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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, 1998


                        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 the Form 10-K. [X]

     As of March 25, 1999, the Registrant had 3,657,776 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
$74,494,000.

     Portions of the Proxy Statement of the Registrant for the Annual Meeting
of Shareholders to be held on May 11, 1999 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 ..............      21
             ITEM 6      SELECTED FINANCIAL DATA ................................................................       6
             ITEM 7      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                         OPERATIONS .............................................................................    7-21
             ITEM 7A     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............................   11-12
             ITEM 8      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                         Independent Auditors' Report ...........................................................      22
                         Consolidated Balance Sheets at December 31, 1998 and 1997 ..............................      23
                         Consolidated Statements of Income for each of the years in the three-year period ended
                         December 31, 1998 ......................................................................      24
                         Consolidated Statements of Shareholders' Equity and Comprehensive Income for each
                         of the years in the three-year period ended December 31, 1998 ..........................      25
                         Consolidated Statements of Cash Flows for each of the years in the three-year period
                         ended December 31, 1998 ................................................................      26
                         Notes to Consolidated Financial Statements .............................................   27-43
                         Quarterly Financial Data for 1998 and 1997 .............................................      21
             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 ........................................................................      45
                         (b)  Reports on Form 8-K (None were filed during the last quarter of the period
                         covered by this Form 10-K).
</TABLE>

---------
* Information called for by Part III is incorporated herein by reference to
  portions of the Registrant's Proxy Statement for the 1999 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 and Siler City. 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,
credit cards and loans, both secured and unsecured, for business, agricultural
and personal use. The Bank also has automated teller machines and is a member
of two national teller machine networks, Cirrus and Plus, and one regional
network, Honor.

     The Bank has a Trust and Investment Services Division that offers
traditional trust and estate settlement services, investment management
programs, brokerage services and tax-deferred annuities. Certain investment
products and services are offered through "FNB Investor Services", a service
provided by Liberty Securities Corporation.

     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 merger expenses in the consolidated statement of
income for the year ended December 31, 1997.

     The Bank's data processing, item capture and statement rendering
operations are currently outsourced under a service bureau arrangement. The
Bank is presently in the process of converting these operations to an in-house
basis. Conversion is expected to be complete by the end of March 1999. The
total capital expenditure outlay for hardware and software is expected to
amount to approximately $1,600,000, of which approximately one-half was
recorded in 1998. In addition to capital expenditures for the new system, the
Bank has incurred certain expenses in 1998, totaling approximately $302,000,
related to the data processing conversion.

     Commencing in 1995, the Bank significantly increased its investment in
computer equipment through expanded use of personal computer networks. Capital
expenditures in 1995, which totaled $1,302,000, related primarily to the
increase in computer equipment. Approximately one-third of 1996 and one-half of
1997 capital expenditures, which totaled $1,019,000 and $478,000, respectively,
also related to personal computer networks.

     As of December 31, 1998, the Bank had received regulatory approval for
establishment of a new branch office in Trinity, North Carolina. Construction
and occupancy of the Trinity branch is expected to occur in 1999, resulting in
a total capital outlay of approximately $950,000, of which approximately
one-third was recorded in 1998.


YEAR 2000 ISSUE

     The Corporation recognizes and is addressing the potentially serious
implications of the "Year 2000 Issue", which has resulted from the use of
two-digit year values in many existing computer programs. As the Year 2000
approaches, virtually every computer operation will be affected in some way by
the rollover of the two-digit year value to "00". The issue is whether computer
systems and other equipment incorporating computer components will properly
recognize date sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate erroneous data
or fail.

     The Corporation, which relies on third-party vendors for all computer
programming and equipment, has completed a thorough internal assessment in
connection with its Year 2000 Plan and is utilizing both internal and external
resources to identify, correct or reprogram, and test systems for Year 2000
compliance. Extensive consideration has been made in the


                                       3
<PAGE>

Year 2000 Plan for the conversion, now in process, of the Bank's data
processing, item capture and statement rendering operations from a service
bureau arrangement to an in-house basis, a project expected to be complete by
the end of March 1999.

     For additional information on Year 2000 matters, see "Year 2000 Readiness
Disclosure" 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.


                                       4
<PAGE>

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 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, 1998, the Parent Company had three officers, all of
whom were also officers of the Bank. On that same date, the Bank had 131
full-time employees and 25 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 and
Siler City, 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>
                                                                1998         1997         1996         1995         1994
                                                            ------------ ------------ ------------ ------------ ------------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                         <C>          <C>          <C>          <C>          <C>
SUMMARY OF OPERATIONS
Interest income ...........................................   $ 26,411     $ 24,507     $ 22,248     $ 20,606     $ 17,688
Interest expense ..........................................     11,591       10,576        9,612        9,002        6,979
                                                              --------     --------     --------     --------     --------
Net interest income .......................................     14,820       13,931       12,636       11,604       10,709
Provision for loan losses .................................        390          600          490          515          220
                                                              --------     --------     --------     --------     --------
Net interest income after provision for loan losses .......     14,430       13,331       12,146       11,089       10,489
Noninterest income ........................................      3,204        2,875        2,444        1,826        2,075
Noninterest expense .......................................     11,088       10,288        9,077        9,114        8,578
                                                              --------     --------     --------     --------     --------
Income before income taxes ................................      6,546        5,918        5,513        3,801        3,986
Income taxes ..............................................      1,984        1,818        1,676        1,101        1,159
                                                              --------     --------     --------     --------     --------
Net income ................................................   $  4,562     $  4,100     $  3,837     $  2,700     $  2,827
                                                              ========     ========     ========     ========     ========
PER SHARE DATA (1)
Net income:
 Basic ....................................................   $   1.25     $   1.13     $   1.06     $    .75     $    .79
 Diluted ..................................................       1.20         1.11         1.05          .75          .79
Cash dividends declared ...................................        .45          .38          .33          .26          .23
Book value ................................................       9.58         8.76         7.96         7.23         6.49
BALANCE SHEET INFORMATION
Total assets ..............................................   $356,623     $325,655     $307,134     $283,678     $261,616
Investment securities .....................................    104,771       86,881       90,316       84,536       76,983
Loans .....................................................    229,722      217,451      195,273      179,923      168,328
Deposits ..................................................    304,690      280,548      271,380      250,144      229,925
Shareholders' equity ......................................     35,002       31,901       28,767       25,995       23,379
RATIOS (AVERAGES)
Return on assets ..........................................       1.33%        1.30%        1.32%        1.00%        1.11%
Return on shareholders' equity ............................      13.52        13.45        13.97        10.93        12.33
Shareholders' equity to assets ............................       9.85         9.68         9.41         9.17         8.98
Dividend payout ratio .....................................      36.03        33.21        31.02        34.62        29.71
Loans to deposits .........................................      76.41        74.72        72.87        73.10        70.67
Net yield on earning assets, taxable equivalent basis .....       4.88         4.99         4.90         4.84         4.73
</TABLE>

---------
(1) All per share data has been retroactively adjusted to reflect the
    two-for-one common stock split effected in the form of a 100% stock
    dividend paid in the first quarter of 1998.
      

                                       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 $4,562,000 in 1998, an 11.3% increase in net income
from 1997. Basic earnings per share, adjusted for the two-for-one common stock
split in 1998, increased from $1.13 in 1997 to $1.25 in 1998 and diluted
earnings per share increased from $1.11 to $1.20. Total assets were
$356,623,000 at December 31, 1998, up 9.5% from year-end 1997. Loans amounted
to $229,722,000 at December 31, 1998, up 5.6% from the prior year. Total
deposits grew 8.6% to $304,690,000 in 1998.

     The 1998 operating results were impacted by 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 merger expenses resulting from the termination of an agreement for the
acquisition of a savings bank. These issues are discussed further in "Business
Development Matters".


EARNINGS REVIEW

     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 each year, as
discussed in the "Overview", tended to offset on a comparative basis.

     In 1997, earnings increased $263,000 or 6.8% from 1996. Earnings were
positively impacted in 1997 by increases of $1,295,000 or 10.2% in net interest
income and $431,000 in noninterest income. These gains were significantly
offset, however, by merger expenses of $305,000 as discussed in the "Overview",
by an increase of $906,000 in noninterest expense exclusive of the merger
expenses and by a $110,000 increase in the provision for loan losses.

     Return on average assets improved from 1.30% in 1997 to 1.33% in 1998.
Return on average assets declined in 1997 from 1.32% in 1996, reflecting the
effect in 1997 of the merger expenses. Similarly, return on average
shareholders' equity increased to 13.52% in 1998 after decreasing to 13.45% in
1997 from 13.97% in 1996.


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 $14,820,000 in 1998 compared to $13,931,000 in
1997. The increase of $889,000 or 6.4% resulted primarily from a 9.0% 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 4.99% in 1997 to 4.88% in 1998. In 1997, there was a $1,295,000 or 10.2%
increase in net interest income reflecting both an improvement in the net
interest margin from 4.90% in 1996 and an 8.1% increase in average earning
assets. On a taxable equivalent basis, the increases in net interest income in
1998 and 1997 were $960,000 and $1,358,000, 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.


