Exhibit 13






                              FNB CORPORATION

                       ANNUAL REPORT TO STOCKHOLDERS

                                    2001










                 INDEX TO ANNUAL REPORT TO STOCKHOLDERS


                                                                      Page


Selected Consolidated Financial Information                             1

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

Market Price and Dividend Data                                         10

Market Risks Related to Financial Instruments                          10

Management's Statement of Financial Responsibility                     13

Independent Auditors' Report on Consolidated Financial Statements      14

Consolidated Balance Sheets                                            15

Consolidated Statements of Income                                      16

Consolidated Statements of Comprehensive Income                        16

Consolidated Statements of Cash Flows                                  18

Consolidated Statements of Changes in Stockholders' Equity             21

Notes to Consolidated Financial Statements                             24
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
                                            Years Ended December 31,
                                     2001(1)  2000     1999     1998     1997
<S>                             <C>        <C>      <C>      <C>      <C>
Selected income statement data
   (in thousands):
     Interest income            $  47,850   42,017   37,563   34,931   32,402
     Interest expense              22,827   20,102   17,610   17,249   16,764

     Net interest income           25,023   21,915   19,953   17,682   15,638
     Provision for loan
        losses                      1,637    1,082    1,445    1,135      550
     Noninterest income             5,798    3,528    3,729    3,437    2,707
     Noninterest expense           19,900   15,073   13,964   12,396   11,306
     Income tax expense             2,550    2,454    1,946    1,657    1,324

     Net income                 $   6,734    6,834    6,327    5,931    5,165

Per share data:
     Basic earnings             $    1.63     1.71     1.59     1.50     1.32
     Cash basis earnings             1.71     1.71     1.59     1.50     1.32
     Diluted earnings                1.62     1.71     1.59     1.50     1.32
     Cash dividends declared          .72      .70      .63      .57      .35
     Book value                     15.86    13.11    11.93    11.20    10.26

Average shares outstanding
   (in thousands):
     Basic                          4,126    3,993    3,982    3,959    3,918
     Diluted                        4,154    3,993    3,982    3,959    3,918

Selected balance sheet data
   at year end
      (in thousands):
     Total securities           $ 182,164   97,167  101,375   95,584  105,276
     Loans, net of unearned
        income                    648,263  409,586  382,272  328,599  291,058
     Allowance for loan
        losses                      8,827    5,670    5,173    4,640    4,291
     Total assets                 954,450  539,231  516,906  461,916  428,174
     Deposits                     806,787  431,659  398,871  386,257  352,545
     Trust preferred               14,549        -        -        -        -
     Stockholders' equity          86,633   51,942   47,579   44,401   40,213

Selected ratios (in percentages):
     Return on average assets        1.04     1.32     1.30     1.34     1.26
     Return on average equity       11.67    13.77    13.75    14.00    13.59
     Dividend pay-out ratio         44.85    40.94    39.89    38.44    26.08
     Average equity to
        average assets               8.89     9.58     9.44     9.60     9.31
</TABLE>

(1)  Includes effect of acquisitions.  See full discussion in footnote 21.


             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").  This discussion should be read in connection with the
consolidated financial statements, statistical disclosures and other
financial information presented herein.  All amounts presented are in
thousands except per share and percentage data.

Forward Looking Information

This report contains forward-looking statements with respect to the financial
condition, results of operations and business of the Corporation.  These
forward-looking statements involve risks and uncertainties and are based on
the beliefs and assumptions of the management of the Corporation, and on the
information available to management at the time that these disclosures were
prepared.  Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others,
the following possibilities:  (1) competitive pressures among depository and
other financial institutions may increase significantly; (2) changes in the
interest rate environment may reduce margins; (3) general economic
conditions, either nationally or regionally, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality
and/or a reduced demand for credit; (4) legislative or regulatory changes,
including changes in accounting standards, may adversely affect the
businesses in which the Corporation and its subsidiaries are engaged;
(5) costs or difficulties related to the integration of the businesses of
the Corporation and its merger partners may be greater than expected;
(6) expected cost savings associated with pending mergers may not be fully
realized or realized within the expected time frame; (7) deposit attrition,
customer loss or revenue loss following pending mergers may be greater than
expected; (8) competitors may have greater financial resources and develop
products that enable such competitors to compete more successfully than the
Corporation and its subsidiaries; and (9) adverse changes may occur in the
securities markets.

Mergers and Acquisitions

On March 23, 2001, First National Bank, the Corporation's wholly-owned
subsidiary acquired two Wachovia Bank branches in southwest Virginia that
were merged into First National Bank.  In addition, on May 2, 2001, Southwest
Virginia Bankshares, Inc. and its subsidiary, Southwest Virginia Savings
Bank, F.S.B., Roanoke, Virginia, was acquired.  Southwest was renamed FNB-
Southwest.  Salem Community Bankshares and its subsidiary, Salem Bank and
Trust, National Association, Salem, Virginia were acquired on December 31,
2001.  The acquisitions were recorded under the "purchase" method of
accounting; therefore, the results of their operations are only included in
the accompanying financial statements from the respective dates of
acquisition.  Results of operations of Salem Bank & Trust were not included
in the Corporation's 2001 Statement of Income as the acquisition was effected
at close of business on December 31, 2001.

Prior to 2001, the Corporation served as a holding company for its wholly
owned subsidiary, First National Bank with banking operations primarily in
Christiansburg, Montgomery County, Virginia and contiguous counties.  At
December 31, 2001 the Corporation served as the holding company for First
National Bank with banking operations in Christiansburg, Montgomery County,
Virginia and contiguous counties and FNB-Southwest, National Association,
with banking operations in Salem, Roanoke and Roanoke County, Virginia and
Salem Bank & Trust, National Association, with banking operations primarily
in Salem and Roanoke and Roanoke County, Virginia.

Net Income

Net income for 2001 was $6,734 compared to $6,834 for 2000 and $6,327 for
1999.  The decrease of 1.5% when comparing 2001 with 2000 followed an 8%
increase when performance for 2000 is compared with 1999.  Basic earnings per
share for 2001 were $1.63 compared to $1.71 for 2000 and $1.59 for 1999.  As
discussed further in the paragraphs that follow, compressed interest margins
created by historic downward trends in interest rates coupled with cost
associated with a major data processing initiative negatively impacted
earnings for 2001.  The increase in earnings in 2000 when compared with 1999
was principally the result of improved net interest margins related to core
deposit and loan growth.

FAS 142 was adopted by the Corporation on January 1, 2002 and provides that
goodwill related to acquisitions that had been subject to periodic
amortization will no longer be amortized but will be annually tested for
impairment.  Earnings for 2001 when adjusted by adding the amortization of
goodwill, net of income taxes where applicable, to net income were $7,040 or
a 3.0% increase over 2000.  Earnings for 2000 and 1999 would not be changed
as the Corporation had no goodwill prior to 2001.  Management feels that the
presentation of cash basis earnings, defined as net income plus the after tax
impact of adding back goodwill amortization, is a better measure of core
operating performance.  Cash basis earnings per share for 2001 of $1.71 were
the same as 2000.

Net Interest Income

The principal source of earnings for the Corporation is net interest income.
Net interest income is the amount of interest earned on loans and investments
less the amount of interest paid on deposits and other interest-bearing
liabilities.  Net interest income before provision for loan losses for 2001
was $25,023, a 14.2% increase over 2000.  The increase in net interest income
was the result of acquisitions completed in 2001 netted with a decrease in
net interest income at First National Bank resulting from the rapid decrease
in interest rates experienced during 2001.  Variable rate loans on which
pricing is tied to a broad index such as New York Prime repriced quickly
during the declining interest rate environment in 2001 while time deposit
repricing lagged.  Net interest income for 2000 of $21,915 increased 9.8%
over the $19,953 for 1999.  This increase in net interest income in 2000 was
principally due to core loan and deposit growth.

Average year-to-date loans grew $61,900 or 15.6% in 2001 and $38,600 or 10.8%
in 2000.  Average year-to-date investments increased by $56,000 in 2001 as a
result of acquisitions.  Average year-to-date investments declined $7,800 in
2000 as a portion of the proceeds of investment maturities was used to fund
increased loan demand.

Total average year-to-date deposits increased $145,400 or 32.5% in 2001 and
$21,400 or 5.5% in 2000.  The majority of the growth in 2001 was attributable
to acquisitions; however, internal growth was strong at 8.4%.  Growth in
2000, when compared with 1999 was attributable to two new branches which were
opened in 1999.  This growth occurred primarily in the non interest-bearing
demand and certificate of deposit/individual retirement account categories.

Other borrowed funds are comprised primarily of advances from the Federal
Home Loan Bank of Atlanta.  Average year-to-date other borrowed funds
declined $24,300 in 2001 as the liquidity provided by the branch purchases
was used by the Corporation to repay outstanding advances.  Other borrowed
funds increased $4,700 in 2000.

