UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998

                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
For the transition period from_______________________ to____________________

Commission File Number 0-13823

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

         North Carolina                                    56-1456589
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       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 3,651,137 shares of $2.50 par value common stock outstanding
at August 13, 1998.

<PAGE>      
                               PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                            FNB Corp. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>     <C>  
                                                                            June 30,     
                                                              ----------------------------------          December 31,
ASSETS                                                            1998                 1997                   1997
                                                              --------------       -------------         -------------
Cash and due from banks                                      $  14,117,018         $  11,065,084         $  12,914,021
Federal funds sold                                               3,960,000                  --                    --
Investment securities:
     Available for sale, at estimated fair value
          (amortized cost of $44,120,059,
          $30,794,985 and $34,997,094)                          44,153,638            30,776,055            35,125,191
     Held to maturity (estimated fair value of
          $53,054,933, $58,383,363 and $52,234,241)             52,381,542            58,548,941            51,755,433
Loans                                                          223,911,710           204,128,158           217,450,749
     Less: Allowance for loan losses                            (2,467,537)           (2,091,206)           (2,293,495)
                                                             -------------         -------------         -------------
                     Net loans                                 221,444,173           202,036,952           215,157,254
                                                             -------------         -------------         -------------
Premises and equipment                                           5,876,280             6,203,051             6,129,335
Other assets                                                     4,898,817             4,298,374             4,574,070
                                                             -------------         -------------         -------------

                     TOTAL ASSETS                            $ 346,831,468         $ 312,928,457         $ 325,655,304
                                                             =============         =============         =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand deposits                     $  44,912,667         $  39,162,055         $  38,310,654
     Interest-bearing deposits:
          NOW, savings and money market deposits                93,105,327            87,515,163            88,779,811
          Time deposits of $100,000 or more                     57,623,890            43,765,858            52,915,324
          Other time deposits                                  104,634,017           101,928,634           100,541,785
                                                             -------------         -------------         -------------
                     Total deposits                            300,275,091           272,371,710           280,547,574
Retail repurchase agreements                                     9,169,039             6,029,662             7,436,625
Federal funds purchased                                               --                 900,000             2,400,000
Other liabilities                                                3,898,742             3,326,509             3,369,747
                                                             -------------         -------------         -------------
                     TOTAL LIABILITIES                         313,343,682           282,627,881           293,753,946
                                                             -------------         -------------         -------------

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 - 3,651,137, 1,812,275 and 1,819,825            9,127,843             4,530,688             4,549,563
     Surplus                                                         2,558               340,659               527,627
     Retained earnings                                          24,335,223            25,441,722            26,739,624
     Accumulated other comprehensive income:
          Net unrealized securities gains (losses)                  22,162               (12,493)               84,544
                                                             -------------         -------------         -------------
                     TOTAL SHAREHOLDERS' EQUITY                 33,487,786            30,300,576            31,901,358
                                                             -------------         -------------         -------------

                     TOTAL LIABILITIES AND
                            SHAREHOLDERS' EQUITY             $ 346,831,468         $ 312,928,457         $ 325,655,304
                                                             =============         =============         =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       1
<PAGE>
                            FNB Corp. and Subsidiary

                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                                 June 30,
                                                                     ------------------------------
                                                                         1998             1997
                                                                     -----------        -----------
<S>                                                                  <C>                <C>        
INTEREST INCOME:
     Interest and fees on loans                                      $10,201,128        $ 8,997,462
     Interest and dividends on investment securities:
          Taxable income                                               2,324,522          2,375,958
          Non-taxable income                                             487,887            452,915
     Federal funds sold                                                  107,704             63,795
                                                                     -----------        -----------
                    Total interest income                             13,121,241         11,890,130
                                                                     -----------        -----------

INTEREST EXPENSE:
     Deposits                                                          5,523,919          5,014,088
     Retail repurchase agreements                                        208,198            112,922
     Federal funds purchased                                               6,945              8,815
                                                                     -----------        -----------
                    Total interest expense                             5,739,062          5,135,825
                                                                     -----------        -----------

NET INTEREST INCOME                                                    7,382,179          6,754,305
     Provision for loan losses                                           270,000            240,000
                                                                     -----------        -----------
NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                                                   7,112,179          6,514,305
                                                                     -----------        -----------

OTHER OPERATING INCOME:
     Service charges on deposit accounts                                 847,603            727,724
     Annuity and brokerage commissions                                   107,210            164,225
     Cardholder and merchant services income                             166,988            181,613
     Other service charges, commissions and fees                         201,144            210,103
     Other income                                                        229,526             89,741
                                                                     -----------        -----------
                    Total other operating income                       1,552,471          1,373,406
                                                                     -----------        -----------

OTHER OPERATING EXPENSE:
     Personnel expense                                                 2,746,343          2,565,184
     Net occupancy expense                                               257,068            289,755
     Furniture and equipment expense                                     426,457            386,497
     Data processing services                                            642,854            550,167
     Other expense                                                     1,330,395          1,093,793
                                                                     -----------        -----------
                    Total other operating expense                      5,403,117          4,885,396
                                                                     -----------        -----------

INCOME BEFORE INCOME TAXES                                             3,261,533          3,002,315
Income taxes                                                             998,930            909,644
                                                                     -----------        -----------

NET INCOME                                                           $ 2,262,603        $ 2,092,671
                                                                     ===========        ===========

Net income per common share:
     Basic                                                           $       .62        $       .58
     Diluted                                                                 .60                .57
                                                                     ===========        ===========

Weighted average number of shares outstanding:
     Basic                                                             3,647,692          3,620,110
     Diluted                                                           3,795,403          3,686,986
                                                                     ===========        ===========

Cash dividends declared per common share                             $       .20        $       .18
                                                                     ===========        ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        2
<PAGE>

