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

                                   FORM 10-KSB


|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 (FEE REQUIRED)

      For the fiscal year ended December 31, 1996

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

      For the transition period from ________ to ________

                           Commission File No: 0-25988

                                    CNB, Inc.
                         -------------------------------
                         (Name of Small Business Issuer)

                        FLORIDA                               59-2958616
          ----------------------------------------        -------------------
          (State or other jurisdiction                    (I.R.S. Employer
          of incorporation or organization)               Identification No.)

          Post Office Box 3239
          201 North Marion Street
          Lake City, Florida                                     32056
          ----------------------------------------        -------------------
          (Address of principal executive offices)             (Zip Code)

          Registrant's telephone number, including area code: (904) 755-3240

          Securities registered pursuant to Section 12(b) of the Act: NONE
          Securities registered pursuant to Section 12(g) of the Act: COMMON
          STOCK,                                  Par value $ 0.01 per share.

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.                                               |_|

The Registrant's revenues for the fiscal year ended December 31, 1996, totaled
$16,866,864.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $9,051,526, as of the most recent date on which stock was sold,
March 7, 1997.

The number of shares of the registrant's common stock outstanding as of March 1,
1997 was 1,937,905 shares, $0.01 par value per share.

                      DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's 1997 Annual Meeting Proxy Statement is incorporated by
reference in this report in Part III, pursuant to Instruction E of Form 10-KSB,
except for the information relating to executive officers and key employees. The
Company will file its definitive Proxy Statement with the Commission prior to
April 15, 1997.
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                                  PART I

Item 1. Description of Business

Business Development

      CNB, Inc. (the "Company", "CNB" or the "Registrant") was formed as a
Florida corporation on January 15, 1987, for the purpose of becoming a bank
holding company by acquiring the capital stock of CNB National Bank (the
"Bank").

      Within Lake City, Florida, the Bank currently operates two full service
facilities. The Company's headquarters is located in the lead bank office
located downtown and is named the Marion Street office and the Baya Avenue
office is located immediately south of downtown. Recognizing an opportunity to
better serve the community, the Bank now plans to open a third office in Lake
City to be located in an expanding retail business area on the west side of
town. Construction began on February 17, 1997 and management anticipates the
branch to be open by early summer.

      On September 1, 1996, the Company completed the acquisition of Riherd Bank
Holding Company ("RBHC") and its subsidiary, Farmer and Dealers Bank ("F&D").
This expanded the Company's service area into Union and Alachua Counties. The
acquired institution had total assets of $48.0 million, deposits of $43.4
million, loans of $24.7 million, and shareholders' equity of $4.6 million.
Resulting from the acquisition, the Bank now has three (3) additional locations
- one (1) in Lake Butler, Union County, Florida and two (2) in Gainesville,
Alachua County, Florida. Total deposits on December 31, 1996 were $30.2 million
in Union County and $12.7 million in Alachua County.

      In the fourth quarter of 1996, the Company completed the purchase of an
operations center on the east side of Lake City. After complete renovations, the
operations center will house most of the Bank's non-customer operations.

Business of Issuer

      CNB, through the Bank, now operates a total of ten banking offices in
Columbia, Suwannee, Baker, Bradford, Union and Alachua Counties, Florida. As of
December 31, 1996, CNB had total assets of $254.9 million, total deposits of
$226.8 million, and total shareholders' equity of $19.7 million. CNB presently
conducts no business other than owning and operating the Bank as a wholly owned
subsidiary.

      The Bank offers a full range of deposit services including checking
accounts, NOW accounts, savings accounts and time deposits ranging from daily
money market accounts to longer-term certificates of deposit. The transaction
accounts and time certificates are tailored to the Bank's principal market area
at rates competitive to those offered in the area. In addition, retirement
accounts such as IRAs are available. All deposit accounts are insured by the
Federal Deposit Insurance Corporation (the "FDIC") up to the maximum amount
(generally $100,000 per depositor subject to aggregation rules). The Bank
solicits these accounts from individuals, businesses, associations,
organizations and governmental authorities. The Bank is not currently dependent
upon a single depositor or borrower, the loss of which would have a material
adverse effect on the Bank.

      The Bank also offers a full range of short to medium-term commercial,
agricultural, Small Business Administration guaranteed, Farmers Home
Administration guaranteed, and personal loans. Commercial loans include both
secured and unsecured loans for working capital (including inventory and
receivables), business expansion (including acquisition of real estate and
improvements), and purchase of equipment and machinery. Consumer loans include
secured and unsecured loans for financing automobiles, home improvements,
education and other personal investments. The Bank also offers real estate
construction and acquisition loans.

      The Bank acts as an issuing agent for U.S. savings bonds, traveler's
checks, money orders and 


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cashier's checks, and offers collection teller services, including Treasury, Tax
and Loan payment collection, and wire transfer services. The Bank also offers
safe deposit boxes, direct deposit of payroll and social security checks, and
automatic drafts for various accounts. The Bank is currently a member of the
HONOR, PLUS and CIRRUS networks of automated teller machines that may be used by
Bank customers in major cities throughout the United States. The Bank also
offers credit cards.

Location and Service Area

      The Company's principal executive offices are located at the Bank's main
office at 201 North Marion Street, Lake City, Florida 32055, which is in
Columbia County. In addition to Lake City, the Bank has offices in Live Oak,
Fort White, Macclenny, Starke, Lake Butler and Gainesville, Florida. The
following table summarizes the Bank's deposits by location as of December 31,
1996, and 1995.

                     CNB National Bank Deposits at Year-End

                  City                             1996              1995
               ----------                        --------          --------
                                                         (thousands)
               Lake City
                    Marion St                    $ 60,092          $ 51,136
                    Baya Ave                       34,401            31,541
               Live Oak
                    White Ave                      37,132            34,828
                    S. Ohio Ave                    12,402            12,401
               Fort White                           6,241             6,275
               Macclenny                           20,379            11,493
               Starke                              13,180            11,329
               Lake Butler                         30,290              --
               Gainesville
                    Northwood                       5,657              --
                    Alachua County                  7,050              --
                                                 --------          --------
               Total                             $226,824          $159,003
                                                 ========          ========

      The Bank's primary service area ("PSA") includes the Florida counties of
Columbia, Suwannee, Baker, Bradford, Union and Alachua. With the exception of
Fort White, all offices are located in the county seat and largest incorporated
municipality of each county. The PSA adjoins Marion, Levy and Gilchrist Counties
on the south, Duval, Clay and Putnam Counties on the east, Hamilton County on
the north, and Madison and Lafayette County on the west. In 1994, the
populations of Columbia, Suwannee, Baker, Bradford, Union and Alachua Counties
were 48,897, 29,299, 19,700, 24,210, 12,534 and 193,879 respectively. According
to the Chamber of Commerce of each county, the population of Columbia, Suwannee,
Baker, Bradford, Union and Alachua Counties is projected to increase 11.1%,
19.8%, 8.7%, 4.7%, 6.6% and 10.9%, respectively, between 1994 and 2000.

      Each of the counties in the Bank's PSA is located in close proximity to
Interstates 10 and 75 and a short distance from the Gainesville Regional
Airport, the Jacksonville International Airport and the Port of Jacksonville, a
major Eastern Seaboard cargo-handling facility. Four major universities, the
University of Florida in Gainesville, Florida State University in Tallahassee,
the University of North Florida and Jacksonville University, as well as three
community colleges, are within commuting distance of the PSA.

Competitive Business Conditions

      Within the Bank's PSA, there are competing financial institutions
comprised of other commercial banks, savings and loan offices and credit unions.
As of December 31, 1996, deposits in the PSA had increased 5.3% from 1995, and
totaled $2.4 billion, of which the Bank held $226.8 million, or 9.6%.
Specifically, the Bank held 29.3%, 19.3%, 22.8%, 12.2%, 100.0% and .8% of the
total deposits in Columbia, Suwannee, Baker, Bradford Counties, Union and
Alachua, respectively, at the end of 1996.


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<PAGE>

      With the Riherd acquisition, our market expanded to Union and Alachua
Counties. The acquisition added two banking offices in Gainesville in Alachua
County. Because of the relative newness of the offices in Alachua County, only
$12.7 million or 29.5% of the acquired institution's deposits were located
there. As management analyzes market share, it separates Alachua County from
other PSA counties considering it a focus for future expansion.

      Certain non-Florida financial institutions affiliated with Florida banks
or savings and loans offer limited financial services, including lending and
deposit gathering activities. In addition, the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 has removed substantially all state
barriers to the acquisition of banks by out-of-state bank holding companies.
Other out-of-state bank holding companies have entered the Florida banking
market by acquiring failing thrift institutions and commercial banks. Florida
banks and bank holding companies may also enter the Bank's PSA by acquisition of
a financial institution within the PSA, by establishing de novo branches or by
forming de novo banks.

      Competition for deposit and loan business in the Bank's PSA will continue
to be intense because of existing competition, the accelerating pace of product
deregulation and the likelihood of expansion into the PSA by other institutions.
To compete, the Bank relies on specialized services, responsive handling of
customer needs, customer contact by Bank officers, directors and staff, and the
appeal of a locally-owned institution.

Regulatory Matters

General

      As a bank holding company, the Company is subject to regulation and
supervision by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company ("BHC") Act. The Bank is
subject to regulation and supervision by the Office of the Comptroller of the
Currency (the "OCC") and the Federal Deposit Insurance Corporation (the "FDIC").

      The Bank is subject to restrictions under federal law which limit the
transfer of funds by the Bank to the Company, whether in the form of loans,
extensions of credit, investments or asset purchases. Such transfers by the Bank
to the Company are limited in amount to 10% of the Bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts.

      Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to the Bank and to commit resources to support the
Bank in circumstances where the Company might not do so absent such policy. In
addition, any capital loans by the Company to the Bank would also be subordinate
in right of payment to deposits and to certain other obligations of the Bank,
including any liabilities of the Bank to the FDIC under the "cross guarantee"
provisions described below.

      As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default. "Default" is defined generally as
the appointment of a conservator or a receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
"default" is likely to occur in the absence of regulatory assistance.

      Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), after December 31, 1994, the FDIC may not take any action that
would have the effect of increasing the losses to a deposit insurance fund by
protecting depositors for more than the insured portion of deposits (generally,
$100,000) or creditors other than depositors. The FDIC is also authorized by
FDICIA to settle all uninsured and unsecured claims in the insolvency of an
insured bank by making a final settlement payment after the declaration of
insolvency. Such a payment would constitute full payment and 


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disposition of the FDIC's obligations to claimants. The rate of such final
settlement payments is to be a percentage rate determined by the FDIC reflecting
an average of the FDIC's receivership recovery experience.

      As a result of the provisions of law described above, in the event of the
insolvency of the Bank, the FDIC could limit or prohibit dividends payable to
the Company by the Bank, and any debt securities could be treated differently
from, and holders of any debt securities could receive substantially less than
holders of, deposit obligations of the Bank.

Federal Depositor Preference Legislation

      On August 10, 1993, the Federal Deposit Insurance Act was amended to
provide that in the event of the liquidation or other resolution of an insured
depository institution occurring on or after such date, the claims of depositors
of such institution (including claims by the FDIC as subrogee of insured
depositors) are entitled to priority in payment over the claims of any other
senior or general creditors of the institution, including any obligations to
shareholders of such depository institution in their capacity as such.

Dividends

      The principal source of funds for the Company is dividends paid to it by
the Bank. Various federal and state statutory provisions limit the amount of
dividends the Bank can pay to the Company. The approval of the OCC is required
for any dividend by a national bank if the total of all dividends declared by
the bank in any calendar year would exceed the total of its net income, as
defined by the OCC, for that year to date combined with its retained net income
for the preceding two years, less any required transfers to surplus or a fund
for the retirement of any preferred stock. In addition, a national bank may not
pay a dividend in an amount greater than its undivided profits then on hand.
Under these provisions, the Bank could have declared, at the close of 1996,
aggregate dividends of approximately $2.2 million. The payment of dividends by
the Bank is affected by various factors, such as maintenance of adequate capital
for the Bank as described more fully below. The Federal Reserve Board, the OCC
and the FDIC have indicated that as a general matter dividends should be paid by
banks only to the extent of earnings from continuing operations.

