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

                                    FORM 10-Q

                                   ----------

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

                         For the quarterly period ended:

                                 March 31, 2005

                        Commission File Number: 000-13086

                       FNB FINANCIAL SERVICES CORPORATION
             (Exact name of Registrant as specified in its Charter)

             North Carolina                              56-1382275
        (State of Incorporation)            (I.R.S. Employer Identification No.)

   1501 Highwoods Boulevard, Suite 400
       Greensboro, North Carolina                          27410
(Address of principal executive offices)                 (Zip Code)

                                 (336) 369-0900
              (Registrant's telephone number, including area code)

                                   ----------

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

    Indicate by check mark whether the Registrant is an accelerated filer (as
                defined in Rule 12b-2 of the Act). Yes |X| No |_|

    At May 5, 2005, 5,595,557 shares of the registrant's common stock, $1.00
                          par value, were outstanding.

        This Form 10-Q has 23 pages. The Exhibit Index begins on page 17.

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<PAGE>

                       FNB FINANCIAL SERVICES CORPORATION

                                    FORM 10-Q

                                      INDEX

                                                                            Page
                                                                            ----

PART I   FINANCIAL INFORMATION

 Item 1  Financial Statements

         Consolidated Balance Sheets                                          3
         March 31, 2005 and December 31, 2004

         Consolidated Statements of Income and Comprehensive Income           4
         for the Three Months Ended March 31, 2005 and 2004

         Consolidated Statements of Changes in Shareholders' Equity for       5
         the Three Months Ended March 31, 2005 and 2004

         Consolidated Statements of Cash Flows for the                        6
         Three Months Ended March 31, 2005 and 2004

         Notes to Consolidated Financial Statements                           7

 Item 2  Management's Discussion and Analysis of Financial Condition         11
         and Results of Operations

 Item 3  Quantitative and Qualitative Disclosures About Market Risk          16

 Item 4  Controls and Procedures                                             16

PART  II OTHER INFORMATION

 Item 1  Legal Proceedings                                                   17

 Item 2  Unregistered Sales of Equity 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                                                            17


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

FNB Financial Services Corporation and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                  March 31,
                                                                    2005         December 31,
                                                                 (Unaudited)        2004 *
                                                                 -----------     ------------
<S>                                                               <C>             <C>
ASSETS

Cash and due from banks                                           $  28,356       $  24,246
Investment securities:
     Securities available for sale                                  139,377         137,161
     Federal Home Loan Bank and Federal Reserve Bank Stock            5,289           4,442
Loans, net of allowance for credit losses of $7,843 at
      March 31, 2005 and $7,353 at December 31, 2004                705,467         656,073
Premises and equipment, net                                          12,853          13,144
Accrued income and other assets                                      29,178          30,269
                                                                  ---------       ---------

               Total assets                                       $ 920,520       $ 865,335
                                                                  =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest bearing                                          $  84,707       $  78,810
     Interest bearing                                               682,793         645,475
                                                                  ---------       ---------
               Total deposits                                       767,500         724,285

Federal funds purchased and retail repurchase agreements             15,583          21,534
Other borrowings                                                     60,000          45,000
Accrued expenses and other liabilities                                6,051           4,086
                                                                  ---------       ---------
               Total liabilities                                    849,134         794,905
                                                                  ---------       ---------

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 5,590,257 at March 31, 2005 and
               5,550,326 at December 31, 2004                         5,590           5,550
Paid-in capital                                                      21,719          21,367
Retained earnings                                                    45,524          43,986
Accumulated other comprehensive loss                                 (1,447)           (473)
                                                                  ---------       ---------

               Total shareholders' equity                            71,386          70,430
                                                                  ---------       ---------

               Total liabilities and shareholders' equity         $ 920,520       $ 865,335
                                                                  =========       =========
</TABLE>

      See notes to unaudited consolidated  financial statements.  * Derived from
      audited consolidated financial statements.


                                       3
<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
                                                                  March 31,
                                                         ---------------------------
                                                             2005            2004
                                                         -----------     -----------
<S>                                                      <C>             <C>
Interest income
     Loans                                               $    12,102     $     9,187
     Federal funds sold and overnight deposits                    66              17
     Investment securities
               Taxable                                           823             857
               Tax exempt                                        319             329
     Other                                                        67              48
                                                         -----------     -----------
               Total interest income                          13,377          10,438
                                                         -----------     -----------

Interest expense
     Deposits                                                  4,283           3,168
     Short-term borrowings                                        99              54
     Long-term debt                                              481             368
                                                         -----------     -----------
               Total interest expense                          4,863           3,590
                                                         -----------     -----------

Net interest income                                            8,514           6,848
Provision for credit losses                                      680             388
                                                         -----------     -----------

Net interest income after provision for credit losses          7,834           6,460

Noninterest income
     Service charges on deposit accounts                         823           1,012
     Mortgage banking fees                                     1,004             334
     Investment services fees                                    139             134
     Net gain (loss) on securities available for sale             (2)            111
     Net gain on disposition of other assets                      11             122
     Other noninterest income                                    163             129
                                                         -----------     -----------
               Total noninterest income                        2,138           1,842

Noninterest expense
     Salaries and employee benefits                            3,467           2,797
     Occupancy expense                                           401             325
     Furniture and equipment expense                             758             670
     Telecommunications expense                                  159             157
     Marketing expense                                           263             151
     Printing and supply expense                                 174             131
     Other noninterest expense                                 1,670           1,215
                                                         -----------     -----------
               Total noninterest expense                       6,892           5,446

Income before provision for income taxes                       3,080           2,856
Provision for income taxes                                     1,037             961
                                                         -----------     -----------

Net income                                                     2,043           1,895
Other comprehensive income (loss)                               (973)          1,086
                                                         -----------     -----------

Comprehensive income                                     $     1,070     $     2,981
                                                         ===========     ===========
Per share data
     Net income, basic                                   $      0.37     $      0.35
     Net income, diluted                                 $      0.36     $      0.33
     Cash dividends                                      $      0.14     $      0.12
Weighted average shares outstanding, basic                 5,504,159       5,485,747
Weighted average shares outstanding, diluted               5,700,526       5,760,968
</TABLE>

      See notes to unaudited consolidated financial statements.


