SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10 - Q

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                         Commission File Number: 0-13086



                       FNB FINANCIAL SERVICES CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


        North Carolina                                        56 - 1382275
--------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification Number)


202 South Main Street, Reidsville, North Carolina                       27320
--------------------------------------------------------------------------------
     (Address of principal executive offices)                         (Zip Code)


                                 (336) 342-3346
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                 Not Applicable
--------------------------------------------------------------------------------
             (Former name, former address, and former fiscal years,
                          if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

Yes [X]   No [ ]

4,483,704  common  shares were  outstanding  as of October 31, 2002,  with a par
value per share of $1.00.

<PAGE>

                       FNB FINANCIAL SERVICES CORPORATION

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
  <S>          <C>     <C>                                                                          <C>
  PART         I       FINANCIAL INFORMATION

  Item         1        Financial Statements

                        Consolidated Balance Sheets
                        September 30, 2002 and December 31, 2001                                       1

                        Consolidated Statements of Income and Comprehensive Income Three
                        months and nine months ended September 30, 2002 and 2001                       2

                        Consolidated Statements of Cash Flows
                        Nine months ended September 30, 2002 and 2001                                3 - 4

                        Notes to Consolidated Financial Statements                                   5 - 9

  Item         2        Management's Discussion and Analysis of Financial Condition and
                        Results of Operations                                                       10 - 16

  Item         3        Quantitative and Qualitative Disclosures About Market Risk                    17

  Item         4        Controls and Procedures                                                       17

  PART         II       OTHER INFORMATION

  Item         1        Legal Proceedings                                                             17

  Item         2        Changes in Securities and Use of Proceeds                                     17

  Item         3        Defaults Upon Senior Securities                                               17

  Item         4        Submission of Matters to a Vote of Security Holders                           17

  Item         5        Other Information                                                             17

  Item         6        Exhibits and Reports on Form 8 - K                                            18

</TABLE>

<PAGE>


PART I.   FINANCIAL INFORMATION
Item 1.      Financial Statements

FNB Financial Services Corporation and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands except par value)

<TABLE>
<CAPTION>
                                                                  September 30,  December 31,
                                                                      2002          2001
                                                                   (Unaudited)    (Audited)
                                                                   -----------    ---------
<S>                                                                 <C>           <C>
ASSETS

Cash and due from banks                                             $ 26,781      $ 23,673
Investment securities:
     Securities available for sale                                   118,350       123,597
     Federal Home Loan Bank and Federal Reserve Bank Stock             4,007         3,967
Loans, net of allowance for credit losses of $7,138 at
      September 30, 2002 and $6,731 at December 31, 2001             547,038       528,614
Premises and equipment, net                                           10,891        11,381
Accrued income and other assets                                       13,341        13,593
                                                                    --------      --------

               Total assets                                         $720,408      $704,825
                                                                    ========      ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest bearing                                            $ 56,573      $ 58,831
     Interest bearing                                                534,959       527,929
                                                                    --------      --------
               Total deposits                                        591,532       586,760

Federal funds purchased and retail repurchase agreements               7,926        19,677
Other borrowings                                                      52,500        30,000
Accrued expenses and other liabilities                                 5,093         5,680
                                                                    --------      --------

               Total liabilities                                     657,051       642,117
                                                                    --------      --------

Shareholders' Equity:
Preferred stock no par value; authorized 10,000,000 shares;
               none issued                                                --            --
Common stock, $1.00 par value; authorized 40,000,000 shares;
               outstanding 4,486,021 at September 30, 2002 and
               4,568,907 at December 31, 2001                          4,486         4,569
Paid-in capital                                                       24,266        26,465
Retained earnings                                                     33,113        30,178
Accumulated other comprehensive income                                 1,492         1,496
                                                                    --------      --------

               Total shareholders' equity                             63,357        62,708
                                                                    --------      --------

               Total liabilities and shareholders' equity           $720,408      $704,825
                                                                    ========      ========

</TABLE>

         See notes to unaudited consolidated financial statements.

                                        1


<PAGE>


FNB Financial Services Corporation and Subsidiary
Consolidated Statements of Income and Comprehensive Income
(Unaudited; dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                               Three Months Ended               Nine Months Ended
                                                                  September 30,                    September 30,
                                                              --------------------             ---------------------
                                                              2002            2001             2002             2001
                                                              ----            ----             ----             ----
<S>                                                       <C>             <C>             <C>              <C>
Interest income
     Loans                                                $     9,416     $    10,638     $    27,658      $    33,529

     Federal funds sold and overnight deposits                    107             111             150              280
     Investment securities
               Taxable                                          1,235           2,119           3,987            6,135
               Tax exempt                                          50             194             243              580
               Other                                               58              71             177              231
                                                          -----------     -----------     -----------      -----------
               Total interest income                           10,866          13,133          32,215           40,755
                                                          -----------     -----------     -----------      -----------
Interest expense
     Deposits                                                   4,437           7,232          13,578           22,366
     Federal funds purchased and other borrowings                 431             496           1,103            1,929
                                                          -----------     -----------     -----------      -----------
               Total interest expense                           4,868           7,728          14,681           24,295
                                                          -----------     -----------     -----------      -----------
Net interest income                                             5,998           5,405          17,534           16,460
Provision for credit losses                                       250             315           1,215              798
                                                          -----------     -----------     -----------      -----------
Net interest income after provision for credit losses           5,748           5,090          16,319           15,662

Other income
     Service charges on deposit accounts                          783             516           2,028            1,609
     Net gain on sale of securities                                --             298             318              457
     Net gain on disposition of asset                              --              --             104               --
     Income from investment services                               51              62             197              136
     Mortgage banking fees                                        318              12             760               60
     Other income                                                 101             188             323              343
                                                          -----------     -----------     -----------      -----------
               Total other income                               1,253           1,076           3,730            2,605

Other expenses
     Salaries and employee benefits                             2,437           2,316           7,373            7,028
     Occupancy expense                                            291             264             820              770
     Furniture and equipment expense                              458             470           1,437            1,439
     Insurance expense, including FDIC assessment                  55              46             152              131
     Marketing expense                                             80              75             199              185
     Printing and supply expense                                  100             108             329              281
     Other expenses                                               617             692           2,635            1,996
                                                          -----------     -----------     -----------      -----------
               Total other expenses                             4,038           3,971          12,945           11,830

