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                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                ---------------

                                   FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999


                        COMMISSION FILE NUMBER 0-13823

                                ---------------

                                   FNB CORP.
            (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                    <C>
           NORTH CAROLINA                           56-1456589
  (State of incorporation)             (I.R.S. Employer Identification No.)
</TABLE>

                101 SUNSET AVENUE, ASHEBORO, NORTH CAROLINA 27203
                    (Address of principal executive offices)


                                 (336) 626-8300
              (Registrant's telephone number, including area code)



                SECURITIES PURSUANT TO SECTION 12(G) OF THE ACT:


                     COMMON STOCK, PAR VALUE $2.50 PER SHARE
                                (Title of Class)


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

     As of March 23, 2000, the Registrant had 3,655,802 shares of $2.50 par
value common stock outstanding. The aggregate market value of voting stock held
by nonaffiliates of the Registrant, assuming, without admission, that all
directors and officers of the Registrant may be deemed affiliates, was
$44,671,000.

     Portions of the Proxy Statement of the Registrant for the Annual Meeting
of Shareholders to be held on May 9, 2000 are incorporated by reference in Part
III of this report.
--------------------------------------------------------------------------------
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<PAGE>

                             CROSS REFERENCE INDEX




<TABLE>
<CAPTION>
                                                                                                                     PAGE
                                                                                                                    ------
<S>          <C>         <C>                                                                                        <C>
PART I       ITEM 1      BUSINESS ...............................................................................     3-5
             ITEM 2      PROPERTIES .............................................................................       5
             ITEM 3      LEGAL PROCEEDINGS
                         Not applicable.
             ITEM 4      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                         Not applicable.
PART II      ITEM 5      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ..............      23
             ITEM 6      SELECTED FINANCIAL DATA ................................................................       6
             ITEM 7      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                         OPERATIONS .............................................................................    7-23
             ITEM 7A     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............................   13-14
             ITEM 8      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                         Independent Auditors' Report ...........................................................      24
                         Consolidated Balance Sheets at December 31, 1999 and 1998 ..............................      25
                         Consolidated Statements of Income for each of the years in the three-year period ended
                         December 31, 1999 ......................................................................      26
                         Consolidated Statements of Shareholders' Equity and Comprehensive Income for each
                         of the years in the three-year period ended December 31, 1999 ..........................      27
                         Consolidated Statements of Cash Flows for each of the years in the three-year period
                         ended December 31, 1999 ................................................................      28
                         Notes to Consolidated Financial Statements .............................................   29-45
                         Quarterly Financial Data for 1999 and 1998 .............................................      23
             ITEM 9      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                         DISCLOSURE
                         Not applicable.
PART III     ITEM 10     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .....................................       *
             ITEM 11     EXECUTIVE COMPENSATION .................................................................       *
             ITEM 12     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .........................       *
             ITEM 13     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .........................................       *
PART IV      ITEM 14     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
                         (a)(1) Financial Statements (See Item 8 for reference).
                            (2) Financial Statement Schedules normally required on Form 10-K are omitted
                                since they are not applicable.
                          (3) Exhibits have been filed separately with the Commission and are available upon
                              written request ...................................................................      47
                          (b) Reports on Form 8-K. During the quarter ended December 31, 1999, the
                              Registrant filed a Current Report on Form 8-K dated October 16, 1999, which
                              reported under "Item 5" that the Registrant had entered into a definitive merger
                              agreement to acquire Carolina Fincorp, Inc.
---------
</TABLE>

* Information called for by Part III is incorporated herein by reference to
  portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
  Shareholders, as follows:
     Item 10 -- See information that appears under the headings "Election of
     Directors" and "Executive Officers".
     Item 11 -- See information that appears under the heading "Executive
     Compensation".
     Item 12 -- See information that appears under the headings "Voting
     Securities Outstanding and Principal Shareholders" and "Security Ownership
     of Management".
     Item 13 -- See information that appears under the heading "Indebtedness of
     Officers and Directors".

                                       2
<PAGE>

                                   BUSINESS

GENERAL

     FNB Corp. (the "Parent Company") is a bank holding company incorporated
under the laws of the State of North Carolina in 1984. On July 2, 1985, through
an exchange of stock, the Parent Company acquired its wholly-owned bank
subsidiary, First National Bank and Trust Company (the "Bank"), a national
banking association founded in 1907. The Parent Company and the Bank are
collectively referred to as the "Corporation".

     The Bank, a full-service commercial bank, currently conducts all of its
operations in Randolph, Montgomery and Chatham counties in North Carolina. Four
offices, including the main office, are located in Asheboro. Additional
community offices are located in Archdale (two offices), Biscoe, Ramseur,
Randleman, Seagrove, Siler City and Trinity. Some of the major services offered
include checking accounts, NOW accounts (including package account versions
that offer a variety of products and services), money market accounts, savings
accounts, certificates of deposit, holiday club accounts, individual retirement
accounts, debit cards, credit cards and loans, both secured and unsecured, for
business, agricultural and personal use. Certain banking services for both
individual and business customers became available over the internet in a test
environment in 1999, subsequently being offered to all customers in February
2000. The Bank also has automated teller machines and is a member of Plus, a
national teller machine network, and Star, a regional network.

     On October 16, 1999, the Corporation entered into a definitive merger
agreement to acquire Carolina Fincorp, Inc. ("Carolina Fincorp"), holding
company for Richmond Savings Bank, Inc., SSB ("Richmond Savings"),
headquartered in Rockingham, North Carolina. Under the terms of the agreement,
Carolina Fincorp will be merged with a wholly-owned subsidiary of FNB Corp.
formed for the purposes of effecting the merger, immediately after which, the
subsidiary will be merged into FNB Corp. Following the merger of holding
companies, Richmond Savings will be merged with and into the Bank. The merger
will be accounted for as a pooling-of-interests transaction and is subject to
several conditions, including approval by the shareholders of FNB Corp. and
Carolina Fincorp and approval by applicable regulatory authorities. On March
21, 2000, the shareholders of both FNB Corp. and Carolina Fincorp voted to
approve the merger, leaving certain contractual conditions of the merger
agreement to be satisfied. Upon satisfaction of these conditions, the merger is
anticipated to close early in the second quarter of 2000. To effect the merger,
each share of Carolina Fincorp common stock will be converted into .79 (subject
to possible adjustment) of a share of FNB Corp. common stock. At December 31,
1999, Carolina Fincorp operated five offices through Richmond Savings and had
approximately $120,069,000 in total assets, $102,917,000 in deposits and
$16,138,000 in stockholders' equity.

     On June 3, 1997, the Corporation entered into a definitive agreement to
acquire a savings bank in Siler City, North Carolina. On January 28, 1998, as
permitted by the agreement, the Board of Directors of the savings bank
exercised its right to terminate the proposed combination due to the increase
in the market value of FNB Corp. common stock above a specified level. The
Corporation incurred certain costs in connection with the proposed acquisition.
Those costs, which had been initially deferred, amounted to $305,000 and are
included in terminated merger expenses in the consolidated statement of income
for the year ended December 31, 1997.

     Prior to March 26, 1999, the Bank's data processing, item capture and
statement rendering operations were outsourced under a service bureau
arrangement. Commencing in the 1998 fourth quarter, the Bank began the process
of converting these operations to an in-house basis. Conversion to the
replacement systems occurred on March 26, 1999. The total capital expenditure
outlay for hardware and software amounted to approximately $1,700,000, of which
approximately one-half was recorded in 1998 and the remainder in 1999. In
addition to capital expenditures for the new system, the Bank incurred certain
expenses in 1998, totaling approximately $302,000, related to deconversion from
the prior arrangement.

     In the 1998 fourth quarter, the Bank received regulatory approval for
establishment of a new branch office in Trinity, North Carolina. Construction
of the permanent Trinity facility is expected to be complete in 2001, resulting
in a total capital outlay of approximately $1,000,000, of which approximately
one-third was recorded in 1998 related to the purchase of land. Prior to
completion of the permanent facility, a temporary mobile office, which opened
in August 1999, is being operated at this site.


YEAR 2000 READINESS

     As of the date of this report, the Corporation has not experienced any
material effects related to the Year 2000 readiness problem. Although the
Corporation has not been informed of any material risks associated with the
Year 2000 problem from third parties, there can be no assurance that the
Corporation will not be impacted in the future. The Corporation will
continuously monitor its business applications and maintain contact with its
third-party vendors and key business partners to resolve any Year 2000 problems
that may arise in the future.


                                       3
<PAGE>

     For additional information on Year 2000 matters, see "Year 2000 Status" in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".


COMPETITION

     The commercial banking industry within the Bank's marketing area is
extremely competitive. The Bank faces direct competition in Randolph,
Montgomery and Chatham counties from approximately eighteen different financial
institutions, including commercial banks, savings institutions and credit
unions. Although none of these entities is dominant, the Bank considers itself
one of the major financial institutions in the area in terms of total assets
and deposits. Further competition is provided by banks located in adjoining
counties, as well as other types of financial institutions such as insurance
companies, finance companies, pension funds and brokerage houses and other
money funds.


SUPERVISION AND REGULATION

     The Parent Company is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), and is registered
as such with the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). A bank holding company is required to file with the Federal
Reserve Board annual reports and other information regarding its business
operations and those of its subsidiaries. It is also subject to examination by
the Federal Reserve Board and is required to obtain Federal Reserve Board
approval prior to acquiring, directly or indirectly, ownership or control of
any voting shares of any bank if, after such acquisition, it would own or
control, directly or indirectly, more than five percent of the voting stock of
such bank, unless it already owns a majority of the voting stock of such bank.
Furthermore, a bank holding company, with limited exceptions, is prohibited
from acquiring direct or indirect ownership or control of more than five
percent of the voting stock of any company which is not a bank or a bank
holding company and must engage only in the business of banking or managing or
controlling banks or furnishing services to or performing services for its
subsidiary banks. One of the exceptions to this prohibition is the ownership of
shares in a company the activities of which the Federal Reserve Board has
determined to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto.

     The Federal Reserve Board has determined that certain activities are
closely related to banking, and that bank holding companies may apply to the
Federal Reserve Board for permission to form, retain or acquire an interest in
a company engaging or proposing to engage in these activities. The permitted
nonbanking activities include, without limitation: (1) making, acquiring or
servicing loans or other extensions of credit such as consumer finance, credit
card, mortgage, commercial finance and factoring companies would make; (2)
acting as an investment or financial advisor; (3) leasing real or personal
property or acting as agent, broker, or advisor in leasing such property if the
lease is to serve as the functional equivalent of an extension of credit to the
lessee of the property and certain other conditions are met; (4) providing
bookkeeping or data processing services under certain circumstances; (5) acting
as an insurance agent or broker with respect to insurance that is directly
related to the extension of credit with other financial services; (6) acting as
an underwriter for credit life insurance and credit accident and health
insurance directly related to extensions of credit by the holding company
system; and (7) providing securities brokerage services and related securities
credit activities.

     As a national banking association, the Bank is subject to regulatory
supervision, of which regular bank examinations by the Comptroller of the
Currency are a part. The Bank is a member of the Federal Deposit Insurance
Corporation (the "FDIC") which currently insures the deposits of each member
bank to a maximum of $100,000 per depositor. For this protection, each bank
pays a quarterly statutory assessment and is subject to the rules and
regulations of the FDIC. The Bank is also a member of the Federal Reserve
System and is therefore subject to the applicable provisions of the Federal
Reserve Act, which imposes restrictions on loans by subsidiary banks to a
holding company and its other subsidiaries and on the use of stock or
securities as collateral security for loans by subsidiary banks to any
borrower.

     The ability of the Parent Company to pay dividends depends to a large
extent upon the amount of dividends the Bank pays to the Parent Company.
Approval of the Comptroller of the Currency, or his designate, will be required
for any dividend to the Parent Company by the Bank if the total of all
dividends, including any proposed dividend, declared by the Bank in any
calendar year exceeds the total of its net profits for that year combined with
its retained net profits for the preceding two years, less any required
transfers to surplus or a fund for the retirement of any preferred stock.


EFFECT OF GOVERNMENTAL POLICIES

     The operations and earnings of the Bank and, therefore, of the Parent
Company are affected by legislative changes and by the policies of various
regulatory agencies. In particular, the Bank is affected by the monetary and
fiscal policies of the Federal Reserve Board. The instruments of monetary
policy used by the Federal Reserve Board include its open market


                                       4
<PAGE>

operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, and changes in reserve requirements on member bank
deposits. The actions of the Federal Reserve Board influence the growth of bank
loans, investments and deposits and also affect interest rates charged on loans
or paid on deposits.


EMPLOYEES

     As of December 31, 1999, the Parent Company had three officers, all of
whom were also officers of the Bank. On that same date, the Bank had 148
full-time employees and 20 part-time employees. The Bank considers its
relationship with its employees to be excellent. The Bank provides employee
benefit programs, including a noncontributory defined benefit pension plan,
matching retirement/savings (401(k)) plan, group life, health and dental
insurance, paid vacations, sick leave, and health care and life insurance
benefits for retired employees.


PROPERTIES

     The main offices of the Bank and the principal executive offices of the
Parent Company are located in an office building at 101 Sunset Avenue,
Asheboro, North Carolina. The premises contain approximately 36,500 square feet
of office space. The Bank also has other community offices in Asheboro (three
offices), Archdale (two offices), Biscoe, Ramseur, Randleman, Seagrove, Siler
City, and Trinity, North Carolina. Except as noted below, all premises are
owned by the Bank in fee. The Randolph Mall office in Asheboro is under a lease
expiring January 31, 2002. The Bush Hill office in Archdale is under a lease
expiring January 31, 2002, with lease renewal options for up to an additional
20-year term. The land on which the Seagrove Office is situated is under a
lease expiring June 30, 2016. At that time, the land is subject to a purchase
option at a fixed price or lease renewal options for up to an additional
30-year term.


                                       5
<PAGE>

                            FNB CORP. AND SUBSIDIARY


                          FIVE YEAR FINANCIAL HISTORY



<TABLE>
<CAPTION>
                                                                 1999          1998          1997          1996          1995
                                                            ------------- ------------- ------------- ------------- -------------
                                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                         <C>           <C>           <C>           <C>           <C>
SUMMARY OF OPERATIONS
Interest income ...........................................   $  27,312     $  26,411     $  24,507     $  22,248     $  20,606
Interest expense ..........................................      11,815        11,591        10,576         9,612         9,002
                                                              ---------     ---------     ---------     ---------     ---------
Net interest income .......................................      15,497        14,820        13,931        12,636        11,604
Provision for loan losses .................................         405           390           600           490           515
                                                              ---------     ---------     ---------     ---------     ---------
Net interest income after provision for loan losses .......      15,092        14,430        13,331        12,146        11,089
Noninterest income ........................................       3,422         3,204         2,875         2,444         1,826
Noninterest expense .......................................      11,870        11,088        10,288         9,077         9,114
                                                              ---------     ---------     ---------     ---------     ---------
Income before income taxes ................................       6,644         6,546         5,918         5,513         3,801
Income taxes ..............................................       1,987         1,984         1,818         1,676         1,101
                                                              ---------     ---------     ---------     ---------     ---------
Net income ................................................   $   4,657     $   4,562     $   4,100     $   3,837     $   2,700
                                                              =========     =========     =========     =========     =========
PER SHARE DATA
Net income:
 Basic ....................................................   $   1.27      $   1.25      $   1.13           1.06     $    .75
 Diluted ..................................................       1.23          1.20          1.11           1.05          .75
Cash dividends declared ...................................        .51           .45           .38            .33          .26
Book value ................................................       9.81          9.58          8.76           7.96         7.23
BALANCE SHEET INFORMATION
Total assets ..............................................   $ 396,067     $ 356,623     $ 325,655     $ 307,134     $ 283,678
Investment securities .....................................     105,832       104,771        86,881        90,316        84,536
Loans .....................................................     265,029       229,722       217,451       195,273       179,923
Deposits ..................................................     322,767       304,690       280,548       271,380       250,144
Shareholders' equity ......................................      35,930        35,002        31,901        28,767        25,995
RATIOS (AVERAGES)
Return on assets ..........................................       1.25%         1.33%         1.30%          1.32%        1.00%
Return on shareholders' equity ............................      12.99         13.52         13.45          13.97        10.93
Shareholders' equity to assets ............................       9.64          9.85          9.68           9.41         9.17
Dividend payout ratio .....................................      40.07         36.03         33.21          31.02        34.62
Loans to deposits .........................................      78.14         76.41         74.72          72.87        73.10
Net yield on earning assets, taxable equivalent basis .....       4.70          4.88          4.99           4.90         4.84
</TABLE>

                                       6
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The purpose of this discussion and analysis is to assist in the
understanding and evaluation of the financial condition, changes in financial
condition and results of operations of FNB Corp. (the "Parent Company") and its
wholly-owned subsidiary, First National Bank and Trust Company (the "Bank"),
collectively referred to as the "Corporation". This discussion should be read
in conjunction with the consolidated financial statements and supplemental
financial information appearing elsewhere in this report.


OVERVIEW

     The Corporation earned $4,657,000 in 1999, a 2.1% increase in net income
from 1998. Basic earnings per share increased from $1.25 in 1998 to $1.27 in
1999 and diluted earnings per share increased from $1.20 to $1.23. Total assets
were $396,067,000 at December 31, 1999, up 11.1% from year-end 1998. Loans
amounted to $265,029,000 at December 31, 1999, up 15.4% from the prior year.
Total deposits grew 5.9% to $322,767,000 in 1999.

