FNB Financial Services Corporation Reports First Quarter 2007 Results

Share Name	Share Symbol	Market	Type
Fnb Financial Services Corp (MM)	NASDAQ:FNBF	NASDAQ	Common Stock

Fnb Financial Services (NASDAQ:FNBF)
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FNB Financial Services Corporation (NASDAQ:FNBF) (�FNB�), parent of FNB Southeast, today reported first quarter 2007 net income of $697,000, compared to $2.38 million for the same period a year ago. On a per diluted share basis, FNB earned $0.10 and $0.33 in the quarters ended March 31, 2007 and 2006, respectively. �While we are dissatisfied with our earnings performance during the first quarter, we are committed to completing the resolution of our asset quality issues. In February we announced the termination of the memorandum of understanding that was entered into with our banking regulators during the first quarter of 2006. Although our systems for identifying risk in the loan portfolio have improved, the level of problem credits remains high and we are still distracted from quality loan growth as we deal with the management of nonperforming loans, credit quality downgrades and chargeoffs. Our goal is to improve in these areas prior to the merger of equals with LSB Bancshares, Inc., which is expected to occur in the third quarter of 2007, so the resulting company will not be burdened with significant ongoing credit quality issues,� stated Pressley A. Ridgill, President and Chief Executive Officer. Net interest income totaled $7.62 million in the first quarter of 2007, a decrease of $2.48 million or 24.6%, compared to $10.10 million in 2006. Noninterest income was $1.29 million in the first quarter of 2007, compared to $1.33 million in the first quarter of 2006. Noninterest expense for the quarters ended March 31, 2007 and 2006 was $7.85 million and $7.06 million, respectively, an 11.2% increase. Assets at March 31, 2007 totaled $997.2 million, a decrease of $22.7 million, or 2.2%, over one year earlier. Outstanding loans declined $67.0 million during the past four quarters, from $754.9 million at March 31, 2006 to $687.9 million at the end of the first quarter 2007, an 8.9% decrease. As a result, earning assets were $919.2 million at March 31, 2007, compared to $965.0 million a year ago, a $45.8 million decrease. Net credit losses for the first quarter of 2007 amounted to $609,000, or 0.35% of average outstanding loans on an annualized basis, compared to $1.2 million, or 0.65%, for the same period a year ago. FNB recorded provisions for credit losses of $54,000 and $755,000 for the quarters ended March 31, 2007 and 2006, respectively. The quarterend allowance for credit losses to outstanding loans was 1.84% for 2007 and 2.47% for 2006. During the first quarter of 2007, FNB continued to be negatively impacted by a high level of nonperforming loans, downgrades of loans in the portfolio, and chargeoffs. At March 31, 2007, nonperforming loans totaled $14.8 million, an increase of $5.5 million, compared to $9.3 million at March 31, 2006. During the past year, deposits decreased $35.3 million, or 4.2%, to $801.1 million at March 31, 2007. The net yield on earning assets for the first quarter of 2007 was 3.50%, compared to 4.28% for the year ago quarter. Shareholders� equity was $73.1 million at March 31, 2007, compared to $69.0 million a year ago. FNB Financial Services Corporation is a bank holding company with one bank subsidiary, FNB Southeast; a North Carolina chartered commercial bank. FNB Southeast currently operates 17 banking offices located in North Carolina and Virginia. FNB Southeast Mortgage Corporation and FNB Southeast Investment Services, Inc. are operating subsidiaries of FNB Southeast. Forward Looking Statements This news release may contain forward looking statements with respect to the financial conditions and results of operations of FNB Financial Services Corporation (�FNB�). These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of FNB and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like �expect,� �anticipate,� �estimate� and �believe,� variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) projected results in connection with the implementation of our business plan are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions or expenses in general are greater than expected; (4) general economic conditions, in the markets in which FNB does business, are less favorable than expected; (5) risks inherent in making loans, including repayment risks and risks associated with collateral values, are greater than expected; (6) changes in the interest rate environment reduce interest margins and affect funding sources; (7) changes in market rates and prices may adversely affect the value of financial products; (8) legislation or regulatory requirements or changes thereto adversely affect the businesses in which FNB is engaged; (9) regulatory compliance cost increases are greater than expected; and (10) decisions to change the business mix of FNB. For further information and other factors which could affect the accuracy of forward looking statements, please see FNB�s reports filed with the Securities and Exchange Commission (�SEC�) pursuant to the Securities Exchange Act of 1934 which are available at the SEC�s website (www.sec.gov) or at FNB�s website (www.fnbsoutheast.com). Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management�s judgments only as of the date hereof. FNB undertakes no obligation to publicly revise those forward looking statements to reflect events and circumstances that arise after the date hereof. FINANCIAL SUMMARY � � First Quarter 2007� 2006� � 2006� 2007-2006� First Fourth Third Second First Percent Quarter Quarter Quarter Quarter Quarter Variance � Average Balances (Dollars in thousands) � Assets $ 1,002,969� $ 1,003,156� $ 1,031,364� $ 1,022,267� $ 1,015,797� (1.3)% Loans 689,463� 714,082� 736,365� 759,948� 760,026� (9.3) Investment securities 221,597� 218,452� 212,884� 209,041� 204,468� 8.4� Earning assets 920,531� 943,324� 976,797� 977,031� 974,586� (5.5) Noninterest-bearing deposits 80,555� 85,571� 86,741� 89,311� 87,174� (7.6) Interest-bearing deposits 719,781� 729,513� 755,221� 734,631� 741,104� (2.9) Interest-bearing liabilities 830,678� 827,387� 859,476� 853,536� 850,713� (2.4) Shareholders' equity 71,965� 73,092� 70,573� 68,897� 68,203� 5.5� � Period-End Balances (Dollars in thousands) � Assets $ 997,156� $ 1,010,773� $ 1,013,671.0� $ 1,027,827� $ 1,019,878� (2.2)% Loans 687,879� 707,146� 722,494� 750,725� 754,921� (8.9) Investment securities 228,370� 217,127� 218,641� 211,871� 203,824� 12.0� Earning assets 919,232� 927,281� 954,471� 968,126� 965,004� (4.7) Noninterest-bearing deposits 85,447� 87,047� 89,204� 90,116� 89,996� (5.1) Interest-bearing deposits 715,691� 731,521� 744,924� 756,668� 746,422� (4.1) Interest-bearing liabilities 828,011� 838,679� 840,403� 864,769� 855,611� (3.2) Shareholders' equity 73,051� 72,693� 73,153� 69,363� 68,986� 5.9� � Asset Quality Data (Dollars in thousands) � Nonperforming loans $ 14,835� $ 13,521� $ 15,287� $ 14,869� $ 9,346.0� Other nonperforming assets 741� 889� 1,786� 1,609� 1,527� Net credit losses 609� 2,776� 2,583� 791� 1,232� Allowance for credit losses 12,640� 13,195� 15,656� 18,239� 18,665� Nonperforming loans to outstanding loans 2.16% � 1.91% � 2.12% � 1.98% � 1.24% � Annualized net credit losses to average loans 0.35� 1.56� 1.40� 0.42� 0.65� Allowance for credit losses to outstanding loans 1.84� 1.87� 2.17� 2.43� 2.47� Allowance for credit losses to nonperforming loans 85.20� X 97.59� X 102.41� X 122.66� X 199.71� X FINANCIAL SUMMARY � First Quarter 2007� 2006� 2007-2006� First Fourth Third Second First Percent Quarter Quarter Quarter Quarter Quarter Variance � Income Statement Data (Dollars in thousands, except share data) � Interest income: Loans $ 14,411� $ 16,055� $ 15,972� $ 15,814� $ 15,757� (8.5)% Other � 2,448� � 2,401� � � 2,600� � � 2,204� � � 2,131� 14.9� Total interest income 16,859� 18,456� 18,572� 18,018� 17,888� (5.8) Interest expense � 9,240� � 9,092� � � 9,185� � � 8,479� � � 7,786� 18.7� Net interest income 7,619� 9,364� 9,387� 9,539� 10,102� (24.6) Provision for credit losses 54� 315� 0� 365� 755� (92.8) Net interest income after provision for credit losses 7,565� 9,049� 9,387� 9,174� 9,347� (19.1) Noninterest income 1,288� 1,459� 1,406� 1,311� 1,332� (3.3) Noninterest expense � 7,850� � 7,699� � � 7,305� � � 6,846� � � 7,057� 11.2� Income before income tax expense 1,003� 2,809� 3,488� 3,639� 3,622� (72.3) Income tax expense � 306� � 789� � � 1,163� � � 1,249� � � 1,244� (75.4) Net income $ 697� $ 2,020� � $ 2,325� � $ 2,390� � $ 2,378� (70.7) � Net income per share: Basic $ 0.10� $ 0.29� $ 0.33� $ 0.34� $ 0.34� (70.6)% Diluted $ 0.10� $ 0.28� $ 0.32� $ 0.33� $ 0.33� (69.7)% Cash dividends per share $ 0.13� $ 0.13� $ 0.12� $ 0.12� $ 0.12� 8.3% � � Other Data � Return on average assets 0.28% � 0.80% � 0.89% � 0.94% � 0.95% � Return on average equity 3.93� 10.96� 13.07� 13.91� 14.14� Net yield on earning assets/a 3.50� 4.05� 3.91� 4.00� 4.28� Efficiency 84.84� 69.06� 66.21� 61.87� 60.70� Equity to assets 7.18� 7.29� 6.84� 6.74� 6.71� Loans to assets 68.74� 71.18� 71.40� 74.34� 74.82� Loans to deposits 86.15� 87.61� 87.46� 92.23� 91.76� Noninterest - bearing deposits to total deposits 10.07� 10.50� 10.30� 10.84� 10.52� � /a: Fully taxable equivalent basis COMMON STOCK DATA � � 2007� 2006� First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter � Market value: End of period $ 15.33� $ 14.82� $ 14.75� $ 15.16� $ 16.05� High 16.00� 15.68� 15.50� 15.67� 16.46� Low 14.40� 14.56� 13.04� 14.70� 14.00� Book value 10.34� 10.30� 10.34� 9.81� 9.79� Dividend 0.13� 0.13� 0.12� 0.12� 0.12� Shares outstanding at period-end 7,063,952� 7,060,241� 7,077,691� 7,048,976� 7,045,335� Average shares outstanding 7,063,303� 7,057,452� 7,053,509� 7,074,254� 7,040,964� Shares traded 386,600� 305,100� 493,900� 544,000� 474,471�

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