FNB CORPORATION

                         ANNUAL REPORT TO STOCKHOLDERS

                                      1998
<PAGE>
                   INDEX TO ANNUAL REPORT TO STOCKHOLDERS


Selected Consolidated Financial Information 


Management's Discussion and Analysis of Financial Condition and Results of  
Operations 


Market Price and Dividend Data 


Market Risks Related to Financial Instruments 


Independent Auditors' Report on Consolidated Financial Statements 


Consolidated Balance Sheets 


Consolidated Statements of Income 


Consolidated Statements of Comprehensive Income 


Consolidated Statements of Cash Flows 


Consolidated Statements of Changes in Stockholders' Equity 


Notes to Consolidated Financial Statements 
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Years Ended December 31,

                                    1998       1997       1996       1995       1994
Selected income statement data
   (in thousands):
<S>                            <C>        <C>        <C>        <C>        <C>                 
     Interest income            $  35,653     33,114     30,526     28,330     24,089
     Interest expense              17,249     16,764     15,016     14,081     11,022

     Net interest income           18,404     16,350     15,510     14,249     13,067

     Provision for loan 
       losses                       1,135        550        595        300        360

     Noninterest income             3,001      2,291      2,034      1,869      1,704
     Noninterest expense           12,682     11,602     10,254      9,695      9,010
     Income tax expense             1,657      1,324      1,491      1,449      1,394
   Net income                   $   5,931      5,165      5,204      4,674      4,007

Per share data:
   Net income                   $    1.65       1.45       1.47       1.35       1.17
   Cash dividends declared            .63        .38        .55        .50        .66
     Book value per share           12.32      11.29      10.13       9.22       7.73

Average number of shares 
   outstanding                  3,599,168  3,561,504  3,525,645  3,479,159  3,427,281  

Selected balance sheet data at year end
   (in thousands):
    Total securities           $  95,584    105,276     97,975      87,962     86,013
    Loans, net                   323,959    286,767    269,145     248,305    213,899
    Allowance for loan 
       losses                      4,640      4,291      4,179       3,988      3,815
    Total assets                 461,916    428,174    395,324     360,533    323,876
    Deposits                     386,257    352,545    335,402     315,777    286,130
    Subordinated capital
       notes                           -          -          -         937      1,044
    Stockholders' equity          44,401     40,213     35,828      32,191     26,777

Selected ratios (in percentages):
   Return on average assets         1.34        .26       1.41        1.38       1.29
   Return on average equity        14.00      13.59      15.20       15.64      14.93
   Dividend pay-out ratio          38.44      26.08      36.99       37.27      56.25
   Average equity to average
      assets                        9.60       9.31       9.26        8.82       8.68
</TABLE>

NOTES:  All share and per share data have been adjusted retroactively to 
        reflect the 2 for 1 stock split effected in the form of a 100% stock 
        dividend in 1997 and a 10% stock dividend in 1998.
<PAGE>

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

The following is a discussion of factors that significantly affected the 
financial condition and results of operations of FNB Corporation, a bank 
holding company, and its wholly-owned subsidiaries (collectively, the 
"Corporation").  The primary subsidiary of FNB Corporation is First National 
Bank (the "Bank").  This discussion should be read in connection with the 
consolidated financial statements, statistical disclosures and other financial 
information presented herein.  All amounts presented are denoted in thousands 
except per share and percentage data.

Net Income
Net income for 1998 was $5,931 compared to $5,165 for 1997 and $5,204 for 
1996.  This amounted to an increase of 14.8% for 1998 compared to a decrease 
of 0.8% for 1997.  Earnings per share were $1.65 for 1998 compared to $1.45 
for 1997 and $1.47 for 1996. The increase in earnings for 1998 was primarily 
the result of increases in net interest income, which in turn stemmed 
primarily from an increase in volume.  The decrease in 1997 earnings resulted 
from higher overhead expenses from the opening of two new branch offices 
during the second half of 1996 and the new corporate office facility in early 
1997. 

The per share earnings for 1997 and 1996 have been restated to reflect the 
effects of a 10% stock dividend declared in the third quarter of 1998 and a 
two-for-one stock split effected in the form of a 100% stock dividend declared 
in the second quarter of 1997.

Net Interest Income 
The principal source of earnings for the Corporation is net interest income.  
Net interest income is the net amount of interest earned on interest bearing 
assets, less the amount of interest paid on deposits and other interest-
bearing liabilities.  Net interest income before provision for loan losses for 
1998 was $18,404, up 12.6% from $16,350 for 1997, which was up 5.4% from 
$15,510 for 1996.  The increases in net interest income in both 1998 and 1997 
were primarily the result of growth in average earning assets, partially 
offset by growth in interest bearing liabilities.  Average earning asset 
growth totaled $30,016 or 7.75% for 1998 and $30,842 or 8.71% for 1997.  The 
largest component of the increase in earning assets was average loans, 
reflecting increases of $33,545 or 12.03% for 1998 and $18,741 or 7.28% for 
1997.  Growth in the loan portfolio was concentrated primarily in commercial 
and industrial loans and in loans secured by real estate, reflecting combined 
average increases of $32,436 and $19,160 for 1998 and 1997 respectively. 
Average securities decreased $6,642 or 6.51% for 1998 and were used to 
partially fund the increased loan demand.  Average securities increased $9,192 
or 9.91% for 1997 and were used as an alternative investment for funds in 
excess of loan demand.

Average interest-bearing liabilities increased $20,172 or 5.96% for 1998 and 
$32,278 or 10.62% for 1997.  The largest component of the increase in 
interest-bearing liabilities was average deposits, reflecting an increase of 
$21,450 for 1998 and $19,790 for 1997.  Growth in the deposit portfolio was 
<PAGE>

concentrated in certificates of deposit of $100 and over with an average 
increase of $12,883 for 1998 and $4,505 for 1997 and in demand and savings 
deposits with an average increase of $9,259 for 1998 and time deposits with an 
average increase of $9,969 for 1997. 

Increased market penetration in new markets and a concerted effort to obtain 
business deposit accounts from our business loan customers accounted for the 
increases.  Average other borrowed funds increased $12,100 for 1997 
representing an increase in advances from the Federal Home Loan Bank of 
Atlanta, as the Corporation increasingly utilized this source of funds.

Net interest yield increased to 4.74% for 1998 from 4.59% for 1997 and 
decreased from 4.80% for 1996.  The yield on average earning assets decreased 
4 and 13 basis points for 1998 and 1997, respectively, from the respective 
prior years.   The cost of interest-bearing liabilities decreased 14 basis 
points for 1998 compared to a 3 basis point increase in 1997.  Overall, 104.2% 
and 137.4% of the net interest income increases in 1998 and 1997, 
respectively, were attributable to changes in the volume of net interest-
earning assets and interest-bearing liabilities.  The remainder of the changes 
in both years was due to changes in average rates.

Management attempts to match, where possible, the maturities and repricing 
intervals of its interest earning assets and interest bearing liabilities.  
The largest cumulative interest sensitivity gap for periods up to five years 
is $13,016, which represents 3.0% and 3.5% of total interest earning assets 
and interest bearing liabilities at December 31, 1998, respectively.  The 
sensitivity gap for the period beyond five years is $56,804.  Management 
considers the interest rate exposure represented by these gaps to be 
acceptable.

Provision for Loan Losses
The provision for loan losses was $1,135 for 1998, $550 for 1997 and $595 for 
1996.  Net charge-offs amounted to $786, $438 and $404 for 1998, 1997 and 
1996, respectively.  The increase in net charge-offs for 1998 can be 
attributed to one commercial customer.  The allowance for loan losses was 
$4,640, 1.41% of outstanding loans, at December 31, 1998 and $4,291, 1.47% of 
outstanding loans, at December 31, 1997.  With the increase in 1998 net 
charge-offs, the provision for loan losses was also increased and the 
allowance for loan losses reflected a corresponding increase.  Although the 
provision for loan losses decreased and net charge-offs increased for 1997 in 
comparison to 1996, the allowance for loan losses increased as the result of 
the fact that the 1997 provision exceeded net charge-offs.  Management 
believes the allowance for loan losses as a percentage of outstanding loans 
remains at a prudent level.

Noninterest Income
Noninterest income, which includes service charges on deposit accounts, loan 
origination fees, other service charges, other income and net securities gains 
(losses), was $3,001, $2,291 and $2,034 for 1998, 1997 and 1996, respectively.  
The increase in noninterest income for 1998 resulted primarily from an 
increase in loan origination fees due to mortgage volume, non-sufficient fund 
check charges due to higher pricing and volume, net gains on the disposition 
<PAGE>

of securities, trust fees, fees related to a new investment service, a full 
year of automated teller machine usage fees, and gain on sale of other real 
estate.  The increase in noninterest income for 1997 was due primarily to 
increases in service charges on deposit accounts, automated teller machine 
usage fees, trust fees and net gains on sales of loans.   Increases for both 
1998 and 1997 were partially offset by reductions in other areas.

Noninterest Expense
Noninterest expense, consisting of salaries and employee benefits, occupancy 
costs, credit cards, supplies, FDIC assessment and other expenses was $12,682 
for 1998, $11,602 for 1997 and $10,254 for 1996.  The 1998 net increase in 
noninterest expense resulted from increases in several categories, primarily 
personnel costs, occupancy and equipment expense, postage and telephone 
expense.  Personnel costs increased primarily as the result of merit 
increases, contributions to a new 401-K plan and additional branch personnel.  
The increases in occupancy and equipment expense  resulted  from  an  increase  
in  depreciation  expense  for  buildings  and furniture and fixtures, which 
was related to the new corporate office facility opened in 1997.  The 1997 net 
increase resulted from increases in personnel costs, occupancy and equipment 
expense, telephone, supplies, education, marketing and donations, the bulk of 
which was attributable to the operation of new branch facilities and the new 
corporate office building which opened in February, 1997. The increases for 
both 1998 and 1997 were partially offset by reductions in other areas.

Income Taxes
Income tax expense as a percentage of pre-tax income was 21.8%, 20.4% and 
22.3% in 1998, 1997 and 1996, respectively.  The increase in 1998 was due to a 
drop in non-taxable interest as a percent of total interest.  The decline in 
the 1997 rate from 1996 resulted from anticipated income tax refunds recorded 
in 1997 related to amendments of prior year tax returns.

