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 September 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 3,652,151 shares of $2.50 par value common stock  outstanding
at November 13, 1998.

<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                                                FNB Corp. and Subsidiary

                                      CONSOLIDATED BALANCE SHEETS

                                                                                          September 30,
                                                                    --------------------------------------------------
ASSETS                                                                      1998                        1997
                                                                    ---------------------      -----------------------
<S>                                                                    <C>                        <C>
Cash and due from banks                                                $  10,745,633              $  12,331,035
Federal funds sold                                                         4,100,000                       --
Investment securities:
     Available for sale, at estimated fair value
          (amortized cost of $42,471,518,
          $29,550,120 and $34,997,094)                                    42,838,675                 29,643,623
     Held to maturity (estimated fair value of
          $52,721,823, $58,843,653 and $52,234,241)                       51,331,897                 58,516,379
Loans                                                                    226,293,855                211,501,710
     Less:  Allowance for loan losses                                     (2,507,249)                (2,188,476)
                                                                       -------------              -------------
            Net loans                                                    223,786,606                209,313,234
                                                                       -------------              -------------
Premises and equipment                                                     6,393,907                  6,143,442
Other assets                                                               5,194,817                  4,753,644
                                                                       -------------              -------------

                     TOTAL ASSETS                                      $ 344,391,535              $ 320,701,357
                                                                       =============              =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand deposits                               $  36,904,478              $  35,912,097
     Interest-bearing deposits:
          NOW, savings and money market deposits                          93,730,310                 87,057,063
          Time deposits of $100,000 or more                               58,839,857                 51,996,700
          Other time deposits                                            105,570,867                103,116,662
                                                                       -------------              -------------
                     Total deposits                                      295,045,512                278,082,522
Retail repurchase agreements                                              10,964,301                  7,296,864
Federal funds purchased                                                         --                      875,000
Other liabilities                                                          3,841,444                  3,181,976
                                                                       -------------              -------------
                     TOTAL LIABILITIES                                   309,851,257                289,436,362
                                                                       -------------              -------------

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 - 3,652,151, 1,816,853 and 1,819,825                      9,130,378                  4,542,133
     Surplus                                                                  25,758                    456,816
     Retained earnings                                                    25,156,255                 26,204,334
     Accumulated other comprehensive income:
          Net unrealized securities gains (losses)                           227,887                     61,712
                                                                       -------------              -------------
                     TOTAL SHAREHOLDERS' EQUITY                           34,540,278                 31,264,995
                                                                       -------------              -------------

                     TOTAL LIABILITIES AND
                            SHAREHOLDERS' EQUITY                       $ 344,391,535              $ 320,701,357
                                                                       =============              =============

<CAPTION>

                                                                                       December 31,
ASSETS                                                                                     1997
                                                                               --------------------------
<S>                                                                                <C>
Cash and due from banks                                                            $  12,914,021
Federal funds sold                                                                          --
Investment securities:
     Available for sale, at estimated fair value
          (amortized cost of $42,471,518,
          $29,550,120 and $34,997,094)                                                35,125,191
     Held to maturity (estimated fair value of
          $52,721,823, $58,843,653 and $52,234,241)                                   51,755,433
Loans                                                                                217,450,749
     Less: Allowance for loan losses                                                  (2,293,495)
                                                                                   -------------
           Net loans                                                                 215,157,254
                                                                                   -------------
Premises and equipment                                                                 6,129,335
Other assets                                                                           4,574,070
                                                                                   -------------

                     TOTAL ASSETS                                                  $ 325,655,304
                                                                                   =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand deposits                                           $  38,310,654
     Interest-bearing deposits:
          NOW, savings and money market deposits                                      88,779,811
          Time deposits of $100,000 or more                                           52,915,324
          Other time deposits                                                        100,541,785
                                                                                   -------------
                     Total deposits                                                  280,547,574
Retail repurchase agreements                                                           7,436,625
Federal funds purchased                                                                2,400,000
Other liabilities                                                                      3,369,747
                                                                                   -------------
                     TOTAL LIABILITIES                                               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 - 3,652,151, 1,816,853 and 1,819,825                                  4,549,563
     Surplus                                                                             527,627
     Retained earnings                                                                26,739,624
     Accumulated other comprehensive income:
          Net unrealized securities gains (losses)                                        84,544
                                                                                   -------------
                     TOTAL SHAREHOLDERS' EQUITY                                       31,901,358
                                                                                   -------------

                     TOTAL LIABILITIES AND
                            SHAREHOLDERS' EQUITY                                   $ 325,655,304
                                                                                   =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                        1

<PAGE>
                            FNB Corp. and Subsidiary

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                  September 30,
                                                       -----------------------------------
                                                            1998                 1997
                                                       ----------------   ----------------
<S>                                                    <C>                 <C>
INTEREST INCOME:
     Interest and fees on loans                        $    15,308,904     $    13,853,084
     Interest and dividends on investment securities:
          Taxable income                                     3,526,062           3,527,849
          Non-taxable income                                   740,268             680,301
     Federal funds sold                                        162,063              90,609
                                                       ----------------   -----------------
                    Total interest income                   19,737,297          18,151,843
                                                       ----------------   -----------------