Net interest margin was compressed to 4.28% in 2001 from 4.70% in 2000.  This
follows an increase from 4.63% to 4.70% from 1999 to 2000.  Approximately 30%
or 13 basis points of the decline in 2001 was the result of acquisitions.
The loan to deposit ratio also declined from 94.9% at December 31, 2000 to
80.4% at December 31, 2001 principally as a result of acquisitions completed
during the year in which the ratio of loans acquired to total deposits
assumed was much less than the historic loan to deposit ratio of the
Corporation.  The Corporation acquired $70,789 in loans together with
$153,423 in deposits in the branch and Southwest acquisitions and the loan
to deposit ratio of Salem Bank and Trust was approximately 83.2% at the date
of acquisition.  The decline in net interest margin in 2001 was further the
result of an unprecedented decrease of 475 basis points in the prime rate
during the year.

Management attempts to match the maturities and re-pricing intervals of its
earning assets and liabilities in order to avoid material fluctuations in
earnings if interest rates change.  Changes were made throughout 2001 to make
the Corporation's balance sheet less sensitive to interest rate fluctuations
by changing the duration of its investment portfolio and promoting certain
certificate of deposit maturities.  This is more fully covered under the
heading "Market Risks Related to Financial Instruments".

Provision for Loan Losses

The provision for loan losses was $1,637 for 2001, $1,082 for 2000 and $1,445
for 1999.  The provision for loan losses when expressed as a percentage of
average loans outstanding was .36%, .28% and .40% for 2001, 2000 and 1999,
respectively.  Net charge-offs were $1,625, $584 and $913 for 2001, 2000 and
1999, respectively.  The provision for loan losses increased in 2001 due to
higher net charge-offs in both the commercial and consumer portfolios.  Net
charge offs related to commercial loans were $869 in 2001 as compared with
$355 in 2000.  This increase related primarily to a $387 charge off on a
relationship with a single commercial customer and his related entities
engaged in the nursing home and extended care industry.  In the consumer
portfolio, net charge offs for 2001 were $701, an increase of $471 over the
$230 experienced in 2000, primarily resulting from a slowdown in the economy.
The provision for loan losses declined in 2000 when compared with 1999 due to
lower net charge-offs and reduced reserves required because of lower new loan
volume.  Loans grew at an annual rate of 7.2% in 2000 and 16.3% in 1999.

Noninterest Income

Noninterest income, which includes service charges on deposit accounts, loan
origination and service release fees on mortgage loans sold, other service
charges, sundry income and net securities gains (losses) was $5,798, $3,528
and $3,729 for 2001, 2000 and 1999, respectively.  Approximately 42% of the
$2,270 increase in noninterest income in 2001 was due to significantly higher
mortgage refinancing activity resulting from the decline in interest rates on
residential mortgage loans.  Increased revenue related to acquisitions was
$547, net gains on sales of securities was $283 over the $52 loss in 2000,
cardholder revenue was up $146 due to volume, service charge revenue,
excluding the impact of acquisitions, increased $170 and revenue from the
Trust/Securities Division was up $98.  Service charges on deposit accounts
and other service charges and fees in 2001 increased 7.8% and 15.0%,
respectively, primarily related to non-interest bearing deposit growth.

Noninterest income in 2000 was less than 1999 due primarily to lower mortgage
financing activity, outsourcing of the appraisal function and losses on sales
of securities.

The Corporation expects to build incremental future sources of noninterest
income through its association with Bankers Insurance, a five-agency
insurance company collectively owned by over 55 banks throughout Virginia.
Going forward, the Corporation will strive to maintain a healthy balance of
fee-generating services with strong levels of loans and deposits.  This
combination should help deliver better than average returns in all economic
cycles.

Noninterest Expense

Noninterest expense consisting of salaries and employee benefits, occupancy
costs, cardholder processing costs, supplies and other operating expenses,
increased $4,827 or 32.0% from 2000 to 2001 and $1,109 or 7.9% for 2000 when
compared with 1999.  The increase in noninterest expense in 2001 was
primarily due to the additional operating costs of branches and banks
acquired during 2001 from the date of acquisition through December 31, 2001
and costs associated with the conversion to a new core data processing
system.  Excluding the impact of acquisitions and non-recurring expense
items, core non-interest expense increased approximately 7% in 2001.  The
new core data processing system enables the Corporation to support a multi-
bank environment, provides improved operating efficiencies and additional and
more timely information to better serve customers.  In addition to the impact
of acquisitions and one time and increased continuing core data processing
expense, certain other non-interest expense increases during 2001 were in
salaries and benefits that increased ($748 or 11%) due to merit increases,
staff adds and production incentives, cardholder expenses which increased
($98 or 23%) due to volume, and communication costs and building maintenance
costs which increased ($148 or 26%).

The 8.4% growth in salaries and benefit expenses in 2000 over 1999 was due
primarily to merit increases, higher employee insurance costs, and a new
incentive plan designed to be self funding from increased revenues and
expense containment attributable to the plan.  In addition, building
maintenance expense increased over 1999 and depreciation and software
amortization increased due largely to investment in new technology resulting
in a 5.2% overall increase in occupancy and equipment expense.

Income Taxes

Income tax expense as a percentage of pre-tax net income was 27.5%, 26.4%,
and 23.5% in 2001, 2000 and 1999, respectively.  The increase in the
effective income tax rate is due to continued declines in nontaxable interest
on investment securities as a percentage of income before income taxes.

Decisions as to which securities to purchase are based on taxable equivalent
yields for specific durations.  The Corporation has increased its investment
in certain taxable securities which had higher yields than nontaxable
securities when measured on a tax equivalent basis.

Balance Sheet

Total assets of the Corporation at December 31, 2001, were $954,450 compared
to $539,231 at December 31, 2000.  The $415,219 or 77.0% increase was due
primarily to acquisitions.  Excluding acquisitions, total asset growth
approximated 4.0%.

Loans grew from $409,586 in 2000 to $648,263 due to acquisitions.  Excluding
acquisitions, loan growth was flat due to the slowing economy.  Investments
as a percent of assets were 23.0% at December 31, 2001 compared to 18.8% at
December 31, 2000.  Investment balances increased as a result of the
investment of additional liquidity provided by acquisition of the branches
(after the repayment of certain outstanding FHLB advances) and due to the
higher percentage of investments to total assets of the two bank acquisitions
completed in 2001.  Mortgage loans held for sale increased from $725 to
$13,926 due to the substantial increase in mortgage loan origination and
refinancing activity during 2001.  Goodwill and core deposit intangibles
resulted from the acquisitions completed in 2001.  The core deposit
intangible balance was recorded in the acquisition of Salem Bank & Trust
based upon estimates pending a core deposit study to be completed prior to
March 31, 2002.  This balance will be amortized over the estimated life of
the core deposits acquired.

Total deposits at December 31, 2001, were $806,787, an increase of $375,128
over 2000.  Excluding acquisitions, year-end deposits grew 4.1% and year-to-
date average deposits grew 8.4%.  Deposit growth occurred in part as a result
of success in certain targeted promotional programs on selected maturities of
Certificates of Deposit and Individual Retirement Account products, which
complemented the Corporation's assets/liability strategies.  In addition,
bank deposit alternatives appeared to regain favor as the desirability for
common stock investments weakened in 2001.

Other borrowed funds at December 31, 2001 decreased $8,282 from December 31,
2000.  Borrowings at the Federal Home Loan Bank (FHLB) declined $23,272 due
to repayment of outstanding advances of $40,169 by First National Bank with a
portion of the additional liquidity provided by the branch purchases, netted
with $17,338 in FHLB borrowings of Southwest and Salem outstanding at
December 31, 2001.  Borrowed funds also increased by $14,549 due to the
Corporation's issuance of trust preferred stock via participation in a
trust-preferred pool.  These funds, which are reflected in Cash and Due from
Banks at December 31, 2001, will substantially all be used to pay the cash
portion of the consideration to the stockholders of Salem Community
Bankshares.  Trust preferred stock qualifies as Tier I capital.  Other
liabilities increased $15,853 at December 31, 2001 over 2000 primarily due to
the establishment of a liability for the cash portion of the Salem Community
Bankshares consideration.  These payments will be made in January 2002.

Other borrowed funds and federal funds purchased decreased $5,162 and $13,635
from 1999 to 2000, respectively, as these liabilities were repaid from
proceeds of growth in customer deposits.

Stockholders' Equity

Stockholders' equity was $86,633 at December 31, 2001, compared to $51,942 at
December 31, 2000 an increase of $34,691.  The Corporation issued 1.565
million shares of common stock in the acquisition of Southwest and Salem for
total consideration of $30,893.  Net Income for the year less dividends on
common stock declared and paid added $3,714 to stockholder's equity during
2001.  In addition, there was an increase of $826 in net tax effected
unrealized gains on securities available-for-sale.

The $4,363 change in Stockholder's Equity from December 31, 1999 to 2000 was
primarily the addition of net income less dividends on common stock.