     On October 16, 1999, the Corporation entered into a definitive merger
agreement to acquire Carolina Fincorp, Inc. ("Carolina Fincorp"), holding
company for Richmond Savings Bank, Inc., SSB ("Richmond Savings"),
headquartered in Rockingham, North Carolina. Under the terms of the agreement,
Carolina Fincorp will be merged with a wholly-owned subsidiary of FNB Corp.
formed for the purposes of effecting the merger, immediately after which, the
subsidiary will be merged into FNB Corp. Following the merger of holding
companies, Richmond Savings will be merged with and into the Bank. The merger
will be accounted for as a pooling-of-interests transaction and is subject to
several conditions, including approval by the shareholders of FNB Corp. and
Carolina Fincorp and approval by applicable regulatory authorities. On March
21, 2000, the shareholders of both FNB Corp. and Carolina Fincorp voted to
approve the merger, leaving certain contractual conditions of the merger
agreement to be satisfied. Upon satisfaction of these conditions, the merger is
anticipated to close early in the second quarter of 2000. To effect the merger,
each share of Carolina Fincorp common stock will be converted into .79 (subject
to possible adjustment) of a share of FNB Corp. common stock. At December 31,
1999, Carolina Fincorp operated five offices through Richmond Savings and had
approximately $120,069,000 in total assets, $102,917,000 in deposits and
$16,138,000 in stockholders' equity.

     On June 3, 1997, the Corporation entered into a definitive agreement to
acquire a savings bank in Siler City, North Carolina. On January 28, 1998, as
permitted by the agreement, the Board of Directors of the savings bank
exercised its right to terminate the proposed combination due to the increase
in the market value of FNB Corp. common stock above a specified level. The
Corporation incurred certain costs in connection with the proposed acquisition.
Those costs, which had been initially deferred, amounted to $305,000 and are
included in terminated merger expenses in the consolidated statement of income
for the year ended December 31, 1997.

     The 1998 operating results were impacted by special fourth quarter charges
of $302,000 relating to a major data processing conversion. Similarly, 1997
operating results were affected by the fourth quarter recognition of $305,000
in terminated merger expenses as discussed above.


EARNINGS REVIEW

     The Corporation's net income increased $95,000 in 1999, up 2.1% over 1998.
Earnings were positively impacted in 1999 by increases of $677,000 or 4.6% in
net interest income and $218,000 in noninterest income. These gains were
significantly offset, however, by an increase of $782,000 in noninterest
expense. Special noninterest expense charges, relating to a major data
processing conversion, significantly affected the 1998 fourth quarter operating
results, as noted in the "Overview", and to a lesser extent affected the 1999
operating results, especially in the first quarter.

     The Corporation's net income increased $462,000 in 1998, up 11.3% over
1997. Earnings were positively impacted in 1998 by increases of $889,000 or
6.4% in net interest income and $329,000 in noninterest income and by a
$210,000 reduction in the provision for loan losses. These gains were
significantly offset, however, by an increase of $800,000 in noninterest
expense. The effect of special noninterest expense charges in both 1998 and
1997, as discussed in the "Overview", tended to offset on a comparative basis.

     Return on average assets, reflecting the effect of a faster rate of growth
in average total assets than in net income, declined from 1.33% in 1998 to
1.25% in 1999. Return on average assets improved in 1998 from 1.30% in 1997.
Similarly, return on average shareholders' equity decreased to 12.99% in 1999
after increasing to 13.52% in 1998 from 13.45% in 1997.


                                       7
<PAGE>

NET INTEREST INCOME

     Net interest income is the difference between interest income, principally
from loans and investments, and interest expense, principally on customer
deposits. Changes in net interest income result from changes in interest rates
and in the volume, or average dollar level, and mix of earning assets and
interest-bearing liabilities.

     Net interest income was $15,497,000 in 1999 compared to $14,820,000 in
1998. The increase of $677,000 or 4.6% resulted primarily from a 8.6% increase
in the level of average earning assets, the effect of which was partially
offset by a decline in the net yield on earning assets, or net interest margin,
from 4.88% in 1998 to 4.70% in 1999. In 1998, there was a $889,000 or 6.4%
increase in net interest income reflecting a 9.0% increase in average earning
assets as partially offset by a decline in the net interest margin from 4.99%
in 1997. On a taxable equivalent basis, the increases in net interest income in
1999 and 1998 were $731,000 and $960,000, respectively, reflecting changes in
the relative mix of taxable and non-taxable earning assets in each year.

     Table 1 sets forth for the periods indicated information with respect to
the Corporation's average balances of assets and liabilities, as well as the
total dollar amounts of interest income (taxable equivalent basis) from earning
assets and interest expense on interest-bearing liabilities, resultant rates
earned or paid, net interest income, net interest spread and net yield on
earning assets. Net interest spread refers to the difference between the
average yield on earning assets and the average rate paid on interest-bearing
liabilities. Net yield on earning assets, or net interest margin, refers to net
interest income divided by average earning assets and is influenced by the
level and relative mix of earning assets and interest-bearing liabilities.


                                       8
<PAGE>

TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS



<TABLE>
<CAPTION>
                                                        1999                                   1998
                                       -------------------------------------- --------------------------------------
                                                    INTEREST                               INTEREST
                                         AVERAGE     INCOME/   AVERAGE RATES    AVERAGE     INCOME/   AVERAGE RATES
                                         BALANCE     EXPENSE    EARNED/PAID     BALANCE     EXPENSE    EARNED/PAID
                                       ----------- ---------- --------------- ----------- ---------- ---------------
                                                     (TAXABLE EQUIVALENT BASIS, DOLLARS IN THOUSANDS)
<S>                                    <C>         <C>        <C>             <C>         <C>        <C>
EARNING ASSETS
Loans (1) (2) ........................  $241,550    $20,854         8.63%      $224,972    $20,393         9.06%
Investment securities (1):
 Taxable income ......................    87,627      5,820         6.64         75,002      5,225         6.97
 Non-taxable income ..................    19,832      1,540         7.76         19,780      1,547         7.82
Federal funds sold ...................     1,849         94         5.10          3,417        188         5.51
                                        --------    -------         ----       --------    -------         ----
  Total earning assets ...............   350,858     28,308         8.07        323,171     27,353         8.46
                                        --------    -------         ----       --------    -------         ----
Cash and due from banks ..............    11,871                                 10,800
Other assets, net ....................     9,167                                  8,491
                                        --------                               --------
  TOTAL ASSETS .......................  $371,896                               $342,462
                                        ========                               ========
INTEREST-BEARING
 LIABILITIES
Interest-bearing deposits:
 NOW accounts ........................  $ 43,025        525         1.22       $ 41,353        648         1.57
 Savings deposits ....................    26,273        535         2.03         27,414        614         2.24
 Money market accounts ...............    31,839      1,154         3.62         25,430        977         3.84
 Certificates and other time
  deposits ...........................   167,784      8,582         5.12        162,484      8,879         5.46
Retail repurchase agreements .........    12,971        501         3.87         10,169        444         4.37
Federal Home Loan Bank
 advances ............................     8,567        433         5.05             --         --           --
Federal funds purchased ..............     1,590         85         5.38            539         29         5.32
                                        --------    -------         ----       --------    -------         ----
  Total interest-bearing
    liabilities ......................   292,049     11,815         4.05        267,389     11,591         4.33
                                        --------    -------         ----       --------    -------         ----
Noninterest-bearing demand
 deposits ............................    40,201                                 37,730
Other liabilities ....................     3,797                                  3,601
Shareholders' equity .................    35,849                                 33,742
                                        --------                               --------
  TOTAL LIABILITIES AND
    SHAREHOLDERS'
    EQUITY ...........................  $371,896                               $342,462
                                        ========                               ========
NET INTEREST INCOME
 AND SPREAD ..........................              $16,493         4.02%                  $15,762         4.13%
                                                    =======         ====                   =======         ====
NET YIELD ON EARNING
 ASSETS ..............................                              4.70%                                  4.88%
                                                                    ====                                   ====



<CAPTION>
                                                       1997
                                       ------------------------------------
                                                    INTEREST
                                         AVERAGE    INCOME/   AVERAGE RATES
                                         BALANCE    EXPENSE    EARNED/PAID
                                       ----------- --------- --------------
                                       (TAXABLE EQUIVALENT BASIS, DOLLARS IN
                                                    THOUSANDS)
<S>                                    <C>         <C>       <C>
EARNING ASSETS
Loans (1) (2) ........................  $205,127    $18,813        9.17%
Investment securities (1):
 Taxable income ......................    70,817      4,975        7.03
 Non-taxable income ..................    17,741      1,435        8.09
Federal funds sold ...................     2,813        155        5.51
                                        --------    -------        ----
  Total earning assets ...............   296,498     25,378        8.56
                                        --------    -------        ----
Cash and due from banks ..............     9,985
Other assets, net ....................     8,267
                                        --------
  TOTAL ASSETS .......................  $314,750
                                        ========
INTEREST-BEARING
 LIABILITIES
Interest-bearing deposits:
 NOW accounts ........................  $ 38,017        677        1.78
 Savings deposits ....................    29,199        678        2.32
 Money market accounts ...............    19,459        707        3.63
 Certificates and other time
  deposits ...........................   150,566      8,206        5.45
Retail repurchase agreements .........     6,229        281        4.51
Federal Home Loan Bank
 advances ............................        --         --          --
Federal funds purchased ..............       473         27        5.71
                                        --------    -------        ----
  Total interest-bearing
    liabilities ......................   243,943     10,576        4.34
                                        --------    -------        ----
Noninterest-bearing demand
 deposits ............................    37,289
Other liabilities ....................     3,038
Shareholders' equity .................    30,480
                                        --------
  TOTAL LIABILITIES AND
    SHAREHOLDERS'
    EQUITY ...........................  $314,750
                                        ========
NET INTEREST INCOME
 AND SPREAD ..........................              $14,802        4.22%
                                                    =======        ====
NET YIELD ON EARNING
 ASSETS ..............................                             4.99%
                                                                   ====
</TABLE>

---------
(1) Interest income and yields related to certain investment securities and
    loans exempt from both federal and state income tax or from state income
    tax alone are stated on a fully taxable equivalent basis, assuming a 34%
    federal tax rate and applicable state tax rate, reduced by the
    nondeductible portion of interest expense.

(2) Nonaccrual loans are included in the average loan balance. Loan fees and
    the incremental direct costs associated with making loans are deferred and
    subsequently recognized over the life of the loan as an adjustment of
    interest income.

     Changes in the net interest margin and net interest spread tend to
correlate with movements in the prime rate of interest. There are variations,
however, in the degree and timing of rate changes, compared to prime, for the
different types of earning assets and interest-bearing liabilities.

     The average prime rate of interest has been relatively stable in recent
years, amounting to 7.99%, 8.37% and 8.44% in 1999, 1998 and 1997,
respectively. This general stability has tended to apply to the interest rates
both earned and paid by the Bank. During the last three months of 1998,
however, a significant change occurred in the level of the prime rate when the
Federal Reserve took action on the level of interest rates in response to the
downturn of the economies of certain Asian


                                       9
<PAGE>

and Latin American countries and the effects or potential effects of those
downturns on the U.S. economy. In rapid succession, three 25 basis point cuts
were recorded in the prime rate, lowering it from 8.50% to 7.75%. This decrease
in the prime rate has tended to negatively impact the Corporation's net
interest margin and net interest spread. Due to subsequent concern about
inflationary pressures that appeared to be building in the U. S. economy, the
Federal Reserve elected to raise the level of interest rates in the third and
fourth quarters of 1999, resulting in three 25 basis point increases in the
prime rate that raised it from 7.75% to 8.50%, thereby effectively reversing
the rate reductions that occurred in 1998.

     In 1999, the net interest spread declined by 11 basis points from 4.13% in
1998 to 4.02% in 1999, reflecting a decrease in the average total yield on
earning assets that was only partially offset by a decrease in the average rate
paid on interest-bearing liabilities, or cost of funds. The yield on earning
assets decreased by 39 basis points from 8.46% in 1998 to 8.07% in 1999, while
the cost of funds decreased by 28 basis points in moving from 4.33% to 4.05%.
In 1998, the 9 basis points decrease in net interest spread resulted from a 10
basis points decrease in the yield on earning assets as partially offset by a 1
basis point decrease in the cost of funds.

     The 1999 and 1998 changes in net interest income on a taxable equivalent
basis, as measured by volume and rate variances, are analyzed in Table 2.
Volume refers to the average dollar level of earning assets and
interest-bearing liabilities.


TABLE 2
VOLUME AND RATE VARIANCE ANALYSIS



<TABLE>
<CAPTION>
                                                       1999 VERSUS 1998                     1998 VERSUS 1997
                                              ----------------------------------- ------------------------------------
                                                VARIANCE DUE TO(1)                   VARIANCE DUE TO(1)
                                              ----------------------              ------------------------
                                                VOLUME       RATE     NET CHANGE    VOLUME        RATE      NET CHANGE
                                              ---------- ----------- ------------ ---------- ------------- -----------
                                                              (TAXABLE EQUIVALENT BASIS, IN THOUSANDS)
<S>                                           <C>        <C>         <C>          <C>        <C>           <C>
INTEREST INCOME
 Loans (2) ..................................   $1,457    $   (996)     $ 461       $1,807      $ (227)      $ 1,580
 Investment securities (2):
   Taxable income ...........................      851        (256)       595          293         (43)          250
   Non-taxable income .......................        4         (11)        (7)         161         (49)          112
 Federal funds sold .........................      (81)        (13)       (94)          33          --            33
                                                ------    --------      -------     ------      ------       -------
    Total interest income ...................    2,231      (1,276)       955        2,294        (319)        1,975
                                                ------    --------      -------     ------      ------       -------
INTEREST EXPENSE
 Interest-bearing deposits:
   NOW accounts .............................       25        (148)      (123)          56         (85)          (29)
   Savings deposits .........................      (24)        (55)       (79)         (41)        (23)          (64)
   Money market accounts ....................      235         (58)       177          227          43           270
   Certificates and other time deposits .....      278        (575)      (297)         658          15           673
 Retail repurchase agreements ...............      112         (55)        57          172            (9)        163
 Federal Home Loan Bank advances ............      433          --        433           --          --            --
 Federal funds purchased ....................       56          --         56            4            (2)          2
                                                ------    --------      -------     ------      ---------    -------
    Total interest expense ..................    1,115        (891)       224        1,076         (61)        1,015
                                                ------    --------      -------     ------      --------     -------
NET INTEREST INCOME .........................   $1,116    $   (385)     $ 731       $1,218      $ (258)      $   960
                                                ======    ========      =======     ======      ========     =======
</TABLE>

---------
(1) The mix variance, not separately stated, has been proportionally allocated
    to the volume and rate variances based on their absolute dollar amount.

(2) Interest income related to certain investment securities and loans exempt
    from both federal and state income tax or from state income tax alone is
    stated on a fully taxable equivalent basis, assuming a 34% federal tax
    rate and applicable state tax rate, reduced by the nondeductible portion
    of interest expense.


PROVISION FOR LOAN LOSSES

     This provision is the charge against earnings to provide an allowance or
reserve for probable losses inherent in the loan portfolio. The amount of each
year's charge is affected by several considerations including management's
evaluation of various risk factors in determining the adequacy of the allowance
(see "Asset Quality"), actual loan loss experience and loan portfolio growth.
In 1999, earnings were negatively impacted by a $15,000 increase in the
provision. In 1998, there was a positive impact from a $210,000 provision
decrease.


                                       10
<PAGE>

     The allowance for loan losses, as a percentage of loans outstanding,
amounted to 1.04% at December 31, 1999 and 1.10% at December 31, 1998. The
reduction in the allowance percentage reflected changes in the loan portfolio
mix. As discussed in "Loans", the 1-4 family residential mortgage loan
portfolio, which requires a relatively lower level of reserve for loan losses,
significantly increased in 1999. Further, a riskier loan segment, retail
installment loan contracts purchased from automobile and equipment dealers, has
been discontinued.


NONINTEREST INCOME

     Noninterest income increased $218,000 or 6.8% in 1999 and $329,000 or
11.4% in 1998, reflecting in part the general increase in the volume of
business. The increase in service charges on deposit accounts in 1999 was
primarily due to the selected increases in service charges that became
effective in the 1999 first quarter. The 1998 increase in service charges on
deposit accounts resulted partially from the implementation for a full year of
the service charge increases that became effective in the 1997 second quarter.
Further, there was increased revenue in 1998 from a NOW account version that
provides a package of products and services for a stated monthly fee as a
result of increases in the number of such accounts and in the stated monthly
fee, the new fee having become effective in the 1997 fourth quarter.

     The increase in annuity and brokerage commissions in 1999 related to a
general increase in both sales of annuity products and the volume of brokerage
services, while the opposite was true in 1998 when such commissions declined.
The level of other service charges, commissions and fees was higher in 1999 due
largely to a significantly greater annual commission adjustment in 1999 on
sales of credit life insurance, such adjustment being paid in the first quarter
of each year and based on prior year claims. Other income was lower in 1999 due
mainly to a reduction in gains on loan sales, but the comparison to 1998 was
also impacted by the $39,000 recovery in 1998 of a portion of certain expenses,
initially recorded in the 1997 fourth quarter, related to a terminated merger
agreement with another financial institution (see "Overview"). Other income was
higher in 1998 due largely to increases in gains on loan sales and in fees for
trust services and to the $39,000 recovery of a portion of the terminated
merger expenses.


