<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                  ____________


                                   FORM 10-Q


                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

               For the quarterly period ended September 30, 2001

                         Commission File Number 0-13823

                                  ____________


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


     North Carolina                                    56-1456589
(State of incorporation)                  (I.R.S. Employer Identification No.)


               101 Sunset Avenue, Asheboro, North Carolina  27203
                    (Address of principal executive offices)


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


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
                                        ---      ---

The registrant had 4,802,312 shares of $2.50 par value common stock outstanding
at November 2, 2001.
<PAGE>

                        PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                           FNB Corp. and Subsidiary

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                     September 30,  (unaudited)
                                                                                    ---------------------------       December 31,
                                                                                        2001           2000               2000
                                                                                    ------------   ------------       ------------
                                                                                        (in thousands, except share data)
<S>                                                                                 <C>             <C>               <C>
ASSETS
Cash and due from banks                                                               $ 14,092       $ 12,926           $ 14,108
Interest-bearing bank accounts                                                              -              71                 -
Federal funds sold                                                                       5,852             82                 94
Investment securities:
   Available for sale, at estimated fair value
     (amortized cost of $141,679, $65,822 and $73,572)                                 145,093         63,683             73,023
   Held to maturity (estimated fair value of
     $55,962 and $59,727)                                                                   -          56,923             59,361
Loans:
   Loans held for sale                                                                   2,905            243              9,870
   Loans held for investment                                                           392,730        399,823            385,867
   Less allowance for loan losses                                                       (4,422)        (4,169)            (4,352)
                                                                                ----------------  --------------   ---------------
              Net loans                                                                391,213        395,897            391,385
                                                                                ----------------  --------------   ---------------
Premises and equipment, net                                                              9,974          9,644              9,596
Other assets                                                                            18,675          8,909             18,072
                                                                                ----------------  --------------   ---------------
              Total Assets                                                            $584,899       $548,135           $565,639
                                                                                ================  ==============   ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Noninterest-bearing demand deposits                                                $ 45,543       $ 45,530           $ 45,901
   Interest-bearing deposits:
        Demand, savings and money market deposits                                      137,205        124,370            126,823
        Time deposits of $100,000 or more                                              106,382         98,476            101,584
        Other time deposits                                                            190,486        192,127            198,140
                                                                                ----------------  --------------   ---------------
              Total deposits                                                           479,616        460,503            472,448
Retail repurchase agreements                                                            13,879         10,065             11,201
Federal Home Loan Bank advances                                                         25,000         15,000             15,000
Federal funds purchased                                                                     -           3,200              4,750
Other liabilities                                                                        7,815          6,067              7,118
                                                                                ----------------  --------------   ---------------
              Total Liabilities                                                        526,310        494,835            510,517
                                                                                ----------------  --------------   ---------------

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
     shares - 4,912,212, 5,053,529 and 5,059,641                                        12,281         12,634             12,649
   Surplus                                                                                 854          2,786              2,836
   Retained earnings                                                                    43,200         39,292             40,000
   Accumulated other comprehensive income (loss)                                         2,254         (1,412)              (363)
                                                                                ----------------  --------------   ---------------
              Total Shareholders' Equity                                                58,589         53,300             55,122
                                                                                ----------------  --------------   ---------------

              Total Liabilities and
                  Shareholders' Equity                                                $584,899       $548,135           $565,639
                                                                                ================  ==============   ===============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       1
<PAGE>

                           FNB Corp. and Subsidiary

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                            Three Months Ended              Nine Months Ended
                                                                         September 30,  (unaudited)     September 30,  (unaudited)
                                                                       -----------------------------   ----------------------------
                                                                             2001          2000             2001         2000
                                                                       -------------  --------------   ------------  --------------
                                                                                     (in thousands, except per share data)
<S>                                                                    <C>            <C>              <C>           <C>
Interest Income
   Interest and fees on loans                                          $      7,807   $       8,885    $    24,411   $      25,174
   Interest and dividends on investment securities:
      Taxable income                                                          2,202           1,579          6,171           4,710
      Non-taxable income                                                        235             242            716             735
   Other interest income                                                         25              28            167             259
                                                                       -------------  --------------   ------------  --------------
          Total interest income                                              10,269          10,734         31,465          30,878
                                                                       -------------  --------------   ------------  --------------
Interest Expense
   Deposits                                                                   4,580           5,088         15,032          14,036
   Retail repurchase agreements                                                 103             137            346             377
   Federal Home Loan Bank advances                                              325             205            926             610
   Federal funds purchased                                                        7              15             45              67
                                                                       -------------  --------------   ------------  --------------
          Total interest expense                                              5,015           5,445         16,349          15,090
                                                                       -------------  --------------   ------------  --------------

Net Interest Income                                                           5,254           5,289         15,116          15,788
   Provision for loan losses                                                    205             160            490           1,152
                                                                       -------------  --------------   ------------  --------------
Net Interest Income After Provision for Loan Losses                           5,049           5,129         14,626          14,636
                                                                       -------------  --------------   ------------  --------------

Noninterest Income
   Service charges on deposit accounts                                          644             550          1,873           1,650
   Annuity and brokerage commissions                                             61              87            175             340
   Cardholder and merchant services income                                      146             131            441             373
   Other service charges, commissions and fees                                  172             163            537             508
   Bank owned life insurance                                                    161              -             477              -
   Net gain on sales of loans                                                   235              27            664              49
   Other income                                                                  34             112            200             390
                                                                       -------------  --------------   ------------  --------------
          Total noninterest income                                            1,453           1,070          4,367           3,310
                                                                       -------------  --------------   ------------  --------------
Noninterest Expense
   Personnel expense                                                          2,294           2,165          6,783           6,520
   Net occupancy expense                                                        217             230            621             639
   Furniture and equipment expense                                              365             442          1,066           1,358
   Data processing services                                                     188             159            529             664
   Merger related expenses                                                       -               -              -            2,796
   Other expense                                                              1,033             961          3,008           2,810
                                                                       -------------  --------------   ------------  --------------
          Total noninterest expense                                           4,097           3,957         12,007          14,787
                                                                       -------------  --------------   ------------  --------------

Income Before Income Taxes                                                    2,405           2,242          6,986           3,159
Income taxes                                                                    685             698          1,986           1,109
                                                                       -------------  --------------   ------------  --------------
Net Income                                                             $      1,720   $       1,544    $     5,000   $       2,050
                                                                       =============  ==============   ============  ==============
Net income per common share:
   Basic                                                               $        .34   $         .31    $       .99   $         .41
   Diluted                                                                      .34             .30            .97             .40
                                                                       =============  ==============   ============  ==============
Weighted average number of shares outstanding:
   Basic                                                                  5,009,017       5,049,303      5,044,566       5,028,238
   Diluted                                                                5,117,112       5,069,131      5,130,706       5,073,207
                                                                       =============  ==============   ============  ==============

Cash dividends declared per common share                               $        .12   $         .12    $       .36   $         .36
                                                                       =============  ==============   ============  ==============

</TABLE>

         See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

                           FNB Corp. and Subsidiary

   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

    Nine Months Ended September 30, 2001 and September 30, 2000 (unaudited)