                                       7
<PAGE>

TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS



<TABLE>
<CAPTION>
                                                        1998                                   1997
                                       -------------------------------------- --------------------------------------
                                                    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) ........................  $224,972    $20,393         9.06%      $205,127    $18,813         9.17%
Investment securities (1):
 Taxable income ......................    75,002      5,225         6.97         70,817      4,975         7.03
 Non-taxable income ..................    19,780      1,547         7.82         17,741      1,435         8.09
Federal funds sold ...................     3,417        188         5.51          2,813        155         5.51
                                        --------    -------         ----       --------    -------         ----
  Total earning assets ...............   323,171     27,353         8.46        296,498     25,378         8.56
                                        --------    -------         ----       --------    -------         ----
Cash and due from banks ..............    10,800                                  9,985
Other assets, net ....................     8,491                                  8,267
                                        --------                               --------
  TOTAL ASSETS                          $342,462                               $314,750
                                        ========                               ========
INTEREST-BEARING
 LIABILITIES
Interest-bearing deposits:
 NOW accounts ........................  $ 41,353        648         1.57       $ 38,017        677         1.78
 Savings deposits ....................    27,414        614         2.24         29,199        678         2.32
 Money market accounts ...............    25,430        977         3.84         19,459        707         3.63
 Certificates and other time
  deposits ...........................   162,484      8,879         5.46        150,566      8,206         5.45
Retail repurchase agreements .........    10,169        444         4.37          6,229        281         4.51
Federal funds purchased ..............       539         29         5.32            473         27         5.71
                                        --------    -------         ----       --------    -------         ----
  Total interest-bearing
    liabilities ......................   267,389     11,591         4.33        243,943     10,576         4.34
                                        --------    -------         ----       --------    -------         ----
Noninterest-bearing demand
 deposits ............................    37,730                                 37,289
Other liabilities ....................     3,601                                  3,038
Shareholders' equity .................    33,742                                 30,480
                                        --------                               --------
  TOTAL LIABILITIES AND
    SHAREHOLDERS'
    EQUITY ...........................  $342,462                               $314,750
                                        ========                               ========
NET INTEREST INCOME AND
 SPREAD ..............................              $15,762         4.13%                  $14,802         4.22%
                                                    =======         ====                   =======         ====
NET YIELD ON EARNING
 ASSETS ..............................                              4.88%                                  4.99%
                                                                    ====                                   ====



<CAPTION>
                                                       1996
                                       ------------------------------------
                                                    INTEREST
                                         AVERAGE    INCOME/   AVERAGE RATES
                                         BALANCE    EXPENSE    EARNED/PAID
                                       ----------- --------- --------------
                                       (TAXABLE EQUIVALENT BASIS, DOLLARS IN
                                                    THOUSANDS)
<S>                                    <C>         <C>       <C>
EARNING ASSETS
Loans (1) (2) ........................  $186,937    $16,777        8.96%
Investment securities (1):
 Taxable income ......................    71,297      4,985        6.99
 Non-taxable income ..................    14,282      1,205        8.44
Federal funds sold ...................     1,688         89        5.27
                                        --------    -------        ----
  Total earning assets ...............   274,204     23,056        8.40
                                        --------    -------        ----
Cash and due from banks ..............     9,423
Other assets, net ....................     8,161
                                        --------
  TOTAL ASSETS                          $291,788
                                        ========
INTEREST-BEARING
 LIABILITIES
Interest-bearing deposits:
 NOW accounts ........................  $ 35,021        666        1.90
 Savings deposits ....................    30,147        756        2.50
 Money market accounts ...............    16,067        444        2.76
 Certificates and other time
  deposits ...........................   138,993      7,525        5.40
Retail repurchase agreements .........     4,118        178        4.32
Federal funds purchased ..............       764         43        5.63
                                        --------    -------        ----
  Total interest-bearing
    liabilities ......................   225,110      9,612        4.26
                                        --------    -------        ----
Noninterest-bearing demand
 deposits ............................    36,296
Other liabilities ....................     2,921
Shareholders' equity .................    27,461
                                        --------
  TOTAL LIABILITIES AND
    SHAREHOLDERS'
    EQUITY ...........................  $291,788
                                        ========
NET INTEREST INCOME AND
 SPREAD ..............................              $13,444        4.14%
                                                    =======        ====
NET YIELD ON EARNING
 ASSETS ..............................                             4.90%
                                                                   ====
</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 prime rate of interest has been relatively stable in recent years,
averaging 8.37%, 8.44% and 8.28% in 1998, 1997 and 1996, 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 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.


                                       8
<PAGE>

     In 1998, the net interest spread declined by 9 basis points from 4.22% in
1997 to 4.13% in 1998, 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 10 basis points from 8.56% in 1997 to 8.46% in 1998, while
the cost of funds decreased by 1 basis point in moving from 4.34% to 4.33%. In
1997, the 8 basis points increase in net interest spread resulted from a 16
basis points increase in the yield on earning assets as partially offset by an
8 basis points increase in the cost of funds.

     The 1998 and 1997 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>
                                                        1998 VERSUS 1997                   1997 VERSUS 1996
                                              ------------------------------------- -------------------------------
                                                 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) .................................   $1,807      $ (227)      $ 1,580      $1,640    $ 396     $ 2,036
  Investment securities (2):
   Taxable income ...........................      293         (43)          250         (37)      27         (10)
   Non-taxable income .......................      161         (49)          112         282      (52)        230
  Federal funds sold ........................       33         ---            33          62        4          66
                                                ------      ------       -------      ------    -----     -------
    Total interest income ...................    2,294        (319)        1,975       1,947      375       2,322
                                                ------      ------       -------      ------    -----     -------
INTEREST EXPENSE
  Interest-bearing deposits:
   NOW accounts .............................       56         (85)          (29)         55      (44)         11
   Savings deposits .........................      (41)        (23)          (64)        (24)     (54)        (78)
   Money market accounts ....................      227          43           270         107      156         263
   Certificates and other time deposits .....      658          15           673         613       68         681
  Retail repurchase agreements ..............      172            (9)        163          95        8         103
  Federal funds purchased ...................        4            (2)          2         (17)       1         (16)
                                                ------      ---------    -------      ------    -----     -------
    Total interest expense ..................    1,076         (61)        1,015         829      135         964
                                                ------      --------     -------      ------    -----     -------
NET INTEREST INCOME .........................   $1,218      $ (258)      $   960      $1,118    $ 240     $ 1,358
                                                ======      ========     =======      ======    =====     =======
</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 potential 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 1998, earnings were positively impacted by a decrease in the provision of
$210,000, due primarily to a lower rate of loan growth than in 1997 and a
reduction in net loan charge-offs. In 1997, there was a negative impact from a
$110,000 provision increase.


NONINTEREST INCOME

     Noninterest income increased $329,000 or 11.4% in 1998 and $431,000 or
17.6% in 1997, reflecting in part the general increase in the volume of
business. The increase in service charges on deposit accounts in 1997 was
primarily due to the selected increases in service charges that became
effective in the 1997 second quarter and to the income generated by a new NOW
account version that provides a package of products and services for a stated
monthly fee. The 1998 increase in service charges on deposit accounts resulted
partially from the implementation for a full year of the service charge
increases


                                       9
<PAGE>

that became effective in the 1997 second quarter. Further, there was increased
revenue in 1998 from the new NOW account version 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 decline in annuity and brokerage commissions in 1998 related to a
general decrease in both sales of annuity products and the volume of brokerage
services. The 1997 gain in annuity and brokerage commissions reflected a
significant increase in the volume of brokerage services. The level of other
service charges, commissions and fees was higher in 1997 due primarily to the
implementation in the 1996 third quarter of a fee charged to noncustomers for
usage of the Bank's automated teller machines. Other income was higher in both
1997 and 1998 due largely to increases in gains on loan sales and in fees for
trust services. Other income also benefited in 1998 from a $39,000 recovery of
a portion of the merger expenses recorded in the 1997 fourth quarter (see
"Overview").


NONINTEREST EXPENSE

     Noninterest expense was $800,000 or 7.8% higher in 1998 due in part to
charges of $302,000 relating to a major data processing conversion (see
"Overview"). 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 undertaken in 1998 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.

     In 1997, noninterest expense was $1,211,000 or 13.3% higher due in part to
merger expenses of $305,000. The remaining net increase of $906,000 was due
mainly to costs associated with changes in operations, increased personnel
expense and the continuing effects of inflation. Personnel expense was impacted
by increased staffing requirements, normal salary adjustments and higher costs
of fringe benefits. Net occupancy expense was affected by increased maintenance
charges. The expanded use of personal computer networks has contributed to
higher levels of equipment costs and data processing services.


INCOME TAXES

     The effective income tax rate of 30.3% in 1998 did not significantly
change from the 30.7% rate in 1997 and the 30.4% rate in 1996.


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
$37,000,000 line of credit established at the Federal Home Loan Bank 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 on a core of local deposits and the Bank's
capital position. To date, the steady increase in deposits, retail repurchase
agreements and capital 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.


                                       10
<PAGE>

     The Bank's balance sheet was liability-sensitive at December 31, 1998. A
liability-sensitive position means that in gap measurement periods of one year
or less there will be 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.

     As a specific asset/liability management tool and as further discussed in
Note 15 to Consolidated Financial Statements, the Bank, at December 31, 1998,
had entered into two interest rate floor agreements with a correspondent bank
to protect certain variable-rate loans from the downward effects of their
repricing in the event of a decreasing rate environment. The notional amount of
each agreement is $10,000,000. The agreements require the correspondent bank to
pay to the Bank the difference between the floor rate of interest of 7.50% in
one agreement and 8.00% in the other agreement as compared to the prime rate of
interest in the event that the prime rate is less. Any payments received under
the agreements, net of premium amortization, will be treated as an adjustment
of interest income on loans. At December 31, 1998, the unamortized premium
related to the interest rate floor agreements amounted to $23,000 and had an
estimated fair value of $30,000.

     Table 3 presents information about the periods in which the
interest-sensitive assets and liabilities at December 31, 1998 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.


TABLE 3
INTEREST RATE SENSITIVITY ANALYSIS



<TABLE>
<CAPTION>
                                                                                       DECEMBER 31, 1998
                                                             ---------------------------------------------------------------------
                                                                       RATE MATURITY IN DAYS
                                                             -----------------------------------------     BEYOND
                                                                  1-90         91-180       181-365       ONE YEAR       TOTAL
                                                             ------------- ------------- ------------- ------------- -------------
                                                                                    (DOLLARS IN THOUSANDS)
<S>                                                          <C>           <C>           <C>           <C>           <C>
EARNING ASSETS
 Loans .....................................................   $  85,921     $   8,469     $  13,169     $ 122,163     $ 229,722
 Investment securities .....................................       2,043           607           732       101,389       104,771
                                                               ---------     ---------     ---------     ---------     ---------
   Total earning assets ....................................      87,964         9,076        13,901       223,552       334,493
                                                               ---------     ---------     ---------     ---------     ---------
INTEREST-BEARING LIABILITIES
 NOW accounts ..............................................      22,329            --            --        22,330        44,659
 Savings deposits ..........................................      13,238            --            --        13,239        26,477
 Money market accounts .....................................      14,340            --            --        14,340        28,680
 Time deposits of $100,000 or more .........................      30,151        13,445        13,433         3,643        60,672
 Other time deposits .......................................      29,874        26,467        28,295        19,344       103,980
 Retail repurchase agreements ..............................      11,484            --            --            --        11,484
 Federal funds purchased ...................................       1,545            --            --            --         1,545
                                                               ---------     ---------     ---------     ---------     ---------
   Total interest-bearing liabilities ......................     122,961        39,912        41,728        72,896       277,497
                                                               ---------     ---------     ---------     ---------     ---------
INTEREST SENSITIVITY GAP                                       $ (34,997)    $ (30,836)    $ (27,827)    $ 150,656     $  56,996
                                                               =========     =========     =========     =========     =========
Cumulative gap .............................................   $ (34,997)    $ (65,833)    $ (93,660)    $  56,996     $  56,996
Ratio of interest-sensitive assets to interest-sensitive
 liabilities ...............................................          72%           23%           33%          307%          121%
</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


                                       11
<PAGE>

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.