NONINTEREST EXPENSE

     Noninterest expense was $782,000 or 7.1% higher in 1999 due largely to
increased personnel expense, the effect of a major data processing conversion
and the continuing effects of inflation. The level of noninterest expense was
further affected by the opening of a new branch office in August 1999 (see
"Business Development Matters"). Personnel expense was impacted by increased
staffing requirements, especially as related to the data processing conversion,
and by normal salary adjustments. Net occupancy expense was affected by
increased maintenance charges. Furniture and equipment expense increased
largely as a result of the data processing conversion, especially for
depreciation charges. Advertising and marketing expense, included in "other
expense", increased significantly in 1998 above the level of prior years due
primarily to new programs undertaken that included an advertising campaign
based on customer testimonials and a major marketing plan centered around the
"YES YOU CAN, YES WE CAN(R)" program. Significant advertising and marketing
expenditures continued in 1999 for the new marketing plan resulting in a
$13,000 expense increase over 1998.

     The major data processing conversion from a service bureau arrangement to
an in-house basis, completed on March 26, 1999 and discussed in "Business
Development Matters", significantly affected operating results for the 1999
first quarter. The cost of data processing services in the 1999 first quarter
was impacted by the higher rate charged by the service bureau on a
month-to-month basis, subsequent to the termination of the prior long-term
agreement in late 1998. Also, personnel expense was negatively affected by the
staffing and training requirements that were preliminary to the implementation
of the new system.

     Subsequent to the 1999 first quarter, the total cost related to data
processing operations on an in-house basis compares favorably to the cost that
was being experienced under the service bureau arrangement prior to the start
of the conversion process in the 1998 fourth quarter. Noninterest expense
components are being significantly affected, however, as there is a major
decrease in the direct cost of data processing services, but increases in the
levels of personnel expense and furniture and equipment expense.

     Noninterest expense was $800,000 or 7.8% higher in 1998 due in part to
charges of $302,000 relating to the major data processing conversion discussed
above. The remaining net increase of $498,000 was due largely to increased
personnel expense, new advertising and marketing programs and the continuing
effects of inflation. Personnel expense was impacted by increased staffing
requirements and normal salary adjustments. Advertising and marketing expense,
included in "other expense", increased $223,000 due primarily to new programs
discussed above.


                                       11
<PAGE>

INCOME TAXES

     The effective income tax rate, impacted by a series of scheduled annual
reductions in the state income tax rate, amounted to 29.9% in 1999, 30.3% in
1998 and 30.7% in 1997.


LIQUIDITY

     Liquidity refers to the continuing ability of the Bank to meet deposit
withdrawals, fund loan and capital expenditure commitments, maintain reserve
requirements, pay operating expenses and provide funds to the Parent Company
for payment of dividends, debt service and other operational requirements.
Liquidity is immediately available from five major sources: (a) cash on hand
and on deposit at other banks, (b) the outstanding balance of federal funds
sold, (c) lines for the purchase of federal funds from other banks, (d) the
$47,500,000 line of credit established at the Federal Home Loan Bank, less
existing advances against that line, and (e) the available-for-sale securities
portfolio. Further, while available-for-sale securities are intended to be a
source of immediate liquidity, the entire investment securities portfolio is
managed to provide both income and a ready source of liquidity. All debt
securities are of investment grade quality and, if the need arises, can be
promptly liquidated on the open market or pledged as collateral for short-term
borrowing.

     Consistent with its approach to liquidity, the Bank as a matter of policy
does not solicit or accept brokered deposits for funding asset growth. Instead,
loans and other assets are based primarily on a core of local deposits and the
Bank's capital position. To date, the steady increase in deposits, retail
repurchase agreements and capital, supplemented by Federal Home Loan Bank
advances, has been adequate to fund loan demand in the Bank's market area,
while maintaining the desired level of immediate liquidity and a substantial
investment securities portfolio available for both immediate and secondary
liquidity purposes.


ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

     One of the primary objectives of asset/liability management is to maximize
net interest margin while minimizing the earnings risk associated with changes
in interest rates. One method used to manage interest rate sensitivity is to
measure, over various time periods, the interest rate sensitivity positions, or
gaps; however, this method addresses only the magnitude of timing differences
and does not address earnings or market value. Therefore, management uses an
earnings simulation model to prepare, on a regular basis, earnings projections
based on a range of interest rate scenarios in order to more accurately measure
interest rate risk.

     The Bank's balance sheet was liability-sensitive at December 31, 1999. A
liability-sensitive position means that in gap measurement periods of one year
or less there are more liabilities than assets subject to immediate repricing
as market rates change. Because immediately rate sensitive interest-bearing
liabilities exceed rate sensitive assets, the earnings position could improve
in a declining rate environment and could deteriorate in a rising rate
environment, depending on the correlation of rate changes in these two
categories. Included in interest-bearing liabilities subject to rate changes
within 90 days is a portion of the NOW, savings and money market deposits.
These types of deposits historically have not repriced coincidentally with or
in the same proportion as general market indicators.

     Table 3 presents information about the periods in which the
interest-sensitive assets and liabilities at December 31, 1999 will either
mature or be subject to repricing in accordance with market rates, and the
resulting interest-sensitivity gaps. This table shows the sensitivity of the
balance sheet at one point in time and is not necessarily indicative of what
the sensitivity will be on other dates. As a simplifying assumption concerning
repricing behavior, 50% of the NOW, savings and money market deposits are
assumed to reprice immediately and 50% are assumed to reprice beyond one year.


                                       12
<PAGE>

TABLE 3
INTEREST RATE SENSITIVITY ANALYSIS



<TABLE>
<CAPTION>
                                                                         DECEMBER 31, 1999
                                                             ------------------------------------------
                                                                       RATE MATURITY IN DAYS
                                                             ------------------------------------------
                                                                  1-90         91-180        181-365
                                                             ------------- ------------- --------------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                                          <C>           <C>           <C>
EARNING ASSETS
 Loans .....................................................   $  92,771     $  13,638     $   12,525
 Investment securities .....................................         461           818            809
                                                               ---------     ---------     ----------
   Total earning assets ....................................      93,232        14,456         13,334
                                                               ---------     ---------     ----------
INTEREST-BEARING LIABILITIES
 NOW accounts ..............................................      21,463            --             --
 Savings deposits ..........................................      12,495            --             --
 Money market accounts .....................................      16,963            --             --
 Time deposits of $100,000 or more .........................      33,796        21,417         11,084
 Other time deposits .......................................      33,980        30,858         28,820
 Retail repurchase agreements ..............................      10,667            --             --
 Federal Home Loan Bank advances ...........................          --            --             --
 Federal funds purchased ...................................       7,735            --             --
                                                               ---------     ---------     ----------
   Total interest-bearing liabilities ......................     137,099        52,275         39,904
                                                               ---------     ---------     ----------
INTEREST SENSITIVITY GAP ...................................   $ (43,867)    $ (37,819)    $  (26,570)
                                                               =========     =========     ==========
Cumulative gap .............................................   $ (43,867)    $ (81,686)    $ (108,256)
Ratio of interest-sensitive assets to interest-sensitive
 liabilities ...............................................          68%           28%            33%



<CAPTION>
                                                                  DECEMBER 31, 1999
                                                             ---------------------------
                                                                 BEYOND
                                                                ONE YEAR       TOTAL
                                                             ------------- -------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                          <C>           <C>
EARNING ASSETS
 Loans .....................................................   $ 146,095     $ 265,029
 Investment securities .....................................     103,744       105,832
                                                               ---------     ---------
   Total earning assets ....................................     249,839       370,861
                                                               ---------     ---------
INTEREST-BEARING LIABILITIES
 NOW accounts ..............................................      21,463        42,926
 Savings deposits ..........................................      12,495        24,990
 Money market accounts .....................................      16,964        33,927
 Time deposits of $100,000 or more .........................       6,327        72,624
 Other time deposits .......................................      15,459       109,117
 Retail repurchase agreements ..............................          --        10,667
 Federal Home Loan Bank advances ...........................      15,000        15,000
 Federal funds purchased ...................................          --         7,735
                                                               ---------     ---------
   Total interest-bearing liabilities ......................      87,708       316,986
                                                               ---------     ---------
INTEREST SENSITIVITY GAP ...................................   $ 162,131     $  53,875
                                                               =========     =========
Cumulative gap .............................................   $  53,875     $  53,875
Ratio of interest-sensitive assets to interest-sensitive
 liabilities ...............................................         285%          117%
</TABLE>

MARKET RISK

     Market risk reflects the risk of economic loss resulting from adverse
changes in market price and interest rates. This risk of loss can be reflected
in diminished current market values and/or reduced potential net interest
income in future periods.

     The Bank's market risk arises primarily from interest rate risk inherent
in its lending and deposit-taking activities. The structure of the Bank's loan
and deposit portfolios is such that a significant decline in interest rates may
adversely impact net market values and net interest income. The Bank does not
maintain a trading account nor is the Bank subject to currency exchange risk or
commodity price risk. Interest rate risk is monitored as part of the Bank's
asset/liability management function, which is discussed in "Asset/Liability
Management and Interest Rate Sensitivity" above.


                                       13
<PAGE>

     Table 4 presents information about the contractual maturities, average
interest rates and estimated fair values of financial instruments considered
market risk sensitive at December 31, 1999.


TABLE 4
MARKET RISK ANALYSIS OF FINANCIAL INSTRUMENTS



<TABLE>
<CAPTION>
                                            CONTRACTUAL MATURITIES AT DECEMBER 31, 1999
                           ------------------------------------------------------------------------------
                                                                                     BEYOND                 AVERAGE   ESTIMATED
                                                                                      FIVE                 INTEREST     FAIR
                              2000       2001       2002       2003       2004       YEARS       TOTAL     RATE (1)     VALUE
                           ---------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
                                                                  (DOLLARS IN THOUSANDS)
<S>                        <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>        <C>
FINANCIAL ASSETS
 Debt securities (2) .....  $  2,086   $  3,590   $  1,128   $  4,843   $  7,228   $ 88,368    $107,243       6.86%   $102,690
 Loans (3):
   Fixed rate ............    34,734     18,704     17,226     12,987     13,133     68,187     164,971       8.30     158,987
   Variable rate .........    27,598     12,366      9,099      7,384      9,534     34,077     100,058       8.86     100,026
                            --------   --------   --------   --------   --------   --------    --------               --------
    Total ................  $ 64,418   $ 34,660   $ 27,453   $ 25,214   $ 29,895   $190,632    $372,272       8.04    $361,703
                            ========   ========   ========   ========   ========   ========    ========               ========
FINANCIAL LIABILITIES
 Now accounts ............  $     --   $     --   $     --   $     --   $     --   $     --      42,926       1.15    $ 42,926
 Savings deposits ........        --         --         --         --         --         --      24,990       1.73      24,990
 Money market
   accounts ..............        --         --         --         --         --         --      33,927       3.69      33,927
 Time deposits:
   Fixed rate ............   146,215     10,705      9,971        245        863         --     167,999       5.28     168,883
   Variable rate .........     4,966      8,333        328        115         --         --      13,742       5.47      13,742
 Retail repurchase
   agreements ............        --         --         --         --         --         --      10,667       3.97      10,667
 Federal Home Loan
   Bank advances .........        --         --         --         --      3,000     12,000      15,000       5.06      13,994
 Federal funds
   purchased .............        --         --         --         --         --         --       7,735       5.18       7,735
                            --------   --------   --------   --------   --------   --------    --------               --------
    Total ................  $151,181   $ 19,038   $ 10,299   $    360   $  3,863   $ 12,000    $316,986       4.22    $316,864
                            ========   ========   ========   ========   ========   ========    ========               ========
</TABLE>

---------
(1) The average interest rate related to debt securities is stated on a fully
    taxable equivalent basis, assuming a 34% federal income tax rate and
    applicable state income tax rate, reduced by the nondeductible portion of
    interest expense.

(2) Debt securities are reported on the basis of amortized cost.

(3) Nonaccrual loans are included in the balance of loans. The allowance for
    loan losses is excluded.


CAPITAL ADEQUACY

     Under guidelines established by the Board of Governors of the Federal
Reserve System, capital adequacy is currently measured for regulatory purposes
by certain risk-based capital ratios, supplemented by a leverage capital ratio.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier 1, Tier 2 and Tier 3, as a percentage of
risk-weighted assets, which are computed by measuring the relative credit risk
of both the asset categories on the balance sheet and various off-balance sheet
exposures. Tier 1 capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier 2 capital, which is limited to the total of Tier 1
capital, includes allowable amounts of subordinated debt, mandatory convertible
debt, preferred stock and the allowance for loan losses. Tier 3 capital,
applicable only to financial institutions subject to certain market risk
capital guidelines, is capital allocated to support the market risk related to
a financial institution's ongoing trading activities. At December 31, 1999, FNB
Corp. and the Bank were not subject to the market risk capital guidelines and,
accordingly, had no Tier 3 capital allocation. Total capital, for risk-based
purposes, consists of the sum of Tier 1, Tier 2 and Tier 3 capital. Under
current requirements, the minimum total capital ratio is 8.00% and the minimum
Tier 1 capital ratio is 4.00%. At December 31, 1999, FNB Corp. and the Bank had
total capital ratios of 15.05% and 14.48%, respectively, and Tier 1 capital
ratios of 14.03% and 13.46%.


                                       14
<PAGE>

     The leverage capital ratio, which serves as a minimum capital standard,
considers Tier 1 capital only and is expressed as a percentage of average total
assets for the most recent quarter, after reduction of those assets for
goodwill and other disallowed intangible assets at the measurement date. As
currently required, the minimum leverage capital ratio is 4.00%. At December
31, 1999, FNB Corp. and the Bank had leverage capital ratios of 9.66% and
9.27%, respectively.

     The Bank is also required to comply with prompt corrective action
provisions established by the Federal Deposit Insurance Corporation Improvement
Act. To be categorized as well-capitalized, the Bank must have a minimum ratio
for total capital of 10.00%, for Tier 1 capital of 6.00% and for leverage
capital of 5.00%. As noted above, the Bank met all of those ratio requirements
at December 31, 1999 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.


BALANCE SHEET REVIEW

     Asset growth was higher in 1999 than in 1998. Total assets increased
$39,444,000 or 11.1% in 1999 compared to $30,968,000 or 9.5% in 1998. Deposits
grew $18,077,000 or 5.9% and $24,142,000 or 8.6%, respectively, in the same
periods. Retail repurchase agreements declined $817,000 in 1999 but increased
in 1998 to fund $4,047,000 of the asset growth in that year. A portion of the
1999 asset growth was funded by initial advances totaling $15,000,000 from the
Federal Home Loan Bank. The average asset growth rates were 8.6% in 1999 and
8.8% in 1998. The corresponding average deposit growth rates were 5.0% and
7.2%.


                                       15
<PAGE>

INVESTMENT SECURITIES

     Investments are carried on the consolidated balance sheet at estimated
fair value for available-for-sale securities and at amortized cost for
held-to-maturity securities. Table 5 presents information, on the basis of
selected maturities, about the composition of the investment securities
portfolio for each of the last three years.


TABLE 5
INVESTMENT SECURITIES PORTFOLIO ANALYSIS



<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                            ---------------------------------------------------------
                                                            1999                    1998       1997
                                            ------------------------------------ ---------- ---------
                                                         ESTIMATED     TAXABLE
                                             AMORTIZED      FAIR     EQUIVALENT   CARRYING   CARRYING
                                                COST       VALUE      YIELD (1)     VALUE     VALUE
                                            ----------- ----------- ------------ ---------- ---------
                                                             (DOLLARS IN THOUSANDS)
<S>                                         <C>         <C>         <C>          <C>        <C>
AVAILABLE FOR SALE
 U.S. Treasury:
   Within one year ........................   $   253     $   255        7.52%    $   756    $ 1,345
   One to five years ......................       248         250        7.17         527      1,280
                                              -------     -------                 -------    -------
    Total .................................       501         505        7.35       1,283      2,625
                                              -------     -------                 -------    -------
 U.S. Government agencies and corporations:
   Within one year ........................       503         503        7.73         350      1,750
   One to five years ......................     7,750       7,481        6.54       2,949      8,354
   Five to ten years ......................    45,853      43,214        6.52      39,000     18,880
                                              -------     -------                 -------    -------
    Total .................................    54,106      51,198        6.54      42,299     28,984
                                              -------     -------                 -------    -------
 Mortgage-backed securities ...............        --          --          --         230      2,422
                                              -------     -------                 -------    -------
 Total debt securities ....................    54,607      51,703        6.55      43,812     34,031
 Equity securities ........................     1,481       1,493                   1,146      1,095
                                              -------     -------                 -------    -------
    Total available-for-sale securities ...   $56,088     $53,196                 $44,958    $35,126
                                              =======     =======                 =======    =======
HELD TO MATURITY
 U.S. Government agencies and corporations:
   Within one year ........................   $    --     $    --          --     $ 1,201    $ 5,383
   One to five years ......................     4,296       4,197        6.48       8,294     18,597
   Five to ten years ......................    28,292      26,825        6.52      30,032      8,824
                                              -------     -------                 -------    -------
    Total .................................    32,588      31,022        6.51      39,527     32,804
                                              -------     -------                 -------    -------
 State, county and municipal:
   Within one year ........................     1,330       1,333       10.60         845        753
   One to five years ......................     4,495       4,545        8.56       5,261      3,992
   Five to ten years ......................     6,645       6,639        8.10       6,358      6,456
   Over ten years .........................     7,578       7,448        7.88       7,822      7,750
                                              -------     -------                 -------    -------
    Total .................................    20,048      19,965        8.29      20,286     18,951
                                              -------     -------                 -------    -------
    Total held-to-maturity securities .....   $52,636     $50,987        7.19     $59,813    $51,755
                                              =======     =======                 =======    =======
</TABLE>

---------
(1) Yields are stated on a fully taxable equivalent basis, assuming a 34%
    federal income tax rate and applicable state income tax rate, reduced by
    the nondeductible portion of interest expense.