Balance Sheet
Total assets of the Corporation at December 31, 1998, were $461,916 compared 
to $428,174 at December 31, 1997.  Total loans were $328,599 at December 31, 
1998, an increase of $37,529 from December 31, 1997.  Loan growth was 
concentrated in the commercial, real estate-commercial and construction 
portfolios and amounted to $38,079.    The decline in the real estate-mortgage 
portfolio of $1,017 resulted from an increase in the refinancing of home 
mortgage loans and their subsequent sale on the secondary market.  Federal 
Funds sold increased $7,100 and was funded primarily by sales and maturities 
of securities which decreased $9,692.

Total deposits at December 31, 1998, were $386,257, an increase of $33,712 
from December 31, 1997.  Deposit growth was concentrated in the interest-
bearing demand and savings portfolio, and amounted to $26,481.  All other 
deposit portfolios experienced increases of varying amounts, except the time 
deposits portfolio which decreased $1,751.  New interest-bearing demand and 
savings deposits account for approximately $12,936 of the increase.  Interest 
bearing public fund demand deposits increased $12,544 excluding new accounts. 
Competition for deposits among local financial institutions continues to be 
strong.
<PAGE>

Other borrowed funds at December 31, 1998, were $21,612, a decrease of $4,481 
from December 31, 1997.  Other borrowed funds is composed primarily of 
advances from the Federal Home Loan Bank of Atlanta and is used to provide 
partial funding for earning asset growth.

The Employee Stock Ownership Plan (ESOP) debt was $901 at December 31, 1997.  
This debt, as well as an additional $1,400 of new debt issued by the ESOP in 
the first quarter of 1998, is not reflected in the balance sheet as of 
December 31, 1998, because of the repurchase of the ESOP loans by the banking 
subsidiary of FNB Corporation.  The ESOP debt and the related loans have been 
eliminated in consolidation.  The new debt financed the purchase by the ESOP 
of $1,400 of newly issued stock of the Corporation.

Stockholders' Equity
Stockholders' equity was $44,401 at December 31, 1998, compared to $40,213 at 
December 31, 1997.  This increase of $4,188 was the net result of earnings 
retention, dividends paid to shareholders, an improvement in net unrealized 
gain or loss (net-of-tax) on securities available-for-sale, and principal 
repayments on ESOP debt.  In the third quarter of 1998, the Corporation 
declared and paid a 10% stock dividend.  This resulted in a transfer of $9,130 
from retained earnings to the capital stock account.  There was no effect on 
total stockholders' equity.

All financial institutions are required to maintain minimum levels of 
regulatory capital.  The Federal Reserve and the Office of the Comptroller of 
the Currency (OCC) have established substantially similar risk-based and 
leveraged capital standards for financial institutions they regulate.  Under 
the risk-based capital requirements of these regulatory agencies, the 
Corporation is required to maintain a minimum ratio of total capital to risk-
weighted assets of at least 8%. At least half of the total capital is required 
to be "Tier 1 capital", which consists principally of common and certain 
qualifying preferred shareholders' equity, less certain intangibles and other 
adjustments.  The remainder, "Tier 2 capital", consists of a limited amount of 
subordinated and other qualifying debt and a limited amount of the general 
loan loss reserve.  Tier 1 and total capital to risk-weighted assets ratios on 
a consolidated basis as of December 31, 1998 were 12.3% and 13.5%, 
respectively, exceeding the minimums required.

In addition, the federal regulatory agencies have established a minimum 
leveraged capital ratio (Tier 1 capital to tangible assets).  These guidelines 
provide for a minimum leveraged capital ratio of 3% for banks and their 
respective holding companies that meet certain specified criteria, including 
that they have the highest regulatory examination rating and are not 
contemplating significant growth or expansion.  All other institutions are 
expected to maintain a leverage ratio of at least 100 to 200 basis points 
above that minimum.  The guidelines also provide that banking organizations 
experiencing internal growth or making acquisitions will be expected to 
maintain strong capital positions substantially above the minimum supervisory 
levels, without significant reliance on intangible assets.  The leverage ratio 
of the Corporation on a consolidated basis as of December 31, 1998 was 9.7% as 
compared to a minimum requirement of 4.0%.
<PAGE>

As of December 31, 1997, the most recent notification from the OCC categorized 
the Bank as "well capitalized" under the regulatory framework for prompt 
corrective action.  To be categorized as well capitalized, minimum total risk-
based capital, Tier 1 risk-based capital, and Tier 1 leverage ratios of 10.0%, 
6.0% and 5.0%, respectively, must be maintained.  As noted above, the Bank 
exceeded all three of these minimums as of December 31, 1998.  There are no 
conditions or events that management believes have changed the institution's 
category.

Past Due Loans and Nonperforming Assets
Loans past due 90 days and over at December 31, 1998 totaled $161 compared to 
$196 at December 31, 1997.  In addition, nonaccrual loans and other real 
estate owned totaled $1,139 at December 31, 1998, compared to $991 at December 
31, 1997.  The increase in nonaccrual loans can be attributed to one 
commercial customer.  A portion of this customer's loans is guaranteed by the 
United States Department of Agriculture.  The New River Valley economy remains 
strong.  

Liquidity and Capital Resources
Liquidity is the ability to provide sufficient cash flow to meet financial 
commitments and to fund additional loan demand or withdrawal of existing 
deposits.  Liquidity remains sufficient, as assets are maintained on a short-
term basis to meet the liquidity demands anticipated by management.  Funding 
sources primarily include customer-based core deposits and cash generated by 
operations.  Another source of liquidity is additional borrowings from the 
Federal Home Loan Bank of Atlanta; in excess of $39,000 of the Corporation's 
borrowing capacity under an existing agreement with the FHLB remains unused as 
of December 31, 1998, based on the level of qualifying portfolio mortgage 
loans available for securitization.  Secondary sources of liquidity are 
available should the need arise, including approximately $35,000 in unused 
Federal Funds lines of credit and the ability to liquidate assets held for 
sale, especially investment securities.

The only significant source of cash for the holding company is transfers from 
its bank subsidiary in the form of dividends, loans, or advances.  The most 
restrictive regulatory limitation placed on the amount of funds that may be 
transferred from the Bank to the holding company is that placed on dividends.  
Specifically, the maximum amount of dividends that may be paid by the Bank in 
any calendar year without prior regulatory approval is the net profits of that 
year, as defined, combined with the retained net profits for the two preceding 
years.  In effect, this limits 1999 dividends (unless prior regulatory 
approval is obtained) to $7,467 plus year-to-date 1999 net profits as of the 
declaration date.  This limitation had no effect on the liquidity of the 
holding company in 1998 and it is not expected to have any material impact in 
1999.  During 1998, the bank paid $7,578 in dividends to the holding company.

Effects of Inflation
The income statement generally reflects the effects of inflation.  Since 
interest rates, loan activities and deposit levels are related to inflation, 
the resulting changes are included in net income.  The most significant item 
that does not reflect the effects of inflation is depreciation expense because 
historically presented dollar values used to determine this expense do not 
reflect the effects of inflation on the market value of depreciable assets.
<PAGE>

Recent Accounting Developments
During the first quarter of 1998 the Corporation adopted Statement of 
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive 
Income."  The Statement requires enterprises to display "comprehensive income" 
and its components in a financial statement that is displayed with the same 
prominence as other financial statements in a full set of financial 
statements.  "Comprehensive income" is comprised of net income as reported in 
the Statement of Income as well as "other comprehensive income," which is 
comprised of certain items and events that have been reflected only in 
stockholders' equity without impacting the Statement of Income.   Currently 
the only items included in FNB Corporation's financial statements that are 
required to be reflected in other comprehensive income are the unrealized 
gains and losses on securities classified as available-for-sale under SFAS No. 
115, "Accounting for Certain Investments in Debt and Equity Securities."

The adoption of SFAS No. 130 resulted in the presentation of the accompanying 
Consolidated Statements of Comprehensive Income for the years ended December 
31, 1998, 1997 and 1996.  Amounts reported in the accompanying Consolidated 
Statements of Income, Balance Sheets, Statements of Cash Flows and Statements 
of Changes in Stockholders Equity were not impacted by the adoption of SFAS 
No. 130.

Year 2000 Readiness Disclosure
A number of electronic systems utilize a two-digit field for year references, 
e.g., "98" for "1998."  Such systems may interpret the year reference "00" as 
referring to the Year 1900 rather than the Year 2000.  If these systems are 
not corrected prior to December 31, 1999, many processing failures could 
result.  This section describes the status of the Corporation's efforts to 
correct these systems deficiencies.

State of Readiness.  The Corporation has committed personnel and resources to 
resolve potential year 2000 issues, both internally and externally (with 
respect to the Corporation's service providers, vendors and customers) for 
both information technology assets and non-information technology assets.  The 
Corporation has identified year 2000 dependencies in its systems, equipment, 
and processes and is implementing changes to such systems, updating or 
replacing such equipment, and modifying such processes to make them Year 2000 
compliant.  The Corporation has completed its assessment of internal Year 2000 
issues and is in the process of remediation of the critical systems.

The Corporation does not employ computer programmers and relies heavily on 
outside vendors to make the necessary software and hardware changes for Year 
2000 compliance.  All mission-critical service providers delivered Year 2000 
upgrades to the Corporation before December 31, 1998.   Plans are in place to 
test these systems before June 30, 1999, by entering various critical future 
dates into the systems in an off line mode.  The Corporation anticipates that 
all of its systems will be substantially compliant by June 30, 1999.
<PAGE>

The Corporation is also assessing the operability of other devices after 1999, 
including vaults, fax machines, stand-alone personal computers, security 
systems and elevators and addressing deficiencies, if necessary.  These 
efforts are currently underway and we anticipate compliance to be achieved in 
1999.

Costs.  In order to achieve and confirm Year 2000 readiness, significant costs 
are being incurred to test and modify or replace computer software and 
hardware, as well as a variety of other items, such as automated teller 
machines.  The Corporation had an estimated capital outlay of $1,000 in 1997 
and $800 during 1998 on hardware and software equipment.  Approximately $55 in 
related expenses has been recognized through December 31, 1998, in the 
Statement of Income.  Estimated outlays during 1999 for computer hardware and 
software approximate $75 with an additional $25 for related expenses.

Risks.  If the Corporation's mission-critical applications are not compliant 
by 2000, it may not be able to correctly process transactions in a reasonable 
period of time.  This scenario could result in a wide variety of claims 
against the Corporation for improper handling of its assets as well as 
deposits and other borrowings from its customers.  For example, the 
Corporation's ability to process interest payments on deposits and other 
liabilities could be impaired.  The Corporation is also at risk if the credit 
worthiness of a few of its large borrowers or a significant number of its 
small borrowers, were to deteriorate quickly and severely as a result of their 
inability to conduct business operations after December 31, 1999, for whatever 
reason.  Such risks would include a potential negative impact on earnings and 
financial position to the extent that a significant amount of loans were not 
repaid based on contractual terms.  The Corporation is presently monitoring 
existing and assessing new large credit customers' Year 2000 plans to 
ascertain the sufficiency of their remediation efforts and the implication of 
their actions on their credit worthiness.  The Corporation explicitly 
disclaims, however, any obligation or liability for the completeness, or lack 
thereof, of its customers' Year 2000 remediation plans or actions.