Capital

      The Federal Reserve Board's risk-based capital guidelines for bank holding
companies were fully phased in at the end of 1992. Under the guidelines, the
minimum ratio of total capital to risk-weighted assets is 8%. At least half of
the total capital is to be comprised of common equity, retained earnings and
qualifying perpetual preferred stock, after subtracting goodwill and other
intangibles (with certain limited exceptions), as described below ("Tier 1
capital"). The remainder ("Tier 2 capital") may consist of perpetual debt,
mandatory convertible debt securities, a limited amount of subordinated debt,
term preferred stock and a limited amount of loan loss reserves. The Bank is
subject to similar capital requirements adopted by the OCC. In addition, the
Federal Reserve Board requires a minimum leverage ratio (Tier 1 capital to total
average assets, excluding goodwill and other ineligible intangibles) of 3% for
bank holding companies that meet certain specified criteria, including having
the highest regulatory rating. The rule indicates that the minimum leverage
ratio should be at least 1-2% higher for bank holding companies that do not have
the highest rating or that are undertaking major expansion programs. The OCC has
adopted substantially identical minimum leverage ratio requirements. Failure to
meet the applicable capital guidelines could subject a bank to a variety of
enforcement remedies available to the federal regulatory authorities, including
limitations on the ability to pay dividends, the issuance of a directive to
increase capital, the termination of deposit insurance by the FDIC, and
appointment of a conservator or receiver. On December 31, 1996, the Company had
a Tier 1 risk-based capital ratio of 12.6% and a total risk-based capital ratio
of 13.6%. At that date, the Company had a Tier 1 leverage ratio of 7.3%.

      Under the Federal Reserve Board's guidelines, the only types of intangible
assets that may be included (i.e., not deducted from) in a bank holding
company's capital are readily marketable mortgage servicing rights ("MSRs") and
purchased credit card relationships ("PCCRs"), provided that, in the 


                                       5
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aggregate, the total amount of MSRs and PCCRs included in capital does not
exceed 50% of Tier 1 capital. PCCRs are subject to a separate sublimit of 25% of
Tier 1 capital. The amount of MSRs and PCCRs that a bank holding company may
include in its capital is limited to the lesser of (i) 90% of such assets' fair
market value (as determined under the guidelines) or (ii) 100% of such assets'
book value, each determined quarterly. Identifiable intangible assets (i.e.,
intangible assets other than goodwill) other than MSRs and PCCRs, including core
deposit intangibles, acquired on or before February 19, 1992 (the date the
Federal Reserve Board issued its original proposal for public comment) generally
will not be deducted from capital for supervisory purposes, although they will
continue to be deducted for purposes of evaluating applications filed by bank
holding companies.

      Effective January 1, 1998, the Federal Reserve Board, the FDIC, and the
OCC amended their respective risk-based capital standards to take account of
market risk in foreign exchange and commodity activities and in the trading of
debt and equity instruments. Institutions with significant exposure to market
risk would calculate their capital charges for market risk using their internal
value-at-risk models, subject to parameters contained in the rule, and hold a
commensurate amount of capital. It is anticipated that only about fifteen of the
largest U.S. institutions plus a few small institutions will be affected by this
rule. Because the Company and the Bank do not engage in foreign exchange and
commodity activities, the Company does not believe it will be affected by the
rule.

      On August 2, 1995, the Federal Reserve Board, the FDIC, and the OCC
published a joint notice of rulemaking revising their risk-based capital
standards to take account of interest rate risk. The new rule provides that the
agencies will consider a bank's exposure to declines in the economic value of
its capital due to changes in interest rates as a factor that the agencies will
consider in evaluating a depository institution's capital adequacy. On June 26,
1996, the Federal Reserve Board, the FDIC and the OCC issued a Joint Agency
Policy Statement on Interest Rate Risk that establishes a framework to measure
and monitor the level of interest rate risk at a depository institution. The
agencies have indicated that they may adopt explicit minimum requirements for
interest rate risk into their risk-based capital requirements at a future,
unspecified date. The Company cannot assess at this point the impact, if any,
that the Joint Agency Policy Statement and the proposed minimum requirements
will have on its capital ratios.

FDICIA

      FDICIA specifies, among other things, the following capital standard
categories for depository institutions: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions depending on the category in
which an institution is classified. Each of the federal banking agencies has
issued final uniform regulations that became effective December 19, 1992, which
among other things, define the capital levels described above. Under the final
regulations, a bank is considered "well-capitalized" if it (i) has a total
risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital
ratio of 6% or greater, (iii) has a leverage ratio of 5% or greater and (iv) is
not subject to any order or written directive to meet and maintain a specific
capital level for any capital measure. An "adequately capitalized" bank is
defined as one that has (i) a total risk-based capital ratio of 8% or greater,
(ii) Tier 1 risk-based capital ratio of 4% or greater and (iii) a leverage ratio
of 4% or greater (or 3% or greater in the case of a bank with a composite CAMEL
rating of 1). A bank is considered (A) "undercapitalized" if it has (i) a total
risk-based capital ratio of less than 8%, (ii) a Tier 1 risk-based capital ratio
of less than 4% or (iii) a leverage ratio of less than 4% (or 3% in the case of
a bank with a composite CAMEL rating of 1); (B) "significantly undercapitalized"
if the bank has (i) a total risk-based capital ratio of less than 6%, (ii) a
Tier 1 risk-based capital ratio of less than 3% or (iii) a leverage ratio of
less than 3%; and (C) "critically undercapitalized" if the bank has a ratio of
tangible equity to total assets equal to or less than 2%. The applicable federal
regulatory agency for a bank that is "well capitalized" may reclassify it as
"adequately capitalized," or subject an "adequately capitalized" or
"undercapitalized" institution to the


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supervisory actions applicable to the next lower capital category, if it
determines that the bank is in an unsafe or unsound condition or deems the bank
to be engaged in an unsafe or unsound practice and not to have corrected the
deficiency. As of December 31, 1996, the Bank met the definition of a "well
capitalized" institution.

      "Undercapitalized" depository institutions, among other things, are
subject to growth limitations, are prohibited, with certain exceptions, from
making capital distributions, are limited in their ability to obtain funding
from a Federal Reserve Bank and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan and provide appropriate assurances of
performance. If a depository institution fails to submit an acceptable plan,
including if the bank holding company refuses or is unable to make the guarantee
described in the previous sentence, it is treated as if it is "significantly
undercapitalized." Failure to submit or implement an acceptable capital plan
also is grounds for the appointment of a conservator or a receiver.
"Significantly undercapitalized" depository institutions may be subject to a
number of additional requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions, among other things, are prohibited
from making any payments of principal and interest on subordinated debt, and are
subject to the appointment of a receiver or conservator.

      Under FDICIA, the FDIC is permitted to provide financial assistance to an
insured bank before appointment of a conservator or receiver only if (i) such
assistance would be the least costly method of meeting the FDIC's insurance
obligations, (ii) grounds for appointment of a conservator or a receiver exist
or are likely to exist, (iii) it is unlikely that the bank can meet all capital
standards without assistance and (iv) the bank's management has been competent,
has complied with applicable laws, regulations, rules and supervisory directives
and has not engaged in any insider dealing, speculative practice or other
abusive activity.

      FDICIA also contains a variety of other provisions that may affect the
operations of the Company including reporting requirements, regulatory standards
for real estate lending, "truth in savings" provisions, and the requirement that
a depository institution give 90 days prior notice to customers and regulatory
authorities before closing any branch. FDICIA also contains a prohibition on the
acceptance or renewal of brokered deposits by depository institutions that are
not "well capitalized" or are "adequately capitalized" and have not received a
waiver from the FDIC.

      FDICIA provides the federal banking agencies with significantly expanded
powers to take enforcement action against institutions which fail to comply with
capital or other standards. Such action may include the termination of deposit
insurance by the FDIC or the appointment of a receiver or conservator for the
institution.

Interstate Banking Legislation

      The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
was enacted into law on September 29, 1994 and provides that, among other
things, substantially all state law barriers to the acquisition of banks by
out-of-state bank holding companies are eliminated effective as of September 29,
1995. The law will also permit interstate branching by banks effective as of
June 1, 1997, subject to the ability of states to opt-out completely or to set
an earlier effective date. The Company anticipates that the effect of the new
law will be to increase competition within the markets in which it now operates,
although the Company cannot predict the extent to which competition will
increase in such markets or the timing of such increase.


                                       7
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Employees

      As of December 31, 1996, the Bank had 130 full-time equivalent employees,
up 36.8% from 95 employees at the end of 1995. The Company's operations are
conducted through the Bank and consequently, the Company does not have any
separate employees.

Item 2. Properties

      The Bank currently operates out of ten offices and a non-customer
operations center. The Company's first banking office and administrative office
are located at 201 North Marion Street, Lake City, Florida, in a three-story
historic building. The building was extensively renovated in 1986 and contains
approximately 22,000 square feet of which approximately one-third is leased to
business tenants at annual rates ranging from $10.49 to $13.64 per square foot.
The real estate encompasses one full city block in downtown Lake City. The White
Avenue, Live Oak office contains approximately 6,000 square feet and was
constructed subsequent to that office opening in 1988. The Fort White and
Macclenny offices contain approximately 2,200 and 2,400 square feet,
respectively. The Macclenny office renovation was completed in 1996 and includes
a colonial design, improved service areas and the installation of an Automated
Teller Machine. The Baya Avenue, Lake City facility was built in 1971 and is a
two-story building containing approximately 10,100 square feet. Subsequent to a
full renovation in 1994, this facility also houses the Bank's loan operations
center on the second floor. The South Ohio Avenue, Live Oak office was
constructed in 1984 and contains approximately 2,000 square feet. The Company
plans to renovate this office during 1997. The Starke office is a two story,
8,000 square foot building located on a 28,000 square foot parcel of real
estate. The Bank currently uses the entire first floor of the building for
business, while the second floor is available for future expansion or leasing.
Resulting from the acquisition on September 1, 1996, of the Riherd Bank Holding
Company, three additional offices are being operated. The Lake Butler office was
constructed in 1993 with approximately 6,750 square feet. The Northwood,
Gainesville office was purchased by Farmer & Dealers Bank in August, 1994 and
contains approximately 2,000 square feet. The Alachua County, Gainesville office
was constructed in 1990 on the north side of Gainesville. The office is a
two-story building much like the Lake Butler office and contains approximately
4500 square feet. In July of 1995 the Bank purchased property located on U.S.
Highway 90 West, in Lake City. Construction began on February 17, 1997 on what
will house the Bank's third Lake City office to more fully allow the Bank to
serve its intense commercial area. In the fourth quarter of 1996 the Company
purchased and began renovations on a facility, approximately 7000 square feet,
which will house most of the Bank's non-customer operations.

      All properties, including land, improvements, furniture, fixtures, and
equipment are owned by the Bank and had a total net book value at December 31,
1996, of approximately $9.5 million. In the opinion of the Company's management,
the properties are adequately covered by insurance.

Item 3. Legal Proceedings

      Neither the Company nor the Bank is a party to, nor is any of their
property the subject of, any material pending legal proceedings.

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

      No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


                                       8
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                                  PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

      The Company's articles of incorporation authorize it to issue up to
10,000,000 shares of Common Stock. As of March 1, 1997, there were 1,937,905
shares of Common Stock issued and outstanding to 529 holders of record, and
47,790 shares subject to currently exercisable options. There is currently no
established public trading market for the Company's stock and it is not expected
that any such market will develop in the foreseeable future. Transactions in the
Company's common stock are infrequent and negotiated privately between the
persons involved in those transactions.

      Company dividends for 1996 consisted of the payment of quarterly cash
dividends in the amount of $0.05 per common share outstanding on February 5 and
May 5, and $0.06 per common share outstanding on August 5 and November 5.
Payment was made to 1,639,733 holders of record on January, April and July 25,
and 1,937,905 on October 25, 1996. The $0.22 total dividend paid in 1996
reflects an increase of 22.2% compared to $.18 total paid in 1995 ($0.04 per
common share outstanding on February 5 and May 5, and $0.05 on August 5 and
November 5, to 1,639,733 holders of record on January 25, April 25, July 25 and
October 25, 1995, respectively).