<TABLE>
<CAPTION>
                                                                                     ESOP        Accumulated
                                      Common Stock                                   and            Other
                                 ----------------------               Retained    Restricted    Comprehensive
                                   Shares       Amounts    Surplus    Earnings    Stock Plans   Income (Loss)    Total
                                 ----------     -------    -------    --------    -----------   ------------    -------
                                                        (in thousands, except share data)
<S>                              <C>            <C>        <C>        <C>         <C>           <C>             <C>

Balance, December 31, 1999       5,139,520      $12,849    $ 4,131    $ 39,158       $ (2,092)    $ (1,978)     $52,068

Comprehensive income:
  Net income                            -             -         -        2,050              -           -         2,050
  Other comprehensive income:
    Unrealized securities gains,
     net of income tax benefit
     of $654                            -             -         -            -              -          566          566
                                                                                                                -------
  Total comprehensive income            -             -         -            -              -           -         2,616
                                                                                                                -------
Cash dividends declared                 -             -         -        (1,916)            -           -        (1,916)

Cash paid for fractional shares
 in merger                            (122)           -         (1)          -              -           -            (1)
ESOP and restricted stock plan
 transactions:
  Termination of plans             (93,113)         (233)    (1,342)         -           1,960          -           385
  Other transactions                    -             -         (17)         -             132          -           115
Common stock issued through:
  Dividend reinvestment plan         4,701            12         39          -              -           -            51
  Stock option plan                  9,243            23         64          -              -           -            87
Common stock repurchased            (6,700)          (17)       (88)         -              -           -          (105)
                                 ---------       -------    -------     --------       --------    --------     -------

Balance, September 30, 2000      5,053,529       $12,634    $ 2,786     $ 39,292       $    -      $ (1,412)    $53,300
                                 =========       =======    =======     ========       =========   ========     =======



Balance, December 31, 2000
Comprehensive income:            5,059,641       $12,649    $ 2,836      $40,000       $    -       $  (363)    $55,122
  Net income                            -             -          -         5,000            -            -        5,000
  Other comprehensive income:
    Unrealized securities gains,
     net of income taxes
     of $1,346                          -             -          -            -             -         2,617       2,617
                                                                                                                -------
  Total comprehensive income            -             -          -            -             -            -        7,617
                                                                                                                -------
Cash dividends declared                 -             -          -        (1,800)           -            -       (1,800)

Common stock issued through:
  Stock option plan                 24,461            61        174           -             -            -          235
Common stock repurchased          (171,890)         (429)    (2,156)          -             -            -       (2,585)
                                 ---------       -------    -------     --------       --------    --------     -------

Balance, September 30, 2001      4,912,212        12,28     $   854      $43,200    $       -       $ 2,254     $58,589
                                 =========       =======    =======     ========       =========   ========     =======
</TABLE>



         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                           FNB Corp. and Subsidiary

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                       September 30, (unaudited)
                                                       -------------------------
                                                          2001            2000
                                                       -------------------------
                                                             (in thousands)
<S>                                                    <C>             <C>
Operating Activities:
 Net income                                            $   5,000       $  2,050
 Adjustments to reconcile net income to net
  cash provided by operating activities:
  Depreciation and amortization of premises
   and equipment                                             856          1,145
  Provision for loan losses                                  490          1,152
  Deferred income taxes (benefit)                             31           (281)
  Deferred loan fees and costs, net                           65             18
  Premium amortization and discount accretion
   of investment securities, net                              (6)            38
  ESOP and restricted stock plan expenses                      -            500
  Amortization of intangibles                                  7             11
  Net decrease (increase) in loans held for sale           6,965           (169)
  Increase in other assets                                (1,221)        (1,170)
  Increase in other liabilities                              142          1,084
                                                       ---------       --------
    Net Cash Provided by Operating Activities             12,329          4,378
                                                       ---------       --------
Investing Activities:
 Available-for-sale securities:
  Proceeds from sales                                          -             77
  Proceeds from maturities and calls                      96,723              -
  Purchases                                             (105,452)        (1,761)
 Held-to-maturity securities:
  Proceeds from maturities and calls                           -          2,418
  Purchases                                                    -           (655)
 Net increase in loans held for investment                (7,949)       (39,079)
 Purchases of premises and equipment                      (1,234)          (622)
 Other, net                                                  552           (129)
                                                       ---------       --------
    Net Cash Used in Investing Activities                (17,360)       (39,751)
                                                       ---------       --------

Financing Activities:
 Net increase in deposits                                  7,168         33,493
 Increase (decrease) in retail repurchase agreements       2,678           (602)
 Increase in Federal Home Loan Bank advances              10,000              -
 Decrease in federal funds purchased                      (4,750)        (4,535)
 Common stock issued                                         235            138
 Common stock repurchased                                 (2,585)          (105)
 Cash dividends paid                                      (1,973)        (1,860)
                                                       ---------       --------
    Net Cash Provided by Financing Activities             10,773         26,529
                                                       ---------       --------

Net Increase (Decrease) in Cash and Cash Equivalents       5,742         (8,844)
Cash and cash equivalents at beginning of period          14,202         21,923
                                                       ---------       --------
Cash and Cash Equivalents at End of Period             $  19,944       $ 13,079
                                                       =========       ========
Supplemental disclosure of cash flow information:
 Cash paid during the period for:
  Interest                                             $  16,609       $ 14,582
  Income taxes                                             2,195          1,448
 Noncash transactions:
  Transfer of held-to-maturity securities to
   available-for-sale securities                          59,361              -
  Foreclosed loans transferred to other real estate          626          1,173
  Unrealized securities gains, net of income taxes         2,617            566
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                            FNB Corp. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Basis of Presentation

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

    The accompanying consolidated financial statements, prepared without audit,
    include the accounts of FNB Corp. and the Bank (collectively the
    "Corporation"). All significant intercompany balances and transactions have
    been eliminated. 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
    accounting principles generally accepted in the United States of America
    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.

    As discussed in Note 3 below, the Corporation in 2000 completed a merger for
    the acquisition of Carolina Fincorp, Inc. in a transaction accounted for as
    a pooling of interests. Historical financial information included in these
    consolidated financial statements has been restated to include the account
    balances and results of operations of Carolina Fincorp, Inc.

2.  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.

3.  Merger Information

    On April 10, 2000, the Corporation completed a merger for the acquisition of
    Carolina Fincorp, Inc. ("Carolina Fincorp"), holding company for Richmond
    Savings Bank, Inc., SSB ("Richmond Savings"), headquartered in Rockingham,
    North Carolina, in a transaction accounted for as a pooling of interests.
    Accordingly, all historical financial information included in these
    consolidated financial statements has been restated to include the account
    balances and results of operations of Carolina Fincorp.

    Pursuant to the terms of the merger, each share of Carolina Fincorp common
    stock was converted into .79 of a share of FNB Corp. common stock, for a
    total issuance of 1,478,398 FNB Corp. shares.  On

                                       5
<PAGE>

    June 26, 2000, Richmond Savings was merged into First National Bank and
    Trust Company. At March 31, 2000, Carolina Fincorp operated five offices
    through Richmond Savings and had approximately $125,943,000 in total assets,
    $108,848,000 in deposits and $16,332,000 in shareholders' equity. Merger-
    related expenses of $2,796,000 were recorded in the second quarter of 2000.
    Upon the change in control, the Carolina Fincorp ESOP plan terminated
    according to its terms and unvested MRP shares became fully vested. Included
    in merger-related expenses were $385,000 of expense related to the
    termination of these plans. Additionally, approximately $450,000 of the
    total provision for loan losses of $835,000 in the 2000 second quarter was
    related to aligning the credit risk methodologies of FNB Corp. and Carolina
    Fincorp.

