<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
                           PERIOD ENDED JUNE 30, 2000.

Commission File Number:             0-13086



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


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


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


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


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


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

Yes [X]       No [ ]

4,485,165 common shares were outstanding as of July 31, 2000, with a par value
per share of $1.00

<PAGE>   2

                       FNB FINANCIAL SERVICES CORPORATION
                                AND SUBSIDIARIES

                                      INDEX

                                                                     PAGE NUMBER

  PART     I      FINANCIAL INFORMATION

  ITEM     1      Financial Statements

                  Consolidated Balance Sheets
                  June 30, 2000 and December 31, 1999                     1

                  Consolidated Statements of Income and
                  Comprehensive Income Three months and six
                  months ended June 30, 2000 and 1999                     2

                  Consolidated Statements of Cash Flows
                  Six months ended June 30, 2000 and 199                3 - 4

                  Notes to Consolidated Financial Statements            5 - 8

  ITEM     2      Management's Discussion and Analysis of
                  Financial Condition and Results of Operations         9 - 12

  ITEM     3      Quantitative and Qualitative Disclosures
                  About Market Risk                                       12


  PART     II     OTHER INFORMATION

  ITEM     1      Legal Proceedings                                       13

  ITEM     2      Changes in Securities and Use of Proceeds               13

  ITEM     3      Defaults Upon Senior Securities                         13

  ITEM     4      Submission of Matters to a Vote of Security Holders     13

  ITEM     5      Other Information                                       13

  ITEM     6      Exhibits and Reports on Form 8 - K                      13

<PAGE>   3

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

FNB Financial Services Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited; dollars in thousands, except par value)

<TABLE>
<CAPTION>
                                                                  June 30,      December 31,
                                                                    2000            1999
                                                                  --------        --------

<S>                                                               <C>             <C>
ASSETS

Cash and due from banks                                           $ 21,199        $ 24,391
Investment securities:
     Securities available for sale                                 131,049         129,445
     Federal Home Loan Bank and Federal Reserve Bank Stock           3,622           2,573
Loans, net allowance for credit losses of $5,218 at June 30,
     2000, and $4,436 at December 31, 1999                         451,626         408,821
Loans held for sale                                                  1,045             754
Premises and equipment, net                                         11,301           9,807
Accrued income and other assets                                     11,366          12,628
                                                                  --------        --------

               Total Assets                                       $631,208        $588,419
                                                                  ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest bearing                                          $ 50,227        $ 47,915
     Interest bearing                                              461,108         436,327
                                                                  --------        --------
               Total deposits                                      511,335         484,242

Federal funds purchased and retail repurchase agreements            11,331          15,599
Other borrowings                                                    52,500          31,500
Accrued expenses and other liabilities                               3,585           6,348
                                                                  --------        --------

               Total liabilities                                   578,751         537,689
                                                                  --------        --------

Shareholders' Equity:
Preferred stock no par value; authorized 10,000,000 shares;
               none issued                                              --              --
Common stock, $1.00 par value; authorized 40,000,000 shares;
               outstanding 4,485,038 at June 30, 2000
               and 4,478,545 at December 31, 1999                    4,485           4,479
Paid-in capital                                                     25,724          25,653
Retained earnings                                                   25,494          23,458
Accumulated other comprehensive income (loss)                       (3,246)         (2,860)
                                                                  --------        --------

               Total shareholders' equity                           52,457          50,730
                                                                  --------        --------

               Total Liabilities and Shareholders' Equity         $631,208        $588,419
                                                                  ========        ========
</TABLE>


                                       1
<PAGE>   4

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

<TABLE>
<CAPTION>
                                                         Three Months Ended                  Six Months Ended
                                                              June 30,                           June 30,
                                                     --------------------------        ----------------------------
                                                        2000            1999              2000              1999
                                                     ----------      ----------        ----------        ----------

<S>                                                  <C>             <C>               <C>               <C>
Interest income
     Loans                                           $   10,524      $    8,270        $   20,170        $   16,235
     Federal funds sold and overnight deposits               53              92               171               130
     Investment securities
               Taxable                                    1,753           1,850             3,540             3,794
               Tax exempt                                   165              89               314               174
     Other                                                   76              52               122                84
                                                     ----------      ----------        ----------        ----------