Income before income taxes                                      2,963           2,195           7,104            6,437
Income tax expense                                              1,032             664           2,386            1,883
                                                          -----------     -----------     -----------      -----------
Net income                                                      1,931           1,531           4,718            4,554
Other comprehensive income (loss)                                  83           1,746              (4)           2,975
                                                          -----------     -----------     -----------      -----------
Comprehensive income                                      $     2,014     $     3,277          $4,714      $     7,529
                                                          ===========     ===========          ======      ===========
Per share data
     Net income, basic                                    $      0.43     $      0.34     $      1.03      $      1.01
     Net income, diluted                                  $      0.42     $      0.33     $      1.01      $      0.99
     Cash dividends                                       $      0.13     $      0.13     $      0.39      $      0.38
Weighted average shares outstanding, basic                  4,549,869       4,544,457       4,587,011        4,516,280

Weighted average shares outstanding, diluted                4,658,277       4,634,312       4,682,293        4,583,446

</TABLE>

         See notes to unaudited consolidated financial statements.

                                        2


<PAGE>


FNB Financial Services Corporation and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)

<TABLE>
<CAPTION>
                                                                                Nine Months Ended
                                                                                  September 30,
                                                                               ------------------
                                                                               2002          2001
                                                                               ----          ----

<S>                                                                         <C>            <C>
Cash flows from operating activities:
          Interest received                                                 $  32,645      $  40,852
          Fees and commissions received                                         3,658          3,203
          Interest paid                                                       (14,914)       (25,323)
          Noninterest expense paid                                            (12,369)       (10,498)
          Income taxes paid                                                    (2,752)        (1,951)
          Funding of loans held for sale                                      (18,824)       (12,363)
          Proceeds from sales of loans held for sale                           18,964         12,541
                                                                            ---------      ---------

               Net cash provided by operating activities                        6,408          6,461
                                                                            ---------      ---------

Cash flows from investing activities:
          Proceeds from sales or calls of securities available for sale        55,318        119,414
          Proceeds from maturities of securities available for sale                --         20,500
          Purchase of securities                                              (49,587)      (147,718)
          Capital expenditures                                                   (369)          (612)
          (Increase) decrease in other real estate owned                       (1,319)           307
          (Increase) decrease in loans                                        (18,831)       (23,494)
                                                                            ---------      ---------

               Net cash used in investing activities                          (14,788)       (31,603)
                                                                            ---------      ---------

Cash flows from financing activities:
          Increase (decrease) in demand, savings and interest
                checking accounts                                              (1,749)        12,187
          Increase in time deposits                                             6,521         20,795
          Increase (decrease) in federal funds purchased and
                retail repurchase agreements                                  (11,751)         3,165
          Increase (decrease) in other borrowings                              22,500         (4,000)
          Proceeds from issuance of common stock                                1,200            690
          Repurchase of common stock                                           (3,450)            --
          Dividends paid                                                       (1,783)        (1,733)
                                                                            ---------      ---------

               Net cash provided by financing activities                       11,488         31,104
                                                                            ---------      ---------

Net increase in cash and cash equivalents                                       3,108          5,962
Cash and cash equivalents, January 1                                           23,673         15,952
                                                                            ---------      ---------

Cash and cash equivalents, September 30                                     $  26,781      $  21,914
                                                                            =========      =========

Supplemental disclosure of non-cash transactions:
Non-cash transfers from loans to other real estate                          $   1,526      $   1,647
                                                                            =========      =========

</TABLE>

         See notes to unaudited consolidated financial statements.


                                        3


<PAGE>

FNB Financial Services Corporation and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)

Reconciliation of net income to net cash provided by operating activities:

<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                                 September 30,
                                                                              ------------------
                                                                              2002          2001
                                                                              ----          ----

<S>                                                                         <C>           <C>
Net income                                                                  $  4,718      $  4,554


Adjustments to reconcile net income to net cash provided by operating
activities:
          Provision for credit losses                                          1,215           798
          Depreciation                                                           961         1,114
          Accretion and amortization                                             131           353
          (Gain) loss on sale of securities available for sale                  (318)         (457)
          Funding of loans held for sale                                     (18,824)      (12,363)
          Proceeds from sales of loans held for sale                          18,964        12,541
          (Gain) loss on other assets                                           (104)          (13)
          (Increase) decrease in accrued income and other assets                 252            23
          Increase (decrease) in accrued expenses and other liabilities         (587)          (89)
                                                                            --------      --------

               Net cash provided by operating activities                    $  6,408      $  6,461
                                                                            ========      ========

</TABLE>


         See notes to unaudited consolidated financial statements.

                                        4


<PAGE>

FNB Financial Services Corporation and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)

1.   Basis of Presentation

          The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally  accepted  accounting  principles and
     with  the  instructions  to Form  10-Q and Rule  10-01 of  Regulation  S-X.
     Accordingly,  these  statements do not include all of the  information  and
     footnotes required by generally accepted accounting principles for complete
     financial  statements.  In  the  opinion  of  management,  all  adjustments
     (consisting of normal recurring accruals)  considered  necessary for a fair
     presentation  have been  included.  Operating  results  for the nine  month
     period  ended  September  30, 2002 are not  necessarily  indicative  of the
     results that may be expected for the year ending December 31, 2002.


2.   Nature of Operations

          FNB Financial Services Corporation (the "Company") is a North Carolina
     financial  holding  company.  The Company's  wholly owned  subsidiary,  FNB
     Southeast (the "Bank"), is a North Carolina chartered  commercial bank. FNB
     Southeast operates two wholly owned subsidiaries,  FNB Southeast Investment
     Services, Inc. and FNB Southeast Mortgage Corporation.

          As of September 30, 2002,  FNB  Southeast  operated  thirteen  banking
     offices in North Carolina and four banking offices in Virginia. The Company
     and the Bank are headquartered in Reidsville, North Carolina.