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 the 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 stockholders' 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 at December 31, 2001, were 10.01% and
11.19% respectively, exceeding minimum requirements.

In addition, federal regulatory agencies have established minimum leveraged
capital guidelines for insured financial institutions (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 at
December 31, 2001 was 7.91% as compared to a minimum requirement of 4.0%.

As of December 31, 2001, the affiliate banks were categorized as "well
capitalized" by the regulators 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.  The affiliate banks
exceeded all three of these minimums as of December 31, 2001.  There are no
conditions or events that management believes have changed the category of
any of the affiliate banks.

Past Due Loans and Nonperforming Assets

Loans past due 90 days and over at December 31, 2001 on which interest was
still accruing totaled $1,031 compared to $410 at December 31, 2000.
Expressed as a percentage these loans represent .16% and .10% of total loans
outstanding at December 31, 2001 and 2000, respectively.  The substantial
portion of these loans is secured by real estate and management anticipates
no material losses as these loans are repaid or collection is completed
through liquidation of underlying collateral.  Nonaccrual loans and other
real estate owned totaled $4,389 at December 31, 2001, compared to $2,672 at
December 31, 2000.  Expressed as a percentage of total loans, nonaccrual
loans and other real estate represent .68% and .65% of total loans
outstanding at December 31, 2001 and 2000, respectively.  At December 31,
2001, total nonaccrual loans of $2,969 included $650 related to the
commercial customer in the nursing home and assisted living industry
discussed under Allowance for Loan Losses, below. This relationship, which
totals $2,680 at December 31, 2001, includes a number of individual credits
totaling $2,157 secured by various parcels of real estate and other
collateral including certificates of deposits to secure $496 in outstanding
amounts and $523 in unsecured loans.  In addition, certain of the loans are
guaranteed by other parties.  The Corporation is in active negotiations
with the principles to restructure these credits and management believes
they have adequately evaluated these credits, written off identified
losses and allocated specific reserves where necessary.

Allowance for Loan Losses

The Corporation identifies specific credit exposures through its periodic
analysis of the loan portfolio and monitors general exposures from economic
trends, market values and other external factors.  The Corporation maintains
an allowance for loan losses, which is available to absorb losses inherent in
the loan portfolio.  The allowance for loan losses increased $3,157 to $8,827
or 1.36% of outstanding loans, net of unearned income at December 31, 2001,
from $5,670 or 1.38% of outstanding loans, net of unearned income at December
31, 2000.  Acquisitions accounted for substantially all of the $3,157
increase in the allowance for loan losses in 2001.  The allowance for loan
losses increased $497 to $5,670 or 1.38% of outstanding loans, net of
unearned income at December 31, 2000, responsive primarily to loan growth.

The adequacy of the allowance for loan losses is reviewed quarterly and, for
commercial loans is calculated based on a very structured commercial credit
risk grading system, which is continuously monitored.  All commercial and
commercial real estate loans over $25,000 are risk rated.  Loans identified
as "Watch" and "Special Mention" are grouped into pools of risk with loss
factors consistent with identified risk.  Loans with "Classified" ratings
are assigned allocated reserves based on the risk exposure in each individual
credit.  "Pass" credits have reserve factors applied consistent with
migration analysis and ten year forward moving historic loss experience.  The
allowance for other loan categories (consumer, credit card, equity line, real
estate mortgage) is based on historic loss experience.  Reserve assumptions
are monitored and validated quarterly.

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 ratios were well within guidelines and were enhanced
with the purchase of the branches.  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.  The Corporation has additional borrowing capacity of $98,500
under its existing agreement with the FHLB as of December 31, 2001, based on
the level of qualifying portfolio mortgage loans available for
securitization.  Should the need arise, secondary sources of liquidity are
available including $22,500 in unused 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 dividends from
its bank subsidiaries in the form of dividends.  The maximum amount of
dividends that may be paid by each affiliate bank to the holding company in
any calendar year without prior regulatory approval is the retained net
profits of that year, as defined, combined with the retained net profits for
the two preceding years.  In effect, this limits 2002 dividends (unless prior
regulatory approval is obtained) to $9,617 plus year-to-date 2002 net profits
as of the declaration date.  This limitation had no effect on the liquidity
of the holding company in 2001 and it is not expected to have any material
impact in 2002.  During 2001, the affiliate banks paid $5,785 in dividends to
the holding company.

Impact of Inflation and Changing Prices

The majority of the assets and liabilities of a financial institution are
monetary in nature and therefore differ greatly from most industrial
companies that have significant investments in fixed assets.  Due to this
fact, the effects of inflation on the Corporation's balance sheet are
minimal, meaning that there are no substantial increases or decreases in net
purchasing power over time.  The most significant effect of inflation is on
other expenses that tend to rise during periods of general inflation.  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 effect of inflation on the market
value of depreciable assets.

Management thinks that the most significant impact of inflation on financial
results is changes in interest rates and the Corporation's ability to react
to those changes.  As discussed above, management attempts to measure,
monitor and control interest rate risk.

Market Price and Dividend Data

The following information reflects per share data for the periods indicated
relative to Common Stock trading values and dividends.
<TABLE>
<CAPTION>
                         Trading Value                 Dividends
    2001               High         Low                Per Share
<S>                <C>            <C>                  <C>
First Quarter      $  17.38       15.63                   0.18
Second Quarter        19.00       16.31                   0.18
Third Quarter         20.75       18.05                   0.18
Fourth Quarter        21.00       20.05                   0.18
</TABLE>
<TABLE>
<CAPTION>
                         Trading Value                 Dividends
    2000               High         Low                Per Share
<S>                <C>            <C>                  <C>
First Quarter      $  21.00       16.50                   0.17
Second Quarter        18.13       15.50                   0.17
Third Quarter         17.50       15.75                   0.18
Fourth Quarter        17.00       15.75                   0.18
</TABLE>

As of December 31, 2001, there were 1,170 holders of record of FNB
Corporation Common Stock.  At December 31, 2001, although the merger
transaction was completed, shares of stock had not been issued to the
stockholders of Salem who were in the process of determining the mix of
cash and stock consideration to be received.  It is estimated that the
Salem acquisition will add 375 additional shareholders to the Corporation's
shareholder base.

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, investments and deposits.  By
their nature most financial instruments carry associated market risks.  The
most significant market risk associated with the Corporation's financial
instruments is interest rate risk; that is, the risk that net interest income
and fair values of the Corporation 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 with no impact
on its fair value.  However, such a decline will normally have the effect of
increasing the fair value of a fixed contractual rate investment security.

The Corporation manages its interest rate risk by establishing
asset/liability management policies and by continually monitoring the
characteristics of its asset and liability portfolios that impact interest
rate risk.  Interest rate management is conducted in coordination with the
management of liquidity and capital adequacy.  The monitoring of interest
rate risk is supervised by asset liability committees at each of the
affiliate banks and by a corporate Risk Management Committee comprised of
senior officers and certain members of the board of directors.  Management
seeks to minimize the risks to earnings and equity associated with movements
in interest rates.  To achieve this objective management monitors such
factors as:

     Relative volumes of fixed-rate versus variable-rate loans and deposits;

     Average interest rate spreads between interest bearing assets and
     liabilities; and,

     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; promoting,
changing the pricing of or developing new products to emphasize or
de-emphasize different maturities and/or fixed versus variable loans and
deposits; redirecting funds from maturity 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 any derivative
financial instruments such as futures, forward interest rate agreements,
swaps or option contracts in order to manage interest rate risk.  However,
policies of the Asset Liability Committees permit purchases of a limited
amount of these instruments should they think it prudent to do so to enhance
interest rate risk management.  In general, the Corporation does not enter
into financial instruments for trading purposes.

An important analytical technique used by management to manage interest rate
risk is "interest rate shock" by means of a computer simulation model.  One
method projects the impact that multiple interest rate scenarios have on
earnings.  The model incorporates current volumes, average rates and
scheduled maturities and payments of asset and liability portfolios, together
with multiple scenarios of projected prepayments, re-pricing opportunities
and anticipated volume growth.  This method is subject to the accuracies of
the assumptions that underlie the process, however, it provides a better
illustration of the sensitivity of earnings to changes in interest rates than
other analyses such as static or dynamic gap.  A second method seeks first to
estimate the current market value of the Corporation's assets and liabilities
by applying present value techniques (discounting) of the Corporation's
assets and liabilities at current market interest rates.  The difference
between the market value of assets and liabilities is the market value of the
Corporation's equity.  The current market value of assets and liabilities is
then recalculated assuming a hypothetical increase or decrease in market
interest rates of up to 300 basis points within a 12 month period.

The table below reflects the outcome of these analyses as of November 30,
2001.  Earnings would rise by 4.95% if rates were to increase by 300 basis
points over a 12-month period and fall by 5.43% if they were to fall by
300 basis points within a 12-month period.  Market value of equity
would decline 1.14% if market rates were to rise by 300 basis points and
decline by .91% if market rates were to fall by 300 basis points.  A
decline is occurring under both scenarios because of callable securities
in the portfolio.  If market rates increase, they are not projected to be
called and decline in value.  If rates decline, they are called and have
to be replaced with lower-yielding securities.  All of these changes are
within management's targets.