4.  Adoption of SFAS No. 133

    On January 1, 2001, the Corporation adopted Statement of Financial
    Accounting Standards No. 133, "Accounting for Derivative Instruments and
    Hedging Activities", as further amended by Statement of Financial Accounting
    Standards No. 138, "Accounting for Certain Derivative Financial Instruments
    and Certain Hedging Activities, an amendment of FASB Statement No. 133"
    (collectively referred to as "SFAS No. 133"). This statement establishes
    accounting and reporting standards for derivative instruments, including
    certain derivative instruments embedded in other contracts, and for hedging
    activities. It requires that an entity recognize all derivatives as either
    assets or liabilities in the balance sheet and measure those instruments at
    fair value. The accounting for changes in the fair value of a derivative
    depends on the intended use of the derivative and the resulting designation.
    As permitted by SFAS No. 133, on January 1, 2001, the Corporation
    transferred all of its securities from the held-to-maturity portfolio to the
    available-for-sale portfolio as follows:
<TABLE>
<CAPTION>

                                              Securities Transferred
                                           -----------------------------
                                                      Estimated  Pretax
                                           Amortized    Fair      Gain
                                             Cost       Value    (Loss)
                                           ---------  ---------  -------
                                                  (in thousands)
<S>                                        <C>        <C>        <C>
         U.S. Government agencies and
           corporations                      $36,089    $35,759   $(330)
         Mortgage-backed securities              483        488       5
         State, county and municipal          19,735     20,352     617
         Other debt securities                 3,054      3,128      74
                                             -------    -------   -----
          Total                              $59,361    $59,727   $ 366
                                             =======    =======   =====
</TABLE>

     As of January 1, 2001, the transfer of the securities had a net of tax
     effect of $242,000 on other comprehensive income.

     On January 1, 2001, the Corporation had no embedded derivative instruments
     requiring separate accounting treatment and had identified fixed rate
     conforming loan commitments as its only freestanding derivative
     instruments.  The fair value of these commitments was not material and
     therefore the adoption of SFAS No. 133 on January 1, 2001, did not have a
     material impact on the Corporation's consolidated financial statements.
     The fair value of these commitments at September 30, 2001 was not material
     to the Corporation's consolidated financial statements.  The Corporation
     had no other derivative instruments requiring separate accounting treatment
     at September 30, 2001.

                                       6
<PAGE>

5.   Earnings Per Share (EPS)

     Basic net income per share, or basic earnings per share (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:
<TABLE>
<CAPTION>

                                                       Three Months Ended        Nine Months Ended
                                                           September 30,             September 30,
                                                    ------------------------  ------------------------
                                                      2001           2000       2001           2000
                                                    ---------      ---------  ---------      ---------
<S>                                                 <C>        <C>            <C>        <C>
         Basic EPS denominator - Weighted
           average number of common
           shares outstanding                       5,009,017      5,049,303  5,044,566      5,028,238
         Dilutive share effect arising from
           assumed exercise of stock options
           and unvested MRP shares                    108,095         19,828     86,140         44,969
                                                    ---------      ---------  ---------      ---------
          Diluted EPS denominator                   5,117,112      5,069,131  5,130,706      5,073,207
                                                    =========      =========  =========      =========
</TABLE>

6.   Loans

     Loans as presented are reduced by net deferred loan fees of $470,000,
     $445,000 and $405,000 at September 30, 2001, September 30, 2000 and
     December 31, 2000, respectively.

7.   Allowance for Loan Losses

     Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>

                                                       Three Months Ended        Nine Months Ended
                                                           September 30,             September 30,
                                                    ------------------------  ------------------------
                                                      2001           2000       2001           2000
                                                    ---------      ---------  ---------      ---------
                                                                      (in thousands)
<S>                                                 <C>          <C>           <C>           <C>

         Balance at beginning of period              $4,353        $4,012      $4,352         $3,289
         Charge-offs                                    166           106         481            488
         Recoveries                                      30           103         104            216
                                                     ------        ------      ------         ------
             Net loan charge-offs                       136             3         377            272
         Provision for loan losses                      205           160         490          1,152
         Allowance adjustment for loans sold              -             -         (43)             -
                                                     ------        ------      ------         ------
         Balance at end of period                    $4,422         4,169      $4,422         $4,169
                                                     ======        ======      ======         ======
</TABLE>

                                       7
<PAGE>

8.   Supplementary Income Statement Information

     Significant components of other expense were as follows:
<TABLE>
<CAPTION>

                                                       Three Months Ended        Nine Months Ended
                                                           September 30,             September 30,
                                                    ------------------------  ------------------------
                                                      2001           2000       2001           2000
                                                    ---------      ---------  ---------      ---------
                                                                      (in thousands)
<S>                                                 <C>          <C>           <C>           <C>
     Stationery, printing and supplies                $126           $145       $385           $385
     Advertising and marketing                          84             66        254            335
</TABLE>

                                       8
<PAGE>

Item 2.  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 financial information appearing elsewhere in this
report.

Overview

     On April 10, 2000, the Corporation completed a merger for the acquisition
of Carolina Fincorp, Inc. ("Carolina Fincorp"), holding company for Richmond
Savings Bank, Inc., SSB ("Richmond Savings"), headquartered in Rockingham, North
Carolina, in a transaction accounted for as a pooling of interests.  Pursuant to
the terms of the merger, each share of Carolina Fincorp common stock was
converted into .79 of a share of FNB Corp. common stock, for a total issuance of
1,478,398 FNB Corp. shares.  On June 26, 2000, Richmond Savings was merged into
First National Bank and Trust Company.  At March 31, 2000, Carolina Fincorp
operated five offices through Richmond Savings and had approximately
$125,943,000 in total assets, $108,848,000 in deposits and $16,332,000 in
shareholders' equity.  Merger-related expenses of $2,796,000 were recorded in
the second quarter of 2000.  Upon the change in control, the Carolina Fincorp
ESOP plan terminated according to its terms and unvested MRP shares became fully
vested.  Included in merger-related expenses were $385,000 of expense related to
the termination of these plans.  Additionally, approximately $450,000 of the
total provision for loan losses of $835,000 in the 2000 second quarter was
related to aligning the credit risk methodologies of FNB Corp. and Carolina
Fincorp.  Historical financial information included in the consolidated
financial statements has been restated to include the account balances and
results of operations of Carolina Fincorp.

     In the 2000 fourth quarter, management adopted a balance sheet
restructuring project to reduce the level of lower yielding, 1-4 family
residential mortgage loans by selling those loans and redeploying the funds in
other types of assets, including specific purchases of bank owned life insurance
and a more general redeployment to other loan programs and investment
securities.  1-4 family residential mortgage loans totaling $20,938,000 were
transferred to loans held for sale, and of that amount, $12,199,000 were sold in
2000 and the remainder were sold in the first quarter of 2001.  In December
2000, single premium purchases of life insurance amounting to $10,000,000 were
recorded as bank owned life insurance in other assets on the consolidated
balance sheet.  Income relating to the bank owned life insurance is being
recorded as noninterest income, while the loans sold had generated interest
income.  The effective reduction of interest income will tend to lower the net
yield on earning assets and net interest spread in future periods.  Management
believes that the income resulting from the bank owned life insurance, which is
not subject to income tax, will produce a greater contribution to net income
than did the income from the loans sold.