Contingency Plans.  The Corporation is in the process of developing 
contingency plans in the event that the remediation plan is not completed in 
time or fails for reasons that are not presently foreseen.  In the event of 
such a failure, these plans will outline the steps that will be taken to deal 
with the situation to minimize the effect on customers and losses to the 
Corporation.

Market Price and Dividend Data
The following information reflects per share data for the periods indicated 
relative to Common Stock trading values and dividends. FNB Corporation Common 
Stock began appearing on The Nasdaq Stock Market under the symbol FNBP on 
July 7, 1998.  Previously the stock appeared on the OTC Bulletin Board under 
the same symbol.  Shares were occasionally bought and sold by private 
individuals, firms or corporations, and in many instances FNB Corporation did 
not have knowledge of the purchase price or the terms of the purchase.  The 
information below, prior to July 7, 1998, relating to the trading values for 
the stock is based upon information furnished to FNB Corporation by one or 
more parties involved in certain purchases and sales of the stock.  No attempt 
<PAGE>

was made to verify or determine the accuracy of the representations made.  
Both the trading values and per share dividends in the tables below have been 
adjusted to retroactively reflect the effects of a 10% stock dividend in 
August 1998 and a two-for-one stock split effected in the form of a 100% stock 
dividend in June 1997.  As of December 31, 1998, there were 1,062 holders of 
record of FNB Corporation Common Stock.
<TABLE>
<CAPTION>

                                   Trading Value            Dividends
1998                            High            Low         Per Share
<S>                         <C>                <C>            <C>                                                                  
First Quarter               $  25.25            22.00          0.15
Second Quarter                 27.00            24.00          0.16
Third Quarter                  28.75            22.73          0.15
Fourth Quarter                 25.00            23.13          0.17
</TABLE>
<TABLE>
<CAPTION>

                                    Trading Value           Dividends
1997                            High            Low         Per Share
<S>                         <C>                <C>            <C>                                                                  
First Quarter               $  20.23            18.18            --   
Second Quarter                 19.09            17.95          0.09
Third Quarter                  20.91            18.18          0.14
Fourth Quarter                 21.59            19.55          0.15
</TABLE>

Market Risks Related to Financial Instruments

The Corporation is a party to a variety of financial instruments in the 
ordinary course of business, including loans, investment securities and 
deposits.  Most financial instruments by their nature carry associated market 
risks.  The only substantial market risk associated with the Corporation's 
financial instruments is interest rate risk; that is, the risk that the fair 
values or future cash flows from an instrument could change as a result of 
changes in market interest rates.  For example, a decline in market interest 
rates will generally have the effect of reducing the expected future interest 
to be received on a loan with a variable contractual interest rate.  However, 
such a decline will normally have the effect of increasing the fair value of a 
fixed contractual rate investment security.  Management does not expect 
significant changes in its market risk exposure positions in the near term 
future.

The Corporation is not a party to any material amounts of derivative financial 
instruments such as futures, forward interest rate agreements, swaps or option 
contracts.  Commitments to lend are entered into in the ordinary course of 
business as discussed more fully in the notes to the financial statements, but 
the majority of these commitments reflect interest rates that vary with 
certain indexes, such as the prime rate.  As a result, those commitments 
normally do not expose the Corporation to market interest rate risks prior to 
funding the loan.
<PAGE>

In general, the Corporation does not enter into financial instruments for 
trading purposes.  That is, obtaining short-term profits by buying and selling 
instruments is not an objective pursued by management.  The turnover frequency 
associated with financial instruments is, in general, greater when trading is 
a short-term objective, and market risks can be enhanced or reduced by such 
trading.

The Corporation seeks to manage its interest rate risk by establishing 
asset/liability management policies and by continually monitoring the 
characteristics of its asset and liability portfolios that bear on interest 
rate risk.  Interest rate management is conducted in coordination with 
management of liquidity and capital adequacy.  The monitoring of interest rate 
risk is supervised by an Asset Liability Management Committee comprised of 
certain senior officers and certain members of the board of directors.  
Management seeks to minimize the risks to earnings and equity associated with 
movements in market interest rates.  To achieve this objective management 
monitors such factors as:

     Relative volumes of fixed rate vs. variable rate loans and deposits
 
     Average interest rate spreads between interest bearing assets and      
     liabilities

     Maturity and repricing schedules of loans, investment securities and 
     deposits, including the extent to which expected maturities of interest 
     sensitive assets align with that of interest sensitive liabilities 
     ("sensitivity gap")

Techniques used by management to adjust exposure to interest rate risk include 
but are not limited to selling certain types of loans (especially fixed rate 
loans), periodically changing stated interest rates charged on loans and 
offered on deposits in conjunction with market trends, redirecting funds upon 
maturities of investment securities and loan repayments, and careful selection 
among choices of sources of borrowed funds other than deposits.  The 
Corporation has not entered into derivative financial instruments such as 
futures, forward interest rate agreements, swaps or option contracts in order 
to manage interest rate risk.

A key analytical technique used by management in its efforts to manage 
interest rate risk is interest rate shock simulation.  This method seeks to 
estimate the impact on earnings or on the fair values of interest bearing 
assets and liabilities if market interest rates fluctuate by a  predetermined   
amount  by  using  present  value  techniques  (discounting). The  table  
below provides information about the Corporation's financial instruments that 
are sensitive to changes in interest rates, including those with fixed 
contractual rates and those with variable rates.  The information is presented 
as of December 31, 1998.  The expected increases or decreases in the fair 
values of financial instruments assuming an increase and a decrease of 200 
basis points in market interest rates are as follows:
<PAGE>
<TABLE>
<CAPTION>
                              Percentage Increase (Decrease) in Fair Value      
                        200 Basis Point Increase      200 Basis Point Decrease
<S>                             <C>                           <C>
Total Securities                 (5.12)%                       4.84%

Total Loans                      (2.78)%                       2.82%

Total Deposits                   (1.36)%                       1.20%

Repurchase Agreements and
      Other Borrowed Funds       (1.23)%                       1.25%
</TABLE>

Excluded from the above table are financial instruments that carry no market 
interest rate risk because of their terms, including cash, non-interest 
bearing deposits at other financial institutions, accounts payable and similar 
liabilities, and accrued interest receivable and payable.  Also excluded are 
instruments which carry only an insignificant degree of market risk because 
the principal amount of the instrument reprices daily, including federal funds 
purchased and sold.  The table reflects annual loan prepayment assumptions of 
5% for commercial loans and installment loans and 18% for mortgage loans.  
These prepayment assumptions represent estimates derived by management.  
Investment securities are assumed to remain in the Corporation's portfolio 
until maturity unless called by the issuer.  No early withdrawals are assumed 
for deposits with defined contractual maturity terms.  For other deposits, 30% 
of the balance is assumed to mature in three months and another 30% in the 
next three months.  The remaining 40% is assumed to mature between two and 
three years from the date of the table.
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
FNB Corporation

We have audited the accompanying consolidated balance sheets of FNB 
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related 
consolidated statements of income, comprehensive income, changes in 
stockholders' equity and cash flows for each of the years in the three-year 
period ended December 31, 1998.  These consolidated financial statements are 
the responsibility of the Corporation's management.  Our responsibility is to 
express an opinion on these consolidated financial statements based on our 
audits. 

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of FNB 
Corporation and subsidiaries as of December 31, 1998 and 1997,  and the 
results of their operations and their cash flows for each of the years in the 
three-year period ended December 31, 1998, in conformity with generally 
accepted accounting principles.


                                         McLEOD & COMPANY


Roanoke, Virginia
February 19, 1999
<PAGE>
<TABLE>
<CAPTION>

December 31, 1998 and 1997       
CONSOLIDATED BALANCE SHEETS                                          
(in thousands, except share and per share data)

   ASSETS                                              1998            1997
<S>                                                <C>              <C>
Cash and due from banks                            $  11,875          14,406
Federal funds sold                                    10,600           3,500
Securities available-for-sale, at fair value          57,232          62,856
Securities held-to-maturity, at amortized cost        38,352          42,420
Mortgage loans held for sale                           1,646           1,159
Loans:
   Commercial                                         85,536          64,247
   Consumer                                           66,526          66,059
   Real estate- commercial                            65,165          56,404
   Real estate - construction                         16,686           8,657
   Real estate - mortgage                             94,686          95,703

            Total loans                              328,599         291,070
Less unearned income                                      --              12

            Loans, net of unearned income            328,599         291,058
Less allowance for loan losses                         4,640           4,291

            Loans, net                               323,959         286,767
Bank premises and equipment, net                      12,977          12,518
Other real estate owned                                   30              98
Other assets                                           5,245           4,450

            Total assets                           $ 461,916          428,174

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                               
   Noninterest-bearing demand deposits             $  39,141           35,279
   Interest-bearing demand and savings deposits      126,204           99,723
   Time deposits                                     172,368          174,119
   Certificates of deposit of $100,000 and over       48,544           43,424

            Total deposits                           386,257          352,545

   Securities sold under agreements to repurchase      6,650            5,460
   Other borrowed funds                               21,612           26,093
   Other liabilities                                   2,996            2,962
   ESOP debt                                               -              901

   Total liabilities                                 417,515          387,961

Stockholders' equity:
   Common stock, $5.00 par value. Authorized 
      10,000,000 shares; issued and outstanding 
      3,722,139 shares in 1998 and 3,323,800
      in 1997                                         18,611           16,619
   Surplus                                            19,320           10,782
   Unearned ESOP shares (117,660 and 77,811
      shares in 1998 and 1997, respectively)          (2,120)          (1,208)
   Retained earnings                                   8,307           13,793
   Accumulated other comprehensive income                283              227

            Total stockholders' equity                44,401           40,213

            Total liabilities and stockholders'
               equity                              $ 461,916          428,174
</TABLE>
              See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
         
                                  Years Ended December 31,1998, 1997 and 1996
CONSOLIDATED STATEMENTS OF INCOME       (in thousands, except per share data)
                                             1998         1997         1996
<S>                                      <C>            <C>          <C>
Interest income:
   Interest and fees on loans            $  29,786       26,754       24,962
   Interest on securities:
      Taxable                                3,082        3,642        2,998
      Nontaxable                             2,278        2,374        2,378
   Interest on federal funds sold              507          344          188