      The Company had issued $274,250 of ten-year $10 Series A Mandatory
Convertible Subordinated Debentures callable on or after November 1, 1992. On
November 15, 1996, the Company exercised its call option on these debentures,
resulting in an early redemption penalty of $8,228.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

      The following tables set forth certain selected statistical information
and should be read in conjunction with the consolidated financial statements of
the Company and the Bank included elsewhere herein. The Company has no foreign
operations; accordingly, there are no assets or liabilities attributable to
foreign operations. In comparing 1996 to 1995, it should be noted at the close
of business on August 31, 1996, CNB completed the acquisition of Riherd Banking
Company and its subsidiary, Farmers and Dealers Bank. Assets of $48.0 million
were acquired in exchange for 298,172 of CNB common stock and $2.7 million cash.
The financial results since September 1, 1996, applicable to that transaction
are included in this report.

      In 1996, the FDIC assessed financial institutions to recapitalize the
Savings Association Insurance Fund (SAIF). During the third quarter of 1996, the
Company recognized a $205,000 expense, net of applicable taxes, or $0.12 per
common share, representing its portion of the SAIF assessment. This one time
assessment should be considered when analyzing the Company's 1996 financial
performance.


                                       9
<PAGE>

                             CNB INC. AND SUBSIDIARY
                        Selected Year-End Financial Data

                                             1996          1995         Change%
                                          -----------   -----------     -------
Dollars in thousands except per share information.
================================================================================
SUMMARY OF OPERATIONS:
Total Interest Income                     $    15,090   $    12,745       18%
Total Interest Expense                         (6,612)       (5,966)      11%
                                          -----------   -----------      
   Net Interest Income                          8,478         6,779       25%

Loan Loss Provision                              (335)         (230)      46%
                                          -----------   -----------      
   Net Interest Income After
      Provision for Loan Losses                 8,143         6,549       24%

Non-Interest Income                             1,777         1,478       20%
Non-Interest Expense                           (6,360)       (5,172)      23%
                                          -----------   -----------      

Income Before Taxes                             3,560         2,855       25%
Income Taxes                                   (1,247)       (1,014)      23%
                                          -----------   -----------      

Net Income                                $     2,313   $     1,841       26%
                                          ===========   ===========    

================================================================================
PER COMMON SHARE:
Net Income Per Common Share               $      1.33   $      1.12       19%
Book Value                                      10.15          9.00       13%
Dividends                                        0.22          0.18       22%
Shares Outstanding                          1,937,905     1,639,733       18%
Weighted Average Shares Outstanding         1,739,124     1,639,733        6%

================================================================================
KEY RATIOS:
Return on Average Assets                         1.14%         1.06%       8%
Return on Average Shareholders' Equity          13.88%        13.24%       5%
Dividend Payout-computed on a per
   share basis                                  16.54%        16.07%       3%
Overhead Ratio                                  64.10%        64.43%      (1)%
Total Risk-Based Capital Ratio                  13.58%        14.90%      (9)%
Average Shareholders' Equity to Assets           8.24%         7.99%       3%
Tier 1 Capital to Total Assets - Leverage        7.25%         7.87%      (8)%

================================================================================
FINANCIAL CONDITION AT YEAR END:
Assets                                    $   254,945   $   176,733       44%
Net Loans                                     147,428       101,403       45%
Total Deposits                                226,824       159,003       43%
Common Shareholders' Equity                    19,669        14,754       33%


                                       10
<PAGE>

Overview

      Record earnings of $2.3 million, or $1.33 per share, were achieved during
1996 and exceeded 1995's earnings by $472,000, or 25.6%. This past year's
earnings also produced a return on average assets of 1.14% and a return on
average stockholders' equity of 13.88%, compared to 1.06% and 13.24%,
respectively, for 1995. Without the SAIF impact, per share results would have
been $1.45 in 1996, as compared to $1.12 in 1995, or an increase of 29.5%. The
significant factors contributing to the improvement in earnings were the growth
in operating revenue net of interest expense and improved overhead expense as a
percentage of that revenue. Total assets were $254.9 million at December 31,
1996 compared to $176.7 on December 31, 1995, a $78.2 million or 44.3% growth.
Stockholders' equity was $19.7 million at the close of 1996, compared to $14.8
million in 1995, due to net earnings retention of $2.3 million less $379,000
cash dividends to shareholders, coupled with $2.9 million resulting from shares
issued in conjunction with the Riherd transaction.

      Total loans as a percentage of total deposits improved to 65.6% at
December 31, 1996, from 64.4% at year-end 1995. The improved loan to deposit
ratio is a result of increased total loans by $46.5 million, or 45.4%, while
deposits have increased by $67.8 million, or 42.7%. Therefore, loan growth
during this past year was the main contributor to the $1.7 million, or 25.1%,
increase in net interest income, as compared to 1995.

      Liquidity and capital ratios remain well within regulatory limits. Total
non-performing assets decreased by $253,000 to $404,000 in 1996 from $657,000 in
1995, a reduction of 38.5%. Non-performing assets as a percentage of total
assets decreased to 0.16% in 1996 from 0.37% in 1995.

      Dividends paid in 1996 were $0.22 per share, representing an earnings per
share payout of 16.5%.

Results of Operations

      Improved earnings are mainly attributable to a 25.1% increase in
net-interest income to $8.5 million, from $6.8 million in 1995. The total
average loan portfolio, which is the largest and highest yielding component of
earning assets, increased as a percentage of average earning assets to 63.5%
from 59.3% in 1995. The higher yield in 1996 is a result of both higher interest
rates on securities and loan volume, which increased steadily throughout the
year. The improved loan ratio is a result of increasing average loans by $24.0
million, or 25.7%, while average assets have increased by $28.3 million, or
16.3%. The Company's total average investments increased by $3.2 million, or
4.9% to $67.4 million in 1996, compared to $64.3 million in 1995. Provision for
loan losses increased $105,000 to $335,000 or 45.7% from $230,000 in 1995, in
direct correlation to the higher average loans outstanding. Non-interest
expenses, net of non-interest income, increased $888,000, or 24.0%, to $4.6
million in 1996 compared to $3.7 million in 1995. Non-interest expenses as a
percentage of average total assets were up slightly to 3.1% at December 31,
1996, compared to 3.0% for the year ended 1995.

Net Interest Income/Margins

      Net interest income, the primary source of revenue for the Bank, increased
by 25.1% to $8.5 million in 1996, from $6.8 million in 1995. Total average
assets increased by 16.3%, as the Company enjoyed a higher level of earning
assets in 1996. The higher yield in 1996 is a result of both higher interest
rates on securities and loan volume. Net interest margins grew to 4.59% in 1996,
from 4.30% in 1995, reflective of a more favorable mix of earning assets. Yields
on securities available-for-sale increased to 6.06% from 5.15% in 1995, or an
increase of 17.7%, which was primarily due to maturing low-yielding securities,
purchased in late 1993 and 1994 following the Company's acquisition of the
Anchor Savings Bank offices, being replaced with higher-yielding investments.
Table 1: "Average Balances - Yields and Rates", below, indicates the Company's
average volume of interest earning assets and interest bearing liabilities for
1996 and 1995. Other components of earning assets as well as rates on
interest-bearing liabilities were impacted by the modest decline in market rates
in 1996, as compared to 1995. Total earning asset yields increased to 8.16% in
1996 from 8.08%, while rates on interest-bearing liabilities 


                                       11
<PAGE>

decreased to 4.13% from 4.32% in 1995. Average time deposits for 1996
represented 51.5% of total average deposits, compared to 53.6% a year earlier.
Average demand deposits, as a percentage of total average deposits, increased to
13.1% from 11.9% a year ago. Table 1a: "Analysis of Changes in Interest Income
and Expense", below, indicates that the change in interest income was due mainly
to volume increases in the loan portfolio, while the change in interest expense
was primarily due to increased volume in NOW, Money Market and Time Deposits.

              Table 1: Average Balances - Yields and Rates

<TABLE>
<CAPTION>
                                         December 31, 1996                  December 31, 1995
                                  -------------------------------    -------------------------------
                                             Interest                            Interest
                                  Average   Income or     Average    Average     Income or   Average   
                                  Balance    Expense        Rate     Balance      Expense      Rate
                                  --------   --------       ----     --------    --------      ---- 
                                                       (dollars in thousands)  
ASSETS:                                                                          
<S>                               <C>        <C>            <C>      <C>         <C>           <C>  
   Federal Funds Sold             $ 11,781   $    613       5.20%    $  7,490    $    436      5.82%
   Securities Available for Sale    43,180      2,615       6.06       16,246         837      5.15
   Investment Securities            12,135        654       5.39       40,180       2,291      5.70
   Loans, net unearned (1)         117,450     11,188       9.53       93,454       9,161      9.80
   Interest Bearing Deposits           352         20       5.69          355          20      5.64
                                  --------   --------       ----     --------    --------      ---- 
TOTAL EARNING ASSETS               184,898     15,090       8.16      157,725      12,745      8.08
   All Other Assets                 17,434                             16,253    
                                  --------                           --------                       
TOTAL ASSETS                      $202,332                           $173,978    
                                  ========                           ========    
LIABILITIES AND                                                                  
   SHAREHOLDERS' EQUITY:                                                         
Deposits:                                                                        
   NOW & Money Markets            $ 50,945      1,330       2.61     $ 41,219       1,041      2.52
   Savings                          13,466        277       2.06       12,283         320      2.61
   Time Deposits                    93,481      4,847       5.18       82,999       4,444      5.35
Short Term Borrowings                  520         25       4.81         --          --        --
Notes Payable & Debentures           1,511        133       8.80        1,623         161      9.92
                                  --------   --------       ----     --------    --------      ---- 
TOTAL INTEREST BEARING                                                           
   LIABILITIES                     159,923      6,612       4.13      138,124       5,966      4.32
Demand Deposits                     23,701                             18,406    
Other Liabilities                    2,041                              3,541    
Shareholders' Equity                16,667                             13,907    
                                  --------                           --------                       
TOTAL LIABILITIES AND                                                            
   SHAREHOLDERS' EQUITY           $202,332                           $173,978    
                                  ========                           ========    
                                                            ----                               ---- 
INTEREST SPREAD (2)                                         4.03%                              3.76%
                                                            ====                               ==== 
                                             --------                            --------
NET INTEREST INCOME                          $  8,478                            $  6,779
                                             ========                            ========
NET INTEREST MARGIN (3)                                     4.59%                              4.30%
                                                            ====                               ==== 
</TABLE>

----------
(1)   Interest income on average loans includes loan fee recognition of $410,000
      and $401,000 in 1996 and 1995 respectively.
(2)   Represents the average rate earned minus average rate paid.
(3)   Represents net interest income divided by total earning assets.


                                       12
<PAGE>

          Table 1a: Analysis of Changes in Interest Income and Expense

<TABLE>
<CAPTION>
                                    NET CHANGE DECEMBER 31,          NET CHANGE DECEMBER 31,
                                   1995-1996 ATTRIBUTABLE TO:       1994-1995 ATTRIBUTABLE TO:
                                  -----------------------------    ----------------------------
                                                           Net                             Net
                                  Volume (1)   Rate (2)  Change    Volume (1)  Rate (2)  Change
                                  ----------   --------  ------    ----------  --------  ------
                                                           (thousands)
<S>                               <C>            <C>        <C>     <C>           <C>       <C>
INTEREST INCOME:
   Federal Funds Sold             $   249        (72)       177     $    22       120       142
   Securities Available for Sale    1,387        391      1,778        (438)      130      (308)
   Investment Securities           (1,599)       (38)    (1,637)        157       203       360
   Loans                            2,349       (322)     2,027       1,285       957     2,242
   Interest Bearing Deposits         --         --         --             6      --           6
                                  -------        ---      -----     -------       ---     -----
      Total                       $ 2,386        (41)     2,345     $ 1,032     1,410     2,442
                                                                                        
INTEREST EXPENSE:                                                                       
   Deposits:                                                                            
      NOW & Money Markets         $   243         46        289     $   (67)       50       (17)
      Savings                          32        (75)       (43)       --          39        39
      Time Deposits                   557       (154)       403         314     1,015     1,329
   Short Term Borrowings               25       --           25        --        --        --
   Notes Payable & Debentures         (10)       (18)       (28)        (45)       28       (17)
                                  -------        ---      -----     -------       ---     -----
      Total                           847       (201)       646         202     1,132     1,334
                                  -------        ---      -----     -------       ---     -----
         Net Interest Income      $ 1,539        160      1,699     $   830       278     1,108
                                  =======        ===      =====     =======       ===     =====
</TABLE>

----------
(1)   The volume variance reflects the change in the average balance outstanding
      multiplied by the actual average rate during the prior period.
(2)   The rate variance reflects the change in the actual average rate
      multiplied by the average balance outstanding during the prior period.