                                       4
<PAGE>

FNB Financial Services Corporation and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited; dollars in thousands)

                                                           Three Months Ended
                                                                March 31,
                                                          ---------------------
                                                            2005         2004
                                                          --------     --------
Common stock
    Balance at beginning of period                        $  5,550     $  5,479
    Stock repurchase                                           (23)         (17)
    Exercise of stock options                                   63           33
                                                          --------     --------
    Balance at end of period                                 5,590        5,495
                                                          --------     --------

Paid-in capital
    Balance at beginning of period                          21,091       22,025
    Stock repurchase                                          (495)        (302)
    Exercise of stock options                                  671          367
    Tax benefit relating to exercise of stock options          452           --
                                                          --------     --------
    Balance at end of period                                21,719       22,090
                                                          --------     --------

Retained earnings
    Balance at beginning of period                          44,262       38,395
    Net income                                               2,043        1,895
    Cash dividends declared                                   (781)        (658)
    Tax benefit relating to exercise of stock options           --          276
                                                          --------     --------
    Balance at end of period                                45,524       39,908
                                                          --------     --------

Accumulated other comprehensive income (loss)
    Balance at beginning of period                            (474)        (149)
    Other comprehensive income (loss)                         (973)       1,086
                                                          --------     --------
    Balance at end of period                                (1,447)         937
                                                          --------     --------

Total shareholders' equity                                $ 71,386     $ 68,430
                                                          ========     ========

      See notes to unaudited consolidated financial statements.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                    ---------------------
                                                                                      2005         2004
                                                                                    --------     --------
<S>                                                                                 <C>          <C>
Cash flows from operating activities:
   Net income                                                                       $  2,043     $  1,895
   Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
          Depreciation, accretion, and amortization                                      311          673
          Provision for credit losses                                                    680          388
          Gain on sale of securities available for sale                                   (2)        (111)
          Gain on disposal of other assets                                               (11)        (122)
          Net change in loans held for sale                                            3,526       (4,337)
          Changes in assets and liabilities:
               Increase in other assets                                               (2,884)     (18,196)
               Increase in other liabilities                                           2,418       12,359
                                                                                    --------     --------
               Net cash provided by (used in) operating activities                     6,081       (7,451)
                                                                                    --------     --------

Cash flows from investing activities:
      Proceeds from sales, maturities, or calls of securities available for sale       5,673       15,736
      Purchase of securities available for sale                                       (9,649)      (3,195)
      Purchase of premises and equipment                                                (205)        (387)
      (Increase) decrease in other real estate owned                                     201       (1,026)
      Net increase in loans                                                          (49,688)     (18,904)
                                                                                    --------     --------

               Net cash used in investing activities                                 (53,668)      (7,776)
                                                                                    --------     --------

Cash flows from financing activities:
      Net increase (decrease) in deposits                                             43,214       (1,856)
      Net decrease in other borrowings                                                15,000        2,000
      Net increase (decrease) in federal funds purchased and repurchase
             agreements                                                               (5,952)       7,954
      Repurchase of common stock                                                        (518)        (320)
      Proceeds from issuance of common stock                                             734          400
      Cash dividends paid                                                               (781)        (657)
                                                                                    --------     --------

               Net cash provided by financing activities                              51,697        7,521
                                                                                    --------     --------

Net increase (decrease) in cash and cash equivalents                                   4,110       (7,706)
Cash and cash equivalents, January 1                                                  24,246       29,319
                                                                                    --------     --------

Cash and cash equivalents, March 31                                                 $ 28,356     $ 21,613
                                                                                    ========     ========
</TABLE>

      See notes to unaudited consolidated financial statements.


                                       6
<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 accounting  principles generally accepted
      in the United States of America 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 accounting  principles
      generally  accepted in the United States of America 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  three-month  period ended
      March 31, 2005 are not  necessarily  indicative of the results that may be
      expected for the year ending  December 31, 2005.  For further  information
      refer to the  consolidated  financial  statements  and  footnotes  thereto
      included in FNB  Financial  Services  Corporation's  2004 Annual Report on
      Form 10-K.  Certain  reclassifications  have been made to the prior period
      consolidated financial statements to place them on a comparable basis with
      the   current   period   consolidated    financial    statements.    These
      reclassifications  have no effect on net income or shareholders' equity as
      previously reported.

2.    Per share data

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

                                                        Three Months Ended
                                                            March 31,
                                                      ----------------------
                                                        2005         2004
                                                      ---------    ---------

      Weighted average number of shares
              used in basic EPS                       5,504,159    5,485,787
      Effect of dilutive stock options                  196,367      275,221
                                                      ---------    ---------

      Weighted average number of common
              shares and dilutive potential common
              shares used in dilutive EPS             5,700,526    5,760,968
                                                      =========    =========

            For the three  months  ended  March 31,  2005 and 2004,  there  were
      109,000, and 6,250 options,  respectively,  that were antidilutive because
      the exercise  price  exceeded the average  market price for the period and
      were omitted from the calculation of diluted  earnings per share for their
      respective periods.