     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, 1998.


TABLE 4
MARKET RISK ANALYSIS OF FINANCIAL INSTRUMENTS



<TABLE>
<CAPTION>
                                          CONTRACTUAL MATURITIES AT DECEMBER 31, 1998
                           --------------------------------------------------------------------------
                                                                                 BEYOND                 AVERAGE   ESTIMATED
                                                                                  FIVE                 INTEREST     FAIR
                               1999       2000      2001      2002      2003      YEARS      TOTAL     RATE (1)     VALUE
                           ----------- --------- --------- --------- --------- ---------- ----------- ---------- ----------
                                                                (DOLLARS IN THOUSANDS)
<S>                        <C>         <C>       <C>       <C>       <C>       <C>        <C>         <C>        <C>
FINANCIAL ASSETS
 Debt securities (2) .....  $  3,374    $ 2,215   $ 3,888   $ 1,533   $ 9,323   $ 83,275   $103,608       6.95%   $104,671
 Loans (3):
   Fixed rate ............    33,299     13,459    13,279    11,951    12,592     45,692    130,272       8.72     130,923
   Variable rate .........    36,663      9,239     8,140     9,914     5,474     30,020     99,450       8.35     100,400
                            --------    -------   -------   -------   -------   --------   --------               --------
    Total ................  $ 73,336    $24,913   $25,307   $23,398   $27,389   $158,987   $333,330       8.06    $335,994
                            ========    =======   =======   =======   =======   ========   ========               ========
FINANCIAL LIABILITIES
 Now accounts ............  $     --    $    --   $    --   $    --   $    --   $     --   $ 44,659       1.26    $ 44,659
 Savings deposits ........        --         --        --        --        --         --     26,477       2.09      26,477
 Money market
   accounts ..............        --         --        --        --        --         --     28,680       3.55      28,680
 Time deposits:
   Fixed rate ............   130,685     17,812     1,821       333       241         --    150,892       5.35     152,039
   Variable rate .........     8,258      5,063       381        58        --         --     13,760       5.19      13,836
 Retail repurchase
   agreements ............        --         --        --        --        --         --     11,484       3.79      11,484
 Federal funds
   purchased .............        --         --        --        --        --         --      1,545       4.94       1,545
                            --------    -------   -------   -------   -------   --------   --------               --------
    Total ................  $138,943    $22,875   $ 2,202   $   391   $   241   $     --   $277,497       4.12    $278,720
                            ========    =======   =======   =======   =======   ========   ========               ========
</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 I and Tier II, 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 I capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier II capital, which is limited to the total of Tier I
capital, includes allowable amounts of subordinated debt, mandatory convertible
securities, preferred stock and the allowance for loan losses. Under current
requirements, the minimum total capital ratio, consisting of both Tier I and
Tier II capital, is 8.00% and the minimum Tier I capital ratio is 4.00%. At
December 31, 1998, FNB Corp. and the Bank had total capital ratios of 16.05%
and 15.63%, respectively, and Tier I capital ratios of 14.98% and 14.55%.

     The leverage capital ratio, which serves as a minimum capital standard,
considers Tier I 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, 1998, FNB Corp. and the Bank had leverage capital ratios of 9.89% and
9.61%, respectively.


                                       12
<PAGE>

     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 I 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, 1998 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.


BALANCE SHEET REVIEW

     Asset and deposit growth was higher in 1998 than in 1997. Total assets
increased $30,968,000 or 9.5% in 1998 compared to $18,521,000 or 6.0% in 1997.
Deposits grew $24,142,000 or 8.6% and $9,168,000 or 3.4%, respectively, in the
same periods. Retail repurchase agreements funded $4,047,000 of the asset
growth in 1998 and $3,712,000 in 1997. The average asset growth rates were 8.8%
in 1998 and 7.9% in 1997. The corresponding average deposit growth rates were
7.2% and 7.0%.


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.


                                       13
<PAGE>

TABLE 5
INVESTMENT SECURITIES PORTFOLIO ANALYSIS



<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                            ---------------------------------------------------------
                                                            1998                    1997       1996
                                            ------------------------------------ ---------- ---------
                                                         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 ........................   $   750     $   756        6.97%    $ 1,345    $ 2,589
   One to five years ......................       503         527        7.36       1,280      2,114
                                              -------     -------                 -------    -------
    Total .................................     1,253       1,283        7.12       2,625      4,703
                                              -------     -------                 -------    -------
 U.S. Government agencies and corporations:
   Within one year ........................       350         350        5.98       1,750        500
   One to five years ......................     2,901       2,949        7.23       8,354      9,939
   Five to ten years ......................    39,063      39,000        6.56      18,880      8,844
                                              -------     -------                 -------    -------
    Total .................................    42,314      42,299        6.59      28,984     19,283
                                              -------     -------                 -------    -------
 Mortgage-backed securities ...............       228         230        6.65       2,422      4,787
                                              -------     -------                 -------    -------
 Total debt securities ....................    43,795      43,812        6.61      34,031     28,773
 Equity securities ........................     1,123       1,146                   1,095        156
                                              -------     -------                 -------    -------
    Total available-for-sale securities ...   $44,918     $44,958                 $35,126    $28,929
                                              =======     =======                 =======    =======
HELD TO MATURITY
 U.S. Government agencies and corporations:
   Within one year ........................   $ 1,201     $ 1,201        5.98     $ 5,383    $ 1,348
   One to five years ......................     8,294       8,310        6.57      18,597     24,480
   Five to ten years ......................    30,032      30,114        6.57       8,824     18,108
                                              -------     -------                 -------    -------
    Total .................................    39,527      39,625        6.56      32,804     43,936
                                              -------     -------                 -------    -------
 State, county and municipal:
   Within one year ........................       845         854       10.21         753        325
   One to five years ......................     5,261       5,445        9.28       3,992      3,104
   Five to ten years ......................     6,358       6,675        8.13       6,456      5,930
   Over ten years .........................     7,822       8,260        7.91       7,750      8,092
                                              -------     -------                 -------    -------
    Total .................................    20,286      21,234        8.43      18,951     17,451
                                              -------     -------                 -------    -------
    Total held-to-maturity securities .....   $59,813     $60,859        7.19     $51,755    $61,387
                                              =======     =======                 =======    =======
</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 1998, the level of investment securities was increased $17,890,000 or 20.6%.
In 1997, when the growth in loans exceeded that for total assets, there was a
reduction in the level of investment securities of $3,435,000 or 3.8%.
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, 1998.


LOANS

     The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. Loans experienced growth of $12,271,000
or 5.6% in 1998 and $22,178,000 or 11.4% in 1997. Average loans increased
$19,845,000 or 9.7% and $18,190,000 or 9.7%, respectively. The ratio of average
loans to average deposits increased from 74.7% in 1997 to 76.4% in 1998. The
ratio of loans to deposits at December 31, 1998 was 75.4%.


                                       14
<PAGE>

     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, 1998 are presented in Table 7.


TABLE 6
LOAN PORTFOLIO COMPOSITION



<TABLE>
<CAPTION>
                                                  DECEMBER 31
                                   -----------------------------------------
                                           1998                 1997
                                   -------------------- --------------------
                                     AMOUNT       %       AMOUNT       %
                                   ---------- --------- ---------- ---------
                                            (DOLLARS IN THOUSANDS)
<S>                                <C>        <C>       <C>        <C>
 Commercial and agricultural .....  $ 99,055      43.1   $ 84,221      38.7
 Real estate -- construction .....     3,279       1.4      4,989       2.3
 Real estate -- mortgage:
  1-4 family residential .........    88,591      38.6     81,182      37.3
  Commercial and other ...........    16,708       7.3     20,556       9.5
 Consumer ........................    22,089       9.6     26,503      12.2
                                    --------     -----   --------     -----
    Total loans ..................  $229,722     100.0   $217,451     100.0
                                    ========     =====   ========     =====



<CAPTION>
                                                             DECEMBER 31
                                   ---------------------------------------------------------------
                                           1996                 1995                 1994
                                   -------------------- -------------------- ---------------------
                                     AMOUNT       %       AMOUNT       %        AMOUNT       %
                                   ---------- --------- ---------- --------- ----------- ---------
                                                       (DOLLARS IN THOUSANDS)
<S>                                <C>        <C>       <C>        <C>       <C>         <C>
 Commercial and agricultural .....  $ 62,678      32.1   $ 47,317      26.3   $ 41,777       24.8
 Real estate -- construction .....     4,348       2.2        759        .4      1,331         .8
 Real estate -- mortgage:
  1-4 family residential .........    68,887      35.3     57,664      32.0     50,575       30.0
  Commercial and other ...........    24,257      12.4     27,803      15.5     28,594       17.0
 Consumer ........................    35,103      18.0     46,380      25.8     46,051       27.4
                                    --------     -----   --------     -----   --------      -----
    Total loans ..................  $195,273     100.0   $179,923     100.0   $168,328      100.0
                                    ========     =====   ========     =====   ========      =====
</TABLE>

TABLE 7
SELECTED LOAN MATURITIES



<TABLE>
<CAPTION>
                                                     DECEMBER 31, 1998
                                      ------------------------------------------------
                                       ONE YEAR     ONE TO        OVER
                                        OR LESS   FIVE YEARS   FIVE YEARS     TOTAL
                                      ---------- ------------ ------------ -----------
                                                       (IN THOUSANDS)
<S>                                   <C>        <C>          <C>          <C>
Commercial and agricultural .........  $31,343      $36,375      $31,337    $ 99,055
Real estate -- construction .........    2,326          470          483       3,279
                                       -------      -------      -------    --------
    Total selected loans ............  $33,669      $36,845      $31,820    $102,334
                                       =======      =======      =======    ========
Sensitivity to rate changes:
 Fixed interest rates ...............  $ 9,778      $21,637      $19,258    $ 50,673
 Variable interest rates ............   23,891       15,208       12,562      51,661
                                       -------      -------      -------    --------
    Total ...........................  $33,669      $36,845      $31,820    $102,334
                                       =======      =======      =======    ========
</TABLE>

     The commercial and agricultural loan portfolio and the 1-4 family
residential mortgage loan portfolio each experienced strong gains during 1998.
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 1998 and 1997 of $5,929,000 and $10,681,000, 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 portion of the
allowance for loan losses represents management's estimate of the appropriate
level of reserve to provide for potential 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.