                                Hypothetical             Hypothetical
Change in Prime Rate           Percent Change           Percent Change
   Over 12 Months               In Earnings              Market Value
      +3.00%                       4.95%                    -1.14%
      +2.00                        3.24                      -.96
      +1.00                        1.44                      -.45
      -1.00                       -1.94                      -.24
      -2.00                       -3.77                      -.53
      -3.00                       -5.43                      -.91


The simulation model incorporates management's estimates on loan prepayments,
which vary depending upon the relationship between the change in rates
scenarios and current book yields.  Investment securities are assumed to
remain in the portfolio until maturity unless called by the issuer.  Non-
maturity deposits such as checking and savings are assumed to mature over a
60-month period.  Rates on accounts that are interest bearing are increased
or decreased according to the pricing expectations, before cash flows are
discounted.  As a result, while the rates on these accounts change, they do
not change as quickly or to the same extent as market rates.  This captures
the value of the optionality in the pricing of these deposits.  Discount
rates for loans are based upon loan pricing spreads and discount rates for
term deposits are based upon the cost of wholesale funding.


            MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY


The management of FNB Corporation is responsible for the content of the
financial information contained herein.  In order to meet this
responsibility, the financial statements have been prepared in conformity
with generally accepted accounting principles appropriate in the
circumstances to reflect, in all material respects, the substance of events
and transactions that should be included.

The accounting systems and related internal accounting controls of FNB
Corporation and its subsidiaries are designed to provide reasonable assurance
that the financial records are reliable for preparing financial statements
and maintaining accountability for assets, including safeguarding assets
against loss from unauthorized use or disposition.  The system of internal
controls is augmented by written policies, internal audits and staff training
programs.

The Audit Committee of FNB Corporation, composed solely of outside directors,
reviews the internal audit function and meets periodically with
representatives of Brown Edwards & Company, L.L.P., independent public
accountants, whose selection to express an independent professional opinion
as to the fairness of the presentation of FNB Corporation's consolidated
financial statements has been ratified by the shareholders.





J. Daniel Hardy, Jr.                               Daniel A. Becker
President and Chief                                Senior Vice President and
   Executive Officer                                  Chief Financial Officer
FNB Corporation                                    FNB Corporation


                     INDEPENDENT AUDITORS REPORT



To the Board of Directors
FNB Corporation and Subsidiaries
Christiansburg, Virginia


We have auditied the accompanying consolidated balance sheet of FNB
Corporation and subsidiaries as of December 31, 2001, and the related
consolidated statements of income and comprehensive income, stockholders'
equity, and cash flows for the year then ended.  These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.  The accompanying consolidated balance
sheet of the Company as of December 31, 2000 and the related consolidated
statements of income and comprehensive income, changes in stockholders'
equity, and cash flows for the years ended December 31, 2000 and 1999
were audited by other auditors whose report dated February 2, 2001
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement.
An audit includes, examining on a test basis, evidence supporting the
amounts and disclosures in the consolidated 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 audit
provides a reasonable basis for our opinion.

In our opinion, the 2001 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
FNB Corporation and Subsidiaries at December 31, 2001, and the consolidated
results of their operations and cash flows for the year then ended in
conformity with accounting principles generally accepted in the United
States of America.


                                     Brown, Edwards & Company, L.L.P.
                                     CERTIFIED PUBLIC ACCOUNTANTS




February 1, 2002
<TABLE>
<CAPTION>


                                                  December 31, 2001 and 2000
CONSOLIDATED BALANCE SHEETS   (in thousands, except share and per share data)

ASSETS                                                   2001           2000
<S>                                                 <C>              <C>
Cash and due from banks                             $  28,817         12,325
Federal funds sold                                      9,010          3,450
Short term investments                                 16,549              -
Securities available-for-sale, at fair value          151,352         68,974
Securities held-to-maturity, at amortized cost
  (fair value approximated $31,526 and $28,589
   at December 31, 2001 & 2000, respectively)          30,812         28,193
Mortgage loans held for sale                           13,926            725
Loans:
   Commercial                                          75,705         76,023
   Consumer                                           130,072         77,395
   Real estate - commercial                           193,575        108,338
   Real estate - construction                          42,404         20,326
   Real estate - mortgage                             206,507        127,504
          Total loans                                 648,263        409,586
          Loans, net of unearned income               648,263        409,586
Less allowance for loan losses                          8,827          5,670
          Loans, net                                  639,436        403,916
Bank premises and equipment, net                       22,732         14,580
Other real estate owned                                 1,420            281
Goodwill                                               19,797              -
Core deposit intangibles                                7,500              -
Other assets                                           13,099          6,787
          Total assets                              $ 954,450        539,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
   Noninterest-bearing demand deposits              $  96,466         50,107
   Interest-bearing demand and savings deposits       246,103        134,574
   Time deposits                                      369,283        187,849
   Certificates of deposit of $100,000 and over        94,935         59,129
          Total deposits                              806,787        431,659
   Short term borrowings                                8,463         10,634
   Long term debt                                      32,818         41,100
   Other liabilities                                   19,749          3,896
          Total liabilities                           867,817        487,289
Stockholders' equity
   Common stock, $5.00 par value.  Authorized
      10,000,000 shares; issued and outstanding
      5,539,117 shares in 2001 and 4,044,887
      in 2000                                          27,696         20,224
   Surplus                                             47,481         25,037
   Unearned ESOP shares (75,556 and 82,601
      shares in 2001 and 2000, respectively)           (1,139)        (1,374)
   Retained earnings                                   11,718          8,004
   Accumulated other comprehensive income (loss)          877             51
          Total stockholders' equity                   86,633         51,942
          Total liabilities and
             stockholders' equity                   $ 954,450        539,231

                 See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
                             Years Ended December 31, 2001, 2000 and 1999
                                        (in thousands, except per share data)

CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME

                                                2001          2000       1999
<S>                                        <C>             <C>        <C>
Interest income:
    Interest and fees on loans             $  39,438        36,632     31,970
    Interest on securities:
        Taxable                                5,829         3,186      3,157
        Nontaxable                             1,850         2,100      2,253
    Interest on federal funds sold
      and short term investments                 733            99        183
            Total interest income             47,850        42,017     37,563
Interest expense:
    Interest on interest-bearing
      demand and savings deposits              3,683         3,966      3,400
    Interest on time deposits                 13,601         9,915      8,905
    Interest on certificates of
      deposit of $100,000 and over             4,195         3,348      2,931
    Interest on short term borrowings            271           437        380
    Interest on other borrowed funds           1,077         2,436      1,994
            Total interest expense            22,827        20,102     17,610
            Net interest income               25,023        21,915     19,953
Provision for loan losses                      1,637         1,082      1,445
            Net interest income after
              provision for loan losses       23,386        20,833     18,508
Noninterest income:
    Service charges on deposit
      accounts                                 1,714         1,362      1,263
    Loan origination fees                      1,298           197        359
    Other service charges and fees             1,687         1,411      1,226
    Other income                                 868           610        877
    Securities gains (losses), net               231           (52)         4
            Total noninterest income           5,798         3,528      3,729
</TABLE>
<TABLE>
<CAPTION>

                                Years Ended December 31, 2001, 2000 and 1999
                                        (in thousands, except per share data)

CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (Continued)

                                                2001          2000       1999
<S>                                          <C>           <C>         <C>
Noninterest expense:
    Salaries and employee benefits             9,952         7,924      7,309
    Occupancy and equipment
      expense, net                             3,571         2,628      2,497
    Cardholder/merchant processing               521           417        405
    Supplies expense                             685           440        448
    Other expenses                             5,171         3,664      3,305
            Total noninterest expense         19,900        15,073     13,964
Income before income tax expense               9,284         9,288      8,273
Income tax expense                             2,550         2,454      1,946
            Net income                     $   6,734         6,834      6,327
Other comprehensive income (loss),
    net of income tax expense (benefit):
      Gross unrealized gains (losses) on
        available-for-sale securities          1,057           706      (986)
         Less: Reclassification adjustment
           for (gains) losses included in
           net income                           (231)           52        (4)
      Other comprehensive income                 826           758      (990)

            Comprehensive income           $   7,560         7,592      5,337


            Basic earnings per share       $    1.63          1.71       1.59
            Diluted earnings per share     $    1.62          1.71       1.59
</TABLE>