     Additions to the investment securities portfolio depend to a large extent
on the availability of investable funds that are not otherwise needed to
satisfy loan demand. Because the growth in total assets exceeded that for loans
in 1999, the level of investment securities was increased $1,061,000 or 1.0%.
In 1998, when the growth in total assets far exceeded that for loans, there was
a $17,890,000 or 20.6% increase in the level of investment securities.
Investable funds not otherwise utilized are temporarily invested on an
overnight basis as federal funds sold, the level of which is affected by such
considerations as near-term loan demand and liquidity needs. Based on funds
requirements, the Bank was a net purchaser of funds at December 31, 1999.


                                       16
<PAGE>

LOANS

     The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. Loans experienced growth of $35,307,000
or 15.4% in 1999 and $12,271,000 or 5.6% in 1998. Average loans increased
$16,578,000 or 7.4% and $19,845,000 or 9.7%, respectively. The ratio of average
loans to average deposits increased from 76.4% in 1998 to 78.1% in 1999. The
ratio of loans to deposits at December 31, 1999 was 82.1%.

     Table 6 sets forth the major categories of loans for each of the last five
years. The maturity distribution and interest sensitivity of selected loan
categories at December 31, 1999 are presented in Table 7.


TABLE 6
LOAN PORTFOLIO COMPOSITION



<TABLE>
<CAPTION>
                                                  DECEMBER 31
                                  -------------------------------------------
                                          1999                  1998
                                  --------------------- ---------------------
                                     AMOUNT       %        AMOUNT       %
                                  ----------- --------- ----------- ---------
                                            (DOLLARS IN THOUSANDS)
<S>                               <C>         <C>       <C>         <C>
Commercial and agricultural .....  $125,273       47.3   $ 99,055       43.1
Real estate -- construction .....     2,320         .9      3,279        1.4
Real estate -- mortgage:
 1-4 family residential .........    97,694       36.8     88,591       38.6
 Commercial and other ...........    14,309        5.4     16,708        7.3
Consumer ........................    18,601        7.0     22,089        9.6
Leases ..........................     6,832        2.6         --        --
                                   --------      -----   --------      -----
    Total loans .................  $265,029      100.0   $229,722      100.0
                                   ========      =====   ========      =====



<CAPTION>
                                                             DECEMBER 31
                                  -----------------------------------------------------------------
                                          1997                  1996                  1995
                                  --------------------- --------------------- ---------------------
                                     AMOUNT       %        AMOUNT       %        AMOUNT       %
                                  ----------- --------- ----------- --------- ----------- ---------
                                                       (DOLLARS IN THOUSANDS)
<S>                               <C>         <C>       <C>         <C>       <C>         <C>
Commercial and agricultural .....  $ 84,221       38.7   $ 62,678       32.1   $ 47,317       26.3
Real estate -- construction .....     4,989        2.3      4,348        2.2        759         .4
Real estate -- mortgage:
 1-4 family residential .........    81,182       37.3     68,887       35.3     57,664       32.0
 Commercial and other ...........    20,556        9.5     24,257       12.4     27,803       15.5
Consumer ........................    26,503       12.2     35,103       18.0     46,380       25.8
Leases ..........................        --        --          --        --          --        --
                                   --------      -----   --------      -----   --------      -----
    Total loans .................  $217,451      100.0   $195,273      100.0   $179,923      100.0
                                   ========      =====   ========      =====   ========      =====
</TABLE>

TABLE 7
SELECTED LOAN MATURITIES



<TABLE>
<CAPTION>
                                                     DECEMBER 31, 1999
                                      ------------------------------------------------
                                       ONE YEAR     ONE TO        OVER
                                        OR LESS   FIVE YEARS   FIVE YEARS     TOTAL
                                      ---------- ------------ ------------ -----------
                                                       (IN THOUSANDS)
<S>                                   <C>        <C>          <C>          <C>
Commercial and agricultural .........  $37,929      $55,465      $31,879    $125,273
Real estate -- construction .........    1,760          202          358       2,320
                                       -------      -------      -------    --------
    Total selected loans ............  $39,689      $55,667      $32,237    $127,593
                                       =======      =======      =======    ========
Sensitivity to rate changes:
 Fixed interest rates ...............  $16,598      $30,290      $18,384    $ 65,272
 Variable interest rates ............   23,091       25,377       13,853      62,321
                                       -------      -------      -------    --------
    Total ...........................  $39,689      $55,667      $32,237    $127,593
                                       =======      =======      =======    ========
</TABLE>

     The commercial and agricultural loan portfolio experienced a very strong
gain during 1999, and the 1-4 family mortgage loan portfolio grew
significantly. Lease financing contracts, a new loan product in 1999, has
further added to the balance of the total loan portfolio. Loan growth and the
composition of the loan portfolio, however, have been affected by management's
decision in March 1996 to discontinue the purchase of retail installment loan
contracts from automobile and equipment dealers (see "Business Development
Matters"). The outstanding balance of these loan contracts, which are primarily
included in consumer loans, experienced net decreases in 1999 and 1998 of
$2,782,000 and $5,929,000, respectively. Consequently, total consumer loans
declined significantly during those periods.


ASSET QUALITY

     Management considers the Bank's asset quality to be of primary importance.
A formal loan review function, independent of loan origination, is used to
identify and monitor problem loans. As part of the loan review function, a
third party assessment group is employed to review the underwriting
documentation and risk grading analysis. In determining the allowance for loan
losses and any resulting provision to be charged against earnings, particular
emphasis is placed on the results of the loan review process. Consideration is
also given to historical loan loss experience, the value and adequacy of
collateral, and economic conditions in the Bank's market area. For loans
determined to be impaired, the allowance is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. This evaluation is
inherently subjective as it requires material estimates, including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change. The unallocated


                                       17
<PAGE>

portion of the allowance for loan losses represents management's estimate of
the appropriate level of reserve to provide for probable losses inherent in the
loan portfolio. Considerations in determining the unallocated portion of the
allowance for loan losses include general economic and lending trends and other
factors.

     Management's policy in regard to past due loans is conservative and
normally requires a prompt charge-off to the allowance for loan losses
following timely collection efforts and a thorough review. Further efforts are
then pursued through various means available. Loans carried in a nonaccrual
status are generally collateralized and the possibility of future losses is
considered in the determination of the allowance for loan losses.

     At December 31, 1999, the Bank had impaired loans with three borrowers
which totaled $1,420,000 and were also on nonaccrual status. The related
allowance for loan losses on these loans amounted to $289,000. The payment of
principal and interest on impaired loans with one borrower is guaranteed up to
a specified percentage by an agency of the U. S. Government. Based on the
balances outstanding at December 31, 1999, the guaranteed portion of impaired
loans amounted to $792,000.

     Table 8 presents an analysis of the changes in the allowance for loan
losses and of the level of nonperforming assets for each of the last five
years. Information about management's allocation of the allowance for loan
losses by loan category is presented in Table 9.


TABLE 8
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS



<TABLE>
<CAPTION>
                                                             1999        1998        1997        1996        1995
                                                         ----------- ----------- ----------- ----------- -----------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                      <C>         <C>         <C>         <C>         <C>
ALLOWANCE FOR LOAN LOSSES
 Balance at beginning of year ..........................   $ 2,517     $ 2,294     $ 1,986     $ 1,903     $ 1,720
 Charge-offs:
   Commercial and agricultural .........................        49           9          66          24          84
   Real estate -- construction .........................        --          --          --          --          --
   Real estate -- mortgage .............................         2          --           2          12          --
   Consumer ............................................       277         327         389         532         393
   Leases ..............................................        --          --          --          --          --
                                                           -------     -------     -------     -------     -------
    Total charge-offs ..................................       328         336         457         568         477
                                                           -------     -------     -------     -------     -------
 Recoveries:
   Commercial and agricultural .........................        16          16          14          12           8
   Real estate -- construction .........................        --          --          --          --          --
   Real estate -- mortgage .............................        --          --          11           3           3
   Consumer ............................................       135         153         140         146         134
   Leases ..............................................        --          --          --          --          --
                                                           -------     -------     -------     -------     -------
    Total recoveries ...................................       151         169         165         161         145
                                                           -------     -------     -------     -------     -------
 Net loan charge-offs ..................................       177         167         292         407         332
 Provision for loan losses .............................       405         390         600         490         515
                                                           -------     -------     -------     -------     -------
 Balance at end of year ................................   $ 2,745     $ 2,517     $ 2,294     $ 1,986     $ 1,903
                                                           =======     =======     =======     =======     =======
NONPERFORMING ASSETS, AT END OF YEAR
 Nonaccrual loans ......................................   $ 1,451     $   731     $    51     $    65     $    26
 Accruing loans past due 90 days or more ...............       298         263         167         231         317
                                                           -------     -------     -------     -------     -------
    Total nonperforming loans ..........................     1,749         994         218         296         343
 Foreclosed assets .....................................         3          --          23          38          64
 Other real estate owned ...............................       115          --          27          --          --
                                                           -------     -------     -------     -------     -------
    Total nonperforming assets .........................   $ 1,867     $   994     $   268     $   334     $   407
                                                           =======     =======     =======     =======     =======
RATIOS
 Net loan charge-offs to average loans .................       .07%        .07%        .14%        .22%        .19%
 Net loan charge-offs to allowance for loan losses .....      6.45        6.63       12.74       20.49       17.45
 Allowance for loan losses to year-end loans ...........      1.04        1.10        1.05        1.02        1.06
 Total nonperforming loans to year-end loans ...........       .66         .43         .10         .15         .19
</TABLE>

                                       18
<PAGE>

TABLE 9
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES



<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                              -------------------------------------------------
                                                 1999      1998      1997      1996      1995
                                              --------- --------- --------- --------- ---------
                                                               (IN THOUSANDS)
<S>                                           <C>       <C>       <C>       <C>       <C>
Commercial and agricultural .................  $1,070    $  821    $  719    $  650    $  572
Real estate -- construction .................       6         8        12        10         9
Real estate -- mortgage .....................     530       492       493       439       384
Consumer ....................................     798       867       830       727       695
Leases ......................................      58        --        --        --        --
Unallocated .................................     283       329       240       160       243
                                               ------    ------    ------    ------    ------
    Total allowance for loan losses .........  $2,745    $2,517    $2,294    $1,986    $1,903
                                               ======    ======    ======    ======    ======
</TABLE>

DEPOSITS

     The level and mix of deposits is affected by various factors, including
general economic conditions, the particular circumstances of local markets and
the specific deposit strategies employed. In general, broad interest rate
declines tend to encourage customers to consider alternative investments such
as mutual funds and tax-deferred annuity products, while interest rate
increases tend to have the opposite effect.

     The Bank's level and mix of deposits has been specifically affected by the
following factors. The growth in money market accounts of $5,247,000 in 1999
and $6,211,000 in 1998 was due to a high-yield product that has had steady
growth since its introduction in the 1996 fourth quarter. Time deposits of
$100,000 or more accounted for $11,952,000 of total time deposit growth of
$17,089,000 in 1999 and for $7,757,000 of total time deposit growth of
$11,195,000 in 1998. Further, the level of time deposits obtained from
governmental units fluctuates, amounting to $38,529,000, $25,905,000 and
$24,431,000 at December 31, 1999, 1998 and 1997, respectively.


                                       19
<PAGE>

     Table 10 shows the year-end and average deposit balances for the years
1999, 1998 and 1997 and the changes in 1999 and 1998.


TABLE 10
ANALYSIS OF DEPOSITS



<TABLE>
<CAPTION>
                                                             1999                              1998                   1997
                                              ---------------------------------- --------------------------------- ----------
                                                               CHANGE FROM                        CHANGE FROM
                                                                PRIOR YEAR                        PRIOR YEAR
                                                          ----------------------             ---------------------
                                                BALANCE      AMOUNT        %       BALANCE      AMOUNT       %       BALANCE
                                              ----------- ------------ --------- ----------- ----------- --------- ----------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                           <C>         <C>          <C>       <C>         <C>         <C>       <C>
YEAR-END BALANCES
  Interest-bearing deposits:
   NOW accounts .............................  $ 42,926     $ (1,733)     (3.9)   $ 44,659    $  6,052       15.7   $ 38,607
   Savings deposits .........................    24,990       (1,487)     (5.6)     26,477      (1,227)     (4.4)     27,704
   Money market accounts ....................    33,927        5,247       18.3     28,680       6,211       27.6     22,469
                                               --------     --------              --------    --------              --------
    Total ...................................   101,843        2,027        2.0     99,816      11,036       12.4     88,780
   Certificates and other time deposits .....   181,741       17,089       10.4    164,652      11,195        7.3    153,457
                                               --------     --------              --------    --------              --------
    Total interest-bearing deposits .........   283,584       19,116        7.2    264,468      22,231        9.2    242,237
  Noninterest-bearing demand deposits .......    39,183       (1,039)     (2.6)     40,222       1,911        5.0     38,311
                                               --------     --------              --------    --------              --------
    Total deposits ..........................  $322,767     $ 18,077        5.9   $304,690    $ 24,142        8.6   $280,548
                                               ========     ========              ========    ========              ========
AVERAGE BALANCES
  Interest-bearing deposits:
   NOW accounts .............................  $ 43,025     $  1,672        4.0   $ 41,353    $  3,336        8.8   $ 38,017
   Savings deposits .........................    26,273       (1,141)     (4.2)     27,414      (1,785)     (6.1)     29,199
   Money market accounts ....................    31,839        6,409       25.2     25,430       5,971       30.7     19,459
                                               --------     --------              --------    --------              --------
    Total ...................................   101,137        6,940        7.4     94,197       7,522        8.7     86,675
   Certificates and other time deposits .....   167,784        5,300        3.3    162,484      11,918        7.9    150,566
                                               --------     --------              --------    --------              --------
    Total interest-bearing deposits .........   268,921       12,240        4.8    256,681      19,440        8.2    237,241
  Noninterest-bearing demand deposits .......    40,201        2,471        6.5     37,730         441        1.2     37,289
                                               --------     --------              --------    --------              --------
    Total deposits ..........................  $309,122     $ 14,711        5.0   $294,411    $ 19,881        7.2   $274,530
                                               ========     ========              ========    ========              ========
</TABLE>

BUSINESS DEVELOPMENT MATTERS

     As discussed in the "Overview" and Note 18 to Consolidated Financial
Statements, the Corporation has entered into a definitive merger agreement to
acquire Carolina Fincorp, headquartered in Rockingham, North Carolina. Under
the terms of the agreement, Carolina Fincorp will be merged with a wholly-owned
subsidiary of FNB Corp. formed for the purposes of effecting the merger. The
merger is anticipated to close early in the second quarter of 2000.

     In 1997, the Corporation entered into a definitive agreement to acquire a
savings bank in Siler City, North Carolina. On January 28, 1998, as permitted
by the agreement, the Board of Directors of the savings bank exercised its
right to terminate the proposed combination due to the increase in the market
value of FNB Corp. common stock above a specified level.

     Prior to March 26, 1999, the Bank's data processing, item capture and
statement rendering operations were outsourced under a service bureau
arrangement. Commencing in the 1998 fourth quarter, the Bank began the process
of converting these operations to an in-house basis. Conversion to the
replacement systems occurred on March 26, 1999. The total capital expenditure
outlay for hardware and software amounted to approximately $1,700,000, of which
approximately one-half was recorded in 1998 and the remainder in 1999. In
addition to capital expenditures for the new system, the Bank incurred certain
expenses in 1998, totaling approximately $302,000, related to deconversion from
the prior arrangement.

     In the 1998 fourth quarter, the Bank received regulatory approval for
establishment of a new branch office in Trinity, North Carolina. Construction
of the permanent Trinity facility is expected to be complete in 2001, resulting
in a total capital outlay of approximately $1,000,000, of which approximately
one-third was recorded in 1998 related to the purchase of land. Prior to
completion of the permanent facility, a temporary mobile office, which opened
in August 1999, is being operated at this site.


                                       20
<PAGE>

     Management decided in March 1996 that the Bank would discontinue the
purchase of retail installment loan contracts from automobile and equipment
dealers, due largely to the declining yields being experienced in this loan
program. Contracts of this nature included in loans at December 31, 1999, 1998
and 1997 amounted to $963,000, $3,745,000 and $9,674,000, respectively. While
there will be no purchases of new contracts, current plans call for the
collection of outstanding loans based on their contractual terms. The funds
previously invested in this loan program are being redeployed, as loan payments
occur, to other loan programs or to the investment securities portfolio.