               Total interest income                     12,571          10,353            24,317            20,417
                                                     ----------      ----------        ----------        ----------

Interest expense
     Deposits                                             6,084           5,039            11,744            10,061
     Federal funds purchased and other
       borrowings                                           851             339             1,527               617
                                                     ----------      ----------        ----------        ----------

               Total interest expense                     6,935           5,378            13,271            10,678
                                                     ----------      ----------        ----------        ----------

Net interest income                                       5,636           4,975            11,046             9,739
Provision for credit losses                                 340             184               876               413
                                                     ----------      ----------        ----------        ----------

Net interest income after provision for credit
  loss                                                    5,296           4,791            10,170             9,326

Other income
     Service charges on deposit accounts                    517             434               961               802
     Bankcard fees                                          126             130               241               242
     Net gain on sale of loans                               37              51                52               111
     Net gain on sale of credit card operations              --              --               148                --
     Net gain on securities available for sale                1               5                 1                95
     Other income                                            79              41               163               125
                                                     ----------      ----------        ----------        ----------

               Total other income                           760             661             1,566             1,375

Other expenses
     Salaries and employee benefits                       2,138           2,075             4,065             4,096
     Occupancy expense                                      192             202               396               379
     Furniture and equipment expense                        349             329               694               682
     Insurance expense, including FDIC
       assessment                                            52              27                88                54
     Printing and supply expense                             62              92               144               173
     Bankcard processing                                     75             114               173               199
     Other expenses                                         991             865             1,760             1,661
                                                     ----------      ----------        ----------        ----------

               Total other expenses                       3,859           3,704             7,320             7,244

Income before income taxes                                2,197           1,748             4,416             3,457
Income tax expense                                          711             566             1,428             1,116
                                                     ----------      ----------        ----------        ----------

Net income                                                1,486           1,182             2,988             2,341
Other comprehensive income (loss)                           150          (1,982)             (386)           (2,868)
                                                     ----------      ----------        ----------        ----------


Comprehensive income (loss)                          $    1,636      $     (800)       $    2,602        $     (527)
                                                     ==========      ==========        ==========        ==========

Per share data
     Net income, basic                               $     0.33      $     0.26        $     0.67        $     0.52
     Net income, diluted                             $     0.33      $     0.26        $     0.66        $     0.51
     Cash dividends                                  $     0.11      $     0.08        $     0.22        $     0.16
Weighted average shares outstanding, basic            4,484,675       4,427,494         4,482,589         4,460,309
Weighted average shares outstanding, diluted          4,520,514       4,529,058         4,528,556         4,569,332
</TABLE>

                                       2
<PAGE>   5

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

<TABLE>
<CAPTION>
                                                                                         Six Months Ended
                                                                                             June 30,
                                                                                     -----------------------
                                                                                       2000           1999
                                                                                     --------       --------

<S>                                                                                  <C>            <C>
Cash flows from operating activities:
          Interest received                                                          $ 23,277       $ 19,723
          Fees and commissions received                                                 1,887          1,760
          Interest paid                                                               (12,896)       (10,871)
          Noninterest expense paid                                                     (7,748)        (6,663)
          Income taxes paid                                                            (2,152)        (1,397)
          Proceeds from mortgage loans                                                  1,254          5,724
                                                                                     --------       --------

               Net cash provided by operating activities                                3,622          8,276
                                                                                     --------       --------

Cash flows from investing activities:
          Proceeds from sales of securities available for sale                          4,784         55,652
          Proceeds from maturities of securities available for sale                       228         17,280
          Purchase of securities                                                      (10,231)       (57,474)
          Capital expenditures                                                         (2,031)          (614)
          (Increase) decrease in other real estate owned                                  356          1,016
          (Increase) decrease in loans                                                (42,869)       (34,280)
                                                                                     --------       --------

               Net cash used in investing activities                                  (49,763)       (18,420)
                                                                                     --------       --------