                            FNB Corp. and Subsidiary

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                 June 30,
                                                                     ------------------------------
                                                                         1998               1997
                                                                     -----------        -----------
<S>                                                                  <C>                <C>       
INTEREST INCOME:
     Interest and fees on loans                                      $5,126,676         $4,569,390
     Interest and dividends on investment securities:
          Taxable income                                              1,214,431          1,167,503
          Non-taxable income                                            250,599            224,924
     Federal funds sold                                                  46,626             35,644
                                                                     ----------         ----------
                    Total interest income                             6,638,332          5,997,461
                                                                     ----------         ----------
INTEREST EXPENSE:
     Deposits                                                         2,811,969          2,504,155
     Retail repurchase agreements                                       112,584             68,617
     Federal funds purchased                                              5,680              4,207
                                                                     ----------         ----------
                    Total interest expense                            2,930,233          2,576,979
                                                                     ----------         ----------

NET INTEREST INCOME                                                   3,708,099          3,420,482
     Provision for loan losses                                          110,000            115,000
                                                                     ----------         ----------
NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                                                  3,598,099          3,305,482
                                                                     ----------         ----------
OTHER OPERATING INCOME:
     Service charges on deposit accounts                                441,913            381,815
     Annuity and brokerage commissions                                   62,943             72,998
     Cardholder and merchant services income                             89,594             95,223
     Other service charges, commissions and fees                         95,427            107,655
     Other income                                                       146,822             51,826
                                                                     ----------         ----------
                    Total other operating income                        836,699            709,517
                                                                     ----------         ----------
OTHER OPERATING EXPENSE:
     Personnel expense                                                1,397,848          1,308,818
     Net occupancy expense                                              127,613            141,287
     Furniture and equipment expense                                    208,838            191,533
     Data processing services                                           337,975            275,502
     Other expense                                                      667,619            568,550
                                                                     ----------         ----------
                    Total other operating expense                     2,739,893          2,485,690
                                                                     ----------         ----------

INCOME BEFORE INCOME TAXES                                            1,694,905          1,529,309
Income taxes                                                            518,259            469,388
                                                                     ----------         ----------

NET INCOME                                                           $1,176,646         $1,059,921
                                                                     ==========         ==========
Net income per common share:
     Basic                                                           $      .32         $      .29
     Diluted                                                                .31                .29
                                                                     ==========         ==========
Weighted average number of shares outstanding:
     Basic                                                            3,651,008          3,622,640
     Diluted                                                          3,798,822          3,692,542
                                                                     ==========         ==========

Cash dividends declared per common share                             $      .10         $      .09
                                                                     ==========         ==========

</TABLE>
          See accompanying notes to consolidated financial statements.

                                        3
<PAGE>


                            FNB Corp. and Subsidiary

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                Six Months Ended June 30, 1998 and June 30, 1997

<TABLE>
<CAPTION>

                                                                                                                                    
                                                                                                                       Accumulated  
                                                            Common Stock                                                  Other     
                                                   ------------------------------                       Retained      Comprehensive
                                                      Shares           Amount          Surplus          Earnings          Income
                                                   -------------    -------------    -------------    -------------    -------------
                                                                                                                     
<S>               <C>                                 <C>           <C>              <C>              <C>              <C>         
BALANCE, DECEMBER 31,1996                             1,806,994     $  4,517,485     $    213,510     $ 24,001,259     $     34,988
Net income                                                 --               --               --          2,092,671             --
Cash dividends declared                                                                                   (652,208)                 
Common stock issued through:                                                                                         
     Dividend reinvestment plan                           4,131           10,328          110,541             --               --
     Stock option plan                                    1,150            2,875           16,608             --               --
Change in unrealized securities gains (losses),            --                                                        
     net of applicable income taxes                        --               --               --               --            (47,981)
                                                   ------------     ------------     ------------     ------------     ------------
                                                                                                                     
BALANCE, JUNE 30, 1997                                1,812,275     $  4,530,688     $    340,659     $ 25,441,722     $    (12,493)
                                                   ============     ============     ============     ============     ============
                                                                                                                     
                                                                                                                     
                                                                                                                     
BALANCE, DECEMBER 31,1997                             1,819,825     $  4,549,563     $    527,627     $ 26,739,624     $     84,544
Net income                                                 --               --               --          2,262,603             --
Cash dividends declared                                                                                   (730,182)                 
Two-for-one stock split effected in the form                                                                         
     of a 100% stock dividend                         1,825,343        4,563,358         (626,535)      (3,936,822)  
Common stock issued through:                                                                                         
     Dividend reinvestment plan                               1                2               24             --               --
     Stock option plan                                    5,968           14,920          101,442             --               --
Change in unrealized securities gains (losses),            --                                                        
     net of applicable income taxes                        --               --               --               --            (62,382)
                                                   ------------     ------------     ------------     ------------     ------------
                                                                                                                     
BALANCE, JUNE 30, 1998                                3,651,137     $  9,127,843     $      2,558     $ 24,335,223     $     22,162
                                                   ============     ============     ============     ============     ============
                                                                                                                      
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                            FNB Corp. and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                  June 30,
                                                                     ---------------------------------
                                                                         1998                1997
                                                                     ------------        -------------
<S>                                                                  <C>                 <C>         
OPERATING ACTIVITIES:
     Net income                                                      $  2,262,603        $  2,092,671
     Adjustments to reconcile net income to net
          cash provided by operating activities:
          Depreciation and amortization of premises and equipment         405,766             370,548
          Provision for loan losses                                       270,000             240,000
          Deferred income taxes (benefit)                                  50,355             (53,522)
          Deferred loan fees and costs, net                               106,805             242,004
          Premium amortization and discount accretion
                 of investment securities, net                            (37,133)            (21,125)
          Amortization of intangibles                                      12,166              16,166
          Net increase in loans held for sale                          (1,516,795)           (318,600)
          Increase in other assets                                       (392,838)            (84,529)
          Increase in other liabilities                                   643,489             691,346
                                                                     ------------        ------------
                    NET CASH PROVIDED BY OPERATING ACTIVITIES           1,804,418           3,174,959
                                                                     ------------        ------------

