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, 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  [ ]

4,628,812  common shares were outstanding as of April 30, 2002, with a par value
per share of $1.00.


                       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
                        March 31, 2002 and December 31, 2001                                       1

                        Consolidated Statements of Income and Comprehensive Income Three
                        months ended March 31, 2002 and 2001                                       2

                        Consolidated Statements of Cash Flows
                        Three months ended March 31, 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 - 14

  Item         3        Quantitative and Qualitative Disclosures About Market Risk             14 - 15


  PART         II        OTHER INFORMATION

  Item         1        Legal Proceedings                                                           15

  Item         2        Changes in Securities and Use of Proceeds                                   15

  Item         3        Defaults Upon Senior Securities                                             15

  Item         4        Submission of Matters to a Vote of Security Holders                         15

  Item         5        Other Information                                                           16

  Item         6        Exhibits and Reports on Form 8 - K                                          16

</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>
                                                                      March 31,        December 31,
                                                                        2002              2001
                                                                     (Unaudited)        (Audited)
                                                                     -----------        ---------
<S>                                                                   <C>               <C>
ASSETS
Cash and due from banks                                               $ 18,756          $ 23,673
Investment securities:
     Securities available for sale                                      99,564           123,597
     Federal Home Loan Bank and Federal Reserve Bank Stock               3,879             3,967
Loans, net of allowance for credit losses of $6,742 at
      March 31, 2002 and $6,731 at December 31, 2001                   526,773           528,614
Premises and equipment, net                                             11,189            11,381
Accrued income and other assets                                         12,645            13,593
                                                                      --------          --------

               Total assets                                           $672,806          $704,825
                                                                      ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest bearing                                              $ 54,912          $ 58,831
     Interest bearing                                                  489,967           527,929
                                                                      --------          --------
               Total deposits                                          544,879           586,760

Federal funds purchased and retail repurchase agreements                15,580            19,677
Other borrowings                                                        45,000            30,000
Accrued expenses and other liabilities                                   4,721             5,680
                                                                      --------          --------

               Total liabilities                                       610,180           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 4,599,114 at March 31, 2002 and
               4,568,907 at December 31, 2001                            4,599             4,569
Paid-in capital                                                         26,758            26,465
Retained earnings                                                       30,833            30,178
Accumulated other comprehensive income                                     436             1,496

               Total shareholders' equity                               62,626            62,708
                                                                      --------          --------

               Total liabilities and shareholders' equity             $672,806          $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
                                                                           March 31,
                                                                   -------------------------
                                                                   2002                 2001
                                                                   ----                 ----
<S>                                                            <C>                   <C>
Interest income
     Loans                                                     $     9,024           $    11,640
     Federal funds sold and overnight deposits                          20                    87
     Investment securities
               Taxable                                               1,531                 1,949
               Tax exempt                                               97                   193
     Other                                                              61                    91
                                                               -----------           -----------
               Total interest income                                10,733                13,960
                                                               -----------           -----------

Interest expense
     Deposits                                                        4,898                 7,561
     Federal funds purchased and other borrowings                      304                   842
                                                               -----------           -----------
               Total interest expense                                5,202                 8,403
                                                               -----------           -----------
Net interest income                                                  5,531                 5,557
Provision for credit losses                                            285                   223
                                                               -----------           -----------
Net interest income after provision for credit losses                5,246                 5,334

Other income
     Service charges on deposit accounts                               582                   594
     Net gain on securities available for sale                          --                     1
     Net gain on disposition of asset                                   10                    --
     Income from investment services                                    69                    37
     Mortgage banking fees                                             160                    11
     Other income                                                      109                    52
                                                               -----------           -----------
               Total other income                                      930                   695

Other expenses
     Salaries and employee benefits                                  2,412                 2,320
     Occupancy expense                                                 259                   247
     Furniture and equipment expense                                   497                   477
     Insurance expense, including FDIC assessment                       45                    42
     Marketing expense                                                  45                    50
     Printing and supply expense                                       135                    64
     Other expenses                                                    938                   714
                                                               -----------           -----------
               Total other expenses                                  4,331                 3,914