                                       15
<PAGE>

     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.
     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>
                                                              1998        1997        1996        1995        1994
                                                          ----------- ----------- ----------- ----------- -----------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                       <C>         <C>         <C>         <C>         <C>
 ALLOWANCE FOR LOAN LOSSES
  Balance at beginning of year ..........................   $ 2,294     $ 1,986     $ 1,903     $ 1,720     $ 1,745
  Charge-offs:
   Commercial and agricultural ..........................         9          66          24          84          16
   Real estate -- construction ..........................        --          --          --          --          --
   Real estate -- mortgage ..............................        --           2          12          --           1
   Consumer .............................................       327         389         532         393         419
                                                            -------     -------     -------     -------     -------
    Total charge-offs ...................................       336         457         568         477         436
                                                            -------     -------     -------     -------     -------
  Recoveries:
   Commercial and agricultural ..........................        16          14          12           8           6
   Real estate -- construction ..........................        --          --          --          --          --
   Real estate -- mortgage ..............................        --          11           3           3           5
   Consumer .............................................       153         140         146         134         180
                                                            -------     -------     -------     -------     -------
    Total recoveries ....................................       169         165         161         145         191
                                                            -------     -------     -------     -------     -------
  Net loan charge-offs ..................................       167         292         407         332         245
  Provision for loan losses .............................       390         600         490         515         220
                                                            -------     -------     -------     -------     -------
  Balance at end of year ................................   $ 2,517     $ 2,294     $ 1,986     $ 1,903     $ 1,720
                                                            =======     =======     =======     =======     =======
 NONPERFORMING ASSETS, AT END OF YEAR
  Nonaccrual loans ......................................   $   731     $    51     $    65     $    26     $    --
  Accruing loans past due 90 days or more ...............       263         167         231         317         118
                                                            -------     -------     -------     -------     -------
    Total nonperforming loans ...........................       994         218         296         343         118
  Foreclosed assets .....................................        --          23          38          64          78
  Other real estate owned ...............................        --          27          --          --          --
                                                            -------     -------     -------     -------     -------
    Total nonperforming assets ..........................   $   994     $   268     $   334     $   407     $   196
                                                            =======     =======     =======     =======     =======
 RATIOS
  Net loan charge-offs to average loans .................       .07%        .14%        .22%        .19%        .15%
  Net loan charge-offs to allowance for loan losses .....      6.63       12.74       20.49       17.45       14.25
  Allowance for loan losses to year-end loans ...........      1.10        1.05        1.02        1.06        1.02
  Total nonperforming loans to year-end loans ...........       .43         .10         .15         .19         .07
</TABLE>

TABLE 9

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES



<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                              -------------------------------------------------
                                                 1998      1997      1996      1995      1994
                                              --------- --------- --------- --------- ---------
                                                               (IN THOUSANDS)
<S>                                           <C>       <C>       <C>       <C>       <C>
Commercial and agricultural .................  $  821    $  719    $  650    $  572    $  490
Real estate -- construction .................       8        12        10         9        14
Real estate -- mortgage .....................     492       493       439       384       346
Consumer ....................................     867       830       727       695       651
Unallocated .................................     329       240       160       243       219
                                               ------    ------    ------    ------    ------
    Total allowance for loan losses .........  $2,517    $2,294    $1,986    $1,903    $1,720
                                               ======    ======    ======    ======    ======
</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.


                                       16
<PAGE>

     The Bank's level and mix of deposits has been specifically affected by the
following factors. The growth in money market accounts of $6,211,000 in 1998
and $5,165,000 in 1997 was due to a new high-yield product introduced in the
1996 fourth quarter. Time deposits of $100,000 or more accounted 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 $25,905,000,
$24,431,000 and $21,602,000 at December 31, 1998, 1997 and 1996, respectively.

     Table 10 shows the year-end and average deposit balances for the years
1998, 1997 and 1996 and the changes in 1998 and 1997.


TABLE 10
ANALYSIS OF DEPOSITS



<TABLE>
<CAPTION>
                                                            1998                              1997                  1996
                                              --------------------------------- -------------------------------- ----------
                                                               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 .............................  $ 44,659    $  6,052       15.7   $ 38,607    $  2,468       6.8   $ 36,139
   Savings deposits .........................    26,477      (1,227)     (4.4)     27,704      (1,430)    (4.9)     29,134
   Money market accounts ....................    28,680       6,211       27.6     22,469       5,165      29.8     17,304
                                               --------    --------              --------    --------             --------
    Total ...................................    99,816      11,036       12.4     88,780       6,203       7.5     82,577
   Certificates and other time deposits .....   164,652      11,195        7.3    153,457       3,459       2.3    149,998
                                               --------    --------              --------    --------             --------
    Total interest-bearing deposits .........   264,468      22,231        9.2    242,237       9,662       4.2    232,575
  Noninterest-bearing demand deposits .......    40,222       1,911        5.0     38,311        (494)    (1.3)     38,805
                                               --------    --------              --------    --------             --------
    Total deposits ..........................  $304,690    $ 24,142        8.6   $280,548    $  9,168       3.4   $271,380
                                               ========    ========              ========    ========             ========
AVERAGE BALANCES
  Interest-bearing deposits:
   NOW accounts .............................  $ 41,353    $  3,336        8.8   $ 38,017    $  2,996       8.6   $ 35,021
   Savings deposits .........................    27,414      (1,785)     (6.1)     29,199        (948)    (3.1)     30,147
   Money market accounts ....................    25,430       5,971       30.7     19,459       3,392      21.1     16,067
                                               --------    --------              --------    --------             --------
    Total ...................................    94,197       7,522        8.7     86,675       5,440       6.7     81,235
   Certificates and other time deposits .....   162,484      11,918        7.9    150,566      11,573       8.3    138,993
                                               --------    --------              --------    --------             --------
    Total interest-bearing deposits .........   256,681      19,440        8.2    237,241      17,013       7.7    220,228
  Noninterest-bearing demand deposits .......    37,730         441        1.2     37,289         993       2.7     36,296
                                               --------    --------              --------    --------             --------
    Total deposits ..........................  $294,411    $ 19,881        7.2   $274,530    $ 18,006       7.0   $256,524
                                               ========    ========              ========    ========             ========
</TABLE>

BUSINESS DEVELOPMENT MATTERS

     As discussed in Note 17 to Consolidated Financial Statements, the
Corporation in 1997 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. Costs amounting to $305,000,
initially deferred in connection with the proposed acquisition, were recognized
as merger expenses in 1997.

     The Bank's data processing, item capture and statement rendering
operations are currently outsourced under a service bureau arrangement. The
Bank is presently in the process of converting these operations to an in-house
basis. Conversion is expected to be complete by the end of March 1999. The
total capital expenditure outlay for hardware and software is expected to
amount to approximately $1,600,000, of which approximately one-half was
recorded in 1998. In addition to capital expenditures for the new system, the
Bank has incurred certain expenses in 1998, totaling approximately $302,000,
related to the data processing conversion.

     Commencing in 1995, the Bank significantly increased its investment in
computer equipment through expanded use of personal computer networks. Capital
expenditures in 1995, which totaled $1,302,000, related primarily to the
increase in computer equipment. Approximately one-third of 1996 and one-half of
1997 capital expenditures, which totaled $1,019,000 and $478,000, respectively,
also related to personal computer networks.


                                       17
<PAGE>

     As of December 31, 1998, the Bank had received regulatory approval for
establishment of a new branch office in Trinity, North Carolina. Construction
and occupancy of the Trinity branch is expected to occur in 1999, resulting in
a total capital outlay of approximately $950,000, of which approximately
one-third was recorded in 1998.

     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, 1998, 1997
and 1996 amounted to $3,745,000, $9,674,000 and $20,355,000, 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 READINESS DISCLOSURES

     The Corporation recognizes and is addressing the potentially serious
implications of the "Year 2000 Issue", which is a general term used to describe
various problems that may result from the improper processing of dates and
date-sensitive calculations by many existing computer programs when the Year
2000 is reached. This issue is ultimately caused by the fact that many of the
world's existing computer programs use only two digits to identify the year in
the date field of a program. These programs were designed and developed without
considering the upcoming change in the century and could experience serious
malfunctions when the last two digits of the year change to "00" as a result of
identifying the "00" year as the year 1900 rather than the year 2000. This
identification error could result in a disruption of normal business
operations, including, among other things, the miscalculation of interest
accruals and the inability to process customer transactions. In addition,
non-banking systems, such as security alarms, elevators and telephones, are
subject to malfunction due to their dependence upon computers for proper
operation.

     The Corporation first began to assess its Year 2000 readiness in August
1996, completing that assessment in January 1997. The Corporation then
developed a Year 2000 Plan that follows guidelines outlined by the Federal
Financial Institutions Council. The Year 2000 Project Team, which is
responsible for execution of the Plan, includes members of senior management
and departmental management from all areas of the organization. Additionally,
an outside consulting firm has been engaged to assist with the Year 2000
project.

     In the implementation of the Year 2000 Plan, a thorough inventory was
first performed to determine all hardware, software and facilities that might
be impacted by the Year 2000 Issue. Since all software is purchased and no
separate in-house programming is performed, the Corporation is dependent upon
its third-party vendors for modifications of its existing systems to correct
any defects related to the Year 2000 Issue. Accordingly, written documentation
has been solicited from all of the software and hardware vendors, as well as
the providers of facilities using embedded chip technology, with respect to
their Year 2000 compliance status. The validation phase of the Corporation's
project includes the receipt and analysis of vendor-performed testing, as well
as the testing of all hardware, software and facilities in the Corporate
environment. Internal testing of mission critical systems is scheduled to be
completed by June 30, 1999, with the testing of other applications to be
completed by September 30, 1999.

     The Corporation currently uses a service bureau for core processing and
related items processing. Testing of this mission critical system for Year 2000
compliance was completed by December 31, 1998. In August 1998, however, the
Corporation contracted with third-party vendors for the hardware and software
necessary to convert this entire operation to an in-house basis. Conversion to
the replacement systems is expected to be complete by late March 1999. Initial
internal testing on a trial basis of these replacement systems for Year 2000
compliance was completed in November 1998. Final testing in the normal
operating environment is to be completed by June 30, 1999.