            Total interest income           35,653       33,114       30,526
Interest expense:
   Interest on interest-bearing demand 
      and savings deposits                   2,958        2,823        2,675
   Interest on time deposits                 9,801       10,070        9,497
   Interest on certificates of deposit of
      $100,000 and over                      2,870        2,148        1,856
   Interest on securities sold under 
      agreements to repurchase                 261          250          229
   Interest on other borrowed funds          1,283        1,385          574
   Interest on subordinated capital notes        -            -           67
   Interest on ESOP debt                        76           88          118

            Total interest expense          17,249       16,764       15,016

            Net interest income             18,404       16,350       15,510
Provision for loan losses                    1,135          550          595

            Net interest income after 
              provision for loan losses     17,269       15,800        4,915
Noninterest income:
   Service charges on deposit accounts       1,156          990          957
   Loan origination fees                       393          205          223
   Other service charges and fees              481          375          332
   Other income                                813          740          517
   Securities gains (losses), net              158          (19)           5

            Total noninterest income         3,001        2,291        2,034
Noninterest expense:
   Salaries and employee benefits            6,570        6,193        5,745
   Occupancy and equipment expense, net      2,166        1,786        1,285
   Credit card expense                         613          560          572
   Supplies expense                            503          456          371
   FDIC assessment expense                      42           41            2
   Other expenses                            2,788        2,566        2,279

            Total noninterest expense        12,682      11,602       10,254
Income before income tax expense              7,588       6,489        6,695
Income tax expense                            1,657       1,324        1,491

            Net income                    $   5,931       5,165        5,204
            Net income per share          $    1.65        1.45         1.47
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>

                                 Years Ended December 31, 1998, 1997 and 1996
                                       (in thousands, except per share data)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                             1998        1997        1996
<S>                                     <C>             <C>         <C>
Net income                               $   5,931       5,165       5,204

Other comprehensive income, before tax:
   Unrealized holding gains (losses)
      arising during period on
      securities                               227         382        (369)
   Less:  reclassification adjustment
      for (gains) losses included in
      net income                              (142)         20          (5)

Other comprehensive income (loss)
   before tax                                   85         402        (374)

Income tax effect of items of other
   comprehensive income                        (29)       (137)        127

Other comprehensive income (loss),
   net of tax                                   56         265        (247)


Comprehensive Income                     $   5,987       5,430       4,957
</TABLE>
   
            See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                 Years Ended December 31, 1998, 1997 and 1996
                                        (in thousands, except per share data)   
CONSOLIDATED STATEMENTS OF                                                                                                         
CASH FLOWS
                                              1998        1997         1996
<S>                                       <C>         <C>          <C>       
Cash flows from operating activities:
   Net income                              $   5,931      5,165        5,204
   Adjustments to reconcile net income 
      to net cash provided
      by operating activities:
         Provision for loan losses             1,135        550          595
         Depreciation and amortization 
            of bank premises and
            equipment                          1,098        902          549
         ESOP compensation                       488        302          604
           Provision for deferred income taxes   132        130           64
         Loss (gain) on sales of securities 
            available-for-sale, net             (142)        20           (5)
         Amortization of premiums and 
            accretion of discounts, net          230         71           73
         Gain on calls of securities 
            held-to-maturity, net                (16)        (1)           0
         Loss (gain) on sale of other real
            estate  and fixed assets             (34)       (32)         (47)
         Proceeds from sales of mortgage 
            loans held for sale               33,298     13,751       11,843
         Origination of mortgage loans 
            held for sale                    (33,785)   (14,580)     (11,356)
         Decrease (increase) in other 
            assets                              (795)       179         (401)
        (Decrease) increase in other 
            liabilities                           34       (681)         251

         Net cash provided by operating 
            activities                         7,574      5,776        7,374

Cash flows from investing activities:
   Net decrease (increase)in federal funds 
      sold                                    (7,100)    (1,000)       2,930
   Proceeds from sales of securities 
      available-for-sale                         617      6,060        9,462
   Proceeds from calls and maturities of 
      securities available-for-sale           39,232     13,269       10,895
   Proceeds from calls and maturities of 
      securities held to maturity              4,066      2,640        3,037
   Purchases of securities 
      available-for-sale                     (34,196)   (26,963)     (27,834)
   Purchase of securities held-to-maturity       (15)    (1,994)      (6,047)
   Net increase in loans                     (40,535)   (18,673)     (21,739)
   Proceeds from sale of other real 
      estate owned                               228        155          449
   Recoveries on loans previously charged off    184        190          156
   Bank premises and equipment expenditures   (1,561)    (3,130)      (6,203)

         Net cash used in investing
            activities                       (39,080)   (29,446)     (34,894)

Cash flows from financing activities:
   Net increase (decrease) in demand 
      deposits                                30,343      8,603         (330)
   Net increase in time deposits and 
      certificates of deposit                  3,369      8,540       19,955
   Net increase in securities sold 
      under agreements to repurchase           1,190        665          853
   Net increase (decrease) in other 
      borrowed funds                          (4,481)    11,689       12,036
   Principal payments on ESOP debt              (488)      (302)        (604) 
   Sale of stock to ESOP                       1,400          -            -
   Principal payments on subordinated 
      capital notes                                -          -         (937)
   Dividends paid                             (2,280)    (1,347)      (1,924)
   Dividends on unallocated ESOP shares          (78)       (49)         (70)

         Net cash provided by financing 
            activities                        28,975     27,799       28,979

Net increase (decrease) in cash and 
         due from banks                       (2,531)     4,129        1,459
Cash and due from banks at beginning 
         of year                              14,406     10,277        8,818

Cash and due from banks at end of year     $  11,875     14,406       10,277
</TABLE>

                  See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>

                               Years Ended December 31, 1998, 1997 and 1996
                               (in thousands, except share and per share data)
CONSOLIDATED STATEMENTS OF     
CHANGES IN STOCKHOLDERS' EQUITY
                                                               Accumulated
                                                               Other
                                            Unearned           Compre-
                           Common           ESOP     Retained  hensive
                           Stock   Surplus  Shares   Earnings  Income      Total
<S>                     <C>       <C>      <C>       <C>      <C>         <C>                    
Balances at 
   December 31, 1995    $  8,310   10,782   (2,115)   15,006      208      32,191    


Net income                     -        -        -     5,204        -       5,204
Cash dividends, $0.54
   per share                   -        -        -    (1,925)       -      (1,925)
ESOP shares allocated
   upon loan
   repayment                   -        -      604         -        -         604
Change in net unrealized 
   gains (losses) on 
   securities available
   for sale, net of 
   tax effect of $127          -        -        -         -     (246)       (246)

Balances at December 31,
    1996                   8,310   10,782   (1,511)   18,285      (38)     35,828   

Net income                     -        -        -     5,165        -       5,165    
Cash dividends, $0.38
   per share                   -        -        -    (1,348)       -      (1,348)
ESOP shares allocated 
   upon loan
   repayment                   -        -      303         -        -         303
Two for one stock split
   effected in form 
   of 100% stock
   dividend                8,309        -        -    (8,309)       -           -
Change in net unrealized
   gains (losses) on
   securities available
   for sale, net of tax
   effect of $136              -        -        -         -      265         265    

Balances at December 31,
   1997                   16,619   10,782   (1,208)   13,793      227      40,213

Net income                     -        -        -     5,931        -       5,931
Cash dividends, $0.63
   per share                   -        -        -    (2,280)       -      (2,280)
ESOP shares allocated 
   upon loan repayment         -        -      488         -        -         488
10%  stock dividend        1,691    7,439        -    (9,137)       -          (7)    
Change in net unrealized
   gains (losses) on 
   securities available 
   for sale, net 
   of tax effect of $29        -        -        -         -       56          56
Sale of 60,215 shares 
    of stock to ESOP         301    1,099   (1,400)        -        -           -

Balances at December 31,
   1998                 $ 18,611   19,320   (2,120)    8,307      283      44,401
</TABLE>
         
          See accompanying notes to consolidated financial statements
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         December 31, 1998
                                   (in thousands, except share data)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The reporting entity is comprised of FNB Corporation, a bank 
     holding company, and its wholly-owned subsidiaries 
     (collectively the "Corporation").  The primary subsidiary of 
     FNB Corporation is First National Bank (the "Bank").  The 
     accounting and reporting policies of the Corporation conform 
     to generally accepted accounting principles and general 
     practices within the banking industry.  In preparing the 
     financial statements, management is required to make estimates 
     and assumptions that affect the reported amounts of assets and 
     liabilities as of the date of the balance sheet and revenues 
     and expenses for the year.  Actual results could differ 
     significantly from those estimates.

     Material estimates that are particularly susceptible to 
     significant changes in the near term relate to the 
     determination of the allowance for loan losses and the 
     valuation of other real estate owned acquired in connection 
     with foreclosures or in satisfaction of loans.  In connection 
     with the determination of the allowance for loan losses and 
     the valuation of other real estate owned, management obtains 
     independent appraisals for significant properties.

     Management believes that the allowance for loan losses and the 
     valuation of other real estate owned are adequate.  While 
     management uses available information to recognize loan losses 
     and write-downs of other real estate owned, future additions 
     to the allowance and write-downs of other real estate owned 
     may be necessary based on changes in economic conditions.  In 
     addition, various regulatory agencies, as an integral part of 
     their examination process, periodically review the allowance 
     for loan losses and valuation of other real estate owned.  
     Such agencies may require the Bank to recognize additions to 
     the allowance for loan losses and additional write-downs of 
     other real estate owned based on their judgments of 
     information available to them at the time of their 
     examination.

     The following is a summary of the more significant accounting 
     policies.

     (a)  Consolidation
          The consolidated financial statements include the 
          accounts of FNB Corporation, a bank holding company, and 
          its wholly-owned subsidiaries.

     (b)  Cash and Cash Equivalents
          For purposes of reporting cash flows, cash and cash 
          equivalents include those amounts in the balance sheet 
          caption, cash and due from banks.  Generally, cash and 
          cash equivalents are considered to have maturities of 
          three months or less.  The Bank maintains amounts due 
          from banks which, at times, may exceed federally insured 
          limits.  No losses have been experienced in such 
          accounts.
     
     (c)  Securities
          The Corporation follows the provisions of Statement of 
          Financial Accounting Standards No. 115, "Accounting for 
          Certain Investments in Debt and Equity Securities."   
          Under Statement 115, investments in debt and equity 
          securities are required to be classified in three 
          categories and accounted for as follows:
<PAGE>

             Debt securities which the Corporation has the positive 
             intent and ability to hold to maturity are classified as 
             held-to-maturity securities and reported at amortized 
             cost, computed by the level yield method.