Income before income taxes                                           1,845                 2,115
Income tax expense                                                     593                   611
                                                               -----------           -----------
Net income                                                           1,252                 1,504
Other comprehensive income (loss)                                   (1,060)                1,210
                                                               -----------           -----------
Comprehensive income                                           $       192           $     2,714
                                                               ===========           ===========
 per share data
     Net income, basic                                         $      0.27           $      0.33

     Net income, diluted                                       $      0.27           $      0.33

     Cash dividends                                            $      0.13           $      0.12

Weighted average shares outstanding, basic                       4,576,158             4,491,946
Weighted average shares outstanding, diluted                     4,645,399             4,539,356

</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>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                                 --------------------
                                                                                 2002            2001
                                                                                 ----            ----

<S>                                                                            <C>              <C>
Cash flows from operating activities:
          Interest received                                                    $ 11,968         $ 17,752
          Fees and commissions received                                             542              991
          Interest paid                                                          (5,626)          (8,706)
          Noninterest expense paid                                               (4,364)          (2,334)
          Income taxes paid                                                        (625)             (21)
          Funding of loans held for sale                                         (5,566)          (2,593)
          Proceeds from sales of loans held for sale                              5,760            2,608
                                                                               --------         --------
               Net cash provided by operating activities                          2,089            7,697
                                                                               --------         --------

Cash flows from investing activities:
          Proceeds from sales or calls of securities available for sale          22,702           26,712
          Proceeds from maturities of securities available for sale                  --            1,500
          Purchase of securities                                                   (220)         (44,807)
          Capital expenditures                                                     (103)            (135)
          (Increase) decrease in other real estate owned                            215               64
          (Increase) decrease in loans                                            1,646           (7,161)
                                                                               --------         --------
               Net cash provided (used) in investing activities                  24,240          (23,827)
                                                                               --------         --------

Cash flows from financing activities:
          Increase (decrease) in demand, savings and interest
                checking accounts                                                  (606)           1,998
          Increase (decrease) in time deposits                                  (41,275)          42,171
          Increase (decrease) in federal funds purchased and
                retail repurchase agreements                                     (4,097)          (1,493)
          Increase (decrease) in other borrowings                                15,000           (5,000)
          Proceeds from issuance of common stock                                    329               81
          Dividends paid                                                           (597)            (540)
                                                                               --------         --------
               Net cash provided (used) by financing activities                 (31,246)          37,217
                                                                               --------         --------
Net increase (decrease) in cash and cash equivalents                             (4,917)          21,087
Cash and cash equivalents, January 1                                             23,673           15,952
                                                                               --------         --------
Cash and cash equivalents, March 31                                            $ 18,756         $ 37,039
                                                                               ========         ========

Supplemental disclosure of non-cash transactions:
Non-cash transfers from loans to other real estate                             $     52         $    129
                                                                               ========         ========

</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>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                                 --------------------
                                                                                 2002            2001
                                                                                 ----            ----

<S>                                                                            <C>             <C>
Net income                                                                     $ 1,252         $ 1,504

Adjustments to reconcile net income to net cash provided by operating
activities:
          Provision for credit losses                                              285             223
          Depreciation                                                             326             369
          Accretion and amortization                                                53             109
          (Gain) loss on sale of securities available for sale                      --               1
          Funding of loans held for sale                                        (5,566)         (2,593)
          Proceeds from sales of loans held for sale                             5,760           2,608
          (Gain) loss on other assets                                              (10)             --
          (Increase) decrease in accrued income and other assets                   948            (112)
          Increase (decrease) in accrued expenses and other liabilities           (959)          5,588
                                                                               -------         -------
               Net cash provided by operating activities                       $ 2,089         $ 7,697
                                                                               =======         =======

</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 three month
     period ended March 31, 2002 are not  necessarily  indicative of the results
     that may be expected for the year ending December 31, 2002.