INVESTING ACTIVITES:
     Available-for-sale securities:
          Proceeds from maturities and calls                           15,377,098          11,904,437
          Purchases                                                   (24,453,062)        (13,812,126)
     Held-to-maturity securities:
          Proceeds from maturities and calls                           18,142,250           3,375,594
          Purchases                                                   (18,775,961)           (527,224)
     Net increase in loans                                             (5,138,204)         (8,919,595)
     Proceeds from sales of premises and equipment                          1,090               1,181
     Purchases of premises and equipment                                 (251,246)           (283,128)
     Other, net                                                            26,715              42,573
                                                                     ------------        ------------
                    NET CASH USED IN INVESTING ACTIVITIES             (15,071,320)         (8,218,288)
                                                                     ------------        ------------

FINANCING ACTIVITIES:
     Net increase in deposits                                          19,728,327             991,645
     Increase in retail repurchase agreements                           1,732,414           2,304,733
     Increase (decrease) in federal funds purchased                    (2,400,000)            325,000
     Common stock issued                                                  116,389             140,352
     Cash dividends paid                                                 (747,231)           (705,467)
                                                                     ------------        ------------
                    NET CASH PROVIDED BY FINANCING ACTIVITIES          18,429,899           3,056,263
                                                                     ------------        ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    5,162,997          (1,987,066)
Cash and cash equivalents at beginning of period                       12,914,021          13,052,150
                                                                     ------------        ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $ 18,077,018        $ 11,065,084
                                                                     ============        ============
Supplemental disclosure of cash flow information: Cash paid during the period
     for:
          Interest                                                   $  5,279,666        $  5,205,171
          Income taxes                                                  1,019,107             836,765
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        5
<PAGE>
                            FNB Corp. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       FNB Corp. is a one-bank holding company whose wholly-owned subsidiary
         is the First National Bank and Trust Company (the "Bank"). The Bank is
         an independent community bank that offers full banking and trust
         services to consumer and business customers primarily in the region of
         North Carolina that includes Randolph, Montgomery and Chatham 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 preparation of the consolidated financial statements in conformity
         with generally accepted accounting principles requires management to
         make estimates and assumptions that affect the reported amounts of
         assets and liabilities and disclosure of contingent assets and
         liabilities at the date of the consolidated financial statements and
         the reported amounts of revenues and expenses during the reporting
         periods. Actual results could differ from those estimates.

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

         Share and per share information in the consolidated financial
         statements and related notes thereto have been restated, where
         appropriate, to reflect the two-for-one common stock split declared on
         February 19, 1998 and paid to shareholders in the form of a 100% stock
         dividend on March 18, 1998.

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

         Basic net income per share, or basic EPS, is computed by dividing net
         income by the weighted average number of common shares outstanding for
         the period. Diluted EPS reflects the potential dilution that could
         occur if the Corporation's dilutive stock options were exercised. The
         numerator of
                                    6                                 
<PAGE>

         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>
<S>     <C>    
                                                       Three Months Ended                      Six Months Ended
                                                             June 30,                              June 30,
                                                     ---------------------------        ----------------------------
                                                        1998             1997            1998                 1997
                                                     ---------        ----------        ---------         ----------
         Basic EPS denominator - Weighted
              average number of common
              shares outstanding                     3,651,008         3,622,640        3,647,692         3,620,110
         Dilutive share effect arising from
              assumed exercise of stock options        147,814            69,902          147,711            66,876
                                                     ---------         ---------        ---------         ---------
         Diluted EPS denominator                     3,798,822         3,692,542        3,795,403         3,686,986
                                                     =========         =========        =========         =========
</TABLE>

4.        On January 1, 1998, The Corporation adopted Statement of Financial
          Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income".
          SFAS No. 130 establishes standards for reporting and displaying
          comprehensive income and its components (revenues, expenses, gains and
          losses) in a full set of general-purpose financial statements. It
          requires that an enterprise (a) classify items of other comprehensive
          income by their nature in a financial statement and (b) display the
          accumulated balance of other comprehensive income separately from
          retained earnings and surplus in the equity section of a statement of
          financial position. In accordance with the provisions of SFAS No. 130,
          comparative financial statements presented for earlier periods have
          been reclassified to reflect the provisions of the statement.

          Comprehensive income is the change in equity of a Corporation during
          the period from transactions and other events and circumstances from
          nonowner sources and, accordingly, includes both net income and
          amounts referred to as other comprehensive income. The Corporation's
          other comprehensive income for the three and six months ended June 30,
          1998 and 1997 consisted of unrealized gains and losses on certain
          investments in debt and equity securities. Comprehensive income for
          the three months ended June 30, 1998 and 1997 amounted to $1,130,335
          and $1,185,734, respectively, and for the six months then ended
          amounted to $2,200,221 and $2,044,690.

5.        Loans as presented are reduced by net unearned income of $373,083,
          $163,691 and $269,599 at June 30, 1998, June 30, 1997 and December 31,
          1997, respectively.

6.        Significant components of other expense were as follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>   

                                                          Three Months Ended                   Six Months Ended
                                                                June 30,                           June 30,
                                                       -------------------------         --------------------------
                                                        1998             1997              1998              1997
                                                       -------          --------         --------         ---------
              Advertising and marketing                $89,905           $28,006         $210,459         $  49,869
              Stationery, printing and supplies        $95,488           $70,559         $184,550          $163,145
</TABLE>


                                       7
<PAGE>
7.        On June 3, 1997, the Corporation entered into a definitive
          agreement to acquire Home Savings Bank of Siler City, Inc., SSB ("Home
          Savings") of Siler City, North Carolina. Under terms of the agreement,
          Home Savings shareholders were to receive $15.50 per share, either in
          FNB Corp. common stock or in cash or a combination thereof, subject to
          the limitation that FNB Corp. common stock issued in the merger would
          be not more than 60% and not less than 50% of the total consideration.
          On January 28, 1998, as permitted by the agreement, the Board of
          Directors of Home Savings exercised its right to terminate the
          proposed combination due to the increase in the market value of FNB
          Corp. common stock above a specified level.