                                       13
<PAGE>

Non-Interest Income

      Non-interest income increased by 20.2% to $1.8 million in 1996 from $1.5
million in 1995. As a percentage of average assets, there was a modest increase
to 0.88% from 0.85 in 1995. This increase is due mainly to fees and revenues
generated from demand deposit accounts with other non-interest components
contributing proportionately.

Non-Interest Expense

      Non-interest expense increased by $1.2 million, or 23.0% for the year
ended 1996, as compared to 1995. When analyzing this ratio, we would call
attention to the one-time SAIF assessment of $327,000 before-tax effect; without
the SAIF impact the increase would have only been 16.6%. Salaries and employee
benefits have increased $413,000 from 1995; however, as a percentage of average
total assets they are essentially unchanged. With the celebration of our 10 year
anniversary, added emphasis was placed on marketing the bank, resulting in a
$71,000, or 42.4% increase. Occupancy and equipment expenses have increased
20.7%, due mainly to added expenses resulting from facilities and equipment
acquired in the merger with Farmer and Dealers Bank of Lake Butler, as well as
the Operations Center which houses the Company's items processing and check
imaging systems. At the end of 1996, non-interest expenses as a percentage of
average total assets were slightly up to 3.1%, compared to 3.0% for 1995.

      The overhead efficiency ratio, which is the percentage of overhead expense
to total revenue less interest expense and provision for loan losses, has
improved to 64.1% from 64.4% for the year ended December 31, 1996, compared to
1995. When the impact of the special SAIF assessment is discounted, the overhead
ratio improved to 60.8%. The improvement in the efficiency ratio is materially
influenced by the improvements in net interest income and continued improvements
with the management of expenses. The following table details the areas of
significant non-interest expense.

                        Table 2: Other Operating Expenses
                          (Dollar amounts in thousands)

                             Year Ended December 31,

                                                           1996          1995
                                                          ------        ------
              Special one time SAIF assessment            $  327        $ --
              Data processing                                298           213
              Marketing                                      237           166
              Postage and delivery                           219           193
              Regulatory fees                                176           302
              Amortization of intangible assets              158           151
              Legal and professional                         134            84
              Supplies                                       133            94
              Loan expenses                                  120            91
              Telephone                                      105            94
              Administrative                                  92            81
              Other                                          267           190
                                                          ------        ------
              Total other operating expenses              $2,266        $1,659
                                                          ======        ======


                                       14
<PAGE>

Liquidity and Interest Rate Sensitivity

      Interest rate sensitivity refers to the responsiveness of interest-earning
assets and interest-bearing liabilities to changes in market interest rates. The
rate sensitive position, or gap, is the difference in the volume of
rate-sensitive assets and liabilities, at a given time interval, including both
floating rate and instruments which are approaching maturity. The measurement of
the Company's interest rate sensitivity, or gap, is one of the principal
techniques used in asset and liability management. Management generally attempts
to maintain a balance between rate-sensitive assets and liabilities as the
exposure period is lengthened to minimize the overall interest rate risks to the
Company. In the future, the Company will attempt to maintain, with respect to
management's expectations of interest rate changes in the immediate twelve
months, a cumulative gap position within plus, or minus, 20% of total assets.

      The asset mix of the balance sheet is continually evaluated in terms of
several variables: yield, credit quality, appropriate funding sources and
liquidity. Management of the liability mix of the balance sheet focuses on
expanding the various funding sources.

      The interest rate sensitivity position at year-end 1996 is presented in
Table 3 - "Rate Sensitivity Analysis." The difference between rate-sensitive
assets and rate-sensitive liabilities, or the interest rate sensitivity gap, is
shown at the bottom of the table. The Company would benefit from increasing
market rates when it is asset sensitive and would benefit from decreasing market
rates when it is liability sensitive. At December 31, 1996, the Company had a
liability sensitive gap (more liabilities than assets subject to repricing
within the stated time frame) of $25.0 million within a one-year period. This
suggests that if interest rates should decline over this period, the net
interest margin should improve, and if interest rates should increase, the net
interest margin should decline. Since all interest rates and yields do not
adjust at the same velocity, the gap is only a general indicator of rate
sensitivity.


                                       15
<PAGE>

                       Table 3: Rate Sensitivity Analysis
                                December 31, 1996
<TABLE>
<CAPTION>

(Dollars in thousands)                 0-3         4-6        7-12        1-5     Over 5
                                     Months      Months      Months      Years     Years       Total
                                    --------    --------    --------    -------   --------    --------
<S>                                 <C>         <C>         <C>         <C>       <C>         <C>     
INTEREST EARNING ASSETS:
Federal Funds Sold                  $  9,950    $   --      $   --      $  --     $   --      $  9,950
Securities Held to Maturity             --          --            92      9,917       --        10,009
Securities Available for Sale(1,2)     9,485       2,798       8,546     32,007      8,066      60,902
Loans(3)                              54,112      12,837      16,355     49,489     16,192     148,985
                                    --------    --------    --------    -------   --------    --------

Total Earning Assets                  73,547      15,635      24,993     91,413     24,258     229,846
                                    --------    --------    --------    -------   --------    --------

INTEREST BEARING LIABILITIES:
NOW & Money Market(4)                 33,528        --          --         --       30,858      64,386
Savings(4)                             4,418        --          --         --       10,308      14,726
Time Deposits                         33,833      28,746      32,272     19,539        120     114,510
Securities Sold Under Repurchase
   Agreements                          3,766        --          --         --         --         3,766
Notes Payable & Debentures             2,650        --          --         --         --         2,650
                                    --------    --------    --------    -------   --------    --------

Total Interest Bearing                78,195      28,746      32,272     19,539     41,286     200,038
                                    --------    --------    --------    -------   --------    --------

Int. Rate Sens. Gap                 $ (4,648)   $(13,111)   $ (7,279)   $71,874   $(17,028)   $ 29,808
                                    ========    ========    ========    =======   ========    ========
Cum. Int. Rate Sens. Gap            $ (4,648)   $(17,759)   $(25,038)   $46,836   $ 29,808    $ 29,808
                                    ========    ========    ========    =======   ========    ========

Int. Rate Sens. Gap Ratio               0.94        0.54        0.77       4.68       0.59        1.15
                                    ========    ========    ========    =======   ========    ========

Cum. Int. Rate Sens. Gap Ratio          0.94        0.83        0.82       1.30       1.15        1.15
                                    ========    ========    ========    =======   ========    ========

Ratio of Cumulative Gap to
   Total Earning Assets:
      December 31, 1996                (2.02)%     (7.73)%    (10.89)%    20.38%     12.97%
                                    ========    ========    ========    =======   ========    

      December 31, 1995                (0.40)%     (9.08)%     (8.78)%    25.11%     12.23%
                                    ========    ========    ========    =======   ========    
</TABLE>

----------
(1)   Includes Interest Bearing Deposits of $141,000.
(2)   Includes equity in Federal Home Loan Bank of $586,000 and Federal Reserve
      Bank of $518,000. Securities are shown at their amortized cost, excluding
      market value adjustment for unrealized gains of $105,000.
(3)   Total Loans including Unearned Discount of $161,000
(4)   Certain deposit accounts are included in the After Five Years category. If
      these deposit accounts had been included in the Within Three Months
      category, the ratio of cumulative gap to total earning assets would have
      been (28.80) for the one year category at December 31, 1996.


                                       16
<PAGE>

      The Bank's gap and liquidity positions are formally reviewed quarterly by
management to determine whether or not changes in policies and procedures are
necessary to achieve financial goals. Included in the review is an internal
analysis of the possible impact on net interest income due to market rate
changes of plus and minus 1%. In the rate sensitivity analysis, current average
rates within the repricing periods of affected balance sheet categories are
adjusted to an historical percentage of market change according to each rate
shock scenario. The adjusted rates are then substituted in interest computations
and compared to actual results. These efforts will continue to provide the tools
necessary in the Company's attempt to maximize its primary earnings factor: net
interest income.

      Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to provide sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. These funds can be obtained by converting assets to cash or by
attracting new deposits. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, federal funds sold and securities
available-for-sale) totaled $63.2 million and represented 34.8% of average total
deposits during 1996, compared to $30.4 million and 19.6% for 1995. At the end
of 1995 banks were granted an opportunity to restructure their securities
portfolios according to availability for sale. The Bank, thereby, reclassed
$30.1 million of its securities held to maturity as those available for sale, in
effect increasing its liquidity position in anticipation of the need for future
loan demand. Average loans were 64.7% and 60.3% of average deposits for 1996 and
1995, respectively. As noted in Table 5 - "Loan Portfolio Composition",
approximately $129.4 million, or 87.0%, of the loan portfolio consisted of
commercial loans, real estate mortgage loans and real estate construction loans.
Approximately 14.1% of the portfolio matures within one year.

      Core deposits, which represent all deposits other than time deposits in
excess of $100,000, averaged 91.4% of total deposits in 1996 and 92.0% in 1995.
The Bank closely monitors its reliance on time deposits in excess of $100,000,
which are generally considered less stable and less reliable than core deposits.
The Bank does not nor has it ever solicited brokered deposits. Table 4, below,
sets forth the amounts of time deposits with balances of $100,000 or more that
mature within indicated periods.

             Table 4: Maturity of Time Deposits of $100,000 or More
                                December 31, 1996

                                                    Amount
                                                   --------
                                                  (thousands)
               Three Months or Less                $  6,118
               Three Through Six Months               5,173
               Six Through Twelve Months              8,890
               Over Twelve Months                     3,797
                                                   --------
               Total                               $ 23,978
                                                   ========


                                       17
<PAGE>

Lending Activities

     The local markets served by the Company continued to experience solid loan
demand, fueled by an increase in commercial, commercial real estate and
residential mortgages. Because loans are expected to produce higher yields than
securities and other interest-earning assets (assuming that loan losses are not
excessive), the absolute volume of loans and the volume as a percentage of total
earning assets is an important determinant of net interest margin. During 1996,
average loans were $117.4 million and were 63.5% of average earning assets,
compared to $93.4 million and 59.3% for 1995. Average loans increased by $24.0
million, or 25.7%, during 1996. On December 31, 1996, the Company's
loan-to-deposit ratio stood at 65.6%, compared to 64.4% at the end of 1995. The
following table compares the composition of the Company's loan portfolio as of
December 31, 1996, to 1995. This loan portfolio composition is expected to stay
roughly the same in 1997.

                    Table 5: Loan Portfolio Composition

<TABLE>
<CAPTION>
                                                                  December 31,
       Types of Loans                                    1996                     1995            
       -------------------                          --------------           -------------
                                                                  (thousands)
       <S>                                     <C>               <C>     <C>             <C>  
       Commercial, Financial and Agricultural  $   68,595        46.1%   $   48,948      47.8%
       Real Estate - Construction                   4,029         2.7%        2,159       2.1%
       Real Estate - Mortgage                      56,787        38.2%       34,912      34.1%
       Installment and Consumer Lines              19,413        13.0%       16,330      16.0%
                                               ----------        ----    ----------      ---- 
       Total Loans, Net of Unearned Discount      148,824       100.0%      102,349     100.0%
       Less: Allowance for Loan Losses             (1,396)                     (946)
                                               ----------                ----------           
       Net Loans                               $  147,428                $  101,403
                                               ==========                ==========           
</TABLE>

      The following table sets forth the maturity distribution for selected
components of the Company's loan portfolio including unearned discounts of
$161,000 on December 31, 1996. Demand loans and overdrafts are reported as due
in one year or less, and loan maturity is based upon scheduled principal
payments.