INTEREST EXPENSE:
     Deposits                                                8,331,823           7,613,564
     Retail repurchase agreements                              323,661             192,209
     Federal funds purchased                                     8,820              22,749
                                                       ----------------   -----------------
                    Total interest expense                   8,664,304           7,828,522
                                                       ----------------   -----------------

NET INTEREST INCOME                                         11,072,993          10,323,321
     Provision for loan losses                                 330,000             470,000
                                                       ----------------   -----------------
NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                                        10,742,993           9,853,321
                                                       ----------------   -----------------

OTHER OPERATING INCOME:
     Service charges on deposit accounts                     1,275,529           1,114,437
     Annuity and brokerage commissions                         169,132             236,788
     Cardholder and merchant services income                   260,569             254,203
     Other service charges, commissions and fees               290,110             301,917
     Other income                                              371,015             203,718
                                                       ----------------   -----------------
                    Total other operating income             2,366,355           2,111,063
                                                       ----------------   -----------------

OTHER OPERATING EXPENSE:
     Personnel expense                                       4,169,019           3,908,156
     Net occupancy expense                                     395,081             432,153
     Furniture and equipment expense                           639,007             589,197
     Data processing services                                  954,082             823,771
     Other expense                                           1,980,818           1,629,266
                                                       ----------------   -----------------
                    Total other operating expense            8,138,007           7,382,543
                                                       ----------------   -----------------

INCOME BEFORE INCOME TAXES                                   4,971,341           4,581,841
Income taxes                                                 1,522,491           1,399,525
                                                       ----------------   -----------------

NET INCOME                                             $     3,448,850    $      3,182,316
                                                       ===============     ================

Net income per common share:
     Basic                                             $           .95    $            .88
     Diluted                                                       .91                 .86
                                                       ===============     ================

Weighted average number of shares outstanding:
     Basic                                                   3,648,990           3,622,900
     Diluted                                                 3,793,360           3,689,838
                                                       ===============     ================

Cash dividends declared per common share               $           .30     $           .27
                                                       ===============     ================
</TABLE>
          See accompanying notes to consolidated financial statements.

                                        2
<PAGE>
<TABLE>
<CAPTION>


                                          FNB Corp. and Subsidiary

                                      CONSOLIDATED STATEMENTS OF INCOME

                                                                                     Three Months Ended
                                                                                        September 30,
                                                                 -------------------------------------------------------
                                                                          1998                          1997
                                                                 -----------------------      --------------------------
<S>                                                                         <C>                     <C>
INTEREST INCOME:
     Interest and fees on loans                                             $5,107,776              $4,855,622
     Interest and dividends on investment securities:
          Taxable income                                                     1,201,540               1,151,891
          Non-taxable income                                                   252,381                 227,386
     Federal funds sold                                                         54,359                  26,814
                                                                            ----------              ----------
                    Total interest income                                    6,616,056               6,261,713
                                                                            ----------              ----------

INTEREST EXPENSE:
     Deposits                                                                2,807,904               2,599,476
     Retail repurchase agreements                                              115,463                  79,287
     Federal funds purchased                                                     1,875                  13,934
                                                                            ----------              ----------
                    Total interest expense                                   2,925,242               2,692,697
                                                                            ----------              ----------

NET INTEREST INCOME                                                          3,690,814               3,569,016
     Provision for loan losses                                                  60,000                 230,000
                                                                            ----------              ----------
NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                                                         3,630,814               3,339,016
                                                                            ----------              ----------

OTHER OPERATING INCOME:
     Service charges on deposit accounts                                       427,926                 386,713
     Annuity and brokerage commissions                                          61,922                  72,563
     Cardholder and merchant services income                                    93,581                  72,590
     Other service charges, commissions and fees                                88,966                  91,814
     Other income                                                              141,489                 113,977
                                                                            ----------              ----------
                    Total other operating income                               813,884                 737,657
                                                                            ----------              ----------

OTHER OPERATING EXPENSE:
     Personnel expense                                                       1,422,676               1,342,972
     Net occupancy expense                                                     138,013                 142,398
     Furniture and equipment expense                                           212,550                 202,700
     Data processing services                                                  311,228                 273,604
     Other expense                                                             650,423                 535,473
                                                                            ----------              ----------
                    Total other operating expense                            2,734,890               2,497,147
                                                                            ----------              ----------

INCOME BEFORE INCOME TAXES                                                   1,709,808               1,579,526
Income taxes                                                                   523,561                 489,881
                                                                            ----------              ----------

NET INCOME                                                                  $1,186,247              $1,089,645
                                                                            ==========              ==========

Net income per common share:
     Basic                                                                  $      .32              $      .30
     Diluted                                                                       .31                     .29
                                                                            ==========              ==========

Weighted average number of shares outstanding:
     Basic                                                                   3,651,545               3,628,392
     Diluted                                                                 3,789,343               3,695,452
                                                                            ==========              ==========

Cash dividends declared per common share                                    $      .10              $      .09
                                                                            ==========              ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>

                                                                                        FNB Corp. and Subsidiary

                                                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                       Nine Months Ended September 30, 1998 and September 30, 1997