YEAR 2000 STATUS

     As of the date of this report, the Corporation has not experienced any
material effects related to the Year 2000 readiness problem. Although the
Corporation has not been informed of any material risks associated with the
Year 2000 problem from third parties, there can be no assurance that the
Corporation will not be impacted in the future. The Corporation will
continuously monitor its business applications and maintain contact with its
third-party vendors and key business partners to resolve any Year 2000 problems
that may arise in the future.

     The Corporation's cost of Year 2000 compliance was substantially less than
the original estimate of approximately $200,000. Actual Year 2000 project
expenditures totaled $116,000. Of this total, capital expenditures amounted to
$69,000 and were all recorded in 1998. Project expenses amounted to $47,000 on
a cumulative basis and $32,000 for the year ended December 31, 1999.


ACCOUNTING PRONOUNCEMENT MATTERS

     In September 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a)
a hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting designation. An
entity that elects to apply hedge accounting is required to establish at the
inception of the hedge the method it will use for assessing the effectiveness
of the hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk. SFAS No. 133, as amended by SFAS No. 137,
is effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. At this time, the Corporation has not determined what effect, if any,
that adoption of SFAS No. 133 will have on the consolidated financial
statements.

     In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", which requires that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments. SFAS No. 134 is effective for the first fiscal quarter beginning
after December 31, 1998, with earlier application permitted. As the Corporation
does not have any mortgage-backed securities or other retained interests
resulting from the securitization of mortgage loans held for sale, adoption of
SFAS No. 134 did not have an effect on the consolidated financial statements.


EFFECTS OF INFLATION

     The operations of the Bank and therefore of the Corporation are subject to
the effects of inflation through interest rate fluctuations and changes in the
general price level of noninterest operating expenses. Such costs as salaries,
fringe benefits and utilities have tended to increase at a rate comparable to
or even greater than the general rate of inflation. Broadly speaking, all
operating expenses have risen to higher levels as inflationary pressures have
increased. Management has responded to this situation by evaluating and
adjusting fees charged for specific services and by emphasizing operating
efficiencies.

     The level of interest rates is also considered to be influenced by
inflation, rising whenever inflationary expectations and the actual level of
inflation increase and declining whenever the inflationary outlook appears to
be improving. Management constantly monitors this situation, attempting to
adjust both rates received on earning assets and rates paid on interest-bearing
liabilities in order to maintain the desired net yield on earning assets.


                                       21
<PAGE>

CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

     The statements contained in this Annual Report on Form 10-K that are not
historical facts are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995), which can be identified by
the use of forward-looking terminology such as "believes", "expects", "plans",
"projects", "goals", "estimates", "may", "could", "should", or "anticipates" or
the negative thereof or other variations thereon of comparable terminology, or
by discussions of strategy that involve risks and uncertainties. In addition,
from time to time, the Corporation or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
the Corporation with the Securities and Exchange Commission, or press releases
or oral statements made by or with the approval of an authorized executive
officer of the Corporation. Forward-looking statements are based on
management's current views and assumptions and involve risks and uncertainties
that could significantly affect expected results. The Corporation wishes to
caution the reader that factors, such as those listed below, in some cases have
affected and could affect the Corporation's actual results, causing actual
results to differ materially from those in any forward-looking statement. These
factors include: (i) expected cost savings from the proposed merger with
Carolina Fincorp may not materialize, (ii) the Corporation may experience
greater than expected deposit attrition, customer loss, or revenue loss
following completion of the proposed merger, (iii) competitive pressure in the
banking industry or in the Corporation's markets may increase significantly,
(iv) changes in the interest rate environment may reduce margins, (v) general
economic conditions, either nationally or regionally, may be less favorable
than expected, resulting in, among other things, credit quality deterioration,
(vi) changes may occur in banking legislation and in the environment, (vii)
changes may occur in general business conditions and inflation and (viii)
changes may occur in the securities markets.


                                       22
<PAGE>

TABLE 11
QUARTERLY FINANCIAL DATA



<TABLE>
<CAPTION>
                                                         FIRST       SECOND        THIRD       FOURTH
                                                     ------------ ------------ ------------ ------------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>          <C>          <C>          <C>
1999
Interest income ....................................   $  6,626     $  6,665     $  6,853     $  7,168
Interest expense ...................................      2,826        2,833        2,935        3,221
                                                       --------     --------     --------     --------
Net interest income ................................      3,800        3,832        3,918        3,947
Provision for loan losses ..........................         65           95           60          185
                                                       --------     --------     --------     --------
Net interest income after provision for loan losses       3,735        3,737        3,858        3,762
Noninterest income .................................        838          867          841          876
Noninterest expense ................................      2,941        2,875        3,037        3,017
                                                       --------     --------     --------     --------
Income before income taxes .........................      1,632        1,729        1,662        1,621
Income taxes .......................................        487          528          509          463
                                                       --------     --------     --------     --------
Net income .........................................   $  1,145     $  1,201     $  1,153     $  1,158
                                                       ========     ========     ========     ========
Per share data:
  Net income:
   Basic ...........................................   $    .31     $    .33     $    .32     $    .32
   Diluted .........................................        .30          .32          .31          .31
  Cash dividends declared ..........................        .12          .12          .12          .15
  Common stock price (1):
   High ............................................      29.00        27.00        24.25        22.00
   Low .............................................      20.00        20.00        19.00        13.25
1998
Interest income ....................................   $  6,483     $  6,638     $  6,616     $  6,674
Interest expense ...................................      2,809        2,930        2,925        2,927
                                                       --------     --------     --------     --------
Net interest income ................................      3,674        3,708        3,691        3,747
Provision for loan losses ..........................        160          110           60           60
                                                       --------     --------     --------     --------
Net interest income after provision for loan losses       3,514        3,598        3,631        3,687
Noninterest income .................................        716          837          813          838
Noninterest expense ................................      2,663        2,740        2,735        2,950
                                                       --------     --------     --------     --------
Income before income taxes .........................      1,567        1,695        1,709        1,575
Income taxes .......................................        481          518          523          462
                                                       --------     --------     --------     --------
Net income .........................................   $  1,086     $  1,177     $  1,186     $  1,113
                                                       ========     ========     ========     ========
Per share data:
  Net income:
   Basic ...........................................   $    .30     $    .32     $    .32     $    .30
   Diluted .........................................        .29          .31          .31          .29
  Cash dividends declared ..........................        .10          .10          .10          .15
  Common stock price (1):
   High ............................................      30.00        27.50        26.50        30.00
   Low .............................................      21.00        23.25        21.50        20.00
</TABLE>

---------
(1) FNB Corp. common stock is traded on the NASDAQ National Market System under
    the symbol FNBN. At December 31, 1999, there were 1,172 shareholders of
    record.


                                       23
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
FNB CORP.

     We have audited the accompanying consolidated balance sheets of FNB Corp.
and subsidiary as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and comprehensive income and cash
flows for each of the years in the three-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FNB Corp.
and subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.


                                                        /s/   KPMG LLP
                                                       ---------------------
                                                              KPMG LLP




Raleigh, North Carolina
March 22, 2000

                                       24
<PAGE>

                           FNB CORP. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                            DECEMBER 31
                                                                                      ------------------------
                                                                                          1999         1998
                                                                                      ------------ -----------
                                                                                       (IN THOUSANDS, EXCEPT
                                                                                            SHARE DATA)
<S>                                                                                   <C>          <C>
ASSETS
Cash and due from banks .............................................................   $ 14,271    $ 12,787
Investment securities:
 Available for sale, at estimated fair value (amortized cost of $56,088 in 1999
   and $44,918 in 1998) .............................................................     53,196      44,958
 Held to maturity (estimated fair value of $50,987 in 1999 and $60,859 in 1998) .....     52,636      59,813
Loans ...............................................................................    265,029     229,722
 Less: Allowance for loan losses ....................................................     (2,745)     (2,517)
                                                                                        --------    --------
     Net loans ......................................................................    262,284     227,205
                                                                                        --------    --------
Premises and equipment, net .........................................................      7,698       6,978
Other assets ........................................................................      5,982       4,882
                                                                                        --------    --------
     TOTAL ASSETS ...................................................................   $396,067    $356,623
                                                                                        ========    ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
 Noninterest-bearing demand deposits ................................................   $ 39,183    $ 40,222
 Interest-bearing deposits:
   NOW, savings and money market deposits ...........................................    101,843      99,816
   Time deposits of $100,000 or more ................................................     72,624      60,672
   Other time deposits ..............................................................    109,117     103,980
                                                                                        --------    --------
    Total deposits ..................................................................    322,767     304,690
Retail repurchase agreements ........................................................     10,667      11,484
Federal Home Loan Bank advances .....................................................     15,000          --
Federal funds purchased .............................................................      7,735       1,545
Other liabilities ...................................................................      3,968       3,902
                                                                                        --------    --------
    Total Liabilities ...............................................................    360,137     321,621
                                                                                        --------    --------

Shareholders' equity:
 Preferred stock, $10.00 par value; authorized 200,000 shares, none issued ..........         --          --
 Common stock, $2.50 par value; authorized 10,000,000 shares, issued
   3,661,000 shares in 1999 and 3,655,376 shares in 1998 ............................      9,153       9,138
 Surplus ............................................................................        174         117
 Retained earnings ..................................................................     28,512      25,721
 Accumulated other comprehensive income (loss) ......................................     (1,909)         26
                                                                                        --------    --------
    Total Shareholders' Equity ......................................................     35,930      35,002
                                                                                        --------    --------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................................   $396,067    $356,623
                                                                                        ========    ========
</TABLE>

Commitments (Note 16)


          See accompanying notes to consolidated financial statements.


                                       25
<PAGE>

                           FNB CORP. AND SUBSIDIARY


                       CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31
                                                          -----------------------------------------
                                                               1999          1998          1997
                                                          ------------- ------------- -------------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>           <C>           <C>
INTEREST INCOME
 Interest and fees on loans .............................  $   20,808    $   20,361    $   18,787
 Interest and dividends on investment securities:
   Taxable income .......................................       5,419         4,868         4,645
   Non-taxable income ...................................         991           994           920
 Federal funds sold .....................................          94           188           155
                                                           ----------    ----------    ----------
    Total interest income ...............................      27,312        26,411        24,507
                                                           ----------    ----------    ----------

INTEREST EXPENSE
 Deposits ...............................................      10,796        11,118        10,268
 Retail repurchase agreements ...........................         501           444           281
 Federal Home Loan Bank advances ........................         433            --            --
 Federal funds purchased ................................          85            29            27
                                                           ----------    ----------    ----------
    Total interest expense ..............................      11,815        11,591        10,576
                                                           ----------    ----------    ----------
NET INTEREST INCOME .....................................      15,497        14,820        13,931
 Provision for loan losses ..............................         405           390           600
                                                           ----------    ----------    ----------
Net Interest Income After Provision for Loan Losses .....      15,092        14,430        13,331
                                                           ----------    ----------    ----------
NONINTEREST INCOME
 Service charges on deposit accounts ....................       1,791         1,737         1,533
 Annuity and brokerage commissions ......................         435           228           313
 Cardholder and merchant services income ................         444           362           333
 Other service charges, commissions and fees ............         479           386           389
 Other income ...........................................         273           491           307
                                                           ----------    ----------    ----------
    Total noninterest income ............................       3,422         3,204         2,875
                                                           ----------    ----------    ----------

NONINTEREST EXPENSE
 Personnel expense ......................................       6,277         5,518         5,318
 Occupancy expense ......................................         612           522           562
 Furniture and equipment expense ........................       1,265           850           777
 Data processing services ...............................         850         1,541         1,136
 Terminated merger expenses .............................          --            --           305
 Other expense ..........................................       2,866         2,657         2,190
                                                           ----------    ----------    ----------
    Total noninterest expense ...........................      11,870        11,088        10,288
                                                           ----------    ----------    ----------
Income Before Income Taxes ..............................       6,644         6,546         5,918
Income taxes ............................................       1,987         1,984         1,818
                                                           ----------    ----------    ----------
NET INCOME ..............................................  $    4,657    $    4,562    $    4,100
                                                           ==========    ==========    ==========
Net income per common share:
 Basic ..................................................  $     1.27    $     1.25    $     1.13
 Diluted ................................................  $     1.23    $     1.20    $     1.11

Weighted average number of shares outstanding:
 Basic ..................................................   3,658,987     3,649,875     3,626,132
 Diluted ................................................   3,773,181     3,794,823     3,696,384
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       26
<PAGE>

                           FNB CORP. AND SUBSIDIARY


   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME



<TABLE>
<CAPTION>
                                                                                                        ACCUMULATED
                                                             COMMON STOCK                                  OTHER
                                                      --------------------------            RETAINED   COMPREHENSIVE
                                                          SHARES       AMOUNT     SURPLUS   EARNINGS      INCOME        TOTAL
                                                      ------------- ------------ --------- ---------- -------------- ----------
                                                                          (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                   <C>           <C>          <C>       <C>        <C>            <C>
BALANCE, DECEMBER 31, 1996 ..........................   1,806,994      $4,517     $  214    $ 24,001     $     35     $ 28,767
Comprehensive income:
  Net income ........................................          --         --          --       4,100           --        4,100
  Other comprehensive income:
   Unrealized securities gains (losses), net of
    income taxes of $26 .............................          --         --          --          --           49           49
                                                                                                                      --------
  Total comprehensive income ........................                                                                    4,149
                                                                                                                      --------
Cash dividends declared, $.75 per share .............          --         --          --      (1,361)          --       (1,361)
Common stock issued through:
  Dividend reinvestment plan ........................       8,106         21         220          --           --          241
  Stock option plan .................................       4,725         12          93          --           --          105
                                                        ---------      ------     ------    --------     --------     --------
BALANCE, DECEMBER 31, 1997 ..........................   1,819,825      4,550         527      26,740           84       31,901
Comprehensive income:
  Net income ........................................          --         --          --       4,562           --        4,562
  Other comprehensive income:
   Unrealized securities gains (losses), net of
    income tax benefit of $31 .......................         ---         --          --          --          (58)         (58)
                                                                                                                      --------
  Total comprehensive income ........................                                                                    4,504
                                                                                                                      --------
Cash dividends declared, $.45 per share .............          --         --          --      (1,644)          --       (1,644)
Two-for-one stock split effected in the form of a
  100% stock dividend ...............................   1,825,343      4,563        (626)     (3,937)          --           --
Common stock issued through:
  Dividend reinvestment plan ........................       1,015          2          24          --           --           26
  Stock option plan .................................       9,193         23         192          --           --          215
                                                        ---------      ------     ------    --------     --------     --------
BALANCE, DECEMBER 31, 1998 ..........................   3,655,376      9,138         117      25,721           26       35,002
Comprehensive income:
  Net income ........................................          --         --          --       4,657           --        4,657
  Other comprehensive income:
   Unrealized securities gains (losses), net of
    income tax benefit of $997 ......................          --         --          --          --       (1,935)      (1,935)
                                                                                                                      --------
  Total comprehensive income ........................                                                                    2,722
                                                                                                                      --------
Cash dividends declared, $.51 per share .............          --         --          --      (1,866)          --       (1,866)
Common stock issued through:
  Dividend reinvestment plan ........................          --         --          --          --           --           --
  Stock option plan .................................       7,224         19          77          --           --           96

Common stock repurchased ............................      (1,600)          (4)      (20)         --           --          (24)
                                                        ---------      --------   ------    --------     --------     --------
BALANCE, DECEMBER 31, 1999 ..........................   3,661,000      $9,153     $  174    $ 28,512     $ (1,909)    $ 35,930
                                                        =========      =======    ======    ========     ========     ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

                           FNB CORP. AND SUBSIDIARY


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                              YEARS ENDED DECEMBER 31
                                                                                       --------------------------------------
                                                                                           1999         1998         1997
                                                                                       ------------ ------------ ------------
                                                                                                   (IN THOUSANDS)
<S>                                                                                    <C>          <C>          <C>
OPERATING ACTIVITIES
 Net income ..........................................................................  $   4,657    $   4,562    $   4,100
 Adjustments to reconcile net income to net cash provided by operating activities:
   Depreciation and amortization of premises and equipment ...........................      1,164          810          734
   Provision for loan losses .........................................................        405          390          600
   Deferred income taxes (benefit) ...................................................       (141)         (52)        (252)
   Deferred loan fees and costs, net .................................................        115          180          367
   Premium amortization and discount accretion of investment securities, net .........        (42)         (61)         (25)
   Amortization of intangibles .......................................................         19           24           32
   Net decrease (increase) in loans held for sale ....................................      4,145       (3,660)        (559)
   Increase in other assets ..........................................................       (122)        (277)        (203)
   Increase in other liabilities .....................................................          7          461          581
                                                                                        ---------    ---------    ---------
     Net Cash Provided by Operating Activities .......................................     10,207        2,377        5,375
                                                                                        ---------    ---------    ---------

INVESTING ACTIVITIES
 Available-for-sale securities:
   Proceeds from maturities and calls ................................................     12,458       51,183       20,536
   Purchases .........................................................................    (23,532)     (61,042)     (26,646)
 Held-to-maturity securities:
   Proceeds from maturities and calls ................................................      9,076       29,242       11,717
   Purchases .........................................................................     (1,946)     (37,298)      (2,072)
 Net increase in loans ...............................................................    (39,862)      (8,908)     (22,291)
 Proceeds from sales of premises and equipment .......................................          8            3            5
 Purchases of premises and equipment .................................................     (1,897)      (1,786)        (478)
 Other, net ..........................................................................        315            5           24
                                                                                        ---------    ---------    ---------
     Net Cash Used in Investing Activities ...........................................    (45,380)     (28,601)     (19,205)
                                                                                        ---------    ---------    ---------

FINANCING ACTIVITIES
 Net increase in deposits ............................................................     18,077       24,142        9,168
 Increase (decrease) in retail repurchase agreements .................................       (817)       4,047        3,712
 Increase in Federal Home Loan Bank advances .........................................     15,000           --           --
 Increase (decrease) in federal funds purchased ......................................      6,190         (855)       1,825
 Common stock issued .................................................................         96          241          346
 Common stock repurchased ............................................................        (24)          --           --
 Cash dividends paid .................................................................     (1,865)      (1,478)      (1,359)
                                                                                        ---------    ---------    ---------
     Net Cash Provided by Financing Activities .......................................     36,657       26,097       13,692
                                                                                        ---------    ---------    ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................      1,484         (127)        (138)
Cash and cash equivalents at beginning of year .......................................     12,787       12,914       13,052
                                                                                        ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .............................................  $  14,271    $  12,787    $  12,914
                                                                                        =========    =========    =========
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
   Interest ..........................................................................  $  11,721    $  11,308    $  10,231
   Income taxes ......................................................................      2,026        2,156        1,896
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       28
<PAGE>

                           FNB CORP. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS/CONSOLIDATION

     FNB Corp. is a one-bank holding company whose wholly-owned subsidiary is
the First National Bank and Trust Company (the "Bank"). The Bank is an
independent community bank that offers a complete line of financial services,
including deposit, loan, investment and trust services, to individual and
business customers primarily in the region of North Carolina that includes
Randolph, Montgomery and Chatham counties.