          The Corporation incurred certain costs in connection with the proposed
          acquisition. Those costs, which had been initially deferred, amounted
          to $305,000 and were charged to expense in the fourth quarter of 1997.
          A portion of these costs, amounting to $38,660, was recovered in the 
          second quarter of 1998 and credited to other income.

8.        In the opinion of management, the financial information furnished in
          this report includes all adjustments (consisting of normal recurring
          accruals) necessary to a fair statement of the results for the periods
          presented.

                                       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

      The Corporation earned $2,262,603 in the first six months of 1998, an 8.1%
increase over the same period in 1997. Basic earnings per share, adjusted for
the two-for-one common stock split in March 1998, increased from $.58 to $.62 in
comparing these six-month periods and diluted earnings per share increased from
$.57 to $.60. For the 1998 second quarter, earnings amounted to $1,176,646,
which represents an 11.0% increase from the 1997 second quarter and a gain in
basic earnings per share from $.29 to $.32 and in diluted earnings per share
from $.29 to $.31. Total assets were $346,831,468 at June 30, 1998, up 10.8%
from June 30, 1997 and 6.5% from December 31, 1997. Loans amounted to
$223,911,710 at June 30, 1998, increasing 9.7% from June 30, 1997 and 3.0% from
December 31, 1997. Total deposits grew 10.2% from June 30, 1997 and 7.0% from
December 31, 1997 to $300,275,901 at June 30, 1998.

      On June 3, 1997, the Corporation entered into a definitive agreement to
acquire Home Savings Bank of Siler City, Inc., SSB ("Home Savings") of Siler
City, North Carolina. Under terms of the agreement, Home Savings shareholders
were to receive $15.50 per share, either in FNB Corp. common stock or in cash or
a combination thereof, subject to the limitation that FNB Corp. common stock
issued in the merger would be not more than 60% and not less than 50% of the
total consideration. On January 28, 1998, as permitted by the agreement, the
Board of Directors of Home Savings exercised its right to terminate the proposed
combination due to the increase in the market value of FNB Corp. common stock
above a specified level.

      The Corporation incurred certain costs in connection with the proposed
acquisition. Those costs, which had been initially deferred, amounted to
$305,000 and were charged to expense in the fourth quarter of 1997. A portion of
these costs, amounting to $38,660, was recovered in the second quarter of 1998
and credited to other income.

EARNINGS REVIEW

      The Corporation's net income increased $169,932 or 8.1% in the first six
months of 1998 compared to the same period of 1997 and increased $116,725 or
11.0% in comparing second quarter periods. Earnings were positively impacted in
the first six months and second quarter of 1998 by increases in net interest
income of $627,874 or 9.3% and $287,617 or 8.4%, respectively, and by increases
of $179,065 and $127,182 in total other operating income. As discussed in the
"Overview", other operating income benefited in 1998 from a $38,660 recovery of
merger expenses. These gains were significantly offset, however, by increases in
total other operating expense of $517,721 in the first six months of 1998 and
$254,203 in the 1998 second quarter.
                                        9
<PAGE>
      On an annualized basis, return on average assets decreased from 1.35% in
the first six months of 1997 to 1.34% in the first six months of 1998. Return on
average shareholders' equity decreased from 14.12% to 13.75% in comparing the
same periods. In comparing second quarter periods, return on average assets was
unchanged at 1.37% in each period and return on average shareholders' equity
improved from 14.14% to 14.17%.

NET INTEREST INCOME

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

      Net interest income was $7,382,179 in the first six months of 1998
compared to $6,754,305 in the same period of 1997. This increase of $627,874 or
9.3% resulted primarily from a 9.2% increase in the level of average earning
assets, the effect of which was partially offset by a decline in the net yield
on earning assets, or net interest margin, from 4.95% in the first six months of
1997 to 4.94% in the same period of 1998. In comparing second quarter periods,
net interest income increased $287,617 or 8.4%, reflecting an 11.0% increase in
average earning assets and a decline in the net interest margin from 4.98% to
4.87%. On a taxable equivalent basis, the increases in net interest income in
the first six months and second quarter of 1998 were $635,000 and $307,000,
respectively, reflecting changes in the relative mix of taxable and non-taxable
earning assets.

      Table 1 on page 16 and Table 2 on page 17 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 been relatively stable in recent years,
averaging 8.28% in 1996 and 8.44% in 1997. For the first six months of 1998, the
average prime rate was 8.50% compared to 8.38% in the same period of 1997. This
general stability has tended to apply to the interest rates both earned and paid
by the Bank. In comparing six-month periods, the net interest spread
increased by 1 basis point from 4.18% in 1997 to 4.19% in 1998, reflecting an
increase in the average total yield on earning assets that was only partially
offset by an increase in the average rate paid on interest-bearing liabilities,
or cost of funds. The yield on earning assets increased by 8 basis points from
8.50% in 1997 to 8.58% in 1998, while the cost of funds increased by 7 basis
points from 4.32% to 4.39%. In comparing second quarter periods, the net
interest spread declined by 9 basis points from 4.20% to 4.11%, as the yield on
earning assets decreased by 3 basis points while the cost of funds increased by
6 basis points.
                                        10
<PAGE>
PROVISION FOR LOAN LOSSES

      This provision is the charge against earnings to provide an allowance or
reserve for possible future losses on loans. 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 six months of 1998 compared to the same period
in 1997 by a $30,000 increase in the provision and were positively affected by a
$5,000 decrease in comparing second quarter periods.

