds may not be invested successfully.

We have not designated any portion of the net proceeds from this offering to be used for any particular purpose. Accordingly, our management will have broad discretion as to the use of the net proceeds from any offering by us and could use them for purposes other than those contemplated at the time of this offering. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any, return for our company.

You may experience future dilution as a result of this and future offerings.

If our Anchor Investors and the Additional Investors decide to exercise their preemptive rights and purchase shares in this offering, shareholders may experience dilution by reducing his, her or its percentage ownership of the total outstanding shares. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share in this offering. For example, pursuant to the terms of the Recapitalization, we are required to offer warrants to purchase shares of our common stock to our shareholders on the day immediately preceding the closing of the Merger at a purchase price per share (after taking into account the Reverse Split) of $16.00. The exercise of any of these warrants may have a dilutive effect on you and our other shareholders, a negative impact on the market value of our common stock, or both. We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by investors in this offering.

We intend to use the net proceeds we receive from the sale of our common stock pursuant to this prospectus supplement for general corporate purposes, including contributions to the capital of CommunityOne Bank and Bank of Granite. We may invest the net proceeds temporarily until we use them for their stated purpose. We cannot predict whether the proceeds invested will yield a favorable return.

We have entered into an sales agency agreement, dated as of May 18, 2012, with our placement agent, under which we may issue and sell up to an aggregate of 2,000,000 shares of our common stock from time to time through the placement agent, as our agent for the offer and sale of the shares, or to the placement agent for resale. The sales, if any, of the common stock under the sales agency agreement will be made in “at-the-market” offerings as defined in Rule 415 of the Securities Act, including sales made directly on NASDAQ, on any other existing trading market for the common stock or to or through a market maker or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. As our sales agent, the placement agent will not engage in any transactions that stabilize our common stock.

From time to time during the term of the sales agency agreement, we may deliver a placement notice to the placement agent, acting as our agent, which shall at a minimum include the number of shares of common stock to be issued, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in any one day and any minimum price below which sales may not be made. Upon acceptance of a placement notice from us, and subject to the terms and conditions of the sales agency agreement, if acting as agent, such placement agent agrees to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such shares. We or the placement agent may suspend the offering of our common stock at any time upon delivery of proper notice in writing to the other, at which time the selling period will immediately terminate.

We will pay the placement agent commissions, or allow a discount, not to exceed, in the aggregate, 3% of the gross proceeds from the sale of all shares sold through the placement agent under the sales agency agreement. The remaining sales proceeds, after deducting any expenses payable by us and any transaction fees imposed by any governmental or self-regulatory organization in connection with the sales, will equal our net proceeds for the sale of our common stock. We have agreed to reimburse the placement agent for certain expenses in certain circumstances, including fees and disbursements of counsel to the placement agent incurred in connection with or incident to the sales agency agreement and the transactions and obligations contemplated thereby, in an amount not to exceed $50,000 in the aggregate, excluding the reasonable fees and disbursements of counsel to the placement agent in connection with FINRA’s review of the terms of this offering. In addition, the placement agent will pay a fee to FBR Capital Markets & Co. as compensation for acting as a “qualified independent underwriter” in connection with this offering. See “—Conflict of Interest” below.

In connection with the Recapitalization, we granted preemptive rights to the Anchor Investors and the Additional Investors which permit such investors to maintain their proportionate equivalent interest in our common stock in an amount equal prior to the commencement of this offering. We have offered each of such investors the right, following the completion of this offering, to purchase such number of shares to maintain their proportionate interest at a price equal to the average sale price of shares sold in the offering. We will pay the placement agent a commission of 3.0% in connection with any such sales to the Additional Investors, and the Additional Investors are prohibited from purchasing shares in excess of 4.99% of our outstanding stock after giving effect to the exercise of by all other holders of their preemptive rights. In connection with this the offering, each Anchor Investor and each Additional Investor will be notified as to the number of shares they may purchase to maintain their respective ownership percentage and the purchase price. The purchase price per share of common stock that such investors will pay pursuant to their preemptive rights will be equal to the average sales price of sales of our common stock pursuant to this offering as determined by us. Such investors will have ten business days following receipt of the notice to exercise such rights, and 30 days from such election to purchase the shares pursuant to this offering.

Settlement for sales of our common stock are generally anticipated to occur on the third trading day following the date on which any sales were made in return for payment of the net proceeds to us, unless we agree otherwise with the placement agent. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.

Sales of our common stock as contemplated by this prospectus supplement will be settled through the facilities of the Depository Trust Company. The placement agent will provide written confirmation to us following the close of trading on NASDAQ each trading day on which common stock is sold by it as placement agent for us under the sales agency agreement, but in any event prior to the end of the placement agent’s next

business day. Each confirmation will include the number of shares sold on that day, the aggregate gross sales proceeds with respect to such sales, the compensation payable by us to the placement agent with respect to such sales and the net proceeds to us. We will report at least quarterly in our periodic filings and/or a prospectus supplement the number of shares of common stock sold through the placement agent in “at-the-market” offerings, the compensation payable by us to the placement agent with respect to such sales and the net proceeds to us in connection with such sales of our common stock.