2.   Significant Activities

          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 March 31, 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 period month
     ended March 31, 2002 and 2001  consists of  unrealized  gains and losses on
     available for sale securities, net of related income taxes, as follows:

                                                Three Months Ended
                                                     March 31,
                                              ----------------------
                                              2002              2001
                                              ----              ----

Unrealized gains (losses) on
    available for sale securities           $(1,738)          $ 1,984

Reclassification of realized gains               --                (1)

Income tax effect                               678              (773)
                                            -------           -------
                                            $(1,060)          $ 1,210
                                            =======           =======
Other comprehensive income (loss)


                                        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.

                                                    Three Months Ended
                                                         March 31,
                                                    -------------------
                                                    2002           2001
                                                    ----           ----

Weighted average number of shares
        used in basic EPS                         4,576,158      4,491,946
Effect of dilutive stock options                     69,241         47,410
                                                  ---------      ---------
Weighted average number of common
        shares and dilutive potential common
        shares used in dilutive EPS               4,645,399      4,539,356
                                                  =========      =========


          As of March 31, 2002,  there were 181,249  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>
                                               March 31, 2002               December 31, 2001
                                           ----------------------        ---------------------
      (Dollars in thousands)               Amortized      Fair           Amortized        Fair
                                             Cost         Value             Cost          Value
                                             ----         -----             ----          -----

      <S>                                  <C>           <C>              <C>           <C>
      U.S. Agency securities               $ 83,083      $ 83,360         $104,039      $106,032
      Mortgage backed securities              7,505         7,631            8,477         8,628
      State and municipal obligations         7,956         8,264            8,325         8,628
      Other                                     294           309              304           309
                                           --------      --------         --------      --------
      Total available for sale             $ 98,838      $ 99,564         $121,145      $123,597
                                           ========      ========         ========      ========

<CAPTION>




7.     Loans  (net of unearned income)

       (Dollars in thousands)                      March 31,    December 31,
                                                     2002          2001
                                                     ----          ----

       <S>                                         <C>           <C>
       Loan Category:

       Real estate - commercial                    $162,991      $168,419
       Real estate - residential                    114,850       129,212
       Real estate - construction                    68,648        55,861
       Commercial, financial and agricultural        96,675        90,858
       Consumer                                      89,493        89,943
                                                   --------      --------
                 Subtotal loans                     532,657       534,293

       Loans held for sale                              858         1,052
                                                   --------      --------
                 Gross loans                       $533,515      $535,345
                                                   ========      ========

</TABLE>


                                       7


<PAGE>


8.     Allocation of Allowance for Credit Losses
<TABLE>
<CAPTION>

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

       Real estate - construction                          $   16                13             $   18                10
       Real estate - mortgage                                 135                52                104                56
       Commercial                                           4,532                18              4,773                17
       Consumer                                             2,059                17              1,836                17
                                                           ------               ---             ------               ---
            Total allocation                               $6,742               100%            $6,731               100%
                                                           ======               ===             ======               ===

</TABLE>


9.     Analysis of Allowance for Credit Losses

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                          March 31,
                                                                  ------------------------
(Dollars in thousands)                                            2002                2001
                                                                  ----                ----

<S>                                                              <C>                <C>
       Balance, beginning of period                              $6,731             $6,311

       Charge-offs                                                  302                103
       Recoveries                                                    28                 92
                                                                 ------             ------
       Net charge-offs                                              274                 11
                                                                 ------             ------
       Allowance charged to operations                              285                223
                                                                 ------             ------
       Balance, end of period                                    $6,742             $6,523
                                                                 ======             ======

       Ratio of annualized net charge-offs during the
                 period to average loans outstanding
                 during the period                                 0.20%              0.01%
                                                                 ======             ======
       Ratio of allowance for credit losses to
                 month end loans                                   1.26%              1.28%
                                                                 ======             ======