3.    Stock compensation plans

            The  Company  follows  SFAS No.  123,  "Accounting  for  Stock-Based
      Compensation."  Under SFAS No.  123,  the  Company has elected to continue
      using the measurement  prescribed in Accounting  Principles  Board ("APB")
      Opinion  No.  25,  and  accordingly,  SFAS No.  123 had no  effect  on the
      Company's  financial  position or results of  operations.  The Company has
      issued stock under both  incentive and  non-qualified  stock option plans.
      The proforma  impact on net income and net income per share as if the fair
      value of stock-based  compensation  plans had been recorded as a component
      of compensation expense in the consolidated financial statements as of the
      date of grant of awards related to such plans,  pursuant to the provisions
      of SFAS No. 148, "Accounting for Stock-Based  Compensation-Transition  and
      Disclosure,"  which  amends  SFAS No.  123,  "Accounting  for Stock  Based
      Compensation," is disclosed in the accompanying table.


                                       7
<PAGE>

4.    Stock compensation plans (continued)

            These plans  provide  that shares  granted  come from the  Company's
      authorized but unissued or reacquired  common stock. The exercise price of
      the  options  granted  pursuant  to these  plans will not be less than 100
      percent of the fair market  value of the shares on the date of grant.  The
      options  granted in 1996 and  thereafter  vest  ratably  over a  four-year
      period.  No option  will be  exercisable  after  ten  years  from the date
      granted.

                                                      For the three months ended
                                                              March 31,
                                                      --------------------------
(Dollars in thousands, except per share data)            2005           2004
                                                        ------         ------
Net income, as reported                                 $2,043         $1,895
Less: Stock based
compensation as calculated per
fair value method, net of tax
effect                                                    (367)          (362)
                                                        ------         ------
Proforma net income                                     $1,676         $1,533
                                                        ======         ======

Earnings per share:
Basic - as reported                                     $ 0.37         $ 0.35
Basic - proforma                                        $ 0.36         $ 0.33
Diluted - as reported                                   $ 0.36         $ 0.33
Diluted - proforma                                      $ 0.35         $ 0.32

            In December 2004,  the FASB issued SFAS No.  123(R),  Accounting for
      Stock-Based  Compensation.  This Statement focuses primarily on accounting
      for  transactions  in  which  an  entity  obtains  employee   services  in
      share-based payment  transactions.  SFAS No. 123(R) requires that the fair
      value of such  equity  instruments  be  recognized  as an  expense  in the
      financial  statements as services are  performed.  The  provisions of this
      Statement are effective for the first interim reporting period that begins
      after  December  31,  2005.  Accordingly,  the Company will adopt SFAS No.
      123(R) commencing with the quarter ending March 31, 2006.

4.    Loans

      Loan Category:
      (Dollars in thousands)                March 31, 2005   December 31, 2004
                                            --------------   -----------------

      Real estate - construction                $188,904          $162,143
      Real estate - mortgage                     305,928           290,927
      Commercial                                  84,505            83,332
      Consumer                                   140,755           137,332
                                                --------          --------

             Gross loans                         720,092           673,734

       Less: Loans held for sale                   6,782            10,308
                                                --------          --------

             Loans held for investment          $713,310          $663,426
                                                ========          ========


                                       8
<PAGE>

4.    Loans (continued)

Allowance for credit losses:

<TABLE>
<CAPTION>
                                           March 31, 2005             December 31, 2004
                                     -------------------------    -------------------------
                                                   % of Loans                    % of Loans
(Dollars in thousands)                               in Each                      in Each
                                                   Category to                  Category to
                                     Allowance     Total Loans    Allowance     Total Loans
                                     ---------     -----------    ---------     -----------
<S>                                    <C>              <C>         <C>              <C>
Balance at end of period
applicable to:

     Real estate - construction        $    1            26%        $    1            24%
     Real estate - mortgage                71            42             43            42
     Commercial                         5,410            12          5,166            13
     Consumer                           2,361            20          2,143            21
                                       ------        ------         ------        ------

          Total                        $7,843           100%        $7,353           100%
                                       ======        ======         ======        ======
</TABLE>

Rollforward - allowance for credit losses:

                                                         Three Months Ended
                                                              March 31,
                                                      ------------------------
(Dollars in thousands)                                  2005             2004
                                                      -------          -------

Balance, beginning of period                          $ 7,353          $ 7,124

Charge-offs                                               214              327
Recoveries                                                (24)             (18)
                                                      -------          -------
Net charge-offs                                           190              309
                                                      -------          -------
Provision for credit losses                               680              388
                                                      -------          -------
Balance, end of period                                $ 7,843          $ 7,203
                                                      =======          =======

Annualized net charge-offs during the
          period to average loans outstanding
          during the period                              0.11%            0.21%
                                                      =======          =======
Allowance for credit losses to
          period end loans                               1.10%            1.21%
                                                      =======          =======

Nonperforming assets:

                                                       March 31,    December 31,
(Dollars in thousands)                                    2005          2004
                                                       ---------    ------------

Nonaccrual                                               $2,569        $3,450
Past due 90 days or more and still accruing interest         44            65
Other real estate                                         5,357         5,559
Renegotiated troubled debt                                   --            --


                                       9
<PAGE>

5.    Employee benefit plans

            The  accompanying  table details the  components of pension  expense
      recognized  in  the  Company's  Consolidated   Statements  of  Income  and
      Comprehensive Income:

                                                     For the three months
                                                        ended March 31,
                                                     --------------------
      (Dollars in thousands)                          2005           2004
      ----------------------                         -----          -----
      Service cost                                   $ 127          $ 127
      Interest cost                                     90             90
      Expected return on plan assets                  (121)          (121)
      Amortization of prior service cost                 5              5
                                                     -----          -----
      Net periodic pension cost                      $ 101          $ 101
                                                     =====          =====

            For the 2005 Plan Year, no tax-deductible contributions are required
      or allowed.