     The Corporation is informing its customers about the Year 2000 Issue in
general and the efforts it is undertaking to ensure that banking services
continue in the Year 2000 and beyond. Additionally, the Corporation is
contacting its significant commercial customers to determine such customers'
plans with respect to the Year 2000 Issue and the Corporation's vulnerability
to the failure of any such customer to remediate its own problems that may
result from the Year 2000 Issue. As most commercial customers depend on
computer systems that must be Year 2000 compliant, a disruption in their
businesses could result in potentially significant financial difficulties that
could affect their creditworthiness. The Corporation is also initiating contact
with key vendors to determine their plans with respect to the Year 2000 Issue.
There can be no guarantee that customers and vendors will convert their systems
on a timely basis or in a manner that is compatible with the Corporation's
systems. Significant business interruptions or failures by significant
commercial vendors, trading partners or governmental agencies resulting from
the effects of the Year 2000 Issue could have a material adverse effect on the
Corporation.


                                       18
<PAGE>

     The Corporation's projected cost of Year 2000 compliance is estimated to
be approximately $200,000, the majority of such estimated cost relating to
computer equipment that may need be replaced. Actual Year 2000 project
expenditures totaled $84,000 at December 31, 1998. Of this total, capital
expenditures amounted to $69,000 and were all recorded in 1998. Project
expenses amounted to $15,000 on a cumulative basis and $13,000 for the year
ended December 31, 1998. Funding of Year 2000 project costs will come from
normal operating cash flows; however, the expenses associated with the Year
2000 Issue will directly reduce otherwise reported net income for the
Corporation.

     Management believes that the potential effects on the Corporation's
internal operations of the Year 2000 Issue can be mitigated on a timely basis.
However, if required modifications or conversions are not made or are not
completed on a timely basis, the Year 2000 Issue could disrupt normal business
operations and have a material adverse impact on the Corporation.

     Contingency plans are being developed to mitigate the potential effects of
a disruption in normal business operations. Contingency planning includes
developing alternative solutions should a vendor not become compliant, as well
as plans for the resumption of business if, despite the Corporation's best
efforts, there is a disruption in business operations. In the event of what
could be described as a "worst case" scenario, the contingency plans will allow
for limited transactions, including the ability to make certain deposits and
withdrawals, until the Year 2000 problems are fixed.

     The costs of the Year 2000 project and the schedule for achieving Year
2000 compliance are based on management's best estimates, which were derived
using numerous assumptions of future events such as the availability of certain
resources (including appropriately trained personnel and other internal and
external resources), third-party vendor plans and other factors. However, there
can be no guarantee that these estimates will be achieved at the cost disclosed
or within the timeframes indicated, and actual results could differ materially
from these plans. Factors that might affect the timely and efficient completion
of the Corporation's Year 2000 project include, but are not limited to,
vendors' abilities to adequately correct or convert software and the effect on
the Corporation's ability to test its systems, the availability and cost of
personnel trained in the Year 2000 areas, the ability to identify and correct
all relevant computer programs, the readiness of key utilities, vendors and
customers, and similar uncertainties.


ACCOUNTING PRONOUNCEMENT MATTERS

     In July 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events during the period other than transactions with owners (therein
defined as "comprehensive income"). Comprehensive income is the total of net
income and all other nonshareholder changes in equity. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. If comparative
financial statements are provided for earlier periods, those financial
statements shall be reclassified to reflect application of the provisions of
SFAS No. 130. The Corporation adopted SFAS No. 130 in 1998, resulting in
comprehensive income disclosures in the consolidated balance sheets and
consolidated statements of shareholders' equity and comprehensive income.

     In July 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information, an Amendment of Statements No. 87, 88
and 106". SFAS No. 131 requires disclosures for each segment that are similar
to those required under current standards with the addition of quarterly
disclosure requirements and a finer partitioning of geographic disclosures. It
requires limited segment data on a quarterly basis. It also requires geographic
data by country, as opposed to broader geographic regions as permitted under
current standards. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. As the Corporation has only one operating segment, adoption
of SFAS No. 131 in 1998 did not have an effect on the consolidated financial
statements.

     In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures
about Pensions and Other Postretirement Benefits". SFAS No. 132 standardizes
the disclosure requirements of pensions and other postretirement benefits and
does not change any measurement or recognition provisions. SFAS No. 132 is
effective for fiscal years beginning after December 15, 1997. The Corporation
adopted SFAS No. 132 in 1998, resulting in the disclosures presented in Note 9
to the Consolidated Financial Statements.

     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


                                       19
<PAGE>

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 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. 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, "Acounting 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 would not currently have any 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.

                                       20
<PAGE>

TABLE 11
QUARTERLY FINANCIAL DATA



<TABLE>
<CAPTION>
                                                        FIRST       SECOND      THIRD       FOURTH
                                                     ----------- ----------- ----------- -----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>         <C>         <C>         <C>
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 (2):
  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
1997
Interest income ....................................  $  5,893    $  5,997    $  6,262    $  6,355
Interest expense ...................................     2,559       2,577       2,693       2,747
                                                      --------    --------    --------    --------
Net interest income ................................     3,334       3,420       3,569       3,608
Provision for loan losses ..........................       125         115         230         130
                                                      --------    --------    --------    --------
Net interest income after provision for loan losses      3,209       3,305       3,339       3,478
Noninterest income .................................       664         709         738         764
Noninterest expense ................................     2,400       2,485       2,497       2,906
                                                      --------    --------    --------    --------
Income before income taxes .........................     1,473       1,529       1,580       1,336
Income taxes .......................................       440         469         491         418
                                                      --------    --------    --------    --------
Net income .........................................  $  1,033    $  1,060    $  1,089    $    918
                                                      ========    ========    ========    ========
Per share data (2):
  Net income:
   Basic ...........................................  $    .29    $    .29    $    .30    $    .25
   Diluted .........................................       .28         .29         .29         .25
  Cash dividends declared ..........................       .09         .09         .09         .11
  Common stock price (1):
   High ............................................     16.00       16.50       16.00       20.25
   Low .............................................     13.50       14.25       14.38       16.00
</TABLE>

---------
(1) FNB Corp. common stock is traded on the NASDAQ National Market System under
    the symbol FNBN. At December 31, 1998, there were 1,143 shareholders of
    record.

(2) All per share data has been retroactively adjusted to reflect the
    two-for-one common stock split effected in the form of a 100% stock
    dividend paid in the first quarter of 1998.


                                       21
<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, 1998 and 1997, 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, 1998.
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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.


                                               /s/   KPMG LLP

 
Greensboro, North Carolina
March 12, 1999

                                       22
<PAGE>

                            FNB CORP. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                                DECEMBER 31
                                                                                          -----------------------
                                                                                              1998        1997
                                                                                          ----------- -----------
                                                                                           (IN THOUSANDS, EXCEPT
                                                                                                SHARE DATA)
<S>                                                                                       <C>         <C>
ASSETS
Cash and due from banks .................................................................  $ 12,787    $ 12,914
Investment securities:
 Available for sale, at estimated fair value (amortized cost of $44,918 in 1998 and
   $34,997 in 1997) .....................................................................    44,958      35,126
 Held to maturity (estimated fair value of $60,859 in 1998 and $52,234 in 1997) .........    59,813      51,755
Loans ...................................................................................   229,722     217,451
 Less: Allowance for loan losses ........................................................    (2,517)     (2,294)
                                                                                           --------    --------
     Net loans ..........................................................................   227,205     215,157
                                                                                           --------    --------
Premises and equipment, net .............................................................     6,978       6,129
Other assets ............................................................................     4,882       4,574
                                                                                           --------    --------
     TOTAL ASSETS .......................................................................  $356,623    $325,655
                                                                                           ========    ========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
 Noninterest-bearing demand deposits ....................................................  $ 40,222    $ 38,311
 Interest-bearing deposits:
   NOW, savings and money market deposits ...............................................    99,816      88,780
   Time deposits of $100,000 or more ....................................................    60,672      52,915
   Other time deposits ..................................................................   103,980     100,542
                                                                                           --------    --------
    Total deposits ......................................................................   304,690     280,548
Retail repurchase agreements ............................................................    11,484       7,437
Federal funds purchased .................................................................     1,545       2,400
Other liabilities .......................................................................     3,902       3,369
                                                                                           --------    --------
    Total Liabilities ...................................................................   321,621     293,754
                                                                                           --------    --------
 
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 3,655,376 shares
   in 1998 and 1,819,825 shares in 1997 .................................................     9,138       4,550
 Surplus ................................................................................       117         527
 Retained earnings ......................................................................    25,721      26,740
 Accumulated other comprehensive income:
   Net unrealized securities gains ......................................................        26          84
                                                                                           --------    --------
    Total Shareholders' Equity ..........................................................    35,002      31,901
                                                                                           --------    --------
 
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..........................................  $356,623    $325,655
                                                                                           ========    ========
</TABLE>

Commitments (Note 15)


          See accompanying notes to consolidated financial statements.
 

                                       23
<PAGE>

                            FNB CORP. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31
                                                          -----------------------------------------
                                                               1998          1997          1996
                                                          ------------- ------------- -------------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>           <C>           <C>
INTEREST INCOME
 Interest and fees on loans .............................  $   20,361    $   18,787    $   16,728
 Interest and dividends on investment securities:
   Taxable income .......................................       4,868         4,645         4,661
   Non-taxable income ...................................         994           920           770
 Federal funds sold .....................................         188           155            89
                                                           ----------    ----------    ----------
    Total interest income ...............................      26,411        24,507        22,248
                                                           ----------    ----------    ----------
 
INTEREST EXPENSE
 Deposits ...............................................      11,118        10,268         9,391
 Retail repurchase agreements ...........................         444           281           178
 Federal funds purchased ................................          29            27            43
                                                           ----------    ----------    ----------
    Total interest expense ..............................      11,591        10,576         9,612
                                                           ----------    ----------    ----------
 
NET INTEREST INCOME .....................................      14,820        13,931        12,636
 Provision for loan losses ..............................         390           600           490
                                                           ----------    ----------    ----------
Net Interest Income After Provision for Loan Losses .....      14,430        13,331        12,146
                                                           ----------    ----------    ----------
NONINTEREST INCOME
 Service charges on deposit accounts ....................       1,737         1,533         1,415
 Annuity and brokerage commissions ......................         228           313           218
 Cardholder and merchant services income ................         362           333           316
 Other service charges, commissions and fees ............         386           389           314
 Other income ...........................................         491           307           181
                                                           ----------    ----------    ----------
    Total noninterest income ............................       3,204         2,875         2,444
                                                           ----------    ----------    ----------
 
NONINTEREST EXPENSE
 Personnel expense ......................................       5,518         5,318         4,733
 Occupancy expense ......................................         522           562           485
 Furniture and equipment expense ........................         850           777           662
 Data processing services ...............................       1,541         1,136         1,006
 Merger expenses ........................................          --           305            --
 Other expense ..........................................       2,657         2,190         2,191
                                                           ----------    ----------    ----------
    Total noninterest expense ...........................      11,088        10,288         9,077
                                                           ----------    ----------    ----------
 
