<PAGE>   1

                                                                      EXHIBIT 13

       ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2000


<PAGE>   2

                              FNB BANCSHARES, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 -----
<S>                                                                              <C>
Shareholders' Letter............................................................     2
Summary of Selected Financial Data..............................................     3
Management's Discussion and Analysis............................................  4-16
Independent Auditors' Report....................................................    17
Consolidated Balance Sheets.....................................................    18
Consolidated Statements of Income...............................................    19
Consolidated Statements of Changes in Shareholders' Equity......................    20
Consolidated Statements of Cash Flows...........................................    21
Notes to Consolidated Financial Statements...................................... 22-36
Directors, Officers, and Services...............................................    37
Corporate Data..................................................................    38
</TABLE>


<PAGE>   3

                              FNB BANCSHARES, INC.

To our Shareholders:

In the year 2000, First National Bank of the Carolinas continued its steady
growth as we continued to increase our market share in Cherokee County. Local
decision-making and a commitment to personal service continue to be keys to our
success.

Profitability continued to increase in 2000. Net income was $281,000, an
increase of 64% over net income of $171,000 in 1999. During 2000 we became
cumulatively profitable and the tangible book value of our stock increased to
$10.20 per share.

Deposits increased 35% over 1999 and year end deposits were 36,785,000. We were
able to continue increasing our deposits even though we do not pay above market
rates.

Loan demand remained strong in 2000 and we were able to continue growing our
portfolio with quality loans. Net loans at year end were $35,179,000, an
increase over 1999 of 28%. Although we experienced some loan losses during the
year, our allowance for loan losses was at 1.31% of our total loans, a figure
that is above industry standards. These reserves of $466,835 should provide
adequate safety for the Bank. A third party consultant continues to review our
loans on a quarterly basis.

As interest margins continue to shrink industry wide, fee income is becoming
more important in profitability growth. In 2000, fee income was $357,833, an
increase of 15% over 1999. While net interest income will continue to be our
most important revenue source, we will continue to explore additional avenues to
increase fee based income.

We are planning to establish an investment department during the second quarter
of 2001. This will provide us with an additional source of revenue and also
provide another service for our customers. A greater emphasis is being placed on
mortgage loan originations. We have brought in a mortgage lender to develop this
key market and thus increase this additional source of fee income.

During February of 2001, we moved into our new permanent facility in Blacksburg.
Due to our success in Blacksburg, we had outgrown the temporary building. We
have also purchased property on Highway 11 in Gaffney for the construction of a
second Gaffney office. This area has shown tremendous growth and we feel that it
will quickly become a profitable location for the Bank. Construction is
scheduled to begin in April of 2001 with a completion date of August of 2001.
Although construction of these two new facilities will be a drain on
profitability in the short term they should allow us to continue taking
advantage of opportunities for future growth and profitability.

We, the directors and employees of First National Bank of the Carolinas, remain
optimistic about our continued growth and success. We will continue seeking ways
to improve our efficiency and customer service, thus adding value for our
shareholders. We feel that the necessary resources and people are in place to
continue our opportunities for long-term growth and profitability.

Please join us for the annual Shareholders meeting on Tuesday April 24, 2001 at
5:30 p.m. in the lobby of our main office at 217 North Granard Street in
Gaffney, South Carolina. The directors and employees of First National Bank of
the Carolinas are committed to building a strong community bank and improving
shareholder value. We remain grateful for your continued support in our success.



Bill H. Mason
Chairman of the Board



V. Stephen Moss
President


                                       2
<PAGE>   4

                              FNB BANCSHARES, INC.

                             SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data concerning FNB
Bancshares, Inc. (the "Company"). The selected financial data has been derived
from the consolidated financial statements, which have been audited by
Tourville, Simpson & Caskey, L.L.P., independent accountants. This information
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations.

<TABLE>
<CAPTION>
Year Ended December 31,                                 2000          1999          1998          1997            1996
                                                     ---------     ---------     ---------     ----------      ----------
(Dollars in thousands, except per share)
<S>                                                  <C>           <C>           <C>           <C>             <C>
INCOME STATEMENT DATA:
   Interest income                                   $   3,485     $   2,660     $   2,059     $    1,248      $      206
   Interest expense                                      1,407           939           755            396              42
                                                     ---------     ---------     ---------     ----------      ----------
   Net interest income                                   2,078         1,721         1,304            852             164
   Provision for loan losses                               152           140           160            138              20
                                                     ---------     ---------     ---------     ----------      ----------
   Net interest income after provision for
    loan losses                                          1,926         1,581         1,144            714             144
   Other income                                            358           311           193            101               6
   Other expense                                         1,846         1,633         1,207          1,072             431
                                                     ---------     ---------     ---------     ----------      ----------
   Income (loss) before income taxes                       438           259           130           (257)           (281)
   Income tax expense (benefit)                            157            88             3            (72)            (84)
                                                     ---------     ---------     ---------     ----------      ----------
      Net income (loss)                              $     281     $     171     $     127     $     (185)     $     (197)
                                                     =========     =========     =========     ==========      ==========
 BALANCE SHEET DATA:
   Securities held-to-maturity                       $   3,621     $   2,349     $   1,800     $    1,501      $      344
   Allowance for loan losses                               467           429           303            153              20
   Net loans                                            35,179        27,401        19,952         14,016           2,024
   Premises and equipment, net                           2,598         2,214         1,804            761             734
   Total assets                                         44,942        35,196        28,035         19,920          11,733
   Noninterest-bearing deposits                          5,044         4,565         3,070          2,478           1,125
   Interest-bearing deposits                            31,741        22,670        18,026         11,082           4,679
   Total deposits                                       36,785        27,235        21,096         13,560           5,804
   Total liabilities                                    38,653        29,188        22,199         14,211           5,839
   Total shareholders' equity                            6,289         6,008         5,837          5,709           5,894
 PER SHARE DATA:
   Weighted-average common shares
    outstanding                                        616,338       616,338       616,338        616,338         616,338
   Basic earnings per share                          $    0.46     $    0.28      $ 0.21 8     $    (0.30)     $    (0.32)
   Diluted earnings per share                        $    0.46     $    0.28      $ 0.21 8     $    (0.30)     $    (0.32)
   Tangible book value (period end)                  $   10.20     $    9.75      $ 9.47 5     $     9.26      $     9.56
</TABLE>

                      DESCRIPTION OF THE COMPANY'S BUSINESS

The Company was organized as a bank holding company on September 27, 1995. Its
subsidiary, First National Bank of the Carolinas (the "Bank"), commenced
operations on October 18, 1996. FNB Bancshares, Inc., is a South Carolina
corporation, which was incorporated primarily to hold all of the capital stock
of First National Bank of the Carolinas. The Bank engages in commercial and
retail banking, emphasizing the needs of small to medium businesses,
professional concerns, and individuals, primarily in Gaffney and Blacksburg,
South Carolina and the surrounding area. The Company currently engages in no
other business other than owning and managing the Bank.


                                       3
<PAGE>   5

                              FNB BANCSHARES, INC.

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

                              RESULTS OF OPERATIONS

This discussion and analysis is intended to assist the reader in understanding
the financial condition and results of operations of FNB Bancshares, Inc., and
its subsidiary, First National Bank of The Carolinas. Comparisons of the
Company's results for all of the periods presented, particularly with respect to
the banking operations, should be made with an understanding of the Company's
short operating history. This commentary should be read in conjunction with the
consolidated financial statements and the related notes and the other
statistical information in this report.

YEAR ENDED DECEMBER 31, 2000, COMPARED WITH YEAR ENDED DECEMBER 31, 1999

Net income for the year ended December 31, 2000 was $281,164, or $0.46 per
share, compared to $171,249, or $0.28 per share, for the year ended December 31,
1999. An increase in net interest income of $356,594 over the 1999 amount of
$1,721,168 was the primary reason for the increase in net income from 1999 to
2000. Other income increased $46,680, or 15%, to $357,833 for the year ended
December 31, 2000 as compared to a year earlier. Other expenses increased from
$1,633,137 for 1999 to $1,845,551 for 2000.

YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998

Net income for the year ended December 31, 1999 was $171,249, or $.28 per share,
compared to $127,392, or $.21 per share, for the year ended December 31, 1998.
An increase in net interest income of $417,360 over the 1998 amount of
$1,303,808 was the primary reason for the increase in net income from 1998 to
1999. Other income increased $117,269, or 60.5%, to $311,153 for the year ended
December 31, 1999 as compared to a year earlier. Other expenses increased from
$1,207,204 for 1998 to $1,633,137 for 1999.

                               NET INTEREST INCOME

To a large degree, earnings are dependent on net interest income. Net interest
income represents the difference between interest earned on assets and interest
paid on liabilities. Interest rate spread and net interest margin are two
significant elements in analyzing the Company's net interest income. Interest
rate spread is the difference between the yield on average earning assets and
the rate on average interest bearing liabilities. Net interest margin is net
interest income divided by earning assets.

Net interest income increased from $1,721,168 in 1999 to $2,077,762 in 2000,
resulting in an increase of 21.0%. Income from loans increased by 33% to
$3,203,076 for 2000 as compared to $2,408,140 for 1999. This increase was
attributable to the growth in the loan portfolio from $27,830,158 in 1999 to
$35,645,983 in 2000. There was also an increase in investment income of $6,483,
an increase of 4.69% over the 1999 amount of $138,085. The net interest spread
and net interest margin were 4.61% and 5.61% in 2000 as compared to 4.78% and
5.76% in 1999.

Net interest income increased from $1,303,808 in 1998 to $1,721,168 in 1999,
resulting in an increase of 32.0%. Income from loans increased by 41.0% to
$2,408,140 for 1999, as compared to $1,707,484 for 1998. This increase was
attributable to the growth in the loan portfolio from $20,254,948 in 1998 to
$27,830,158 in 1999. There was also an increase in investment income of $29,168,
an increase of 26.78% over the 1998 amount of $108,917. The net interest spread
and net interest margin were 4.78% and 5.76% in 1999 as compared to 4.32% and
5.55% in 1998.


                                       4
<PAGE>   6

                              FNB BANCSHARES, INC.

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

The following table sets forth, for the periods indicated, the weighted-average
yields earned, the weighted-average yields paid, the net interest spread and the
net interest margin on earning assets. The table also indicates the average
monthly balance and the interest income or expense by specific categories.