6.    Subsequent event

            On April 21, 2005, the Board of Directors  approved a  five-for-four
      (5:4)  stock  split of its common  stock,  to be  effected  as a 25% stock
      dividend.  Shareholders of record at the close of business on May 12, 2005
      shall receive one additional  share of the Company's common stock for each
      four shares owned. Certificates for the new shares and any cash to be paid
      to  shareholders  in lieu of fractional  shares will be issued on or about
      May 31,  2005.  The par value of the common stock will remain at $1.00 per
      share.

            The accompanying table presents, on a proforma basis, March 31, 2005
      and 2004 share data, restated to reflect the impact of the stock split.

                                                          Three Months Ended
                                                               March 31,
                                                       -------------------------
                                                          2005           2004
                                                       ----------     ----------

      Per share data
           Net income, basic                           $     0.30     $     0.28
           Net income, diluted                         $     0.29     $     0.26
           Cash dividends                              $     0.11     $     0.10

      Weighted average shares outstanding, basic        6,880,199      6,857,184
      Weighted average shares outstanding, diluted      7,125,658      7,201,210


                                       10
<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.

Application of Critical Accounting Policies

      The  Company's   accounting  policies  are  fundamental  to  understanding
management's  discussion  and analysis of results of  operations  and  financial
condition. The Company's significant accounting policies are discussed in detail
in Note 1 of the  consolidated  financial  statements  included in the Company's
2004 Annual Report on Form 10-K. The following is a summary of the allowance for
credit losses, one of the most complex and judgmental accounting policies of the
Company.

      The allowance for credit losses, which is utilized to absorb actual losses
in the loan portfolio,  is maintained at a level  consistent  with  management's
best estimate of probable  credit losses  incurred as of the balance sheet date.
The  Company's  allowance  for  credit  losses  is also  analyzed  quarterly  by
management.  This analysis  includes a methodology that separates the total loan
portfolio into homogeneous loan classifications for purposes of evaluating risk,
as well as analysis  of certain  individually  identified  loans.  The  required
allowance is calculated by applying a risk adjusted  reserve  requirement to the
dollar volume of loans within a homogenous group. Major loan portfolio subgroups
include: risk graded commercial loans, mortgage loans, home equity loans, retail
loans and retail credit lines. Management also analyzes the loan portfolio on an
ongoing  basis to evaluate  current  risk  levels,  and risk grades are adjusted
accordingly.  While  management uses the best  information to make  evaluations,
future  adjustments  may be necessary,  if economic or other  conditions  differ
substantially from the assumptions used.

Executive Summary

      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. As of March 31,
2005,  the Bank operated  thirteen  banking  offices in North  Carolina and four
banking  offices in Virginia.  The Bank has two wholly owned  subsidiaries:  FNB
Southeast  Investment  Services,  Inc.,  which operated  three offices;  and FNB
Southeast Mortgage Corporation, which operated ten offices.

      Assets at March  31,  2005  were  $920.5  million,  an  increase  of $55.2
million,  or 6.4%,  since  December 31, 2004.  A $49.9  million  increase in net
loans, combined with a $3.1 million increase in investment securities,  were the
principal  factors impacting this overall increase during the first three months
of 2005.  Over the past  three  months,  interest-bearing  deposits  rose  $37.3
million due to promotional campaigns and noninterest-bearing  deposits increased
$5.9 million, resulting in a 6.0% increase in total deposits for the period. The
Company's first quarter earnings were $2.04 million in 2005 and $1.90 million in
2004.  Earnings  per  diluted  share were  $0.36 for the first  quarter of 2005,
compared to $0.33 for the same period in 2004.

Financial Condition

      Since  December  31,  2004,  the  Company's  assets have  increased  $55.2
million,  rising from $865.3  million at yearend 2004 to $920.5 million at March
31, 2005. The principal factors impacting this overall increase during the first
three months of 2005 were a $49.4 million increase in net loans, combined with a


                                       11
<PAGE>

$3.1 million increase in investment securities.  Loans at March 31, 2005 totaled
$713.3 million, compared to $663.4 million at yearend 2004, an increase of 7.5%.
Investment  securities of $144.7 million at March 31, 2005 were 2.2% higher than
the $141.6 million balance at December 31, 2004.

      Deposits  totaled  $767.5  million at March 31,  2005,  compared to $724.3
million  at  December  31,  2004.   At  the  end  of  the  first  quarter  2005,
noninterest-bearing deposits were $84.7 million, or 11.0%, of total deposits. At
March 31, 2005,  borrowings  at the Federal  Home Loan Bank of Atlanta  ("FHLB")
totaled  $60.0  million,  an  increase of 33.3%,  compared  to $45.0  million at
December 31, 2004.  This  increase was  primarily  utilized to fund loan demand.
Federal funds purchased and retail repurchase  agreements  totaled $15.6 million
at March 31, 2005, a decrease of $6.0 million from December 31, 2004.