3.   Comprehensive Income

          The Company's other comprehensive  income for the three and nine month
     periods ended September 30, 2002 and 2001 consists of unrealized  gains and
     losses on available for sale  securities,  net of related income taxes,  as
     follows:

<TABLE>
<CAPTION>

     (Dollars in thousands)                    Three Months Ended          Nine Months Ended
                                                  September 30,               September 30,
                                               ------------------          ------------------
                                               2002          2001          2002          2001
                                               ----          ----          ----          ----

<S>                                          <C>           <C>           <C>           <C>
     Unrealized gains (losses) on
         available for sale securities       $   135       $ 2,863       $   311       $ 4,878

     Reclassification of realized gains           --          (298)         (318)         (457)

     Income tax effect                           (52)         (819)            3        (1,446)
                                             -------       -------       -------       -------
     Other comprehensive income (loss)       $    83       $ 1,746       $    (4)      $ 2,975
                                             =======       =======       =======       =======


</TABLE>


                                        5
<PAGE>

4.   Segment Information

          The  Company   follows  the   provisions  of  Statement  of  Financial
     Accounting  Standards  ("SFAS") No. 131,  "Disclosure  about Segments of an
     Enterprise and Related  Information."  SFAS 131  establishes  standards for
     determining  an  entity's  operating  segments  and the type  and  level of
     financial  information to be disclosed in both annual and interim financial
     statements.  It also establishes  standards for related  disclosures  about
     products and services, geographic areas, and major customers.

          Operating  segments are  components  of an  enterprise  with  separate
     financial  information  available for use by the chief  operating  decision
     maker to  allocate  resources  and to assess  performance.  The Company has
     determined that it has one significant  operating segment: the providing of
     general financial services to the customers of its wholly owned subsidiary,
     FNB  Southeast.  The various  products  offered by FNB  Southeast are those
     generally  offered by community  banks,  and the allocation of resources is
     based on the overall performance of the Company, rather than the individual
     performance of banking offices or products.



5.   Net Income Per Share

          Basic and diluted  earnings per share amounts have been computed based
     upon net income as presented in the accompanying  income statements divided
     by the weighted  average number of common shares  outstanding or assumed to
     be outstanding as summarized.

<TABLE>
<CAPTION>
                                                          Three Months Ended            Nine Months Ended
                                                             September 30,                September 30,
                                                          ------------------           -------------------
                                                          2002          2001           2002           2001
                                                          ----          ----           ----           ----
     <S>                                               <C>            <C>            <C>            <C>
     Weighted average number of shares
             used in basic EPS                         4,549,869      4,544,457      4,587,011      4,516,280
     Effect of dilutive stock options                    108,408         89,855         95,282         67,166
                                                       ---------      ---------      ---------      ---------
     Weighted average number of common
             shares and dilutive potential common
             shares used in dilutive EPS               4,658,277      4,634,312      4,682,293      4,583,446
                                                       =========      =========      =========      =========

</TABLE>

     As of September 30, 2002,  there were 179,416  potentially  dilutive  share
options  not  included  in the  weighted  average  calculation  since the option
exercise prices are greater than the fair market value of the common shares.


                                        6


<PAGE>


6.   Investment Securities Available for Sale

<TABLE>
<CAPTION>
                                           September 30, 2002          December 31, 2001
                                         ---------------------       ---------------------
      (Dollars in thousands)             Amortized       Fair        Amortized        Fair
                                            Cost         Value         Cost          Value
                                         ---------------------       ---------------------
<S>                                       <C>           <C>           <C>           <C>
     U.S. Agency securities               $ 90,807      $ 92,453      $104,039      $106,032
     Mortgage backed securities             20,361        20,744         8,477         8,628
     State and municipal obligations         4,431         4,834         8,325         8,628
     Other                                     306           319           304           309
                                          --------      --------      --------      --------

     Total available for sale             $115,905      $118,350      $121,145      $123,597
                                          ========      ========      ========      ========
</TABLE>


<TABLE>
<CAPTION>

7.   Loans (net of unearned income)

       (Dollars in thousands)                      September 30,     December 31,
                                                       2001             2002
                                                       ----             ----
       <S>                                          <C>              <C>
       Loan Category:

         Real estate - commercial                    $174,915         $168,419
         Real estate - residential                    120,022          129,212
         Real estate - construction                    82,061           55,861
         Commercial, financial and agricultural        80,745           90,858
         Consumer                                      95,521           89,943
                                                     --------         --------

                   Subtotal loans                     553,264
                                                                       534,293

         Loans held for sale                              912            1,052
                                                     --------         --------

                   Gross loans                       $554,176         $535,345
                                                     ========         ========

</TABLE>



                                        7


<PAGE>


8.   Allowance for Credit Losses

<TABLE>
<CAPTION>
                                                September 30, 2002           December 31, 2001
                                                ------------------           -----------------
                                                            % of Loans                  % of Loans
(Dollars in thousands)                                       in Each                      in Each
                                                             Category                   Category to
                                              Allowance   to Total Loans   Allowance    Total Loans
                                              ---------   --------------   ---------    -----------
<S>                                                <C>           <C>        <C>               <C>
Balance at end of period applicable to:

     Real estate - construction                    10            15         $   18            10
     Real estate - mortgage                       156            22            104
                                                                                              56
     Commercial                                 5,066            46          4,773
                                                                                              17
     Consumer                                   1,906            17          1,836
                                                                                              17
                                               ------        ------         ------        ------

          Total                                $7,138           100%        $6,731           100%
                                               ======        ======         ======        ======

</TABLE>


9.   Analysis of Allowance for Credit Losses

<TABLE>
<CAPTION>
                                                        Nine Months Ended
                                                          September 30,
                                                      ---------------------
(Dollars in thousands)                                2002             2001
                                                      ----             ----
<S>                                                  <C>             <C>
Balance, beginning of period                         $ 6,731         $ 6,311

Charge-offs                                            1,080             661
Recoveries                                              (272)           (112)
                                                     -------         -------

Net charge-offs                                          808             549
                                                     -------         -------

Allowance charged to operations                        1,215             798
                                                     -------         -------

Balance, end of period                               $ 7,138         $ 6,560
                                                     =======         =======

Ratio of annualized net charge-offs during the
          period to average loans outstanding
          during the period                             0.20%           0.14%
                                                     =======         =======

Ratio of allowance for credit losses to
          month end loans                               1.29%           1.26%
                                                     =======         =======

</TABLE>


                                        8
10.
    Nonperforming Assets

<TABLE>
<CAPTION>
                                                             September 30,  December 31,
     (Dollars in thousands)                                      2001          2002
                                                                 ----          ----
     <S>                                                        <C>          <C>
     Nonaccrual (1)                                             $2,566       $ 2,260
     Past due 90 days or more and still accruing interest            9             6
     Other real estate                                           2,500         2,707

</TABLE>

(1)  Other than  amounts  listed  above,  there are no other  loans  which:  (a)
     represent  or  result  from  trends  or   uncertainties   which  management
     reasonably   expects  will  materially  affect  future  operating  results,
     liquidity,  or capital  resources,  or (b) represent material credits about
     which  management is aware of any  information  which causes  management to
     have serious  doubts as to the ability of such borrowers to comply with the
     loan repayment terms.