Cash flows from financing activities:
          Increase (decrease) in demand, savings and interest checking accounts        (6,533)           746
          Increase (decrease) in time deposits                                         33,625          2,464
          Increase (decrease) in federal funds purchased and retail repurchase
            agreements                                                                 (4,268)         7,474
          Increase (decrease) in other borrowings                                      21,000          5,000
          Proceeds from issuance of common stock                                           76            307
          Repurchase of common stock                                                        0         (2,084)
          Dividends paid                                                                 (951)          (707)
                                                                                     --------       --------

               Net cash provided by financing activities                               42,949         13,200
                                                                                     --------       --------

Net increase (decrease) in cash and cash equivalents                                   (3,192)         3,056
Cash and cash equivalents, January 1                                                   24,391         15,728
                                                                                     --------       --------

Cash and cash equivalents, June 30                                                   $ 21,199       $ 18,784
                                                                                     ========       ========

Supplemental disclosure of non-cash transactions:
Non-cash transfers from loans to other real estate                                   $     59       $    157
                                                                                     ========       ========
</TABLE>

                                       3
<PAGE>   6

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

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


<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                                   June 30,
                                                                              -------------------
                                                                              2000          1999
                                                                             -------       ------

<S>                                                                          <C>           <C>
Net income                                                                   $ 2,988       $2,341

Adjustments to reconcile net income to net cash provided by operating
activities:
          Provision for credit losses                                            876          413
          Depreciation                                                           534          474
          Accretion and amortization                                             213          256
          (Gain) loss on sale of securities available for sale                     1         (103)
          (Gain) loss on sale of mortgage loans                                   (1)          (1)
          Proceeds from mortgage loans                                         1,402        6,001
          (Gain) loss on other assets                                            148           58
          (Increase) decrease in accrued income and other assets              (1,153)        (802)
          Increase (decrease) in accrued expenses and other liabilities       (1,386)        (361)
                                                                             -------       ------

               Net cash provided by operating activities                     $ 3,622       $8,276
                                                                             =======       ======
</TABLE>


                                       4
<PAGE>   7

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

1.   Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim information and with the instructions to Form 10-Q and Rule 10-01
     of Regulation S-X. Accordingly, these statements do not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. In the opinion of management,
     all adjustments (consisting of normal recurring accruals) considered
     necessary for a fair presentation have been included. Operating results for
     the six month period ended June 30, 2000 are not necessarily indicative of
     the results that may be expected for the year ending December 31, 2000.

2.   Significant Activities

     On August 31, 1999, the Company completed the acquisition of Black Diamond
     Savings Bank, F.S.B., ("Black Diamond") through the issuance of 1.3333
     shares of the Company's common stock for each share of Black Diamond's
     outstanding common stock, or 1,113,997 shares. The acquisition has been
     accounted for as a pooling of interests, and accordingly, all historical
     financial information has been restated to include the balances and
     operations of both entities.

     Separate information of the pooled entities for the year ended December 31,
     1999, is as follows:

                            FNB Southeast      Black Diamond      Combined
                           ---------------    ---------------   ------------
     Total assets           $    445,172       $     143,247     $  588,419
     Total income                 34,477              11,033         45,510
     Net interest income          16,749               3,678         20,427
     Net income                    3,744                 504          4,248

     During April of this year, FNB Southeast opened three new offices in North
     Carolina. The Bank added two full-service banking offices in Greensboro,
     and a Wilmington office with primary emphasis in construction and mortgage
     lending.

     FNB Southeast operates 13 offices in North Carolina, and Black Diamond
     operates 5 offices in Virginia.

3.   Comprehensive Income

     The Company's other comprehensive income for the three and six month
     periods ended June 30, 2000, and 1999 consists of unrealized gains and
     losses on available for sale securities, net of related income taxes.

4.   Segment information

     During the year ended December 31, 1998, the Bank adopted SFAS 131,
     "Disclosure about Segments of an Enterprise and Related Information." SFAS
     131 establishes standards for determining an entity's operating segments
     and the type and level of financial information to be disclosed in both
     annual and interim financial statements. It also establishes standards for
     related disclosures about products and services, geographic areas, and
     major customers.