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

                                Years Ended December 31, 2001, 2000 and 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS                          (in thousands)
                                                   2001       2000      1999
<S>                                            <C>         <C>       <C>
Cash flows from operating activities:
    Net income                                 $  6,734      6,834     6,327
    Adjustments to reconcile net income to net
      cash provided by operating activities:
        Provision for loan losses                 1,637      1,082     1,445
        Depreciation and amortization of
          bank premises and equipment             1,882      1,339     1,259
        Amortization of goodwill                    436          -         -
        ESOP compensation                           418        373       373
        Stock awards compensation                    70         38         -
        Deferred income tax expense
          (benefit)                                (259)      (147)     (378)
        Loss (gain) on sales of securities
          available-for-sale, net                  (231)        54         -
        Amortization of premiums and
          accretion of discounts, net               190        260       537
        Gain on calls of securities held-
          to-maturity, net                            -         (2)       (4)
        Loss (gain) on sale of other real
          estate and fixed assets                     -        (61)        1
        Proceeds from sales of mortgage
          loans held for sale                   116,465     11,532    22,035
        Origination of mortgage loans
          held for sale                        (126,473)   (12,184)  (20,462)
        Increase in other assets                   (660)      (658)   (1,142)
        Increase (decrease) in other
          liabilities                              (201)       232       532
            Net cash provided by
              operating activities                    8      8,692    10,523
</TABLE>
<TABLE>
<CAPTION>

                                Years Ended December 31, 2001, 2000 and 1999
CONSOLIDATED STATEMENTS OF                                     (in thousands)
CASH FLOWS (continued)

                                                   2001       2000      1999
<S>                                             <C>        <C>      <C>
Cash flows from investing activities:
    Net decrease (increase) in federal
      funds sold                                 (1,850)    (3,450)   10,600
    Net increase in short term
      investments                               (18,237)         -         -
    Proceeds from sales of securities
      available-for-sale                         30,366      5,094         -
    Proceeds from calls and maturities
      of securities available-for-sale           38,464     26,870    14,400
    Proceeds from calls and maturities
      of securities held-to-maturity              7,466      5,020     5,141
    Purchases of securities available-
      for-sale                                  (96,002)   (31,935)  (27,297)
    Purchases of securities held-to-
      maturity                                     (329)         -       (17)
    Acquisition of subsidiaries                  69,851          -         -
    Net increase in loans                         2,293    (27,966)  (54,056)
    Proceeds from sale of fixed assets
      and other real estate owned                   413        795       139
    Recoveries on loans previously
      charged off                                   365        286       221
    Bank premises and equipment
      expenditures                               (2,808)    (2,934)   (1,479)
            Net cash used in investing
              activities                         29,992    (28,220)  (52,348)
</TABLE>
<TABLE>
<CAPTION>

                                Years Ended December 31, 2001, 2000 and 1999
CONSOLIDATED STATEMENTS OF                                     (in thousands)
CASH FLOWS (continued)

                                                   2001       2000      1999
<S>                                            <C>        <C>       <C>
Cash flows from financing activities:
    Net increase in deposits                   $ 19,144     32,788    12,614
    Net (decrease) increase in federal
      funds purchased                                 -    (13,635)   13,635
    Net increase (decrease) in
      securities sold under
      under agreements to repurchase             (2,171)     3,603       381
    Net increase (decrease) in other
      borrowed funds                            (25,608)    (5,162)   24,650
    Principal payments on ESOP debt                (418)      (373)     (373)
    Repurchase of FNB Corporation stock          (1,388)      (871)        -
    Dividends paid                               (3,020)    (2,798)   (2,524)
    Dividends on unallocated ESOP shares            (47)       (62)      (70)
            Net cash provided by
              financing activities              (13,508)    13,490    48,313

Net increase (decrease) in cash and
  due from banks                                 16,492     (6,038)    6,488
Cash and due from banks at beginning
  of year                                        12,325     18,363    11,875

Cash and due from banks at end of year         $ 28,817     12,325    18,363
</TABLE>

                 See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF       Years Ended December 31, 2001, 2000 and 1999
CHANGES IN STOCKHOLDERS' EQUITY    (in thousands, except share and per share
                                    data)

                                                         Accumulated
                                                         Other
                                    Unearned             Compre-
                  Common            ESOP      Retained   hensive
                  Stock   Surplus   Shares    Earnings   Income       Total
Balances at
 December 31,
 1998
<S>             <C>       <C>      <C>        <C>        <C>        <C>
                $ 18,611   19,320   (2,120)      8,307      283      44,401

Net income             -        -        -       6,327        -       6,327
Cash dividends,
 $0.63 per share       -        -        -      (2,524)       -      (2,524)
ESOP shares
 allocated
 upon loan
 repayment             -        -      373           -        -         373
10% stock
 dividend          1,859    6,275        -      (8,142)       -          (8)
Change in net
 unrealized
 gains (losses)
 on securities
 available-
 for-sale, net
 of tax effect
 of $463 and
 reclassification
 adjustments           -        -        -           -     (990)       (990)

Balances at
 December 31,
 1999           $ 20,470   25,595   (1,747)      3,968     (707)     47,579
</TABLE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF      Years Ended December 31, 2001, 2000 and 1999
CHANGES IN STOCKHOLDERS' EQUITY    (in thousands, except share and per share
(continued)                         data)
                                                         Accumulated
                                                         Other
                                    Unearned             Compre-
                  Common            ESOP      Retained   hensive
                  Stock   Surplus   Shares    Earnings   Income       Total
<S>            <C>        <C>       <C>       <C>        <C>        <C>
Net income      $      -        -        -       6,834        -       6,834
Cash dividends,
 $0.70 per share       -        -        -      (2,798)       -      (2,798)
ESOP shares
 allocated
 upon loan
 repayment             -        -      373           -        -         373
Stock awards
 issued               19       48        -           -        -          67
Repurchase and
 retirement of
 common stock       (265)    (606)       -           -        -        (871)
Change in net
 unrealized
 gains (losses)
 on securities
 available-
 for-sale, net
 of tax effect
 of $391 and
 reclassification
 adjustments           -        -        -           -      758         758

Balances at
 December 31,
 2000           $ 20,224   25,037   (1,374)      8,004       51      51,942
</TABLE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF      Years Ended December 31, 2001, 2000 and 1999
CHANGES IN STOCKHOLDERS' EQUITY    (in thousands, except share and per share
(continued)                         data)
                                                         Accumulated
                                                         Other
                                    Unearned             Compre-
                  Common            ESOP      Retained   hensive
                  Stock   Surplus   Shares    Earnings   Income       Total
<S>             <C>       <C>       <C>       <C>        <C>        <C>
Net income      $      -        -        -       6,734        -       6,734
Cash dividends,
 $0.72 per share       -        -        -      (3,020)       -      (3,020)
ESOP shares
 allocated
 upon loan
 repayment             -        -      418           -        -         418
Stock awards
 issued               28       62        -           -        -          90
Stock options
 exercised             1        3        -           -        -           4
Repurchase and
 retirement of
 common stock       (382)  (1,006)       -           -        -      (1,388)
Change in net
 unrealized
 gains (losses)
 on securities
 available-
 for-sale, net
 of tax effect
 of $426 and
 reclassification
 adjustments           -        -        -           -      826         826
Stock issued
 to purchase
 Southwest
 Virginia
 Savings Bank      1,464    3,497        -           -        -       4,961
Fair value of
 options
 resulting
 from merger           -      317        -           -        -         317
Unearned shares-
 Southwest Virginia
 Savings Bank ESOP
 at merger             -        -     (183)          -        -        (183)
Stock issued
 to purchase
 Salem Community
 Bankshares,
 Inc.              6,361   19,571        -           -        -      25,932
Balances at
 December 31,
 2001           $ 27,696   47,481   (1,139)     11,718      877      86,633
</TABLE>

                 See accompanying notes to consolidated financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 December 31, 2001
                                            (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 subsidiaries of FNB Corporation are First
      National Bank, FNB Southwest and Salem Bank & Trust, N.A., collectively
      referred to as 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 might 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.  Significant intercompany transactions and balances
            have been eliminated in consolidation.

      (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:

              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.
      (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 (4,125,602,
            3,993,288 and 3,982,147 in 2001, 2000 and 1999, respectively, as
            restated).  The weighted average shares outstanding do not
            include average unearned shares held by the Employee Stock
            Ownership Plan (ESOP) totaling 77,738, 88,998 and 112,433 shares
            for 2001, 2000 and 1999, respectively.  The shares held by the
            ESOP are not considered outstanding for net income per share
            calculations until the shares are released.



     (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)   Reclassification

            Certain reclassifications have been made to prior year amounts to
            conform to the 2001 presentation.

(2)   RESTRICTIONS ON CASH

      Federal reserve regulations require the Bank to maintain certain
      average balances as cash reserves.  The reserve requirements
      approximated $5,343 and $2,194 at December 31, 2001 and 2000,
      respectively.