                                        9


<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Information set forth below contains various  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,  which  statements  represent  the  Company's
judgment  concerning the future and are subject to risks and uncertainties  that
could cause the Company's actual operating  results to differ  materially.  Such
forward-looking  statements  can be  identified  by the  use of  forward-looking
terminology,  such  as  "may",  "will",  "expect",   "anticipate",   "estimate",
"believe", or "continue", or the negative thereof or other variations thereof or
comparable   terminology.   The  Company  cautions  that  such   forward-looking
statements  are further  qualified  by  important  factors  that could cause the
Company's  actual  operating  results  to differ  materially  from  those in the
forward-looking statements.

Summary

     Assets at  September  30,  2002 were $720.4  million,  an increase of $15.6
million since  December 31, 2001. The increase in assets was primarily due to an
increase in the Company's net loan portfolio.  In the first nine months of 2002,
deposits have increased $4.7 million and other  borrowings  have increased $22.5
million.

     Net income for the quarter  ended  September  30, 2002 of $1.9  million was
$400,000, or 26.1% higher than the amount earned in the third quarter last year.
Diluted earnings per share for the current quarter were $0.42 per share compared
to $0.33 per share for the third quarter last year. For the nine months to date,
earnings of $4.7 million were higher than the same period last year by $164,000,
or 3.6%,  and diluted  earnings per share totaled $1.01 compared to $0.99 in the
same period last year.

Interest Income and Interest Expense

     Third quarter total interest income was $10.9 million,  a decrease of 17.3%
over the same quarter  last year.  Average  earning  assets for the quarter were
$677.8  million,  compared to $698.4  million for the year ago period.  Interest
income from loans was $9.4  million,  down 11.5% from $10.6 million in the third
quarter of 2001.  The  decrease in  interest  income was driven  primarily  by a
dramatic decline in the prime lending rate. Average loans of $553.8 million were
7.2%  higher  than the $516.7  million  last year.  For the third  quarter,  the
average yield on loans was 6.74%  compared to 8.17% in 2001. For the nine months
ended on September 30, 2002, total interest income was $32.2 million, down 21.0%
from $40.8  million in the same  period in 2001,  on a 3.3%  decrease in average
earning assets.

     Interest  income  on  investments  totaled  $1.3  million  for the  current
quarter,  down 43.7% from $2.4 million for the year ago quarter.  The change was
primarily  attributable  to a  41.4%  decrease  in the  average  balance  of the
investment  portfolio  from $169.7 million in the third quarter of 2001 to $99.3
million  in the third  quarter  of 2002.  Due to calls  and sales of  securities
within the portfolio over the last year,  interest income on taxable  investment
securities  decreased  $884,000,  while interest income on tax exempt securities
decreased  $144,000.  Investment income for the nine month period decreased from
$6.9 million in 2001 to $4.4 million in 2002 for the same reasons.

     Third  quarter  total  interest  expense was $4.9 million  compared to $7.7
million for the third quarter of last year, a 37.0% decrease.  Average  interest
bearing  liabilities for the third quarter 2002 decreased 4.5% to $579.6 million
from $607.2 million for the third quarter of 2001. Overall cost of funds for the
second  quarter  was  3.33%  and  5.05% in 2002 and  2001,  respectively.  Total
interest  expense for the first nine months of 2002 was $14.7  million,  a 39.6%
decrease from the $24.3 million expense for the first nine months of 2001.


                                       10

<PAGE>


     Interest expense on deposits for the third quarter  decreased 38.7% to $4.4
million as average interest  bearing deposits for the quarter  decreased 8.7% to
$516.2  million  from  $565.4  million in 2001.  The  Company  elected to fund a
managed  decrease in relatively  high cost deposits with proceeds from called or
sold  investment  securities  rather than  reinvesting  in  securities  near the
perceived bottom of the interest rate cycle. The average rate for the quarter on
interest  bearing  deposits  decreased  to 3.41%  from  5.07% one year  earlier.
Deposit interest expense for the nine months ended September 30, 2002, decreased
from $22.4 million in 2001 to $13.6 million in 2002.

     Interest  expense on  federal  funds  purchased  and other  borrowings  was
$431,000 for the quarter ended  September 30, 2002,  down 13.1% from $496,000 in
the third quarter of 2001. The decrease was primarily  attributable to a decline
in the average  rate paid on  purchased  funds to 2.69% in the third  quarter of
2002 compared to 4.72% in the third  quarter of 2001.  For the nine months ended
June 30, 2002 interest  expense for this  category was $1.1  million,  down from
$1.9 million in 2001 to $1.1 million in 2002.