     The Corporation earned $5,000,000 in the first nine months of 2001, a
143.9% increase over the same period in 2000. Basic earnings per share increased
from $.41 to $.99 in comparing these nine-month periods and diluted earnings per
share increased from $.40 to $.97. For the 2001 third quarter, earnings amounted
to $1,720,000, which represents a 11.4% increase from the 2000 third quarter and
a gain in basic earnings per share from $.31 to $.34 and in diluted earnings per
share from $.30 to $.34. Total assets were $584,899,000 at September 30, 2001,
up 6.7% from September 30, 2000 and 3.4% from December 31, 2000. Loans, affected
by the balance sheet restructuring project, amounted to $395,635,000 at
September 30, 2001, decreasing 1.1%

                                       9
<PAGE>

from September 30, 2000 and 0.03% from December 31, 2000.  Total deposits grew
4.2% from September 30, 2000 and 1.5% from December 31, 2000 to $479,616,000 at
September 30, 2001.

     Largely reflecting the utilization of proceeds from loan sales related to
the restructuring project and advances totaling $10,000,000 obtained from the
Federal Home Loan Bank in the first quarter of 2001, investment securities,
which amounted to $145,093,000 at September 30, 2001, increased $24,487,000 or
20.3% in the twelve-month period ended September 30, 2001 and $12,709,000 or
9.6% in the first nine months of 2001.

Earnings Review

     After exclusion of after-tax, merger-related charges of $2,338,000 recorded
in the second quarter of 2000 and associated with the merger with Carolina
Fincorp as discussed in the "Overview", the Corporation's net income increased
$612,000 or 13.9% in the first nine months of 2001 compared to the same period
of 2000 and increased $176,000 or 11.4% in comparing third quarter periods.
Earnings were positively impacted in the first nine months of 2001 by a
$1,057,000 increase in noninterest income and by a $212,000 decrease in the
provision for loan losses.  These gains were partially offset, however, by a
$16,000 increase in noninterest expense and by a $672,000 or 4.3% decrease in
net interest income, which reflected the effects of interest rate declines
during the first nine months of 2001 and the balance sheet restructuring project
discussed in the "Overview".  The interest rate declines, resulting from actions
taken by the Federal Reserve, caused a greater reduction in the average yield on
earning assets than in the average rate paid on interest-bearing liabilities.
As noted in the discussion of the restructuring project, non-taxable income
related to bank owned life insurance, which replaced a portion of certain loans
sold, is recorded as noninterest income, while income on loans sold was recorded
as interest income.  Income on bank owned life insurance amounted to $477,000 in
the first nine months of 2001.  The net gain on loans sold, which amounted to
$664,000 in the first nine months of 2001 compared to $49,000 in the same period
of 2000, included a $151,000 net gain in the 2001 first quarter related to loans
sold in connection with the restructuring project.

     In comparing the results for third quarter periods, the positive impact on
2001 third quarter earnings from an increase of $383,000 in noninterest income
was partially offset by increases of $140,000 in noninterest expense and $45,000
in the provision for loan losses and by a $35,000 or 0.7% decrease in net
interest income.  The relative improvement in the level of net interest income
in the 2001 third quarter compared to the results of the first nine months of
2001 reflects significant progress made in lowering the cost of deposits.
Income on bank owned life insurance amounted to $161,000 in the 2001 third
quarter, and the net gain on loans sold was $235,000 in the 2001 third quarter
compared to $27,000 in the same period of 2000.

     On an annualized basis and excluding the merger-related charges, return on
average assets increased from 1.09% in the first nine months of 2000 to 1.15% in
the first nine months of 2001.  Return on average shareholders' equity increased
from 11.04% to 11.52% in comparing the same periods.  In comparing third quarter
periods, return on average assets increased from 1.14% to 1.17% and return on
average shareholders' equity decreased from 11.71% to 11.70%.

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.

                                       10
<PAGE>

     Net interest income was $15,116,000 in the first nine months of 2001
compared to $15,788,000 in the same period of 2000.  This decrease of $672,000
or 4.3% resulted primarily from a decline in the net yield on earning assets, or
net interest margin, from 4.34% in the first nine months of 2000 to 3.93% in the
same period of 2001, the effect of which more than offset the benefit of a 6.9%
increase in the level of average earning assets.  As noted in the "Overview",
the level of earning assets was reduced in December 2000 through reinvestment of
$10,000,000 of the proceeds from the sale of certain loans in bank owned life
insurance, which is included in other assets on the consolidated balance sheet
and, accordingly, generates noninterest income rather than interest income.  In
comparing third quarter periods, net interest income decreased only $35,000 or
0.7% reflecting a decline in the net interest margin from 4.29% to 4.05% and a
6.3% increase in average earning assets.  Significant progress was made in
lowering the cost of deposits in the 2001 third quarter, such that the net
interest margin for that period of 4.05% exceeded the net interest margin
recorded for the first nine months of 2001 of 3.93%.  On a taxable equivalent
basis, there was a $539,000 decrease in net interest income in the first nine
months of 2001 and a $28,000 increase in the third quarter, reflecting changes
in the relative mix of taxable and non-taxable earning assets in each period.

     Table 1 on page 20 and Table 2 on page 21 set 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.  Changes in net interest income on a taxable equivalent
basis, as measured by volume and rate variances, are also analyzed in Tables 1
and 2.  Volume refers to the average dollar level of earning assets and
interest-bearing liabilities.

     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 remained in a fairly narrow band in recent
years, averaging 9.21%, 7.99% and 8.37% in 2000, 1999 and 1998, respectively.
This situation has tended to create a degree of stability in the interest rates
both earned and paid by the Bank. Nonetheless, the actual level of the prime
rate has changed with some frequency as the Federal Reserve has responded to
various economic scenarios.  Due to concern about inflationary pressures that
appeared to be building in the economy, the Federal Reserve elected to raise the
level of interest rates in the third and fourth quarters of 1999, resulting in
three 25 basis point increases in the prime rate that increased it from 7.75% to
8.50%, thereby effectively reversing similar rate reductions that had occurred
in 1998.  Continued concerns about possible inflationary pressures caused the
Federal Reserve to further raise the level of interest rates in the first six
months of 2000, resulting in  two additional 25 basis point increases and one 50
basis point increase in the prime rate that raised it to the 9.50% level.  While
the Corporation tended to see some improvement in the average total yield on
earning assets due to the prime rate increases, the average rate paid on
interest-bearing liabilities increased by a greater amount, negatively impacting
the net interest margin and net interest spread.

     Due to a general slowdown in the economy that began to be perceived in the
2000 fourth quarter, the Federal Reserve acted to provide a stimulus through a
series of interest rate reductions commencing in the 2001 first quarter,
resulting in six 50 basis point reductions and two 25 basis point reduction in
the prime rate

                                       11
<PAGE>

that lowered it to the 6.00% level at September 30, 2001.  This decrease in the
prime rate, through the reduction of the average yield on earning assets without
a commensurate reduction in the average rate paid on interest bearing
liabilities, has tended to negatively impact the net interest margin and net
interest spread.