(3)   SECURITIES AVAILABLE-FOR-SALE

      The following sets forth the composition of securities available-for-
      sale, which are reported at fair value, at December 31, 2001 and 2000:
<TABLE>
<CAPTION>
                                        Gross        Gross        Approximate
                            Amortized   Unrealized   Unrealized   Fair
      December 31, 2001     Costs       Gains        Losses       Values
<S>                      <C>          <C>           <C>          <C>
      U.S. Treasury      $     500          3             -          503
      U.S. Government
         agencies and
         corporations       89,885        562          (807)      89,640
      States and
         political
         subdivisions       23,202        268          (168)      23,302
      Corporate             31,422      1,470             -       32,892
      Total AFS debt
         securities        145,009      2,303          (975)     146,337
      Equity securities      5,015          -             -        5,015

      Totals             $ 150,024      2,303          (975)     151,352
</TABLE>
<TABLE>
<CAPTION>
                                        Gross        Gross        Approximate
                            Amortized   Unrealized   Unrealized   Fair
      December 31, 2000     Costs       Gains        Losses       Values
<S>                      <C>          <C>           <C>          <C>
      U.S. Treasury      $     500          3             -          503
      U.S. Government
         agencies and
         corporations       16,217         49          (114)      16,152
      States and
         political
         subdivisions       17,043        155          (106)      17,092
      Corporate             31,553        317          (227)      31,643
      Total AFS debt
         securities         65,313        524          (447)      65,390
      Equity securities      3,584          -             -        3,584

      Totals             $  68,897        524          (447)      68,974
</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, 2001                            Costs        Values
<S>                                            <C>            <C>
      Due in one year or less                  $   4,595         4,677
      Due after one year through five years       52,567        53,591
      Due after five years through ten years      25,642        25,721
      Due after ten years                         62,205        62,348

      Totals                                   $ 145,009       146,337
</TABLE>
      Realized gains on securities available-for-sale were $357 in 2001 and
      were not material in 2000 or 1999.  Realized losses on securities
      available-for-sale were $126 and $54 in 2001 and 2000, respectively,
      and were not material in 1999.

      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
      $31,240 at December 31, 2001 and $13,532 at December 31, 2000.

(4)   SECURITIES HELD-TO-MATURITY

      The amortized costs, gross unrealized gains and losses, and approximate
      fair values of securities held-to-maturity at December 31, 2001 and
      2000 are as follows:
<TABLE>
<CAPTION>
                                        Gross         Gross       Approximate
                           Amortized    Unrealized    Unrealized  Fair
      December 31, 2001    Costs        Gains         Losses      Values
<S>                      <C>           <C>           <C>         <C>
      U.S. Government
         agencies and
         corporations     $  6,707            49            -        6,756
      States and
         political
         subdivisions       24,105           669           (4)      24,770

      Totals              $ 30,812           718           (4)      31,526
</TABLE>
<TABLE>
<CAPTION>
                                        Gross         Gross       Approximate
                           Amortized    Unrealized    Unrealized  Fair
      December 31, 2000    Costs        Gains         Losses      Values
<S>                       <C>           <C>           <C>         <C>
      States and
         political
         subdivisions     $ 28,193           402           (6)      28,589

      Totals              $ 28,193           402           (6)      28,589
</TABLE>

      The amortized costs and approximate fair values of securities held-to-
      maturity 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, 2001                             Costs         Values
<S>                                              <C>            <C>
      Due in one year or less                     $  6,586         6,675
      Due after one year through five years         15,835        16,359
      Due after five years through ten years         2,198         2,265
      Due after ten years                            6,193         6,227

      Totals                                      $ 30,812        31,526
</TABLE>

      Realized gains and losses on calls and maturities of securities held-
      to-maturity were not material in 2001, 2000 or 1999.  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 $15,107 and $12,626
      at December 31, 2001 and 2000, respectively.

(5)   LOANS

      At December 31, 2001 and 2000, there were direct loans to officers and
      directors of $3,117 and $3,427, respectively.  During 2001, new direct
      loans to officers and directors amounted to $1,217 and repayments
      amounted to $1,527.  In addition, there were loans of $3,441 and $1,873
      at December 31, 2001 and 2000, respectively, which were endorsed by
      directors or had been made to companies in which directors had an
      equity interest.

      At December 31, 2001 and 2000, the Corporation had sold without
      recourse to financial institutions and other customers of the
      Corporation participations in various loans in the amount of $42,466
      and $41,151, respectively.

(6)   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, 2001 and 2000, the investment in impaired loans
      approximated $3,506 and $2,521, respectively.  The December 31, 2001
      and 2000 allowances for loan losses includes allowances of $753 and
      $519, respectively, for these loans.  Impaired loans averaged $2,297,
      $3,548 and $3,414 during 2001, 2000 and 1999, 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              2001        2000        1999
<S>                                     <C>          <C>         <C>
      Balance at beginning of year      $ 5,670       5,173       4,640
      Reserve acquired through merger     2,956           -           -
      Provisions for loan losses          1,637       1,082       1,445
      Additional reserve for branch
        loans purchased                     188           -           -
      Loan recoveries                       365         286         221
      Loan charge-offs                   (1,989)       (871)     (1,133)
      Balance at end of year            $ 8,827       5,670       5,173
</TABLE>

      Nonperforming assets consist of the following:
<TABLE>
<CAPTION>
      December 31,                     2001        2000        1999
<S>                                 <C>          <C>         <C>
      Nonaccrual loans              $ 2,815       2,391       4,517
      Other real estate owned         1,420         281         129

      Total nonperforming assets    $ 4,235       2,672       4,646
</TABLE>

      There were no material commitments to lend additional funds to
      customers whose loans were classified as nonperforming at
      December 31, 2001.

      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         2001        2000        1999
<S>                                 <C>         <C>         <C>
      Cash basis interest -
         impaired loans              $  16          17         134

      Recorded interest -
         impaired loans              $   -           9         120
</TABLE>

(7)   BANK PREMISES AND EQUIPMENT, NET

      Bank premises and equipment are stated at cost less accumulated
      depreciation and amortization as follows:
<TABLE>
<CAPTION>
      December 31                         2001          2000
<S>                                  <C>            <C>
      Land                            $  3,121         1,565
      Buildings                         17,499        11,347
      Furniture and equipment           16,882         9,842
      Leasehold improvements               568           423
                                        38,070        23,177
      Less accumulated depreciation
         and amortization              (15,338)       (8,597)

      Totals                          $ 22,732        14,580
</TABLE>

(8)   DEPOSITS

      At December 31, 2001 and 2000, there were deposits from officers and
      directors of $4,526 and $2,999, respectively.  Time deposits and
      certificates of deposit of $100,000 and over as of December 31, 2001
      mature as follows:


         2002          $ 290,151
         2003             85,913
         2004             59,884
         2005             17,998
         2006              8,262
         Thereafter        2,010
                       $ 464,218

(9)   SHORT TERM BORROWINGS AND LONG TERM DEBT

      Advances from the Federal Home Loan Bank of Atlanta were $18,269 and
      $41,100 on December 31, 2001 and 2000, respectively.  The fixed
      interest rates on the advances as of December 31, 2001 range from 4.7
      to 7.3 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, 2001, $41 matures in 2003 and $315 matures in
      2006.  The remainder matures after 2006.

      Securities sold under agreements to repurchase (repurchase
      agreements) at December 31, 2001 were collateralized by investment
      securities controlled by the Corporation with a book value of $11,620.
      The maximum amount of repurchase agreements outstanding during 2001
      was $12,540 and the average amount outstanding during 2001 was $7,491.

      FNB Corporation participated in a pool of subordinated debt securities
      issued by FNB Corporation and other financial institutions to a trust
      in a method generally referred to as trust preferred financing.  FNB
      Corporation borrowed $15,464 that matures on December 18, 2031.
      Interest is payable quarterly at the three month LIBOR rate plus 3.60%.
      The rate may not exceed 12.5% prior to December 18, 2006, and the
      borrowing may be repaid on or after this date without penalty.
      Proceeds were principally used to pay cash to Salem Bank & Trust
      shareholders.  The loan proceeds are treated as capital of FNB
      Corporation for regulatory purposes.

(10)  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.  Salem Bank & Trust employees will
      participate beginning January 1, 2003.  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.  FNB
      Corporation and First National Bank hold all ESOP loans.  Consequently,
      in the consolidated balance sheets, the loans and the related liability
      have been eliminated.  The amounts representing unearned employee
      benefits have been recorded as reductions in stockholders' equity.
      These amounts will be reduced as the ESOP debt is curtailed.  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 contributions.  ESOP compensation
      expense of $418, $373 and $373 was recorded for 2001, 2000 and 1999,
      respectively.

      ESOP shares as of December 31, 2001 consisted of 637,324 allocated
      shares and 75,556 unreleased and unearned shares.  Based on quoted
      trading and bid prices, the fair value of the unreleased and unearned
      shares at December 31, 2001 was $20.10 per share.

      The Corporation sponsors 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 $174, $151 and $147 for 2001, 2000 and
      1999, respectively.

      FNB Southwest employees will participate in the Corporation's 401(k)
      plan beginning January 1, 2002, and Salem Bank & Trust employees will
      participate beginning January 1, 2003.