In connection with the sale of our common stock hereunder, the placement agent may be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation paid such placement agent may be deemed to be underwriting commissions or discounts. We have agreed to provide indemnification and contribution to the placement agent against certain civil liabilities, including liabilities under the Securities Act.

We estimate that the total expenses of the offering payable by us, excluding commissions, discounts or other items of value payable or provided to the placement agent under the sales agency agreement, will be approximately $175,000.

The offering of our common stock pursuant to the sales agency agreement will terminate upon the earlier of (1) the termination of the sales agency agreement by us or the placement agent at any time in the respective party’s sole discretion and upon written notice to the other party or parties, as the case may be, and (2) upon sale of all 2,000,000 shares of our common stock under the sales agency agreement.

Carlyle holds 23.4% of our outstanding shares of common stock. Because entities affiliated with Carlyle have an interest in the placement agent, Sandler O’Neill + Partners, L.P. is deemed to have a “conflict of interest” under FINRA Rule 5121. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. This rule requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. FBR Capital Markets & Co. has assumed the responsibilities of acting as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. The placement agent will pay a fee to FBR Capital Markets & Co. as compensation for acting as a “qualified independent underwriter” in connection with this offering. This fee will be paid by the placement agent out of its commissions received. Subject to applicable limits on underwriting compensation under the rules of FINRA, such fee shall be equal to (i) $25,000, plus (ii) 10% of the total commissions received by the placement agent if aggregate gross proceeds of common stock sold by the placement agent equal or exceed $10,000,000. Sandler O’Neill + Partners, L.P. will not confirm sales of the shares to any account over which it exercises discretionary authority without the prior specific written approval of the customer. We have agreed to indemnify FBR Capital Markets & Co. for acting as a qualified independent underwriter against certain liabilities, including liabilities under the Securities Act and to contribute to payments that FBR Capital Markets & Co. may be required to make for these liabilities.

In accordance with the requirements of FINRA Rule 5110(g), affiliates of Carlyle have agreed that any unregistered common stock acquired by affiliates of Carlyle during the 180 days prior to the required filing date with FINRA will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the common stock by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of the public offering, except as provided in paragraph (g)(2) of FINRA Rule 5110(g).

The placement agent and its affiliates have provided, and may provide, from time to time in the future, certain financial advisory, investment banking and other services to us and our affiliates in the ordinary course of its business, for which it has received and may continue to receive customary fees and commissions. Specifically, the placement agent provided advisory services in connection with our recent private placement and received customary cash fees for such services. In addition, from time to time, the placement agent and its affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

The financial statements incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2011 have been so incorporated in reliance on the report of Dixon Hughes Goodman LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

Parker Poe Adams & Bernstein LLP, our counsel, will pass upon the validity of the common stock to be issued by us through this prospectus supplement. Certain legal matters will be passed upon for the placement agent by DLA Piper LLP (US), Washington, DC.

We may offer and sell from time to time in one or more offerings, up to $60,000,000 of shares of common stock, warrants, and rights (collectively, the “securities”) of FNB United Corp. (“FNB”).

Our common stock is traded on The Nasdaq Capital Market, or Nasdaq, under the symbol “FNBN.” The closing sales price of our common stock on the Nasdaq Stock Market on May 14, 2012 was $17.34 per share. You are urged to obtain current market quotations for our common stock.

Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with the additional information described under the heading “Information Incorporated by Reference” before you make your investment decision.

We may sell the securities to underwriters or dealers, through agents, or directly to investors, or through a combination of these methods. We will set forth the names of any underwriters or agents in the applicable prospectus supplement.

Investing in our securities involves a high degree of risk. See the section “Risk Factors” on page 7 of this prospectus, as well as in any supplements to this prospectus.

The FNB securities offered in this prospectus are not savings or deposit accounts or other obligations of any of our bank or non-bank subsidiaries, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

This prospectus is part of a “shelf” registration statement that we have filed with the Securities and Exchange Commission, which we refer to as the “SEC.” Under this shelf registration statement, we may issue and sell to the public, either separately or together, any part or all of the securities described in the registration statement, at any time and from time to time, in one or more public offerings, up to an aggregate amount of $60,000,000 of our common stock, warrants or rights. We may also issue common stock upon exercise of the warrants.

This prospectus only provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that contains specific information about the terms of those securities. A prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any applicable prospectus supplement together with the additional information described below under the heading “Where You Can Find More Information,” and “Information Incorporated by Reference.” If the information in this prospectus is inconsistent with a prospectus supplement, you should rely on the information in that prospectus supplement. We may also prepare free writing prospectuses that describe particular securities. Any free writing prospectus should also be read in connection with this prospectus and with any prospectus supplement referred to therein. For purposes of this prospectus, any reference to an applicable prospectus supplement may also refer to a free writing prospectus, unless the context otherwise requires.