Comparable net interest margins are as follows:
                                                           Liability
<TABLE>
<CAPTION>

Time Period                          Asset Yield              Rate         Interest Rate Spread
-----------                          -----------              ----         --------------------
<S>            <C>                      <C>                  <C>                   <C>
Third Quarter, 2002                     6.38%         -      3.33%       =         3.05%
Third Quarter, 2001                     7.52%         -      5.05%       =         2.47%

Year-To-Date, 2002                      6.56%         -      3.49%       =         3.07%
Year-To-Date, 2001                      8.05%         -      5.46%       =         2.59%

</TABLE>

Noninterest Income and Expense

     Noninterest  income in the third  quarter of this year  increased  16.5% to
$1.3  million  from $1.1  million in the same period last year.  For the current
quarter, there were no net gains from sales of investment  securities,  compared
to  $298,000  of net gains in the third  quarter of last year.  Deposit  service
charges  of  $783,000  for the third  quarter of 2002  increased  51.7% from the
$516,000 in the third quarter of 2001.  This increase was due to the  successful
implementation  of a new service that allows  customers to overdraw their demand
deposit  accounts,  on a temporary  basis,  in accordance  with the terms of the
service.  Noninterest  income in the third quarter of 2002 included  $318,000 in
mortgage  banking  fees and  $51,000 in  investment  service  fees  compared  to
revenues  of $12,000  and  $62,000,  respectively,  in such  categories  for the
previous year. The increase in mortgage banking fees for the nine months of 2002
was  attributable  to  the  operation  and  expansion  of the  mortgage  banking
subsidiary  established in June of 2001. Total noninterest  income for the first
nine months of 2002 totaled $3.7 million, a 43.2% increase over the $2.6 million
earned in the first nine months of 2001.  During the second quarter of 2002, the
Company  recognized a gain of $94,000 on the sale of mortgage  servicing rights.
Deposit  service  charges of $2.0  million for the nine months were 26.0% higher
than the $1.6 million recorded in the same period last year.

     Noninterest  expense for the third quarter of 2002 was $4.0 million, a 1.7%
increase over the $3.9 million expense in the third quarter of 2001. Compared to
the year ago quarter,  salaries and employee benefits  increased $121,000 due to
higher insurance and retirement costs;  occupancy expense increased $27,000; and
furniture and equipment  expense decreased  $12,000.  Other expense for the 2002
third quarter totaled  $617,000,  compared to $692,000 for the year ago quarter.
Other expense in the first nine months of 2002 totaled $2.6 million, an increase
from $2.0 million from the first nine months of 2001.  This increase was largely
attributable  to the  write-off  of $138,000 in the first  quarter of 2002 of an
uncollectable receivable from a U.S. government agency that guaranteed a portion
of a charged-off loan, a


                                       11


<PAGE>


$60,000 expense in the second quarter to buy-out a third party service agreement
and a $80,000  writedown in the second quarter  related to the disposal of fixed
assets.  This year's  nine-month  noninterest  expense of $12.9 million was 9.4%
higher than the $11.8 million in the same period last year.

     The  provision  for credit losses in the third quarter of 2002 was $250,000
compared to $315,000 in 2001. The allowance for credit losses as a percentage of
gross loans  outstanding was 1.29% at September 30, 2002, an increase from 1.26%
at September  30, 2001.  For the 2002 nine months,  the  provision  totaled $1.2
million,  compared to $798,000 for the same period in 2001.  The increase in the
provision for credit losses was attributable to increased  annualized net credit
losses to average  loans of 0.20% in the first nine  months of 2002  compared to
annualized net credit losses of 0.14% in the first nine months of 2001.

     The  effective  income  tax rate of 33.6%  for the nine  months of 2002 was
higher than the 29.3% rate for the same quarter of 2001.  In the second  quarter
of 2002, the Company sold a portion of the tax-exempt  investment  portfolio and
the related  tax-exempt  income  stream.  This has the effect of increasing  the
effective income tax rate.

Financial Condition

     The  Company's  total  assets at  September  30,  2002 and 2001 were $720.4
million and $724.5 million,  respectively,  a year -to-year decline of 0.6%. The
$4.0 million  decline  represents a 0.6% decrease  over one year earlier.  Since
December 31, 2001, assets have increased $15.6 million.  This increase in assets
was primarily due to an increase in the  Company's net loan  portfolio.  Average
earning  assets for the 2002 third  quarter were $677.8  million,  or 2.9% lower
than the $698.4 million average in the same quarter last year.

     Loans at  September  30, 2002  totaled  $554.2  million  compared to $522.6
million one year earlier,  an increase of 6.0%.  Loans have  increased 3.5% from
$535.3 million at December 31, 2001. Average loans for the third quarter of 2002
were $553.9 million,  or 7.2% higher than the $516.7 million average in the same
period one year ago.

     Investment  securities  of $122.4  million at September 30, 2002 were 23.7%
lower than the $160.3  million  recorded one year  earlier.  Average  investment
securities  were $99.3 million and $169.7  million for the third quarter of 2002
and 2001,  respectively.  The decrease in the  investment  portfolio  was due to
continued calls by issuers of various securities.

     Deposits  totaled  $591.5  million at September  30, 2002, a 1.8%  decrease
compared to $602.4  million one year ago,  and a 0.8%  increase  from the $586.8
million  recorded at December 31, 2001.  At the end of the third  quarter  2002,
noninterest  bearing  deposits were $56.6  million,  or 9.6% of total  deposits.
During the third  quarter  of 2002,  the  Company  increased  deposits  by $53.2
million.  This  increase was  primarily  achieved  through  growth in short-term
certificates  of  deposits  generated  in  local  markets.  Proceeds  from  this
initiative  was  used to  payoff  $9.0  million  in  outstanding  Federal  funds
purchased and fund the $1.9 million outflow of retail  repurchase  agreements at
June 30, 2002.

     At  September  30,  2002,  borrowings  from the  Federal  Home Loan Bank of
Atlanta (FHLB) totaled $52.5 million,  an increase of 75.0% compared to $30.0 in
FHLB borrowings million at December 31, 2001. The increase in borrowings was due
to favorable funding rates and terms available at the FHLB at the time.

     Shareholders'  equity  increased  to $63.4  million at the end of the third
quarter 2002,  compared to $62.7 million at December 31, 2001.  The Company paid
dividends of $0.13 per share during the quarter ended  September  30, 2002,  the
same rate as the third  quarter of 2001.  Year to date  dividends  per share for
2002 were $0.39 compared to $0.38 in 2001. A stock  repurchase  program of up to
5% of the  outstanding  common stock was announced  during the second quarter of
this year.  This  program is intended  to help the  Company  achieve its goal of
building shareholder value while maintaining appropriate capital levels. Through
September 30, 2002, a total of 205,700 shares have been purchased. In accordance
with North  Carolina  state law,  repurchased  shares are  cancelled  and are no
longer considered issued.