     Following the increases in 1999 and 2000,  the prime rate averaged 9.12% in
the first nine months of 2000.  The subsequent prime rate reductions in 2001
resulted in an average prime rate of 7.61% in the first nine months of 2001.
The prime rate averaged 6.64% in the third quarter of 2001 compared to 9.50% in
the 2000 third quarter.  The net interest spread, in comparing nine-month
periods, declined by 32 basis points from 3.61% in 2000 to 3.29% in 2001,
reflecting the effect of a decrease in the average total yield on earning assets
that was only slightly offset by a decrease in the average rate paid on
interest-bearing liabilities, or cost of funds.  The yield on earning assets
decreased by 35 basis points from 8.29% in 2000 to 7.94% in 2001, while the cost
of funds decreased by 3 basis points from 4.68% to 4.65%.  In comparing third
quarter periods, the net interest spread declined by only 4 basis points from
3.53% to 3.49%, as the yield on earning assets decreased by 79 basis points
while the cost of funds, which was positively affected the siginificant progress
made in lowering the cost of deposits in the 2001 third quarter, decreased by 75
basis points.

Provision for Loan Losses

     This provision is the charge against earnings to provide an allowance or
reserve for probable losses inherent in the loan portfolio. The amount of each
period'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.
Earnings were negatively impacted in the first nine months of 2000 by a
$1,152,000 provision for loan losses compared to a $490,000 provision in the
same period of 2001. Of the total 2000 provision, $835,000 was recorded in the
second quarter, which amount included approximately $450,000 that was merger
related as a result of aligning the credit risk metholodogies of FNB Corp. and
Carolina Fincorp, while the remainder resulted from increases in historical
charge-off trends. In comparing third quarter periods, the provision amounted to
$205,000 in 2001 and $160,000 in 2000.

     The allowance for loan losses, as a percentage of loans outstanding,
amounted to 1.13% at September 30, 2001, 1.04% at September 30, 2000 and 1.13%
at December 31, 2000.

Noninterest Income

     Noninterest income for the first nine months and third quarter of 2001
increased $1,057,000 or 31.9% and $383,000 or 35.8%, respectively, compared to
the same periods in 2000, reflecting in part the general increase in the volume
of business. The increase, in comparing nine-month periods, was primarily due to
a $615,000 increase in the net gain on sales of loans and to $477,000 of income
on bank owned life insurance. Similarly, in comparing third quarter periods,
there was a $208,000 increase in the net gain on sales of loans and $161,000 of
income on bank owned life insurance As discussed in the "Overview", a balance
sheet restructuring project resulted in single premium purchases of life
insurance amounting to $10,000,000 in December 2000. Income resulting from the
bank owned life insurance is not subject to income tax. The net gain on sales of
loans of $254,000 in the first quarter of 2001 included a $151,000 net gain
related to loans sold in connection with the restructuring project. The increase
in service charges on deposit accounts was primarily due to the improved fee
collection efforts that became effective in 2000 subsequent to the first
quarter. The decrease in annuity and brokerage commissions was largely related
to a decrease in the volume of sales of annuity products. Other income was lower
in 2001 due mainly to net losses on sales of other real estate compared to net
gains in 2000.

                                       12
<PAGE>

Noninterest Expense

     Excluding merger-related expenses of $2,796,000 recorded in the second
quarter of 2000, noninterest expense was $16,000 or 0.1% higher in the first
nine months of 2001 compared to the same period in 2000 and for the third
quarter was $140,000 or 3.5% higher.  The nominal increase in the level of
noninterest expense in 2001 reflects in part the successful implementation of
synergies following the merger with Carolina Fincorp on April 10, 2000 as
discussed in the "Overview".  The decrease in furniture and equipment expense
was due mainly to the reduction in depreciation expense related to computer
networks that became fully depreciated in the third and fourth quarters of 2000.
The cost of data processing services was higher in the first nine months of 2000
than in the same period of 2001 because of the outside data processing services
employed by Richmond Savings until its merger into First National Bank and Trust
Company on June 26, 2000.  While benefiting from a reduction in advertising and
marketing expense, other expense was negatively impacted in 2001 from increased
expenses related to nonperforming assets.

Income Taxes

     The effective income tax rate decreased from 35.1% in the first nine months
of 2000 to 28.4% in the same period of 2001 due principally to the
nondeductibility of certain merger-related expenses in 2000.

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
$70,100,000 line of credit established at the Federal Home Loan Bank, less
existing advances against that line, and (e) the investment securities
portfolio, all of which is categorized as available-for-sale securities.  All
debt securities are of investment grade quality and, if the need arises, can be
promptly liquidated on the open market or pledged as collateral for short-term
borrowing.

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

Asset/Liability Management and Interest Rate Senstivity

     One of the primary objectives of asset/liability management is to maximize
the 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.

                                       13
<PAGE>

     The Bank's balance sheet was liability-sensitive at September 30, 2001. A
liability-sensitive position means that in gap measurement periods of one year
or less there are more liabilities than assets subject to immediate repricing as
market rates change. Because immediately rate sensitive interest-bearing
liabilities exceed rate sensitive assets, the earnings position could improve in
a declining rate environment and could deteriorate in a rising rate environment,
depending on the correlation of rate changes in these two categories. Included
in interest-bearing liabilities subject to rate changes within 90 days is a
portion of the interest-bearing demand, savings and money market deposits. These
types of deposits historically have not repriced coincidentally with or in the
same proportion as general market indicators.

Capital Adequacy

     Under guidelines established by the Board of Governors of the Federal
Reserve System, capital adequacy is currently measured for regulatory purposes
by certain risk-based capital ratios, supplemented by a leverage capital ratio.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier 1, Tier 2 and Tier 3, as a percentage of risk-
weighted assets, which are computed by measuring the relative credit risk of
both the asset categories on the balance sheet and various off-balance sheet
exposures.  Tier 1 capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets.  Tier 2 capital, which is limited to the total of Tier 1
capital, includes allowable amounts of subordinated debt, mandatory convertible
debt, preferred stock and the allowance for loan losses. Tier 3 capital,
applicable only to financial institutions subject to certain market risk capital
guidelines, is capital allocated to support the market risk related to a
financial institution's ongoing trading activities.  At September 30, 2001, FNB
Corp. and the Bank were not subject to the market risk capital guidelines and,
accordingly, had no Tier 3 capital allocation.  Total capital, for risk-based
purposes, consists of the sum of Tier 1, Tier 2 and Tier 3 capital.  Under
current requirements, the minimum total capital ratio is 8.00% and the minimum
Tier 1 capital ratio is 4.00%. At September 30, 2001, FNB Corp. and the Bank had
total capital ratios of 14.69% and 14.03%, respectively, and Tier 1 capital
ratios of 13.61% and 12.96%, respectively.

     The leverage capital ratio, which serves as a minimum capital standard,
considers Tier 1 capital only and is expressed as a percentage of average total
assets for the most recent quarter, after reduction of those assets for goodwill
and other disallowed intangible assets at the measurement date. As currently
required, the minimum leverage capital ratio is 4.00%. At September 30, 2001,
FNB Corp. and the Bank had leverage capital ratios of 9.62% and 9.16%,
respectively.

     The Bank is also required to comply with prompt corrective action
provisions established by the Federal Deposit Insurance Corporation Improvement
Act.  To be categorized as well-capitalized, the Bank must have a minimum ratio
for total capital of 10.00%, for Tier 1 capital of 6.00% and for leverage
capital of 5.00%.  As noted above, the Bank met all of those ratio requirements
at September 30, 2001 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.