                                                                             Common Stock
                                                             -----------------------------------------------
                                                                    Shares                  Amount                  Surplus
                                                             -----------------------  ----------------------  ---------------------

<S>               <C>                                                 <C>                 <C>                  <C>
BALANCE, DECEMBER 31,1996                                             1,806,994           $4,517,485           $  213,510
Net income                                                                 --                   --                   --
Cash dividends declared
Common stock issued through:
     Dividend reinvestment plan                                           7,859               19,648              213,061
     Stock option plan                                                    2,000                5,000               30,245
Change in unrealized securities gains (losses),
     net of applicable income taxes                                        --                   --                   --
                                                                     ----------           ----------           ----------

BALANCE, SEPTEMBER 30, 1997                                           1,816,853           $4,542,133           $  456,816
                                                                     ==========           ==========           ==========



BALANCE, DECEMBER 31,1997                                             1,819,825           $4,549,563           $  527,627
Net income                                                                 --                   --                   --
Cash dividends declared
Two-for-one stock split effected in the form
     of a 100% stock dividend                                         1,825,343            4,563,358             (626,535)
Common stock issued through:
     Dividend reinvestment plan                                           1,015                2,537               23,224
     Stock option plan                                                    5,968               14,920              101,442
Change in unrealized securities gains (losses),
     net of applicable income taxes                                        --                   --                   --
                                                                     ----------           ----------           ----------

BALANCE, SEPTEMBER 30, 1998                                           3,652,151           $9,130,378           $   25,758
                                                                     ==========           ==========           ==========

<CAPTION>
                                                                                                            Accumulated
                                                                                                               Other
                                                                                 Retained                  Comprehensive
                                                                                 Earnings                      Income
                                                                        ----------------------------   -----------------------

<S>               <C>                                                           <C>                         <C>
BALANCE, DECEMBER 31,1996                                                       $ 24,001,259                $     34,988
Net income                                                                         3,182,316                        --
Cash dividends declared                                                             (979,241)
Common stock issued through:
     Dividend reinvestment plan                                                         --                          --
     Stock option plan                                                                  --                          --
Change in unrealized securities gains (losses),
     net of applicable income taxes                                                     --                        26,724
                                                                                ------------                ------------

BALANCE, SEPTEMBER 30, 1997                                                     $ 26,204,334                $     61,712
                                                                                ============                ============



BALANCE, DECEMBER 31,1997                                                       $ 26,739,624                $     84,544
Net income                                                                         3,448,850                        --
Cash dividends declared                                                           (1,095,397)
Two-for-one stock split effected in the form
     of a 100% stock dividend                                                     (3,936,822)
Common stock issued through:
     Dividend reinvestment plan                                                         --                          --
     Stock option plan                                                                  --                          --
Change in unrealized securities gains (losses),
     net of applicable income taxes                                                     --                       143,343
                                                                                ------------                ------------

BALANCE, SEPTEMBER 30, 1998                                                     $ 25,156,255                $    227,887
                                                                                ============                ============


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

                                       4
<PAGE>
<TABLE>
<CAPTION>



                                                                           FNB Corp. and Subsidiary

                                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                Nine Months Ended
                                                                                                  September 30,
                                                                             -------------------------------------------------------
                                                                                        1998                          1997
                                                                             -----------------------      --------------------------
<S>                                                                                   <C>                 <C>
OPERATING ACTIVITIES:
     Net income                                                                       $  3,448,850        $  3,182,316
     Adjustments to reconcile net income to net
          cash provided by operating activities:
          Depreciation and amortization of premises and equipment                          608,649             555,821
          Provision for loan losses                                                        330,000             470,000
          Deferred income taxes (benefit)                                                   (5,893)           (103,809)
          Deferred loan fees and costs, net                                                125,444             323,933
          Premium amortization and discount accretion
                 of investment securities, net                                             (40,015)            (21,664)
          Amortization of intangibles                                                       18,247              24,251
          Net increase in loans held for sale                                             (654,175)           (476,250)
          Increase in other assets                                                        (770,553)           (530,812)
          Increase in other liabilities                                                    585,915             545,989
                                                                                      ------------        ------------
                    NET CASH PROVIDED BY OPERATING ACTIVITIES                            3,646,469           3,969,775
                                                                                      ------------        ------------

INVESTING ACTIVITES:
     Available-for-sale securities:
          Proceeds from maturities and calls                                            26,205,108          16,296,849
          Purchases                                                                    (33,652,437)        (16,960,157)
     Held-to-maturity securities:
          Proceeds from maturities and calls                                            25,192,250           4,267,140
          Purchases                                                                    (24,775,402)         (1,385,186)
     Net increase in loans                                                              (8,387,538)        (16,335,014)
     Proceeds from sales of premises and equipment                                           1,265               1,181
     Purchases of premises and equipment                                                  (971,756)           (408,792)
     Other, net                                                                             18,260              22,419
                                                                                      ------------        ------------
                    NET CASH USED IN INVESTING ACTIVITIES                              (16,370,250)        (14,501,560)
                                                                                      ------------        ------------