                                       12


<PAGE>


Asset Quality

     The credit loss allowance ratio at September 30, 2002 was 1.29% compared to
1.26% at  December  31,  2001 and 1.26% at  September  30,  2001.  For the third
quarter of 2002, provision charges against earnings totaled $250,000 compared to
$315,000 in the third quarter one year  earlier.  Net  charge-offs  for the 2002
third quarter totaled $20,000, or a 0.01% annualized loss ratio based on average
loans  outstanding.  This  compares to net  charge-offs  of  $252,000,  or 0.20%
annualized  loss ratio for the 2001 third  quarter.  During the third quarter of
2002, the Company received  recoveries  totaling  approximately  $180,000 on two
credit relationships that had been charged-off in previous years. Annualized net
charge-offs  for the first  nine  months of 2002 and 2001 were  0.20% and 0.14%,
respectively, based on average loans outstanding.

     The  Company's  allowance  for  credit  losses  is  analyzed  quarterly  by
management.  This  analysis  includes  a  methodology  that  segments  the  loan
portfolio by selected  types and considers the current  status of the portfolio,
historical  charge-off  experience,  current levels of delinquent,  impaired and
non-performing  loans,  as well as economic and other risk  factors.  It is also
subject to regulatory examinations and determinations as to adequacy,  which may
take into account such factors as the methodology  employed and other analytical
measures  in  comparison  to a group  of peer  banks.  Management  believes  the
allowance for loan losses is  sufficient to absorb known risk in the  portfolio.
No assurances can be given that future  economic  conditions  will not adversely
affect borrowers and result in increased losses.

     Other real estate owned  decreased  to $2.5 million at September  30, 2002,
compared to $2.7 million at December 31,  2001.  Approximately  $1.5 million has
been  transferred  from  loans into other  real  estate and  approximately  $1.8
million of such  assets  were  disposed of during the first nine months of 2002.
The Company has not incurred a net loss on  disposition  of other real estate in
the current year.

Capital Resources

     Banks and financial holding companies, as regulated institutions, must meet
required  levels of capital.  The North Carolina  Commissioner  of Banks and the
Board of  Governors  of the Federal  Reserve,  which are the primary  regulatory
agencies for FNB Southeast and the Company,  respectively,  have adopted minimum
capital  regulations or guidelines that  categorize  components and the level of
risk  associated  with  various  types of  assets.  Financial  institutions  are
required  to  maintain a level of  capital  commensurate  with the risk  profile
assigned to their assets in accordance with the guidelines.

     As shown in the table  below,  the  Company  and its  wholly-owned  banking
subsidiary   have  capital  levels   exceeding  the  minimum  levels  for  "well
capitalized" banks and financial holding companies as of September 30, 2002.

<TABLE>
<CAPTION>
                                    Regulatory Guidelines
                                 ---------------------------------
                                    Well               Adequately                             FNB
     Ratio                       Capitalized           Capitalized        Company          Southeast
                                 -----------           -----------        -------          ---------
<S>                                 <C>                    <C>              <C>              <C>
     Total Capital                  10.0%                  8.0%             12.5%            12.3%
     Tier 1 Capital                  6.0                   4.0              11.2             11.1
     Leverage Capital                5.0                   4.0               8.7              8.6

</TABLE>

                                       13

<PAGE>


New Accounting Pronouncements

     The Financial  Accounting  Standards Board ("FASB") has issued Statement of
Financial  Accounting Standards ("SFAS") No. 141, "Business  Combinations",  and
SFAS No. 142,  "Goodwill and Other  Intangible  Assets." SFAS 141 supersedes APB
Opinion No. 16, "Business Combinations",  and FASB Statement No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises" and requires that all
business combinations be accounted for using the purchase method. This Statement
carries  forward without  reconsideration  those portions of APB Opinion No. 16,
"Business  Combinations",  that provides  guidance related to the application of
the purchase method.  This Statement  requires that intangible  assets that meet
certain criteria be recognized as assets apart from goodwill.  The provisions of
this Statement apply to all business combinations initiated after June 30, 2001.
This Statement also applies to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later.

     SFAS 142 addresses financial accounting and reporting for acquired goodwill
and other  intangible  assets and  supersedes  APB Opinion  No. 17,  "Intangible
Assets." It addresses how intangible  assets that are acquired  individually  or
with a group of other assets (but not those acquired in a business  combination)
should be accounted for in financial  statements  upon their  acquisition.  This
Statement  also  addresses  how goodwill and other  intangible  assets should be
accounted  for after  they  have  been  initially  recognized  in the  financial
statements.   This  Statement  carries  forward  without  reconsideration  those
provisions  of Opinion 17 related to the  accounting  for  internally  developed
intangible  assets.  The provisions of this Statement are required to be applied
starting with fiscal years beginning after December 15, 2001.  Impairment losses
for  goodwill  and  indefinite-lived  intangible  assets  that  arise due to the
initial application of this Statement (resulting from a transitional  impairment
test) are to be reported as resulting from a change in accounting principle. The
provisions of both Statements have been adopted. The implementation did not have
a material effect on the Company's financial statements.

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations." SFAS 143 requires that obligations associated with the
retirement  of a tangible  long-lived  asset to be recorded as a liability  when
those  obligations  are  incurred,  with the amount of the  liability  initially
measured at fair value.  SFAS 143 will be  effective  for  financial  statements
issued for fiscal  years  beginning  after June 15, 2002 (early  application  is
encouraged). The provision of the Statement has been adopted. The implementation
did not have a material effect on the Company's financial statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets." SFAS 144 supersedes  SFAS 121 and
applies  to  all  long-lived  assets  (including  discontinued  operations)  and
consequently  amends APB  Opinion No. 30,  "Reporting  Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business." SFAS 144 requires
that  long-lived  assets  that are to be  disposed of by sale be measured at the
lower of book value or fair value less cost to sell.  SFAS 144 is effective  for
financial  statements  issued for fiscal years beginning after December 15, 2001
and, generally, its provisions are to be applied prospectively. The provision of
the  Statement  has been  adopted.  The  implementation  did not have a material
effect on the Company's financial statements.