      Shareholders'  equity remains strong,  with all of our regulatory  capital
ratios at levels  that  classify  the Company as "well  capitalized"  under bank
regulatory capital guidelines.  Shareholders'  equity increased to $71.4 million
at the end of the first quarter 2005,  compared to $70.4 million at December 31,
2004.  The Company paid  dividends  of $0.14 per share during the quarter  ended
March 31, 2005, a 16.7%  increase over the $0.12 per share dividend rate for the
first quarter of 2004.

      In July 2004, the Company's Board of Directors  approved the  continuation
of its stock repurchase program by authorizing the repurchase of up to 5% of the
Company's  outstanding  common stock.  This program  succeeds a stock repurchase
program  authorized  in  November  2002.  The  2004  program  provides  for  the
repurchase of up to 275,124  additional  shares of common stock. This program is
intended to help the Company  achieve  its goal of  building  shareholder  value
while maintaining appropriate capital levels. During the quarter ended March 31,
2005,  a total of 22,836  shares were  purchased  at an average  price of $22.67
through  the 2004  stock  repurchase  program.  In  accordance  with  state law,
repurchased shares are cancelled and are no longer considered issued.

Asset Quality

      The  Company's  allowance  for  credit  losses is  analyzed  quarterly  by
management.  This  analysis  includes  a  methodology  that  segments  the  loan
portfolio into homogeneous loan classifications 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.

      The credit  loss  allowance  ratio was 1.10% at March 31,  2005,  1.11% at
December 31, 2004,  and 1.21% at March 31, 2004.  For the first quarter of 2005,
provision charges against earnings totaled $680,000, compared to $388,000 in the
first  quarter  of 2004.  The  increased  level  of  provision  in 2005  related
primarily to an increased  level of outstanding  loans.  Net charge-offs for the
first quarter of 2005 totaled  $189,000,  or a 0.11% annualized loss ratio based
on average loans  outstanding.  This is a decrease from the net  charge-offs for
the first quarter of 2004 totaling $309,000, or 0.21% annualized loss ratio.

      Nonperforming  loans  totaled $2.6 million at March 31, 2005,  compared to
$3.5  million at yearend  2004 and $3.6  million at March 31,  2004.  Other real
estate  owned  ("OREO")  was $5.4  million at March 31,  2005,  $5.6  million at
December 31, 2004,  and $5.0 million at March 31, 2004.  Approximately  $308,000
has been  transferred  from loans into OREO and  approximately  $426,000 of such
assets were  disposed of during the first  three  months of 2005.  A net loss of
$9,000 has been recorded on disposition of OREO in the current year, compared to
$110,000  in net  losses  for the same  period a year  ago.  The  Company  had a
writedown of $149,000 on OREO in the first quarter of 2005 and none in the first
quarter of 2004.

      Total  nonperforming  assets  (comprised of nonperforming  loans and OREO)
decreased to $8.0  million,  or 0.87% of total assets,  at March 31, 2005,  from
$9.1 million,  or 1.05% of total assets,  at December 31, 2004 and $8.6 million,
or 1.08% of total assets, a year ago. Management believes these changes indicate
a trend of improving asset quality.


                                       12
<PAGE>

Results of Operations for the Three Months Ended March 31, 2005 and 2004

Interest Income and Interest Expense
------------------------------------

      Total  interest  income was $13.38  million for the first quarter of 2005,
compared  to $10.44  million  for the same  period a year ago.  Average  earning
assets for the current  quarter were $842.1  million,  an increase of 13.5% over
the first quarter  average of $742.2  million a year ago.  Interest  income from
loans was $12.10  million,  up 31.7% from $9.19  million in the first quarter of
2004. The increase in interest income was driven by an increase in average loans
outstanding,  combined with a rising interest rate environment. Average loans of
$691.2  million  were 17.1% higher than the $590.1  million last year.  Interest
income on investment securities totaled $1.21 million for the three months ended
March 31, 2005,  compared to $1.23  million for the first  quarter of 2004.  The
average  balance of the investment  portfolio was $142.0 million for the quarter
ended March 31, 2005, a 2.1% decline from the average  balance of $145.0 million
for the prior year first quarter.

Average Balance Sheets/ Interest Income and Expense

<TABLE>
<CAPTION>
      For the Three Months Ended:                      March 31, 2005                                 March 31, 2004
                                                       --------------                                 --------------
                                                          Interest      Average                          Interest      Average
(Dollars in thousands)                     Average        Income /      Yield /           Average        Income /      Yield /
                                         Balance (3)      Expense         Rate          Balance (3)      Expense         Rate
                                         ---------------------------------------        ---------------------------------------
<S>                                       <C>            <C>                <C>          <C>            <C>                <C>
Interest earning assets:
Loans (2)                                 $ 691,180      $  12,102          7.10%        $ 590,083      $   9,187          6.31%
Taxable investment securities               103,591            824          3.23%          107,323            856          3.23%
Tax-exempt investment securities             32,328            483          6.06%(1)        33,206            502          6.13%(1)
Other securities                              6,044             66          4.43%            4,502             48          4.32%
Overnight deposits                            8,998             66          2.97%            7,070             16          0.92%
                                          ------------------------                       ------------------------
   Total earning assets                     842,141         13,541          6.52%          742,184         10,609          5.80%

Non-earning assets:
Cash and due from banks                      22,681                                         18,553
Premises and equipment                       12,847                                         12,906
Other assets                                 28,969                                         21,772
Less: Allowance for credit losses            (7,555)                                        (7,147)
                                          ---------                                      ---------
   Total assets                           $ 899,083                                      $ 788,268
                                          =========                                      =========