FINANCING ACTIVITIES:
     Net increase in deposits                                                           14,497,938           6,702,457
     Increase in retail repurchase agreements                                            3,527,676           3,571,935
     Increase (decrease) in federal funds purchased                                     (2,400,000)            300,000
     Common stock issued                                                                   142,124             267,954
     Cash dividends paid                                                                (1,112,345)         (1,031,676)
                                                                                      ------------        ------------
                    NET CASH PROVIDED BY FINANCING ACTIVITIES                           14,655,393           9,810,670
                                                                                      ------------        ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     1,931,612            (721,115)
Cash and cash equivalents at beginning of period                                        12,914,021          13,052,150
                                                                                      ------------        ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                            $ 14,845,633        $ 12,331,035
                                                                                      ============        ============
Supplemental  disclosure of cash flow  information:  Cash paid during the period
     for:
          Interest                                                                    $  8,430,216        $  7,726,419
          Income taxes                                                                   1,577,211           1,333,031
</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 the basic EPS computation is the same as the numerator of
         the diluted EPS computation for all


                                        6

<PAGE>


         periods presented. A reconciliation of the denominators of the basic
         and diluted EPS computations is as follows:

<TABLE>
<CAPTION>

                                             Three Months Ended       Nine Months Ended
                                                September 30,           September 30,
                                     --------------------------   ----------------------
                                             1998        1997       1998         1997
                                          ----------  ---------   ----------   ---------

<S>                                       <C>         <C>         <C>         <C>
Basic EPS denominator - Weighted
     average number of common
     shares outstanding                   3,651,545   3,628,392   3,648,990   3,622,900
Dilutive share effect arising from
     assumed exercise of stock options      137,798      67,060     144,370      66,938
                                          ---------   ---------   ---------   ---------

Diluted EPS denominator                   3,789,343   3,695,452   3,793,360   3,689,838
                                          =========   =========   =========   =========
</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 an enterprise 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 nine months ended September 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 September 30, 1998 and 1997 amounted to $1,391,972
         and $1,164,350, respectively, and for the nine months then ended
         amounted to $3,592,193 and $3,209,040.

5.       Loans as presented are reduced by net unearned income of $387,842,
         $237,964 and $269,599 at September 30, 1998, September 30, 1997 and
         December 31, 1997, respectively.

6.       Significant components of other expense were as follows:

                                       Three Months Ended    Nine Months Ended
                                          September 30,        September 30,
                                       ------------------- --------------------
                                          1998     1997      1998        1997  
                                       -------    -------  --------   ---------
                                                                               
Advertising and marketing               $69,778   $30,576  $280,237    $ 80,445
Stationery, printing and supplies       $77,503   $78,809  $262,053    $241,954
                                                                      

                                        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 $3,448,850 in the first nine months of 1998, an
8.4% 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 $.88 to
$.95 in comparing these nine-month periods and diluted earnings per share
increased from $.86 to $.91. For the 1998 third quarter, earnings amounted to
$1,186,247, which represents an 8.9% increase from the 1997 third quarter and a
gain in basic earnings per share from $.30 to $.32 and in diluted earnings per
share from $.29 to $.31. Total assets were $344,391,535 at September 30, 1998,
up 7.4% from September 30, 1997 and 5.8% from December 31, 1997. Loans amounted
to $226,293,855 at September 30, 1998, increasing 7.0% from September 30, 1997
and 4.1% from December 31, 1997. Total deposits grew 6.1% from September 30,
1997 and 5.2% from December 31, 1997 to $295,045,512 at September 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 $266,534 or 8.4% in the first
nine months of 1998 compared to the same period of 1997 and increased $96,602 or
8.9% in comparing third quarter periods. Earnings were positively impacted in
the first nine months and third quarter of 1998 by increases in net interest
income of $749,672 or 7.3% and $121,798 or 3.4%, respectively, by increases of
$255,292 and $76,227 in total other operating income and by reductions of
$140,000 and $170,000 in the provision for loan losses. As discussed in the
"Overview", other operating income benefited in the second quarter of 1998 from
a $38,660 recovery of merger expenses. These gains were significantly offset,
however, by increases in total other operating expense of $755,464 in the first
nine months of 1998 and $237,743 in the 1998 third quarter.





                                        9

<PAGE>


         On an annualized basis, return on average assets was unchanged at 1.36%
in comparing the first nine months of 1997 to the first nine months of 1998.
Return on average shareholders' equity decreased from 14.10% to 13.81% in
comparing the same periods. In comparing third quarter periods, return on
average assets improved from 1.38% to 1.39% and return on average shareholders'
equity decreased from 14.09% to 13.91%.

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 $11,072,993 in the first nine months of 1998
compared to $10,323,321 in the same period of 1997. This increase of $749,672 or
7.3% resulted primarily from an 8.8% increase in the level of average earning
assets, the effect of which was partially offset by a decline in the net yield
on earning assets, or net interest margin, from 4.99% in the first nine months
of 1997 to 4.91% in the same period of 1998. In comparing third quarter periods,
net interest income increased $121,798 or 3.4% reflecting an 8.2% increase in
average earning assets and a decline in the net interest margin from 5.06% to
4.85%. On a taxable equivalent basis, the increases in net interest income in
the first nine months and third quarter of 1998 were $780,000 and $145,000,
respectively, reflecting changes in the relative mix of taxable and non-taxable
earning assets.