     The consolidated financial statements include the accounts of FNB Corp.
and the Bank (collectively the "Corporation"). All significant intercompany
balances and transactions have been eliminated. The Corporation adopted
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", in 1998 without any impact
on the consolidated financial statements as the chief operating decision maker
reviews the results of operations of the Corporation and its subsidiary as a
single enterprise.

     The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.


     CASH AND CASH EQUIVALENTS

     For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold. Generally,
federal funds are purchased and sold for one-day periods.


     INVESTMENT SECURITIES

     Investment securities are categorized and accounted for as follows:

     o  Held-to-maturity securities -- Debt securities that the Corporation has
        the positive intent and ability to hold to maturity are reported at
        amortized cost.

     o  Trading securities -- Debt and equity securities bought and held
        principally for the purpose of being sold in the near future are
        reported at fair value, with unrealized gains and losses included in
        earnings.

     o  Available-for-sale securities -- Debt and equity securities not
        classified as either held-to-maturity securities or trading securities
        are reported at fair value, with unrealized gains and losses, net of
        related tax effect, included as an item of other comprehensive income
        and reported as a separate component of shareholders' equity.

     The Corporation intends to hold its securities classified as
available-for-sale securities for an indefinite period of time but may sell
them prior to maturity. All other securities, which the Corporation has the
positive intent and ability to hold to maturity, are classified as
held-to-maturity securities.

     Interest income on debt securities is adjusted using the level yield
method for the amortization of premiums and accretion of discounts. The
adjusted cost of the specific security is used to compute gains or losses on
the disposition of securities.


     LOANS

     Interest income on loans is generally calculated by using the constant
yield method based on the daily outstanding balance. The recognition of
interest income is discontinued when, in management's opinion, the collection
of all or a portion of interest becomes doubtful.

     Loan fees and the incremental direct costs associated with making loans
are deferred and subsequently recognized over the life of the loan as an
adjustment of interest income. Residential mortgage loans held for sale are
valued at the lower of cost or market as determined by outstanding commitments
from investors or current investor yield requirements, calculated on the
aggregate loan basis.


                                       29
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

     ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses represents an amount considered adequate to
absorb loan losses inherent in the portfolio. Management's evaluation of the
adequacy of the allowance is based on a review of individual loans, historical
loan loss experience, the value and adequacy of collateral, and economic
conditions in the Bank's market area. For loans determined to be impaired, the
allowance is based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain collateral
dependent loans. Losses are charged and recoveries are credited to the
allowance for loan losses. This evaluation is inherently subjective as it
requires material estimates, including the amounts and timing of future cash
flows expected to be received on impaired loans that may be susceptible to
significant change.

     In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize changes to the allowance based
on their judgments about information available to them at the time of their
examination.


     PREMISES AND EQUIPMENT

     Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets as follows: buildings and improvements, 10
to 50 years and furniture and equipment, 3 to 10 years. Leasehold improvements
are amortized on a straight-line basis over the shorter of the estimated life
of the improvement or the term of the lease.


     INTANGIBLE ASSETS

     Deposit base premiums, arising from deposit and branch purchase
acquisitions, amounted to $24,000 and $43,000 at December 31, 1999 and 1998,
respectively, and are included in other assets. The premium amounts are
amortized on an accelerated basis over ten-year periods.


     INCOME TAXES

     Income tax expense includes both a current provision based on the amounts
computed for income tax return purposes and a deferred provision that results
from application of the asset and liability method of accounting for deferred
taxes. Under the asset and liability method, deferred tax assets and
liabilities are established for the temporary differences between the financial
reporting basis and the tax basis of the Corporation's assets and liabilities
at enacted tax rates expected to be in effect when such amounts are realized or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.


     EARNINGS PER SHARE (EPS)

     As required for entities with complex capital structures, a dual
presentation of basic and diluted EPS is included on the face of the income
statement, and a reconciliation is provided in a footnote of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.


     COMPREHENSIVE INCOME

     Effective January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS No.
130 establishes standards for reporting and displaying comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. Comprehensive income is defined as the
change in equity of an enterprise during a period from transactions and other
events and circumstances from nonowner sources and, accordingly, includes both
net income and amounts referred to as other comprehensive income. SFAS No. 130
requires that an enterprise (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and surplus in
the equity section of a statement of financial position. In accordance with the
provisions of SFAS No. 130, comparative consolidated financial statements
presented for earlier periods have been reclassified to reflect the provisions
of the statement.


                                       30
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

     EMPLOYEE BENEFIT PLANS

     The Corporation has a defined benefit pension plan covering substantially
all full-time employees. Pension costs, which are actuarially determined using
the projected unit credit method, are charged to current operations. Annual
funding contributions are made up to the maximum amounts allowable for Federal
income tax purposes.

     Medical and life insurance benefits are provided by the Corporation on a
postretirement basis under defined benefit plans covering substantially all
full-time employees. Postretirement benefit costs, which are actuarially
determined using the attribution method and recorded on an unfunded basis, are
charged to current operations and credited to a liability account on the
consolidated balance sheet.

     The Corporation adopted Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,
an Amendment of Statements No. 87, 88, and 106", during 1998. SFAS No. 132
standardizes the disclosure requirements for pensions and other postretirement
benefits, requires additional information on changes in the benefit obligations
and fair values of plan assets and eliminates certain disclosures previously
required. The methods of measurement and recognition for such plans remain
unchanged. Disclosures for earlier periods provided for comparative purposes
have been restated to reflect the provisions of SFAS No. 132.


     STOCK OPTIONS

     The Corporation accounts for awards under employee stock-based
compensation plans in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and, acordingly, no compensation cost has been recognized
for such awards in the consolidated financial statements. As required by
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", the Corporation discloses in a footnote the pro
forma effect on net income and earnings per share that would result from the
use of the fair value based method to measure compensation costs related to
awards granted after December 15, 1994.


     DERIVATIVE FINANCIAL INSTRUMENTS

     The Corporation may use off-balance sheet derivative contracts for
interest rate risk management purposes. The existing contracts, all of which
expired in 1999, were accounted for on the accrual basis and the net interest
differential, including premiums paid, if any, were recognized as an adjustment
to interest income or expense of the related asset or liability. The
Corporation does not utilize derivative financial instruments for trading
purposes.


     RESTATEMENTS

     Share and per share information in the consolidated financial statements
and related notes thereto have been restated, where appropriate, to reflect the
two-for-one common stock split effected in the form of a 100% stock dividend
paid to shareholders on March 18, 1998.


                                       31
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- INVESTMENT SECURITIES
     Summaries of the amortized cost and estimated fair value of investment
securities and the related gross unrealized gains and losses are presented
below:



<TABLE>
<CAPTION>
                                                                      GROSS        GROSS     ESTIMATED
                                                       AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                          COST        GAINS       LOSSES       VALUE
                                                      ----------- ------------ ------------ ----------
                                                                       (IN THOUSANDS)
<S>                                                   <C>         <C>          <C>          <C>
   AVAILABLE FOR SALE
     DECEMBER 31, 1999
      U.S. Treasury .................................   $   501   $    4          $   --     $   505
      U.S. Government agencies and corporations .....    54,106       --           2,908      51,198
      Equity securities .............................     1,481       12              --       1,493
                                                        -------   ------          ------     -------
       Total ........................................   $56,088   $   16          $2,908     $53,196
                                                        =======   ======          ======     =======
     DECEMBER 31, 1998
      U.S. Treasury .................................   $ 1,253   $   30          $   --     $ 1,283
      U.S. Government agencies and corporations .....    42,314      143             158      42,299
      Mortgage-backed securities ....................       228        2              --         230
      Equity securities .............................     1,123       23              --       1,146
                                                        -------   ------          ------     -------
       Total ........................................   $44,918   $  198          $  158     $44,958
                                                        =======   ======          ======     =======
   HELD TO MATURITY
     DECEMBER 31, 1999
     U.S. Government agencies and corporations ......   $32,588   $   --           $1,566     $31,022
     State, county and municipal ....................    20,048      156             239      19,965
                                                        -------   ------          ------     -------
       Total ........................................   $52,636   $  156          $1,805     $50,987
                                                        =======   ======          ======     =======
     DECEMBER 31, 1998
     U.S. Government agencies and corporations ......   $39,527   $  154          $   56     $39,625
     State, county and municipal ....................    20,286      952               4      21,234
                                                        -------   ------          ------     -------
       Total ........................................   $59,813   $1,106          $   60     $60,859
                                                        =======   ======          ======     =======
</TABLE>

     The amortized cost and estimated fair value of investment securities at
December 31, 1999, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because issuers may have the right to
prepay obligations with or without prepayment penalties.



<TABLE>
<CAPTION>
                                                   AVAILABLE FOR SALE       HELD TO MATURITY
                                                 ----------------------- ----------------------
                                                              ESTIMATED               ESTIMATED
                                                  AMORTIZED      FAIR     AMORTIZED     FAIR
                                                     COST       VALUE        COST       VALUE
                                                 ----------- ----------- ----------- ----------
                                                                 (IN THOUSANDS)
<S>                                              <C>         <C>         <C>         <C>
    Due in one year or less ....................   $   756     $   758     $ 1,330    $ 1,333
    Due after one year through five years ......     7,998       7,731       8,791      8,742
    Due after five years through ten years .....    45,853      43,214      34,937     33,464
    Due after ten years ........................        --          --       7,578      7,448
                                                   -------     -------     -------    -------
      Total ....................................    54,607      51,703      52,636     50,987
    Equity securities ..........................     1,481       1,493          --         --
                                                   -------     -------     -------    -------
      Total investment securities ..............   $56,088     $53,196     $52,636    $50,987
                                                   =======     =======     =======    =======
</TABLE>

     Debt securities with an estimated fair value of $96,075,000 were pledged
to secure public funds and trust funds on deposit, retail repurchase agreements
and the special Year 2000 credit facility with the Federal Reserve at December
31, 1999.

     There were no sales of investment securities in the three-year period
ended December 31, 1999.

                                       32
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- LOANS
     Major classifications of loans are as follows:



<TABLE>
<CAPTION>
                                                   DECEMBER 31
                                             -----------------------
                                                 1999        1998
                                             ----------- -----------
                                                 (IN THOUSANDS)
<S>                                          <C>         <C>
        Commercial and agricultural ........  $125,273    $ 99,055
        Real estate -- construction ........     2,320       3,279
        Real estate -- mortgage:
         1-4 family residential ............    97,694      88,591
         Commercial and other ..............    14,309      16,708
        Consumer ...........................    18,601      22,089
        Leases .............................     6,832          --
                                              --------    --------
          Total loans ......................  $265,029    $229,722
                                              ========    ========
</TABLE>

     Loans as presented are reduced by net deferred loan fees of $553,000 and
$443,000 at December 31, 1999 and 1998, respectively. Nonaccrual loans amounted
to $1,451,000 at December 31, 1999 and $731,000 at December 31, 1998. Interest
income that would have been recorded on nonaccrual loans for the years ended
December 31, 1999 and 1998, had they performed in accordance with their
original terms, amounted to approximately $144,000 and $59,000, respectively.
Interest income on all such loans included in the the results of operations
amounted to approximately $90,000 in 1999 and $30,000 in 1998. For the year
ended December 31, 1997, lost and recorded interest income on nonaccrual loans
was not material.

     At December 31, 1999, the Bank had impaired loans with three borrowers
which totaled $1,420,000 and were also on nonaccrual status. The related
allowance for loan losses on these loans amounted to $289,000. The payment of
principal and interest on impaired loans with one borrower is guaranteed up to
a specified percentage by an agency of the U. S. Government. Based on the
balances outstanding at December 31, 1999, the guaranteed portion of impaired
loans amounted to $792,000. At December 31, 1998, the Bank had impaired loans
with one borrower which totaled $467,000 and were also on nonaccrual status.
The related allowance for loan losses on these loans amounted to $200,000. The
average carrying value of impaired loans was $1,508,000 in 1999 and $467,000 in
1998. Interest income on impaired loans amounted to approximately $87,000 in
1999 and was not material in 1998.

     Loans with outstanding balances of $213,000 in 1999 were transferred from
loans to other real estate acquired through foreclosure. Such loans transferred
in 1998 and 1997 were not material. Other real estate acquired through loan
foreclosures amounted to $115,000 at December 31, 1999 and are included in
"other assets" on the consolidated balance sheet. There was no balance of other
real estate acquired through loan foreclosures at December 31, 1998.

     Loans are primarily made in the region of North Carolina that includes
Randolph, Montgomery and Chatham counties. The real estate loan portfolio can
be affected by the condition of the local real estate markets. Included in
consumer loans at December 31, 1999 and 1998 are $963,000 and $3,745,000,
respectively, of retail installment loan contracts purchased primarily from
automobile dealers. In March 1996, the Bank discontinued the purchase of retail
installment loan contracts from automobile and equipment dealers.

     Loans have been made by the Bank to directors and executive officers of
the Corporation and to the associates of such persons, as defined by the
Securities and Exchange Commission. Such loans were made in the ordinary course
of business on substantially the same terms, including rate and collateral, as
those prevailing at the time in comparable transactions with other borrowers
and do not involve more than normal risk of collectibility. A summary of the
activity during 1999 with respect to related party loans is as follows (in
thousands):


<TABLE>
<S>                                    <C>
  Balance, December 31, 1998 .........  $   8,524
  New loans during 1999 ..............     21,156
  Repayments during 1999 .............    (20,482)
                                        ---------
  Balance, December 31, 1999 .........  $   9,198
                                        =========
</TABLE>



                                       33
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- ALLOWANCE FOR LOAN LOSSES
     Changes in the allowance for loan losses were as follows:



<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31
                                                         -----------------------------
                                                            1999      1998      1997
                                                         --------- --------- ---------
                                                                (IN THOUSANDS)
<S>                                                      <C>       <C>       <C>
        Balance at beginning of year ...................  $2,517    $2,294    $1,986
        Provision for losses charged to operations .....     405       390       600
        Loans charged off ..............................    (328)     (336)     (457)
        Recoveries on loans previously charged off .....     151       169       165
                                                          ------    ------    ------
        Balance at end of year .........................  $2,745    $2,517    $2,294
                                                          ======    ======    ======
</TABLE>

NOTE 5 -- PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows:



<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                             -------------------
                                                                1999      1998
                                                             --------- ---------
                                                               (IN THOUSANDS)
<S>                                                          <C>       <C>
        Land ...............................................  $ 1,396   $ 1,361
        Buildings and improvements .........................    4,584     4,408
        Furniture and equipment ............................    7,879     6,262
        Leasehold improvements .............................      415       415
                                                              -------   -------
          Total ............................................   14,274    12,446
        Less accumulated depreciation and amortization .....    6,576     5,468
                                                              -------   -------
        Premises and equipment, net ........................  $ 7,698   $ 6,978
                                                              =======   =======
</TABLE>

NOTE 6 -- INCOME TAXES

     Income taxes as reported in the consolidated income statement included the
following expense (benefit) components:



<TABLE>
<CAPTION>
                                         1999      1998      1997
                                      --------- --------- ---------
                                             (IN THOUSANDS)
<S>                                   <C>       <C>       <C>
      Current:
        Federal .....................  $2,080    $1,959    $1,942
        State .......................      49        77       128
                                       ------    ------    ------
  Total .............................   2,129     2,036     2,070
                                       ------    ------    ------
      Deferred -- Federal ...........    (142)      (52)     (252)
                                       ------    ------    ------
  Total income taxes ................  $1,987    $1,984    $1,818
                                       ======    ======    ======
</TABLE>

                                       34
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- INCOME TAXES -- (Continued)

     A reconciliation of income tax expense computed at the statutory Federal
income tax rate to actual income tax expense is presented below:



<TABLE>
<CAPTION>
                                                                   1999      1998      1997
                                                                --------- --------- ---------
                                                                       (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
        Amount of tax computed using Federal statutory tax rate
          of 34% ..............................................  $2,259    $2,226    $2,012
        Increases (decreases) resulting from:
          Effect of tax-exempt loan and investment securities
           income .............................................    (316)     (308)     (282)
          Other ...............................................      44        66        88
                                                                 ------    ------    ------
           Total ..............................................  $1,987    $1,984    $1,818
                                                                 ======    ======    ======
</TABLE>

     The components of deferred tax assets and liabilities and the tax effect
of each are as follows:



<TABLE>
<CAPTION>
                                                       DECEMBER 31
                                                    -----------------
                                                      1999     1998
                                                    -------- --------
                                                     (IN THOUSANDS)
<S>                                                     <C>      <C>
  Deferred tax assets:
     Allowance for loan losses ....................  $  760   $  682
     Net unrealized securities losses .............     983       --
     Accrued expenses, not currently deductible ...     440      428
     Other ........................................      69       74
                                                     ------   ------
       Total ......................................   2,252    1,184
                                                     ------   ------
  Deferred tax liabilities:
     Depreciable basis of premises and equipment ..     255      280
     Taxable basis of investment securities .......      23       32
     Prepaid pension cost .........................     289      321
     Net deferred loan fees and costs .............     117      112
     Other ........................................      54       63
                                                     ------   ------
       Total ......................................     738      808
                                                     ------   ------
           Net deferred tax asset .................  $1,514   $  376
                                                     ======   ======
</TABLE>

     There is no valuation allowance for deferred tax assets as it is
management's contention that realization of the deferred tax assets is more
likely than not based upon the Corporation's history of taxable income and
estimates of future taxable income.