Income Before Income Taxes ..............................       6,546         5,918         5,513
Income taxes ............................................       1,984         1,818         1,676
                                                           ----------    ----------    ----------
NET INCOME ..............................................  $    4,562    $    4,100    $    3,837
                                                           ==========    ==========    ==========
Net income per common share:
 Basic ..................................................  $     1.25    $     1.13    $     1.06
 Diluted ................................................  $     1.20    $     1.11    $     1.05
 
Weighted average number of shares outstanding:
 Basic ..................................................   3,649,875     3,626,132     3,603,866
 Diluted ................................................   3,794,823     3,696,384     3,641,660
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       24
<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, 1995 ..........................  1,797,995   $4,495   $   19    $ 21,354      $ 127       $ 25,995
Comprehensive income:
  Net income ........................................         --       --       --       3,837         --          3,837
  Other comprehensive income:
   Unrealized securities gains (losses), net of
    income tax benefit of $47 .......................         --       --       --          --        (92)           (92)
                                                                                                                --------
  Total comprehensive income ........................                                                              3,745
                                                                                                                --------
Cash dividends declared, $.66 per share .............         --       --       --      (1,190)        --         (1,190)
Common stock issued through:
  Dividend reinvestment plan ........................      6,574       16      151          --         --            167
  Stock option plan .................................      2,425        6       44          --         --             50
                                                       ---------   ------   ------    --------      -----       --------
 
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
                                                       =========   ======   ======    ========      =====       ========
</TABLE>

          See accompanying notes to consolidated financial statements.
 

                                       25
<PAGE>

                           FNB CORP. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                              YEARS ENDED DECEMBER 31
                                                                                       --------------------------------------
                                                                                           1998         1997         1996
                                                                                       ------------ ------------ ------------
                                                                                                   (IN THOUSANDS)
<S>                                                                                    <C>          <C>          <C>
OPERATING ACTIVITIES
 Net income ..........................................................................  $   4,562    $   4,100    $   3,837
 Adjustments to reconcile net income to net cash provided by operating activities:
   Depreciation and amortization of premises and equipment ...........................        810          734          634
   Provision for loan losses .........................................................        390          600          490
   Deferred income taxes (benefit) ...................................................        (52)        (252)         (66)
   Deferred loan fees and costs, net .................................................        180          367          395
   Premium amortization and discount accretion of investment securities, net .........        (61)         (25)          39
   Amortization of intangibles .......................................................         24           32           44
   Net decrease (increase) in loans held for sale ....................................     (3,660)        (559)         406
   Increase in other assets ..........................................................       (277)        (203)        (439)
   Increase (decrease) in other liabilities ..........................................        461          581         (160)
                                                                                        ---------    ---------    ---------
     Net Cash Provided by Operating Activities .......................................      2,377        5,375        5,180
                                                                                        ---------    ---------    ---------
 
INVESTING ACTIVITIES
 Available-for-sale securities:
   Proceeds from maturities and calls ................................................     51,183       20,536       20,001
   Purchases .........................................................................    (61,042)     (26,646)     (20,765)
 Held-to-maturity securities:
   Proceeds from maturities and calls ................................................     29,242       11,717       15,369
   Purchases .........................................................................    (37,298)      (2,072)     (20,558)
 Net increase in loans ...............................................................     (8,908)     (22,291)     (16,532)
 Proceeds from sales of premises and equipment .......................................          3            5           15
 Purchases of premises and equipment .................................................     (1,786)        (478)      (1,019)
 Other, net ..........................................................................          5           24          (34)
                                                                                        ---------    ---------    ---------
     Net Cash Used in Investing Activities ...........................................    (28,601)     (19,205)     (23,523)
                                                                                        ---------    ---------    ---------
 
FINANCING ACTIVITIES
 Net increase in deposits ............................................................     24,142        9,168       21,236
 Increase (decrease) in retail repurchase agreements .................................      4,047        3,712         (917)
 Increase (decrease) in federal funds purchased ......................................       (855)       1,825          575
 Common stock issued .................................................................        241          346          217
 Cash dividends paid .................................................................     (1,478)      (1,359)      (1,081)
                                                                                        ---------    ---------    ---------
     Net Cash Provided by Financing Activities .......................................     26,097       13,692       20,030
                                                                                        ---------    ---------    ---------
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................       (127)        (138)       1,687
Cash and cash equivalents at beginning of year .......................................     12,914       13,052       11,365
                                                                                        ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .............................................  $  12,787    $  12,914    $  13,052
                                                                                        =========    =========    =========
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
   Interest ..........................................................................  $  11,308    $  10,231    $   9,747
   Income taxes ......................................................................      2,156        1,896        1,911
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        

                                       26
<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.

     Certain items for 1996 and 1997 have been reclassified to conform with the
1998 presentation. The reclassifications have no effect on the financial
position or results of operations as previously reported.


     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.


                                       27
<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 $67,000 at December 31, 1998 and 1997,
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

     In 1997, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share", which establishes standards for
computing and presenting earnings per share (EPS) data. SFAS No. 128 simplifies
the standards for computing EPS previously found in APB Opinion No. 15,
"Earnings Per Share", and makes them comparable to international EPS standards.
Under SFAS No. 128, basic EPS replaces the former presentation of primary EPS.
Also, a dual presentation of basic and diluted EPS is required on the face of
the income statement for all entities with complex capital structures, and a
reconciliation must be provided of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS
computation. In accordance with SFAS No. 128, all prior period EPS data has
been restated.


     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


                                       28
<PAGE>

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

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

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.


     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 (SFAS)
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

     Effective January 1, 1997, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation",
which requires either (i) the fair value of employee stock-based compensation
plans be recorded as a component of compensation expense in the statement of
income as of the date of grant of awards related to such plans or (ii) the
impact of such fair value on net income and earnings per share be disclosed in
a footnote to financial statements for awards granted after December 15, 1994,
if the accounting for such awards continues to be in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees". The Corporation has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure provisions of SFAS No. 123.


     DERIVATIVE FINANCIAL INSTRUMENTS

     The Corporation may use off-balance sheet derivative contracts for
interest rate risk management purposes. The existing contracts are accounted
for on the accrual basis and the net interest differential, including premiums
paid, if any, is 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.


                                       29
<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, 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
                                                        =======      ======        ====      =======
     DECEMBER 31, 1997
      U.S. Treasury .................................   $ 2,603      $   26        $  4      $ 2,625
      U.S. Government agencies and corporations .....    28,893         120          29       28,984
      Mortgage-backed securities ....................     2,423           7           7        2,423
      Equity securities .............................     1,078          16          --        1,094
                                                        -------      ------        ----      -------
       Total ........................................   $34,997      $  169        $ 40      $35,126
                                                        =======      ======        ====      =======
   HELD TO MATURITY
     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
                                                        =======      ======        ====      =======
     DECEMBER 31, 1997
     U.S. Government agencies and corporations ......   $32,804      $   67        $110      $32,761
     State, county and municipal ....................    18,951         551          29       19,473
                                                        -------      ------        ----      -------
       Total ........................................   $51,755      $  618        $139      $52,234
                                                        =======      ======        ====      =======
</TABLE>

     The amortized cost and estimated fair value of investment securities at
December 31, 1998, 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 ....................   $ 1,100     $ 1,106     $ 2,046    $ 2,055
    Due after one year through five years ......     3,404       3,476      13,555     13,755
    Due after five years through ten years .....    39,063      39,000      36,390     36,789
    Due after ten years ........................        --          --       7,822      8,260
                                                   -------     -------     -------    -------
      Total ....................................    43,567      43,582      59,813     60,859
    Mortgage-backed securities .................       228         230          --         --
    Equity securities ..........................     1,123       1,146          --         --
                                                   -------     -------     -------    -------
      Total investment securities ..............   $44,918     $44,958     $59,813    $60,859
                                                   =======     =======     =======    =======
</TABLE>

     Debt securities with an estimated fair value of $58,311,000 were pledged
to secure public funds and trust funds on deposit and retail repurchase
agreements at December 31, 1998.


                                       30
<PAGE>

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

NOTE 2 -- INVESTMENT SECURITIES -- (Continued)

     There were no sales of investment securities in the three-year period
ended December 31, 1998.


NOTE 3 -- LOANS

     Major classifications of loans are as follows:



<TABLE>
<CAPTION>
                                                  DECEMBER 31
                                             ---------------------
                                                1998       1997
                                             ---------- ----------
                                                (IN THOUSANDS)
<S>                                          <C>        <C>
        Commercial and agricultural ........  $ 99,055   $ 84,221
        Real estate -- construction ........     3,279      4,989
        Real estate -- mortgage:
         1-4 family residential ............    88,591     81,182
         Commercial and other ..............    16,708     20,556
        Consumer ...........................    22,089     26,503
                                              --------   --------
          Total loans ......................  $229,722   $217,451
                                              ========   ========
</TABLE>

     Loans as presented are reduced by net deferred loan fees of $443,000 and
$270,000 at December 31, 1998 and 1997, respectively. Nonaccrual loans amounted
to $731,000 at December 31, 1998 and $51,000 at December 31, 1997. Interest
income that would have been recorded on nonaccrual loans for the year ended
December 31, 1998, had they performed in accordance with their original terms,
amounted to approximately $59,000. Interest income on all such loans included
in the the results of operations for 1998 amounted to approximately $30,000.
For the years ended December 31, 1997 and 1996, lost and recorded interest
income on nonaccrual loans was not material. 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 $457,000
in 1998. Interest income on impaired loans in 1998 was not material. There were
no loans considered to be impaired at December 31, 1997.