Interest bearing liabilities:
Savings and NOW                           $  52,739             20          0.15%        $  52,083             16          0.12%
MMI                                         121,175            665          2.23%           65,909            225          1.38%
Time deposits                               485,920          3,598          3.00%          448,819          2,926          2.64%
Federal funds purchased,
borrowed funds and securities sold
under agreements to repurchase               76,218            580          3.09%           76,379            422          2.24%
                                          ------------------------                       ------------------------
   Total interest bearing liabilities       736,052          4,863          2.68%          643,190          3,589          2.26%

Other liabilities and shareholders'
equity:
Demand deposits                              78,685                                         69,793
Other liabilities                            13,526                                          8,517
Shareholders' equity                         70,820                                         66,768
                                          ---------                                      ---------
  Total liabilities and equity            $ 899,083                                      $ 788,268
                                          =========                                      =========

Net interest income and net yield on
earning assets (3) (4)                                   $   8,678          4.18%                       $   7,020          3.84%
                                                         =======================                        =======================

Interest rate spread (5)                                                    3.84%                                          3.53%
                                                                       =========                                      =========
</TABLE>

(1)   The fully tax  equivalent  basis is  computed  using a federal tax rate of
      34%. The adjustments  made to convert to a fully taxable  equivalent basis
      were $164,000 for 2005 and $172,000 for 2004.

(2)   The average loan balances include nonaccruing loans.

(3)   The average  balances for all years  include  market  adjustments  to fair
      value for securities and loans available/held for sale.

(4)   Net yield on earning assets is computed by dividing net interest income by
      average earning assets.

(5)   Earning asset yield minus interest bearing liabilities rate.


                                       13
<PAGE>

      First quarter total interest expense was $4.86 million,  compared to $3.59
million from the first quarter of last year, a 35.5% increase.  Average interest
bearing deposits  increased 16.4%, to $659.8 million,  from $566.8 for the first
quarter of 2004. The average balance of federal funds purchased,  borrowed funds
and  securities  sold under  agreements to repurchase  was $76.2 million for the
first quarter of 2005 and $76.4 million for the same period in 2004. The Company
primarily  utilized the growth in deposits as funding sources to support balance
sheet growth.

      During  the  three  months  ended  March 31,  2005,  net  interest  income
increased $1.67 million, or 24.3%, over the same period a year ago. Net interest
income  benefited  from strong growth in average  earning assets which rose from
$742.2  million  for the first  quarter of 2004 to $842.1  million for the first
quarter of 2005, a 13.5% increase.  The average yields on total interest earning
assets for the same  periods  increased  72 basis  points,  from 5.80% to 6.52%.
Average  interest  bearing  liabilities  for the first quarter of 2005 increased
14.4%, to $736.1 million, from $643.2 million for the first quarter of 2004. The
average cost of interest bearing  liabilities for the same periods  increased 42
basis  points  from 2.26% to 2.68%.  The net result  was an  improvement  in the
interest  rate  spread from 3.53% for the three  months  ended March 31, 2004 to
3.84% for the same period in 2005.

Provision for Credit Losses
---------------------------

      A  provision  for credit  losses is charged  against  earnings in order to
maintain the allowance  for credit losses at a level that reflects  management's
evaluation of the incurred losses  inherent in the portfolio.  The amount of the
provision is based on continuing  assessments of nonperforming  and "watch list"
loans,  analytical  reviews of loan loss  experience in relation to  outstanding
loans, loan charge-offs,  nonperforming  asset trends and management's  judgment
with respect to current and expected economic conditions and their impact on the
existing credit portfolio.

      The  provision for credit losses in the first quarter of 2005 was $680,000
compared to $388,000 in 2004.  The  allowance  for credit losses as a percent of
gross loans outstanding was 1.10% at March 31, 2005, 1.11% at December 31, 2004,
and 1.21% at March 31,  2004.  Annualized  net  credit  losses,  as a percent of
average  loans,  was 0.11% and 0.21% for the  quarters  ended March 31, 2005 and
2004, respectively.

Noninterest Income and Expense
------------------------------

      Noninterest  income  in the  first  quarter  of 2005  was  $2.14  million,
compared to $1.84 million in the same period last year.  Deposit service charges
were  $823,000 for the first  quarter of 2005,  compared to $1.01 million in the
first quarter of 2004.  Sales of securities  available for sale during the first
quarter of 2005 resulted in a $2,000 loss; however, gains on sales of securities
during the same period in 2004 were  $111,000.  Noninterest  income in the first
quarter of 2005 included $1.00 million in mortgage  banking fees and $139,000 in
investment   service  fees  compared  to  revenues  of  $334,000  and  $134,000,
respectively,  for the same period a year ago. The increase in mortgage  banking
fees for 2005 was primarily  attributable to the increased  volume  generated by
the mortgage banking subsidiary.

      Noninterest  expense for the first  quarter of 2005 was $6.89  million,  a
26.6%  increase  over the $5.45  million  expense in the first  quarter of 2004.
Salaries and employee benefits  increased $670,000 because of increased staffing
associated  with  the  expansion  of the  mortgage  banking  operations  and the
corporate headquarters relocation, combined with higher insurance and retirement
costs.  Other items impacted by the increased  staffing related to the expansion
of the mortgage  banking  operations and the corporate  headquarters  relocation
were occupancy  expense,  which increased  $76,000,  and furniture and equipment
expense,  which rose $88,000,  compared to first quarter 2005. Marketing expense
increased $111,000 in the first quarter 2005, compared to the same period a year
ago, primarily because of costs associated with various deposit campaigns. Other
expense for the first  quarters of 2005 and 2004 totaled $1.67 million and $1.22
million, respectively.