NOTE 7 -- TIME DEPOSITS

     The scheduled maturities of time deposits at December 31, 1999 are as
follows (in thousands):



<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
-------------------------------
<S>                             <C>
  2000 ........................  $151,181
  2001 ........................    19,038
  2002 ........................    10,299
  2003 ........................       360
  2004 ........................       863
                                 --------
  Total time deposits .........  $181,741
                                 ========
</TABLE>

                                       35
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 --  SHORT-TERM BORROWED FUNDS
     Funds are borrowed on an overnight basis through retail repurchase
agreements with Bank customers and federal funds purchased from other financial
institutions. Retail repurchase agreement borrowings are collateralized by
securities of the U.S. Treasury and U.S. Government agencies and corporations.

     Information concerning retail repurchase agreements and federal funds
purchased is as follows:



<TABLE>
<CAPTION>
                                                   1999                    1998
                                         ------------------------ -----------------------
                                            RETAIL      FEDERAL      RETAIL      FEDERAL
                                          REPURCHASE     FUNDS     REPURCHASE     FUNDS
                                          AGREEMENTS   PURCHASED   AGREEMENTS   PURCHASED
                                         ------------ ----------- ------------ ----------
                                                      (DOLLARS IN THOUSANDS)
<S>                                      <C>          <C>         <C>          <C>
   Balance at December 31 ..............   $ 10,667     $ 7,735     $ 11,484    $ 1,545
   Average balance during the year .....     12,971       1,590       10,169        539
   Maximum month-end balance ...........     14,230       8,200       13,107      3,250
   Weighted average interest rate:
    At December 31 .....................       3.97%       5.18%        3.79%      4.94%
    During the year ....................       3.87        5.38         4.37       5.32
</TABLE>

NOTE 9 -- FEDERAL HOME LOAN BANK (FHLB) ADVANCES

     The Bank has a $47,500,000 line of credit with the FHLB, secured by a
blanket collateral agreement on qualifying 1-4 family residential mortgage
loans. At December 31, 1999, FHLB advances under this line amounted to
$15,000,000 and were at interest rates ranging from 4.92% to 5.36%. There were
no FHLB advances at December 31, 1998.

     The scheduled maturities of FHLB advances at December 31, 1999 are as
follows (in thousands):



<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
-------------------------------
<S>                             <C>
  2004 ........................  $ 3,000
  2009 ........................   12,000
                                 -------
  Total FHLB Advances .........  $15,000
                                 =======
</TABLE>

NOTE 10 -- EMPLOYEE BENEFIT PLANS


     PENSION PLAN

     The Corporation has a noncontributory defined benefit pension plan
covering substantially all full-time employees who qualify as to age and length
of service. Benefits are based on the employee's compensation, years of service
and age at retirement. The Corporation's funding policy is to contribute
annually to the plan an amount which is not less than the minimum amount
required by the Employee Retirement Income Security Act of 1974 and not more
than the maximum amount deductible for income tax purposes.


                                       36
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- EMPLOYEE BENEFIT PLANS -- (Continued)

     Information concerning the status of the plan is as follows:



<TABLE>
<CAPTION>
                                                              1999        1998
                                                           ----------  ---------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                        <C>         <C>
   Change in Benefit Obligation:
    Benefit obligation at beginning of year ..............  $  6,137    $5,681
    Service cost .........................................       225       177
    Interest cost ........................................       392       379
    Net actuarial loss (gain) ............................      (648)      196
    Benefits paid ........................................      (364)     (296)
                                                            --------    ------
    Benefit obligation at end of year ....................  $  5,742    $6,137
                                                            ========    ======
   Change in Plan Assets:
    Fair value of plan assets at beginning of year .......  $  7,231    $5,952
    Actual return on plan assets .........................       965     1,209
    Employer contributions ...............................        --       366
    Benefits paid ........................................      (364)     (296)
                                                            --------    ------
    Fair value of plan assets at end of year .............  $  7,832    $7,231
                                                            ========    ======
   Prepaid Pension Cost Components:
    Funded status of plan ................................  $  2,090    $1,094
    Unrecognized net actuarial gain ......................    (1,957)     (995)
    Unrecognized prior service cost ......................       673       780
    Unrecognized transition obligation ...................        43        65
                                                            --------    ------
    Prepaid pension cost at end of year ..................  $    849    $  944
                                                            ========    ======
   Weighted-Average Plan Assumptions at End of Year:
    Discount rate ........................................       7.5%      6.5%
    Expected long-term rate of return on plan assets .....       9.0       8.0
    Rate of increase in compensation levels ..............       5.5       5.5
</TABLE>

     Net periodic pension cost included the following components:



<TABLE>
<CAPTION>
                                                      1999       1998      1997
                                                   --------- ----------- --------
                                                           (IN THOUSANDS)
<S>                                                <C>       <C>         <C>
   Service cost ..................................  $  225     $ 177      $  151
   Interest cost .................................     393       379         363
   Expected return on plan assets ................    (635)     (477)       (385)
   Amortization of prior service cost ............     107       107         107
   Amortization of transition obligation .........      21        21          21
   Recognized net actuarial gain .................     (16)         (1)       --
                                                    ------     --------   ------
   Net periodic pension cost .....................  $   95     $ 206      $  257
                                                    ======     =======    ======
</TABLE>

     OTHER POSTRETIREMENT DEFINED BENEFIT PLANS

     The Corporation has postretirement medical and life insurance plans
covering substantially all full-time employees who qualify as to age and length
of service. The medical plan is contributory, with retiree contributions
adjusted whenever medical insurance rates change. The life insurance plan is
noncontributory.


                                       37
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- EMPLOYEE BENEFIT PLANS -- (Continued)

     Information concerning the plans, which are unfunded, is as follows:



<TABLE>
<CAPTION>
                                                                 1999        1998
                                                              ----------  ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>         <C>
   Change in Benefit Obligation:
    Benefit obligation at beginning of year .................   $  763      $  721
    Service cost ............................................       22          19
    Interest cost ...........................................       48          47
    Net actuarial loss (gain) ...............................      (46)          5
    Benefits paid ...........................................      (58)        (29)
                                                                ------      ------
    Benefit obligation at end of year .......................   $  729      $  763
                                                                ======      ======
   Accrued Postretirement Benefit Cost Components:
    Unrecognized net actuarial gain .........................   $ (652)     $ (635)
    Unrecognized prior service cost .........................       59          68
    Unrecognized transition obligation ......................      263         283
                                                                ------      ------
    Accrued postretirement benefit cost at end of year ......   $ (330)     $ (284)
                                                                ======      ======
   Weighted-Average Plan Assumptions at End of Year:
    Discount rate ...........................................      7.5%        6.5%
    Annual rate of increase in the cost of medical benefits:
     Current year ...........................................     11.0        12.0
     Final constant amount ..................................      5.0         6.0
     Annual decrease ........................................      1.0         1.0
</TABLE>

     Increasing or decreasing the assumed medical cost trend rate by one
percentage point would not have a significant effect on either the
postretirement benefit obligation at December 31, 1999 or the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the year ended December 31, 1999.

     Net periodic postretirement benefit cost included the following
components:



<TABLE>
<CAPTION>
                                                       1999   1998    1997
                                                      ------ ------ -------
                                                         (IN THOUSANDS)
<S>                                                   <C>    <C>    <C>
   Service cost .....................................  $ 22   $19    $ 19
   Interest Cost ....................................    48    47      46
   Amortization of prior service cost ...............    10    10      10
   Amortization of transition obligation ............    20    20      20
   Recognized net actuarial loss ....................     4     3       5
                                                       ----   ---    ----
   Net periodic postretirement benefit cost .........  $104   $99    $100
                                                       ====   ===    ====
</TABLE>

     MATCHING RETIREMENT/SAVINGS PLAN

     The Corporation has a matching retirement/savings plan which permits
eligible employees to make contributions to the plan up to a specified
percentage of compensation as defined by the plan. A portion of the employee
contributions are matched by the Corporation based on the plan formula. The
matching contributions amounted to $107,000 in 1999, $96,000 in 1998 and
$85,000 in 1997.


                                       38
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- LEASES
     Future obligations at December 31, 1999 for minimum rentals under
noncancellable operating lease commitments, primarily relating to premises, are
as follows (in thousands):



<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
----------------------------------------
<S>                                      <C>
  2000 .................................  $ 49
  2001 .................................    48
  2002 .................................     7
  2003 .................................     3
  2004 .................................     3
  2005 and later years .................    42
                                          ----
  Total minimum lease payments .........  $152
                                          ====
</TABLE>

     Net rental expense for all operating leases amounted to $52,000 in 1999,
$55,000 in 1998 and $57,000 in 1997. One operating lease for real property
contains a purchase option considered to approximate fair market value.


NOTE 12 -- SUPPLEMENTARY INCOME STATEMENT INFORMATION

     Significant components of other expense were as follows:



<TABLE>
<CAPTION>
                                           1999   1998    1997
                                          ------ ------ -------
                                             (IN THOUSANDS)
<S>                                       <C>    <C>    <C>
  Stationery, printing and supplies .....  $439   $345   $335
  Advertising and marketing .............   359    346    123
</TABLE>

NOTE 13 -- FNB CORP. (PARENT COMPANY) FINANCIAL DATA

     The Parent Company's principal asset is its investment in the Bank
subsidiary, and its principal source of income is dividends from that
subsidiary.

     The Parent Company's condensed balance sheets as of December 31, 1999 and
1998, and the related condensed statements of income and cash flows for each of
the years in the three-year period ended December 31, 1999 are as follows:


CONDENSED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                         ---------------------
                                                            1999       1998
                                                         ---------- ----------
                                                            (IN THOUSSANDS)
<S>                                                      <C>        <C>
  Assets:
   Cash ................................................  $   984    $   943
   Investment in wholly-owned bank subsidiary ..........   34,415     34,041
   Other assets ........................................    1,093        567
                                                          -------    -------
    Total assets .......................................  $36,492    $35,551
                                                          =======    =======
  Liabilities and Shareholders' Equity:
   Accrued liabilities .................................  $   562    $   549
   Shareholders' equity ................................   35,930     35,002
                                                          -------    -------
    Total liabilities and shareholders' equity .........  $36,492    $35,551
                                                          =======    =======
</TABLE>

                                       39
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- FNB CORP. (PARENT COMPANY) FINANCIAL DATA -- (Continued)

CONDENSED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31
                                                                        -----------------------------
                                                                           1999      1998      1997
                                                                        --------- --------- ---------
                                                                               (IN THOUSANDS)
<S>                                                                     <C>       <C>       <C>
Income:
 Dividends from bank subsidiary .......................................  $2,364    $1,635    $1,137
 Other income .........................................................       7         2         1
                                                                         ------    ------    ------
   Total income .......................................................   2,371     1,637     1,138
                                                                         ------    ------    ------
Operating expenses ....................................................      29        28        23
                                                                         ------    ------    ------
Income before income tax benefit and equity in undistributed net income
 of bank subsidiary ...................................................   2,342     1,609     1,115
Income tax benefit ....................................................       6         9         8
                                                                         ------    ------    ------
Income before equity in undistributed net income of bank subsidiary ...   2,348     1,618     1,123
Equity in undistributed net income of bank subsidiary .................   2,309     2,944     2,977
                                                                         ------    ------    ------
   Net income .........................................................  $4,657    $4,562    $4,100
                                                                         ======    ======    ======
</TABLE>

CONDENSED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                YEARS ENDED DECEMBER 31
                                                                                        ---------------------------------------
                                                                                             1999         1998         1997
                                                                                        ------------- ----------- -------------
                                                                                                    (IN THOUSANDS)
<S>                                                                                     <C>           <C>         <C>
Operating activities:
  Net income ..........................................................................   $ 4,657      $  4,562     $ 4,100
  Adjustments to reconcile net income to net cash provided by operating activities:
   Equity in undistributed net income of bank subsidiary ..............................    (2,309)       (2,944)     (2,977)
   Other, net .........................................................................      (511)         (164)           (8)
                                                                                          --------     --------     ----------
    Net cash provided by operating activities .........................................     1,837         1,454       1,115
                                                                                          --------     --------     ---------
Investing activities:
  Decrease (increase) in other assets .................................................          (3)         20            (8)
                                                                                          ----------   --------     ----------
Financing activities:
  Common stock issued .................................................................        96           241         346
  Common stock repurchased ............................................................       (24)           --          --
  Cash dividends paid .................................................................    (1,865)       (1,478)     (1,359)
                                                                                          ---------    --------     ---------
    Net cash used in financing activities .............................................    (1,793)       (1,237)     (1,013)
                                                                                          ---------    --------     ---------
Net increase in cash ..................................................................        41           237          94
Cash at beginning of year .............................................................       943           706         612
                                                                                          ---------    --------     ---------
Cash at end of year ...................................................................   $   984      $    943     $   706
                                                                                          =========    ========     =========
</TABLE>

NOTE 14 -- CAPITAL ADEQUACY REQUIREMENTS

     Certain regulatory requirements restrict the lending of funds by the Bank
to FNB Corp. and the amount of dividends which can be paid to FNB Corp. In
2000, the maximum amount of dividends the Bank can pay to FNB Corp., without
the approval of the Comptroller of the Currency, is $5,253,000 plus an
additional amount equal to the retained net income in 2000 up to the date of
any dividend declaration.

     The Bank is required to maintain average reserve balances with the Federal
Reserve Bank based on a percentage of deposits. For the reserve maintenance
period in effect at December 31, 1999, the average daily reserve requirement
was $4,407,000.


                                       40
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14 -- CAPITAL ADEQUACY REQUIREMENTS -- (Continued)

     FNB Corp. and the Bank are required to comply with capital adequacy
standards established by the Board of Governors of the Federal Reserve System.
In addition, the Bank is required to comply with prompt corrective action
provisions established by the Federal Deposit Insurance Corporation Improvement
Act. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, there are minimum ratios of capital to risk-weighted assets.
The capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly discretionary actions by regulators that, if undertaken,
could have a material effect on the consolidated financial statements.

     Regulatory capital amounts and ratios are set forth in the table below.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier 1, Tier 2 and Tier 3, as a percentage of
risk-weighted assets, which are computed by measuring the relative credit risk
of both the asset categories on the balance sheet and various off-balance sheet
exposures. Tier 1 capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier 2 capital, which is limited to the total of Tier 1
capital, includes allowable amounts of subordinated debt, mandatory convertible
debt, preferred stock and the allowance for loan losses. Tier 3 capital,
applicable only to financial institutions subject to certain market risk
capital guidelines, is capital allocated to support the market risk related to
a financial institution's ongoing trading activities. At December 31, 1999, FNB
Corp. and the Bank were not subject to the market risk capital guidelines and,
accordingly, had no Tier 3 capital allocation. Total capital, for risk-based
purposes, consists of the sum of Tier 1, Tier 2 and Tier 3 capital.

     The Bank is well-capitalized under the regulatory framework for prompt
corrective action. To be categorized as well-capitalized, the Bank must meet
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the table below. There are no events or conditions since the
notification that management believes have changed the Bank's category.