     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, 1998 and 1997 are $3,745,000 and $9,674,000,
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 1998 with respect to related party loans is as follows (in
thousands):


<TABLE>
<S>                                    <C>
  Balance, December 31, 1997 .........  $  10,037
  New loans during 1998 ..............     17,839
  Repayments during 1998 .............    (19,352)
                                        ---------
  Balance, December 31, 1998 .........  $   8,524
                                        =========
</TABLE>

 

                                       31
<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
                                                         -----------------------------
                                                            1998      1997      1996
                                                         --------- --------- ---------
                                                                (IN THOUSANDS)
<S>                                                      <C>       <C>       <C>
        Balance at beginning of year ...................  $2,294    $1,986    $1,903
        Provision for losses charged to operations .....     390       600       490
        Loans charged off ..............................    (336)     (457)     (568)
        Recoveries on loans previously charged off .....     169       165       161
                                                          ------    ------    ------
        Balance at end of year .........................  $2,517    $2,294    $1,986
                                                          ======    ======    ======
</TABLE>

NOTE 5 -- PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows:



<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                             -------------------
                                                                1998      1997
                                                             --------- ---------
                                                               (IN THOUSANDS)
<S>                                                          <C>       <C>
        Land ...............................................  $ 1,361   $ 1,004
        Buildings and improvements .........................    4,408     4,314
        Furniture and equipment ............................    6,262     5,221
        Leasehold improvements .............................      415       410
                                                              -------   -------
          Total ............................................   12,446    10,949
        Less accumulated depreciation and amortization .....    5,468     4,820
                                                              -------   -------
        Premises and equipment, net ........................  $ 6,978   $ 6,129
                                                              =======   =======
</TABLE>

NOTE 6 -- INCOME TAXES

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



<TABLE>
<CAPTION>
                                         1998      1997      1996
                                      --------- --------- ---------
                                             (IN THOUSANDS)
<S>                                   <C>       <C>       <C>
      Current:
        Federal .....................  $1,959    $1,942    $1,675
        State .......................      77       128        67
                                       ------    ------    ------
  Total .............................   2,036     2,070     1,742
                                       ------    ------    ------
      Deferred -- Federal ...........     (52)     (252)      (66)
                                       ------    ------    ------
  Total income taxes ................  $1,984    $1,818    $1,676
                                       ======    ======    ======
</TABLE>

                                       32
<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>
                                                                   1998      1997      1996
                                                                --------- --------- ---------
                                                                       (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
        Amount of tax computed using Federal statutory tax rate
          of 34% ..............................................  $2,226    $2,012    $1,874
        Increases (decreases) resulting from:
          Effect of tax-exempt loan and investment
           securities income ..................................    (308)     (282)     (251)
          Other ...............................................      66        88        53
                                                                 ------    ------    ------
           Total ..............................................  $1,984    $1,818    $1,676
                                                                 ======    ======    ======
</TABLE>

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



<TABLE>
<CAPTION>
                                                       DECEMBER 31
                                                    -----------------
                                                      1998     1997
                                                    -------- --------
                                                     (IN THOUSANDS)
<S>                                                 <C>      <C>
           Deferred tax assets:
  Allowance for loan losses .......................  $  682   $  606
  Accrued expenses, not currently deductible ......     428      471
  Other ...........................................      74       76
                                                     ------   ------
  Total ...........................................   1,184    1,153
                                                     ------   ------
           Deferred tax liabilities:
  Depreciable basis of premises and equipment .....     280      323
  Taxable basis of investment securities ..........      32       68
  Prepaid pension cost ............................     321      266
  Net deferred loan fees and costs ................     112      139
  Other ...........................................      63       64
                                                     ------   ------
  Total ...........................................     808      860
                                                     ------   ------
           Net deferred tax asset .................  $  376   $  293
                                                     ======   ======
</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 are as follows (in thousands):



<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
-------------------------------
<S>                             <C>
  1999 ........................  $138,943
  2000 ........................    22,875
  2001 ........................     2,202
  2002 ........................       391
  2003 ........................       241
                                 --------
  Total time deposits .........  $164,652
                                 ========
</TABLE>

                                       33
<PAGE>

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

NOTE 8 -- 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>
                                                   1998                    1997
                                         ------------------------ -----------------------
                                            RETAIL      FEDERAL      RETAIL      FEDERAL
                                          REPURCHASE     FUNDS     REPURCHASE     FUNDS
                                          AGREEMENTS   PURCHASED   AGREEMENTS   PURCHASED
                                         ------------ ----------- ------------ ----------
                                                      (DOLLARS IN THOUSANDS)
<S>                                      <C>          <C>         <C>          <C>
   Balance at December 31 ..............   $ 11,484     $ 1,545     $ 7,437     $ 2,400
   Average balance during the year .....     10,169         539       6,229         473
   Maximum month-end balance ...........     13,107       3,250       7,676       2,400
   Weighted average interest rate:
    At December 31 .....................       3.79%       4.94%       4.51%       6.59%
    During the year ....................       4.37        5.32        4.51        5.71
</TABLE>

     At December 31, 1998, the Bank had an available line of credit of
$37,000,000 with the Federal Home Loan Bank (the "FHLB"). Any advances that the
Bank may obtain under the FHLB line would be secured by a blanket collateral
agreement on qualifying 1-4 family residential mortgage loans.


NOTE 9 -- 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.


                                       34
<PAGE>

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

NOTE 9 -- EMPLOYEE BENEFIT PLANS -- (Continued)

     Information concerning the status of the plan is as follows:



<TABLE>
<CAPTION>
                                                              1998       1997
                                                           ---------- ---------
                                                               (DOLLARS IN
                                                                THOUSANDS)
<S>                                                        <C>        <C>
   Change in Benefit Obligation:
    Benefit obligation at beginning of year ..............   $5,681    $5,325
    Service cost .........................................      177       151
    Interest cost ........................................      379       363
    Net actuarial loss ...................................      196       148
    Benefits paid ........................................     (296)     (306)
                                                             ------    ------
    Benefit obligation at end of year ....................   $6,137    $5,681
                                                             ======    ======
   Change in Plan Assets:
    Fair value of plan assets at beginning of year .......   $5,952    $4,828
    Actual return on plan assets .........................    1,209     1,050
    Employer contributions ...............................      366       380
    Benefits paid ........................................     (296)     (306)
                                                             ------    ------
    Fair value of plan assets at end of year .............   $7,231    $5,952
                                                             ======    ======
   Prepaid Pension Cost Components:
    Funded status of plan ................................   $1,094    $  272
    Unrecognized net actuarial gain ......................     (995)     (461)
    Unrecognized prior service cost ......................      780       888
    Unrecognized transition obligation ...................       65        85
                                                             ------    ------
    Prepaid pension cost at end of year ..................   $  944    $  784
                                                             ======    ======
   Weighted-Average Plan Assumptions at End of Year: .....
    Discount rate ........................................      6.5%      7.0%
    Expected long-term rate of return on plan assets .....      8.0       8.0
    Rate of increase in compensation levels ..............      5.5       6.0
</TABLE>

Net periodic pension cost included the following components:



<TABLE>
<CAPTION>
                                                         1998         1997        1996
                                                     -----------   ---------   ---------
                                                               (IN THOUSANDS)
<S>                                                  <C>           <C>         <C>
   Service cost ..................................     $ 177        $  151      $  108
   Interest Cost .................................       379           363         328
   Expected return on plan assets ................      (477)         (385)       (352)
   Amortization of prior service cost ............       107           107          80
   Amortization of transition obligation .........        21            21          21
   Recognized net actuarial gain .................          (1)         --          --
                                                       --------     ------      ------
   Net periodic pension cost .....................     $ 206        $  257      $  185
                                                       =======      ======      ======
</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.


                                       35
<PAGE>

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

NOTE 9 -- EMPLOYEE BENEFIT PLANS -- (Continued)

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



<TABLE>
<CAPTION>
                                                                  1998       1997
                                                               ---------- ----------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                            <C>        <C>
   Change in Benefit Obligation:
    Benefit obligation at beginning of year ..................   $  721     $  550
    Service cost .............................................       19         19
    Interest cost ............................................       47         46
    Net actuarial loss .......................................        5        144
    Benefits paid ............................................      (29)       (38)
                                                                 ------     ------
    Benefit obligation at end of year ........................   $  763     $  721
                                                                 ======     ======
   Accrued Postretirement Benefit Cost Components:
    Unrecognized net actuarial gain ..........................   $ (635)    $ (595)
    Unrecognized prior service cost ..........................       68         78
    Unrecognized transition obligation .......................      283        303
                                                                 ------     ------
    Accrued postretirement benefit cost at end of year .......   $ (284)    $ (214)
                                                                 ======     ======
   Weighted-Average Plan Assumptions at End of Year:
    Discount rate ............................................      6.5%       7.0%
    Annual rate of increase in the cost of medical benefits:
      Current year ...........................................     12.0       13.0
      Final constant amount ..................................      6.0        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, 1998 or the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the year ended December 31, 1998.

     Net periodic postretirement benefit cost included the following
components:



<TABLE>
<CAPTION>
                                                       1998   1997   1996
                                                      ------ ------ -----
                                                        (IN THOUSANDS)
<S>                                                   <C>    <C>    <C>
   Service cost .....................................  $19    $ 19   $17
   Interest cost ....................................   47      46    36
   Amortization of prior service cost ...............   10      10    10
   Amortization of transition obligation ............   20      20    20
   Recognized net actuarial loss ....................    3       5    --
                                                       ---    ----   ---
   Net periodic postretirement benefit cost .........  $99    $100   $83
                                                       ===    ====   ===
</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 $96,000 in 1998, $85,000 in 1997 and $78,000
in 1996.


                                       36
<PAGE>

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

NOTE 10 -- LEASES
     Future obligations 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>
  1999 .................................  $ 49
  2000 .................................    47
  2001 .................................    45
  2002 .................................     7
  2003 .................................     3
  2004 and later years .................    44
                                          ----
  Total minimum lease payments .........  $195
                                          ====
</TABLE>

     Net rental expense for all operating leases amounted to $55,000 in 1998,
$57,000 in 1997 and $58,000 in 1996. One operating lease for real property
contains a purchase option considered to approximate fair market value.