AVERAGE BALANCES, INCOME, EXPENSES, AND RATES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                       2000                              1999                              1998
                                ----------------------------      ------------------------------     ------------------------------
                                 AVERAGE    INCOME/     YIELD/     AVERAGE     INCOME/    YIELD/     AVERAGE      INCOME/    YIELD/
(Dollars in thousands)           BALANCE    EXPENSE      RATE      BALANCE     EXPENSE     RATE      BALANCE      EXPENSE     RATE
                                --------    -------     ------    --------     -------    ------     --------     -------    ------
<S>                             <C>         <C>         <C>       <C>          <C>        <C>        <C>          <C>        <C>
ASSETS:
  Earning Assets:
    Securities, taxable         $  2,465     $  145     5.88%     $  2,358     $   138     5.86%     $  1,856     $   109     5.87%
    Time deposits with other
      banks                           --         --                     17           1     5.88           503          29     5.78
    Federal funds sold             2,089        137     6.56         2,265         113     4.99         3,904         214     5.48
    Loans (1)                     32,493      3,203     9.86        25,261       2,408     9.53        17,222       1,707     9.91
                                --------     ------               --------     -------               --------     -------
      Total earning assets        37,047      3,485     9.41        29,901       2,660     8.90        23,485       2,059     8.77
                                --------     ------               --------     -------               --------     -------
  Cash and due from banks          1,589                             1,405                              1,019
  Allowance for loan losses         (427)                             (371)                              (227)
  Premises and equipment           2,358                             2,176                                992
  Other assets                       690                               607                                566
                                --------                          --------                           --------
      Total assets              $ 41,257                          $ 33,718                           $ 25,835
                                ========                          ========                           ========

LIABILITIES AND
  SHAREHOLDER'S EQUITY
  Interest-bearing liabilities:

    Interest-bearing deposits   $ 27,509     $1,302     4.73%     $ 22,206     $   915     4.12%     $ 16,368     $   731     4.47%
    Advances from FHLB             1,183         79     6.68            25           2     8.00            --          --       --
    Securities sold under
      agreements to repurchase
      and federal funds
      purchased                      638         26     4.08           538          22     4.09           613          24     3.92
                                --------     ------               --------     -------               --------     -------
      Total interest-bearing
        liabilities               29,330      1,407     4.80        22,769         939     4.12        16,981         755     4.45
                                --------     ------               --------     -------               --------     -------
  Noninterest-bearing
    deposits                       5,532                             4,797                              2,951
  Accrued interest and other
    liabilities                      221                               258                                160
  Shareholders' equity             6,174                             5,894                              5,743
                                --------                          --------                            -------
      Total liabilities and
        shareholders' equity    $ 41,257                          $ 33,718                            $25,835
                                ========                          ========                            =======
Net interest spread                                     4.61%                              4.78%                              4.32%
Net interest income                          $2,078                            $ 1,721                            $ 1,304
                                             ======                            =======                            =======
Net interest margin                                     5.61%                              5.76%                              5.55%
</TABLE>

(1) The effect of loans in nonaccrual status and fees collected is not
significant to the computations. All loans and deposits are domestic.


                                       5
<PAGE>   7

                              FNB BANCSHARES, INC.

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

The following table sets forth the effect which the varying levels of earning
assets and interest-bearing liabilities and the applicable rates have had on
changes in net interest income during the periods indicated.

ANALYSIS OF CHANGES IN NET INTEREST INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                       2000 COMPARED WITH 1999                    1999 COMPARED WITH 1998
                                       -------------------------------------        ------------------------------------
                                                  VARIANCE DUE TO                              VARIANCE DUE TO
Dollars in thousands)                  VOLUME(1)       RATE(1)        TOTAL         VOLUME(1)       RATE(1)       TOTAL
                                       ---------       -------        ------        ---------       -------       ------
<S>                                    <C>             <C>            <C>           <C>             <C>           <C>
EARNING ASSETS
Securities, taxable                     $    6         $    1         $    7         $   28         $   1         $   29
Time deposits with other banks              (1)            --             (1)           (29)            1            (28)
Federal funds sold                         (12)            36             24            (81)          (20)          (101)
Loans                                      712             83            795            766           (65)           701
                                        ------         ------         ------         ------         -----         ------
    Total interest income                  705            120            825            684           (83)           601
                                        ------         ------         ------         ------         -----         ------

INTEREST-BEARING LIABILITIES
Interest-bearing deposits                  135            252            387            241           (57)           184
Advances from FHLB                          79             (1)            78              1            --              2
Securities sold under agreements
  to repurchase and federal funds
  to repurchase and federal funds
  purchased                                  3             --              3             (3)            1             (2)
                                        ------         ------         ------         ------         -----         ------
    Total interest expense                 217            251            468            239           (56)           184
                                        ------         ------         ------         ------         -----         ------

Net interest income                     $  488         $ (131)        $  357         $  445         $ (27)        $  417
                                        ======         ======         ======         ======         =====         ======
</TABLE>


(1) Volume-rate changes have been allocated to each category based on the
percentage of the total change.

The Company monitors and manages the pricing and maturity of its assets and
liabilities in order to diminish the potential adverse impact that changes in
interest rates could have on its net interest income. The principal monitoring
technique employed by the Company is the measurement of the Company's interest
sensitivity "gap," which is the positive or negative dollar difference between
assets and liabilities that are subject to interest rate repricing within a
given period of time. Interest rate sensitivity can be managed by repricing
assets or liabilities, replacing an asset or liability at maturity, or adjusting
the interest rate during the life of an asset or liability. Managing the amount
of assets and liabilities repricing in this same time interval helps to hedge
the risk and minimize the impact on net interest income of rising or falling
interest rates.


                                       6
<PAGE>   8

                              FNB BANCSHARES, INC.

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

The following table presents the Company's rate sensitivity at each of the time
intervals indicated as of December 31, 2000. The table may not be indicative of
the Company's rate sensitivity position at other points in time.

INTEREST RATE SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
                                                      LESS THAN                     SEVEN TO
DECEMBER 31, 2000                                       THREE       FOUR TO SIX      TWELVE      ONE TO FIVE   OVER FIVE
(Dollars in thousands)                                  MONTHS        MONTHS         MONTHS         YEARS        YEARS       TOTAL
                                                      ---------     -----------     --------     -----------   ---------    -------
<S>                                                   <C>           <C>             <C>          <C>           <C>          <C>
ASSETS
Earning Assets
  Loans                                                $ 10,351       $ 1,400       $  1,535       $17,679      $4,681      $35,646
  Securities                                                976            --            900         1,845          --        3,721
  Federal funds sold                                      1,150            --             --            --          --        1,150
                                                       --------       -------       --------       -------      ------      -------
     Total earning assets                                12,477         1,400          2,435        19,524       4,681       40,517
                                                       --------       -------       --------       -------      ------      -------

LIABILITIES
Interest-bearing liabilities:
  Interest-bearing deposits:
    Demand deposits                                       5,912            --             --            --          --        5,912
    Savings deposits                                      4,454            --             --            --          --        4,454
    Time deposits                                         4,469         4,410          8,201         4,296          --       21,376
                                                       --------       -------       --------       -------      ------      -------
     Total interest-bearing deposits                     14,835         4,410          8,201         4,296          --       31,742
  Advances from Federal Home Loan Bank                    1,000            --             --            --          --        1,000
  Securities sold under agreements to repurchase            639            --             --            --          --          639
                                                       --------       -------       --------       -------      ------      -------
     Total interest-bearing liabilities                  16,474         4,410          8,201         4,296          --       33,381
                                                       --------       -------       --------       -------      ------      -------
Period gap                                             $ (3,997)      $(3,010)      $ (5,766)      $15,228      $4,681
                                                       ========       =======       ========       =======      ======
Cumulative gap                                         $ (3,997)      $(7,007)      $(12,773)      $ 2,455      $7,136
                                                       ========       =======       ========       =======      ======
Cumulative gap ratio (2)                                  (9.86)%      (17.29)%       (31.53)%        6.06%      17.61%
                                                       ========       =======       ========       =======      ======
</TABLE>

(1) All savings and interest-bearing transaction accounts are included in the
less than three months category.
(2) Ratio of cumulative gap to total earning assets.

The above table reflects the balances of interest-earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Overnight federal funds are reflected at the earliest pricing interval
due to the immediately available nature of the instruments. Debt securities are
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate amortizing loans are reflected at each scheduled payment date.
Scheduled payment amounts of variable rate amortizing loans are reflected at
each scheduled payment date until the loan may be repriced contractually; the
unamortized balance is reflected at that point. Interest-bearing liabilities
with no contractual maturity, such as savings deposits and interest-bearing
transaction accounts, are reflected in the earliest repricing period due to
contractual arrangements which give the Company the opportunity to vary the
rates paid on those deposits within a thirty-day or shorter period. Fixed rate
time deposits, principally certificates of deposit, are reflected at their
contractual maturity date. Advances from the Federal Home Loan Bank mature on a
daily basis and are reflected in the earliest pricing period.


                                       7
<PAGE>   9

                              FNB BANCSHARES, INC.

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

The Company generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap position and generally would benefit from
decreasing market rates of interest when it is liability-sensitive. The Company
is liability sensitive over the less than one year time frames. However, the
Company's gap analysis is not a precise indicator of its interest sensitivity
position. The analysis presents only a static view of the timing of maturities
and repricing opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally. For example,
rates paid on a substantial portion of core deposits may change contractually
within a relatively short time frame, but those rates are viewed by management
as significantly less interest-sensitive than market-based rates such as those
paid on noncore deposits. Accordingly, management believes a liability-sensitive
gap position is not as indicative of the Company's true interest sensitivity as
it would be for an organization which depends to a greater extent on purchased
funds to support earning assets. Net interest income may be impacted by other
significant factors in a given interest rate environment, including changes in
the volume and mix of earning assets and interest-bearing liabilities.

                            PROVISION FOR LOAN LOSSES

The Company maintains a reserve for loan losses which is funded by charges to
current earnings. This reserve is intended to be an adequate allowance to absorb
losses on loans outstanding and is based on management's continuing review and
evaluation of the Company's loan portfolio. During 2000, the Company transferred
$151,500 from earnings to the reserve for loan losses, increasing the balance to
$466,835 on December 31, 2000 after deducting current year net chargeoffs.

Reserve for loan losses was approximately 1.31% and 1.54% of total loans on
December 31, 2000 and 1999, respectively. As the Company continues to mature,
management will evaluate its reserve policy and adjust the policy based on
historical loss experience, changes in economic conditions, growth in the
portfolio and evaluations of specific loans. Management believes the level of
the allowance for loan losses is sufficient to provide for potential losses in
the loan portfolio. However, management's judgment as to the adequacy of the
allowance is based upon a number of assumptions about future events which it
believes to be reasonable, but which may or may not be valid. Thus, there can be
no assurance that chargeoffs in future periods will not exceed the allowance for
loan losses or that additional increases in the loan loss allowance will not be
required.

                                  OTHER INCOME

Other income for the year ended December 31, 2000 was $357,833, as compared to
$311,153 for the year ended December 31, 1999. The most significant portion of
other income was from NSF/overdraft charges which totaled $211,293, as compared
to $140,309 in the prior year. The increase in NSF/overdraft charges was
attributable to an increase in the per item charge from $22 to $25 per item and
an overall increase in deposit accounts.

Other income for the year ended December 31, 1999 was $311,153, as compared to
$193,884 for the year ended December 31, 1998. The most significant portion of
other income was from NSF/overdraft charges which totaled $140,309, as compared
to $92,586 in the prior year.

                                 OTHER EXPENSES

Noninterest expenses were $1,845,551 for the year ended December 31, 2000, as
compared to $1,633,137 for the year ended December 31, 1999. This was comprised
of salaries and employee benefits of $905,586, furniture and equipment expense
of $157,592, occupancy expense of $145,094, data processing expense of $150,322,
office supplies expense of $44,361, and other operating expenses of $442,596.