</TABLE>


                                        8


<PAGE>


10.
       Nonperforming Assets

<TABLE>
<CAPTION>
                                                                         March 31,      December 31,
       (Dollars in thousands)                                              2002             2001
                                                                           ----             ----

       <S>                                                               <C>              <C>
       Nonaccrual  (1)                                                   $ 3,457          $ 2,260

       Past due 90 days or more and still accruing interest                   31                6
       Other real estate                                                   2,544            2,707
       Renegotiated troubled debt                                             --               --

</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 March 31, 2002 were $672.8  million,  a decrease of $32.0 million
since  December 31, 2001.  The decrease in assets is primarily due to a decrease
in  investment  securities  available  for sale of $24.1  million over the first
three months of 2002. Over the past three months,  deposits have decreased $41.9
million.

     Net income for the  quarter  ended  March 31,  2002,  of $1.3  million  was
$252,000 or 16.8% lower than the amount  earned in the first  quarter last year.
Diluted  earnings per share for the current quarter was $0.27 per share compared
to $0.33 per share last year.


Interest Income and Interest Expense

     First quarter total interest income was $10.7 million,  a decrease of 23.1%
over the same quarter  last year.  Average  earning  assets for the quarter were
$658.8  million,  compared to $664.4  million for the year ago period.  Interest
income from loans was $9.0  million,  down 22.5% from $11.6 million in the first
quarter of 2001.  The  decrease  was  driven by a dramatic  decline in the prime
lending rate.  Average loans of $535.7  million were 6.1% higher than the $504.8
million last year. For the first  quarter,  the average yield on loans was 6.83%
in 2002 compared to 9.35% in 2001.

     Interest  income  on  investments  totaled  $1.6  million  for the  current
quarter,  down 24.0% from $2.1 million for the year ago  quarter.  The change is
primarily  attributable  to a decrease of  $408,000  in interest  income on U.S.
Agency securities.

     First  quarter  total  interest  expense was $5.2 million  compared to $8.4
million from the first quarter of last year, a 38.1% decrease.  Average interest
bearing  liabilities for the first quarter 2001 decreased 2.6% to $566.0 million
from $581.3 million for the first quarter of 2001. Overall cost of funds for the
first quarter was 3.73% and 5.86% for 2002 and 2001, respectively.

     Interest  expense  on  deposits  for the  quarter  decreased  35.2% to $4.9
million as average interest  bearing deposits  decreased 3.1% to $511.1 million.
The average rate for the quarter on interest bearing deposits decreased to 3.89%
from 5.82% one year earlier.

     Interest  expense on  federal  funds  purchased  and other  borrowings  was
$304,000 for the current quarter, down 63.9%, from $842,000 in the first quarter
of 2001.  The  decrease is primarily  attributable  to a decline in average rate
paid on purchased  funds to 2.22% in the first quarter of 2002 compared to 6.23%
in the first quarter of 2001.


                                       10


<PAGE>


Comparable net interest margins as follows:

<TABLE>
<CAPTION>
                                                     Liability
Time Period                       Asset Yield           Rate           Interest Rate Spread

       <S>                           <C>                <C>                   <C>
       First Quarter, 2002           6.64%     -        3.73%     =           2.91%
       First Quarter, 2001           8.58%     -        5.86%     =           2.72%

</TABLE>

Noninterest Income and Expense

     Noninterest  income  in the first  quarter  this  year  increased  33.8% to
$930,000 from $695,000 in the same period last year. For the current quarter, no
net gains from sales of investment  securities were recognized.  Deposit service
charges of $582,000 for the first  quarter of 2002  decreased  slightly from the
$594,000 in the first quarter of 2001.  Noninterest  income in the first quarter
of 2002  included  $160,000 in mortgage  banking fees and $69,000 in  investment
service  fees.  The increase in mortgage  banking fees for the first  quarter of
2002  is  attributable  to the  operation  of the  mortgage  banking  subsidiary
established in June of 2001.