             Debt and equity securities that are bought and held 
             principally for the purpose of selling them in the near 
             term are classified as trading securities and reported 
             at fair value, with unrealized gains and losses included 
             in income.  The Corporation has no trading securities.  

             Debt and equity securities not classified as either 
             held-to-maturity or trading securities are classified as 
             available-for-sale securities and reported at fair 
             value, with unrealized gains and losses excluded from 
             income and reported as a separate component of 
             stockholders' equity, net of the related income tax 
             effect.

        Gains and losses on sales of securities are based on the 
        net proceeds and adjusted carrying amount of the 
        security sold using the specific identification method.  
        Declines in fair values of individual securities below 
        their cost that are other  than temporary are charged to 
        income resulting in a new cost basis for the security.

     (d)  Loans 
          Loans are stated at the amount of funds disbursed plus 
          the applicable amount, if any, of unearned interest and 
          deferred fees and costs less payments received.  
          Interest on commercial and real estate mortgage loans is 
          accrued based on the average loans outstanding times the 
          applicable interest rates.  Interest on installment 
          loans is recognized on methods which approximate the 
          level yield method.  Loan origination and commitment 
          fees and certain costs are deferred, and the net amount 
          is amortized over the contractual life of the related 
          loans as an adjustment of the yield.

          Interest related to nonaccrual loans is recognized on 
          the cash basis.  Loans are generally placed on 
          nonaccrual status when the collection of principal or 
          interest is 90 days or more past due, unless the 
          obligation is both well-secured and in the process of 
          collection.

          Mortgage loans held for sale are carried at the lower of 
          aggregate cost or market value.  Loans sold are removed 
          from the accounts and any realized gain or loss is 
          recorded.

     (e)  Bank Premises and Equipment, Net
          Bank premises and equipment are stated at cost less 
          accumulated depreciation and amortization.  Depreciation 
          and amortization is charged to expense over the 
          estimated useful lives of the assets, principally on the 
          straight-line method.  Costs of maintenance and repairs 
          are charged to expense as incurred and improvements are 
          capitalized.

     (f)  Other Real Estate Owned
          Other real estate owned represents properties acquired 
          through foreclosure or deed taken in lieu of 
          foreclosure.  At the time of acquisition, these 
          properties are recorded at the lower of the recorded 
          investment in the loan or fair value less estimated 
          costs to sell.  Expenses incurred in connection with 
          operating these properties and subsequent write-downs, 
          if any, are charged to expense.  Gains and losses on the 
          sales of these properties are credited or charged to 
          income in the year of the sale.
<PAGE>

     (g)  Income Taxes
          Deferred tax assets and liabilities are recognized for 
          the future tax consequences attributable to differences 
          between the financial statement carrying amounts of 
          existing assets and liabilities and their respective tax 
          bases and operating loss and tax credit carryforwards.  
          Deferred tax assets and liabilities are measured using 
          enacted tax rates expected to apply to taxable income in 
          the years in which those temporary differences are 
          expected to be recovered or settled. The effect on 
          deferred tax assets and liabilities of a change in tax 
          rates is recognized in income in the period that 
          includes the enactment date.

     (h)  Net Income Per Share
          Net income per share computations are based on the 
          weighted average number of shares outstanding during 
          each year (3,599,168, 3,561,504, and 3,525,645 in 1998, 
          1997 and 1996, respectively, as restated). The weighted 
          average shares outstanding do not include average 
          unearned shares held by the Employee Stock Ownership 
          Plan (ESOP) totaling 114,969, 94,676 and 130,535 shares 
          for 1998, 1997 and 1996, respectively.  The shares held 
          by the ESOP are not considered outstanding for net 
          income per share calculations until the shares are 
          released. 

          During the second quarter of 1997, the Corporation 
          declared a two for one stock split effected in the form 
          of a 100% stock dividend.  As a result, the total number 
          of shares outstanding doubled.  Par value per share did 
          not change. During the third quarter of 1998, the 
          Corporation declared a 10% stock dividend.  Earnings per 
          share, dividends per share and weighted average shares 
          for periods prior to the split and the stock dividend 
          have been restated to reflect the change in shares 
          outstanding as though the split and the stock dividend 
          had occurred at the beginning of the earliest period 
          presented.

     (i)  Trust Assets 
          Assets held by the Bank's trust department in a 
          fiduciary or agency capacity are not included in the 
          consolidated financial statements as they are not assets 
          of the Corporation.

     (j)  Reclassifications
          Certain reclassifications have been made to prior year 
          amounts to conform to the 1998 presentation.

(3)  RESTRICTIONS ON CASH
     Federal reserve regulations require the Bank to maintain 
     certain average balances as cash reserves.  The reserve 
     requirements approximated $1,113 and $4,285 at December 31, 
     1998 and 1997, respectively.

(4)  SECURITIES AVAILABLE-FOR-SALE
     The following sets forth the composition of securities  
     available-for-sale, which are reported at fair value, at 
     December 31, 1998 and 1997:
<PAGE>
<TABLE>
<CAPTION>

                                        Gross       Gross        Approximate
                             Amortized  Unrealized  Unrealized   Fair
December 31, 1998            Costs      Gains       Losses       Values
<S>                        <C>         <C>         <C>          <C> 
U.S. Treasury               $  7,062     102           -          7,164
U.S. Government agencies
   and corporations           19,511     120          (7)        19,624
States and political 
   subdivisions               11,436     231         (19)        11,648
Other securities              18,794      16         (14)        18,796

Totals                      $ 56,803     469         (40)        57,232
</TABLE>
<TABLE>
<CAPTION>

                                        Gross       Gross        Approximate
                             Amortized  Unrealized  Unrealized   Fair
December 31, 1997            Costs      Gains       Losses       Values
<S>                        <C>         <C>         <C>          <C> 
U.S. Treasury               $  8,109      53           -          8,162
U.S. Government 
   agencies and
   corporations               46,864     272        (116)        47,020
States and political 
   subdivisions                2,962     108           -          3,070
Other securities               4,576      28           -          4,604

Totals                      $ 62,511     461        (116)        62,856
</TABLE>

     The amortized costs and approximate fair values of securities 
     available-for-sale by contractual maturity are shown below.  
     Expected maturities may differ from contractual maturities 
     because borrowers may have the right to call or prepay 
     obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                                       Approximate
                                   Amortized           Fair
December 31, 1998                  Costs               Values
<S>                             <C>                   <C>
Due in one year or less          $   4,087               4,126
Due after one year through 
   five years                       24,628              24,743
Due after five years through 
   ten years                        20,917              21,126
Due after ten years                  7,171               7,237

Totals                           $  56,803              57,232
</TABLE>

     Realized gains and losses on securities available-for-sale 
     were not material in 1997 or 1996.  In 1998, realized gains 
     and losses totaled $147 and $5, respectively.

     The carrying value of securities available-for-sale pledged to 
     secure public and trust deposits and securities sold under 
     agreements to repurchase, and for other purposes as required 
     or permitted by law, was $17,887 at December 31, 1998 and 
     $16,371 at December 31, 1997.

(5)  SECURITIES HELD-TO-MATURITY
     The amortized costs, gross unrealized gains and losses, and 
     approximate fair values of securities held-to-maturity at 
     December 31, 1998 and 1997 are as follows:
<PAGE>
<TABLE>
<CAPTION>

                                      Gross       Gross       Approximate
                         Amortized    Unrealized  Unrealized  Fair
December 31, 1998        Costs        Gains       Losses      Values
<S>                     <C>          <C>         <C>         <C>
States and political 
   subdivisions         $  38,322       1,289          -        39,611
Other securities               30           -          -            30

Totals                  $  38,352       1,289          -        39,641
</TABLE>
<TABLE>
<CAPTION>

                                      Gross       Gross         Approximate
                         Amortized    Unrealized  Unrealized    Fair
December 31, 1997        Costs        Gains       Losses        Values
<S>                     <C>          <C>         <C>           <C>       
States and political 
   subdivisions         $  42,360        1,029       (19)       43,370
Other securities               60            -         -            60

Totals                  $  42,420        1,029       (19)       43,430
</TABLE>

     The amortized costs and approximate fair values of securities 
     held-to-maturity at December 31, 1998 by contractual maturity 
     are shown below.  Expected maturities may differ from 
     contractual maturities because borrowers may have the right to 
     call or prepay obligations with or without call or prepayment 
     penalties.
<TABLE>
<CAPTION>
 
                                                      Approximate
                                       Amortized      Fair
December 31, 1998                      Costs          Values
<S>                                 <C>              <C>
Due in one year or less              $   3,360           3,387
Due after one year through 
   five years                           21,977          22,652
Due after five years through 
   ten years                            12,736          13,316
Due after ten years                        279             286

Totals                               $  38,352          39,641
</TABLE>

     Realized gains and losses on calls and maturities of 
     securities held-to-maturity were not material in 1998, 1997 or 
     1996. The carrying value of securities held-to-maturity 
     pledged to secure public and trust deposits and securities 
     sold under agreements to repurchase, and for other purposes as 
     required or permitted by law, was $18,386 and $16,381 at 
     December 31, 1998 and 1997, respectively.

(6)  LOANS
     At December 31, 1998 and 1997, there were direct loans to 
     officers and directors of $6,167 and $5,595, respectively.  
     During 1998, new direct loans to officers and directors 
     amounted to $1,188 and repayments amounted to $616.   In 
     addition, there were loans of $6,324 and $5,957 at December 
     31, 1998 and 1997, respectively, which were endorsed by 
     directors or had been made to companies in which directors had 
     an equity interest.

     At December 31, 1998 and 1997, the Corporation had sold 
     without recourse to financial institutions and other customers 
     of the Corporation participations in various loans in the 
     amount of $37,994 and $30,000, respectively.
<PAGE>

(7)  ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
     Impaired loans are measured based on the present value of 
     expected future cash flows discounted at the loan's effective 
     interest rate or, as a practical expedient, at the loan's 
     observable market price or the fair value of the collateral if 
     the loan is collateral dependent.  A loan is considered 
     impaired when, based on management's judgment, it is probable 
     that the Corporation will not be able to collect on all 
     amounts due according to the contractual terms of the loan.  
     In making such assessment, management considers the individual 
     strength of borrowers, the strength of particular industries, 
     the payment history of individual loans, the value and 
     marketability of collateral and general economic conditions.  
     Management's methodology for evaluating the collectibility of 
     a loan after it is deemed to be impaired does not differ from 
     the methodology used for nonimpaired loans.