OTHER OPERATING INCOME

      Total other operating income, or noninterest income, for the first six
months and second quarter of 1998 increased $179,065 or 13.0% and $127,182 or
17.9%, respectively, compared to the same periods in 1997, reflecting in part
the general increase in the volume of business. The increase in service charges
on deposit accounts was primarily due to the selected increases in service
charge rates that became effective in the 1997 second quarter and to the higher
level of income being generated by a NOW account version that provides a package
of products and services for a stated monthly fee as a result of increases in
the number of such NOW accounts and in the stated monthly fee, the new fee
having become effective in the 1997 fourth quarter. The decline in annuity and
brokerage commissions related to a general decrease in both sales of annuity
products and the volume of brokerage services. Other income was higher due
mainly to increases in trust revenues and in gains on loan sales and to the
$38,660 recovery in the 1998 second quarter of a portion of the merger expenses
initially recorded in the 1997 fourth quarter (see "Overview").

OTHER OPERATING EXPENSE

      Total other operating expense, or noninterest expense, was $517,721 or
10.6% higher in the first six months of 1998 compared to the same period in 1997
and for the second quarter was $254,203 or 10.2% higher, due largely to
increased personnel expense, new advertising and marketing programs and the
continuing effects of inflation. Personnel expense was impacted by increased
staffing requirements and normal salary adjustments. Advertising and marketing
expense, included in other expense, increased $160,590 in the first six months
of 1998 and $61,899 in the second quarter due primarily to new programs
undertaken in 1998 that include an advertising campaign based on customer
testimonials and a major marketing plan centered around the phrase "Yes You
Can".

INCOME TAXES

      The effective income tax rate of 30.6% in the first six months of 1998 did
not significantly change from the 30.3% rate in the same period of 1997.

LIQUIDITY

      Liquidity refers to the continuing ability of the Bank to meet deposit
withdrawals, fund loan and capital expenditure commitments, maintain reserve
requirements, pay operating expenses and provide funds to the Parent Company for
payment of dividends, debt service and other operational requirements. Liquidity
is immediately available from five major sources: (a) cash on hand and on
deposit at other banks, (b) the outstanding balance of federal funds sold, (c)
lines for the purchase of federal funds from other banks, (d) the

                                        11
<PAGE>
$49,000,000 line of credit established at the Federal Home Loan Bank and (e) the
available-for-sale securities portfolio. Further, while available-for-sale
securities are intended to be a source of immediate liquidity, the entire
investment securities portfolio is managed to provide both income and a ready
source of liquidity. The average portfolio life of debt securities is
approximately six years, resulting in a substantial level of maturities each
year. All debt securities are of investment grade quality and, if the need
arises, can be promptly liquidated on the open market or pledged as collateral
for short-term borrowing.

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

ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

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

      The Bank's balance sheet is generally liability-sensitive, meaning that in
a given period there will be more liabilities than assets subject to immediate
repricing as market rates change. When 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 30 days is a portion of the NOW, savings and money market deposits. These
types of deposits historically have not repriced coincidentally with or in the
same proportion as general market indicators.

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

CAPITAL ADEQUACY

      Under guidelines established by the Board of Governors of the Federal
Reserve System, capital adequacy is currently measured for regulatory purposes
by certain risk-based capital ratios, supplemented by a leverage capital ratio.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier I and Tier II, as a percentage of
risk-adjusted assets, which are computed by measuring the relative credit risk
of both the asset categories on the balance sheet and various off-balance

                                        12
<PAGE>
sheet exposures. Tier I capital consists primarily of common shareholders'
equity and qualifying perpetual preferred stock, net of goodwill and other
disallowed intangible assets. Tier II capital, which is limited to the total of
Tier I capital, includes allowable amounts of subordinated debt, mandatory
convertible securities, preferred stock and the allowance for loan losses. Under
current requirements, the minimum total capital ratio, consisting of both Tier I
and Tier II capital, is 8.00% and the minimum Tier I capital ratio is 4.00%. At
June 30, 1998, FNB Corp. and the Bank had total capital ratios of 15.54% and
15.15%, respectively, and Tier I capital ratios of 14.47% and 14.08%.

      The leverage capital ratio, which serves as a minimum capital standard,
considers Tier I capital only and is expressed as a percentage of average total
assets for the most recent quarter, after reduction of those assets for goodwill
and other disallowed intangible assets at the measurement date. As currently
required, the minimum leverage capital ratio is 4.00%. At June 30, 1998, FNB
Corp. and the Bank had leverage capital ratios of 9.78% and 9.49%, 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 I capital of 6.00% and for leverage
capital of 5.00%. As noted above, the Bank met all of those ratio requirements
at June 30, 1998 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.

BALANCE SHEET REVIEW

      Total assets at June 30, 1998 were higher than at June 30, 1997 and
December 31, 1997 by $33,903,000 or 10.8% and $21,176,000 or 6.5%, respectively;
deposits were ahead by $27,904,000 or 10.2% and $19,728,000 or 7.0%. A portion
of the asset growth was funded by retail repurchase agreements, which had
increased at June 30, 1998 by $3,139,000 or 52.1% from June 30, 1997 and by
$1,732,000 or 23.3% from December 31, 1997. Average assets increased $27,598,000
or 8.9% in the first six months of 1998 compared to the same period in 1997,
while average deposits increased $19,817,000 or 7.3% and average retail
repurchase agreements increased $4,039,000 or 78.5%, the second quarter
increases being $33,167,000 or 10.7%, $25,416,000 or 9.4% and $3,842,000 or
63.7%, 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. During the twelve-month period ended June 30, 1998, when the growth
in total assets exceeded that for loans, the level of investment securities was
increased $7,210,000 or 8.1%, with a larger net increase of $9,654,000 or 11.1%
occurring in the first six months of 1998. 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 increased $19,784,000 or 9.7% during
the twelve-month period ended June 30, 1998. The net loan increase during the
first six months of 1998 was $6,461,000 or 3.0%. Average loans were $25,142,000
or 12.6% higher in the first six months of 1998 than in the same period of 1997.
The ratio of
                                        13
<PAGE>
average loans to average deposits, in comparing six-month periods, increased
from 73.4% in 1997 to 77.0% in 1998. The ratio of loans to deposits at June 30,
1998 was 74.6%.