                  Table 6: Maturity Schedule of Selected Loans
                                December 31, 1996

                                           0-12       1-5      Over 5
                                          Months     Years     Years     Total
                                          -------   -------   -------   --------
                                                       (thousands)
All Loans Other Than Construction         $16,968   $59,656   $68,332   $144,956
Real Estate - Construction                  4,029      --        --        4,029
                                          -------   -------   -------   --------
Total                                     $20,997   $59,656   $68,332   $148,985

Fixed Interest Rate                       $ 7,165   $37,994   $17,826   $ 62,985
Variable Interest Rate                    $13,832   $21,662   $50,506   $ 86,000


Loan Quality

     Total non-performing assets decreased by $253,000 to $404,000 in 1996 from
$657,000 in 1995, a reduction of 38.5%. Non-performing assets as a percentage of
total assets decreased to 0.16% in 1996 from 0.37% in 1995. Non-accrual loans
have decreased $285,000 since December 31, 1995. The decrease in non-accrual
loans since December 31, 1995 was attributable to loans which have been
liquidated without significant losses, with the exception of one $55,000
charge-off during 1996.


                                       18
<PAGE>

                         Table 7: Non-Performing Assets

                                                   December 31,
                                              1996            1995
                                              ----            ---- 
                                             (dollars in thousands)
            Non-Accrual Loans                $  87           $ 372
            Past Due Loans 90 Days or
                More and Still Accruing        229             159
            Other Real Estate Owned             88             126
                                              ----            ---- 
            
            Total Non-Performing Assets      $ 404           $ 657
                                              ====            ==== 
            
            Percent of Total Assets           0.16%           0.37%
                                              ====            ==== 
      
      The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. On an ongoing basis, management attempts to maintain the
allowance for loan losses at levels sufficient to provide for potential losses
inherent to the loan portfolio. The allowance for loan losses is established
through a provision charged to expense. Loans are charged against the allowance
when it is recognized that collection of the principal is unlikely. The
allowance for loan losses on December 31, 1996, was 0.94% of total loans. Table
8 Allocation of Allowance for Loan Losses, set forth below, indicates the
specific reserves allocated by loan type.

                Table 8: Allocation of Allowance for Loan Losses

                                                 December 31,
                                          1996                    1995
                                  --------------------    --------------------
                                           Percent of              Percent of
                                          Loans in Each           Loans in Each
                                           Category to             Category to
                                  Amount   Total Loans    Amount   Total Loans
                                  ------   -----------    ------   -----------
                                             (dollars in thousands)
      Commercial, Financial                                       
         and Agricultural         $  821        46%        $476        48%
      Real Estate - Construction       5         3%           5         2%
      Real Estate- Mortgage          154        38%          72        34%
      Consumer                       416        13%         389        16%
      Unallocated                   --         --             4       --
                                  ------       ---         ----       --- 
      Total                       $1,396       100%        $946       100%
                                  ======       ===         ====       === 
                                                                           
      The determination of the reserve level rests upon management's judgment
about factors affecting loan quality and assumptions about the economy.
Management considers the period-end allowance appropriate and adequate to cover
possible losses in the loan portfolio; however, management's judgment is based
upon a number of assumptions about future events, which are believed to be
reasonable, but which may or may not prove to be valid. Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the allowance for loan losses will
not be required. Table 9: Activity in Allowance for Loan Losses, below,
indicates activity in the allowance for loan losses for the year 1996 as
compared to 1995.


                                       19
<PAGE>

             Table 9: Activity in Allowance for Loan Losses

                                                         1996          1995
                                                       ---------     ---------
                                                        (dollars in thousands)

Balance at Beginning of Year                           $     946     $     827
Allowance Acquired in Merger                                 371          --
Loans Charged-Off:
   Commercial, Financial and Agricultural                     79            11
   Real Estate, Mortgage                                       1          --
   Consumer                                                  203           159
                                                       ---------     ---------
      Total Loans Charged-Off                               (283)         (170)
Recoveries on Loans Previously Charged-Off:
   Commercial, Financial and Agricultural                      7            17
   Real Estate Mortgage                                        1          --
   Consumer                                                   19            42
                                                       ---------     ---------
      Total Loan Recoveries                                   27            59
                                                       ---------     ---------
        Net Loans Charged-Off                               (256)         (111)
                                                       ---------     ---------

Provision for Loan Losses Charged to Expense                 335           230
                                                       ---------     ---------
Ending Balance                                         $   1,396     $     946
                                                       =========     =========
Total Loans Outstanding                                $ 148,824     $ 102,349
Average Loans Outstanding                              $ 117,450     $  93,454
Allowance for Loan Losses to Loans Outstanding              0.94%         0.92%
Net Charge-Offs to Average Loans Outstanding                0.22%         0.12%


                                       20
<PAGE>

Investment Portfolio

     The following tables set forth the maturity distribution and the weighted
average yields of securities held to maturity and securities available for sale.

        Table 10: Maturity Distribution of Investment Securities
                            December 31, 1996

<TABLE>
<CAPTION>

Thousands                                Held to Maturity(4)      Available for Sale
---------------------------------------------------------------------------------------
                                       Amortized   Estimated    Amortized   Estimated
                                         Cost     Market Value    Cost     Market Value
                                       ---------  ------------  ---------  ------------
<S>                                     <C>          <C>         <C>          <C>    
U.S. Treasury:
   One Year or Less                     $  --        $ --        $10,073      $10,022
   Over One Through Five Years             --          --         21,941       22,089
                                        -------      ------      -------      -------
Total U.S. Treasury                        --          --         32,014       32,111

 U.S. Government Agencies
 and Corporations:
   One Year or Less                          92          94        3,193        3,196
   Over One Through Five Years            9,917       9,628       10,388       10,327
   Over Five Through Ten Years(4)          --          --          3,257        3,229
   Over Ten Years(4)                       --          --          9,037        9,036
                                        -------      ------      -------      -------
Total U.S. Government Agencies           10,009       9,722       25,875       25,788
 and Corporations

Obligations of State and Political
 Subdivisions:
   Over One Through Five Years             --          --            100          103
   Over Five Through Ten Years             --          --            705          750
   Over Ten Years                          --          --            857          910
                                        -------      ------      -------      -------
Total Obligations of State and             --          --          1,662        1,763
 Political Subdivisions

Other Securities:
   One Year or Less(2)                     --          --             64           64
   Over One Through Five Years(2)          --          --             77           77
   Over Ten Years(3)                       --          --          1,210        1,204
                                        -------      ------      -------      -------
Total Other Securities                     --          --          1,351        1,345
                                        -------      ------      -------      -------
Total Securities                        $10,009      $9,722      $60,902      $61,007
                                        =======      ======      =======      =======
</TABLE>

----------
(1)   All securities, excluding Obligations of State and Political Subdivisions,
      are taxable.
(2)   Represents Interest-bearing deposits in other banks.
(3)   Represents investment in Federal Reserve Bank and Federal Home Loan Bank
      stock and other marketable equity securities.
(4)   Includes investments in mortgage-backed securities which are subject to
      early repayment.


                                       21
<PAGE>

        Table 10a: Weighted Average Yield by Range of Maturities

                                      December 31,
                                   1996          1995
                                   ----          ----
One Year or Less                   5.24%         5.83%
Over One through Five Years        6.09          5.63
Over Five through Ten Years        6.43          7.80
Over Ten Years (1)                 6.14          6.23

----------
(1)  Represents adjustable rate, mortgage-backed securities which are
     repriceable within one year.

Capital Resources

      The OCC regulates risk based capital guidelines for national banks. These
guidelines are intended to provide an additional measure of a bank's capital
adequacy by assigning weighted levels of risk to asset categories. Banks are
also required to systematically hold capital against such "off balance sheet"
activities as loans sold with recourse, loan commitments, guarantees and standby
letters of credit. These guidelines are intended to strengthen the quality of
capital by increasing the emphasis on common equity and restricting the amount
of loss reserves and other forms of equity such as preferred stock that may be
included in capital.

      Under the terms of the guidelines, banks must meet minimum capital
adequacy based upon both total assets and risk adjusted assets. All banks are
required to maintain a minimum ratio of total capital to risk-weighted assets of
8% and a minimum ratio of Tier 1 capital to risk-weighted assets of 4%.
Adherence to these guidelines has not had an adverse impact on the Company or
the Bank. Selected capital ratios at year-end 1996 as compared to 1995 are as
follows:

                            Table 11: Capital Ratios

                                   December 31,     Well Capitalized  Regulatory
                                 1996       1995      Requirements     Minimums
                                 ----       ----      ------------     --------
Risk Based Capital Ratios:
     Tier 1 Capital Ratio        12.6%      13.7%          6.0%          4.0%
     Total Capital to
       Risk-Weighted Assets      13.6%      14.9%         10.0%          8.0%
Tier 1 Leverage Ratio             7.3%       7.9%          5.0%          4.0%

Item 7. Financial Statements

      The consolidated financial statements which follow have been audited by
the Company's independent certified public accountants, Osburn, Henning and
Company. Their opinion on the Company's consolidated financial statements is
also included therein.



                                       22
<PAGE>

                             FINANCIAL STATEMENTS

                           CNB, INC. AND SUBSIDIARY
                              LAKE CITY, FLORIDA

                              DECEMBER 31, 1996
<PAGE>

                        INDEX TO FINANCIAL STATEMENTS


Report of Independent Certified Public Accountants ..................... Page 1

Consolidated Balance Sheets ............................................      2

Consolidated Statements of Operations ..................................      3

Consolidated Statements of Shareholders' Equity ........................      4

Consolidated Statements of Cash Flows ..................................      5

Notes to Consolidated Financial Statements .............................      6
<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders
CNB, Inc. and Subsidiary
Lake City, Florida

      We have audited the accompanying consolidated balance sheets of CNB, Inc.
and Subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNB, Inc.
and Subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.


OSBURN, HENNING & COMPANY

January 31, 1997


                                      - 1 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS


                                                            December 31,
                                                        1996           1995
                                                    ------------  -------------
          ASSETS

Cash and due from banks                             $ 12,789,396  $   7,898,690
Federal funds sold                                     9,950,000      4,660,000
Interest bearing deposits in other banks                 140,986        413,072
                                                    ------------  -------------
          Total Cash and Cash Equivalents             22,880,382     12,971,762
Securities available for sale                         60,866,357     39,838,485
Securities held to maturity                           10,008,604     13,246,806
Loans, net                                           147,428,138    101,402,908
Premises and equipment, net                            9,459,393      6,432,547
Other assets                                           4,302,470      2,840,797
                                                    ------------  -------------
          TOTAL ASSETS                              $254,945,344  $ 176,733,305
                                                    ============  =============

   LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
 Deposits:
  Noninterest-bearing demand                        $ 33,201,517  $  19,110,965
  Savings, NOW and money market                       79,111,428     55,480,072
  Time, under $100,000                                90,533,210     71,441,973
  Time, $100,000 and over                             23,977,814     12,969,601
                                                    ------------  -------------
       Total Deposits                                226,823,969    159,002,611

 Securities sold under repurchase agreements           3,766,347           --
 Notes payable                                         2,650,000        950,000
 Other liabilities                                     2,036,195      1,752,548
                                                    ------------  -------------
       Total Liabilities                             235,276,511    161,705,159
                                                    ------------  -------------
MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES               --          274,250
                                                    ------------  -------------
COMMITMENTS AND CONTINGENCIES (Note 17)

SHAREHOLDERS' EQUITY
  Preferred stock, $.01 par value, 500,000 shares
    authorized; no shares issued or outstanding             --             --
  Common stock, $.01 par value, 10,000,000 shares
    authorized; 1,937,905 and 1,639,733 shares
    issued and outstanding                                19,379         16,397
  Additional paid-in capital                          12,682,601      9,784,369
  Retained earnings                                    6,901,006      4,966,357
  Net unrealized gain (loss) on securities
    available for sale                                    65,847        (13,227)
                                                    ------------  -------------
       Total Shareholders' Equity                     19,668,833     14,753,896
                                                    ------------  -------------
       TOTAL LIABILITIES AND SHAREHOLDERS'
         EQUITY                                     $254,945,344  $ 176,733,305
                                                    ============  =============

See Notes to Consolidated Financial Statements.