Non-interest expenses were $1,633,137 for the year ended December 31, 1999, as
compared to $1,207,204 for the year ended December 31, 1998. This was comprised
of salaries and employee benefits of $790,095, furniture and equipment expense
of $142,891, occupancy expense of $105,272, data processing expense of $136,866,
disposal of fixed assets expense of $45,894, office supplies expense of $44,665,
and other operating expenses of $367,454.


                                       8
<PAGE>   10

                              FNB BANCSHARES, INC.

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

                                  INCOME TAXES

For the year ended December 31, 2000, the Company recorded income tax expense in
the amount of $157,380. This resulted in an effective tax rate of 35.9%. For the
year ended December 31, 1999, the Company recorded income tax expense in the
amount of $88,185. This resulted in an effective tax rate of 34%.

                                CAPITAL RESOURCES

Total capital of the Company was increased by net income in 2000 of $281,164.
Total capital of the Company was increased by net income in 1999 of $171,249.

The Federal Reserve Board and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance-sheet exposures, adjusted for
risk weights ranging form 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital of the Company consists of common
shareholders' equity minus certain intangible assets. Tier 2 capital consists of
the allowance for loan losses subject to certain limitations. A bank holding
company's qualifying capital base for purposes of its risk-based capital ratio
consists of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital. The holding
company and banking subsidiary are also required to maintain capital at a
minimum level based on average assets, which is known as the leverage ratio.
Only the strongest bank holding companies and banks are allowed to maintain
capital at the minimum requirement. All others are subject to maintaining ratios
100 to 200 basis points above the minimum.

RISK-BASED CAPITAL RATIOS

<TABLE>
<CAPTION>
(Dollars in thousands)                                 THE BANK             THE COMPANY
                                                     ------------          ------------
<S>                                                  <C>                   <C>
Tier 1 capital
  Common shareholders' equity                        $  4,846,573          $  6,288,986
  Less:  intangibles                                      (12,001)              (15,020)
                                                     ------------          ------------
   Total Tier 1 capital                                 4,834,572             6,273,966
Tier 2 capital
  Allowable allowance for loan losses:                    462,165               462,833
                                                     ------------          ------------
   Tier 2 capital additions                               462,165               462,833
                                                     ------------          ------------
   Total qualifying capital                          $  5,296,737          $  6,736,799
                                                     ============          ============

Risk-adjusted total assets
 (including off-balance sheet exposures)             $ 36,934,234          $ 37,026,672
                                                     ============          ============

  Total assets                                       $ 44,857,952          $ 44,941,974
                                                     ============          ============

Risk-based capital ratios:
  Tier 1 risk-based capital ratio                           13.09%                16.94%
  Total risk-based capital ratio                            14.34%                18.19%
  Tier 1 leverage ratio                                     10.78%                14.99%
</TABLE>


                                       9
<PAGE>   11

                              FNB BANCSHARES, INC.

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

                                    LIQUIDITY

The Company manages its liquidity from both the asset and liability side of the
balance sheet through the coordination of the relative maturities of its assets
and liabilities. Short-term liquidity needs are generally met from cash, due
from banks, federal funds sold, and deposit levels. An advance from the Federal
Home Loan Bank was also obtained in 2000 for liquidity purposes. Management has
established policies and procedures governing the length of time to maturity on
loans and investments. In the opinion of management, the Company's short-term
liquidity needs can be adequately supported by the Company's deposit base.

                     IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related financial data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in relative purchasing power
over time due to inflation. Unlike most industrial companies, virtually all of
the assets and the liabilities of a financial institution are monetary in
nature. As a result, interest rates generally have a more significant impact on
a financial institution's performance than does the effect of inflation.

While the effect of inflation on a bank is normally not as significant as its
influence on those businesses that have large investments in plant and
inventories, it does have an effect. Interest rates generally increase as the
rate of inflation increases, but the magnitude of the change in rates may not be
the same. While interest rates have traditionally moved with inflation, the
effect on income is diminished because both interest earned on assets and
interest paid on liabilities vary directly with each other. Also, increases in
the price of goods and services will generally result in increased operating
expenses.

                              INVESTMENT PORTFOLIO

The following tables summarize the carrying value of investment securities and
weighted-average yields of those securities at December 31, 2000 and 1999.

INVESTMENT SECURITIES PORTFOLIO COMPOSITION

<TABLE>
<CAPTION>
HELD-TO-MATURITY
December 31,                                          2000           1999
                                                     -------        -------
(Dollars in thousands)
<S>                                                  <C>            <C>
U.S. Government Agencies and Corporations              3,621          2,349
Nonmarketable equity securities                          100             84
                                                     -------        -------

   Total securities                                  $ 3,721        $ 2,433
                                                     =======        =======
</TABLE>


                                       10
<PAGE>   12

                              FNB BANCSHARES, INC.

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

INVESTMENT SECURITIES PORTFOLIO MATURITY DISTRIBUTION AND YIELDS

<TABLE>
<CAPTION>
DECEMBER 31, 2000                                             2000
                                                     ---------------------
(Dollars in thousands)                               AMOUNT          YIELD
                                                     -------        ------
<S>                                                  <C>            <C>
U.S. Government agencies due:
  Within one year                                    $ 1,700         5.57%
  After one year but within five years                 1,921         5.83%
                                                     -------
    Total                                            $ 3,621         5.72%
                                                     =======
</TABLE>

                                 LOAN PORTFOLIO

                             CREDIT RISK MANAGEMENT

Credit risk entails both general risk, which is inherent in the process of
lending, and risk that is specific to individual borrowers. The management of
credit risk involves both the process of loan underwriting and loan
administration. The Company manages credit risk through a strategy of making
loans within the Company's primary marketplace and within the Company's limits
of expertise. Although management seeks to avoid concentrations of credit by
loan type or industry through diversification, a substantial portion of the
borrowers' ability to honor the terms of their loans is dependent on the
business and economic conditions in Cherokee County and the surrounding areas
comprising the Company's marketplace. Additionally, since real estate is
considered by the Company as the most desirable nonmonetary collateral, a
significant portion of the Company's loans are collateralized by real estate;
however, the cash flow of the borrower or the business enterprise is generally
considered as the primary source of repayment. Generally, the value of real
estate is not considered by the Company as the primary source of repayment for
performing loans. The Company also seeks to limit total exposure to individual
and affiliated borrowers. The Company manages the risk specific to individual
borrowers through the loan underwriting process and through an ongoing analysis
of the borrower's ability to service the debt as well as the value of the
pledged collateral.

The Bank's loan officers and loan administration staff are charged with
monitoring the Company's loan portfolio and identifying changes in the economy
or in a borrower's circumstances which may affect the ability to repay the debt
or the value of the pledged collateral. In order to assess and monitor the
degree of risk in the Company's loan portfolio, several credit risk
identification and monitoring processes are utilized. The Company uses an
outside consultant to perform loan reviews on a quarterly basis.

                               LENDING ACTIVITIES

The Company extends credit primarily to consumers and small businesses in
Cherokee County and, to a limited extent, customers in surrounding areas.

The Company's service area is mixed in nature. The corporate office is located
in Gaffney, South Carolina. The economy of Cherokee County is a regional
business center whose economy contains elements of medium and light
manufacturing, higher education, regional health care, and distribution
facilities. Outside the incorporated city limits of Gaffney, the economy
includes manufacturing, agriculture, timber, and recreational activities. No
particular category or segment of the economy previously described is expected
to grow or contract disproportionately in 2001.

There are no significant concentrations of loans in the Company's loan portfolio
to any particular individuals or industry or group of related individuals or
industries.


                                       11
<PAGE>   13

                              FNB BANCSHARES, INC.

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

                         LENDING ACTIVITIES (continued)

Total loans outstanding were $35,645,983 and $27,830,158 at December 31, 2000
and 1999, respectively. The loan demand remains strong in the Company's market
area, supported in part by customers moving from larger financial institutions
after recent mergers. There are no significant concentrations of loans in the
Company's loan portfolio to any particular individuals or industry or group of
related individuals or industries.

The Company's ratio of loans to deposits was 97% and 102% at December 31, 2000
and 1999, respectively. The loan to deposit ratio is used to monitor a financial
institution's potential profitability and efficiency of asset distribution and
utilization. Generally, a higher loan to deposit ratio is indicative of higher
interest income since loans yield a higher return than alternative investment
vehicles. Management has concentrated on maintaining quality in the loan
portfolio while continuing to increase the deposit base.

The following table summarizes the composition of the loan portfolio at December
31, 2000 and 1999.

LOAN PORTFOLIO COMPOSITION

<TABLE>
<CAPTION>
DECEMBER 31,                               2000                        1999
                                   ------------------------     -----------------------
                                                 PERCENT OF                  PERCENT OF
(Dollars in thousands)              AMOUNT         TOTAL         AMOUNT        TOTAL
                                   ---------     ----------     ---------    ----------
<S>                                <C>           <C>            <C>          <C>
Commercial and industrial          $   6,415        18.00%      $   5,831       20.95%
Real estate
  Construction                         1,119         3.14             404        1.45
  Mortgage                            21,735        60.97          15,971       57.39
Consumer and other                     6,377        17.89           5,624       20.21
                                   ---------      -------       ---------     -------
    Total loans                       35,646       100.00%         27,830      100.00%
                                                  =======                     =======
Allowance for loan losses               (467)                        (429)
                                   ---------                    ---------
    Net loans                      $  35,179                    $  27,401
                                   =========                    =========
</TABLE>


                                       12
<PAGE>   14

                              FNB BANCSHARES, INC.

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

MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES:

The following table summarizes the loan maturity distribution, by type, at
December 31, 2000 and related interest rate characteristics:

<TABLE>
<CAPTION>
                                                      OVER ONE
DECEMBER 31, 2000                   ONE YEAR OR     YEAR THROUGH   OVER FIVE
(Dollars in thousands)                  LESS         FIVE YEARS      YEARS             TOTAL
                                    -----------     ------------   ---------         --------
<S>                                 <C>             <C>            <C>               <C>
Commercial and industrial             $  3,444        $  2,867        $   104        $  6,415
Real estate - construction                 994               5            120           1,119
Real estate - mortgage                   6,934          10,721          4,080          21,735
Consumer and other                       1,914           4,086            377           6,377
                                      --------        --------        -------        --------
                                      $ 13,286        $ 17,679        $ 4,681        $ 35,646
                                      --------        --------        -------        --------

Loans maturing after one year with:                                                  $ 18,078
  Fixed interest rates                                                                  4,282
                                                                                     --------
  Floating interest rates                                                            $ 22,360
                                                                                     ========
</TABLE>

                                  RISK ELEMENTS

At December 31, 2000, there were no loans past due 90 days or more and still
accruing interest, and loans totaling $51,869 were in nonaccrual status. At
December 31, 1999, there were no loans past due 90 days or more and still
accruing interest, and loans totaling $266,444 were in nonaccrual status.

SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
(Dollars in thousands)                                      2000               1999
                                                          ---------          ---------
<S>                                                       <C>                <C>
Total loans outstanding at end of year                    $  35,646          $  27,830
                                                          =========          =========
Average loans outstanding                                 $  32,493          $  25,261
                                                          =========          =========

Balance, beginning of year                                $     429          $     303
Loans charged off                                              (123)               (27)
Recoveries on loans previously charged off                       10                 13
                                                          ---------          ---------
  Net chargeoffs                                               (113)               (14)
                                                          ---------          ---------
Provision charged to operations                                 151                140
                                                          ---------          ---------
  Balance, end of year                                    $     467          $     429
                                                          =========          =========

Ratios:
  Allowance for loan losses to average loans                   1.44%              1.70%
  Allowance for loan losses to period end loans                1.31%              1.54%
</TABLE>

Management has allocated the majority of its allowance for loan losses to real
estate and commercial loans at December 31, 2000.

The allowance for loan losses is maintained at a level determined by management
to be adequate to provide for probable losses inherent in the loan portfolio
including commitments to extend credit. The allowance is maintained through the
provision for loan losses which is a charge to operations. The potential for
loss in the portfolio reflects the risks and uncertainties inherent in the
extension of credit.


                                       13
<PAGE>   15

                              FNB BANCSHARES, INC.

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

                            RISK ELEMENTS (continued)

The Bank's provision and allowance for loan losses is subjective in nature and
relies on judgments and assumptions about future economic conditions and other
factors affecting borrowers. Management is not aware of any trends, material
risks, or uncertainties affecting the loan portfolio nor is management aware of
any information about any significant borrowers which causes serious doubts as
to the ability of the borrower to comply with the loan repayment terms. However,
it should be noted that no assurances can be made that future charges to the
allowance for loan losses or provisions for loan losses may not be significant
to a particular accounting period.

Impaired loans are measured based on the present value of discounted expected
cash flows. When it is determined that a loan is impaired, a direct charge to
bad debt expense is made for the difference between the net present value of
expected future cash flows based on the contractual rate and discount rate and
the Bank's recorded investment in the related loan. The corresponding entry is
to a related valuation account. Interest is discontinued on impaired loans when
management determines that a borrower may be unable to meet payments as they
become due.

At December 31, 2000, management reviewed its loan portfolio and determined that
no impairment on loans existed that it believes would have a material effect on
the Company's consolidated financial statements.

                             AVERAGE DAILY DEPOSITS

Average deposits were $33,040,971 and $27,003,058 during 2000 and 1999,
respectively. The increase in deposits was attributable to an increased presence
in the Bank's market areas. Certificates of deposit over $100,000 totaled
$4,625,975 and $3,334,148 at December 31, 2000 and 1999, respectively. Of this
total, scheduled maturities of three months or less were $885,789 at December
31, 2000; over three months through six months were $335,766 at December 31,
2000; over six months through twelve months were $2,161,845 at December 31,
2000, greater than twelve months $1,242,575.

The following table summarizes the Bank's deposits for the years ended December
31, 2000 and 1999.

<TABLE>
<CAPTION>
DECEMBER 31,                                             2000                            1999
                                                -------------------------       -------------------------
(Dollars in thousands)                                         PERCENT OF                      PERCENT OF
                                                 AMOUNT         DEPOSITS         AMOUNT         DEPOSITS
                                                --------       ----------       --------       ----------
<S>                                             <C>            <C>              <C>            <C>
Noninterest-bearing demand                      $  5,044          13.71%        $  4,565          16.76%
Interest-bearing transaction accounts              5,912          16.07            4,363          16.02
Savings                                            4,454          12.11            4,136          15.19
Certificates of deposit                           21,375          58.11           14,171          52.03
                                                --------        -------         --------        -------

    Total deposits                              $ 36,785         100.00%        $ 27,235         100.00%
                                                ========        =======         ========        =======
</TABLE>


Core deposits, which exclude certificates of deposit of $100,000 or more,
provide a relatively stable funding source for the Company's loan portfolio and
other earning assets. The Company's core deposits were $32,159,242 and
$23,900,816 at December 31, 2000 and 1999, respectively.


                                       14
<PAGE>   16

                              FNB BANCSHARES, INC.

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

ADVANCES FROM THE FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank totaled $1,000,000 at December 31,
2000. The advance matures on a daily basis and averaged $1,183,060 during 2000.

SHORT-TERM BORROWINGS

At December 31, 2000 and 1999 the Company had short term borrowings which
consisted of securities sold under agreements to repurchase of $638,988 and
$746,181, respectively. The Company entered into a repurchase agreement with a
local electric cooperative which generally matures on a one-day basis. The
maximum amount outstanding at any month-end for the repurchase agreement was
$1,141,284 and $764,154, during 2000 and 1999, respectively. The average
interest rate paid on the repurchase agreement was 4% during 2000 and 1999,
respectively.

RETURN ON EQUITY AND ASSETS

The following table shows the return on average assets (net income divided by
average total assets), return on average equity (net income divided by average
equity), equity to assets ratio (average equity divided by average total
assets), for the period indicated. Since its inception, the Company has not paid
cash dividends. Average balances in these computations are based on those
presented in the table on page five.

<TABLE>
<CAPTION>
                                          2000          1999
                                         -----         -----
<S>                                      <C>           <C>
Return on average assets                   .68%          .51%

Return on average equity                  4.55%         2.91%

Equity to assets ratio                   14.96%        17.48%
</TABLE>

ACCOUNTING AND FINANCIAL REPORTING ISSUES

In June 1998, the FASB issued Statement (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, effective for fiscal years
beginning after June 15, 2000. This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities, including
certain derivative instruments embedded in other contracts, and requires that an
entity recognize all derivatives as assets or liabilities in the balance sheet
and measure them at fair value. The accounting for changes in the fair value of
a derivative depends on how the derivative is used and how the derivative is
designated. The Company adopted SFAS on July 1, 2000. The adoption of SFAS No.
133 did not have a material impact on the consolidated financial statements.


                                       15
<PAGE>   17

                              FNB BANCSHARES, INC.

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

FORWARD LOOKING INFORMATION

This Annual Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements appear in a
number of places in this Report and include all statements that are not
historical statements of fact regarding the intent, belief, or current
expectations of the Company or its directors or its officers with respect to,
among other things: (I) the Company's financing plans; (ii) trends affecting the
Company's financial condition or results of operations; (iii) the Company's
growth and operating strategies; and (iv) the quality of the Company's loan
portfolio. Words such as "may," "would," "could," "will," "expect," "estimate,"
"anticipate," "believe," "intend," and "plans" are intended to identify
forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's control. Actual
results may differ materially from those projected in the forward-looking
statements as a result of various factors. Among the key risks, assumptions, and
factors that may affect operating results, performance, and financial condition
are the Company's ability to continue and manage its growth, fluctuations in its
quarterly results, Year 2000 risks and concerns, competition, and other factors
discussed in this Annual Report and in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section of the Company's
Registration Statement on Form S-1 (Registration Number 333-1546).

On November 4, 1999, the U.S. Senate and House of Representatives each passed
the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton in
November 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also creates a new "financial holding company" under
the Bank Holding Company Act, which will permit holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities. The Act is intended to grant to
community banks certain powers as a matter of right that larger institutions
have accumulated on an ad hoc basis. Nevertheless, the Act may have the result
of increasing the amount of competition that the Bank faces from larger
institutions and other types of companies. In fact, it is not possible to
predict the full effect that the Act will have on the Bank.

From time to time, various bills are introduced in the United States Congress
with respect to the regulation of financial institutions. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. The Bank cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Bank.


                                       16
<PAGE>   18

                       TOURVILLE, SIMPSON & CASKEY, L.L.P.
                          CERTIFIED PUBLIC ACCOUNTANTS
                              POST OFFICE BOX 1769
                         COLUMBIA, SOUTH CAROLINA 29202

                            TELEPHONE (803) 252-3000
                               FAX (803) 252-2226

WILLIAM E. TOURVILLE, CPA                                  MEMBER AICPA SEC AND
HARRIET S. SIMPSON, CPA, CISA, CDP                            PRIVATE COMPANIES
R. JASON CASKEY, CPA                                          PRACTICE SECTIONS
JOHN T. DRAWDY, JR., CPA
TIMOTHY R. ALFORD, CPA
DAVID J. WATKINS, II, CPA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
FNB Bancshares, Inc.
Gaffney, South Carolina

We have audited the accompanying consolidated balance sheets of FNB Bancshares,
Inc., and subsidiary as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years ended December 31, 2000, 1999, and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of FNB
Bancshares, Inc., and subsidiary as of December 31, 2000 and 1999, and the
consolidated results of their operations and cash flows for the years ended
December 31, 2000, 1999, and 1998 in conformity with generally accepted
accounting principles.



/s/ Tourville, Simpson & Caskey, L.L.P.

Tourville, Simpson & Caskey, L.L.P.
January 24, 2001
Columbia, South Carolina


<PAGE>   19


                              FNB BANCSHARES, INC.

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                  2000                 1999
                                                                              ------------         ------------
<S>                                                                           <C>                  <C>
ASSETS:
  Cash and cash equivalents:
    Cash and due from banks                                                   $  1,487,957         $  1,512,403
    Federal funds sold                                                           1,150,000              400,000
                                                                              ------------         ------------
     Total cash and cash equivalents                                             2,637,957            1,912,403
                                                                              ------------         ------------

  Investment securities:
    Securities held-to-maturity (estimated market value:
    2000 - $3,614,967; 1999 - $2,318,372)                                        3,620,591            2,349,326
    Nonmarketable equity securities                                                100,000               83,700
                                                                              ------------         ------------
     Total investment securities                                                 3,720,591            2,433,026
                                                                              ------------         ------------

  Loans receivable:                                                             35,645,983           27,830,158
    Less allowance for loan losses                                                (466,835)            (429,049)
                                                                              ------------         ------------
     Loans, net                                                                 35,179,148           27,401,109

  Premises, furniture and equipment, net                                         2,597,536            2,213,812
  Accrued interest receivable                                                      317,271              207,676
  Other assets                                                                     489,471            1,027,530
                                                                              ------------         ------------
     Total assets                                                             $ 44,941,974         $ 35,195,556
                                                                              ============         ============

LIABILITIES:
  Deposits:
    Noninterest-bearing transaction accounts                                  $  5,043,706         $  4,565,052
    Interest-bearing transaction accounts                                        5,912,179            4,362,742
    Savings                                                                      4,453,755            4,136,103
    Time deposits $100,000 and over                                              4,625,975            3,334,148
    Other time deposits                                                         16,749,602           10,836,919
                                                                              ------------         ------------
     Total deposits                                                             36,785,217           27,234,964

  Securities sold under agreements to repurchase                                   638,988              746,181
  Advance from the Federal Home Loan Bank                                        1,000,000            1,000,000
  Accrued interest payable                                                          75,632               49,745
  Other liabilities                                                                153,151              156,844
                                                                              ------------         ------------
     Total liabilities                                                          38,652,988           29,187,734
                                                                              ------------         ------------

  Commitments and contingencies (Notes 4 and 16)