Balance Sheet Review

     Total assets at September 30, 2001 were higher than at September 30, 2000
and December 31, 2000 by $36,764,000 or 6.7% and $19,260,000 or 3.4%,
respectively;  deposits were ahead by $19,113,000 or 4.2% and $7,168,000 or
1.5%.  A portion of the asset growth was funded by advances from the Federal
Home Loan Bank which at September 30, 2001 had increased by $10,000,000 or 66.7%
compared to both September 30, 2000 and December 31, 2000.  The level of funds
provided by retail repurchase agreements at September 30,

                                       14
<PAGE>

2001 had increased by $3,814,000 or 37.9% from September 30, 2000 and by
$2,678,000 or 23.9% from December 31, 2000.  Average assets increased 8.5% in
the first nine months of 2001 compared to the same period in 2000, while average
deposits increased 6.4%, the third quarter increases being 8.5% and 5.5%,
respectively.

Investment Securities

     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.  In general, since there was growth in total assets during the
twelve-month period ended September 30, 2001 but a decrease in loans
outstanding, the level of investment securities was increased $24,487,000 or
20.3%, with a net increase of $12,709,000 or 9.6% occurring in the first nine
months of 2001.  This growth in investment securities also relates to certain
balance sheet strategies, including a restructuring project that commenced in
the 2000 fourth quarter (see "Overview") whereby certain loans were sold with
the reinvestment of such funds planned for other asset categories including
investment securities.  Additionally, the funds obtained from advances totaling
$10,000,000 from the Federal Home Loan Bank in the first quarter of 2001 were
primarily utilized for the purchase of investment securities.  Investable funds
not otherwise utilized are temporarily invested on an overnight basis as federal
funds sold, the level of which is affected by such considerations as near-term
loan demand and liquidity needs.

Loans

     The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. Loans decreased $4,431,000 or 1.1% during
the twelve-month period ended September 30, 2001, with a net loan decrease of
$102,000 or 0.03% occurring in the first nine months of 2001. Average loans were
$10,066,000 or 2.6% higher in the first nine months of 2001 than in the same
period of 2000. The ratio of average loans to average deposits, in comparing
nine-month periods, decreased from 84.7% in 2000 to 81.7% in 2001. The ratio of
loans to deposits at September 30, 2001 was 82.5%.

     The commercial and agricultural loan portfolio experienced strong gains
during both the twelve-month period ended September 30, 2001 and the first nine
months of 2001.  Otherwise, the level of the loan portfolio has been affected by
the balance sheet restructuring project adopted in the 2000 fourth quarter and
discussed in the "Overview".  The specific aim of the restructuring project was
to reduce the level of lower yielding, 1-4 family residential mortgage loans by
selling those loans and redeploying the funds in other types of assets,
including specific purchases of bank owned life insurance and a more general
redeployment to other loan programs and investment securities.  1-4 family
residential mortgage loans totaling $20,938,000 were transferred to loans held
for sale, and of that amount, $12,199,000 were sold in 2000 and the remainder
were sold in the first quarter of 2001.  Funds obtained from these sales were
primarily redeployed to single premium purchases of life insurance amounting to
$10,000,000 in December 2000 and to purchases of investment securities.

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

                                       15
<PAGE>

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 probable losses inherent in the loan
portfolio. Considerations in determining the unallocated portion of the
allowance for loan losses include general economic and lending trends and other
factors.

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

     The following table presents an analysis of the changes in the allowance
for loan losses.
<TABLE>
<CAPTION>

                                                       Three Months Ended        Nine Months Ended
                                                           September 30,             September 30,
                                                    ------------------------  ------------------------
                                                      2001           2000       2001           2000
                                                    ---------      ---------  ---------      ---------
                                                                      (in thousands)
     <S>                                           <C>            <C>         <C>          <C>
     Balance at beginning of period                 $4,353         $4,012      $4,352         $3,289
     Charge-offs                                       166            106         481            488
     Recoveries                                         30            103         104            216
                                                    ------         ------      ------         ------
       Net loan charge-offs                            136              3         377            272
     Provision for loan losses                         205            160         490          1,152
     Allowance adjustment for loans sold                 -              -         (43)             -
                                                    ------         ------      ------         ------
     Balance at end of period                       $4,422         $4,169      $4,422         $4,169
                                                    ======         ======      ======         ======
</TABLE>

     At September 30, 2001, the Bank had impaired loans that totaled $975,000,
of which $954,000 were also on nonaccrual status.  The related allowance for
loan losses on these loans amounted to $312,000.  At September 30, 2001,
nonperforming loans were $5,814,000 in total, nonaccrual loans and accruing
loans past due 90 days or more amounting to $3,705,000 and $2,109,000,
respectively.  At September 30, 2000, nonperforming loans were $2,068,000 in
total, nonaccrual loans and accruing loans past due 90 days or more amounting to
$791,000 and $1,277,000, respectively.  The increase in nonperforming loans was
primarily due to one large credit well secured by real estate and general
economic conditions.

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.  Money market deposits gained significantly, increasing
$11,173,000 during the twelve-month period ended September 30, 2001 and
$9,621,000 during the first nine months of 2001.  Time deposits, reflecting the
effect of promotions for premium-rate certificates of deposit, grew $6,265,000
during the twelve-month period ended September 30, 2001 but declined $2,858,000
during the first nine months of 2001.  Further, the level of time deposits
obtained from governmental units fluctuates, amounting to $51,607,000,
$44,506,000 and $46,800,000 at September 30, 2001, September 30, 2000 and
December 31, 2000, respectively.

Business Development Matters

     As discussed in the "Overview" and in Note 3 to Consolidated Financial
Statements, the Corporation completed a merger on April 10, 2000 for the
acquisition of Carolina Fincorp, Inc. ("Carolina Fincorp"), holding company for
Richmond Savings Bank, Inc., SSB ("Richmond Savings"), headquartered in
Rockingham, North Carolina, in a transaction accounted for as a pooling of
interests.

     As discussed in the "Overview", management adopted a balance sheet
restructuring project in the 2000 fourth quarter that has affected loans and
other balance sheet categories in both the 2000 fourth quarter and the 2001
first quarter.

     In the 1998 fourth quarter, the Bank received regulatory approval for
establishment of a new branch office in Trinity, North Carolina.  Construction
of the permanent Trinity facility is expected to be complete in the first half
of 2002, resulting in a total capital outlay of approximately $1,000,000, of
which approximately one-third was recorded in 1998 related to the purchase of
land.  Prior to completion of the permanent facility, a temporary mobile office,
which opened in August 1999, is being operated at this site.