We may sell the securities (a) through agents; (b) through underwriters or dealers; (c) directly to one or more purchasers; or (d) through a combination of any of these methods of sale. We and our agents reserve the sole right to accept and to reject in whole or in part any proposed purchase of securities. See “Plan of Distribution” below. A prospectus supplement, which we will provide to you each time we offer securities, will provide the names of any underwriters, dealers, or agents involved in the sale of the securities, and any applicable fee, commission or discount arrangements with them.

You should rely only on the information contained in this prospectus, any prospectus supplement and the documents we have incorporated by reference. We will disclose any material changes in our affairs in an amendment to this prospectus, a prospectus supplement or a future filing with the SEC incorporated by reference in this prospectus. No person has been authorized to give any information or to make any representations other than those contained or incorporated in this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized. This prospectus does not constitute an offer to sell or a solicitation of an offer to sell or to buy any securities other than those to which it relates, or an offer or solicitation with respect to those securities to which it relates to any persons in any jurisdiction where such offer or solicitation would be unlawful. The delivery of this prospectus at any time does not imply that the information contained or incorporated herein at its date is correct as of any time subsequent to its date.

Unless specifically noted otherwise in this prospectus, references to “FNB,” “we,” “us,” and “our” are to FNB United Corp., a North Carolina corporation, and its subsidiaries, except that such terms refer to FNB United Corp. only and not to its subsidiaries in the sections entitled “Description of Common Stock,” “Description of Warrants,” and “Description of Rights.”

We make statements in this prospectus and the documents incorporated herein by reference, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other financial, business or strategic matters regarding or affecting FNB that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of management and the information available to management at the time that these disclosures were prepared.

Additional factors that may affect our results are discussed in our Annual Report on Form 10-K under “Item 1A, Risk Factors” or may be contained in our Quarterly Reports on Form 10-Q under headings such as “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and “Business,” or in our Current Reports on Form 8-K, among other places. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

PROSPECTUS SUMMARY

The following summary highlights selected information contained elsewhere in this prospectus and in the documents incorporated by reference in this prospectus and does not contain all the information you will need in making your investment decision. You should read carefully this entire prospectus and the documents incorporated by reference in this prospectus before making your investment decision.

Company Overview

We are a bank holding company with two bank subsidiaries: CommunityOne Bank, N.A. (“CommunityOne”), a national banking association headquartered in Asheboro, North Carolina and, through Bank of Granite Corporation (“Granite”), Bank of Granite, a state chartered bank headquartered in Granite Falls, North Carolina. As of March 31, 2012, CommunityOne had 45 branches, $892.9 million in loans and $1.44 billion in deposits. As of March 31, 2012, Granite had 18 branches, $352.9 million in loans and $682.4 million in deposits.

Through our bank subsidiaries, we offer a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, investment management and trust services, to individual and business customers through operations located in Alamance, Alexander, Ashe, Burke, Caldwell, Catawba, Chatham, Gaston, Guilford, Iredell, Mecklenburg, Montgomery, Moore, Orange, Randolph, Richmond, Rowan, Scotland, Watauga and Wilkes counties in North Carolina. CommunityOne owns three subsidiaries: Dover Mortgage Company, (“Dover”); First National Investor Services, Inc.; and Premier Investment Services, Inc., (“Premier”). Dover previously engaged in the business of originating, underwriting and closing mortgage loans for sale in the secondary market. Dover ceased operations in the first quarter of 2011 and filed for Chapter 11 bankruptcy on February 15, 2012. First National Investor Services, Inc. holds deeds of trust for CommunityOne. Premier is inactive. Through Granite, we also own Granite Mortgage, Inc., which ceased mortgage operations in 2009 and filed for Chapter 11 bankruptcy on February 15, 2012. FNB also owns FNB United Statutory Trust I, FNB United Statutory Trust II, and Catawba Valley Capital Trust II, which were formed to facilitate the issuance of trust preferred securities.

Our common stock is traded on The Nasdaq Capital Market under the ticker symbol “FNBN.” Our principal executive offices are located at 150 South Fayetteville Street, Asheboro, North Carolina, 27203 and our telephone number is (336) 626-8300. Our internet address is http://www.myyesbank.com. The information contained on our web site is not part of this prospectus.

Recent Developments

Reverse Stock Split

On October 31, 2011, we effected a one-for-one hundred reverse stock split of our common stock, or the Reverse Stock Split, for which shareholder approval was obtained on October 19, 2011. The Reverse Stock Split was effective as of the close of business on October 31, 2011 in accordance with the filing of Articles of Amendment to our Articles of Incorporation with the Secretary of State of North Carolina. All share numbers and per share prices in this prospectus reflect the Reverse Stock Split, unless otherwise indicated.