     In May 2002, the FASB issued SFAS No. 145,  "Rescission of FASB  Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
as of April 2002." This  Statement  rescinds  SFAS No. 4,  "Reporting  Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, No. 64,
"Extinguishments of Debt to Satisfy  Sinking-Fund  Requirements." This Statement
also rescinds SFAS No. 44,  "Accounting for Intangible Assets of Motor Carriers"
and amends SFAS No. 13,  "Accounting for Leases",  to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that


                                       14




have  economic  effects that are similar to  sale-leaseback  transactions.  This
Statement  also  amends  other  existing  authoritative  pronouncements  to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions.  Management does not anticipate implementation of this
Statement will have a material effect on the Company's financial statements.

     In June  2002,  the FASB  issued  SFAS  No.  146,  "Accounting  for Exit or
Disposal  Activities".  SFAS 146  addresses  significant  issues  regarding  the
recognition,  measurement,  and reporting of costs that are associated with exit
and disposal activities,  including restructuring  activities that are currently
accounted  for pursuant to the guidance set forth in Emerging  Issues Task Force
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other  Costs to Exit an  Activity  (including  Certain  Costs  Incurred in a
Restructuring)". The scope of SFAS 146 includes (1) costs related to terminating
a contract  that is not a capital  lease (2)  termination  benefits  received by
employees who are involuntarily terminated under the terms of a one-time benefit
arrangement  that  is  not  an  ongoing  benefit  arrangement  or an  individual
deferred-compensation  contract  and (3)  costs  to  consolidate  facilities  or
relocate  employees.  SFAS 146 will be effective for exit or disposal activities
that are initiated after December 31, 2002. At the present time, the adoption of
this  standard  is not  expected  to have a  material  impact  on the  Company's
financial position or results of operations.

     The FASB has  issued  SFAS No.  147,  "Acquisitions  of  Certain  Financial
Institutions,  an amendment of SFAS 72 and SFAS 144 and FASB  Interpretation No.
9".  SFAS No. 72,  "Accounting  for  Certain  Acquisitions  of Banking or Thrift
Institutions," and FASB  Interpretation No. 9, "Applying APB Opinions No. 16 and
17 When a Savings and Loan Association or a Similar Institution Is Acquired in a
Business   Combination   Accounted  for  by  the  Purchase   Method,"   provided
interpretive  guidance on the application of the purchase method to acquisitions
of financial  institutions.  Except for transactions  between two or more mutual
enterprises,  SFAS 147 removes  acquisitions of financial  institutions from the
scope  of  both  Statement  72 and  Interpretation  9 and  requires  that  those
transactions   be  accounted  for  in  accordance   with  SFAS  141,   "Business
Combinations," and SFAS 142,  "Goodwill and Other Intangible  Assets." Thus, the
requirement in paragraph 5 of SFAS 72 to recognize (and  subsequently  amortize)
any  excess of the fair  value of  liabilities  assumed  over the fair  value of
tangible  and  identifiable  intangible  assets  acquired  as an  unidentifiable
intangible asset no longer applies to acquisitions within the scope of SFAS 147.
In  addition,  SFAS 147  amends  SAFS 144,  "Accounting  for the  Impairment  or
Disposal   of   Long-Lived   Assets,"   to  include   in  its  scope   long-term
customer-relationship  intangible  assets  of  financial  institutions  such  as
depositor- and  borrower-relationship  intangible  assets and credit  cardholder
intangible assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow  recoverability  test and impairment loss recognition and
measurement  provisions that SFAS 144 requires for other long-lived  assets that
are held and used.  Paragraph 5 of SFAS 147, which relates to the application of
the purchase method of accounting,  is effective for  acquisitions for which the
date of  acquisition is on or after October 1, 2002. The provisions in paragraph
6 related to  accounting  for the  impairment  or disposal of certain  long-term
customer-relationship  intangible  assets  are  effective  on  October  1, 2002.
Transition provisions for previously recognized unidentifiable intangible assets
in paragraphs  8-14 are effective on October 1, 2002,  with earlier  application
permitted.  Management does not anticipate the  implementation of this statement
to have a material impact on the Company's  consolidated  financial  position or
consolidated results of operations.


                                       15

<PAGE>


Liquidity Management

     Liquidity  management  refers to the ability to meet  day-to-day  cash flow
requirements  based  primarily  on activity in loan and deposit  accounts of the
Company's  customers.  Deposit  withdrawals,  loan funding and general corporate
activity create a need for liquidity for the Company.  Liquidity is derived from
sources  such as  deposit  growth;  maturity,  calls,  or  sales  of  investment
securities;  principal and interest payments on loans;  access to borrowed funds
or lines of credit; and profits.

     During the first nine months of 2002 the  Company had net cash  provided by
operating  activities  of $6.4  million  compared  to $6.5  million  of net cash
provided by operating activities in the nine months of 2001.

     Net cash used by  investing  activities  in the first nine  months  totaled
$14.8  million  primarily  based on the purchase of $49.6  million in investment
securities.  This  compares to the first nine months of 2001 when  purchases  of
$147.7 million in investment  securities  resulted in net cash used in investing
activities of $31.6 million. An increase in loans outstanding used $18.8 million
in cash during 2002,  compared to an increase in outstanding  loans in 2001 that
used $23.5 million of cash during the same period in 2001.

     Financing  activities  in the  first  nine  months of 2002  provided  $11.5
million,  based  primarily on a $22.5 million  increase in other  borrowings and
$11.8 million used for the repayment of federal funds  purchased and  repurchase
agreements.  During the first nine months of 2001, financing activities provided
$31.1 million.  Time deposits provided $20.8 million of cash, while repayment of
other  borrowing used $4.0 million of cash during the first nine months of 2001.
During the second and third  quarter of 2002,  the Company  used $3.5 million to
repurchase  205,700 of 232,377  total shares  authorized  to be  repurchased  in
accordance with the share repurchase program approved by the Board in the second
quarter of 2002.

     Overall cash and cash  equivalents  totaled  $26.8 million at September 30,
2002  compared  to $23.7  million  at  December  31,  2001 and $21.9  million at
September 30, 2001.

     Liquidity  is further  enhanced by an  approximately  $115  million line of
credit with the FHLB  collateralized  by FHLB stock,  investment  securities and
qualifying 1 to 4 family residential  mortgage loans, and qualifying  commercial
real estate loans. The Company provides various reports to the FHLB on a regular
basis  throughout the year to maintain the availability of the credit line. Each
borrowing  request to the FHLB is subject to approval  by the FHLB before  funds
are advanced under the credit agreement.