SHAREHOLDERS' EQUITY:
  Preferred stock, $.01 par value, 10,000,000 shares authorized
  and unissued                                                                          --                   --
  Common stock, $.01 par value, 10,000,000 shares authorized;
  616,338 shares issued and outstanding                                              6,163                6,163
  Capital surplus                                                                6,112,318            6,112,318
  Retained earnings (deficit)                                                      170,505             (110,659)
                                                                              ------------         ------------
     Total shareholders' equity                                                  6,288,986            6,007,822
                                                                              ------------         ------------

     Total liabilities and shareholders' equity                               $ 44,941,974         $ 35,195,556
                                                                              ============         ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       18
<PAGE>   20

                              FNB BANCSHARES, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                              2000              1999              1998
                                                           ----------        ----------        ----------
<S>                                                        <C>               <C>               <C>
INTEREST INCOME:
  Loans, including fees                                    $3,203,076        $2,408,140        $1,707,484
  Investment securities:
    Taxable                                                   144,568           138,085           108,917
  Federal funds sold                                          136,803           112,666           213,852
  Time deposits with other banks                                  200             1,000            29,071
                                                           ----------        ----------        ----------
    Total                                                   3,484,647         2,659,891         2,059,324
                                                           ----------        ----------        ----------

INTEREST EXPENSE:
  Time deposits $100,000 and over                             214,556           177,710           161,021
  Other deposits                                            1,087,494           737,792           570,226
  Federal funds purchased                                         802                --                --
  Securities sold under agreements to repurchase               25,006            21,512                --
  Advance from the Federal Home Loan Bank                      79,027             1,709            24,269
                                                           ----------        ----------        ----------
    Total                                                   1,406,885           938,723           755,516
                                                           ----------        ----------        ----------

NET INTEREST INCOME                                         2,077,762         1,721,168         1,303,808

Provision for loan losses                                     151,500           139,750           160,000
                                                           ----------        ----------        ----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES         1,926,262         1,581,418         1,143,808
                                                           ----------        ----------        ----------

OTHER OPERATING INCOME:
  Service charges on deposit accounts                          35,464            32,878            22,962
  NSF and overdraft fees                                      211,293           140,309            92,586
  Mortgage origination fees                                    22,589            75,697            30,546
  Other service charges, commissions, and fees                 88,487            62,269            47,790
                                                           ----------        ----------        ----------
    Total                                                     357,833           311,153           193,884
                                                           ----------        ----------        ----------

OTHER OPERATING EXPENSES:
  Salaries and benefits                                       905,586           790,095           623,635
  Occupancy expense                                           145,094           105,272            95,484
  Furniture and equipment                                     157,592           142,891           103,590
  Write-down on disposal of assets                                 --            45,894                --
  Office supplies                                              44,361            44,665            32,256
  Data processing                                             150,322           136,866            74,510
  Other operating expenses                                    442,596           367,454           277,729
                                                           ----------        ----------        ----------
    Total                                                   1,845,551         1,633,137         1,207,204
                                                           ----------        ----------        ----------

INCOME BEFORE INCOME TAXES                                    438,544           259,434           130,488

Income tax provision                                          157,380            88,185             3,096
                                                           ----------        ----------        ----------

NET INCOME                                                 $  281,164        $  171,249        $  127,392
                                                           ==========        ==========        ==========

Basic earnings per share                                   $     0.46        $     0.28        $     0.21
Diluted earnings per share                                 $     0.46        $     0.28        $     0.21
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       19
<PAGE>   21

                              FNB BANCSHARES, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                COMMON STOCK                                  RETAINED
                                           -----------------------          CAPITAL           EARNINGS
                                            SHARES         AMOUNT           SURPLUS           (DEFICIT)            TOTAL
                                           --------        -------        -----------        ----------         -----------
<S>                                        <C>             <C>            <C>                <C>                <C>
 BALANCE, DECEMBER 31, 1997                 616,338        $ 6,163        $ 6,112,318        $ (409,300)        $ 5,709,181

 Net income                                      --             --                 --           127,392             127,392
                                           --------        -------        -----------        ----------         -----------

 BALANCE, DECEMBER 31, 1998                 616,338          6,163          6,112,318          (281,908)          5,836,573

 Net income                                      --             --                 --           171,249             171,249
                                           --------        -------        -----------        ----------         -----------

 BALANCE, DECEMBER 31, 1999                 616,338          6,163          6,112,318          (110,659)          6,007,822

 Net income                                      --             --                 --           281,164             281,164
                                           --------        -------        -----------        ----------         -----------

 BALANCE, DECEMBER 31, 2000                 616,338        $ 6,163        $ 6,112,318        $  170,505         $ 6,288,986
                                           ========        =======        ===========        ==========         ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       20
<PAGE>   22

                              FNB BANCSHARES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                           2000              1999              1998
                                                                       ------------      ------------      ------------
<S>                                                                    <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                            $    281,164      $    171,249      $    127,392
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Provision for possible loan losses                                       151,500           139,750           160,000
   Depreciation and amortization expense                                    175,916           172,684            92,902
   Accretion and premium amortization                                          (326)              467               165
   Write-down on disposal of assets                                              --            45,894                --
   Deferred income tax provision (benefit)                                   10,033           (11,343)           (3,695)
   Increase in interest receivable                                         (109,595)          (80,100)           (5,077)
   Increase (decrease) in interest payable                                   25,887             1,946           (25,033)
   (Increase) decrease in other assets                                      674,622           (32,636)           72,089
   Increase (decrease) in other liabilities                                  (3,693)          (28,758)           31,588
                                                                       ------------      ------------      ------------
     Net cash provided by operating activities                            1,205,508           379,153           450,331
                                                                       ------------      ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of securities held-to-maturity                                (1,587,239)       (1,912,602)       (2,469,725)
 Maturities of securities held-to-maturity                                  300,000         1,350,000         2,100,000
 Purchase of time deposits with other banks                                      --                --        (1,000,000)
 Maturities of time deposits with other banks                                    --           500,000         1,100,000
 Net increase in loans to customers                                      (8,076,135)       (8,159,120)       (6,095,482)
 Purchases of premises and equipment                                       (559,640)         (628,833)       (1,135,616)
                                                                       ------------      ------------      ------------
     Net cash used by investing activities                               (9,923,014)       (8,850,555)       (7,500,823)
                                                                       ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net increase in demand deposits, interest-bearing                        2,345,743         3,596,448         3,098,948
 transaction accounts, and savings accounts
 Net increase in time deposits                                            7,204,510         2,542,680         4,437,020
 Net increase (decrease) in securities sold under agreements
   to repurchase                                                           (107,193)         (123,088)          444,856
 Advance from the Federal Home Loan Bank                                         --         1,000,000                --
                                                                       ------------      ------------      ------------
Net cash provided by financing activities                                 9,443,060         7,016,040         7,980,824
                                                                       ------------      ------------      ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        725,554        (1,455,362)          930,332

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            1,912,403         3,367,765         2,437,433
                                                                       ------------      ------------      ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                               $  2,637,957      $  1,912,403      $  3,367,765
                                                                       ============      ============      ============

SUPPLEMENTAL DISCLOSURES:
 Cash paid during the year for interest                                $  1,380,998      $    936,777      $    780,549
 Cash paid during the year for taxes                                   $    168,692      $     88,141      $         --
SUPPLEMENTAL NONCASH INVESTING ACTIVITIES:
 Loans transferred to repossessed assets                               $    146,596      $    569,961      $         --
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       21
<PAGE>   23

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND CONSOLIDATION - FNB Bancshares, Inc., a bank holding company
(the "Company"), and its subsidiary, First National Bank of the Carolinas (the
"Bank"), provide banking services to domestic markets principally in Cherokee
County, South Carolina. The Bank commenced operations on October 18, 1996. The
consolidated financial statements include the accounts of the parent company and
its wholly-owned subsidiary after elimination of all significant intercompany
balances and transactions.

MANAGEMENT'S ESTIMATES - The preparation of 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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans, including
valuation allowances for impaired loans and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowances for losses on loans and
foreclosed real estate, management obtains independent appraisals for
significant properties. Management must also make estimates in determining the
estimated useful lives and methods for depreciating premises and equipment.

While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the
Company's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Company to recognize additions to the allowances based
on their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change materially
in the near term.

CONCENTRATIONS OF CREDIT RISK - Financial instruments, which potentially subject
the Bank to concentrations of credit risk, consist principally of loans
receivable, investment securities, federal funds sold and amounts due from
banks. Management is not aware of any concentrations of loans to classes of
borrowers or industries that would be similarly affected by economic conditions.
Although the Bank's loan portfolio is diversified, a substantial portion of its
borrower's ability to honor the terms of their loans is dependent on business
and economic conditions in Cherokee County and surrounding areas. Management
does not believe credit risk is associated with obligations of the United
States, its agencies or corporations. The Bank places its deposits and
correspondent accounts with and sells federal funds to high credit quality
financial institutions. By policy, time deposits are limited to amounts insured
by the FDIC. Management believes credit risk associated with these financial
instruments is not significant.

SECURITIES HELD TO MATURITY - Investment securities are stated at cost, adjusted
for amortization of premium and accretion of discount computed by the
straight-line method. The Company has the ability and management has the intent
to hold investment securities to maturity. Reductions in market value considered
by management to be other than temporary are reported as a realized loss and a
reduction in the cost basis of the security.

NONMARKETABLE EQUITY SECURITIES - Nonmarketable equity securities include the
cost of the Company's investment in the stock of the Federal Home Loan Bank. The
stock has no quoted market value and no ready market exists. Investment in
Federal Home Loan Bank stock is a condition of borrowing from the Federal Home
Loan Bank, and the stock is pledged to secure the borrowings. There was a
$1,000,000 outstanding advance at December 31, 2000 and 1999. At December 31,
2000 and 1999, the investment in Federal Home Loan Bank stock was $100,000 and
$83,700, respectively.


                                       22
<PAGE>   24

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FORECLOSED ASSETS - Assets acquired through, or in lieu of, loan foreclosure are
held for sale and are initially recorded at fair value at the date of
foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets are carried
at the lower of carrying amount or fair value less cost to sell. Revenue and
expenses from operations and changes in the valuation allowance are included in
net expenses from foreclosed assets.

LOANS - Loans are stated at their unpaid principal balance. Interest income is
computed using the simple interest method and is recorded in the period earned.

When serious doubt exists as to the collectibility of a loan or when a loan
becomes 90 days past due as to principal or interest, interest income is
generally discontinued unless the estimated net realizable value of collateral
exceeds the principal balance and accrued interest. When interest accruals are
discontinued, income earned but not collected is reversed.

ALLOWANCE FOR LOAN LOSSES - An allowance for possible loan losses is maintained
at a level deemed appropriate by management to provide adequately for known and
inherent risks in the loan portfolio. The allowance is based upon a continuing
review of past loan loss experience, current, and future economic conditions
which may affect the borrowers' ability to pay, and the underlying collateral
value of the loans. Loans which are deemed to be uncollectible are charged-off
and deducted from the allowance. The provision for possible loan losses and
recoveries of loans previously charged-off are added to the allowance.

Impaired loans are measured based on the present value of discounted expected
cash flows. When it is determined that a loan is impaired, a direct charge to
bad debt expense is made for the difference between the net present value of
expected future cash flows based on the contractual rate and discount rate and
the Bank's recorded investment in the related loan. The corresponding entry is
to a related valuation account. Interest is discontinued on impaired loans when
management determines that a borrower may be unable to meet payments as they
become due.

PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation. The provision for depreciation is computed by the
straight-line method, based on the following estimated useful lives: buildings -
40 years; furniture and equipment - 5 to 10 years. The cost of assets sold or
otherwise disposed of, and the related allowance for depreciation is eliminated
from the accounts and the resulting gains or losses are reflected in the income
statement when incurred. Maintenance and repairs are charged to current expense.
The costs of major renewals and improvements are capitalized.

FEDERAL RESERVE BANK STOCK - Other assets includes the cost of the Company's
investment in the stock of the Federal Reserve Bank. The stock has no quoted
market value and no ready market exists. Investment in Federal Reserve Bank
stock is required by law of every national bank. The investment in Federal
Reserve Bank Stock was $132,450 at December 31, 2000 and 1999.

INCOME AND EXPENSE RECOGNITION - The accrual method of accounting is used for
all significant categories of income and expense. Other miscellaneous fees are
reported when received.

RETIREMENT PLAN - The Company adopted a contributory 401(K) plan in 1998, which
covers substantially all employees. Under the plan, participants are permitted
to make discretionary contributions up to 15% of annual compensation. At its
discretion, the Company can make matching contributions of $.25 per $1.00 up to
6% of the participants' annual compensation. Expenses charged to earnings in
2000, 1999, and 1998 for the plan were $7,769, $5,727, and $4,096, respectively.


                                       23
<PAGE>   25

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

INCOME TAXES - Income taxes are the sum of amounts currently payable to taxing
authorities and the net changes in income taxes payable or refundable in future
years. Income taxes deferred to future years are determined utilizing a
liability approach. This method gives consideration to the future tax
consequences associated with differences between financial accounting and tax
bases of certain assets and liabilities which are principally the allowance for
loan losses and depreciable premises and equipment.

PER-SHARE AMOUNTS - Basic earnings per share is computed by dividing net income
by the weighted-average number of shares outstanding for the period excluding
the affects of any dilutive potential common shares. Diluted earnings per share
is similar to the computation of basic earnings per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued. The dilutive effect of options outstanding under the Company's stock
option plan are reflected in diluted earnings per share by the application of
the treasury stock method. See Note 17.

STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows in the financial
statements, the Company considers certain highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents. Cash
equivalents include amounts due from banks and federal funds sold. Generally,
federal funds are sold for one-day periods.

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business,
the Company enters into off-balance-sheet financial instruments consisting of
commitments to extend credit and letters of credit. These financial instruments
are recorded in the financial statements when they become payable by the
customer.

RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998, the FASB issued Statement
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities,
effective for fiscal years beginning after June 15, 2000. This Statement
establishes accounting and reporting standards for derivative instruments and
hedging activities, including certain derivative instruments embedded in other
contracts, and requires that an entity recognize all derivatives as assets or
liabilities in the balance sheet and measure them at fair value. The accounting
for changes in the fair value of a derivative depends on how the derivative is
used and how the derivative is designated. The Company adopted SFAS on July 1,
2000. The adoption of SFAS No. 133 did not have a material impact on the
consolidated financial statements.

RECLASSIFICATIONS - Certain captions and amounts in the 1999 and 1998 financial
statements were reclassified to conform with the 2000 presentation.

NOTE 2 - CASH AND DUE FROM BANKS

The Company is required by regulation to maintain average reserve balances with
the Federal Reserve Bank computed as a percentage of deposits. These
requirements were satisfied by vault cash and cash on hand.


                                       24
<PAGE>   26

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INVESTMENT SECURITIES

The amortized costs and estimated market values of securities held to maturity
at December 31, 2000 and 1999 were:

<TABLE>
<CAPTION>
                                                                    GROSS         GROSSS
                                                   AMORTIZED      UNREALIZED    UNREALIZED     ESTIMATED
                                                      COST          GAINS         LOSSES       FAIR VALUE
                                                   ----------     ----------    ----------     ----------

<S>                                                <C>            <C>           <C>            <C>
DECEMBER 31, 2000
U.S. government agencies and corporations          $3,620,591      $  2,624      $  8,248      $3,614,967
                                                   ==========      ========      ========      ==========

DECEMBER 31, 1999
U.S. government agencies and corporations          $2,349,326      $     --      $ 30,954      $2,318,372
                                                   ==========      ========      ========      ==========
</TABLE>

The following is a summary of maturities of securities held to maturity as of
December 31, 2000. The amortized cost and estimated fair values are based on the
contractual maturity dates. Actual maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.

<TABLE>
<CAPTION>
                                                           SECURITIES
                                                        HELD-TO-MATURITY
                                                   --------------------------
                                                   AMORTIZED       ESTIMATED
                                                      COST         FAIR VALUE
                                                   ----------      ----------
<S>                                                <C>             <C>
Due in one year or less                            $1,775,840      $1,773,608
Due after one year but within five years            1,844,751       1,841,359
                                                   ----------      ----------

Total                                              $3,620,591      $3,614,967
                                                   ==========      ==========
</TABLE>

At December 31, 2000 and 1999, investment securities with a book value of
$3,544,730 and $2,349,326, respectively, and a market value of $3,536,482 and
$2,318,372, respectively, were pledged as collateral to secure public deposits
and for other purposes as required and permitted by law.

NOTE 4 - LOANS

Major classifications of loans receivable as of December 31, 2000 and 1999 are
summarized as follows:

<TABLE>
<CAPTION>
                                                            December 31,
                                                   ------------------------------
                                                       2000              1999
                                                   ------------      ------------

<S>                                                <C>               <C>
Commercial, financial, and agricultural            $  6,414,785      $  5,830,787
Real estate - construction                            1,118,659           404,305
Real estate - other                                  21,735,152        15,971,529
Consumer and other                                    6,377,387         5,623,537
                                                   ------------      ------------

    Total gross loans                              $ 35,645,983      $ 27,830,158
                                                   ============      ============
</TABLE>


                                       25
<PAGE>   27

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LOANS (continued)

The Company identifies impaired loans through its normal internal loan review
process. Loans on the Company's problem loan watch list are considered
potentially impaired loans. These loans are evaluated in determining whether all
outstanding principal and interest are expected to be collected. Loans are not
considered impaired if a minimal delay occurs and all amounts due including
accrued interest at the contractual interest rate for the period of delay are
expected to be collected. At December 31, 2000, management has determined that
no impairment of loans existed that would have a material effect on the
Company's financial statements.

The accrual of interest is discontinued on impaired loans when management
anticipates that a borrower may be unable to meet the obligations of the note.
Accrued interest through the date interest is discontinued is reversed.
Subsequent interest earned is recognized only to the point that cash payments
are received. All payments are applied to principal if the ultimate amount of
principal is not expected to be collected.

Transactions in the allowance for loan losses for the years ended December 31,
2000, 1999, and 1998 are summarized below:

<TABLE>
<CAPTION>
                                                      2000            1999            1998
                                                   ----------      ----------      ----------

<S>                                                <C>             <C>             <C>
Balance, beginning of year                         $  429,049      $  303,248      $  152,614
Provision charged to operations                       151,500         139,750         160,000
Recoveries on loans previously charged off              9,712          12,956             402
Loans charged off                                    (123,426)        (26,905)         (9,768)
                                                   ----------      ----------      ----------

Balance, end of year                               $  466,835      $  429,049      $  303,248
                                                   ==========      ==========      ==========
</TABLE>

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and standby
letters of credit. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. A commitment involves, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The Company's exposure to credit
loss in the event of nonperformance by the other party to the instrument is
represented by the contractual notional amount of the instrument. Since certain
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company uses the same credit policies in making commitments to extend credit as
it does for on-balance-sheet instruments. Letters of credit are conditional
commitments issued to guarantee a customer's performance to a third party and
have essentially the same credit risk as other lending facilities.

The following table summarizes the Company's off-balance-sheet financial
instruments whose contract amounts represent credit risk as of December 31, 2000
and 1999:

<TABLE>
<CAPTION>
                                          2000            1999
                                       -----------     -----------

<S>                                    <C>             <C>
Commitments to extend credit           $ 2,885,763     $ 3,365,542
</TABLE>

Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
Although the Bank's loan portfolio is diversified, a substantial portion of its
borrowers' ability to honor the terms of their loans is dependent on the
economic conditions in Cherokee County and surrounding areas.


                                       26
<PAGE>   28

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                            2000            1999
                                         ----------      ----------

<S>                                      <C>             <C>
Land                                     $  436,037      $  245,492
Building and land improvements            1,709,998       1,709,998
Furniture and equipment                     681,420         615,801
Construction in progress                    303,477              --
                                         ----------      ----------
Total                                     3,130,932       2,571,291
Less, accumulated depreciation              533,396         357,479
                                         ----------      ----------

Premises and equipment, net              $2,597,536      $2,213,812
                                         ==========      ==========
</TABLE>

The Company has committed to spend an additional $340,000 to complete the
construction of the Blacksburg office.

NOTE 6 - DEPOSITS

At December 31, 2000, the scheduled maturities of time deposits are as follows:

<TABLE>
<CAPTION>
MATURING IN                             Amount
-----------                         ------------
<S>                                 <C>
 2001                               $ 17,079,993
 2002                                  4,033,303
 2003                                    167,934
 2004                                     94,347
                                    ------------

 Total                              $ 21,375,577
                                    ============
</TABLE>

NOTE 7 - ADVANCE FROM THE FEDERAL HOME LOAN BANK

The advance from the Federal Home Loan Bank consisted of a $1,000,000 variable
rate advance bearing an interest rate of 6.35%. The advance is scheduled to
mature on December 21, 2001.

As collateral, the Company has pledged first mortgage loans on one to four
family residential loans totaling $9,301,917 at December 31, 2000. In addition,
the Company's Federal Home Loan Bank stock is pledged to secure the borrowings.


                                       27
<PAGE>   29

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

At December 31, 2000 and 1999, the Bank had arrangements to sell securities
under agreements to repurchase from a local electric cooperative. Under the
terms of the arrangement, the Bank may borrow at mutually agreed-upon rates for
one to seven day periods. Either party may cancel the arrangement without
penalty. Information concerning securities sold under agreements to repurchase
for the years ended December 31, 2000 and 1999 is summarized as follows:

<TABLE>
<CAPTION>
                                                      2000             1999
                                                   ----------       ----------

<S>                                                <C>              <C>
Average balance during the year                    $  636,463       $  538,136

Average interest rate during the year                    4.00%            4.00%

Maximum month-end balance during the year          $1,141,284       $  764,154
</TABLE>

As of December 31, 2000 and 1999, the amortized costs and market values of the
securities underlying the agreements were $1,500,000 and $1,499,470 and
$1,492,608 and $1,476,357, respectively.

NOTE 9 - RELATED PARTY TRANSACTIONS

Certain parties (principally certain directors and executive officers of the
Company, their immediate families and business interests) were loan customers of
and had other transactions in the normal course of business with the Company.
Related party loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than the normal risk
of collectibility. As of December 31, 2000 and 1999, the Company had related
party loans totaling $443,038, and $99,443, respectively. During 2000, $664,371
of new loans were made to related parties and repayments totaled $320,776.