      Loan growth and the composition of the loan portfolio are being affected
by management's decision in June 1996 to discontinue the purchase of retail
installment loan contracts from automobile and equipment dealers (see "Business
Development Matters"). The outstanding balance of these loan contracts, which
are primarily included in consumer loans, experienced a net decrease of
$7,939,628 during the twelve-month period ended June 30, 1998. Consequently,
total consumer loans declined significantly during that period. The commercial
and agricultural loan portfolio and the 1-4 family residential mortgage loan
portfolio have each experienced strong gains during both the twelve-month period
ended June 30,1998 and the first six months of 1998.

ASSET QUALITY

      Management considers the Bank's asset quality to be of primary importance.
A formal loan review function, independent of loan origination, is used to
identify and monitor problem loans. As part of the loan review function, a third
party assessment group is employed to review the underwriting documentation and
risk grading analysis. In determining the allowance for loan losses and any
resulting provision to be charged against earnings, particular emphasis is
placed on the results of the loan review process. Consideration is also given to
historical loan loss experience, the value and adequacy of collateral, and
economic conditions in the Bank's market area. 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.

      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.

DEPOSITS

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

      The Bank's level and mix of deposits has been specifically affected by the
following factors. Time deposits increased $16,563,000 during the twelve-month 
period ended June 30, 1998 and $8,801,000 during the first six months of 1998. 
Similarly, money market accounts, during the same periods, grew $6,003,000 and 
$2,577,000, respectively, due to a new high-yield product first introduced in 
the 1996 fourth quarter. Further, the level of time deposits obtained from 
governmental units fluctuates, amounting to $23,162,000, $17,858,000 and 
$24,431,000 at June 30, 1998, June 30, 1997 and December 31, 1997, respectively.
                                       14
<PAGE>
BUSINESS DEVELOPMENT MATTERS

      As discussed in the "Overview" and in Note 7 to Consolidated Financial
Statements, the Corporation in 1997 entered into a definitive agreement to
acquire Home Savings Bank of Siler City, Inc., SSB ("Home Savings") of Siler
City, North Carolina. On January 28, 1998, as permitted by the agreement, the
Board of Directors of Home Savings exercised its right to terminate the proposed
combination due to the increase in the market value of FNB Corp. common stock
above a specified level.

      Management decided in March 1996 that the Bank would discontinue the
purchase of retail installment loan contracts from automobile and equipment
dealers, due largely to the declining yields being experienced in this loan
program. Contracts of this nature included in loans amounted to $6,226,888,
$14,166,516 and $9,674,229 at June 30, 1998, June 30, 1997 and December 31,
1997, respectively. While there will be no purchases of new contracts, current
plans call for the collection of outstanding loans based on their contractual
terms. The funds previously invested in this loan program are being redeployed,
as loan payments occur, to other loan programs or to the investment securities
portfolio.

YEAR 2000 ISSUE

      The Corporation is aware of the issue associated with the programming code
in existing computer systems as the year 2000 approaches. The "year 2000"
problem is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two-digit year value to 00. The
issue is whether computer systems and other equipment incorporating computer
components will properly recognize date sensitive information when the year
changes to 2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.

      The Corporation relies on vendors for all computer programming and
equipment. An internal assessment of the year 2000 situation was completed in
January 1997. The assessment included computer software, computer hardware and
other equipment incorporating computer components that are date sensitive. The
Corporation has monitored the status of its vendors and continues to evaluate
vendors for adherence to their year 2000 plans. To date, confirmations have been
received from the Corporation's primary processing vendors that plans have been
implemented to address the processing of transactions in the year 2000.

      The Corporation is utilizing both internal and external resources to
identify, correct or reprogram, and test systems for year 2000 compliance. The
vendors anticipate that all reprogramming efforts will be completed by December
31, 1998, allowing adequate time for testing. Management estimates the cost of
year 2000 compliance will be approximately $200,000, the majority of such cost
relating to computer equipment expected to be replaced in 1998 and 1999. Through
June 30, 1998, the cost related to year 2000 compliance was immaterial.

                                        15
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<CAPTION>
<S>     <C>   
                                                             1998                                 1997             
                                                ------------------------------     -------------------------------
SIX MONTHS ENDED JUNE 30                                                                                           
                                                                                                                   
                                                                       Average                             Average 
                                                          Interest      Rates                Interest       Rates  
                                                Average    Income/     Earned/     Average    Income/      Earned/ 
                                                Balance    Expense      Paid       Balance    Expense       Paid   
                                                -------    -------      ----       -------    -------       ----   
                                                                                                                   

EARNING ASSETS
Loans (2) (3)                                  $224,285   $ 10,213      9.17 %    $199,143   $  9,017        9.11 %
Investment securities:                                                                                             
     Taxable income                              70,454      2,490      7.07        72,503      2,545        7.02  
     Non-taxable income (2)                      19,404        759      7.83        17,322        706        8.16  
Federal funds sold                                3,896        108      5.57         2,390         64        5.38  
                                                  -----     ------      ----       -------     ------        ----  
          Total earning assets                  318,039     13,570      8.58       291,358     12,332        8.50  
                                                  -----     ------      ----       -------     ------        ----                   
                                                                                                                   
Cash and due from banks                          10,665                              9,786                         
Other assets, net                                 8,271                              8,233                         
                                                  -----                              -----                         
          TOTAL ASSETS                         $336,975                           $309,377                         
                                               ========                           ========                         
                                                                                                                   