     Information at June 30, and for the six months ended June 30, related to
     the Company's segments is as follows:

                             FNB Southeast      Black Diamond      Combined
                            ---------------    ---------------   ------------

     June 30, 2000
     -------------
     Total assets             $ 485,147           $ 146,061       $ 631,208
     Total income                19,956               5,928          25,884
     Net income                   2,401                 587           2,988

     June 30, 1999
     -------------
     Total assets               424,844             134,952         559,796
     Total income                16,532               5,260          21,792
     Net income                   1,772                 569           2,341


                                       5
<PAGE>   8

5.   Net Income Per Share

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

<TABLE>
<CAPTION>
                                                                 Three Months Ended                   Six Months Ended
                                                                      June 30,                            June 30,
                                                          ---------------------------------    --------------------------------
                                                              2000               1999              2000               1999
                                                          --------------    ---------------    --------------     -------------

<S>                                                           <C>                <C>               <C>               <C>
Weighted average number of shares
          used in basic EPS                                   4,484,675          4,427,494         4,482,589         4,460,309
Effect of dilutive stock options                                 35,839            101,564            45,967           109,023
                                                          --------------    ---------------    --------------     -------------

Weighted average number of common
          shares and dilutive potential common
          shares used in dilutive EPS                         4,520,514          4,529,058         4,528,556         4,569,332
                                                          ==============    ===============    ==============     =============
</TABLE>

6.   Investment Securities

<TABLE>
<CAPTION>
                                                               June 30, 2000                   December 31, 1999
                                                       -------------------------------     ---------------------------
                                                          Amortized           Fair           Amortized        Fair
                                                            Cost              Value            Cost           Value
                                                       ---------------    ------------     ------------    -----------

<S>                                                    <C>                <C>                <C>             <C>
     U.S. Treasury securities                          $          200     $       200        $     200       $    200
     U.S. Agency securities                                   119,816         114,741          122,604        118,002
     State and municipal obligations                           14,609          14,648            9,989          9,959
     Other debt securities                                      1,320           1,460            1,340          1,284
     Other equity                                               3,622           3,622            2,573          2,573
                                                       ---------------    ------------     ------------    -----------

          Total investment securities                  $     139,567        $ 134,671        $ 136,706       $132,018
                                                       ===============    ============     ============    ===========
</TABLE>


7.   Loans

                                              June 30, 2000   December 31, 1999
                                              -------------   -----------------
Loan Category
     Real estate - commercial                   $122,775         $115,434
     Real estate - residential                   140,529          130,676
     Real estate - construction                   48,900           34,680
     Commercial, financial and agricultural       67,754           58,002
     Consumer - direct                            36,202           32,778
     Consumer - home equity                       35,924           32,836
     Consumer - other                              5,805            9,605
                                                --------         --------

                    Total loans                 $457,889         $414,011
                                                ========         ========


                                       6

<PAGE>   9

8.   Allocation of Allowance for Credit Losses

<TABLE>
<CAPTION>
                                                        June 30, 2000                       December 31, 1999
                                              ----------------------------------    ----------------------------------
                                                               % of Loans in                         % of Loan in
                                                               Each Category                         Each Category
                                              Allowance        to Total Loans       Allowance        to Total  Loans
                                              -------------    -----------------    -------------    -----------------

<S>                                             <C>                  <C>              <C>                   <C>
Balance at end of period applicable to :

Real estate - construction                      $    6               11%              $   50                8%
Real estate - mortgage                             903               58                  868               60
Commercial                                       2,662               15                2,087               14
Consumer                                         1,464               16                1,276               18
General                                            183                0                  155                0
                                                ------              ---               ------              ---

     Total allocation                           $5,218              100%              $4,436              100%
                                                ======              ===               ======              ===
</TABLE>


9.   Analysis of Allowance for Credit Losses

                                                        Six Months Ended
                                                            June 30,
                                                     ----------------------
                                                      2000            1999
                                                     ------          ------

Balance, beginning of period                         $4,436          $3,452

Charge-offs                                             165             190
Recoveries                                               71              35
                                                     ------          ------

Net Charge-offs                                          94             155
                                                     ------          ------

Allowance charged to operations                         876             413
                                                     ------          ------

Balance, end of period                               $5,218          $3,710
                                                     ======          ======

Ratio of annualized net charge-offs during the
          period to average loans outstanding
          during the period                            0.04%           0.09%
                                                     ======          ======