         Table 1 on page 18 and Table 2 on page 19 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 nine months of 1998,
the average prime rate was 8.50% compared to 8.42% 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 nine-month periods, the net interest spread
declined by 6 basis points from 4.22% in 1997 to 4.16% in 1998, reflecting the
effect of a decrease in the average total yield on earning assets coupled with
an increase in the average rate paid on interest-bearing liabilities, or cost of
funds. The yield on earning assets decreased by 2 basis points from 8.55% in
1997 to 8.53% in 1998, while the cost of funds increased by 4 basis points from
4.33% to 4.37%. In comparing third quarter periods, the net interest spread
declined by 19 basis points from 4.29% to 4.10%, as the yield on earning assets
decreased by 19 basis points while the cost of funds was unchanged.

                                       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
positively impacted in the first nine months and third quarter of 1998 compared
to the same periods in 1997 by decreases in the provision of $140,000 and
$170,000, respectively, due primarily to a lower rate of loan growth in 1998 and
a reduction in net loan charge-offs.

OTHER OPERATING INCOME

         Total other operating income, or noninterest income, for the first nine
months and third quarter of 1998 increased $255,292 or 12.1% and $76,227 or
10.3%, 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 an increase in the gains on loan sales, increased trust revenues and
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 $755,464 or
10.2% higher in the first nine months of 1998 compared to the same period in
1997 and for the third quarter was $237,743 or 9.5% 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 $199,792 in the first nine months
of 1998 and $39,202 in the third 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 "YES YOU CAN, YES WE
CAN(R)" program.

INCOME TAXES

         The effective income tax rate of 30.6% in the first nine months of 1998
did not significantly change from the 30.5% 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>


$37,000,000 line of credit established at the Federal Home Loan Bank and (e) the
available-for-sale securities portfolio. Further, while available-for-sale
securities are intended to be a source of immediate liquidity, the entire
investment securities portfolio is managed to provide both income and a ready
source of liquidity. 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 September
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
September 30, 1998, FNB Corp. and the Bank had total capital ratios of 16.03%
and 15.64%, respectively, and Tier I capital ratios of 14.94% and 14.55%.

         The leverage capital ratio, which serves as a minimum capital standard,
considers Tier I capital only and is expressed as a percentage of average total
assets for the most recent quarter, after reduction of those assets for goodwill
and other disallowed intangible assets at the measurement date. As currently
required, the minimum leverage capital ratio is 4.00%. At September 30, 1998,
FNB Corp. and the Bank had leverage capital ratios of 10.04% and 9.78%,
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 September 30, 1998 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.

BALANCE SHEET REVIEW

         Total assets at September 30, 1998 were higher than at September 30,
1997 and December 31, 1997 by $23,691,000 or 7.4% and $18,737,000 or 5.8%,
respectively; deposits were ahead by $16,963,000 or 6.1% and $14,498,000 or
5.2%. A portion of the asset growth was funded by retail repurchase agreements,
which had increased at September 30, 1998 by $3,667,000 or 50.3% from September
30, 1997 and by $3,527,000 or 47.4% from December 31, 1997. Average assets
increased $26,841,000 or 8.6% in the first nine months of 1998 compared to the
same period in 1997, while average deposits increased $19,613,000 or 7.2% and
average retail repurchase agreements increased $3,777,000 or 65.8%, the third
quarter increases being $25,352,000 or 8.0%, $19,212,000 or 7.0% and $3,261,000
or 47.2%, 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 September 30, 1998,
when the growth in total assets exceeded that for loans, the level of investment
securities was increased $6,011,000 or 6.8%, with a larger net increase of
$7,290,000 or 8.4% occurring in the first nine 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 $14,792,000 or 7.0% during
the twelve-month period ended September 30, 1998. The net loan increase during
the first nine months of 1998 was $8,843,000 or 4.1%. Average loans were
$21,947,000 or 10.8% higher in the first nine months of 1998 than in the same
period of 1997. The ratio of

                                       13

<PAGE>


average loans to average deposits, in comparing nine-month periods, increased
from 74.3% in 1997 to 76.8% in 1998. The ratio of loans to deposits at September
30, 1998 was 76.7%.

         Loan growth and the composition of the loan portfolio are being
affected by management's decision in March 1996 to discontinue the purchase of
retail installment loan contracts from automobile and equipment dealers (see
"Business Development Matters"). The outstanding balance of these loan
contracts, which are primarily included in consumer loans, experienced a net
decrease of $6,754,883 during the twelve-month period ended September 30, 1998.
Consequently, total consumer loans declined significantly during that period.
The commercial and agricultural loan portfolio has experienced strong gains
during both the twelve-month period ended September 30,1998 and the first nine
months of 1998. The 1-4 family residential mortgage loan portfolio has also
gained significantly during these periods.