     As of December 31, 1998 and 1997, the investment in impaired 
     loans approximated $2,252 and $1,256, respectively.  The 
     December 31, 1998 and 1997 allowances for loan losses includes 
     allowances of $338 and $183, respectively, for these loans.  
     Impaired loans averaged $1,754, $1,694 and $2,933 during 1998, 
     1997 and 1996, respectively.  Interest on impaired loans is 
     recognized in the same manner as loans that are not considered 
     impaired; that is, interest is generally recognized on the 
     cash basis once the collection of principal or interest is 90 
     days or more past due.

     A summary of the changes in the allowance for loan losses 
     (including allowances for impaired loans) follows:
<TABLE>
<CAPTION>

Years Ended December 31,           1998        1997        1996
<S>                            <C>          <C>         <C>                         
Balance at beginning of 
   year                        $  4,291       4,179       3,988
Provisions for loan losses        1,135         550         595
Loan recoveries                     184         190         156
Loan charge-offs                   (970)       (628)       (560)

Balance at end of year         $  4,640       4,291       4,179
</TABLE>

     Nonperforming assets consist of the following:
<TABLE>
<CAPTION>

December 31,                       1998        1997        1996
<S>                            <C>            <C>         <C>
Nonaccrual loans               $  1,109         893         573
Other real estate owned              30          98         185

Total nonperforming assets     $  1,139         991         758
</TABLE>

     There were no material commitments to lend additional funds to 
     customers whose loans were classified as nonperforming at 
     December 31, 1998.

     The following table shows the pro forma interest that would 
     have been earned on impaired loans if interest had been 
     recorded using the cash basis and the recorded interest that 
     was included in income on these loans:
<TABLE>
<CAPTION>

Years Ended December 31,           1998        1997        1996
<S>                              <C>          <C>         <C>
Cash basis interest - 
   impaired loans                $   50         64          122

Recorded interest - 
   impaired loans                $   48          7          131
</TABLE>
<PAGE>


(8)  BANK PREMISES AND EQUIPMENT, NET
     Bank premises and equipment are stated at cost less 
     accumulated depreciation and amortization as follows:
<TABLE>
<CAPTION>

December 31,                         1998        1997
<S>                               <C>           <C>
Land                              $  1,515       1,359
Buildings                            9,355       9,820
Furniture and equipment              7,641       6,461
Leasehold improvements                 428         383
Construction in progress               613           -
                                    19,552      18,023
Less accumulated depreciation
   and amortization                 (6,575)     (5,505)

Totals                            $ 12,977      12,518
</TABLE>

     In 1997, a total of $22 of interest was capitalized related to 
     the construction of a new headquarters facility.

(9)  DEPOSITS
     At December 31, 1998 and 1997,  there were deposits from 
     officers and directors of $2,338 and $2,066, respectively.  
     Time deposits and certificates of deposit of $100,000 and over 
     as of December 31, 1998 mature as follows:
<TABLE>
          <S>            <C>     
           1999           $ 129,843
           2000              60,861
           2001              10,119
           2002               6,720
           2003              11,662
           Thereafter         1,707
                          $ 220,912
</TABLE>

(10) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS
     Advances from the Federal Home Loan Bank of Atlanta were $21.3 
     million and $22.6 million on December 31, 1998 and 1997, 
     respectively.  The fixed interest rates on the advances as of 
     December 31, 1998 range from 5.3 to 6.7 percent.  The advances 
     are collateralized under a blanket floating lien agreement 
     whereby the Corporation gives a blanket pledge of residential 
     first mortgage loans for 1-4 units.  Of the total balance at 
     December 31, 1998, $10 million  matures in 2000 and $10 
     million matures in 2001. The remainder matures after 2001.

     Securities sold under agreements to repurchase (repurchase 
     agreements) at December 31, 1998 were collateralized by 
     investment securities controlled by the Corporation with a 
     book value of approximately $11.7 million.  The maximum amount 
     of repurchase agreements outstanding during 1998 was $7.6 
     million, and the average amount outstanding during 1998 was 
     $6.4 million.  
<PAGE>

(11) EMPLOYEE BENEFIT PLAN
     The Corporation sponsors a leveraged Employee Stock Ownership 
     Plan (ESOP) which covers all employees following the 
     completion of one year of service and attainment of age 21.  
     The ESOP invests substantially in stock of the Corporation.  
     The purchase of some of the shares held by the ESOP has been 
     financed  by borrowings by the ESOP.  In February 1998, the 
     Corporation sold 60,215 shares to the ESOP for $23.25 per 
     share.  The ESOP borrowed $1,400 from another financial 
     institution to finance the purchase.  The ESOP's obligation to 
     repay these and prior borrowings is guaranteed by the  
     Corporation  and  secured  by  the  stock acquired;  
     therefore,  the  unpaid balance of the borrowings as of  
     December 31, 1997 has been reflected in the accompanying 
     balance sheet as of that date as a  liability.  During the 
     third quarter of 1998, First National Bank purchased all ESOP 
     loans from the outside financial institution which had 
     originally financed them.  Consequently, in the December 31, 
     1998 consolidated balance sheet, the loans and the related 
     liability have been eliminated.  The amounts representing 
     unearned employee benefits have been recorded as reductions in 
     stockholders' equity as unearned ESOP shares.  These amounts 
     are reduced and compensation expense is  recorded as the ESOP 
     debt is curtailed and shares are released from collateral.  
     Shares released are allocated to plan participants as of the 
     end of the Plan's year based on an allocation formula 
     specified in the Plan.  The ESOP is repaying the loans (plus 
     interest) using employer contributions and dividends received 
     on the shares of common stock held by the ESOP.  Dividends on 
     allocated ESOP shares are recorded as a reduction of retained 
     earnings.  Dividends on unallocated shares are recorded as a 
     reduction of ESOP debt to the extent used for debt service, 
     and as compensation expense to the extent expected to be 
     allocated to participants' accounts as additional 
     compensation.  ESOP compensation expense of $488, $302 and 
     $604 and related ESOP interest expense of $76, $88 and $118 
     were recorded for 1998, 1997 and 1996, respectively.

     ESOP shares as of December 31, 1998 consisted of 737,149 
     allocated shares and 117,660   unreleased and unearned shares 
     as restated for the 1997 100% stock dividend and the 1998 10% 
     stock dividend.  Based on quoted trading and bid prices, the 
     fair value of the unreleased and unearned shares at December 
     31, 1998 was $24 per share.

     In 1997, the Corporation instituted a 401(k) plan that covers 
     substantially all employees who work at least 1,000 hours per 
     year.  Participants have the option to have up to 12% of their 
     salary withheld on a pre-tax basis to be contributed to the 
     plan.  The Corporation matches 100% of the first 3% of the 
     participants' contributions.  Participants may choose among 
     several investment options comprised primarily of mutual 
     funds, but there is no stock of the Corporation in the plan.  
     Matching contributions totaled $121 and $26 for 1998 and 1997, 
     respectively.

(12) INCOME TAXES
     Total income taxes are allocated as follows:
<TABLE>
<CAPTION>

Years Ended December 31,                1998        1997        1996
<S>                                  <C>           <C>         <C> 
Income                               $  1,657       1,324       1,491
Stockholders' equity, for net 
  unrealized gains and losses
  on securities available-for-sale 
  recognized for financial reporting
  purposes                                 30         136        (127)

Totals                               $  1,687       1,460       1,364
</TABLE>
<PAGE>

     The components of federal income tax expense are as follows:
<TABLE>
<CAPTION>

Years Ended December 31,             1998        1997        1996
<S>                                <C>          <C>         <C>     
Current                            $ 1,525       1,194       1,427
Deferred                               132         130          64

Total                              $ 1,657       1,324       1,491
</TABLE>

     The reconciliation of expected income tax expense at the 
     statutory federal rate with the reported tax expense at the 
     effective rate is as follows:
<TABLE>
<CAPTION>

Years Ended December 31,             1998            1997            1996
                                        Percent         Percent         Percent
                                           of             of            of
                                        Pretax          Pretax          Pretax
                                Amount  Income  Amount  Income  Amount  Income
<S>                            <C>     <C>     <C>     <C>     <C>     <C>  
Expected tax expense at
   statutory rate              $ 2,580   34.0%   2,206   34.0%   2,276    34.0%
Increase (decrease) in
   taxes resulting from:
    Tax-exempt interest           (979) (12.9)    (970) (15.0)  (1,007)  (15.0)
    Nondeductible interest
    expense                         135    1.8      142    2.2      140     2.1
Other, net                         (79)  (1.1)     (54)  (0.8)      82     1.2

Reported tax expense at
   effective rate              $ 1,657   21.8%   1,324   20.4%   1,491    22.3%
</TABLE>

     The tax effects of temporary differences that give rise to 
     significant portions of deferred tax assets and deferred tax 
     liabilities are as follows:
<TABLE>
<CAPTION>

December  31,                                     1998        1997
<S>                                            <C>          <C>
Deferred tax assets:
   Loans, principally due to allowance
     for loan losses and unearned fees          $ 1,232       1,145
   Accrued post-retirement benefits 
     due to accrual for financial
     reporting purposes in excess of 
     actual contributions                           160         150
   Other                                             17          22

         Total gross deferred tax assets          1,409       1,317

Less valuation allowance                              -           -

         Net deferred tax assets                  1,409       1,317

Deferred tax liabilities:
  Bank premises and equipment, due 
    to differences in
    depreciation                                    251          72
  Securities, due principally to 
    valuation allowance                             146         116
  Investment securities, due to 
    differences in discount accretion               107         106
  Prepaids, due to advance payments                 113          69

         Total gross deferred tax liabilities       617         363

         Net deferred tax asset, included in 
            other assets                        $   792         954
</TABLE>
<PAGE>

     The Corporation has determined that a valuation allowance for 
     gross deferred tax assets is not necessary at December 31, 
     1998 or 1997 since deferred tax assets can be recognized 
     during the carryback period available under current tax laws.

(13) DIVIDEND RESTRICTIONS AND CAPITAL REQUIREMENTS
     The holding company's principal asset is its investment in the 
     Bank, a wholly-owned consolidated subsidiary. The only 
     significant source to date of income for the holding company 
     has been dividends from the Bank.  Regulatory agencies limit 
     the amount of funds that may be transferred from the Bank to 
     the holding company in the form of dividends, loans, or 
     advances.  

     Under applicable federal laws, the Comptroller of the Currency 
     restricts, without prior approval, the total dividend payments 
     of the Bank in any calendar year to the net profits of that 
     year, as defined, combined with the retained net profits for 
     the two preceding years.  The total dividends that may be 
     declared in 1999 without the approval of the Comptroller 
     totals $7,467 plus year-to-date 1999 net profits as of the 
     declaration date.