Ratio of allowance for loan loss to
          month end loans                              1.14%           0.95%
                                                     ======          ======


                                       7
<PAGE>   10

10.  Nonperforming Assets

                                                        June 30,   December 31,
                                                         2000         1999
                                                        ------       ------

Nonaccrual (1)                                          $3,752       $1,195
Past due 90 days or more and still accruing interest       173          117
Other real estate                                          179          534
Renegotiated troubled debt                                  --           --

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


                                       8
<PAGE>   11

PART I - ITEM 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

Information set forth below contains various forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which statements represent the Company's
judgment concerning the future and are subject to risks and uncertainties that
could cause the Company's actual operating results to differ materially. Such
forward-looking statements can be identified by the use of forward-looking
terminology, such as "may", "will", "expect", "anticipate", "estimate",
"believe", or "continue", or the negative thereof or other variations thereof or
comparable terminology. The Company cautions that such forward-looking
statements are further qualified by important factors that could cause the
Company's actual operating results to differ materially from those in the
forward-looking statements, including the factors set forth under "Risk Factors"
in the Company's Registration Statement on Form S-4 filed with the Securities
and Exchange Commission (File No. 333-82873).

Summary

Net income for the quarter ended June 30, 2000, of $1.5 million was a 25.7%
increase over the $1.2 million earned in the second quarter last year. Diluted
earnings per share for the current quarter was $0.33 per share, a 26.9% increase
from $0.26 reported one year earlier. For the six months to date, earnings of
$3.0 million were 27.7% over the same period in 1999.

Assets at June 30, 2000 reached $631.2 million, an increase of $71.4 million
compared to $560.0 million one year earlier. Assets have increased $42.8 million
since December 31, 1999. The increase in assets is due to loan growth of $65.3
million over the proceeding twelve months, with $13.3 million of this growth
occurring in the second quarter of 2000.

To support this asset growth over the past year, deposits have increased $48.5
million, and other borrowings have increased $30.0 million.

Interest Income and Interest Expense

Second quarter total interest income was $12.6 million, an increase of 21.4%
over the same quarter last year. Average earning assets for the quarter were
$593.1 million, compared to $524.7 million for the year ago period. Interest
income from loans was $10.5 million, up 27.3% from $8.3 million one year
earlier. The increase was driven by a 19.5% increase in average loans, and an
increase in the average yield to 9.29% from 8.72%. For the six months ended on
June 30, total interest income was up 19.1%, on an 11.9% increase in average
assets.

Interest income on investments totaled $1.8 million, for the current quarter,
down from $1.9 million for the year ago quarter. The change is attributable to a
decrease in average investments from $137.1 million in 1999 to $133.2 million in
2000.

Second quarter total interest expense was $6.9 million compared to $5.4 million
from last year, a 29.0% increase. Average interest bearing liabilities for the
second quarter 2000 increased 15.4% to $517.4 million. Overall cost of funds for
the second quarter was 5.36% and 4.80% for 2000 and 1999, respectively. Total
interest expense for the first six months of 2000 was $13.3 million, a 24.3%
increase over the $10.7 million expense in 1999.

Interest expense on deposits for the quarter increased 20.7% to $6.1 million as
average interest bearing deposits increased 10.3% to $455.2 million. The average
rate for the quarter on interest bearing deposits increased to 5.35% from 4.89%
one year earlier.

Interest expense on federal funds purchased and other borrowings was $851,000,
up 151.3%, from $339,000 in the second quarter of 1999. The increase is
primarily attributable to an increase in average purchased funds from $35.8
million in the 1999 second quarter compared to $62.2 million in the 2000 second
quarter.