ASSET QUALITY

         Management considers the Bank's asset quality to be of primary
importance. A formal loan review function, independent of loan origination, is
used to identify and monitor problem loans. As part of the loan review function,
a third party assessment group is employed to review the underwriting
documentation and risk grading analysis. In determining the allowance for loan
losses and any resulting provision to be charged against earnings, particular
emphasis is placed on the results of the loan review process. Consideration is
also given to historical loan loss experience, the value and adequacy of
collateral, and economic conditions in the Bank's market area. 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 $9,297,000 during the
twelve-month period ended September 30, 1998 and $10,954,000 during the first
nine months of 1998. Similarly, money market accounts, during the same periods,
grew $6,141,000 and $3,654,000, 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 $23,863,000,
$23,169,000 and $24,431,000 at September 30, 1998, September 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 $4,885,604,
$11,640,487 and $9,674,229 at September 30, 1998, September 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.

         As of September 30, 1998, the Bank had filed for regulatory approval of
a new branch office to be established in Trinity, North Carolina. Assuming that
approval is granted, construction and occupancy of the Trinity branch is
expected to occur in 1999, resulting in a total capital outlay of approximately
$950,000.

         The Bank's data processing, item capture and statement rendering
operations are currently outsourced under a service bureau arrangement. The Bank
is planning to shift these operations to an in-house basis. The target date for
conversion is April 1999. The total outlay for hardware and software
expenditures is expected to amount to approximately $1,600,000.

YEAR 2000 ISSUE

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

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




                                       15

<PAGE>


         In the implementation of the Year 2000 Plan, a thorough inventory was
first performed to determine all hardware, software and facilities that might be
impacted by the Year 2000 Issue. Since all software is purchased and no separate
in-house programming is performed, the Corporation is dependent upon its
third-party vendors for modifications of its existing systems to correct any
defects related to the Year 2000 Issue. Accordingly, written documentation has
been solicited from all of the software and hardware vendors, as well as the
providers of facilities using embedded chip technology, with respect to their
Year 2000 compliance status. The validation phase of the Corporation's project
includes the receipt and analysis of vendor-performed testing, as well as the
testing of all hardware, software and facilities in the Corporate environment.
Internal testing of mission critical systems is scheduled to be completed by
December 31, 1998, with the testing of other applications to be completed by
June 30, 1999.

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

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

         The Corporation's projected cost of year 2000 compliance is estimated
to be approximately $200,000, the majority of such estimated cost relating to
computer equipment that may need be replaced in 1998 and 1999. Actual
expenditures related to the Year 2000 project, which have all been charged to
expense, amount to $10,771 for the nine months ended September 30, 1998 and
$12,175 on a cumulative project basis. Funding of year 2000 project costs will
come from normal operating cash flows; however, the expenses associated with the
Year 2000 Issue will directly reduce otherwise reported net income for the
Corporation.

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

         Contingency plans are being developed to mitigate the potential effects
of a disruption in normal business operations. Contingency planning includes
developing alternative solutions should a vendor not become compliant, as well
as plans for the resumption of business if, despite the Corporation's best
efforts,


                                       16

<PAGE>


there is a disruption in business operations. In the event of what could be
described as a "worst case" scenario, the contingency plans will allow for
limited transactions, including the ability to make certain deposit withdrawals,
until the Year 2000 problems are fixed.

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


                                       17
<PAGE>

<TABLE>
<CAPTION>

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

                                                                                                  1998
                                                                        -----------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30                                                                                     Average

                                                                                                Interest            Rates
                                                                            Average              Income/           Earned/
                                                                            Balance              Expense             Paid
                                                                        ----------------     ----------------     -----------
<S>   <C> <C>                                                           <C>                       <C>                   <C>
EARNING ASSETS
Loans (2) (3)                                                           $       224,234           $   15,327            9.13 %
Investment securities (2):
     Taxable income                                                              71,860                3,780            7.01
     Non-taxable income                                                          19,637                1,152            7.82
Federal funds sold                                                                3,889                  162            5.57
                                                                        ----------------     ----------------     -----------
          Total earning assets                                                  319,620               20,421            8.53
                                                                        ----------------     ----------------     -----------

Cash and due from banks                                                          10,630
Other assets, net                                                                 8,331
                                                                        ----------------
          TOTAL ASSETS                                                  $       338,581
                                                                        ================

INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                                       $        41,048                  505            1.64
     Savings deposits                                                            27,725                  472            2.28
     Money market accounts                                                       24,668                  721            3.91
     Certificates and other time deposits                                       161,631                6,634            5.49
Retail repurchase agreements                                                      9,517                  323            4.55
Federal funds purchased                                                             202                    9            5.84
                                                                        ----------------     ----------------     -----------
          Total interest-bearing liabilities                                    264,791                8,664            4.37
                                                                        ----------------     ----------------     -----------

Noninterest-bearing demand deposits                                              36,968
Other liabilities                                                                 3,512
Shareholders' equity                                                             33,310
                                                                        ----------------
          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY                                   $       338,581
                                                                        ================

NET INTEREST INCOME AND SPREAD                                                               $        11,757            4.16 %
                                                                                             ================     ===========

NET YIELD ON EARNING ASSETS                                                                                             4.91 %
                                                                                                                  ===========