     The Corporation is subject to various regulatory capital 
     requirements administered by the federal banking agencies.  
     Failure to meet minimum capital requirements can initiate 
     certain mandatory--and possibly additional discretionary--
     actions by regulators that, if undertaken, could have a direct 
     material effect on the Corporation's financial statements.  
     Under capital adequacy guidelines and the regulatory framework 
     for prompt corrective action, established by Section 38 of the 
     Federal Deposit Insurance Act (FDI ACT), the Corporation must 
     meet specific capital guidelines that involve quantitative  
     measures of assets, liabilities, and certain off-balance-sheet 
     items as calculated under regulatory accounting practices.  
     The Corporation's capital amounts and classification are also 
     subject to qualitative judgments by the regulators about 
     components, risk weightings, and other factors.

     Quantitative measures established by regulation to ensure 
     capital adequacy require the Corporation to maintain minimum 
     amounts and ratios of total and Tier 1 capital (as defined in 
     the regulations) to risk-weighted assets (as defined), and of 
     Tier 1 capital to average assets (as defined).  Management 
     believes, as of December 31, 1998, that the Corporation meets 
     all capital adequacy requirements to which it is subject.  The 
     table below sets forth the ratios for the Bank for December 
     31, 1998 and 1997.  On a consolidated basis, at December 31, 
     1998 the Corporation's ratios of total capital, Tier 1 capital 
     to risk weighted assets, and Tier 1 capital to average assets 
     were 13.5%, 12.3% and 9.7%, respectively.  For 1999 the 
     consolidated ratios were substantially the same as those for 
     the Bank.

     As of December 31, 1998, the most recent notification from the 
     Office of the Comptroller of the Currency categorized the Bank 
     as well capitalized under the regulatory framework for prompt 
     corrective action (Section 38 of the FDI Act).  To be 
     categorized as well capitalized, minimum total risk-based 
     capital, Tier 1 risk-based capital, and Tier 1 leverage ratios 
     as set forth in the table below must be maintained.  There are 
     no conditions or events since that notification that 
     management believes have changed the institution's category.
<PAGE>
<TABLE>
<CAPTION>
   
  As of December 31, 1998:
                                        Minimum Requirements
                                                                  
                                         For Capital    Federal Deposit
                            Actual         Adequacy      Insurance Act 
                         Amount  Ratio   Amount  Ratio   Amount  Ratio
<S>                    <C>      <C>     <C>     <C>     <C>     <C>  
     Total Capital
      (to Risk Weighted
      Assets)           $43,236  12.0%   28,856   8.0%   36,070  10.0%
     Tier 1 Capital
      (to Risk Weighted 
       Assets)           38,726  10.7%   14,428   4.0%   21,642   6.0%
     Tier 1 Capital
      (to Average
           Assets)       38,726   8.5%   18,138   4.0%   22,673   5.0%
</TABLE>
<TABLE>
<CAPTION>

  As of December 31, 1997:

                                          Minimum Requirements

                                           For Capital     Federal Deposit
                                Actual       Adequacy       Insurance Act    
                            Amount  Ratio  Amount  Ratio    Amount  Ratio
<S>                       <C>      <C>    <C>     <C>      <C>     <C>  
     Total Capital
      (to Risk Weighted 
       Assets)             $44,195  14.5%  24,418   8.0%    30,523  10.0%
     Tier 1 Capital
      (to Risk Weighted 
        Assets)             40,374  13.2%  12,209   4.0%    18,313   6.0%
     Tier 1 Capital
      (to Average Assets)   40,374   9.6%  16,843   4.0%    21,054   5.0%
</TABLE>

(14) SUPPLEMENTAL CASH FLOW INFORMATION
     The Corporation paid $17,090, $16,325 and $14,899 for interest 
     and $1,604, $1,057, and $1,413 for income taxes in 1998, 1997 
     and 1996, respectively.  Noncash investing activities included 
     $30, $98, and $343 of loans transferred to other real estate 
     owned in 1998, 1997 and 1996, respectively, and $599 of non-
     operating real estate transferred from bank premises and 
     equipment to other assets in 1998.

(15) COMMITMENTS AND CONTINGENCIES
     The Corporation is involved from time to time in litigation 
     arising in the normal course of business.  Management believes 
     that any resulting settlements and disposition of these 
     matters will not have a material effect on the Corporation's 
     consolidated results of operations or financial position.
<PAGE>

(16) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
     The Corporation is a party to financial instruments with  off-
     balance-sheet risk in the normal course of business to meet 
     the financing needs of its customers.  The financial 
     instruments include commitments to extend credit and standby 
     letters of credit.  Those instruments involve, to varying 
     degrees, elements of credit risk in excess of the amount 
     recognized in the balance sheets.  The contract amounts of 
     those instruments reflect the extent of involvement the 
     Corporation has in particular classes of financial 
     instruments.  Exposure to credit loss in the event of 
     nonperformance by the other party to the financial instrument 
     for commitments to extend credit and standby letters of credit 
     is represented by the contractual amount of these instruments.  
     The Corporation uses the same credit policies in making 
     commitments and conditional obligations as it does for on-
     balance-sheet instruments.

     Except for unused home equity lines totaling $27,008 at 
     December 31, 1998, and $14,526 at December 31, 1997, the 
     Corporation may not require collateral or other security to 
     support the following financial instruments with credit risk:
<TABLE>
<CAPTION>
                                                    Contract Amounts

December 31,                                         1998      1997
<S>                                             <C>          <C>
Financial instruments whose contract amounts
  represent credit risk:
    Commitments to extend credit                 $  86,583    63,194
    Standby letters of credit                        6,252     4,300
</TABLE>

     Commitments to extend credit are agreements to lend to a 
     customer as long as there is no violation of any condition 
     established in the contract.  Commitments generally have fixed 
     expiration dates or other termination clauses and may require 
     payment of a fee.  Since many of the commitments are expected 
     to expire without being drawn upon, the total commitment 
     amounts do not necessarily represent future cash requirements.   
     The Corporation evaluates each customer's creditworthiness on 
     a case-by-case basis.  The amount of collateral obtained, if 
     deemed necessary by the Corporation upon extension of credit, 
     is based on management's credit evaluation of the customer.  
     Collateral held varies but may include securities, accounts 
     receivable, inventory, property, plant and equipment, and 
     income-producing commercial properties.

     Standby letters of credit are conditional commitments issued 
     by the Corporation to guarantee the performance of a customer 
     to a third party.  Those guarantees are primarily issued to 
     support public and private borrowing arrangements, including 
     commercial paper, bond financing and similar transactions.  
     The credit risk involved in issuing letters of credit is 
     essentially the same as that involved in extending loans to 
     customers.  Collateral held varies but may include securities, 
     accounts receivable, inventory, property, plant and equipment, 
     and income-producing properties.

     Commitments to extend credit, standby letters of credit and 
     financial guarantees written are not reflected in the 
     financial statements except to the extent of fees collected, 
     which are generally reflected in income.  The fulfillment of 
     these commitments would normally result in the recording of a 
     loan at the time the funds are disbursed.

     The Corporation originates mortgage loans for sale to 
     secondary market investors subject to contractually specified 
     and limited recourse provisions.  In 1998, the Corporation 
     originated $33,785 and sold $33,298 to investors, compared to 
     $14,580 originated and $13,751 sold in 1997. Every contract 
     with each investor contains certain recourse language.  In 
<PAGE>

     general, the Corporation may be required to repurchase a 
     previously sold mortgage loan if there is major noncompliance 
     with defined loan origination or documentation standards, 
     including fraud, negligence or material misstatement in the 
     loan documents.  Repurchase may also be required if necessary 
     governmental loan guarantees are canceled or never issued, or 
     if an investor is forced to buy back a loan after it has been 
     resold as a part of a loan pool.  In addition, the Corporation 
     may have an obligation to repurchase a loan if the mortgagor 
     has defaulted early in the loan term.  This potential default 
     period ranges from six to twelve months after sale of a loan 
     to the investor.  Historically, repurchases under these 
     recourse provisions have been minimal.

(17) CONCENTRATIONS OF CREDIT RISK
     The Corporation does a general banking business, serving the 
     commercial, agricultural and personal banking needs of its 
     customers in its trade territory, commonly referred to as the 
     New River Valley, which consists of Montgomery County, 
     Virginia and portions of adjacent counties.   Operating 
     results are closely correlated with the economic trends within 
     this area which are, in turn, influenced by the area's three 
     largest employers - Virginia Polytechnic Institute and State 
     University, Radford University and the Radford Arsenal.  Other 
     industries include a wide variety of manufacturing concerns 
     and agriculture-related enterprises.  The ultimate 
     collectibility of the loan portfolios and the recovery of the 
     carrying amounts of repossessed property are susceptible to 
     changes in the market conditions of this area.  The commercial 
     portfolio is diversified with no significant concentrations of 
     credit within a single industry.  The consumer loan portfolio 
     included approximately $50 million and $55 million of loans to 
     individuals for household, family and other personal 
     expenditures at December 31, 1998 and 1997.  The real estate 
     mortgage portfolio consists primarily of loans secured by 1-4 
     family residential properties.

(18) DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
     Statement of Financial Accounting Standards No. 107, 
     "Disclosures about Fair Value of Financial Instruments," 
     requires the Corporation to disclose estimated fair values of 
     its financial instruments.  The following methods and 
     assumptions were used to estimate the approximate fair value 
     of each class of financial instrument for which it is 
     practicable to estimate that value:

    (a)  Cash and Due from Banks and Federal Funds Sold
         The carrying amounts in the consolidated balance sheets 
         are reasonable estimates of fair values.

    (b) Securities
        The fair value of securities, except certain state and 
        municipal securities, is estimated based on bid prices 
        published in financial newspapers or bid quotations 
        received from securities dealers.  The fair value of 
        certain state and municipal securities is not readily 
        available through market sources other than dealer 
        quotations, so fair value estimates are based on quoted 
        market prices of similar instruments, adjusted for 
        differences between the quoted instruments and the 
        instruments being valued.

   (c)  Loans
        Fair values are estimated for portfolios of loans with 
        similar financial characteristics.  Loans are segregated 
        by type (commercial, mortgage, consumer, etc.), by 
        interest rate terms (fixed and adjustable rate) and by 
        performing and nonperforming categories.  The fair value 
        of performing loans is calculated by discounting 
<PAGE>

        scheduled cash flows through the estimated maturity 
        using estimated market discount rates that reflect the 
        credit and interest rate risk inherent in the loan as 
        well as estimates for operating expenses and 
        prepayments.  The estimate of maturity is based on the 
        Corporation's historical experience with repayments for 
        each loan classification, modified, as required, by an 
        estimate of the effect of current economic and lending 
        conditions.