                                       9
<PAGE>   12

Comparable net interest margins as follows:

                                             Liability      Interest Rate
Time Period              Asset Yield           Rate            Spread
-----------              -----------         ---------      -------------
Second Quarter, 2000        8.54%       -      5.36%     =      3.18%
Second Quarter, 1999        7.93%       -      4.80%     =      3.13%

Year to Date, 2000          8.40%       -      5.24%     =      3.16%
Year to Date, 1999          7.87%       -      4.80%     =      3.07%

Noninterest Income and Expense

Noninterest income in the second quarter this year increased 15.0% to $760,000.
For the current quarter, net securities gains were $1,000 compared to $5,000
recorded one year earlier. For the current quarter, net gains on sales of
mortgages were $37,000 compared to $51,000 recorded one year earlier, a decrease
of $14,000. Increases in noninterest income primarily resulted from deposit
service charges. Deposit service charges increased 19.0% to 517,000 for the 2000
second quarter compared to $434,000 in the same period last year. Bankcard fees
decreased slightly for the 2000 second quarter to $126,000 from $130,000
recorded last year. The credit card and merchant discount operations were sold
during the first quarter 2000. Total noninterest for the first six months was
$1.6 million, a 13.9% increase over 1999. Deposit service charges of $961,000
for the six months were 19.7% higher this year than the $802,000 recorded last
year.

Noninterest expense for the second quarter of 2000 was $3.9 million, a 4.2%
increase from the second quarter of 1999. The increase is due to a $63,000, or
3.0%, increase in salaries and modest increases in other expense categories.
Bankcard processing expense was $75,000 and $114,000 for the 2000 second quarter
and 1999 second quarter, respectively. These expenses have decreased since the
Company's credit card operations were sold during the first quarter 2000. This
year's six-month noninterest expenses of $7.3 million were 1.1% higher than that
same time period last year.

The provision for loan losses was funded at a higher level due to overall loan
growth. Consolidated provision expense for the second quarter was $340,000
compared to $184,000 in the second quarter of 1999. The allowance ratio at
quarter end stood at 1.14% for 2000, compared to 0.95% in 1999. For the 2000 six
months, the provision totaled $876,000, compared to $413,000 for the same period
in 1999.

The effective income tax rate of 32.3% for the six months of 2000 did not change
from the same period of 1999.

Financial Condition

The Company's total assets at June 30, 2000 and 1999, were $631.2 million and
$559.8 million, respectively. The $71.4 million increase represents a 12.8%
increase over one year earlier. Since December 31, 1999, assets have increased
$42.8 million. Average earning assets for the current quarter were $593.1
million, or 13.0% higher than the $524.7 million average in the same quarter
last year.

Loans at June 30, 2000, totaled $457.9 million compared to $391.6 million one
year earlier, an increase of 16.9%. Loans have increased 10.6% from $414.0
million at December 31, 1999. Average loans for the quarter were $453.0 million,
or 19.5% higher than one year ago.

Investment securities of $134.7 million at June 30, 2000, were slightly lower
than the $135.3 million one year earlier. Average investment securities were
$133.2 million and $137.1 million for the 2000 and 1999 second quarter,
respectively.


                                       10
<PAGE>   13

Deposits totaled $511.3 million at June 30, 2000, an 10.5% increase versus one
year ago, and a 5.6% increase over the $484.2 million recorded at December 31,
1999. At June 30, 2000, noninterest bearing deposits were $50.2 million, or 9.8%
of total deposits. The new FNB Southeast branches in Greensboro and Burgaw,
North Carolina, have contributed $15.6 million to the company's deposit growth
during the first six months of 2000.

At the end of the current quarter, borrowings at the Federal Home Loan Bank of
Atlanta totaled $52.5 million. The Company has access to approximately $88.5
million line of credit at the Federal Home Loan Bank of Atlanta through its
subsidiaries. In recent years, the Company has increasingly utilized these
borrowings to supplement deposit growth in order to fund loan growth.

Shareholders' equity increased to $52.5 million at quarter end, compared to
$50.7 million at the previous year-end.

Asset Quality

The allowance ratio at June 30, 2000, stood at 1.14% compared to 1.07% at
December 31, 1999, and 0.95% at June 30, 1999. For the second quarter 2000,
provision charges against earnings totaled $340,000 compared to $184,000 in the
second quarter one year earlier. Net loan losses for the quarter totaled
$54,000, or a 0.05% annualized loss ratio based on average loans outstanding.

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

Other real estate owned decreased to $179,000 at June 30, 2000, compared to
$534,000 at December 31, 1999. The decline resulted from the sale of other real
estate during the year. A loss of $58,000 was recorded in conjunction with the
sale of such property.