                                      - 2 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                       Year Ended December 31,
                                                        1996            1995
                                                    ------------     -----------
Interest Income
  Interest and fees on loans                        $ 11,187,824     $ 9,161,123
  Interest on securities held to maturity                653,748       2,291,192
  Interest on securities available for sale            2,615,265         837,321
  Interest on federal funds sold                         612,765         435,955
  Interest on interest bearing deposits                   20,078          20,091
                                                    ------------     -----------
       Total Interest Income                          15,089,680      12,745,682
                                                    ------------     -----------
Interest Expense
  Interest on deposits                                 6,454,024       5,804,836
  Interest on notes payable                              132,506         161,467
  Interest on short-term borrowings                       25,023            --
                                                    ------------     -----------
       Total Interest Expense                          6,611,553       5,966,303
                                                    ------------     -----------
       Net Interest Income                             8,478,127       6,779,379

Provision for Loan Loss                                  335,000         230,000
                                                    ------------     -----------
       Net Interest Income After
         Loan Loss Provision                           8,143,127       6,549,379

Non-interest Income
  Service charges                                      1,404,930       1,187,036
  Other fees and charges                                 397,199         288,233
  Gain (loss) on sale of securities                      (24,945)          2,838
                                                    ------------     -----------
       Total Non-interest Income                       1,777,184       1,478,107
                                                    ------------     -----------
Non-interest Expense
  Salaries and employee benefits                       3,116,705       2,704,200
  Occupancy and equipment expenses                       976,708         809,223
  Special one-time SAIF assessment                       326,823            --
  Other operating expenses                             1,939,533       1,658,877
                                                    ------------     -----------
       Total Non-interest Expense                      6,359,769       5,172,300
                                                    ------------     -----------
       Income Before Income Taxes                      3,560,542       2,855,186

Income Taxes                                           1,247,261       1,013,930
                                                    ------------     -----------
       NET INCOME                                   $  2,313,281     $ 1,841,256
                                                    ============     ===========
Earnings Per Share:
       NET INCOME PER COMMON SHARE                  $       1.33     $      1.12
                                                    ============     ===========
Weighted average common shares outstanding             1,739,124       1,639,733
                                                    ============     ===========

See Notes to Consolidated Financial Statements.


                                      - 3 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                         Common Stock       Additional                     Total
                                     ---------------------    Paid-in      Retained     Shareholders'
                                      Shares    Par Value     Capital      Earnings        Equity
                                     ---------  ----------  -----------  ------------   ------------
<S>                                  <C>        <C>         <C>          <C>            <C>         
BALANCE, DECEMBER 31, 1994           1,639,733  $   16,397  $ 9,784,369  $  3,420,252   $ 12,927,106

Net income for year ended
  December 31, 1995                       --          --           --       1,841,256      1,841,256

Cash dividends                            --          --           --        (295,151)      (295,151)

Change in unrealized loss on
  securities available for
  sale, net of tax effect of
  $166,979                                --          --           --            --          280,685
                                     ---------  ----------  -----------  ------------   ------------

BALANCE DECEMBER 31, 1995            1,639,733      16,397    9,784,369     4,966,357     14,753,896

Net income for year ended
  December 31, 1996                       --          --           --       2,313,281      2,313,281

Cash dividends                            --          --           --        (378,632)      (378,632)

Shares issued in acquisition
  of Riherd                            298,172       2,982    2,898,232          --        2,901,214

Change in unrealized loss on
  securities available for
  sale, net of tax effect of
  $47,040                                 --          --           --            --           79,074
                                     ---------  ----------  -----------  ------------   ------------

BALANCE DECEMBER 31, 1996            1,937,905  $   19,379  $12,682,601  $  6,901,006   $ 19,668,833
                                     =========  ==========  ===========  ============   ============
</TABLE>

See Notes to Consolidated Financial Statements.


                                    - 4 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                       Year Ended December 31,
                                                        1996           1995
                                                    ------------   ------------
OPERATING ACTIVITIES
  Net income                                        $  2,313,281   $  1,841,256
  Adjustments to reconcile net income to cash
    provided by operating activities:
      Depreciation and amortization                      579,686        504,784
      Provision for loan losses                          335,000        230,000
      Security amortization - net                        225,856        259,214
      Proceeds from sale of other real estate            249,554        104,021
      Deferred income taxes (benefit)                   (165,768)       124,129
  Changes in period-end balances of:
    Other assets                                         (78,202)      (552,613)
    Other liabilities                                    336,470        495,960
                                                    ------------   ------------
        Net Cash Provided By Operating Activities      3,795,877      3,006,751
                                                    ------------   ------------
INVESTING ACTIVITIES
  Purchases of securities available for sale         (17,629,662)    (3,635,985)
  Securities available for sale called by issuer       3,000,000           --
  Maturities of securities available for sale          3,650,000     11,750,000
  Sales of securities available for sale               4,039,164      3,086,221
  Principal payments on mortgage backed securities
    available for sale                                 3,591,500      1,297,405
  Purchases of securities held to maturity                  --      (14,547,968)
  Maturities of securities held to maturity                 --          500,000
  Securities held to maturity called by issuer              --        9,098,568
  Principal payments on mortgage backed securities
    held to maturity                                   3,185,437      2,018,282
  Net increase in loans                              (21,773,508)   (16,580,374)
  Net increase in premises and equipment              (1,427,233)      (632,030)
  Cash received related to acquisition,
    net of cash paid                                     214,372           --
                                                    ------------   ------------
       Net Cash Used In Investing Activities         (23,149,930)    (7,645,881)
                                                    ------------   ------------
FINANCING ACTIVITIES
  Net increase in deposits                            24,449,208      6,390,363
  Securities sold under repurchase agreements          3,766,347           --
  New borrowings under note payable                    2,650,000           --
  Repayment of note payable                             (950,000)      (750,000)
  Redemption of subordinated debentures                 (274,250)          --
  Cash dividends                                        (378,632)      (295,151)
                                                    ------------   ------------
       Net Cash Provided By Financing Activities      29,262,673      5,345,212
                                                    ------------   ------------
       Net Increase in Cash
         and Cash Equivalents                          9,908,620        706,082

       Cash and Cash Equivalents:
         Beginning of Year                            12,971,762     12,265,680
                                                    ------------   ------------
         End of Year                                $ 22,880,382   $ 12,971,762
                                                    ============   ============

See Notes to Consolidated Financial Statements.


                                      - 5 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND FINANCIAL STATEMENT PRESENTATION

      Organization

            CNB, Inc. (the "Company") is a registered bank holding company
            incorporated in Florida. The Company operates a wholly-owned banking
            subsidiary, CNB National Bank (the "Bank"), which is chartered as a
            national bank in Lake City, Florida. The Bank is a member of the
            Federal Reserve System and conducts business from a total of ten
            offices in north Florida. During 1996, the Company acquired another
            banking institution as more fully discussed in Note 3.

      Principles of Consolidation

            The consolidated financial statements include the accounts of the
            Company and the Bank. All significant intercompany accounts and
            transactions have been eliminated in consolidation.

      Reclassification

            Certain amounts and captions presented in the 1995 financial
            statements have been reclassified to conform to the 1996
            presentation. These reclassifications had no effect on total assets,
            liabilities, equity or operations as previously reported.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Securities

            Securities Available for Sale

                  Securities which are used for asset/liability, liquidity, and
                  other funds management purposes are deemed to have indefinite
                  holding periods (securities available for sale). These
                  securities are accounted for on a fair value basis with market
                  adjustments charged or credited directly to shareholders'
                  equity, net of any associated income tax effect.

            Securities Held to Maturity

                  Securities where the Company's intent and ability is to hold
                  to maturity (securities held to maturity) are stated at cost,
                  adjusted for amortization of premiums and accretion of
                  discounts.

      Amortization and accretion of premiums and discounts are recognized as
      adjustments to interest income. Realized gains and losses are recognized
      using the specific identification method.


                                    - 6 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      Loans and Allowance for Loan Losses

            Loans are stated at the amount of unpaid principal, reduced by an
            allowance for loan losses and any unearned loan income. Interest on
            substantially all loans other than installment loans is calculated
            by using the simple interest method on daily balances of the
            principal amounts outstanding except for those classified as
            nonaccrual loans. The accrual of interest is discontinued when
            future collection of principal or interest in accordance with the
            contractual terms may be doubtful. Interest on some installment
            loans is recognized under the rule-of-78s method, the results of
            which are not materially different than the interest method.

            Loan fees, net of loan origination costs, are capitalized and
            amortized as yield adjustments over the respective loan terms using
            a method which does not differ significantly from the interest
            method. For 1996 and 1995, loan fees included in interest and fees
            on loans amounted to $410,033 and $400,602, respectively.

            The allowance for loan losses is established through a provision for
            loan losses charged to operations. Loans are charged against the
            allowance for loan losses when management believes that the
            collectibility of the principal is unlikely. The allowance is an
            amount that management believes will be adequate to absorb possible
            losses on existing loans that may become uncollectible based on
            evaluations of the collectibility of loans. The evaluations take
            into consideration such factors as changes in the nature and volume
            of the loan portfolio, overall portfolio quality, review of specific
            problem loans and current economic conditions that may affect the
            borrowers' ability to pay. Accrual of interest is discontinued on
            loans that are past due 90 days or more as to principal or interest
            unless substantially collateralized and in process of collection, or
            sooner, if in the opinion of management the borrowers' financial
            condition is such that collection of principal or interest is
            doubtful.

      Premises and Equipment

            Premises and equipment are stated at cost less allowances for
            depreciation. Depreciation is computed on the straight-line method
            over the estimated useful lives of the assets. Maintenance and
            repairs are charged to expenses as incurred. Gains and losses on
            dispositions are reflected in operations.


                                      - 7 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      Intangibles

            The Company has intangible assets with a carrying amount of
            $1,726,000 and $928,000 at December 31, 1996 and 1995, respectively.
            Substantially all of the intangibles at December 31, 1995 relate to
            core deposits acquired in prior years' acquisitions. Core deposit
            intangibles are being amortized over a ten year period using the
            straight-line method. During 1996, goodwill was added in connection
            with the acquisition discussed in Note 3. Goodwill is being
            amortized over fifteen years using the straight-line method.
            Goodwill had a carrying amount of $957,000 at December 31, 1996.
            Amortization charged against operations for all intangibles was
            $158,465 and $150,862 for 1996 and 1995, respectively.

      Income Taxes

            The Company uses the liability method of accounting for income
            taxes. This method requires the recognition of deferred tax assets
            and liabilities for the future tax consequences attributable to
            differences between the financial statement carrying amounts of
            existing assets and liabilities and their respective tax bases.

            The Company and the Bank file consolidated federal and state income
            tax returns. Under a tax-sharing arrangement, income tax charges or
            credits are generally allocated to the Company and the Bank on the
            basis of their respective taxable income or loss included in the
            consolidated income tax return as determined by the separate return
            method.

      Cash Flow Information

            For purposes of reporting cash flows, cash and cash equivalents
            include cash and due from banks, interest-bearing deposits in other
            banks, and federal funds sold. Cash paid for interest and income
            taxes was $6,632,799 and $1,247,912, respectively, during 1996, and
            $5,479,743 and $930,047, respectively, during 1995.

            In connection with the acquisition discussed in Note 3, the Company
            received cash of approximately $2.9 million, loans and securities of
            $42.3 million and premises, equipment and other assets of $2.8
            million, and assumed deposits and other liabilities of $43.4
            million. The acquisition was effected by the payment of
            approximately $2.7 million cash and issuance of common stock of the
            Company.


                                      - 8 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - 1996 ACQUISITION

      On August 31, 1996, the Company acquired Riherd, Inc. (Riherd), and its
      wholly-owned subsidiary bank, Farmers and Dealers Bank (F & D) in Lake
      Butler, Florida. F & D operated from its Lake Butler headquarters and two
      branch offices in Alachua County. The acquisition was effected through the
      Company's issuance of 298,172 of its common shares valued at approximately
      $2.9 million and the payment of approximately $2.7 million in cash to
      Riherd's shareholders. As a part of this transaction, Riherd and F & D
      were merged into the Company and the Bank, respectively.