                                       14
<PAGE>

Provision for Income Taxes
--------------------------

      The  Company's  provision  for income taxes  totaled $1.04 million for the
first  quarter of 2005 and $961,000 for the same period in 2004.  The  Company's
effective tax rates were 33.7% for the three-month  periods ended March 31, 2005
and 2004.  The increase in the provision  for 2005,  compared to the prior year,
results  primarily from the increase in taxable income.  Overall,  the effective
tax rate is attributable to the current expense  required to provide an adequate
provision for income taxes for the quarters ended March 31, 2005 and 2004.

Capital Resources

      Banks and financial holding  companies,  as regulated  institutions,  must
meet  required  levels of capital.  The Office of the  Commissioner  of Banks in
North Carolina and the Board of Governors of the Federal Reserve,  which are the
primary  regulatory  agencies for the Bank 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  accompanying  table,  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 March 31, 2005.

                              Regulatory Guidelines
                            -------------------------
                               Well        Adequately                    FNB
                            Capitalized   Capitalized    Company      Southeast
                            -----------   -----------    -------      ---------

      Total Capital            10.0%          8.0%        10.92%        10.57%
      Tier 1 Capital            6.0           4.0          9.85          9.50
      Leverage Capital          5.0           4.0          8.00          7.72

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 three months of 2005,  the Company had net cash  provided
by operating  activities of $6.1  million,  compared to $7.5 million of net cash
used in  operating  activities  in the  first  three  months  of  2004.  This is
primarily  attributable to the $7.9 million  decrease in loans held for sale for
the first three  months of 2005,  compared to a $4.3  million  increase in loans
held for sale for the same period in 2004.  Also  contributing  to this variance
were  changes in other  assets and  liabilities:  other  assets  increased  $2.9
million in the first  quarter of 2005,  compared to an increase of $18.2 million
for the same period in 2004;  and other  liabilities  increased $2.4 million and
$12.4 million for the periods ended March 31, 2005 and 2004.

      Net cash used in  investing  activities  in the first three months of 2005
totaled $53.7  million.  Purchases of investment  securities in the current year
totaled $9.6 million and proceeds from sales, calls, or maturities of securities
were $5.7 million. This compares to the first three months of 2004 when proceeds
from sales,  calls,  or  maturities  of  securities  totaled  $15.7  million and
purchases of investment  securities  totaled $3.2  million,  leading to net cash
used in investment  activities of $7.8 million. An increase in loans outstanding
used  $49.7  million  in cash  during  2005 and $18.9  million  during the first
quarter of 2004.  Purchases of premises  and  equipment  used  $205,000 in 2005,
compared to $387,000 in 2004.


                                       15
<PAGE>

      During  the three  months  ended  March  31,  2005,  financing  activities
provided  $51.7  million.  An  increase of $43.2  million in deposits  and $15.0
million in borrowings  were the principal  components of this  increase,  offset
somewhat by a decrease in federal  funds  purchased and  repurchase  agreements.
Financing  activities  in the three  months ended March 31, 2004  provided  $7.5
million,  based  primarily on an increase of $8.0 million rise in federal  funds
purchased and repurchase  agreements,  combined with a $2.0 million  increase in
borrowings and a $1.9 decrease in deposits

      Overall cash and cash equivalents totaled $28.4 million at March 31, 2005,
compared to $24.2  million at December  31, 2004 and $21.6  million at March 31,
2004.

      Liquidity  is  further  enhanced  by  a  line  of  credit  with  the  FHLB
collateralized  by FHLB stock,  investment  securities and qualifying 1-4 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 initiated through an advance application that is subject to approval
by the FHLB before funds are advanced under the credit agreement.

      The Company also has unsecured overnight borrowing lines available through
five  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. The Company has also  established a $15 million  wholesale
repurchase agreement with a regional brokerage firm. The Company can access this
additional  source of  liquidity  by  pledging  investment  securities  with the
brokerage firm.

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 three months ended March 31, 2005.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

      The Company's management, under the supervision and with the participation
of the Chief Executive  Officer and the Chief  Financial  Officer of the Company
(its principal executive officer and principal financial officer, respectively),
has concluded  based on its  evaluation  as of the end of the period  covered by
this Report, that the Company's disclosure controls and procedures are effective
to ensure  that  information  required  to be  disclosed  by the  Company in the
reports filed or submitted by it under the  Securities  Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods
specified in the applicable rules and forms, and include controls and procedures
designed to ensure that  information  required to be disclosed by the Company in
such  reports is  accumulated  and  communicated  to the  Company's  management,
including the Chief  Executive  Officer and the Chief  Financial  Officer of the
Company, as appropriate to allow timely decisions regarding required disclosure.


                                       16
<PAGE>

Changes in internal control over financial reporting

      There have been no significant  changes in internal control over financial
reporting  during  the  period  covered  by this  Report  that  have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

            None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      The accompanying table details,  by month, the information  related to the
share  repurchase  program  approved by the Company's Board of Directors in July
2004  authorizing  the  repurchase  of up to  275,124  shares  of the  Company's
outstanding  common  stock.  The program was publicly  announced in the month of
approval.