Accounting Pronouncement Matters

     On January 1, 2001, the Corporation adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as further amended by Statement of Financial Accounting Standards
No. 138, "Accounting for Certain Derivative Financial Instruments and Certain
Hedging Activities, an amendment of FASB Statement No. 133" (collectively
referred to as "SFAS No. 133"). This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended

                                       17
<PAGE>

use of the derivative and the resulting designation.  As permitted by SFAS No.
133, on January 1, 2001, the Corporation transferred all of its securities from
the held-to-maturity portfolio to the available-for-sale portfolio as follows:
<TABLE>
<CAPTION>
                                              Securities Transferred
                                           ----------------------------
                                                     Estimated  Pretax
                                           Amorized    Fair      Gain
                                             Cost      Value    (Loss)
                                           --------  ---------  -------
                                                  (in thousands)
        <S>                                <C>       <C>        <C>
         U.S. Government agencies and
            corporations                    $36,089    $35,759   $(330)
         Mortgage-backed securities             483        488       5
         State, county and municipal         19,735     20,352     617
         Other debt securities                3,054      3,128      74
                                            -------    -------   -----
          Total                             $59,361    $59,727   $ 366
                                            =======    =======   =====
</TABLE>

     As of January 1, 2001, the transfer of the securities had a net of tax
effect of $242,000 on other comprehensive income.

     On January 1, 2001, the Corporation had no embedded derivative instruments
requiring separate accounting treatment and had identified fixed rate conforming
loan commitments as its only freestanding derivative instruments.  The fair
value of these commitments was not material and therefore the adoption of SFAS
No. 133 on January 1, 2001, did not have a material impact on the Corporation's
consolidated financial statements.  The fair value of these commitments at
September 30, 2001 was not material to the Corporation's consolidated financial
statements.  The Corporation had no other derivative instruments requiring
separate accounting treatment at September 30, 2001.

     The FASB has issued Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS No. 140").  This statement replaces SFAS No. 125
("Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities") and revises the standards for accounting for securitizations
and other transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of the provisions of SFAS No. 125 without
consideration.  SFAS No. 140 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities,
based on application of a financial components approach that focuses on control.
SFAS No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 2001.  The Corporation
adopted SFAS No. 140 on April 1, 2001 with no material impact on the
Corporation's consolidated financial statements.

     In July 2001, the FASB isssued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS No. 141"), and Statement No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142").  SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001.  SFAS No. 141 also specifies criteria that
intangible assets acquired in a purchase method business combination must meet
to be recognized and reported apart from goodwill, noting that any purchase
price allocable to an assembled workforce may not be accounted for separately.
Effective January 1, 2002, SFAS No. 142 will require that goodwill and
intangible assets with

                                       18
<PAGE>

indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
Also, SFAS No. 142 will require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and be reviewed for impairment in accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of". The adoption of SFAS Nos. 141 and 142 is not
expected to have a material impact on the Corporation's consolidated financial
statements.

     On October 3, 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144"), which addresses financial accounting and reporting for
the impairment or disposal of long-lived assets.  While SFAS No. 144 supersedes
SFAS No. 121 ("Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of"), it retains many of the fundamental provisions
of SFAS No. 121.

     SFAS No. 144 also supersedes the accounting and reporting provisions of
FASB Opinion No. 30 ("Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions") for the disposal of a segment
of a business.  However, it retains the requirement in Opinion No. 30 to report
separately discontinued operations and extends the reporting to a component of
an entity that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale.  By broadening the
presentation of discontinued operations to include more disposal transactions,
the FASB has enhanced management's ability to provide information that helps
financial statement users to assess the effects of disposal transactions on the
ongoing operations of an entity.  The provisions of SFAS No. 144 are effective
for financial statements issued for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years.

Cautionary Statement for Purpose of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

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

                                       19
<PAGE>

Table 1
Average Balances and Net Interest Income Analysis

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30                        2001                                 2000                            2001 Versus 2000
                        ------------------------------     --------------------------------       ------------------------------
                                              Average                              Average         Interest Variance
                                    Interest    Rates                   Interest     Rates           due to (1)
                         Average    Income/    Earned/      Average     Income/     Earned/       --------------------     Net
                         Balance    Expense     Paid        Balance     Expense      Paid         Volume        Rate      Change
                        --------    --------  --------      --------    --------   --------       -------      -------    ------
                                                         (Taxable Equivalent Basis, Dollars in Thousands)
<S>                     <C>         <C>       <C>           <C>         <C>        <C>            <C>          <C>       <C>
Earning Assets
Loans (2)(3)            $390,306    $24,496       8.38 %    $380,240     $25,211       8.83 %      $  630      $(1,345)  $ (715)
Investment
 securities(2):
  Taxable income         129,568      6,599       6.79       103,208       5,042       6.51         1,332          225    1,557
  Non-taxable income      19,237      1,102       7.64        19,667       1,132       7.67           (25)          (5)     (30)
Other earning assets       4,865        167       4.58         5,871         259       5.87           (40)         (52)     (92)
                        --------    --------  --------      --------    --------   --------       -------      -------   ------
    Total earning
     assets              543,976     32,364       7.94       508,986      31,644       8.29         1,897       (1,177)     720
                        --------    --------  --------      --------    --------   --------       -------      -------   ------
Cash and due from
 banks                    12,238                              14,225
Other assets, net         24,538                              11,909
                        --------                            --------
    Total Assets        $580,752                            $535,120
                        ========                            ========

Interest-Bearing
 Liabilities
Interest-bearing
 deposits:
  Demand deposits       $ 54,849        357       0.87      $ 57,325         692       1.61          (29)        (306)     (335)
  Savings deposits        34,377        413       1.61        36,247         652       2.39          (33)        (206)     (239)
  Money market deposits   41,416      1,092       3.53        34,550       1,070       4.13          192         (170)       22
  Certificates and
   other time deposits   301,775     13,170       5.83       274,169      11,622       5.65        1,176          372     1,548
Retail repurchase
 agreements               12,637        346       3.66        10,997         377       4.57           51          (82)      (31)
Federal Home Loan
 Bank advances            23,850        926       5.19        15,237         610       5.33          332          (16)      316
Federal funds
 purchased                 1,103         45       5.46         1,373          67       6.44          (12)         (10)      (22)
                        --------    --------  --------      --------    --------   --------       -------      -------   ------
    Total interest-
     bearing
     liabilities         470,007     16,349       4.65       429,898      15,090       4.68        1,677         (418)    1,259
                        --------    --------  --------      --------    --------   --------       -------      -------   ------

Noninterest               45,495                              46,850
 -bearing demand
 deposits
Other liabilities          7,363                               5,365
Shareholders' equity      57,887                              53,007
                        --------                            --------
    Total Liabilities
     and
     Shareholders'
     Equity             $580,752                            $535,120
                        ========                            ========

Net Interest Income
 and Spread                         $16,015       3.29 %                 $16,554       3.61 %      $  220     $  (759)   $ (539)
                                    ========  ========                  ========   ========       =======     =======    ======

Net Yield on Earning
 Assets                                           3.93 %                               4.34 %
                                              ========                             ========
</TABLE>

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

(2) 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.

(3) 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.