The Recapitalization

On October 21, 2011, we completed the following transactions as part of our recapitalization, or the Recapitalization, in connection with the acquisition of Granite:

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(1) affiliates of each of The Carlyle Group, or Carlyle, and Oak Hill Capital Partners, or Oak Hill Capital and, together with Carlyle, referred to in this prospectus as the Anchor Investors, pursuant to investment agreements with each of the Anchor Investors, or collectively, the Investment Agreements, and (2) various other investors, including certain of our directors and officers, or the Additional Investors and, together with the Anchor Investors, the Investors, pursuant to subscription agreements, or the Subscription Agreements, with each of such Additional Investors;

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concurrently with the Private Placement, (1) the exchange of 51,500 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series A par value $10.00 per share and liquidation preference $1,000 per share, held by the United States Department of the Treasury, or Treasury, and all accrued and unpaid dividends thereon, for an aggregate of 1,085,554 shares of our common stock, pursuant to an agreement between FNB and Treasury, and (2) the amendment of the warrant, or the Amended TARP Warrant, issued to Treasury to purchase 22,072 shares of our common stock at an exercise price of $16.00 per share; and

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The Merger

In connection with the Recapitalization, on October 21, 2011, we consummated the acquisition of Granite. Pursuant to the terms and conditions of the Agreement and Plan of Merger, dated as of April 26, 2011 (as amended, the Merger Agreement), by and among FNB, Gamma Merger Corporation, a Delaware corporation and a wholly owned subsidiary of FNB, or Merger Sub, and Granite, Merger Sub merged with and into Granite, with Granite continuing as the surviving corporation and as a wholly owned subsidiary of FNB. This transaction is referred to in this prospectus as the Merger.

Upon the closing of the Merger, each outstanding share of Granite common stock, par value $1.00 per share, other than shares held by FNB, Granite or any of their respective wholly owned subsidiaries and other than shares owned in a fiduciary capacity or as a result of debts previously contracted, was converted, on a pre-reverse stock split basis, into the right to receive 3.375 shares of FNB’s common stock. As a result of the Merger and as a result of the Reverse Stock Split, FNB issued approximately 521,595 shares of its common stock to Granite stockholders, in the aggregate.

Warrant Offering

We intend to distribute, during fiscal year 2012, to each holder of record of our common stock as of the close of business on October 20, 2011, or the business day immediately preceding the closing date of the Merger, non-transferable warrants to purchase common stock from FNB. As a result of the Reverse Stock Split, each shareholder will receive a warrant to purchase one share of our common stock for every 400 shares of common stock held as of October 20, 2011, at an exercise price of $16.00 per share. Further terms regarding the warrant offering will be set forth in an applicable prospectus supplement.

New Board of Directors and Executive Officers

Immediately following the consummation of the Recapitalization and the Merger, nine members of the Board of Directors resigned. H. Ray McKenney, Jr. and R. Reynolds Neely, Jr., remained on the Board of

Directors following the Recapitalization and Merger. Boyd C. Wilson, Jr., formerly a director of Granite Corp.; John Bresnan, a Managing Director of Carlyle; Scott B. Kauffman, a Principal of Oak Hill Capital, Brian E. Simpson, Robert L. Reid, Austin A. Adams, Jerry R. Licari, J. Chandler Martin and Louis A. “Jerry” Schmitt were appointed to the Board of Directors. Each of the newly appointed directors will serve until their election at the next appropriate annual meeting of shareholders and until any of their successors are duly elected and qualified, or until each such individual’s earlier death, resignation or removal.

Additionally, the following individuals were appointed as the executive officers of FNB upon the completion of the Recapitalization and the Merger: Brian E. Simpson, Chief Executive Officer; Robert L. Reid, President; and David L. Nielsen, Chief Financial Officer. Additionally, our new senior management team includes David C. Lavoie as Chief Risk Officer, Gregory P. Murphy as Chief Workout Officer, and Angus M. McBryde III as Treasurer.

The Securities We May Offer

We may use this prospectus to offer common stock, warrants and rights. A prospectus supplement will describe the specific types, amounts, prices and detailed terms of any of these offered securities.

An investment in our securities involves a high degree of risk. You should carefully consider the risks described in the section entitled “Risk Factors” in any prospectus supplement as well as in the section entitled “Item 1.A “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, and in our updates to those “Risk Factors” contained in our Quarterly Reports on Form 10-Q, as well as other information in this prospectus, any accompanying prospectus supplement, and any other documents or reports incorporated by reference herein, before purchasing any of our securities. Each of the risks described in these sections and documents could materially and adversely affect our business, financial condition, results of operations and prospects, and could result in a loss of your investment.

Unless otherwise specified in a prospectus supplement accompanying this prospectus, we currently intend to use the net proceeds from the sale of the securities offered under this prospectus for general corporate purposes.

General corporate purposes may include repayment of debt or the interest payment thereon, capital expenditures, possible acquisitions, investments in our subsidiary banks, and any other purposes that we may specify in any prospectus supplement. We may invest the net proceeds temporarily until we use them for their stated purpose. We cannot predict whether the proceeds invested will yield a favorable return.