Capital Resources

Banks and bank holding companies, as regulated institutions, must meet required
levels of capital. The Office of the Commissioner of Banks in North Carolina,
the Office of Thrift Supervision and the Federal Reserve, which are the primary
regulatory agencies for FNB Southeast, Black Diamond and the Company,
respectively, have adopted minimum capital regulations or guidelines that
categorize components and the level of risk associated with various types of
assets. Financial institutions are required to maintain a level of capital
commensurate with the risk profile assigned to their assets in accordance with
the guidelines. As shown in the table below, the Company and its wholly-owned
subsidiaries, have capital levels exceeding the minimum levels for "well
capitalized" banks and bank holding companies as of June 30, 2000.

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

<S>                         <C>                  <C>              <C>              <C>               <C>
Total Capital               10.0%                8.0%             13.5%            13.6%             12.1%
Tier 1 Capital               6.0                 4.0              12.3             12.5              10.6
Leverage Capital             5.0                 4.0               8.9              9.2               6.7
</TABLE>


                                       11
<PAGE>   14

Liquidity Management

Liquidity management refers to the ability to meet day-to-day cash flow
requirements based primarily on activity in loan and deposit accounts of the
Company's customers. Deposit withdrawal, loan funding, dividends to
shareholders, and general corporate activities create a need for liquidity for
the Company. Liquidity is derived from sources such as deposit growth,
maturities/calls/sales of investment securities, principal and interest payments
on loans, access to borrowed funds or lines of credit, and profits. Internal
liquidity analysis indicates the Company has the ability to generate sufficient
amounts of cash to cover day-to-day activity and fund earning assets growth over
the twelve month period analyzed.

Effects of Inflation

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

PART I - ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

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

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


                                       12
<PAGE>   15

PART II - OTHER INFORMATION

ITEM 1.

Legal proceedings

                  None.

ITEM 2.

Changes in Securities and Use of Proceeds

                  None.

ITEM 3.

Defaults Upon Senior Securities

                  Not Applicable.

ITEM 4.

Submission of Matters to a Vote of Security Holders

         On May 18, 2000, at the annual meeting of the Company's shareholders,
         the following proposals were voted on by shareholders.

         Proposal One

         To elect three nominees to serve as Class I Directors, each to serve a
         three-year term until the Annual Meeting of Shareholders in 2003.

         To elect one nominee to serve as Class II Director, to serve a one-year
         term until the Annual Meeting of Shareholders in 2001.

         To elect one nominee to serve as Class III Director, to serve a
         two-year term until the Annual Meeting of Shareholders in 2002.

         Directors elected were Ernest J. Sewell, Charles A. Britt, Barry Z.
         Dodson, Don M. Green, and Gary G. Blosser.

         Votes for each nominee were as follows:

         CLASS         NOMINEE                   FOR           WITHHELD
         -----         -------                ---------        --------
          I        Ernest J. Sewell           3,317,786         30,519
          I        Charles A. Britt           3,317,786         30,519
          I        Barry Z. Dodson            3,317,786         30,519
          II       Don M. Green               3,313,649         34,656
          III      Gary G. Blosser            3,312,964         35,341

         The following directors continue in office after the meeting: Willard
         B. Apple, Jr., O. Eddie Green, Clifton G. Payne, Joseph H. Kinnarney,
         Elton H. Trent, Jr., and Kenan C. Wright.

         Proposal Two

         To ratify the selection by the Board of Directors of
         PricewaterhouseCoopers, LLP as the Company's independent auditors for
         the 2000 fiscal year.

         FOR -   3,320,643

         AGAINST -   1,200

         ABSTAIN -   26,462

ITEM 5.

Other Information.

         None.

ITEM 6.

Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  27.01 Financial Data Schedule

         (b)      Reports on Form 8-K

                  None.

                                       13
<PAGE>   16

                                   SIGNATURES


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



                                   FNB FINANCIAL SERVICES CORPORATION
                                   (Registrant)



Date  August 11, 2000              /s/ Michael W. Shelton
                                   --------------------------------------------
                                               Michael W. Shelton
                                   (Vice President and Chief Financial Officer)



                                       14