NOTE 10 - RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS, OR ADVANCES

The ability of FNB Bancshares, Inc., to pay cash dividends is dependent upon
receiving cash in the form of dividends from the Bank. However, certain
restrictions exist regarding the ability of the subsidiary to transfer funds to
FNB Bancshares, Inc., in the form of cash dividends, loans, or advances. The
approval of the Office of the Comptroller of the Currency is required to pay
dividends in excess of the Bank's net profits (as defined) for the current year
plus retained net profits (as defined) for the preceding two years, less any
required transfers to surplus. The undivided profits of the Bank at December 31,
2000 were not sufficient under the restrictions to pay cash dividends to FNB
Bancshares, Inc.


                                       28
<PAGE>   30

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES

Income tax expense for the years ended December 31, 2000, 1999, and 1998 are
summarized as follows:

<TABLE>
<CAPTION>
                                                2000          1999          1998
                                              --------      --------      --------

<S>                                           <C>           <C>           <C>
Currently payable:
Federal                                       $135,006      $ 94,687      $     --
State                                           12,341         5,167            --
                                              --------      --------      --------
Total current                                  147,347        99,854            --
                                              --------      --------      --------
Change in deferred income taxes:
Federal                                          9,020       (13,684)       (2,811)
State                                            1,013         2,015         5,907
                                              --------      --------      --------
Total deferred                                  10,033       (11,669)        3,096
                                              --------      --------      --------

Income tax expense                            $157,380      $ 88,185      $  3,096
                                              ========      ========      ========
</TABLE>

The gross amounts of deferred tax assets and deferred tax liabilities as of
December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                              --------------------------
                                                 2000            1999
                                              ----------      ----------
<S>                                           <C>             <C>
Deferred tax assets:
 Allowance for loan losses                    $  152,458      $  146,720
 Organization costs                               15,130          33,286
 Accumulated depreciation                          2,523             320
 Net operating loss carryforward                     509             327
                                              ----------      ----------
   Total deferred tax assets                     170,620         180,653

Deferred tax liabilities                              --              --
                                              ----------      ----------

Net deferred tax assets                       $  170,620      $  180,653
                                              ==========      ==========
</TABLE>

Deferred tax assets represent the future tax benefit of future deductible
differences and, if it is more likely than not that a tax asset will not be
realized, a valuation allowance is required to reduce the recorded deferred tax
assets to net realizable value. Management has determined that it is more likely
than not that the entire deferred tax asset at December 31, 2000 will be
realized and, accordingly, has not established a valuation allowance.


                                       29
<PAGE>   31

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES (continued)

A reconciliation between the income tax expense and the amount computed by
applying the federal statutory rate of 34% to income before income taxes is as
follows:

<TABLE>
<CAPTION>
                                                                2000            1999            1998
                                                             ----------      ----------      ----------
<S>                                                          <C>             <C>             <C>
Tax expense at statutory rate                                $  149,105      $   88,208      $   44,366
Surtax exemption                                                     --          (1,702)        (10,226)
State income tax, net of federal income tax benefit               9,155           5,425           5,907
Other, net                                                         (880)         (3,746)        (36,951)
                                                             ----------      ----------      ----------

                                                             $  157,380      $   88,185      $    3,096
                                                             ==========      ==========      ==========
</TABLE>

NOTE 12 - OTHER EXPENSES

Other expenses for the years ended December 31, 2000, 1999, and 1998 are
summarized as follows:

<TABLE>
<CAPTION>
                                                      2000            1999            1998
                                                   ----------      ----------      ----------

<S>                                                <C>             <C>             <C>
Amortization of organizational costs               $   18,084      $   18,084      $   17,850
Correspondent bank fees                                32,739          26,087          18,012
Printing and postage                                   28,599          27,650          17,782
Advertising and promotion                              39,204          22,085          14,149
Legal and accounting                                   46,824          33,000          27,530
Telephone expenses                                     22,865          25,053          22,729
ATM surcharges                                         26,578          24,095           9,459
Courier                                                16,878          18,695          16,975
Other                                                 210,825         172,705         133,243
                                                   ----------      ----------      ----------

   Total                                           $  442,596      $  367,454      $  277,729
                                                   ==========      ==========      ==========
</TABLE>

NOTE 13 - STOCK-BASED COMPENSATION

The Company has an Incentive Stock Option Plan (Stock Plan) that provides for
the granting of options to purchase up to 152,450 shares of the Company's common
stock to directors, officers, or employees of the Company. The per-share
exercise price of incentive stock options granted under the Stock Plan may not
be less than the fair market value of a share on the date of grant, nor can the
exercise date of any incentive stock options granted be less than one year from
the date of the grant. The per-share exercise price of stock options granted is
determined by a committee appointed by the Board of Directors. The expiration
date of any option may not be greater than ten years from the date of grant.
Options that expire, unexercised or are canceled become available for issuance.
At December 31, 2000, there were 33,319 options available for grant.


                                       30
<PAGE>   32

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCK-BASED COMPENSATION (continued)

The Company applies APB Opinion No. 25 and related interpretations in accounting
for stock options. Accordingly, no compensation cost has been recognized. Had
compensation cost for the Company's stock options been determined based on the
fair value at the grant dates consistent with the method of FASB Statement 123,
the Company's net income and earnings per share for the years ended December 31,
2000, 1999, and 1998 would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                            2000            1999            1998
                                         ----------      ----------      ----------

<S>                                      <C>             <C>             <C>
Net income:
 As reported                             $  281,164      $  171,249      $  127,392
 Pro forma                                  189,534          83,193          82,909

Basic earnings per share:
 As reported                             $     0.46      $     0.28      $     0.21
 Pro forma                                     0.31            0.13            0.13

Diluted earnings per share:
 As reported                             $     0.46      $     0.28      $     0.21
 Pro forma                                     0.31            0.13            0.13
</TABLE>

In calculating the pro forma disclosures, the fair value of options granted is
estimated as of the date granted using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in 2000, 1999
and 1998: dividend yield of 0 percent; expected volatility of 0 percent;
risk-free interest rates of 6.55%, 5.56% and 4.62% for 2000, 1999 and 1998,
respectively; and an expected life of 10 years for all three years.

The weighted-average fair value of options, calculated using the Black-Scholes
option-pricing model, granted during 2000, 1999 and 1998 is $4.75, $4.21 and
$3.67, respectively.

A summary of the status of the Company's stock option plan as of December 31,
2000, 1999, and 1998 and changes during the years ending on those dates is
presented below:

<TABLE>
<CAPTION>
                                        2000                        1999                        1998
                               ----------------------      ----------------------      ----------------------
                                             WEIGHTED                    WEIGHTED                    WEIGHTED
                                             AVERAGE                     AVERAGE                     AVERAGE
                                             EXERCISE                    EXERCISE                    EXERCISE
                                SHARES        PRICE         SHARES        PRICE         SHARES        PRICE
                               --------      --------      --------      --------      --------      --------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>
Outstanding                     111,131      $  10.00       102,846      $  10.00        45,566      $  10.00
at beginning of year
Granted                           8,000      $  10.00         8,285      $  10.00        57,280      $  10.00
Exercised                            --      $     --            --      $     --            --      $     --
Cancelled                            --      $     --            --      $     --            --      $     --
                               --------                    --------                    --------

Outstanding
  at ending of year             119,131      $  10.00       111,131      $  10.00       102,846      $  10.00
                               ========                    ========                    ========
</TABLE>

Options exercisable at December 31, 2000, 1999, and 1998 were 61,021, 38,795,
and 18,226, respectively.


                                       31
<PAGE>   33

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCK-BASED COMPENSATION (continued)

At December 31, 2000, the outstanding stock options had a weighted average
remaining life of 7.31 years and a remaining life of 6.69 years for those stock
options that were exercisable. All stock options that have been issued by the
Company have an exercisable price of $10.00.

NOTE 14 - UNUSED LINES OF CREDIT

As of December 31, 2000, the Bank had unused lines of credit to purchase federal
funds from unrelated banks totaling $1,500,000. These lines of credit are
available on a one to fourteen-day basis for general corporate purposes.

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair value estimates are made at a
specific point in time based on relevant market information and information
about the financial instruments. Because no market value exists for a
significant portion of the financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. The following methods and assumptions were used to estimate the fair
value of significant financial instruments:

Cash and Due from Banks - The carrying amount is a reasonable estimate of fair
value.

Federal Funds Sold - Federal funds sold are for a term of one day, and the
carrying amount approximates the fair value.

Investment Securities - The fair values of marketable securities held to
maturity are based on quoted market prices or dealer quotes.

Loans - For certain categories of loans, such as variable rate loans which are
repriced frequently and have no significant change in credit risk, fair values
are based on the carrying amounts. The fair value of other types of loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to the borrowers with similar credit ratings and for
the same remaining maturities.

Deposits - The fair value of demand deposits, savings, and money market accounts
is the amount payable on demand at the reporting date. The fair values of time
deposits are estimated using a discounted cash flow calculation that applies
current interest rates to a schedule of aggregated expected maturities.

Advance from the Federal Home Loan Bank - The carrying amounts of variable rate
borrowings are reasonable estimates of fair value because they can be repriced
frequently. The fair values of fixed rate borrowings are estimated using a
discounted cash flow calculation that applies the Company's current borrowing
rate from the Federal Home Loan Bank.

Securities Sold under Agreements to repurchase - The carrying amount is a
reasonable estimate of fair value because these instruments typically have terms
of one day.

Accrued Interest Receivable and Payable - The carrying value of these
instruments is a reasonable estimate of fair value.


                                       32
<PAGE>   34

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Off-balance-sheet Financial Instruments - The carrying amount for loan
commitments and letters of credit, which are off-balance-sheet financial
instruments, approximates the fair value since the obligations are typically
issued on a short-term or floating rate basis.

The carrying values and estimated fair values of the Company's financial
instruments at December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                     2000                                1999
                                                        ------------------------------      ------------------------------
                                                          CARRYING         ESTIMATED          CARRYING         ESTIMATED
                                                           AMOUNT          FAIR VALUE          AMOUNT          FAIR VALUE
                                                        ------------      ------------      ------------      ------------

<S>                                                     <C>               <C>               <C>               <C>
FINANCIAL ASSETS:
 Cash and due from banks                                $  1,487,957      $  1,487,957      $  1,512,403      $  1,512,403
 Federal funds sold                                        1,150,000         1,150,000           400,000           400,000
 Securities held-to-maturity                               3,620,591         3,614,967         2,349,326         2,318,372
 Loans                                                    35,645,983        35,419,957        27,830,158        27,943,854
 Allowance for loan losses                                  (466,835)         (466,835)         (429,049)         (429,049)
 Accrued interest receivable                                 317,271           317,271           207,676           207,676

FINANCIAL LIABILITIES:
 Demand deposit, interest-bearing                       $ 15,409,640      $ 15,409,640      $ 13,063,897      $ 13,063,897
  transaction, and savings accounts
 Time deposits                                            21,375,577        21,357,744        14,171,067        14,123,135
 Advances from the Federal Home Loan Bank                  1,000,000         1,000,000         1,000,000         1,000,000
 Securities sold under agreements to repurchase              638,988           638,988           746,181           746,181
 Accrued interest payable                                     75,632            75,632            49,745            49,745

<CAPTION>
                                                          Notional         Estimated          Notional         Estimated
                                                           Amount          Fair Value          Amount          Fair Value
                                                        ------------      ------------      ------------      ------------

<S>                                                     <C>               <C>               <C>               <C>
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
Commitments to extend credit                            $  2,885,763      $  2,885,763      $  3,365,542      $  3,365,542
</TABLE>


                                       33
<PAGE>   35

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company may, from time to time, become a
party to legal claims and disputes. At December 31, 2000, management and legal
counsel are not aware of any pending or threatened litigation or unasserted
claims or assessments that could result in losses, if any, that would be
material to the financial statements.