     Noninterest expense for the first quarter of 2002 was $4.3 million, a 10.6%
increase over the $3.9 million  expense in the first  quarter of 2001.  Salaries
and employee benefits increased $92,000 based on higher insurance and retirement
costs,  occupancy expense increased $12,000, and furniture and equipment expense
increased  $20,000 compared to the year ago quarter.  Other expense in the first
quarter of 2002  totaled  $938,000,  an increase of $224,000.  This  increase is
largely  attributable to a write-off of an uncollectable  receivable of $138,000
during the quarter.  The remaining  increase is primarily caused by increases in
collection expenses, exams and audit expenses and communications expenses.

     The  provision  for credit losses in the first quarter of 2002 was $285,000
compared to $223,000 in 2001. The allowance for credit losses as a percentage of
gross loans outstanding decreased to 1.26% at March 31, 2002 from 1.28% at March
31, 2001. The decrease in the allowance  percentage for 2002 is  attributable to
annualized net credit losses to average loans of 0.20% in the 2002 first quarter
compared to 0.01% in the 2001 first quarter.

     The  effective  income tax rate of 32.1% for the first three months of 2002
was higher than the 28.9% rate for the same quarter of 2001. The lower effective
tax rate for  2001was  primarily  due to the reduced  amount of current  expense
required to provide  adequate  income tax  provision at the year-end  2001.  The
Company  anticipates  the  effective  tax rate for the 2002  full  year  will be
similar the results of the first quarter of 2002.


Financial Condition

     The Company's  total assets at March 31, 2002 and 2001 were $672.8  million
and $731.0 million,  respectively. The $58.2 million decrease represents an 8.0%
decrease over one year earlier.  Since December 31, 2001,  assets have decreased
$32.0  million.  Average  earning  assets for the 2002 first quarter were $658.8
million,  or 0.8% lower than the $664.4 million average in the same quarter last
year.

     Loans at March 31, 2002 totaled $533.5  million  compared to $507.6 million
one year earlier,  an increase of 5.1%.  Loans have  decreased  0.3% from $535.3
million at December 31, 2001.  Average  loans for the first quarter of 2002 were
$535.7  million,  or 6.1%  higher than the $504.8  million  average in this same
period one year ago.


                                       11


<PAGE>


     Investment  securities of $103.4 million at March 31, 2002 were 38.2% lower
than the $167.3 million recorded one year earlier. Average investment securities
were $119.2  million and $153.6  million for the first quarter of 2002 and 2001,
respectively.  The  decrease in the  investment  portfolio  was due to continued
calls by issuers of various  securities.  The  Company  has elected to use these
proceeds to fund a managed decrease in relatively high cost deposits rather than
reinvesting in securities near the perceived bottom of the interest rate cycle.

     Deposits totaled $544.9 million at March 31, 2002, an 11.1% decrease versus
$613.2  million  one year  ago,  and a 7.1%  decrease  from the  $586.8  million
recorded at December 31, 2001. At March 31, 2002,  noninterest  bearing deposits
were $54.9  million,  or 10.1% of total  deposits.  The decrease in deposits was
primarily funded by proceeds from called  investment  securities as discussed in
the previous paragraph.

     At March 31,  2002,  borrowings  at the  Federal  Home Loan Bank of Atlanta
(FHLB) totaled $45.0 million,  an increase of 50.0% compared to $30.0 million at
December 31, 2001. The increase in borrowings was due to favorable funding rates
available at the current time.

     Shareholders'  equity decreased slightly to $62.6 million at the end of the
first quarter 2002,  compared to $62.7 million at December 31, 2001. The Company
paid dividends of $0.13 per share during the current quarter,  compared to $0.12
per share in the first quarter of 2001.