      The acquisition was accounted for by the Company as a purchase transaction
      and resulted in goodwill of approximately $990,000. Goodwill is being
      amortized over a fifteen year period on a straight-line basis.
      Amortization during 1996 was $21,448. Operating results of Riherd and F &
      D from January 1 through August 31, 1996 were treated as a part of the net
      assets purchased. Their operations after August 31, 1996 are included in
      the accompanying 1996 consolidated statement of operations.

NOTE 4 - SECURITIES

      Amortized cost and estimated fair value of securities available for sale
      at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                U. S.          U. S.       State,                                 
                              Treasury      Government    County &
                             Securities      Agencies     Municipal      Other         Total
                            ------------   ------------   ----------  -----------   ------------
      <S>                   <C>            <C>            <C>         <C>           <C>         
      Amortized cost        $ 32,014,271   $ 25,874,958   $1,662,660  $ 1,209,450   $ 60,761,339
      Gross unrealized:
        Gains                    154,666         92,459      100,814         --          347,939
        Losses                   (58,280)      (179,501)        --         (5,140)      (242,921)
                            ------------   ------------   ----------  -----------   ------------
      Estimated fair value  $ 32,110,657   $ 25,787,916   $1,763,474  $ 1,204,310   $ 60,866,357
                            ============   ============   ==========  ===========   ============
</TABLE>

      Amortized cost and estimated fair value of securities available for sale
      at December 31, 1995 are as follows:

<TABLE>
<CAPTION>
                                   U. S.          U. S.
                                 Treasury      Government
                                Securities      Agencies       Other        Total
                               ------------   ------------   ---------   ------------
      <S>                      <C>            <C>            <C>         <C>         
      Amortized cost           $ 13,701,198   $ 25,210,782   $ 947,600   $ 39,859,580
      Gross unrealized:
        Gains                        26,846        179,038         104        205,988
        Losses                      (95,204)      (124,272)     (7,607)      (227,083)
                               ------------   ------------   ---------   ------------
      Estimated fair value     $ 13,632,840   $ 25,265,548   $ 940,097   $ 39,838,485
                               ============   ============   =========   ============
</TABLE>


                                      - 9 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 - SECURITIES (CONTINUED)

      Amortized cost and estimated fair value of securities held to maturity are
      summarized as follows:

                                                         December 31,
                                              ---------------------------------
                                                  1996                 1995
                                              ------------         ------------
                                                 U. S.                U. S.
                                               Government           Government
                                                Agencies             Agencies
                                              ------------         ------------
      Amortized cost                          $ 10,008,604         $ 13,246,806
      Gross unrealized:
        Gains                                        9,224               34,666
        Losses                                    (295,945)            (228,927)
                                              ------------         ------------
      Estimated fair value                    $  9,721,883         $ 13,052,545
                                              ============         ============

      During 1996, securities available for sale with a carrying amount of
      $4,039,164 were sold for $4,014,219, resulting in gross realized losses of
      $24,945.

      During 1995, securities available for sale with a carrying amount of
      $3,083,383 were sold for $3,086,221, resulting in gross realized gains of
      $6,146 and losses of $3,308.

      Interest income earned on tax exempt securities in 1996 was $32,130. There
      was no tax exempt investment securities income in 1995. Dividends of
      $64,564 and $61,421 on stock of the Federal Reserve Bank and Federal Home
      Loan Bank are included in interest on securities available for sale in
      1996 and 1995, respectively.

      The amortized cost and estimated fair value of securities at December 31,
      1996, by contractual maturity, are shown below:

<TABLE>
<CAPTION>
                                             Securities               Securities       
                                         Available for Sale        Held to Maturity
                                      ------------------------  -----------------------
                                      Amortized    Estimated    Amortized    Estimated
                                         Cost      Fair Value      Cost      Fair Value
                                      -----------  -----------  -----------  ----------
      <S>                             <C>          <C>          <C>          <C>     
      Due in:
        One year or less              $13,073,822  $13,029,149  $      --    $     --
        After one through five years   32,183,276   32,272,037         --          --
        After five through ten          2,724,084    2,751,398         --          --
        Over ten years                    856,718      910,307         --          --
        Mortgage-backed securities
          and other                    11,923,439   11,903,466   10,008,604   9,721,883
                                      -----------  -----------  -----------  ----------
                                      $60,761,339  $60,866,357  $10,008,604  $9,721,883
                                      ===========  ===========  ===========  ==========
</TABLE>

      At December 31, 1996, U. S. Treasury and Government agency securities with
      an amortized cost of $15,803,602 and estimated fair value of $15,917,821
      were pledged to secure public funds, treasury tax and loan deposits and
      repurchase agreements.


                                     - 10 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - LOANS, ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS

      Loans at December 31 were comprised of the following:

                                                     1996              1995
                                                 -------------    -------------
      Commercial, financial and agricultural     $  68,595,222    $  48,948,386
      Real estate - construction                     4,028,756        2,158,705
      Real estate - mortgage                        56,787,218       34,911,476
      Installment and consumer lines                19,412,841       16,330,111
                                                 -------------    -------------
          Total loans net of unearned discount     148,824,037      102,348,678
      Less:  Allowance for loan losses              (1,395,899)        (945,770)
                                                 -------------    -------------
          Net Loans                              $ 147,428,138    $ 101,402,908
                                                 =============    =============

      Activity in the allowance for loan losses account was as follows:

                                                     1996               1995
                                                  -----------         ---------
      Balance beginning of year                   $   945,770         $ 827,052
      Acquired in acquisition                         370,195              --
      Provision                                       335,000           230,000
      Recoveries                                       27,838            59,196
      Charge-offs                                    (282,904)         (170,478)
                                                  -----------         ---------
         Balance At End Of Year                   $ 1,395,899         $ 945,770
                                                  ===========         =========

      Loans on a nonaccrual basis totaled approximately $87,000 and $372,000 at
      December 31, 1996 and 1995, respectively. Foregone interest which would
      have otherwise been recorded on nonaccrual loans, including those loans
      that were nonaccrual at sometime during the year and later paid,
      reinstated or charged off, was approximately $25,000 and $48,000 in 1996
      and 1995, respectively. In addition to nonaccrual loans, non-performing
      assets include Other Real Estate, property acquired by foreclosure in
      settlement of debt. Other Real Estate was $87,960 and $125,994 at December
      31, 1996 and 1995, and is included in the caption "Other Assets" on the
      accompanying balance sheets.

NOTE 6 - PREMISES AND EQUIPMENT

      Premises and equipment were comprised of the following components at
      December 31:

                                                     1996               1995
                                                 ------------       -----------
      Buildings and improvements                 $  7,680,351       $ 5,159,376
      Equipment and furnishings                     3,378,601         1,598,842
      Land                                          1,960,439         1,480,177
                                                 ------------       -----------
                                                   13,019,391         8,238,395
      Less accumulated depreciation                (3,559,998)       (1,805,848)
                                                 ------------       -----------
                                                 $  9,459,393       $ 6,432,547
                                                 ============       ===========

      Depreciation charged against operations was $421,221 and $365,041 for 1996
      and 1995, respectively.


                                     - 11 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 - DEPOSITS

      At December 31, 1996, the scheduled maturities of time certificates of
      deposit are as follows: 

                                                                  (In Thousands)
                                                                   ------------
               1997                                                  $ 94,851
               1998                                                    13,074
               1999                                                     4,316
               2000                                                     1,595
               2001 and thereafter                                        675
                                                                     --------
                                                                     $114,511
                                                                     ========
                                                                       
NOTE 8 - REPURCHASE AGREEMENTS                        

      The Bank has entered into repurchase agreements with several customers
      under which the Bank pledges investment securities owned and under its
      control as collateral against the one-day agreements. The daily average
      balance of these agreements during 1996 was approximately $520,000.
      Interest expense was $25,023, resulting in an average rate paid of 4.81%.
      The highest amount outstanding during 1996 was $5,035,000. There were no
      agreements of this nature at any time during 1995.

NOTE 9 - NOTES PAYABLE

      The Company is indebted under the following notes payable:

                                                            December 31,
                                                        1996            1995
                                                     ----------      ----------
      Notes payable, collateralized by all 
        issued and outstanding common stock of
        the Bank, at prime less .50%, interest 
        only payable monthly until September
        1997, then principal and interest
        payable monthly over a seven year period.    $2,650,000      $  950,000
                                                     ==========      ==========

      The note agreement contains certain restrictions on the Company and the
      Bank including: maintaining a correspondent relationship; ability to
      borrow additional funds; the minimum level of capitalization; return on
      assets; and the maximum level of nonperforming assets.

      Principal payments required under the note at December 31, 1996 are as
      follows:

               1997                                                  $   96,367
               1998                                                     304,447
               1999                                                     328,898
               2000                                                     355,313
               2001                                                     383,849
               Thereafter                                             1,181,126
                                                   
 The Company has voluntarily accelerated principal payments in both 1996 and
 1995. It is management's intention to continue accelerated liquidation of this
 note.


                                    - 12 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10 - MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES

      The Company had issued $274,250 of ten-year $10 Series A Mandatory
      Convertible Subordinated Debentures (the "Debentures") callable on or
      after November 1, 1992. Interest on the Debentures was computed at the
      greater of nine percent or the applicable federal rate under Internal
      Revenue Code Section 1274. On November 15, 1996, the Company exercised its
      call option on these debentures, resulting in an early redemption penalty
      of $8,228.

NOTE 11 - OTHER OPERATING EXPENSES

      Components of other operating expenses that equal or exceed $100,000 in
      either year are as follows: 

                                                          1996            1995
                                                        --------        --------
      Data processing                                   $298,402        $212,789
      Advertising and promotion                          236,695         166,190
      Postage and delivery                               218,681         193,269
      Regulatory fees                                    175,909         302,187
      Amortization of intangible assets                  158,465         150,862
      Supplies                                           133,363          94,103
      Telephone                                          105,111          93,981

      The Company follows the policy of expensing advertising costs as incurred.

      The Company was notified during the third quarter of 1996 of the amount of
      the FDIC's one-time special assessment based on the Company's Savings
      Association Insurance Fund (SAIF)-assessable deposits. The assessment,
      authorized by the Deposit Insurance Funds Act of 1996, applied to all
      banking institutions with deposits insured by SAIF, and amounted to
      approximately $327,000 for the Company.

NOTE 12 - INCOME TAXES

      The income tax provision for the years ended December 31, 1996 and 1995
      consisted of the following components:

<TABLE>
<CAPTION>
                                 1996                              1995                
                  ----------------------------------   ------------------------------
                   Federal      State       Total      Federal    State      Total
                  ----------   --------   ----------   --------  --------  ----------
      <S>         <C>          <C>        <C>          <C>       <C>       <C>       
      Current     $1,229,237   $183,792   $1,413,029   $789,801  $100,000  $  889,801
      Deferred      (149,193)   (16,575)    (165,768)   111,719    12,410     124,129
                  ----------   --------   ----------   --------  --------  ----------
        Total     $1,080,344   $167,217   $1,247,261   $901,520  $112,410  $1,013,930
                  ==========   ========   ==========   ========  ========  ==========
</TABLE>


                                     - 13 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12 - INCOME TAXES (CONTINUED)

      Deferred income tax assets and liabilities reflect the net tax effects of
      temporary differences between the carrying amounts of assets and
      liabilities and their respective tax bases. Significant components of and
      the resultant deferred tax assets and liabilities at December 31, 1996 and
      1995 are as follows:

                                                              December 31,
                                                        -----------------------
                                                          1996          1995
                                                        ---------     --------- 
      Deferred tax liabilities:
      
         Basis difference of property and equipment     $ 505,255     $ 510,458
         Unearned loan fees                                27,288        84,548
         Unrealized gain on securities available
           for sale                                        39,172          --
                                                        ---------     --------- 
                                                          571,715       595,006
                                                        ---------     --------- 
      Deferred tax assets:
      
         Loan loss provisions                             387,881       220,426
         Unrealized loss on securities available
           for sale                                          --           7,868
         Net operating loss carryover of acquiree          27,138        87,338
         Intangible assets                                 58,945        21,017
         Reserve for possible OREO losses                  19,122          --
         Other items                                       23,354        10,980
                                                        ---------     --------- 
                                                          516,440       347,629
                                                        ---------     --------- 
           NET DEFERRED TAX ASSET (LIABILITY)           $ (55,275)    $(247,377)
                                                        =========     ========= 

      The reasons for the differences between the statutory federal income tax
      rates and the effective tax rates are summarized as follows:

                                                               1996       1995
                                                               ----       ---- 
      Statutory rates                                          34.0%      34.0%
      Increase (decrease) resulting from:
        Effect of tax-exempt income                            (2.4)      (2.4)
        State income taxes - net                                3.1        2.6
        Nondeductible expenses                                   .3        1.3
                                                               ----       ---- 
                                                               35.0%      35.5%
                                                               ====       ==== 

      The Company and the Bank have entered into a tax-sharing agreement under
      which intercompany settlements of taxes currently due are made on an "as
      though separate" basis.