NOTE 17 - EARNINGS PER SHARE

Basic EPS excludes dilution and is computed by dividing net income available to
common shareholders by the weighted-average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.

The reconciliation of the numerators and denominators used to calculate basic
and diluted earnings per share have not been presented since both calculations
result in the same per share calculation. Options to purchase 119,131 and
111,131 shares of common stock at $10 per share were outstanding at December 31,
2000 and 1999, respectively. The stock options were not included in the
computation of diluted EPS for December 31, 2000 and 1999 because they would
have resulted in an anti-dilutive per share amount since the exercise price and
market price were both $10 per share.

NOTE 18 - REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios of Tier 1 and total capital as a
percentage of assets and off-balance-sheet exposures, adjusted for risk weights
ranging from 0% to 100%. Tier 1 capital consists of common shareholders' equity,
excluding the unrealized gain or loss on securities available for sale, minus
certain intangible assets. Tier 2 capital consists of the allowance for loan
losses subject to certain limitations. Total regulatory minimum requirements are
4% for Tier 1 and 8% for total risk-based capital.

The Bank is also required to maintain capital at a minimum level based on
average assets, which is known as the leverage ratio. Banks are to maintain
capital at the minimum requirement of 3%.

As of December 31, 2000, the most recent notification from the Bank's primary
regulator categorized the Bank as well-capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events that
management believes have changed the Bank's category.


                                       34
<PAGE>   36

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 - REGULATORY MATTERS (continued)

The following table summarizes the capital amounts and ratios of the Bank and
the regulatory minimum requirements at December 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                                                                TO BE WELL-
                                                                                                             CAPITALIZED UNDER
                                                                                    FOR CAPITAL              PROMPT CORRECTIVE
                                                           ACTUAL                ADEQUACY PURPOSES           ACTION PROVISIONS
                                                   ----------------------      ----------------------      ----------------------
                                                     AMOUNT         RATIO        AMOUNT         RATIO        AMOUNT         RATIO
                                                   ----------       -----      ----------       -----      ----------       -----

<S>                                                <C>              <C>        <C>              <C>        <C>              <C>
DECEMBER 31, 2000
 Total capital (to risk-weighted assets)           $5,296,737       14.34%     $2,954,738        8.00%     $3,693,423       10.00%
 Tier 1 capital (to risk-weighted assets)           4,834,572       13.09%      1,477,369        4.00%      2,216,054        6.00%
 Tier 1 capital (to average assets)                 4,834,572       10.78%      1,794,318        4.00%      2,242,898        5.00%

DECEMBER 31, 1999
 Total capital (to risk-weighted assets)           $4,887,851       17.39%     $2,248,268        8.00%     $2,810,335       10.00%
 Tier 1 capital (to risk-weighted assets)           4,536,559       16.14%      1,124,134        4.00%      1,686,201        6.00%
 Tier 1 capital (to average assets)                 4,536,559       12.89%      1,441,769        4.00%      1,802,212        5.00%
</TABLE>

The Federal Reserve Board has similar requirements for bank holding companies.
The Company is currently not subject to these requirements because the Federal
Reserve guidelines contain an exemption for bank holding companies of less than
$150,000,000 in consolidated assets.

NOTE 19 - FNB BANCSHARES, INC. (PARENT COMPANY ONLY)

                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                            2000              1999
                                                        ------------      ------------

<S>                                                     <C>               <C>
ASSETS
 Cash                                                   $  1,437,200      $  1,435,988
 Investment in banking subsidiary                          4,846,573         4,563,020
 Other assets                                                  5,213            10,069
                                                        ------------      ------------

  Total assets                                          $  6,288,986      $  6,009,077
                                                        ============      ============

LIABILITIES
 Other liabilities                                      $         --      $      1,255

SHAREHOLDERS' EQUITY
 Common stock                                                  6,163             6,163
 Capital surplus                                           6,112,318         6,112,318
 Retained earnings (deficit)                                 170,505          (110,659)
                                                        ------------      ------------
  Total shareholders' equity                               6,288,986         6,007,822
                                                        ------------      ------------
  Total liabilities and shareholders' equity            $  6,288,986      $  6,009,077
                                                        ============      ============
</TABLE>


                                       35
<PAGE>   37

                              FNB BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 - FNB BANCSHARES, INC. (PARENT COMPANY ONLY) (continued)

                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                     2000            1999            1998
                                                                  ----------      ----------      ----------
<S>                                                               <C>             <C>             <C>
INCOME                                                            $       --      $       --      $       --

EXPENSES                                                               3,625           3,625           3,650
                                                                  ----------      ----------      ----------

INCOME BEFORE INCOME TAXES AND EQUITY IN                              (3,625)         (3,625)         (3,650)
 UNDISTRIBUTED EARNINGS OF BANKING SUBSIDIARY

 Income tax benefit                                                    1,236           1,254           1,352

 Equity in undistributed earnings of banking subsidiary              283,553         173,620         129,690
                                                                  ----------      ----------      ----------

  NET INCOME                                                      $  281,164      $  171,249      $  127,392
                                                                  ==========      ==========      ==========
</TABLE>

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                           2000              1999              1998
                                                                       ------------      ------------      ------------

<S>                                                                    <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                            $    281,164      $    171,249      $    127,392
 Adjustments to reconcile net income to net cash provided
 by operating activities:
  Decrease in other assets                                                    4,856            64,404               828
  Increase (decrease) in other liabilities                                   (1,255)            1,255                --
  Equity in undistributed earnings of banking subsidiary                   (283,553)         (173,620)         (129,690)
                                                                       ------------      ------------      ------------
   Net cash provided by operating activities                                  1,212            63,288            (1,470)
                                                                       ------------      ------------      ------------

INCREASE IN CASH                                                              1,212            63,288            (1,470)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            1,435,988         1,372,700         1,374,170
                                                                       ------------      ------------      ------------

CASH AND CASH EQUIVALENTS, ENDING OF PERIOD                            $  1,437,200      $  1,435,988      $  1,372,700
                                                                       ============      ============      ============
</TABLE>


                                       36
<PAGE>   38

                              FNB BANCSHARES, INC.

                               BOARD OF DIRECTORS

<TABLE>
          <S>                                    <C>
          Dr. Richard D. Gardner                      V. Stephen Moss

             Barry L. Hamrick                    Harold D. Pennington, Jr.

            Haskell D. Mallory                   Harold D. Pennington, Sr.

               Bill H. Mason                         Heyward W. Porter
</TABLE>

                                 SENIOR OFFICERS

                           V. Stephen Moss, President

                      Thomas W. Hale, Chief Credit Officer

                     John W. Hobbs, Chief Financial Officer

                                    OFFICERS

              Danny Ham, Vice President, Blacksburg City Executive

                  Mike Grubbs, Vice President, Consumer Banker

            Tina Gainey, Assistant Vice President, Operations Officer

                                    SERVICES

<TABLE>
<S>                                      <C>                                    <C>
All-Day Banking                          Commercial Loans                       Personal Checking
American Express Travelers Checks        Direct Deposits                        Personal Lines of Credit
ATM Service                              Discount Brokerage Service             Personal Loans
Bank By Mail                             Drive-In Service                       Regular Savings
Bond Coupon Redemption                   Individual Retirement Accounts         Safe Deposit Boxes
Business Checking                        Interest Checking                      Senior Checking
Cashiers Checks                          Letters of Credit                      Treasury, Tax & Loan Deposits
Certificates of Deposit                  Money Market Accounts                  U.S. Savings Bonds
Christmas Clubs                          Night Depository                       Visa and Master Card
Collection Items                         Overdraft Protection                   Wire Transfers
</TABLE>


                                       37
<PAGE>   39
                              FNB BANCSHARES, INC.
                                 CORPORATE DATA

ANNUAL MEETING:

The Annual Meeting of Shareholders of FNB Bancshares, Inc. will be held at 5:30
p.m. on April 24, 2001 at our offices at 217 North Granard Street, Gaffney,
South Carolina.

<TABLE>
<S>                                   <C>
CORPORATE OFFICE:                     GENERAL COUNSEL:

217 N. Granard Street                 Nelson Mullins Riley & Scarborough, L.L.P.
Gaffney, South Carolina 29341         First Union Plaza, Suite 1400
Phone (864) 488-2265                  999 Peachtree Street, NE
Fax (864) 488-0041                    Atlanta, Georgia, 30309

STOCK TRANSFER DEPARTMENT:            INDEPENDENT AUDITORS:

First Citizens Bank                   Tourville, Simpson & Caskey, L.L.P.
P.O. Box 29                           P.O. Box 1769
Columbia, South Carolina 29202        Columbia, S.C. 29202
</TABLE>

STOCK INFORMATION:

The Common Stock of FNB Bancshares, Inc. is not listed on any exchange. However,
the Company's stock trades under the symbol "FNBC" on the OTC Bulletin Board.
Trading and quotations of the common stock have been limited and sporadic.
Management is not aware of the prices at which all shares of stock have been
traded. The only trades of which the Company is aware were at $10.00 per share.
As of December 31, 2000, there were 548 shareholders of record.

The ability of FNB Bancshares, Inc. to pay cash dividends is dependent upon
receiving cash in the form of dividends from First National Bank of the
Carolinas. However, certain restrictions exist regarding the ability of the Bank
to transfer funds to the Company in the form of cash dividends. All of the
Bank's dividends to the Company are payable only from the undivided profits of
the Bank.

                                    FORM 10-K

THE COMPANY WILL FURNISH UPON REQUEST, FREE OF CHARGE, COPIES OF THE ANNUAL
REPORT AND THE COMPANY'S REPORT TO THE SECURITIES AND EXCHANGE COMMISSION (FORM
10-K) BY CONTACTING JOHN HOBBS, CHIEF FINANCIAL OFFICER, FNB BANCSHARES, INC.,
P.O. BOX 1539, GAFFNEY, SOUTH CAROLINA 29342.

This Annual Report serves as the ANNUAL FINANCIAL DISCLOSURE STATEMENT furnished
pursuant to Part 350 of the Federal Deposit Insurance Corporations Rules and
Regulations. THIS STATEMENT HAS NOT BEEN REVIEWED, OR CONFIRMED FOR ACCURACY OR
RELEVANCE BY THE OFFICE OF THE COMPTROLLER OF THE CURRENCY.


                                       38