<CAPTION>







                                                                                               1997
                                                                     ---------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30                                                                                    Average
                                                                                             Interest              Rates
                                                                         Average             Income/              Earned/
                                                                         Balance             Expense                Paid
                                                                     ----------------    -----------------     ---------------
<S>   <C> <C>                                                        <C>                       <C>                       <C>
EARNING ASSETS
Loans (2) (3)                                                        $       202,287           $   13,876                9.17 %
Investment securities (2):
     Taxable income                                                           71,710                3,778                7.03
     Non-taxable income                                                       17,429                1,061                8.12
Federal funds sold                                                             2,225                   91                5.44
                                                                     ----------------    -----------------     ---------------
          Total earning assets                                               293,651               18,806                8.55
                                                                     ----------------    -----------------     ---------------

Cash and due from banks                                                        9,812
Other assets, net                                                              8,277
                                                                     ----------------
          TOTAL ASSETS                                               $       311,740
                                                                     ================

INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                                    $        37,640                  503                1.79
     Savings deposits                                                         29,497                  516                2.34
     Money market accounts                                                    18,792                  502                3.57
     Certificates and other time deposits                                    149,580                6,093                5.45
Retail repurchase agreements                                                   5,740                  192                4.45
Federal funds purchased                                                          535                   23                5.69
                                                                     ----------------    -----------------     ---------------
          Total interest-bearing liabilities                                 241,784                7,829                4.33
                                                                     ----------------    -----------------     ---------------

Noninterest-bearing demand deposits                                           36,918
Other liabilities                                                              2,952
Shareholders' equity                                                          30,086
                                                                     ----------------
          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY                                $       311,740
                                                                     ================

NET INTEREST INCOME AND SPREAD                                                           $         10,977                4.22 %
                                                                                         =================     ===============

NET YIELD ON EARNING ASSETS                                                                                              4.99 %
                                                                                                               ===============

<CAPTION>









NINE MONTHS ENDED SEPTEMBER 30                                                                 1998 Versus 1997
                                                                         ----------------------------------------------------------
                                                                                     Interest Variance
                                                                                            due to (1)                      
                                                                         --------------------------------------          Net
                                                                              Volume                Rate                Change
                                                                         -----------------    -----------------    ----------------
<S>   <C> <C>                                                            <C>                 <C>                  <C>
EARNING ASSETS
Loans (2) (3)                                                            $    1,512          $        (61)        $      1,451
Investment securities (2):
     Taxable income                                                              10                    (8)                   2
     Non-taxable income                                                         131                   (40)                  91
Federal funds sold                                                               68                     3                   71
                                                                         -----------------    -----------------    ----------------
          Total earning assets                                                1,721                  (106)               1,615
                                                                         -----------------    -----------------    ----------------

Cash and due from banks
Other assets, net

          TOTAL ASSETS


INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                                                45                   (43)                   2
     Savings deposits                                                           (31)                  (13)                 (44)
     Money market accounts                                                      168                    51                  219
     Certificates and other time deposits                                       496                    45                  541
Retail repurchase agreements                                                    127                     4                  131
Federal funds purchased                                                         (15)                    1                  (14)
                                                                         -----------------    -----------------    ----------------
          Total interest-bearing liabilities                                    790                    45                  835
                                                                         -----------------    -----------------    ----------------

Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity

          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY


NET INTEREST INCOME AND SPREAD                                           $      931           $      (151)         $       780
                                                                         =================    =================    ================

NET YIELD ON EARNING ASSETS

</TABLE>

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

(2)     Interest income 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.
                                       18
<PAGE>
<TABLE>
<CAPTION>


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

                                                                                1998
                                                          ------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30                                                                 Average
                                                                              Interest           Rates
                                                             Average          Income/           Earned/
                                                             Balance          Expense            Paid
                                                          --------------   ---------------    ------------
<S>   <C> <C>                                             <C>               <C>                      <C>
EARNING ASSETS
Loans (2) (3)                                             $     224,134     $       5,114            9.07 %
Investment securities (2):
     Taxable income                                              74,626             1,290            6.92
     Non-taxable income                                          20,096               393            7.81
Federal funds sold                                                3,875                54            5.57
                                                          --------------   ---------------    ------------
          Total earning assets                                  322,731             6,851            8.45
                                                          --------------   ---------------    ------------

Cash and due from banks                                          10,561
Other assets, net                                                 8,449
                                                          --------------
          TOTAL ASSETS                                    $     341,741
                                                          ==============

INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                         $      41,005               157            1.51
     Savings deposits                                            27,023               151            2.22
     Money market accounts                                       25,959               257            3.94
     Certificates and other time deposits                       162,675             2,243            5.47
Retail repurchase agreements                                     10,168               115            4.51
Federal funds purchased                                             125                 2            5.95
                                                          --------------   ---------------    ------------
          Total interest-bearing liabilities                    266,955             2,925            4.35
                                                          --------------   ---------------    ------------

Noninterest-bearing demand deposits                              36,966
Other liabilities                                                 3,703
Shareholders' equity                                             34,117
                                                          --------------
          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY                     $     341,741
                                                          ==============

NET INTEREST INCOME AND SPREAD                                             $        3,926            4.10 %
                                                                           ===============    ============

NET YIELD ON EARNING ASSETS                                                                          4.85 %
                                                                                              ============