(11)  INCOME TAXES

      Total income taxes are allocated as follows:
<TABLE>
<CAPTION>
      Years Ended December 31,             2001        2000        1999
<S>                                     <C>         <C>         <C>
      Income                            $ 2,550       2,454       1,946
      Stockholders' equity, for net
         unrealized gains and losses
         on securities available-for-
         sale recognized for financial
         reporting purposes                 426         391        (463)

      Totals                            $ 2,976       2,845       1,483
</TABLE>
      The components of federal income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
      Years Ended December 31,             2001        2000        1999
<S>                                     <C>         <C>         <C>
      Current                           $ 2,809       2,601       2,324
      Deferred                             (259)       (147)       (378)

      Total                             $ 2,550       2,454       1,946
</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,     2001            2000            1999

                                      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       $ 3,157   34.0%   3,158   34.0%   2,813   34.0%
      Increase (decrease)
         in taxes resulting
         from:
           Tax-exempt
             interest           (734)  (7.9)    (863)  (9.3)  (1,007) (12.2)
           Nondeductible
             interest
             expense             102    1.1      113    1.2      124    1.5
           Other, net             25    0.3       46    0.5       16    0.2

      Reported tax expense
         at effective rate   $ 2,550   27.5%   2,454   26.4%   1,946   23.5%
</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,                                   2001        2000
<S>                                              <C>          <C>
      Deferred tax assets:
        Loans, principally due to allowance
          for loan losses and unearned fees       $ 2,072       1,689
      Accrued employee benefits due to accrual
        for financial reporting purposes in
        excess of actual contributions                224         238
      Other                                           108          61

            Total gross deferred tax assets         2,404       1,988

      Less valuation allowance                          -           -

            Net deferred tax assets                 2,404       1,988
      Deferred tax liabilities:
        Bank premises and equipment,
          due to differences in depreciation          351         351
        Securities, due principally to
          valuation allowance                         593          26
        Investment securities, due to
          differences in discount accretion            93         102
        Prepaids, due to advance payments             149          71
        Other                                          88           -


        Total gross deferred tax
              liabilities                           1,274         550

        Net deferred tax asset,
              included in other assets            $ 1,130       1,438
</TABLE>
      The Corporation has determined that a valuation allowance for gross
      deferred tax assets is not necessary at December 31, 2001 or 2000
      since deferred tax assets can be recognized during the carryback
      period available under current tax laws.

(12)  DIVIDEND RESTRICTIONS AND CAPITAL REQUIREMENTS

      The holding company's principal asset is its investment in its
      wholly owned consolidated subsidiaries.  The primary 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 2002 without the approval
      of the Comptroller totals $9,617 plus year-to-date 2002 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, 2001, that the
      Corporation meets all capital adequacy requirements to which it is
      subject.  The table below sets forth the ratios for the Banks and on a
      consolidated basis for December 31, 2001 and 2000.

      As of December 31, 2001, the most recent notification from the Office
      of the Comptroller of the Currency categorized the Banks 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.
<TABLE>
<CAPTION>

      As of December 31, 2001:
                                                 Minimum Requirements
                                                              Section 38 of
                                              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)
         Consolidated     $ 81,609   11.2%   58,292    8.0%     N/A
         First National
          Bank              50,111   11.0%   36,444    8.0% $ 45,555   10.0%
         Salem Bank &
          Trust             21,659   11.0%   15,752    8.0%   19,690   10.0%
      Tier 1 Capital
        (to Risk Weighted
         Assets)
         Consolidated       73,007   10.0%   29,203    4.0%     N/A
         First National
           Bank             44,396    9.7%   18,308    4.0%   27,461    6.0%
         Salem Bank &
           Trust            19,493    9.9%    7,876    4.0%   11,814    6.0%
      Tier 1 Capital
        (to Average Assets)
         Consolidated       73,007    7.9%   36,966    4.0%     N/A
         First National
           Bank             44,396    7.5%   23,678    4.0%   29,597    5.0%
         Salem Bank &
           Trust            19,493    9.2%    8,475    4.0%   10,594    5.0%
</TABLE>
<TABLE>
<CAPTION>

      As of December 31, 2000:
                                                 Minimum Requirements
                                                              Section 38 of
                                              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)
         Consolidated     $ 57,328   13.2%   34,783    8.0%     N/A
         First National
           Bank             51,567   11.9%   34,719    8.0% $ 43,399   10.0%
      Tier 1 Capital
        (to Risk Weighted
         Assets)
         Consolidated       51,891   11.9%   17,391    4.0%     N/A
         First National
           Bank             46,135   10.6%   17,360    4.0%   26,040    6.0%
      Tier 1 Capital
        (to Average Assets)
         Consolidated       51,891   10.0%   20,831    4.0%     N/A
         First National
           Bank             46,135    8.9%   20,656    4.0%   25,820    5.0%
</TABLE>

(13)  SUPPLEMENTAL CASH FLOW INFORMATION

      The Corporation paid $23,353, $19,785 and $17,652 for interest and
      $2,839, $2,790 and $1,999 for income taxes in 2001, 2000 and 1999,
      respectively.  Noncash investing activities included $932, $252 and
      $190 of loans transferred to other real estate owned in 2001, 2000
      and 1999, respectively.

(14)  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.

(15)  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 $37,959 at December 31,
      2001, and $25,951 at December 31, 2000 (included in amounts below),
      the Corporation may not require collateral or other security to
      support the following financial instruments with credit risk:
<TABLE>
<CAPTION>

                                                   Contract Amounts
      December 31,                                 2001        2000
<S>                                           <C>          <C>
      Financial instruments whose contract
        amounts represent credit risk:
          Commitments to extend credit        $ 110,120      79,310
          Standby letters of credit               7,299       5,045
</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 2001, the Corporation originated $126,473
      and sold $116,465 to investors, compared to $12,184 originated and
      $11,532 sold in 2000.  Every contract with each investor contains
      certain recourse language.  In 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.

(16)  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
      and the Roanoke Valley, which consists of Montgomery and Roanoke
      Counties 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 large employers which include
      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 $101,282 and
      $53,273 of loans to individuals for household, family and other
      personal expenditures at December 31, 2001 and 2000, respectively.
      The real estate mortgage portfolio consists primarily of loans secured
      by 1-4 family residential properties.

(17)  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 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 that 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)   Federal Funds Purchased, 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)   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, 2001 and 2000, 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,                       2001                   2000

                                           Approximate            Approximate
                                 Carrying  Fair        Carrying   Fair
                                 Amounts   Values      Amounts    Values
<S>                            <C>        <C>         <C>        <C>
      Financial assets:
        Cash and due
          from banks           $  28,817      28,817     12,325      12,325
        Federal funds sold         9,010       9,010      3,450       3,450
        Short term investments    16,549      16,549          -           -
        Securities available-
          for-sale               150,688     150,688     68,974      68,974
        Securities held-to-
          maturity                31,476      32,190     28,193      28,589
        Loans, net of
          unearned income        648,263     660,084    409,586     415,292

            Total financial
              assets           $ 884,803     897,338    522,528     528,630


      Financial liabilities:
        Deposits               $ 806,787     816,149    431,659     422,202
        Federal funds
          purchased,
          securities sold
          under agreements
          to repurchase and
          other borrowed
          funds                   41,281      42,199     51,734      52,053

             Total financial
               liabilities     $ 848,068     858,348    483,393     474,255
</TABLE>

      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.

(18)  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, 2001    December 31, 2000
<S>                                   <C>                  <C>
      Assets
      Short term investments               $  16,549                    -
      Securities available-for-sale,
        at fair value                          2,456                5,816
      Investment in subsidiary banks          97,876               46,231
      Receivable from subsidiary banks             -                  908
      Other assets                                45                  109
            Total assets                   $ 116,926               53,064
      Liabilities
      Other borrowed funds                 $  14,549                    -
      Other liabilities                       14,938                    -
      ESOP debt                                  806                1,122
            Total liabilities                 30,293                1,122
      Stockholders' equity
      Common stock and surplus                75,177               45,261
      Retained earnings                       11,718                8,004
      Other                                     (262)              (1,323)
            Total stockholders' equity        86,633               51,942
            Total liabilities and
              stockholders' equity         $ 116,926               53,064
</TABLE>
<TABLE>
<CAPTION>

                     Condensed Statements of Income

                                          2001        2000        1999
<S>                                   <C>           <C>         <C>
      Net interest income              $   149         233         228
      Non interest income                1,086         327          92
      Non interest expense              (1,364)       (646)       (432)
      Equity in earnings of bank
        subsidiaries                     6,863       6,920       6,439
      Income before income taxes         6,734       6,834       6,327
      Income tax expense                     -           -           -
      Net income                       $ 6,734       6,834       6,327
</TABLE>
<TABLE>
<CAPTION>

                  Condensed Statements of Cash Flows

                                        2001        2000        1999
<S>                                 <C>           <C>         <C>
      Dividends paid                $ (3,020)     (2,798)     (2,524)
      Dividends received from
        subsidiary banks               5,785       3,257       2,692
      Issuance of Trust
        Preferred debt                14,549           -           -
      Principal repayments on
        ESOP debt                       (418)       (373)       (373)
      Purchase of short term
        investments                  (16,549)          -           -
      Purchase of securities
        available-for-sale            (1,118)       (564)       (233)
      Proceeds from sales and
        maturities of securities       4,522         100         100
      Net change in receivable
        from subsidiary banks          2,084         795         (21)
      Other, net                      (5,835)       (417)        359

        Cash at beginning of year          -           -           -
        Cash at end of year         $      -           -           -
</TABLE>

      NOTES:

        (1) The ESOP loan is held by the Bank and as such is eliminated
            in consolidation.