We will set forth in a prospectus supplement the following information regarding any material dilution of the equity interests of investors purchasing securities in an offering under this prospectus:

We may sell the securities being offered by this prospectus separately or together through any of the following methods:

Securities may also be issued upon exercise of warrants or as a dividend or distribution. We may issue to the holders of our common stock on a pro rata basis for no consideration, subscription rights to purchase securities, which rights may or may not be transferable. We reserve the right to sell securities directly to investors on our own behalf in those jurisdictions where we are authorized to do so.

We will describe the method of distribution of the securities in the applicable prospectus supplement.

We may directly solicit offers to purchase the securities offered by this prospectus. Agents designated by us from time to time may solicit offers to purchase the securities. We will name any agent involved in the offer or sale of the securities and set forth any commissions payable by us to an agent in the applicable prospectus supplement. Unless otherwise indicated in the applicable prospectus supplement, any agent will be acting on a best efforts basis for the period of his or her appointment. Any agent may be deemed to be an “underwriter” of the securities as that term is defined in the Securities Act of 1933.

If we use an underwriter or underwriters in the sale of securities, we will execute an underwriting agreement with the underwriter or underwriters at the time we reach an agreement for sale. We will set forth in the applicable prospectus supplement the names of the specific managing underwriter or underwriters, as well as any other underwriters, and the terms of the transactions, including compensation of the underwriters and dealers. This compensation may be in the form of discounts, concessions or commissions. The maximum underwriting compensation for any offering under the registration statement to which this prospectus relates may not exceed 8% of the offering proceeds. Underwriters and others participating in any offering of the securities may engage in transactions that stabilize, maintain or otherwise affect the price of the securities. We will describe any of these activities in the applicable prospectus supplement.

If a dealer is used in the sale of the securities, we or an underwriter will sell securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale. The applicable prospectus supplement will set forth the name of the dealer and the terms of the transactions.

We may directly solicit offers to purchase the securities, and we may sell directly to institutional investors or others. These persons may be deemed to be underwriters within the meaning of the Securities Act of 1933 with respect to any resale of the securities. The applicable prospectus supplement will describe the terms of any direct sales, including the terms of any bidding or auction process.

Agreements we enter into with agents, underwriters and dealers may entitle them to indemnification by us against specified liabilities, including liabilities under the Securities Act of 1933, or to contribution by us to payments they may be required to make in respect of these liabilities. The applicable prospectus supplement will describe the terms and conditions of indemnification or contribution.

We may authorize underwriters, dealers and agents to solicit offers by certain institutional investors to purchase offered securities under contracts providing for payment and delivery on a future date specified in the applicable prospectus supplement. The applicable prospectus supplement will also describe the public offering price for the securities and the commission payable for solicitation of these delayed delivery contracts. Delayed delivery contracts will contain definite fixed price and quantity terms. The obligations of a purchaser under these delayed delivery contracts will be subject to only two conditions:

We may from time to time engage one or more firms to act as our agent for one or more offerings of our securities. We sometimes refer to this agent as our “offering agent.” If we reach agreement with an offering agent with respect to a specific offering, including the number of securities and any minimum price below which sales may not be made, then the offering agent will try to sell such securities on the agreed terms. The agreement will provide that any securities sold will be sold at prices related to the then prevailing market prices for our securities. Therefore, exact figures regarding proceeds that will be raised or commissions to be paid cannot be determined at this time. Pursuant to the terms of the agreement, we also may agree to sell, and the relevant offering agents may agree to solicit offers to purchase, blocks of our common stock or other securities.

The offering agent could make sales in privately negotiated transactions or using any other method permitted by law, including sales deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, including sales made directly on Nasdaq, or sales made to or through a market maker other than on an exchange. The offering agent will be deemed to be an “underwriter” within the meaning of the Securities Act of 1933 with respect to any sales effected through an “at the market” offering.

To the extent permitted by and in accordance with Regulation M under the Securities Exchange Act of 1934, in connection with an offering an underwriter may engage in over-allotments, stabilizing transactions, short covering transactions and penalty bids. Over-allotments involve sales in excess of the offering size, which creates a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would be otherwise. If commenced, the underwriters may discontinue any of these activities at any time.

To the extent permitted by and in accordance with Regulation M under the Securities Exchange Act of 1934, any underwriters who are qualified market makers on Nasdaq may engage in passive market making transactions in the securities on Nasdaq during the business day prior to the pricing of an offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.

FNB is registered as a bank holding company and is subject to regulation by, and the supervision of, the Federal Reserve under the Bank Holding Company Act of 1956, as amended. The Federal Reserve has supervisory and enforcement authority over FNB and its non-bank subsidiaries. CommunityOne is regulated and supervised by the Office of the Comptroller of the Currency, or the OCC. Bank of Granite is a state-chartered bank regulated by the North Carolina Commissioner of Banks and the Federal Deposit Insurance Corporation, or the FDIC. The deposits of both banks are insured up to applicable limits by the FDIC’s Deposit Insurance Fund.

If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice, the regulatory authority may require, after notice and hearing, that the bank cease and desist from such practice. Depending on the financial condition of the bank, the applicable regulatory authority might deem the bank to be engaged in an unsafe or unsound practice if the bank were to pay dividends. The Federal Reserve has issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.