INTEREST-BEARING LIABILITIES                                                                                       
Interest-bearing deposits:                                                                                         
     NOW accounts                              $ 41,070        348      1.71      $ 37,313        330        1.78  
     Savings deposits                            28,082        321      2.31        29,600        345        2.35  
     Money market accounts                       24,012        464      3.89        18,367        315        3.45  
     Certificates and other time deposits       161,100      4,391      5.50       149,167      4,024        5.44  
Retail repurchase agreements                      9,186        208      4.57         5,147        113        4.42  
Federal funds purchased                             241          7      5.81           319          9        5.57  
                                                  -----     ------      ----       -------     ------        ----  
          Total interest-bearing liabilities    263,691      5,739      4.39       239,913      5,136        4.32  
                                                  -----     ------      ----       -------     ------        ----  
                                                                                                                   
                                                                                                                   
Noninterest-bearing demand deposits              36,969                             36,969                         
Other liabilities                                 3,415                              2,845                         
Shareholders' equity                             32,900                             29,650                         
                                                 ------                             ------                         
                                                                                                                   
          TOTAL LIABILITIES AND                                                                                    
                 SHAREHOLDERS' EQUITY          $336,975                           $309,377                         
                                               ========                           ========                         
                                                                                                                   
                                                                                                                   
NET INTEREST INCOME AND SPREAD                            $  7,831      4.19 %             $    7,196        4.18 %
                                                          ========    ========             ==========      ========

                                                                                                                        
NET YIELD ON EARNING ASSETS                                             4.94 %                               4.95 %
                                                                      ========                             ========
                                                                             

TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)

                                              
                                              
SIX MONTHS ENDED JUNE 30                               1998 Versus 1997
                                                --------------------------------
                                                   Interest Variance
                                                          due to (1)        
                                                -----------------------    Net
                                                 Volume        Rate       Change
                                                 ------        ----       ------
                                              

EARNING ASSETS
Loans (2) (3)                                  $  1,136    $     60    $  1,196
Investment securities:                         
     Taxable income                                 (73)         18         (55)
     Non-taxable income (2)                          83         (30)         53
Federal funds sold                                   42           2          44
                                                   ----        ----        ----
          Total earning assets                    1,188          50       1,238
                                                   ----        ----        ----                                         
                                               
Cash and due from banks                        
Other assets, net                              
                                               
          TOTAL ASSETS                         
                                               
                                               
INTEREST-BEARING LIABILITIES                   
Interest-bearing deposits:                     
     NOW accounts                                    32         (14)         18
     Savings deposits                               (18)         (6)        (24)
     Money market accounts                          105          44         149
     Certificates and other time deposits           322          45         367
Retail repurchase agreements                         91           4          95
Federal funds purchased                              (2)       --            (2)
                                                   ----        ----        ----
          Total interest-bearing liabilities        530          73         603
                                                   ----        ----        ----
                                                     
                                                     
Noninterest-bearing demand deposits                  
Other liabilities                                    
Shareholders' equity                                 
                                                     
                                                     
          TOTAL LIABILITIES AND                      
                 SHAREHOLDERS' EQUITY                
                                                     
                                                     
                                                  
NET INTEREST INCOME AND SPREAD                 $    658    $    (23)   $    635
                                               ========    ========    ========

                                                  
NET YIELD ON EARNING ASSETS                  
                                             
                                                                                                                           
                                              
(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.

                                       16
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)

                                                                          1998                              1997
                                                          -----------------------------------   -----------------------------  
THREE MONTHS ENDED JUNE 30                                                                                                     
                                                                                                                               
                                                                                     Average                          Average  
                                                                       Interest       Rates               Interest     Rates   
                                                           Average      Income/      Earned/    Average    Income/    Earned/  
                                                           Balance      Expense        Paid     Balance    Expense     Paid    
                                                           -------      -------        ----     -------    -------     ----    

EARNING ASSETS
Loans (2) (3)                                             $225,966    $  5,133       9.11%    $200,738    $  4,576      9.14%  
Investment securities:                                                                        
     Taxable income                                         75,051       1,303       6.94       71,484       1,251      7.00   
     Non-taxable income (2)                                 19,877         390       7.86       17,299         350      8.11   
Federal funds sold                                           3,352          47       5.58        2,607          36      5.48   
                                                          --------    --------       ----     --------    --------      ----   
          Total earning assets                             324,246       6,873       8.49      292,128       6,213      8.52   
                                                          --------    --------       ----     --------    --------      ----   
                                                                                              
Cash and due from banks                                     10,947                               9,820
Other assets, net                                            8,136                               8,214
                                                          --------                            --------
          TOTAL ASSETS                                    $343,329                            $310,162
                                                          ========                            ========
                                                                                              
INTEREST-BEARING LIABILITIES Interest-bearing deposits:                                       
     NOW accounts                                         $ 42,385         175       1.67     $ 38,297         173      1.81   
     Savings deposits                                       28,088         161       2.31       29,661         172      2.32   
     Money market accounts                                  24,963         243       3.90       18,891         169      3.59   
     Certificates and other time deposits                  162,756       2,233       5.50      146,300       1,990      5.46   
Retail repurchase agreements                                 9,870         112       4.58        6,028          69      4.57   
Federal funds purchased                                        396           6       5.75          293           4      5.76   
                                                          --------    --------       ----     --------    --------      ----   
          Total interest-bearing liabilities               268,458       2,930       4.38      239,470       2,577      4.32   
                                                          --------    --------       ----     --------    --------      ----   
                                                                                          
Noninterest-bearing demand deposits                         38,031                              37,658
Other liabilities                                            3,622                               3,060
Shareholders' equity                                        33,218                              29,974
                                                          --------                            --------
          TOTAL LIABILITIES AND                                                              
                 SHAREHOLDERS' EQUITY                     $343,329                            $310,162
                                                          ========                            ========
                                                                     
