Portfolio activity / October 24, 2011

FNB United Corp. Completes Acquisition of Bank of Granite Corporation $310 Million Recapitalization Consummated

For Immediate Release


ASHEBORO, N.C., (Oct. 24, 2011) – FNB United Corp. (Nasdaq: FNBN), parent company of CommunityONE Bank, N.A., today announced that it has completed the acquisition of Bank of Granite Corporation (Nasdaq: GRAN), parent company of Bank of Granite, and consummated a $310 million recapitalization. The two banks will operate separately until the spring of 2012 when the consolidation process will be completed and both organizations will operate as CommunityONE Bank.

“This is truly an unprecedented historic event for community banking in North Carolina”, said Brian Simpson, the new CEO of FNB United. “We have successfully raised sufficient capital to restore two 100-year-old banking companies simultaneously. By combining them into one organization we have the opportunity to again be an economic driver in the communities we serve.”

The combination of Bank of Granite and FNB United has resulted in a North Carolina community banking organization with approximately $2.8 billion in assets, $2.4 billion in deposits and 63 full-service banking offices located in some of the state’s most robust markets.

Simpson and Bob Reid, the new president of FNB United, led a successful $310 million recapitalization of FNB United, which paved the way for its acquisition of Bank of Granite and for the recapitalization of both banks. Lead investors in the recapitalization are The Carlyle Group and Oak Hill Capital Partners, each having invested approximately $79 million.

Integration teams including employees of FNB United and Bank of Granite are working on the consolidation of the two companies. Asheboro will serve as the corporate headquarters and central operations center.

“Our primary goals for the integration process are exemplary customer service and a smooth transition for our people”, Reid said. “FNB United and Bank of Granite employees have been re-energized, and we are all focused on accomplishing our mission.”

In addition to Simpson and Reid, the newly merged banks will be led by a seasoned management team that includes David Nielsen, (senior manager, KPMG; chief operating officer, Wachovia/Wells Fargo), chief financial officer; David Lavoie (senior risk manager, Bank of America), chief credit officer; Greg Murphy (FDIC liquidator, senior risk manager, Bank of America), chief workout officer; and Angus McBryde (treasury and balance sheet manager, Wachovia), treasurer.

The prospective management team, which averages 26 years of banking experience, will be supported by a new board of directors that includes Austin Adams (chief information officer, JP Morgan Chase, BankOne and First Union), chair; Jerry Licari (national banking practice leader, KPMG), chair, audit committee; Chan Martin (treasurer and senior risk executive, Bank of America), chair, risk committee; and Jerry Schmitt, (asset/liability committee chairman, First Union), chair, compensation committee. The new board will also include a representative from each lead investor, and two FNB United and one Bank of Granite legacy board members.

“The closing of this transaction was achieved due to the dedicated efforts of everyone involved – our investors, financial regulators, advisors and the leadership and shareholders of FNB United and Bank of Granite”, Simpson said. “We all share a common mission of assuring that community banking remains strong in North Carolina, serving individuals, families and businesses in their own hometowns.”

The Transaction
The merger agreement provides that Bank of Granite shareholders will receive 3.375 shares of FNB United Corp.’s common stock in exchange for each share of Bank of Granite Corporation common stock they own immediately prior to completion of the merger. FNB United shareholders will continue to own their existing shares of FNB United common stock after the merger and the recapitalization. No earlier than January 1, 2012, FNB United will distribute to each record holder of FNB United common stock as of the close of business on the business day immediately preceding the closing date of the merger, non-transferable warrants to purchase from FNB United one share of common stock for each four shares of FNB United common stock held by such holder at a purchase price of $0.16 per share.

About FNB United Corp.
FNB United Corp. is the Asheboro, N.C.-based bank holding company for CommunityONE Bank, N.A. Opened in 1907, CommunityONE Bank operates 45 offices in 38 communities throughout central, southern and western North Carolina, and offers a complete line of consumer, mortgage and business banking services, including loan, deposit, cash management, wealth management and internet banking services.

About Bank of Granite Corporation
Bank of Granite Corporation is the parent company of Bank of Granite. Founded in 1906, Bank of Granite operates 18 full-service banking offices in seven North Carolina counties: Burke, Caldwell, Catawba, Iredell, Mecklenburg, Watauga and Wilkes.

Forward-Looking Statements
This news release may contain forward-looking statements regarding future events. Forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” These statements are only predictions and are subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include risks of managing our growth, changes in financial markets, changes in real estate markets, regulatory changes, changes in interest rates, changes in economic conditions being less favorable than anticipated, and loss of deposits and loan demand to other financial institutions. Additional information concerning factors that could cause actual results to be materially different from those in the forward-looking statements is contained in FNB United’s filings with the Securities and Exchange Commission. FNB United does not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

About Oak Hill Capital Partners
Oak Hill Capital Partners is a private equity firm with more than $8.2 billion of committed capital from leading entrepreneurs, endowments, foundations, corporations, pension funds and global financial institutions. Robert M. Bass is the lead investor. Over a period of more than 24 years, the professionals at Oak Hill Capital Partners and its predecessors have invested in more than 60 significant private equity transactions. Oak Hill Capital Partners is one of several Oak Hill partnerships, each of which has a dedicated and independent management team. These Oak Hill partnerships comprise over $30 billion of investment capital across multiple asset classes. For more information about Oak Hill Capital Partners, please visit www.oakhillcapital.com.