Depository institutions, such as CommunityOne and Bank of Granite, also are affected by various federal and state laws, including those relating to consumer protection and similar matters. For a discussion of the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and specific information relevant to us, and the terms of the consent orders under which CommunityOne and Bank of Granite are subject, please refer to the Item 1“Business,” in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, and to the subsequent reports we have filed with the SEC, which are incorporated by reference in this prospectus. This regulatory framework is intended primarily for the protection of depositors and the Deposit Insurance Fund and is not for the protection of security holders.

Dividends from CommunityOne and Bank of Granite are the primary source of funds for payment of dividends to FNB’s shareholders. FNB is subject to a written agreement with the Federal Reserve Bank of Richmond pursuant to which FNB agreed that it would not, without prior written approval of the Federal Reserve Bank of Richmond, declare or pay any dividends or take dividends or any other form of payment representing a reduction in capital from CommunityOne. The written agreement has also been interpreted to prohibit FNB from taking dividends from Bank of Granite.

As a national bank, CommunityOne is subject to restrictions on the amount of dividends it may pay to FNB. Unless a national bank receives prior approval from the OCC, the bank may not declare a dividend if the total amount of all dividends (common and preferred), including the proposed dividend, declared by the bank in any current year exceeds the total of the bank’s net income for the current year to date, combined with its retained net income for the preceding two years, less the sum of any transfers required by the OCC and any transfers required to be made to a fund for the retirement of any preferred stock. In addition, a national bank may not pay a dividend if the bank would be undercapitalized after the dividend payment is made. CommunityOne also is subject to a Consent Order with the OCC, which prohibits CommunityOne from paying dividends unless CommunityOne obtains the prior written determination of no supervisory objection from the OCC.

As a North Carolina-chartered commercial bank, Bank of Granite is subject to restrictions in the North Carolina banking law on the amount of dividends it may pay to FNB. In accordance with that law, dividends may not be paid by Bank of Granite unless its capital surplus is at least 50% of its paid-in capital. Bank of Granite is also subject to an Order to Cease and Desist by the FDIC and the North Carolina Commissioner of Banks, which prohibits Bank of Granite from paying cash dividends without the prior written consent of the FDIC and the North Carolina Commissioner of Banks.

This prospectus contains a summary of the common stock, warrants and rights that we may offer from time to time. The following summaries are not meant to be a complete description of each security. However, this prospectus and the accompanying prospectus supplement contain the material terms and conditions for each security. You should read these documents as well as the documents filed as exhibits to or incorporated by reference to this registration statement. This prospectus may not be used to offer or sell any securities unless accompanied by a prospectus supplement.

Our authorized capital stock currently consists of 2,500,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of April 30, 2012, there were 21,102,082 shares of common stock outstanding and no shares of preferred stock outstanding. On October 31, 2011, we effected the Reverse Stock Split.

Our board of directors has also designated and reserved for issuance pursuant to the exercise of rights under FNB’s Tax Benefits Preservation Plan 250,000 shares of its Junior Participating Preferred Stock, Series B, or the FNB Series B Preferred Stock. As of April 30, 2012, no shares of FNB Series B Preferred Stock were outstanding.

Treasury holds the Amended TARP Warrant, which is a ten-year warrant and entitles the Treasury to purchase up to 22,072 shares of our common stock at a price of $16.00 per share. It is subject to certain anti-dilution and other adjustments. In addition, as of April 30, 2012, an aggregate of 8,243 shares of our common stock were reserved for issuance upon conversion or exercise of outstanding stock options and awards, which includes shares of common stock reserved for issuance in connection with the assumption of all outstanding Granite stock options in connection with the Merger.

Because we are a holding company, the rights of FNB to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise (and thus the ability of our shareholders to benefit indirectly from such distribution) would be subject to the prior claims of creditors of that subsidiary, except to the extent that FNB itself may be a creditor of that subsidiary with recognized claims. Claims on FNB’s subsidiaries by creditors other than FNB will include substantial obligations with respect to deposit liabilities and purchased funds.

The holders of our common stock are entitled to share ratably in dividends when and if declared by the board of directors from funds legally available for the dividends. In the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, the holders of our common stock will be entitled to share ratably in any of our assets or funds that are available for distribution to our shareholders after the satisfaction of our liabilities (or after adequate provision is made therefor) and after preferences of any outstanding FNB preferred stock. Our common stock is neither redeemable nor convertible into another security of FNB.

Each holder of our common stock has one vote for each share held on matters presented for consideration by the shareholders. Holders of common stock do not have cumulative voting rights. Our board of directors is classified into three classes, so that shareholders elect only one-third of our board of directors each year.

Generally, the holders of our common stock have no preemptive rights to acquire any additional shares of our common stock, except with respect to the shares issued to certain Investors as described below. Our common stock is listed on The Nasdaq Capital Market, which requires shareholder approval of the issuance of additional shares of common stock under certain circumstances.