<CAPTION>













                                                                                                 1997
                                                                            -----------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30                                                                                  Average
                                                                                               Interest           Rates
                                                                               Average          Income/          Earned/
                                                                               Balance          Expense           Paid
                                                                            --------------   --------------    ------------
<S>   <C> <C>                                                               <C>                 <C>                   <C>
EARNING ASSETS
Loans (2) (3)                                                               $     208,472       $    4,859            9.26 %
Investment securities (2):
     Taxable income                                                                70,150            1,233            7.03
     Non-taxable income                                                            17,640              355            8.04
Federal funds sold                                                                  1,900               27            5.60
                                                                            --------------   --------------    ------------
          Total earning assets                                                    298,162            6,474            8.64
                                                                            --------------   --------------    ------------

Cash and due from banks                                                             9,863
Other assets, net                                                                   8,364
                                                                            --------------
          TOTAL ASSETS                                                      $     316,389
                                                                            ==============

INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                                           $      38,283              173            1.79
     Savings deposits                                                              29,294              171            2.32
     Money market accounts                                                         19,628              187            3.79
     Certificates and other time deposits                                         150,393            2,069            5.46
Retail repurchase agreements                                                        6,907               79            4.55
Federal funds purchased                                                               960               14            5.76
                                                                            --------------   --------------    ------------
          Total interest-bearing liabilities                                      245,465            2,693            4.35
                                                                            --------------   --------------    ------------

Noninterest-bearing demand deposits                                                36,818
Other liabilities                                                                   3,162
Shareholders' equity                                                               30,944
                                                                            --------------
          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY                                       $     316,389
                                                                            ==============

NET INTEREST INCOME AND SPREAD                                                               $       3,781            4.29 %
                                                                                             ==============    ============

NET YIELD ON EARNING ASSETS                                                                                           5.06 %
                                                                                                               ============



<CAPTION>













THREE MONTHS ENDED SEPTEMBER 30                                                                     1998 Versus 1997
                                                                              ---------------------------------------------------
                                                                                          Interest Variance
                                                                                                 due to (1)              
                                                                              -------------------------------        Net
                                                                                Volume             Rate              Change
                                                                              ------------    ---------------   -----------------
<S>   <C> <C>                                                                 <C>           <C>                <C>
EARNING ASSETS
Loans (2) (3)                                                                 $       356   $         (101)    $          255
Investment securities (2):
     Taxable income                                                                    77              (20)                57
     Non-taxable income                                                                48              (10)                38
Federal funds sold                                                                     27                -                 27
                                                                              ------------    ---------------   -----------------
          Total earning assets                                                        508             (131)               377
                                                                              ------------    ---------------   -----------------

Cash and due from banks
Other assets, net

          TOTAL ASSETS


INTEREST-BEARING LIABILITIES Interest-bearing deposits:
     NOW accounts                                                                      11              (27)               (16)
     Savings deposits                                                                 (13)              (7)               (20)
     Money market accounts                                                             63                7                 70
     Certificates and other time deposits                                             170                4                174
Retail repurchase agreements                                                           37               (1)                36
Federal funds purchased                                                               (12)               -                (12)
                                                                              ------------    ---------------   -----------------
          Total interest-bearing liabilities                                          256              (24)               232
                                                                              ------------    ---------------   -----------------

Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity

          TOTAL LIABILITIES AND
                 SHAREHOLDERS' EQUITY


NET INTEREST INCOME AND SPREAD                                                $       252    $        (107)     $         145
                                                                              ============    ===============   =================

NET YIELD ON EARNING ASSETS


</TABLE>


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

(2)     Interest income 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.
                                       19

<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.

                                       20
<PAGE>

                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits.

                  Exhibits to this report are listed in the index to exhibits on
                  pages 22 and 23 of this report.

         (b)      Reports on Form 8-K.

                  No reports on Form 8-K were filed during the quarter ended
                  September 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:    November 13, 1998            By:      /s/ Jerry A. Little
                                               ------------------------------
                                                   Jerry A. Little
                                                   Treasurer and Secretary
                                                   (Principal Financial and
                                                   Accounting Officer)

                                       21

<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, incorporated herein by reference
                                    to Exhibit 3.12 to the Registrant's Form
                                    10-Q Quarterly Report for the quarter ended
                                    June 30, 1998.

    3.20                            Amended and Restated Bylaws of the
                                    Registrant, adopted May 21, 1998,
                                    incorporated herein by reference to Exhibit
                                    3.20 to the Registrant's Form 10-Q Quarterly
                                    Report for the quarter ended June 30, 1998.

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

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

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

    10.20                           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.

                                       22

<PAGE>



Exhibit No.                                 Description of Exhibit

    10.30                           Copy of Stock Compensation Plan, as amended,
                                    effective May 12, 1998, incorporated herein
                                    by reference to Exhibit 10.30 the
                                    Registrant's Form 10-Q Quarterly Report for
                                    the quarter ended June 30, 1998.

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

    10.32                           Form of Nonqualified Stock Option Agreement
                                    between FNB Corp. and certain of its
                                    directors, pursuant to the Registrant's
                                    Stock 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 nine months
                                    ended September 30, 1998.

    27.11                           Restated Financial Data Schedule for the
                                    nine months ended September 30, 1997.



                                       23