<TABLE>
<CAPTION>
                                                                                        MINIMUM RATIOS
                                                                                ------------------------------
                                                                                                TO BE WELL
                                                                                    FOR         CAPITALIZED
                                  CAPITAL AMOUNT               RATIO              CAPITAL      UNDER PROMPT
                              ----------------------  ------------------------   ADEQUACY       CORRECTIVE
                                 1999        1998         1999         1998      PURPOSES    ACTION PROVISIONS
                              ----------  ----------  -----------  -----------  ----------  ------------------
                                                           (DOLLARS IN THOUSANDS)
<S>                           <C>         <C>         <C>          <C>          <C>         <C>
AS OF DECEMBER 31
  Total capital
   (to risk-weighted assets):
   FNB Corp. ................  $40,583     $37,482        15.05%       16.05%       8.00%          N/A
   Bank .....................   39,050      36,489        14.48        15.63        8.00           10.00%
  Tier 1 capital
   (to risk-weighted assets):
   FNB Corp. ................   37,833      34,965        14.03        14.98        4.00           N/A
   Bank .....................   36,300      33,972        13.46        14.55        4.00            6.00%
  Tier 1 capital
   (to average assets):
   FNB Corp. ................   37,833      34,965         9.66         9.89        4.00           N/A
   Bank .....................   36,300      33,972         9.27         9.61        4.00            5.00%
</TABLE>

NOTE 15 -- SHAREHOLDERS' EQUITY


     EARNINGS PER SHARE (EPS)

     Basic net income per share, or basic EPS, is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if the
Corporation's dilutive stock options were exercised. The numerator of the basic
EPS computation is the same as the numerator of the diluted EPS computation for
all periods presented. A reconciliation of the denominators of the basic and
diluted EPS computations is as follows:


                                       41
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15 -- SHAREHOLDERS' EQUITY -- (Continued)


<TABLE>
<CAPTION>
                                                                            1999        1998        1997
                                                                        ----------- ----------- ------------
<S>                                                                     <C>         <C>         <C>
  Basic EPS denominator -- Weighted average number of common shares
   outstanding ........................................................  3,658,987   3,649,875   3,626,132
  Dilutive share effect arising from assumed exercise of stock options     114,194     144,948      70,252
                                                                         ---------   ---------   ---------
  Diluted EPS denominator .............................................  3,773,181   3,794,823   3,696,384
                                                                         =========   =========   =========
</TABLE>

     STOCK OPTIONS

     The Corporation adopted a stock compensation plan in 1993 that allows for
the granting of incentive and nonqualified stock options to key employees and
directors. Under terms of the plan, options are granted at prices equal to the
fair market value of the common stock on the date of grant. Options become
exercisable after one year in equal, cumulative installments over a five-year
period. No option shall expire later than ten years from the date of grant. A
maximum of 720,000 shares of common stock has been reserved for issuance under
the stock compensation plan. At December 31, 1999, there were 225,750 shares
available under the plan for the granting of additional options.

     The Corporation applies APB Opinion No. 25 in accounting for the stock
compensation plan and, accordingly, no compensation cost has been recognized
for stock option grants in the consolidated financial statements. As required
by Statement of Financial Accounting Standards (SFAS) No. 123, disclosures are
presented below for the effect on net income and net income per share that
would result from the use of the fair value based method to measure
compensation costs related to stock option grants in 1995 and subsequent years.
The effect on pro forma net income for 1999, 1998 and 1997 for options granted
prior to 1995 has not been determined. Consequently, the effects of applying
SFAS No. 123 pro forma disclosures during the initial phase-in period may not
be representative of the effects on reported net income in future years.



<TABLE>
<CAPTION>
                                 1999        1998        1997
                             ----------- ----------- -----------
                               (IN THOUSANDS, EXCEPT PER SHARE
                                            DATA)
<S>                          <C>         <C>         <C>
Net Income:
     As reported ...........    $ 4,657     $ 4,562     $ 4,100
     Pro forma .............      4,429       4,422       4,018
Net Income Per Share:
     Basic:
        As reported ........       1.27        1.25        1.13
        Pro forma ..........       1.21        1.21        1.11
     Diluted:
        As reported ........       1.23        1.20        1.11
        Pro forma ..........       1.17        1.17        1.09
</TABLE>

     The weighted-average fair value per share of options granted in 1999, 1998
and 1997 amounted to $5.13, $11.17 and $5.55, respectively. Fair values were
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:



<TABLE>
<CAPTION>
                                          1999        1998        1997
                                       ----------  ----------  ----------
<S>                                    <C>         <C>         <C>
    Risk-free interest rate ..........  6.23%       4.70%       5.86%
    Dividend yield ...................  3.20        1.80        1.60
    Volatility ....................... 41.00       44.00       26.00
    Expected life .................... 6 years     6 years     6 years
</TABLE>

                                       42
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15 -- SHAREHOLDERS' EQUITY -- (Continued)

     A summary of stock option activity is as follows:



<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31
                                        ----------------------------------------------------------------------
                                                 1999                   1998                    1997
                                        ---------------------- ----------------------- -----------------------
                                                     WEIGHTED                WEIGHTED                WEIGHTED
                                                      AVERAGE                 AVERAGE                AVERAGE
                                                     EXERCISE                EXERCISE                EXERCISE
                                           SHARES      PRICE      SHARES       PRICE      SHARES      PRICE
                                        ----------- ---------- ------------ ---------- ----------- -----------
<S>                                     <C>         <C>        <C>          <C>        <C>         <C>
    Outstanding at beginning of year ..   396,089    $  15.53     340,800    $  12.93    276,100    $  11.21
    Granted ...........................    75,375       14.13      71,000       27.00     93,000       17.47
    Exercised .........................    (7,224)      11.37     (14,711)      10.47     (9,450)       9.41
    Forfeited .........................    (6,225)      19.22      (1,000)      17.50    (18,850)      12.00
                                          -------                 -------                -------
    Outstanding at end of year ........   458,015       15.31     396,089       15.53    340,800       12.93
                                          =======                 =======                =======
    Options exercisable at end of year    226,140       12.74     151,639       11.37     96,500       10.19
                                          =======                 =======                =======
</TABLE>

     At December 31, 1999, information concerning stock options outstanding and
exercisable is as follows:



<TABLE>
<CAPTION>
                   OPTIONS OUTSTANDING
               ---------------------------
                               WEIGHTED
                                AVERAGE
                               REMAINING
  EXERCISE                    CONTRACTUAL       OPTIONS
    PRICE        SHARES      LIFE (YEARS)     EXERCISABLE
------------   ----------   --------------   ------------
<S>            <C>          <C>              <C>
 $    8.13       83,315           4.96           83,315
      12.00      62,100           5.96           48,300
      14.00      79,350           6.96           45,750
      16.00       2,000           7.75              800
      17.50      87,000           7.96           34,200
      27.00      68,875           8.96           13,775
      14.13      75,375           9.96               --
                 ------                          ------
                458,015           7.45          226,140
                =======                         =======
</TABLE>

NOTE 16 -- COMMITMENTS

     In the normal course of business, various commitments are outstanding that
are not reflected in the consolidated financial statements. At December 31,
1999, a summary of significant commitments is as follows:


<TABLE>
<S>                                            <C>
         Commitments to extend credit ........  $64,966,000
         Standby letters of credit ...........      382,000
</TABLE>

     In management's opinion, these commitments will be funded from normal
operations with not more than the normal risk of loss.


NOTE 17 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair value
for each class of financial instruments.

     CASH AND CASH EQUIVALENTS. For cash on hand, amounts due from banks, and
federal funds sold, the carrying value is considered to be a reasonable
estimate of fair value.

     INVESTMENT SECURITIES. The fair value of investment securities is based on
quoted market price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities.


                                       43
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- (Continued)

     LOANS. The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.

     DEPOSITS. The fair value of noninterest-bearing demand deposits and NOW,
savings and money market deposits is the amount payable on demand at the
reporting date. The fair value of time deposits is estimated using the rates
currently offered for deposits of similar remaining maturities.

     BORROWED FUNDS. The carrying value of retail repurchase agreements and
federal funds purchased is considered to be a reasonable estimate of fair
value. The fair value of Federal Home Loan Bank advances is estimated using the
rates currently offered for advances of similar remaining maturities.

     COMMITMENTS. The fair value of commitments to extend credit is considered
to approximate carrying value, since the large majority of these commitments
would result in loans that have variable rates and/or relatively short terms to
maturity. For other commitments, generally of a short-term nature, the carrying
value is considered to be a reasonable estimate of fair value. The various
commitment items are disclosed in Note 16.

     The estimated fair values of financial instruments are as follows:



<TABLE>
<CAPTION>
                                             DECEMBER 31, 1999      DECEMBER 31, 1998
                                           ---------------------- ---------------------
                                                       ESTIMATED              ESTIMATED
                                            CARRYING      FAIR     CARRYING     FAIR
                                              VALUE      VALUE       VALUE      VALUE
                                           ---------- ----------- ---------- ----------
                                                          (IN THOUSANDS)
<S>                                        <C>        <C>         <C>        <C>
FINANCIAL ASSETS
 Cash and cash equivalents ...............  $ 14,271   $ 14,271    $ 12,787   $ 12,787
 Investment securities:
   Available for sale ....................    53,196     53,196      44,958     44,958
   Held to maturity ......................    52,636     50,987      59,813     60,859
 Net loans ...............................   262,284    256,268     227,205    228,806
FINANCIAL LIABILITIES
 Deposits ................................   322,767    323,651     304,690    305,913
 Retail repurchase agreements ............    10,667     10,667      11,484     11,484
 Federal Home Loan Bank advances .........    15,000     13,994          --         --
 Federal funds purchased .................     7,735      7,735       1,545      1,545
</TABLE>

     The fair value estimates are made at a specific point in time based on
relevant market and other information about the financial instruments. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Corporation's entire holdings of a particular
financial instrument nor are potential taxes and other expenses that would be
considered in an actual sale considered. Because no market exists for a
significant portion of the Corporation's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and such other factors. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions could significantly
affect the estimates. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.


NOTE 18 -- ACQUISITION MATTERS

     On October 16, 1999, the Corporation entered into a definitive merger
agreement to acquire Carolina Fincorp, Inc. ("Carolina Fincorp"), holding
company for Richmond Savings Bank, Inc., SSB ("Richmond Savings"),
headquartered in Rockingham, North Carolina. Under the terms of the agreement,
Carolina Fincorp will be merged with a wholly-owned subsidiary of FNB Corp.
formed for the purposes of effecting the merger, immediately after which, the
subsidiary will be merged into FNB Corp. Following the merger of holding
companies, Richmond Savings will be merged with and into the Bank. The merger
will be accounted for as a pooling-of-interests transaction and is subject to
several conditions, including approval by


                                       44
<PAGE>

                           FNB CORP. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 18 -- ACQUISITION MATTERS -- (Continued)

the shareholders of FNB Corp. and Carolina Fincorp and approval by applicable
regulatory authorities. On March 21, 2000, the shareholders of both FNB Corp.
and Carolina Fincorp voted to approve the merger, leaving certain contractual
conditions of the merger agreement to be satisfied. Upon satisfaction of these
conditions, the merger is anticipated to close early in the second quarter of
2000. To effect the merger, each share of Carolina Fincorp common stock will be
converted into .79 (subject to possible adjustment) of a share of FNB Corp.
common stock. At December 31, 1999, Carolina Fincorp operated five offices
through Richmond Savings and had approximately $120,069,000 in total assets,
$102,917,000 in deposits and $16,138,000 in stockholders' equity.

     On June 3, 1997, the Corporation entered into a definitive agreement to
acquire a savings bank in Siler City, North Carolina. Under terms of the
agreement, the savings bank shareholders were to receive $15.50 per share,
either in FNB Corp. common stock or in cash or a combination thereof, subject
to the limitation that FNB Corp. common stock issued in the merger would be not
more than 60% and not less than 50% of the total consideration. On January 28,
1998, as permitted by the agreement, the Board of Directors of the savings bank
exercised its right to terminate the proposed combination due to the increase
in the market value of FNB Corp. common stock above a specified level. The
Corporation incurred certain costs in connection with the proposed acquisition.
Those costs, which had been initially deferred, amounted to $305,000 and are
included in terminated merger expenses in the consolidated statement of income
for the year ended December 31, 1997.


                                       45
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, as of March 24,
2000.

                                   FNB CORP.
                                 (Registrant)


                                        By: /s/  MICHAEL C. MILLER
                                          -------------------------------------
                                                 MICHAEL C. MILLER
                                              CHAIRMAN AND PRESIDENT


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of March 24, 2000.



<TABLE>
<CAPTION>
             SIGNATURE               TITLE
-----------------------------------  ---------------------------------------------
<S>                                  <C>
/s/     MICHAEL C. MILLER            Chairman and President
----------------------------------
        MICHAEL C. MILLER

/s/     JERRY A. LITTLE              Treasurer and Secretary
----------------------------------     (Principal Financial and Accounting Officer)
        JERRY A. LITTLE

/s/     JAMES M. CAMPBELL, JR.       Director
----------------------------------
        JAMES M. CAMPBELL, JR.

    /s/  DARRELL L. FRYE             Director
----------------------------------
         DARRELL L. FRYE

  /s    WILBERT L. HANCOCK           Director
----------------------------------
        WILBERT L. HANCOCK

   /s/  THOMAS A. JORDAN             Director
----------------------------------
        THOMAS A. JORDAN

/s/     R. REYNOLDS NEELY, JR.       Director
----------------------------------
        R. REYNOLDS NEELY, JR.

 /s/    RICHARD K. PUGH              Director
----------------------------------
        RICHARD K. PUGH

 /s/     J. M. RAMSAY III            Director
----------------------------------
         J. M. RAMSAY III

/s/     CHARLES W. STOUT, M.D        Director
----------------------------------
        CHARLES W. STOUT, M.D.

/s/     EARLENE V. WARD              Director
----------------------------------
        EARLENE V. WARD
</TABLE>

                                       46
<PAGE>

                               INDEX TO EXHIBITS




<TABLE>
<CAPTION>
 EXHIBIT NO.                                     DESCRIPTION OF EXHIBIT
-------------   ----------------------------------------------------------------------------------------
<S>             <C>
   2.10         Amended and Restated Agreement and Plan of Merger by and between FNB Corp.
                and Carolina Fincorp, Inc., dated as of December 28, 1999, incorporated herein by
                reference to Exhibit 2.10 to the Registrant's Form S-4 Registration Statement (No.
                333-93869) filed December 30, 1999.
  2.11          Stock Option Agreement issued by Carolina Fincorp, Inc. to FNB Corp., dated as of
                October 16, 1999, incorporated herein by reference to Exhibit 2.11 to the
                Registrant's Form S-4 Registration Statement (No. 333-93869) filed December 30,
                1999.
  3.10          Articles of Incorporation of the Registrant, incorporated herein by reference to
                Exhibit 3.1 to the Registrant's Form S-14 Registration Statement (No. 2-96498)
                filed March 16, 1985.
  3.11          Articles of Amendment to Articles of Incorporation of the Registrant, adopted
                May 10, 1988, incorporated herein by reference to Exhibit 19.10 to the Registrant's
                Form 10-Q Quarterly Report for the quarter ended June 30, 1988.
  3.12          Articles of Amendment to Articles of Incorporation of the Registrant, adopted
                May 12, 1998, incorporated herein by reference to Exhibit 3.12 to the Registrant's
                Form 10-Q Quarterly Report for the quarter ended June 30, 1998.
  3.20          Amended and Restated Bylaws of the Registrant, adopted May 21, 1998,
                incorporated herein by reference to Exhibit 3.20 to the Registrant's Form 10-Q
                Quarterly Report for the quarter ended June 30, 1998.
    4           Specimen of Registrant's Common Stock Certificate, incorporated herein by
                reference to Exhibit 4 to Amendment No. 1 to the Registrant's Form S-14
                Registration Statement (No. 2-96498) filed April 19, 1985.
 10.10          Form of Split Dollar Insurance Agreement dated as of November 1, 1987 between
                First National Bank and Trust Company and certain of its key employees and
                directors, incorporated herein by reference to Exhibit 19.20 to the Registrant's Form
                10-Q Quarterly Report for the quarter ended June 30, 1988.
 10.11          Form of Amendment to Split Dollar Insurance Agreement dated as of November 1,
                1994 between First National Bank and Trust Company and certain of its key
                employees and directors, incorporated herein by reference to Exhibit 10.11 to the
                Registrant's Form 10-KSB Annual Report for the fiscal year ended December 31,
                1994.
 10.20          Stock Compensation Plan as amended effective May 12, 1998, incorporated herein
                by reference to Exhibit 10.30 to the Registrant's Form 10-Q Quarterly Report for
                the quarter ended June 30, 1998.
 10.21          Form of Incentive Stock Option Agreement between FNB Corp. and certain of its
                key employees, pursuant to the Registrant's Stock Compensation Plan, incorporated
                herein by reference to Exhibit 10.31 to the Registrant's Form 10-KSB Annual
                Report for the fiscal year ended December 31, 1994.
 10.22          Form of Nonqualified Stock Option Agreement between FNB Corp. and certain of
                its directors, pursuant to the Registrant's Stock Compensation Plan, incorporated
                herein by reference to Exhibit 10.32 to the Registrant's Form 10-KSB Annual
                Report for the fiscal year ended December 31, 1994.
 10.30          Employment Agreement dated as of December 27, 1995 between First National
                Bank and Trust Company and Michael C. Miller, incorporated herein by reference
                to Exhibit 10.50 to the Registrant's Form 10-KSB Annual Report for the fiscal year
                ended December 31, 1995.
   21           Subsidiaries of the Registrant.
   23           Consent of Independent Auditors.
   27           Financial Data Schedule.
</TABLE>

                                       47