Our articles of incorporation and bylaws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by our board of directors. In particular, our articles of incorporation and bylaws:

In addition, we adopted a Tax Benefits Preservation Plan, which provides an economic disincentive for any one person or group to become a 5% shareholder and for any existing 5% shareholder to acquire more than a specified amount of additional shares.

Pursuant to the Investment Agreements and the Subscription Agreements, the Anchor Investors and the Additional Investors (except for the directors and officers who purchased shares in the Private Placement) in the Private Placement are entitled to certain rights and are subject to certain obligations with respect to our common stock they hold to which our other shareholders are not entitled or subject.

For so long after the closing date of the Merger and Recapitalization as an Anchor Investor owns, together with its affiliates, at least 5% of the outstanding shares of our common stock, the Investment Agreements require us to:

Until the date that an Anchor Investor no longer owns, together with its affiliates, either all shares purchased by the Anchor Investor under the applicable Investment Agreement or at least 1.5% of the outstanding shares of our common stock, the Investment Agreements require us to provide the Anchor Investor with preemptive rights with respect to public or private offerings of our equity securities, or any securities, options or debt that is convertible or exchangeable into equity or that includes an equity component, to enable the Anchor Investor to maintain its percentage interest of our common stock beneficially owned, with certain specified exceptions generally applicable to issuances of equity securities not related to a capital raising event.

The Investment Agreements require us to prepare and file with the SEC as soon as practicable (but not later than 15 days) after the transfer restrictions discussed below expire a shelf registration statement covering the resale of all of the shares of our common stock purchased under the Investment Agreements (and equity securities issued with respect to such shares). The Investment Agreements also provide the Anchor Investors with demand registration rights applicable at any time the shelf registration statement discussed above is not existing

and effective. In addition, the Investment Agreements provide the anchor investors with “piggyback” registration rights, or the right to include their shares of FNB common stock in a registration statement that we propose to file to register its securities, whether or not for its own account.

The Investment Agreements generally restrict each Anchor Investor from selling or otherwise transferring or disposing of the shares purchased under the Investment Agreements until the earliest to occur of the following:

The Subscription Agreements executed by the Additional Investors (other than the directors and officers) include the same preemptive rights granted to the Anchor Investors, but the Additional Investors do not have demand registration rights, governance rights or the transfer restrictions described above. The Additional Investors who purchased shares of our common stock in the Private Placement and who are directors and officers do not have preemptive rights, governance rights or registration rights. However, because the common stock issued to all of the Additional Investors are restricted securities, they can be sold only pursuant to an effective registration statement or an exemption therefrom. A resale registration statement covering the shares issued to the Additional Investors was declared effective by the SEC on January 27, 2012.

The transfer agent and registrar for our common stock is Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572.

We may issue warrants for the purchase of shares of our common stock. Warrants may be issued independently or together with the shares of common stock offered by any prospectus supplement to this prospectus and may be attached to or separate from such shares. Further terms of the warrants will be set forth in the applicable prospectus supplement.

The applicable prospectus supplement will describe the terms of the warrants in respect of which this prospectus is being delivered, including, where applicable, the following:

The complete terms of the rights will be contained in the rights agreements we enter into with rights agents. These documents will be included or incorporated by reference as exhibits to the registration statement of which this prospectus is a part. You should read the rights agreements and any related documents. You also should read the prospectus supplement, which will contain additional information and which may update or change some of the information below.

This section describes the general terms of the rights to purchase common stock or other securities that we may offer to shareholders using this prospectus. Additional terms of the rights will be stated in the applicable prospectus supplement. The following description and any description of the rights in a prospectus supplement may not be complete and is subject to and qualified in its entirety by reference to the terms of any agreement relating to the rights.

Rights may be issued independently or together with any other security and may or may not be transferable. As part of any rights offering, we may enter into a standby underwriting or other arrangement under which the underwriters or any other person would purchase any securities that are not purchased in such rights offering. If we issue rights, each series of rights will be issued under a separate rights agreement to be entered into between us and a bank or trust company, as rights agent, that will be named in the applicable prospectus supplement. Additional terms of the rights will be stated in the applicable prospectus supplement. The rights agent will act solely as our agent and will not assume any obligation to any holders of rights certificates or beneficial owners of rights. The rights agreements and rights certificates will be filed with the SEC as an exhibit to the registration statement of which this prospectus is a part or as an exhibit to a filing incorporated by reference in the registration statement. See “Where You Can Find Additional Information” for information on how to obtain copies of the rights agreements and rights certificates.

The prospectus supplement relating to any rights we offer will describe the specific terms of the offering and the rights, including the record date for shareholders entitled to the rights distribution, the number of rights issued and the number of shares of common stock or other securities, including warrants, that may be purchased upon exercise of the rights, the exercise price of the rights, the date on which the rights will become effective and the date on which the rights will expire, and any applicable U.S. federal income tax considerations.