<TABLE>
<CAPTION>
                                 Stock Repurchase Program - Approved July 2004
                                 ---------------------------------------------
                                   (a)               (b)                (c)                  (d)
                                                                                       Maximum Number
                             Total Number of                                           of Shares that
                                  Shares       Average Price   Cumulative Number of      May Yet Be
Period                          Purchased     Paid Per Share     Shares Purchased         Purchased
-----------------------
<S>                               <C>             <C>                 <C>                  <C>
January 1, 2005 to
January 31, 2005 ......               --               --                 --               198,710

February 1, 2005 to
February 28, 2005 .....           16,650          $ 22.70             39,528               182,060

March 1, 2005 to
March 31, 2005 ........            6,186          $ 22.60             45,714               175,874
      Total ...........           22,836          $ 22.67
</TABLE>

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.

Item 6. Exhibits

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

            3.01(1)     Amended and Restated Articles of Incorporation.

            3.02(1)     Bylaws of Company, as amended.

            4.01(1)     Specimen Common Stock Certificate.

            10.01(3)    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(4)    Omnibus Equity Compensation Plan of the Registrant.

            10.03(5)    Severance  Policy for Senior  Officers of the Registrant
                        (employed for five years or more).


                                       17
<PAGE>

            10.04(6)    Revised  Severance  Plan  for  Senior  Officers  of  the
                        Registrant (employed for five years or more).

            10.05(4)    Severance  Policy for Senior  Officers of the Registrant
                        (employed for less than five years).

            10.06(8)    Benefit  Equivalency  Plan of the  Registrant  effective
                        January 1, 1994.

            10.07(12)   Annual Management Incentive Plan of the Registrant.

            10.08(8)    Long Term Incentive Plan of the Registrant.

            10.09(10)   Long Term  Incentive  Plan of the Registrant for certain
                        senior management employees.

            10.10(8)    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(9)    Split-Dollar  Agreement dated January 27, 1995,  between
                        the Registrant and Ernest J. Sewell.

            10.12(9)    Split-Dollar  Agreement dated January 27, 1995,  between
                        the Registrant and C. Melvin Gantt.

            10.13(9)    Split-Dollar  Agreement dated December 8, 1995,  between
                        the Registrant and Richard L. Powell.

            10.14(2)    Amendment to Benefit  Equivalency Plan of the Registrant
                        effective January 1, 1998.

            10.15(9)    Split-Dollar Agreement dated March 20, 1998, between the
                        Registrant and Ernest J. Sewell.

            10.16(12)   Second Amendment,  dated May 19, 2004, to the Employment
                        Agreement dated May 18, 1995, between the Registrant, as
                        employer,  and  Ernest J.  Sewell,  President  and Chief
                        Executive Officer of the Registrant.

            10.17(11)   Employment and Change of Control Agreement dated July 1,
                        2004, between the Registrant,  as employer, and Pressley
                        A. Ridgill, Executive Vice President and Chief Operating
                        Officer of the Registrant.

            10.18(12)   2005 Annual Incentive Bonus Plan

            10.19(12)   Third  Amendment  to  Employment   Agreement  and  First
                        Amendments to  Split-Dollar  Agreements  and  Collateral
                        Agreements  with Ernest J. Sewell  effective  January 1,
                        2004

            31.01       Certification of Ernest J. Sewell.

            31.02       Certification of Michael W. Shelton.

            32.01       Certification  of Periodic  Financial Report Pursuant to
                        18 U.S.C Section 1350.

      Exhibit references:

            (1)   Incorporated herein by reference to the Registrant's Quarterly
                  Report on Form 10-Q for the  fiscal  quarter  ended  March 31,
                  1998, filed with the Securities and Exchange Commission.

            (2)   Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-K for the  fiscal  year ended  December  31,
                  1998, filed with the Securities and Exchange Commission.

            (3)   Incorporated herein by reference to the Registrant's Statement
                  on Form S-8 (No.  33-33186),  filed  with the  Securities  and
                  Exchange Commission.

            (4)   Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-KSB for the fiscal year ended  December  31,
                  1996, filed with the Securities and Exchange Commission.

            (5)   Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-K for the  fiscal  year ended  December  31,
                  1989, filed with the Securities and Exchange Commission.


                                       18
<PAGE>

            (6)   Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-KSB for the fiscal year ended  December  31,
                  1994, filed with the Securities and Exchange Commission.

            (7)   Incorporated herein by reference to the Registrant's Quarterly
                  Report,  on Form 10-QSB for the fiscal  quarter ended June 30,
                  1995, filed with the Securities and Exchange Commission.

            (8)   Incorporated herein by reference to the Registrant's Statement
                  on Form S-2 (File No. 333-47203) filed with the Securities and
                  Exchange Commission on March 3, 1998.

            (9)   Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-KSB for the fiscal year ended  December  31,
                  1997, filed with the Securities and Exchange Commission.

            (10)  Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-K for the  fiscal  year ended  December  31,
                  2002, filed with the Securities and Exchange Commission.

            (11)  Incorporated herein by reference to the Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended  September 30, 2004,
                  filed with the Securities and Exchange Commission.

            (12)  Incorporated  herein by reference to the  Registrant's  Annual
                  Report on Form 10-K for the  fiscal  year ended  December  31,
                  2004, filed with the Securities and Exchange Commission.


                                       19
<PAGE>

                                   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)


May 9, 2005                                 /s/ MICHAEL W. SHELTON
                                            ----------------------
                                               Michael W. Shelton
                                (Senior Vice President, Chief Financial Officer,
                                            Secretary, and Treasurer)


                                       20