(19)  INTERIM FINANCIAL INFORMATION (Unaudited)

      Consolidated quarterly results of operations were as follows:
<TABLE>
<CAPTION>

                                                 2001
                                           Three Months Ended
                              March 31   June 30   September 30   December 31
<S>                          <C>         <C>            <C>           <C>
      Interest income         $ 11,073    12,445         12,425        11,907
      Interest expense           5,497     6,048          6,017         5,265
      Provision for loan
        losses                     370       285            285           697
      Noninterest income         1,114     1,257          1,516         1,911
      Noninterest expense        4,004     4,868          5,217         5,811
      Income before income
        tax expense              2,316     2,501          2,422         2,045
      Income tax expense           626       670            659           595
      Net income              $  1,690     1,831          1,763         1,450

      Basic earnings per
        share                 $   0.43      0.44           0.42          0.35
      Fully diluted earnings
        per share             $   0.43      0.44           0.41          0.34
</TABLE>
<TABLE>
<CAPTION>
                                                 2000
                                           Three Months Ended
                              March 31   June 30   September 30   December 31
<S>                          <C>        <C>        <C>            <C>
      Interest income         $  9,982    10,396         10,664        10,975
      Interest expense           4,735     4,946          5,158         5,263
      Provision for loan
        losses                     293       292            293           204
      Noninterest income           829       877            894           928
      Noninterest expense        3,562     3,762          3,760         3,989
      Income before income
        tax expense              2,221     2,273          2,347         2,447
      Income tax expense           575       593            622           664
      Net income              $  1,646     1,680          1,725         1,783

      Basic and fully
        diluted earnings
        per share             $   0.41      0.42           0.43          0.45
</TABLE>

(20)  STOCK COMPENSATION PLANS

      In 2000 the Corporation's stockholders approved the FNB Corporation
      2000 Incentive Stock Plan (the "Plan"), as previously adopted by the
      Board of Directors.  The Plan makes available up to 400,000 shares of
      common stock for awards to key employees and non-employee directors of
      the Corporation and its subsidiaries in the form of stock options,
      stock appreciation rights, and stock awards.  The Plan will expire in
      2010, unless sooner terminated by the Board.  Any option terms not
      specified in the Plan such as exercise prices, expiration dates, and
      vesting provisions are set forth in an agreement governing each grant.
      A stock option may be either an incentive stock option within the
      meaning of Section 422 of the Internal Revenue Code or a non-qualified
      stock option.

      In order to reflect such events as stock dividends, stock splits,
      recapitalizations, mergers, consolidations, or reorganizations by
      the Corporation, the number of shares subject to each outstanding
      grant, the exercise price, and the aggregate number of shares from
      which grants or awards may be made may be adjusted.

      Statement of Financial Accounting Standards (SFAS) No. 123,
      "Accounting for Stock-Based Compensation," sets forth compensation
      recognition principles that are based on a fair value model.  The
      Corporation has elected another alternative provided for under SFAS
      No. 123, which is to account for the activity under the Plan using
      the accounting prescribed by Accounting Principles Board Opinion
      No. 25, "Accounting for Stock Issued to Employees."  Under Opinion
      No. 25, compensation cost is not recognized in the financial statements
      except to the extent of the excess, if any, of the market price of the
      underlying stock over the exercise price of the stock option at the
      date of grant.

      Compensation cost for awards of stock requiring no payment by the
      grantee is recorded at the effective date of the award and is measured
      by the market price of the stock awarded as of that date.  Such cost
      is amortized to expense over the period of service to which the award
      relates.

      In 2000, the Corporation issued 35,000 nonqualified stock options to
      non-employee directors and 29,800 nonqualified stock options to
      employees, all with an exercise price of $16.50 per share.
      Additionally, 7,500 incentive stock options were issued to an executive
      officer at an exercise price of $15.875.  Since the exercise prices
      approximated the market value on the respective grant dates, no
      compensation cost was recorded.

      In 2001, the Corporation issued 50,000 nonqualified stock options to
      non-employee directors.  Since the exercise prices approximated the
      market value on the respective grant dates, no compensation cost was
      recorded.  The options expire in 10 years, and they vest in terms of
      exercisability at a rate of 25% per year on each of the first four
      anniversary dates from grant.  The total fair value (as defined by SFAS
      No. 123 above) at grant date for the options issued in 2001 was $509.
      The weighted average fair value for the options granted in 2001 was
      $3.23 per option.  Had the fair value method of accounting prescribed
      by SFAS No. 123 been followed, the effect on earnings per share and
      net income for 2001 would have been negligible.  Additionally, 7,500
      incentive stock options were issued to an executive officer at an
      exercise price of $20.25.  Since the exercise prices approximated
      the market value on the respective grant dates, no compensation
      cost was recorded.

      Significant assumptions used to estimate the fair values of the
      options granted in 2001 under the SFAS No. 123 methodology are as
      follows:

      Risk-free interest rate     5.14%
      Expected life              10.0 years
      Expected dividends          3.5%
      Expected volatility        20.0%

      In 2000, certain officers were awarded a total of 5,000 shares of
      restricted common stock at a fair value of $16.50 per share.  The
      awards vest (that is, the restrictions attached to the awards lapse)
      at the rate of 20% annually over a five year period.  The total fair
      value of $83 is being amortized to expense over that five year service
      period.  Also during 2000, a total of 3,800 shares of common stock were
      awarded to non-employee directors at a fair value of $16.50 per share.
      The fair value of $63 is attributable to a 12-month service period
      and, accordingly, is being amortized to expense over that period.

      During the second quarter of 2001, 4,500 shares of common stock were
      awarded to non-employee directors at a fair value of $16.31 per share.
      The fair value of $73 is attributable to a 12-month service period and,
      accordingly, is being amortized to expense over that period.

(21)  MERGERS AND ACQUISITIONS

      On May 1, 2001, Southwest Virginia Savings Bank FSB ("SVSB") of
      Roanoke, Virginia, was merged with FNB Corporation in a business
      combination accounted for by the purchase method of accounting.  At the
      merger date, SVSB had $56,588 in net loans, $93,268 in total assets and
      $76,299 in total deposits.  The shareholders of SVSB received 292,775
      shares of FNB Corporation common stock and cash of $3,530 in connection
      with the merger.  Excess cost over net assets acquired equaled $962 and
      has been allocated to goodwill.  SVSB's results of operations have been
      included in the financial statements from the merger date.

      First National Bank, a wholly owned subsidiary of FNB Corporation,
      consummated the acquisition of two branch banking offices located in
      Pearisburg and Wytheville, Virginia from First Union National Bank
      on March 23, 2001.  The transaction was accounted for by the purchase
      method of accounting.  First National Bank assumed aggregate deposit
      liabilities of $74,289 in connection with the two branch acquisitions.
      Loans of $13,618 and building and equipment of $1,714 were acquired.
      Intangible assets of $5,002 were capitalized and include goodwill and
      other costs incurred directly related to the acquisition.

      The following unaudited proforma financial information shows the effect
      of the First Union, Salem Community Bankshares, Inc. and Southwest
      Virginia Savings Bank FSB acquisitions as if the transactions had been
      consummated on January 1, 2001:
<TABLE>
<CAPTION>

                                      December 31, 2001
<S>                                  <C>
          Interest income               $  66,632
          Noninterest income                7,617
          Interest expense                 32,151
          Noninterest expense              28,040
          Net income                    $   7,469

          EPS shares O/S                5,578,390
          EPS                           $    1.34
</TABLE>

      On December 31, 2001, Salem Community Bankshares, Inc. ("SCB") of
      Salem, Virginia, was merged with FNB Corporation in a business
      combination accounted for by the purchase method of accounting.  At
      the merger date, SCB had $170,813 in net loans, $257,971 in total
      assets and $205,307 in total deposits.  The shareholders of SCB
      received 1,272,153 shares of FNB Corporation common stock and cash of
      $12,937 in connection with the merger.  Excess cost over net tangible
      assets acquired equaled $21,441 and has been allocated to core deposit
      intangible in an amount equal to $7,500 with the remaining $13,941
      recorded as goodwill.  The core deposit intangible was estimated
      pending completion of a core deposit study.


1