Asset Quality

     The credit loss  allowance  ratio at March 31, 2002 stood at 1.26% compared
to 1.26% at December 31, 2001 and 1.28% at March 31, 2001. For the first quarter
of 2002,  provision  charges  against  earnings  totaled  $285,000  compared  to
$223,000 in the first quarter one year  earlier.  Net credit losses for the 2002
first  quarter  totaled  $274,000,  or a 0.20%  annualized  loss ratio  based on
average loans  outstanding.  This  compares to net credit losses of $11,000,  or
0.01% annualized loss ratio for the 2001 first quarter.

     The  Company's  allowance for credit 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 March 31,  2002,
compared to $2.7 million at December 31,  2001.  Approximately  $52,000 has been
transferred from loans into other real estate and approximately $282,000 of such
assets  have been  disposed of during the first  quarter of 2002.  A net loss of
$2,000 has been  recorded  on  disposition  of other real  estate in the current
year.


                                       12



<PAGE>

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 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 March 31, 2002.


<TABLE>
<CAPTION>
                                      Regulatory Guidelines
                                  --------------------------
                                      Well        Adequately                          FNB
       Ratio                      Capitalized    Capitalized        Company         Southeast
       -----                      -----------    -----------        -------         ---------

       <S>                           <C>              <C>             <C>              <C>
       Total Capital                 10.0%            8.0%            13.0%            12.6%
       Tier 1 Capital                 6.0             4.0             11.8             11.3
       Leverage Capital               5.0             4.0              9.0              8.7

</TABLE>

New Accounting Pronouncements

     The FASB has issued 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 provide 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  and  early
application  is permitted for entities with fiscal years  beginning  after March
15,  2001,  under  certain  conditions.   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.

     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).


                                       13


<PAGE>


     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.

     Based on the  Company's  operations  as of March  31,  2002,  none of these
standards had a material effect on the Company's financial statements.


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  quarter of 2002 the  Company  had net cash  provided  by
operating  activities of $2.1 million.  This is a reduction from $7.7 million of
net cash  provided by operating  activities  in the first  quarter of 2001.  The
decline is  primarily  attributable  to the decline of $5.8  million in interest
received and an increase in noninterest expense paid of $2.0 million..

     Net cash  provided by investing  activities  in the first  quarter  totaled
$24.2  million  primarily  based  on  the  proceeds  from  calls  of  investment
securities.  Purchases of investment  securities in the current  quarter totaled
$220,000.  This  compares  the first  quarter  of 2002 when  purchases  of $44.8
million  in  investment  securities  resulted  in net  cash  used  in  investing
activities  of $23.8  million.  A decrease  in loan  outstanding  provided  $1.6
million in cash during  2002,  compared to an increase in  outstanding  loans in
2001 that created a use of $7.2 million of cash in 2001.

     Financing  activities in the 2002 first quarter used $31.2 million based on
$41.3 million outflow of deposits,  and $4.1 million  reduction in Federal funds
purchased.  These cash outflows were partially offset by increased borrowings of
$15.0  million  during the  quarter.  During the 2001 first  quarter,  financing
activities provided $37.2 million.  Time deposits provided $42.2 million of cash
during the quarter.  The increase  was offset by  repayments  of $5.0 million of
other  borrowing  and  $1.5  million  of  federal  funds  purchased  and  retail
repurchase agreements.

     Overall cash and cash  equivalents  totaled $18.8 million at March 31, 2002
compared to $23.7  million at December  31, 2001 and $37.0  million at March 31,
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.  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  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.


                                       14


<PAGE>


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.


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, 2002.


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.


15


<PAGE>


Item 5.           Other Information

                  None.



Item 6.           Exhibits and Reports on Form 8-K

(a)      Exhibits

<TABLE>
<CAPTION>
                    Exhibit No.    Description
                    -----------    -----------

                       <S>         <C>
                       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.

(b)      Reports on Form 8-K

         None.

</TABLE>

                                       16


<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 10, 2002             /s/ Michael W. Shelton
                                      ------------------------------------------
                                      Michael W. Shelton
                                      (Vice President, Secretary and Treasurer)


                                       17