                                       20
<PAGE>

Table 2
Average Balances and Net Interest Income Analysis

THREE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
                                    2001                                     2000                          2001 Versus 2000
                     ----------------------------------       -----------------------------------    -----------------------------
                                                Average                                Average       Interest Variance
                                    Interest     Rates                     Interest     Rates            due to (1)
                       Average      Income/     Earned/        Average     Income/     Earned/       ------------------     Net
                       Balance      Expense      Paid          Balance     Expense      Paid         Volume     Rate      Change
                     ----------------------------------       --------------------------------       -----------------------------
                                                     (Taxable Equivalent Basis, Dollars in Thousands)
<S>                  <C>            <C>         <C>           <C>          <C>         <C>           <C>      <C>         <C>
Earning Assets
Loans (2)(3)           $389,993     $ 7,842      7.99%         $391,876     $ 8,897       9.03%      $(42)    $(1,013)     $(1,055)

Investment
 securities (2):
  Taxable income        136,918       2,356      6.88           103,473       1,690       6.54        574          92          666
  Non-taxable income     18,977         363      7.66            19,374         373       7.68         (9)         (1)         (10)
Other earning assets      3,029          25      3.23             1,681          28       6.55         15         (18)          (3)
                       --------     -------      ----          --------     -------       ----       ----     -------      -------
     Total earning
       assets           548,917      10,586      7.68           516,404      10,988       8.47        538        (940)        (402)
                       --------     -------      ----          --------     -------       ----       ----     -------      -------

Cash and due from
 banks                   12,071                                  12,981
Other assets, net        25,900                                  11,763
                       --------                                --------
     Total Assets      $586,888                                $541,148
                       ========                                ========

Interest-Bearing
 Liabilities
Interest-bearing
 deposits:
  Demand deposits      $ 55,136         100      0.72          $ 55,902         227       1.61         (3)       (124)        (127)
  Savings deposits       34,361         113      1.31            35,446         193       2.16         (6)        (74)         (80)
  Money market
   deposits              44,277         320      2.87            34,690         382       4.37         89        (151)         (62)
  Certificates and
   other time
   deposits             301,799       4,047      5.32           283,702       4,286       5.99        262        (501)        (239)
Retail repurchase
 agreements              13,944         103      2.93            11,205         137       4.85         28         (62)         (34)
Federal Home Loan
 Bank advances           25,000         325      5.15            15,000         205       5.42        131         (11)         120
Federal funds
 purchased                  700           7      4.07               789          15       6.98         (2)         (6)          (8)
                       --------     -------      ----          --------     -------       ----       ----     -------      -------
    Total interest-
     bearing
     liabilities        475,217       5,015      4.19           436,734       5,445       4.94        499        (929)        (430)
                       --------     -------      ----          --------     -------       ----       ----     -------      -------
Noninterest-bearing
 demand deposits         45,446                                  46,204
Other liabilities         7,417                                   5,454
Shareholders' equity     58,808                                  52,756
                        -------                                 -------
    Total Liabilities
     and Shareholders'
     Equity            $586,888                                $541,148
                       ========                                ========
Net Interest
 Income and Spread                  $ 5,571      3.49%                      $ 5,543       3.53%      $ 39      $  (11)     $    28
                                    =======      ====                       =======       ====       ====      ======      =======
Net Yield on Earning
 Assets                                          4.05%                                    4.29%
                                                 ====                                     ====
</TABLE>

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

(2) 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 nondeductib le
    portion of interest expense.

(3) 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.

                                       21
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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

     The Bank's market risk arises primarily from interest rate risk inherent in
its lending and deposit-taking activities.  The structure of the Bank's loan and
deposit portfolios is such that a significant decline in interest rates may
adversely impact net market values and net interest income.  The Bank does not
maintain a trading account nor is the Bank subject to currency exchange risk or
commodity price risk.  Interest rate risk is monitored as part of the Bank's
asset/liability management function, which is discussed above in Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the heading "Asset/Liability Management and Interest Rate
Sensitivity".

     Management does not believe there has been any significant change in the
overall analysis of financial instruments considered market risk sensitive, as
measured by the factors of contractual maturities, average interest rates and
estimated fair values, since the analysis prepared and presented in conjunction
with the Form 10-K Annual Report for the fiscal year ended December 31, 2000.

                                       22

<PAGE>

                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits.

              Exhibits to this report are listed in the index to exhibits on
              pages 24 and 25 of this report.

         (b)  Reports on Form 8-K.

              No reports on Form 8-K were filed during the quarter ended
              September 30, 2001.


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


                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                         FNB Corp.
                                         (Registrant)


Date:  November 8, 2001                  By: /s/ Jerry A. Little
                                            ----------------------
                                                 Jerry A. Little
                                                 Treasurer and Secretary
                                                (Principal Financial and
                                                 Accounting Officer)

                                       23
<PAGE>

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit No.                              Description of Exhibit
-----------                              ----------------------
 <C>          <S>
  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 June 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 the Registrant's
               Form 10-Q 1998. herein by reference to Exhibit Quarterly Report
               for the quarter 3.12 to ended June 30, 1998.

  3.20         Amended and Restated Bylaws of the incorporated herein by
               reference 10-Q to Exhibit 3.20 to the Registrant's Form 10-Q
               Quarterly Report for the quarter ended June 30, 1998.

  4            Specimen of Registrant's Common Stock Certificate, incorporated
               herein by reference to Exhibit 4 to Amendment No. 1 to the
               Registrant's Form S-14 Registration Statement (No. 2-96498) filed
               April 19, 1985.

 10.10*        Form of Split Dollar Insurance Agreement dated as of November 1,
               1987 between First National Bank and Trust Company and certain of
               its key employees and directors, incorporated herein by reference
               to Exhibit 19.20 to the Registrant's Form 10-Q Quarterly Report
               for the Quarter ended June 30, 1988.

 10.11*        Form of Amendment to Split Dollar Insurance Agreement dated as of
               November 1, 1994 between First National Bank and Trust Company
               and certain of its key employees and directors, incorporated
               herein by reference to Exhibit 10.11 to the Registrant's Form 10-
               KSB Annual Report for the fiscal year ended December 31, 1994.

 10.20*        Stock Compensation Plan as amended effective May 12, 1998,
               incorporated herein by reference to Exhibit 10.30 the
               Registrant's Form 810-Q Quarterly Report for the quarter ended
               June 30, 1998.

 10.21*        Form of Incentive Stock Option Agreement between FNB Corp. and
               certain of its key employees, pursuant to the Registrant's Stock
               Compensation Plan, incorporated herein by reference to Exhibit
               10.31 to the Registrant's Form 10-KSB Annual Report for the
               fiscal year ended December 31, 1994.
</TABLE>

                                       24

<PAGE>

<TABLE>
<CAPTION>

Exhibit No.             Description of Exhibit
-----------             ----------------------
<C>           <S>
 10.22*       Form of Nonqualified Stock Option Agreement between FNB Corp. and
              certain of its directors, pursuant to the Registrant's Stock
              Compensation Plan, incorporated herein by reference to Exhibit
              10.32 to the Registrant's Form 10-KSB Annual Report for the fiscal
              year ended December 31, 1994.

 10.30*       Employment Agreement dated as of December 27, 1995 between First
              National Bank and Trust Company and Michael C. Miller,
              incorporated herein by reference to Exhibit 10.50 to the
              Registrant's Form 10-KSB Annual Report for the fiscal year ended
              December 31, 1995.

 10.31*       Carolina Fincorp, Inc. Stock Option Plan (assumed by the
              Registrant on April 10, 2000), incorporated herein by reference to
              Exhibit 99.1 to the Registrant's Registration Statement on Form
              S-8 (File No. 333-54702).

 10.32*       Employment Agreement dated as of April 10, 2000 between First
              National Bank and Trust Company and R. Larry Campbell,
              incorporated herein by reference to Exhibit 10.32 to the
              Registrant's Form 10-K Annual Report for the fiscal year ended
              December 31, 2000.
</TABLE>
______________

*  Management contract, or compensatory plan or arrangement.

                                       25