     The Company  also has  unsecured  overnight  borrowing  lines  totaling $19
million available through four financial  institutions.  These lines are used to
manage the day to day, short-term  liquidity needs of the Company.  Each Federal
funds  line has a  requirement  to repay the line in full on a  frequent  basis,
typically within five to ten business days.


Effects of Inflation

     Inflation  affects  financial  institutions in ways that are different from
most commercial and industrial companies,  which have significant investments in
fixed assets and  inventories.  The effect of  inflation  on interest  rates can
materially impact bank operations, which rely on net interest margins as a major
source of earnings. Non-interest expenses, such as salaries and wages, occupancy
and equipment cost are also negatively impacted by inflation.

                                       16

<PAGE>


Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Market  risk is the  possible  chance of loss from  unfavorable  changes in
market prices and rates.  These changes may result in a reduction of current and
future period net interest income, which is the favorable spread earned from the
excess of interest income on  interest-earning  assets, over interest expense on
interest-bearing liabilities.

     The Company considers  interest rate risk to be its most significant market
risk, which could  potentially  have the greatest impact on operating  earnings.
The Company is asset  sensitive,  which means that falling  interest rates could
result in a reduced  amount of net interest  income.  The monitoring of interest
rate risk is part of the Company's overall  asset/liability  management process.
The primary  oversight of  asset/liability  management  rests with the Company's
Asset and Liability Committee.  The Committee meets on a regular basis to review
asset/liability activities and to monitor compliance with established policies.

     The Company has not experienced  any substantive  changes in portfolio risk
during the nine months ended September 30, 2002.

Item 4. Controls and Procedures

The Company's Chief Executive  Officer and Chief Financial Offider have reviewed
and evaluated the Company's disclosure controls and procedures within 90 days of
the filing of this report in accordance with Rule 13a-14 under the Exchange Act.
Based on their  evaluation,  the Chief Executive Officer and the Chief Financial
Officer have  concluded  that the Company's  disclosure  controls and procedures
were adequate and effective to ensure that information  required to be disclosed
is gathered, processed and reported in a timely manner.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the Chief Executive Officer and Chief Financial Officer's  evaluation,  nor were
there any significant  deficiencies or material weaknesses in the controls which
require corrective action.


PART II. OTHER INFORMATION



Item 1.           Legal Proceedings

                  None.



Item 2.           Changes in Securities and Use of Proceeds

                  None.



Item 3.           Defaults Upon Senior Securities

                  Not Applicable.



Item 4.           Submission of Matters to a Vote of Security Holders

                  None.


Item 5.           Other Information

                  None.


                                       17


<PAGE>


Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits

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

          3.01    Amended and Restated Articles of Incorporation.
          3.02    Bylaws of Company, as amended.
          4.01    Specimen Common Stock Certificate.
          10.01   Stock  Compensation Plan of the Registrant  approved April 11,
                  1989, by the  shareholders  of the  Registrant,  with forms of
                  stock option and stock bonus agreements attached.
          10.02   Omnibus Equity Compensation Plan of the Registrant.
          10.03   Severance   Policy  for  Senior  Officers  of  the  Registrant
                  (employed for five years or more).
          10.04   Revised  Severance Plan for Senior  Officers of the Registrant
                  (employed for five years or more).
          10.05   Severance   Policy  for  Senior  Officers  of  the  Registrant
                  (employed for less than five years).
          10.07   Benefit  Equivalency Plan of the Registrant  effective January
                  1, 1994.
          10.08   Annual Management Incentive Plan of the Registrant.
          10.09   Long Term Incentive Plan of the Registrant.
          10.10   Employment   Agreement   dated  May  18,  1995,   between  the
                  Registrant,  as employer, and Ernest J. Sewell,  President and
                  Chief Executive Officer of the Registrant.
          10.11   Split-Dollar  Agreement  dated  January 27, 1995,  between the
                  Registrant and Ernest J. Sewell.
          10.13   Split-Dollar  Agreement  dated  January 27, 1995,  between the
                  Registrant and C. Melvin Gantt.
          10.14   Split-Dollar  Agreement  dated  December 8, 1995,  between the
                  Registrant and Richard L. Powell.
          10.15   Lease,  dated  January 31, 1997,  between the  Registrant  and
                  Landmark  Commercial,  Inc., relating to the Wilmington branch
                  office.
          10.16   Amendment  to  Benefit  Equivalency  Plan  of  the  Registrant
                  effective January 1, 1998.

          Incorporated by reference from Annual Report on Form 10-K.

          (b)     Reports on Form 8-K

               The Company  filed a Current  Report on Form 8-K on September 30,
          2002, to announce plans to purchase the Harrisonburg,  Virginia branch
          of Guaranty Bank, a subsidiary of Guaranty Financial Corporation.  The
          transaction is subject to regulatory approval.



                                       18


                                   SIGNATURES


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



                                 FNB FINANCIAL SERVICES CORPORATION
                                 (Registrant)



    November 13, 2002            /s/ Michael W. Shelton
                                 -----------------------------------------------
                                 Michael W. Shelton
                                 (Vice President, Secretary and Treasurer)


                                       19


<PAGE>


                                 CERTIFICATIONS
                                 --------------


I, Ernest J. Sewell, certify that:

     1. I have  reviewed  this  quarterly  report on Form 10-Q of FNB  Financial
Services Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3 Base on my  knowledge,  the  financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weakness in internal controls;

          b) any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002                  /s/ Ernest J. Sewell
                                         ---------------------------------------
                                         Ernest J. Sewell
                                         President and Chief Executive Officer


<PAGE>


                                 CERTIFICATIONS
                                 --------------


I, Michael W. Shelton, certify that:

     1. I have  reviewed  this  quarterly  report on Form 10-Q of FNB  Financial
Services Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3 Base on my  knowledge,  the  financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weakness in internal controls;

          b) any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002              /s/ Michael W. Shelton
                                     -------------------------------------------
                                     Michael W. Shelton
                                     Vice President, Secretary, Treasurer
                                     and Chief Financial Officer