In general, a right entitles the holder to purchase for cash a specific number of shares of common stock or other securities at a specified exercise price. The rights are normally issued to shareholders as of a specific record date, may be exercised only for a limited period of time and become void following the expiration of such period. If we determine to issue rights, we will accompany this prospectus with a prospectus supplement that will describe, among other things:

Prior to the exercise of a holder’s rights, the holder will not have any of the rights of holders of the securities issuable upon the exercise of the rights and will not be entitled to, among other things, vote or receive dividend payments or other distributions on the securities purchasable upon exercise.

We adopted ASU 2011-5, Comprehensive Income, as of January 1, 2012, which required a separate statement of Comprehensive Income that follows the Statement of Operations. As this standard requires retrospective application, we are including the impact of the adoption of this accounting principle below to reflect retrospective application for each of the years for the three-year period ended December 31, 2011, as those financial statements are incorporated by reference into this Registration Statement.

Unless the applicable prospectus supplement indicates otherwise, the validity of the securities being offered hereby will be passed upon for us by the law firm of Parker Poe Adams & Bernstein LLP. Any underwriters will also be advised about the validity of the securities and other legal matters by their own counsel, which will be named in the prospectus supplement.

The financial statements incorporated in this Registration Statement by reference to the Annual Report on Form 10-K for the year ended December 31, 2011 have been so incorporated in reliance on the report of Dixon Hughes Goodman LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

We are incorporating by reference certain documents we file with the SEC, which means that we can disclose important information to you by referring you to those documents. Any information that we reference this way is considered part of this prospectus.

We incorporate by reference into this prospectus the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus. These additional documents include periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (other than information furnished under Items 2.02 and 7.01, which is deemed not to be incorporated by reference in this prospectus). You should review these filings as they may disclose a change in our business, prospects, financial condition or other affairs after the date of this prospectus.

This prospectus incorporates by reference the documents listed below that we have filed with the SEC but have not been included or delivered with this document:

Information contained in this prospectus supersedes information incorporated by reference that we have filed with the SEC prior to the date of this prospectus, while information that we file with the SEC after the date of this prospectus that is incorporated by reference will automatically update and supersede this information.

Our filings are available on our website, http://www.myyesbank.com. Information contained in or linked to our website is not a part of this prospectus. We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, at no cost to the requester, a copy of any and all of the information that is incorporated by reference in this prospectus. Requests may be made by contacting:

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy materials that we have filed with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings also are available to the public on the SEC’s website at http://www.sec.gov, which contains reports, proxies and information statements and other information regarding issuers that file electronically. In addition, our filings are available on our website at http://www.myyesbank.com. The information set forth on our website is not part of this prospectus.


(dollars in thousands)	Three months ended March 31,						For the Year Ended December 31,
	2012			2011			2011			2010			2009
Net loss	$	(10,859	)	$	(43,708	)	$	(137,314	)	$	(131,827	)	$	(101,696	)
Other comprehensive income/(loss):
Unrealized holdings gains/(loss) arising during the period on available-for-sale securities		1,158			(261	)		(5,029	)		1,320			5,255
Unrealized holdings gains/(loss) on securities for which credit-related portion was recognized in net realized investment gain/(loss)		—			—			—			—			4,207
Unrealized holdings gains/(loss) arising during the period on reclassifying held-to-maturity securities to available-for sale securities		—			—			—			2,936			—
Tax effect		(456	)		103			1,424			(1,205	)		(2,679	)

Unrealized holdings gains/(loss) arising during the period on available-for-sale securities, net of tax		702			(158	)		(3,605	)		3,051			6,783

Reclassification adjustment for loss/(gains) on available-for-sale securities included in net income		46			(13	)		6,159			(8,985	)		(4,949	)
Tax effect		(18	)		5			(1,744	)		2,544			1,401

Reclassification adjustment for loss/(gains) on available-for-sale securities included in net income, net of tax		28			(8	)		4,415			(6,441	)		(3,548	)

Interest rate swap		—			—			—			347			71
Pension and post retirement liability		—			—			(1,518	)		778			(91	)
Tax effect		—			—			430			(319	)		6

		—			—			(1,088	)		807			(14	)

Other comprehensive income/(loss), net of tax:		730			(166	)		(278	)		(2,583	)		3,221

Comprehensive loss	$	(10,129	)	$	(43,874	)	$	(137,592	)	$	(134,410	)	$	(98,475	)



About this Prospectus Supplement			S-1

Incorporation of Certain Information by Reference			S-2

Forward-Looking and Cautionary Statements			S-3

Prospectus Supplement Summary			S-5

Risk Factors			S-10

Use of Proceeds			S-22

Plan of Distribution (Conflict of Interest)			S-23

Experts			S-25

Legal Matters			S-25


About This Prospectus			1

Special Note Regarding Forward-Looking Statements			2

Prospectus Summary			4

Risk Factors			7

Use of Proceeds			7

Dilution			7

Plan of Distribution			7

Regulatory Considerations			10

Description of the Securities			11

Description of Common Stock			11

Description of Warrants			13

Description of Rights			15

Other Information			17

Legal Matters			18

Experts			18

Incorporation of Certain Documents By Reference			18

Where You Can Find More Information			20