        Fair value for significant nonperforming loans is based 
        on estimated cash flows which are discounted using a 
        rate commensurate with the risk associated with the 
        estimated cash flows.  Assumptions regarding credit 
        risk, cash flows and discount rates are judgmentally 
        determined using available market information and 
        specific borrower information.
   
   (d)  Deposits
        The fair value of demand and savings deposits is the 
        amount payable on demand.  The fair value of fixed 
        maturity time deposits and certificates of deposit is 
        estimated using the rates currently offered for deposits 
        of similar remaining maturities.

   (e)  Securities Sold Under Agreements to Repurchase and Other 
        Borrowed Funds
        Rates currently available  for debt with similar terms 
        and remaining maturities are used to estimate fair value 
        of existing debt.

   (f)  ESOP Debt 
        Rates currently available for debt with similar terms and 
        remaining maturities are used to estimate fair value of 
        existing debt.

   (g)  Commitments to Extend Credit and Standby Letters of Credit
        The only amounts recorded for commitments to extend  
        credit and standby letters of credit are the deferred 
        fees arising from these unrecognized financial 
        instruments.  These deferred fees are not deemed 
        significant at December 31, 1998 and 1997, and as such, 
        the related fair values have not been estimated.

     The carrying amounts and approximate fair values of the 
     Corporation's financial instruments are as follows:
<TABLE>
<CAPTION>
December 31,                        1998                      1997
                                       Approximate               Approximate
                            Carrying   Fair          Carrying    Fair      
                            Amounts    Values        Amounts     Values
<S>                      <C>          <C>          <C>          <C>   
Financial assets:
  Cash and due 
    from banks            $  11,875      11,875      14,406       14,406
  Federal funds sold         10,600      10,600       3,500        3,500
  Securities available
    -for-sale                57,232      57,232      62,856       62,856
  Securities held-to-
    maturity                 38,352      39,641      42,420       43,430
    Loans, net              323,959     327,599     286,767      289,832

         Total financial 
            assets        $ 442,018     446,947     409,949      414,024
Financial liabilities:
  Deposits                $ 386,257     387,931     352,545      353,418
  Securities sold 
   under agreements
    to repurchase and 
    other borrowed 
    funds                    28,262      28,498      31,553       31,559
  ESOP debt                       -           -         901          901

         Total financial 
            liabilities   $ 414,519     416,429     384,999      385,878
</TABLE>
<PAGE>

         Fair value estimates are made at a specific point in 
         time, based on relevant market information and 
         information about the financial instrument.  These 
         estimates do not reflect any premium or discount that 
         could result from offering for sale at one time the 
         Corporation's entire holdings of a particular financial 
         instrument.  Because no market exists for a significant 
         portion of the Corporation's financial instruments, fair 
         value estimates are based on judgments regarding future 
         expected loss experience, current economic conditions, 
         risk characteristics of various financial instruments 
         and other factors.  These estimates are subjective in 
         nature and involve uncertainties and matters of 
         significant judgment and therefore cannot be determined 
         with precision.  Changes in assumptions could 
         significantly affect the estimates.

         Fair value estimates are based on existing on and off-
         balance sheet financial instruments without attempting 
         to estimate the value of anticipated future business and 
         the value of assets and liabilities that are not 
         considered financial instruments.  In addition, the tax 
         ramifications related to the realization of the 
         unrealized gains and losses can have a significant 
         effect on fair value estimates and have not been 
         considered in the estimates.

(19) PARENT COMPANY FINANCIAL INFORMATION

     Condensed financial information of FNB Corporation (the parent 
     or holding company) is presented below:
<TABLE>
<CAPTION>

                           Condensed Balance Sheets

                                        December 31, 1998   December 31, 1997
<S>                                     <C>                 <C>   
Assets
Securities available for sale,
        at fair value                        $   5,369                  -
Investment in bank subsidiary                   39,016             39,699
Receivable from bank subsidiary                  1,682                514
Other assets                                        88                  -

    Total Assets                             $  46,155             40,213

Liabilities

ESOP debt                                    $   1,754                  -

    Total  Liabilities                       $   1,754                  -

Stockholders' Equity

Common stock and surplus                     $  37,931             27,401
Retained earnings                                8,307             13,793
Other                                           (1,837)              (981)
    Total Stockholders' Equity                  44,401             40,213

    Total Liabilities & Stockholders' Equity $  46,155             40,213
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                          
                                       Condensed Statements of Income
                                                         July 6, 1996 to
                                    1998       1997     December 31, 1996
<S>                            <C>           <C>       <C>   
   Net interest income         $      24            -                -
   Non interest income               465            -                -
   Non interest expense             (489)           -               (1)
   Equity in earnings of bank 
     subsidiary                    5,931        5,165            2,570
   Income before income taxes      5,931        5,165            2,569
   Income tax expense                  -            -                -
   Net income                  $   5,931        5,165            2,569
</TABLE>

     NOTES:
     (1)  Cash  flows  for  the  parent  company  during  1997 were not 
     significant, other than dividends from the Bank.  Total dividends paid 
     by the Bank to the parent company were $7,578, $1,911 and $1,163 in 
     1998, 1997, and 1996,  respectively.   In 1998, the parent invested $5.4 
     million in investment securities.   Net  cash  flows  from operations 
     netted to zero in 1998. 
     (2)  July 6, 1996 represents the inception of operations of the holding    
     company.
     (3)  The ESOP debt is held by the Bank and as such is eliminated in    
     consolidation.

(20) INTERIM FINANCIAL INFORMATION (Unaudited)

     Consolidated quarterly results of operations were as follows:
<TABLE>
<CAPTION>
                                             1998
                                       Three Months Ended
                       March 31   June 30   September 30   December 31
<S>                   <C>        <C>        <C>            <C>
Interest income       $  8,583     8,777         9,230        9,063
Interest expense         4,358     4,270         4,391        4,230
Provision for loan 
  losses                   110       210           390          425
Noninterest income         669       689           735          908
Noninterest expense      2,971     3,038         3,157        3,516
Income before income
   tax expense           1,813     1,948         2,027        1,800
Income tax expense         404       445           456          352
Net income            $  1,409     1,503         1,571        1,448

Net income per 
   share              $   0.39      0.42          0.44         0.40
</TABLE>
<TABLE>
<CAPTION>

                                                 1997         
                                      Three Months Ended
                        March 31  June 30   September 30   December 31
<S>                   <C>        <C>       <C>            <C>
Interest income        $  7,775    8,172         8,618        8,549
Interest expense          3,890    4,126         4,385        4,363
Provision for loan
   losses                   175      100           125          150
Noninterest income          613      553           565          560
Noninterest expense       2,712    2,722         2,997        3,171
Income before income
   tax expense            1,611    1,777         1,676        1,425
Income tax expense          351      390           304          279
Net income             $  1,260    1,387         1,372        1,146

Net income per 
    share              $   0.35     0.39          0.39         0.32
</TABLE>
<PAGE>
   
     Net income per share in the above tables has been restated to reflect 
     retroactively a two-for-one stock split effected in the form of a 100% 
     stock dividend in the second quarter of 1997 and a 10% stock dividend 
     declared in the third quarter of 1998.

(21) RECENT ACCOUNTING DEVELOPMENTS
 
     During the first quarter of 1998, the Corporation adopted Statement of 
     Financial Accounting Standards (SFAS) No. 130, "Reporting  Comprehensive 
     Income."  The Statement requires enterprises to display "comprehensive 
     income" and its components in a financial statement that is displayed 
     with the same prominence as other financial statements in a full set of 
     financial statements.  "Comprehensive income" is comprised of net income 
     as reported in the Statement of Income as well as "other comprehensive 
     income," which is comprised of certain items and events that have been 
     reflected only in stockholders' equity without impacting the Statement 
     of Income.  Currently the only items included in FNB Corporation's 
     financial statements that are required to be reflected in other 
     comprehensive income are the unrealized gains and losses on securities 
     classified as available-for-sale under SFAS No. 115, "Accounting for 
     Certain Investments in Debt and Equity Securities."
 
     The adoption of SFAS No. 130 resulted in the presentation of the 
     accompanying Consolidated Statements of Comprehensive Income for 1998, 
     1997 and 1996.  Amounts reported in the accompanying Consolidated 
     Statements of Income, Balance Sheets, Statements of Cash Flows and 
     Statements of Changes in Stockholders' Equity were not impacted by the 
     adoption of SFAS No. 130.
 
(22) YEAR 2000 READINESS DISCLOSURE

     A number of electronic systems utilize a two-digit field for year 
     references, e.g., "98" for "1998".  Such systems may interpret the year 
     reference "00" as referring to the Year 1900 rather than the Year 2000.  
     If these systems are not corrected prior to December 31, 1999, many 
     processing failures could result.  If the Corporation's mission-critical 
     applications are not compliant by 2000, it may not be able to correctly 
     process transactions in a reasonable period of time.  This scenario 
     could result in a wide variety of claims against the Corporation for 
     improper handling of its assets as well as deposits and other borrowings 
     from its customers.  The Corporation is also at risk if the credit 
     worthiness of a few of its large borrowers, or a significant number of 
     its small borrowers, were to deteriorate quickly and severely as a 
     result of their inability to conduct business operations after December 
     31, 1999, for whatever reason.  Such risks would include a potential 
     negative impact on earnings and financial position to the extent that a 
     significant amount of loans were not repaid based on contractual terms.
<PAGE>

     The Corporation has committed significant personnel and resources to 
     resolve potential Year 2000 issues, both internally and externally (with 
     respect to the Corporation's service providers, vendors and customers) 
     for both information technology assets and non-information technology 
     assets.  The Corporation has identified Year 2000 dependencies in its 
     systems, equipment, and processes and is implementing changes to such 
     systems, updating or replacing such equipment, and modifying such 
     proctesses to make them Year 2000 compliant.  The Corporation is also in 
     the process of developing contingency plans in the event that the 
     remediation plan is not completed in time or fails for reasons that are 
     not presently foreseen.

     The Corporation anticipates that all of its systems will be Year 2000 
     compliant in time to avoid any failures that would have a material 
     effect on its operations.  However, because not all circumstances 
     affecting this matter have yet been fully addressed and resolved, and 
     because the impact on the Corporation could be affected by the Year 2000 
     readiness of outside parties, management's assessment could reasonably 
     change in the near term.