NOTE 11 -- SUPPLEMENTARY INCOME STATEMENT INFORMATION

     Significant components of other expense were as follows:



<TABLE>
<CAPTION>
                                           1998   1997    1996
                                          ------ ------ -------
                                             (IN THOUSANDS)
<S>                                       <C>    <C>    <C>
         Stationery, printing and supplies $345   $335   $302
         Advertising and marketing ......   346    123    143
</TABLE>

NOTE 12 -- 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, 1998 and
1997, and the related condensed statements of income and cash flows for each of
the years in the three-year period ended December 31, 1998 are as follows:


CONDENSED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                          -------------------
                                                             1998      1997
                                                          --------- ---------
                                                            (IN THOUSSANDS)
<S>                                                       <C>       <C>
  Assets:
   Cash .................................................  $   943   $   706
   Investment in wholly-owned bank subsidiary ...........   34,041    31,155
   Other assets .........................................      567       423
                                                           -------   -------
     Total assets .......................................  $35,551   $32,284
                                                           =======   =======
  Liabilities and Shareholders' Equity:
   Accrued liabilities ..................................  $   549   $   383
   Shareholders' equity .................................   35,002    31,901
                                                           -------   -------
     Total liabilities and shareholders' equity .........  $35,551   $32,284
                                                           =======   =======
</TABLE>

                                       37
<PAGE>

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

NOTE 12 -- FNB CORP. (PARENT COMPANY) FINANCIAL DATA -- (Continued)

CONDENSED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31
                                                                        -----------------------------
                                                                           1998      1997      1996
                                                                        --------- --------- ---------
                                                                               (IN THOUSANDS)
<S>                                                                     <C>       <C>       <C>
Income:
 Dividends from bank subsidiary .......................................  $1,635    $1,137    $1,383
 Other income .........................................................       2         1         4
                                                                         ------    ------    ------
   Total income .......................................................   1,637     1,138     1,387
                                                                         ------    ------    ------
Operating expenses ....................................................      28        23        16
                                                                         ------    ------    ------
Income before income tax benefit and equity in undistributed net income
 of bank subsidiary ...................................................   1,609     1,115     1,371
Income tax benefit ....................................................       9         8         3
                                                                         ------    ------    ------
Income before equity in undistributed net income of bank subsidiary ...   1,618     1,123     1,374
Equity in undistributed net income of bank subsidiary .................   2,944     2,977     2,463
                                                                         ------    ------    ------
   Net income .........................................................  $4,562    $4,100    $3,837
                                                                         ======    ======    ======
</TABLE>

CONDENSED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                YEARS ENDED DECEMBER 31
                                                                                        ---------------------------------------
                                                                                            1998         1997          1996
                                                                                        ----------- ------------- -------------
                                                                                                    (IN THOUSANDS)
<S>                                                                                     <C>         <C>           <C>
Operating activities:
  Net income ..........................................................................  $  4,562     $ 4,100       $ 3,837
  Adjustments to reconcile net income to net cash provided by operating activities:
   Equity in undistributed net income of bank subsidiary ..............................    (2,944)     (2,977)       (2,463)
   Other, net .........................................................................      (164)         (8)         (111)
                                                                                         --------     -------       -------
    Net cash provided by operating activities .........................................     1,454       1,115         1,263
                                                                                         --------     -------       ------- 
Investing activities:
  Decrease (increase) in other assets .................................................        20          (8)           (7)
                                                                                         --------     --------      -------
Financing activities:
  Common stock issued .................................................................       241         346           217
  Cash dividends paid .................................................................    (1,478)     (1,359)       (1,081)
                                                                                         --------     -------       -------
    Net cash used in financing activities .............................................    (1,237)     (1,013)         (864)
                                                                                         --------     -------       -------
Net increase in cash ..................................................................       237          94           392
Cash at beginning of year .............................................................       706         612           220
                                                                                         --------     -------       -------
Cash at end of year ...................................................................  $    943     $   706       $   612
                                                                                         ========     =======       =======
</TABLE>

NOTE 13 -- 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
1999, the maximum amount of dividends the Bank can pay to FNB Corp., without
the approval of the Comptroller of the Currency, is $5,921,000 plus an
additional amount equal to the retained net income in 1999 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, 1998, the average daily reserve requirement
was $4,166,000.


                                       38
<PAGE>

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

NOTE 13 -- 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 I and Tier II, 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 I capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier II capital, which is limited to the total of Tier I
capital, includes allowable amounts of subordinated debt, mandatory convertible
securities, preferred stock and the allowance for loan losses. Total capital,
for risk-based purposes, consists of both Tier I and Tier II 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 I risk-based and Tier I leverage ratios as set
forth in the table below. There are no events or conditions since December 31,
1998 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
                                 1998       1997        1998        1997     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. ................  $37,482    $34,095       16.05%      15.75%      8.00%          N/A
   Bank .....................   36,489     33,298       15.63       15.39       8.00          10.00%
  Tier I capital
   (to risk-weighted assets):
   FNB Corp. ................   34,965     31,801       14.98       14.69       4.00           N/A
   Bank .....................   33,972     31,004       14.55       14.33       4.00           6.00%
  Tier I capital
   (to average assets):
   FNB Corp. ................   34,965     31,801        9.89        9.83       4.00           N/A
   Bank .....................   33,972     31,004        9.61        9.58       4.00           5.00%
</TABLE>

NOTE 14 -- 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:


                                       39
<PAGE>

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

NOTE 14 -- SHAREHOLDERS' EQUITY -- (Continued)


<TABLE>
<CAPTION>
                                                                            1998        1997        1996
                                                                        ----------- ----------- ------------
<S>                                                                     <C>         <C>         <C>
  Basic EPS denominator -- Weighted average number of common shares
   outstanding ........................................................  3,649,875   3,626,132   3,603,866
  Dilutive share effect arising from assumed exercise of stock options     144,948      70,252      37,794
                                                                         ---------   ---------   ---------
  Diluted EPS denominator .............................................  3,794,823   3,696,384   3,641,660
                                                                         =========   =========   =========
</TABLE>

     STOCK OPTIONS

     All information presented below has been restated to reflect the 1998
stock split disclosed in Note 1.

     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, 1998, there were 294,900 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 1998, 1997 and 1996 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>
                                  1998        1997        1996
                              ----------- ----------- -----------
                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                           <C>         <C>         <C>
     Net Income:
      As reported ...........   $ 4,562     $ 4,100     $ 3,837
      Pro forma .............     4,422       4,018       3,803
 
     Net Income Per Share:
      Basic:
  As reported ...............      1.25        1.13        1.06
  Pro forma .................      1.21        1.11        1.06
      Diluted:
  As reported ...............      1.20        1.11        1.05
  Pro forma .................      1.17        1.09        1.04
</TABLE>

     The weighted-average fair value per share of options granted in 1998, 1997
and 1996 amounted to $11.17, $5.55 and $4.44, 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>
                                            1998       1997       1996
                                         ---------- ---------- ----------
<S>                                      <C>        <C>        <C>
      Risk-free interest rate ..........    4.70%      5.86%      6.25%
      Dividend yield ...................    1.80       1.60       2.50
      Volatility .......................   44.00      26.00      30.00
      Expected life .................... 6 years    6 years    6 years
</TABLE>

                                       40
<PAGE>

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

NOTE 14 -- SHAREHOLDERS' EQUITY -- (Continued)

     A summary of stock option activity is as follows:



<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31
                                      --------------------------------------------------------------------
                                               1998                    1997                  1996
                                      ----------------------- ---------------------- ---------------------
                                                    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    340,800      $12.93    276,100      $11.21    194,750     $ 9.73
     Granted ........................     71,000       27.00     93,000       17.47     95,500      14.00
     Exercised ......................    (14,711)      10.47     (9,450)       9.41     (4,850)      8.78
     Forfeited ......................     (1,000)      17.50    (18,850)      12.00     (9,300)     10.01
                                         -------                -------                -------
     Outstanding at end of year .....    396,089       15.53    340,800       12.93    276,100      11.21
                                         =======                =======                =======
 
     Options exercisable at end of year  151,639       11.37     96,500       10.19     54,500       9.15
                                         =======                =======                =======
</TABLE>

     At December 31, 1998, 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           86,489           5.96           66,239
    12.00          64,400           6.96           36,400
    14.00          82,600           7.96           31,000
    16.00           2,000           8.75              400
    17.50          89,600           8.96           17,600
    27.00          71,000           9.96               --
                   ------                          ------
                  396,089           7.95          151,639
                  =======                         =======
</TABLE>

NOTE 15 -- COMMITMENTS

     In the normal course of business, various commitments are outstanding that
are not reflected in the consolidated financial statements. At December 31,
1998, a summary of significant commitments is as follows:



<TABLE>
<S>                                            <C>
         Commitments to extend credit ........  $61,675,000
         Standby letters of credit ...........      181,000
</TABLE>

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

     The Bank has entered into two interest rate floor agreements with a
correspondent bank to protect certain variable-rate loans from the downward
effects of their repricing in the event of a decreasing rate environment. The
notional amount of each agreement is $10,000,000. The agreements require the
correspondent bank to pay to the Bank the difference between the floor rate of
interest of 7.50% in one agreement and 8.00% in the other agreement as compared
to the prime rate of interest in the event that the prime rate is less. Any
payments received under the agreements, net of premium amortization, will be
treated as an adjustment of interest income on loans. The Bank's exposure to
credit risk is limited to the ability of the counterparty to make potential
future payments to the Bank that are required pursuant to the agreements. The
Bank's exposure to market risk of loss is limited to the amount of the
unamortized premium. At December 31, 1998, the unamortized premium related to
the interest rate floor agreements amounted to $23,000 and had an estimated
fair value of $30,000.


                                       41
<PAGE>

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

NOTE 16 -- 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.

     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.

     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 15.

     The estimated fair values of financial instruments are as follows:



<TABLE>
<CAPTION>
                                          DECEMBER 31, 1998      DECEMBER 31, 1997
                                        ---------------------- ---------------------
                                                    ESTIMATED              ESTIMATED
                                         CARRYING      FAIR     CARRYING     FAIR
                                           VALUE      VALUE       VALUE      VALUE
                                        ---------- ----------- ---------- ----------
                                                       (IN THOUSANDS)
<S>                                     <C>        <C>         <C>        <C>
FINANCIAL ASSETS
 Cash and cash equivalents ............  $ 12,787   $ 12,787    $ 12,914   $ 12,914
 Investment securities:
   Available for sale .................    44,958     44,958      35,126     35,126
   Held to maturity ...................    59,813     60,859      51,755     52,234
 Net loans ............................   227,205    228,806     215,157    217,118
FINANCIAL LIABILITIES
 Deposits .............................   304,690    305,913     280,548    281,488
 Retail repurchase agreements .........    11,484     11,484       7,437      7,437
 Federal funds purchased ..............     1,545      1,545       2,400      2,400
</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.


                                       42
<PAGE>

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

NOTE 17 -- TERMINATED ACQUISITION
     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 merger expenses in the consolidated statement of
income for the year ended December 31, 1997.


                                       43
<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 26,
1999.

                                                  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 26, 1999.



<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>

                                       44
<PAGE>

                               INDEX TO EXHIBITS




<TABLE>
<CAPTION>
 EXHIBIT NO.                                      DESCRIPTION OF EXHIBIT
-------------   -----------------------------------------------------------------------------------------
<S>             <C>
   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.
 10.30          Copy of 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.
 10.31          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.
 10.32          Form of Nonqualified Stock Option Agreement between FNB Corp. and certain of
                its directors, pursuant to the Registrant's Stock Compensaton 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.
 10.40          Copy of 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>


                                       45