NET INTEREST INCOME AND SPREAD                                        $  3,943       4.11%                $  3,636      4.20%  
                                                                      ========    ========                ========   ========  

NET YIELD ON EARNING ASSETS                                                          4.87%                              4.98%
                                                                                  ========                           ========

                                                          
                                                          
THREE MONTHS ENDED JUNE 30                                          1998 Versus 1997
                                                             ----------------------------
                                                             Interest Variance
                                                                     due to (1)       
                                                             ------------------       Net
                                                             Volume       Rate       Change
                                                             ------       -----      ------

EARNING ASSETS
Loans (2) (3)                                               $  572    $    (15)   $    557
Investment securities:                                    
     Taxable income                                             63         (11)         52
     Non-taxable income (2)                                     51         (11)         40
Federal funds sold                                              10           1          11
                                                             --------    --------    ------
          Total earning assets                                 696         (36)        660
                                                             --------    --------    ------
                                                          
Cash and due from banks                                   
Other assets, net                                         
                                                          
          TOTAL ASSETS                                    
                                                          
                                                          
INTEREST-BEARING LIABILITIES Interest-bearing deposits:   
     NOW accounts                                               16         (14)          2
     Savings deposits                                          (10)         (1)        (11)
     Money market accounts                                      58          16          74
     Certificates and other time deposits                      228          15         243
Retail repurchase agreements                                    42           1          43
Federal funds purchased                                          2        --             2
                                                             --------    --------    ------
          Total interest-bearing liabilities                   336          17         353
                                                             --------    --------    ------
                                                          
Noninterest-bearing demand deposits                       
Other liabilities                                         
Shareholders' equity                                      
                                                          
          TOTAL LIABILITIES AND                           
                 SHAREHOLDERS' EQUITY                     
                                                          
                                                          
NET INTEREST INCOME AND SPREAD                              $  360      $  (53)     $  307
                                                            =======    =======     ========
</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.

                                       17

<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, 1997.

                                       18

<PAGE>
                           PART II. OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The Annual Meeting of Shareholders of FNB Corp. (the "Corporation") was
held on May 12, 1998. The total number of shares of the Corporation's Common
Stock, par value $2.50 per share, outstanding as of March 26, 1998, the record
date for the Annual Meeting, was 3,650,686.

      The following nominees were elected to the Board of Directors for the
terms indicated:

      CLASS II DIRECTORS - Elected for Three-Year Terms Expiring with the Annual
Meeting in 2001.

            Nominee                       Votes For         Withheld
            -------                       ---------         -------- 
            James M. Campbell, Jr.        2,817,013          34,704
            Thomas A. Jordan              2,817,013          27,842
            Michael C. Miller             2,817,013          27,842

      The shareholders approved an amendment to the Corporation's Articles of
Incorporation to increase the number of authorized common shares from 5,000,000
to 10,000,000. The votes on this proposal were as follows:

            Votes for                     2,736,319
            Votes against                    96,082
            Abstaining                       18,034

      The shareholders approved an amendment to the Corporation's Stock
Compensation Plan to increase the number of common shares covered by the Plan
from 360,000 to 720,000. The votes on this proposal were as follows:

            Votes for                     2,474,530
            Votes against                   121,617
            Abstaining                       73,724

      The shareholders ratified the selection of KPMG Peat Marwick LLP,
Certified Public Accountants, as independent auditors of the Corporation for the
1998 fiscal year. The votes on ratification were as follows:

            Votes for                     2,815,841
            Votes against                     1,067
            Abstaining                       31,548

ITEM 5.  OTHER INFORMATION

      Unless notice of a matter to be presented by a shareholder of the
Corporation at the next Annual Meeting of Shareholders is received at the
Corporation's principal executive offices on or before February 23, 1999,
Management's proxies for the meeting conferring discretionary authority may be
voted with respect to the matter without including advice in the proxy statement
advising shareholders how the Corporation intends to vote on the matter.

                                        19
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits.

      Exhibits to this report are listed in the index to exhibits on pages 21
      and 22 of this report.

      (b) Reports on Form 8-K.

      No reports on Form 8-K were filed during the quarter ended June 30, 1998.

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


                                   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: August 13, 1998                     By:   /s/ Jerry A. Little
                                                -------------------
                                                    Jerry A. Little
                                                    Treasurer and Secretary
                                                    (Principal Financial and
                                                    Accounting Officer)
                                        20

<PAGE>
                                    FNB CORP.

                                INDEX TO EXHIBITS

Exhibit No.                   Description of Exhibit
-----------                   ----------------------
   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.

   3.20                  Amended and Restated Bylaws of the Registrant, adopted
                         May 21, 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                 Copy of Split Dollar Insurance Agreement dated as of
                         May 28, 1989 between First National Bank and Trust
                         Company and James M. Culberson, Jr., incorporated
                         herein by reference to Exhibit 10.30 to the
                         Registrant's Form 10-K Annual Report for the fiscal
                         year ended December 31, 1989.

   10.30                 Copy of Stock Compensation Plan, as amended, effective
                         May 12, 1998.

                                        21

<PAGE>
Exhibit No.                   Description of Exhibit
-----------                   -----------------------
   10.31                 Form of Incentive Stock Option Agreement between FNB
                         Corp. and certain of its key employees, pursuant to the
                         Registrant's Stock Compensation Plan, incorporated
                         herein by reference to Exhibit 10.31 to the
                         Registrant's Form 10-KSB Annual Report for the fiscal
                         year ended December 31, 1994.

   10.32                 Form of Nonqualified Stock Option Agreement between FNB
                         Corp. and certain of its directors, pursuant to the
                         Registrant's Stock 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.

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

   27.10                 Financial Data Schedule for the six months ended
                         June 30, 1998.

   27.11                 Restated Financial Data Schedule for the six months
                         ended June 30, 1997.



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