                                     - 14 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




NOTE 13 - LOANS TO RELATED PARTIES

      Certain officers and directors, and companies in which they held a 10
      percent or more beneficial ownership, were indebted (or, in some cases,
      guaranteed loans) to the Bank as follows:

                                                     1996               1995
                                                  -----------       -----------
      Balance January 1                           $ 1,811,794       $ 1,955,014
      New loans and advances                        2,904,192         2,025,274
      Repayments (excluding renewals)              (2,683,258)       (2,168,494)
                                                  -----------       -----------
      Balance December 31                         $ 2,032,728       $ 1,811,794
                                                  ===========       ===========

      The loans summarized above were made in the normal course of business at
      prevailing interest rates and terms.

NOTE 14 - DIVIDEND RESTRICTIONS

      The Company's primary source of funds is dividends it receives from the
      Bank. The payment of dividends by the Bank, in turn, is subject to the
      regulations of the Comptroller of the Currency which require, among other
      things, that dividends be paid only from net profits of the current and
      immediately preceding two years. At December 31, 1996, the Bank had
      approximately $2,166,000 of retained earnings available for dividend to
      the Company without being required to seek special regulatory approvals.

NOTE 15 - STOCK OPTIONS

      The Company's President and several key officers have been granted
      incentive stock options to purchase the Company's common stock. Generally,
      the options become exercisable 20% in each year following the year of
      grant, and expire ten years after the date they first become exercisable.
      For all options granted thus far, the grant price is equal to the deemed
      fair value of a share of stock as of the date of grant (generally the book
      value).

      Options to purchase 64,908 shares have been granted to the Company's
      officers as of December 31, 1996. Of this total, 47,790 options are
      currently exercisable, all of which are at prices less than the December
      31, 1996 book value of the Company's stock. None of the options granted
      has been exercised.

      Under Statement of Financial Accounting Standards No. 123, "Accounting for
      Stock-Based Compensation", the Company is not required to recognize or
      disclose any compensation costs that might be associated with these
      options, since no options were granted in 1996 or 1995. Exercise prices
      for the 64,908 options outstanding at both December 31, 1996 and 1995
      range from $6.11 to $10.40. The weighted average price is $7.72, and the
      remaining contractual life is 7.7 years.


                                    - 15 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16 - REGULATORY MATTERS

      The Bank 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 Bank's financial statements.
      Under capital adequacy guidelines and the regulatory framework for prompt
      corrective action, the Bank must meet specific capital guidelines that
      involve quantitative measures of the Bank's assets, liabilities, and
      certain off-balance-sheet items as calculated under regulatory accounting
      practices. The Bank'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 Bank to maintain minimum amounts and ratios of Total and Tier
      I capital (as defined in the regulations) to risk-weighted assets (as
      defined), and of Tier I capital (as defined) to average assets (as
      defined). If such minimum amounts and ratios are met, the Bank is
      considered "adequately capitalized". If a bank exceeds the requirements of
      "adequately capitalized" and meets even more stringent minimum standards,
      it is considered to be "well capitalized". Management believes that as of
      December 31, 1996 and 1995, the Bank meets and exceeds all capital
      adequacy requirements to which it is subject.

      As of December 31, 1996, the most recent notification from the Bank's
      regulatory agency categorized the Bank as well capitalized under the
      regulatory framework for prompt corrective action. To be categorized as
      well capitalized the Bank must maintain Total risk-based, Tier I
      risk-based, and Tier I leverage ratios as set forth in the table which
      follows. There are no conditions or events since that notification that
      management believes have changed the institution's category.

<TABLE>
<CAPTION>
                                                                       Minimum to Remain
                                                   Actual              Well Capitalized
                                          ----------------------    ----------------------
                                            Amount        Ratio       Amount        Ratio
                                          -----------    -------    -----------    -------
                                          (Thousands)               (Thousands)
      <S>                                   <C>           <C>         <C>           <C>  
      As of December 31, 1996:
        Total Capital
          (to Risk Weighted Assets):
            Consolidated                    $19,267       13.6%       $14,189       10.0%
            Subsidiary Bank                 $21,538       15.2%       $14,183       10.0%
        Tier I Capital                                                
          (to Risk Weighted Assets):                                  
            Consolidated                    $17,871       12.6%       $ 8,514        6.0%
            Subsidiary Bank                 $20,142       14.2%       $ 8,510        6.0%
        Tier I Capital                                                
          (to Average Assets):                                        
            Consolidated                    $17,871        7.3%       $12,320        5.0%
            Subsidiary Bank                 $20,142        8.2%       $12,319        5.0%
</TABLE>


                                    - 16 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16 - REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                                      Minimum to Remain
                                                   Actual              Well Capitalized
                                          ----------------------    ----------------------
                                            Amount        Ratio       Amount        Ratio
                                          -----------    -------    -----------    -------
                                          (Thousands)               (Thousands)
      <S>                                   <C>           <C>         <C>           <C>  
      As of December 31, 1995:
       Total Capital
         (to Risk Weighted Assets):
           Consolidated                     $15,059       14.9%       $10,114       10.0%
           Subsidiary Bank                  $15,714       15.5%       $10,112       10.0%
       Tier I Capital                                                 
         (to Risk Weighted Assets):                                   
           Consolidated                     $13,839       13.7%       $ 6,068        6.0%
           Subsidiary Bank                  $14,768       14.6%       $ 6,067        6.0%
       Tier I Capital                                                 
         (to Average Assets):                                         
           Consolidated                     $13,839        7.9%       $ 8,790        5.0%
           Subsidiary Bank                  $14,768        8.9%       $ 8,306        5.0%
</TABLE>

NOTE 17 - COMMITMENTS AND CONTINGENCIES

      Financial Instruments With Off-Balance-Sheet Risk

            The financial statements do not reflect various commitments and
            contingent liabilities that arise in the normal course of business
            to meet the financing needs of customers. These include commitments
            to extend credit and honor stand-by letters of credit. These
            instruments involve, to varying degrees, elements of credit,
            interest rate and liquidity risks in excess of amounts reflected in
            the balance sheets. The extent of the Bank's involvement in these
            commitments or contingent liabilities is expressed by the
            contractual, or notional, amounts of the instruments.

            Commitments to extend credit, which amount to $12,355,074 and
            $10,029,608 at December 31, 1996 and 1995, respectively, represent
            legally binding agreements to lend to customers with fixed
            expiration dates or other termination clauses. Since many
            commitments are expected to expire without being funded, committed
            amounts do not necessarily represent future liquidity requirements.
            The amount of collateral obtained, if any, is based on management's
            credit evaluation in the same manner as though an immediate credit
            extension were to be granted.


                                    - 17 -
<PAGE>

                            CNB, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

      Financial Instruments With Off-Balance-Sheet Risk (Continued)

            Stand-by letters of credit are conditional commitments issued by the
            Bank guaranteeing the performance of a customer to a third party.
            The decision whether to guarantee such performance and the extent of
            collateral requirements are made considering the same factors as are
            considered in credit extension. The Company had $232,000 and
            $598,000 outstanding on stand-by letters of credit at December 31,
            1996 and 1995, respectively.

            The Company expects no significant losses to be realized in the
            performance of its obligations under any of the above instruments.

      Concentrations of Credit Risk

            The Bank originates residential and commercial real estate loans,
            and other consumer and commercial loans primarily in the
            north-central Florida area. In addition, the Bank occasionally
            purchases loans, primarily in Florida. Although the Bank has a
            diversified loan portfolio, a substantial portion of its borrowers'
            ability to repay their loans is dependent upon economic conditions
            in the Bank's market area.

      Use of Estimates in Preparation of Consolidated Financial Statements

            The process of preparing financial statements in conformity with
            generally accepted accounting principles requires the use of
            estimates and assumptions regarding certain types of assets,
            liabilities, revenues and expenses. For the Company, such estimates
            significantly affect the amount at which the allowance for loan
            losses is carried, the amount of the deferred tax assets that are
            dependent upon future taxable income and the likelihood and timing
            of realization of such assets, the factors and amounts entering into
            the estimate of fair value of financial instruments disclosed in
            Note 18, and other accounts. All such estimates relate to unsettled
            transactions and events as of the date of the financial statements
            and, accordingly, upon settlement it is likely that actual amounts
            will differ from currently estimated amounts.

      Federal Reserve Requirement

            The Federal Reserve Board requires that certain banks maintain
            reserves, based on their average deposits, in the form of vault cash
            and average deposit balances at a Federal Reserve Bank. The
            requirement as of December 31, 1996 was approximately $2.4 million.


                                     - 18 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

      The table which follows shows the estimated fair value and the related
      carrying amounts of the Company's financial instruments at December 31,
      1996.

      For purposes of this disclosure, the estimated fair value for cash and
      cash equivalents is considered to approximate their carrying amounts. The
      estimated fair value for securities is based on quoted market values for
      the individual or equivalent securities. The estimated fair value for
      loans is based on interest rates the Company would have charged borrowers
      at December 31, 1996 for similar loans, maturities and terms.

      The estimated fair value for demand and savings deposits is based on their
      carrying amount. The estimated fair value for time deposits is based on
      rates the Company offered at December 31, 1996 for deposits of similar
      remaining maturities. The estimated fair value for other financial
      instruments and off-balance-sheet loan commitments are considered to
      approximate carrying amount at December 31, 1996. Assets and liabilities
      of the Company that are not defined as financial instruments, such as
      premises and equipment, are excluded from these disclosures.

                                                Carrying       Estimated
                                                 Amount        Fair Value
                                                --------        --------
                                                     (In Thousands)
      Financial Assets
        Cash and cash equivalents               $ 22,880        $ 22,880
        Securities available for sale             60,761          60,866
        Securities held to maturity               10,009           9,722
        Net loans                                147,428         147,605
      
      Financial Liabilities
        Demand and Savings Deposits              112,313         112,313
        Time Deposits                            114,511         114,494
        Repurchase agreements                      3,766           3,766
        Notes payable                              2,650           2,650

      Non-financial instruments typically not recognized in the financial
      statements nevertheless may have value but are not included in the above
      disclosures. These include, among other items, the estimated earnings
      power of core deposit accounts, the earnings potential of loan servicing
      rights, customer goodwill, and similar items.

      While these estimates of fair value are based on management's judgment of
      the most appropriate factors, there is no assurance that, were the Company
      to have disposed of such items at December 31, 1996, the estimated fair
      values would necessarily have been achieved at that date, since market
      values may differ depending on various circumstances. The estimated fair
      values at December 31, 1996 should not necessarily be considered to apply
      at subsequent dates.


                                    - 19 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19 - CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY)

                                                            December 31,
                                                        1996           1995
                                                    ------------   ------------
Balance Sheets

         ASSETS

   Cash and cash equivalents                        $    344,689   $    317,620
   Investment in CNB National Bank                    21,795,997     15,653,382
   Other assets                                          202,647         31,105
                                                    ------------   ------------
         TOTAL ASSETS                               $ 22,343,333   $ 16,002,107
                                                    ============   ============
      LIABILITIES AND SHAREHOLDERS' EQUITY

   LIABILITIES

     Notes payable                                  $  2,650,000   $    950,000
     Other liabilities                                    24,500         23,961
                                                    ------------   ------------
         Total Liabilities                             2,674,500        973,961
                                                    ------------   ------------
   MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES            --          274,250
                                                    ------------   ------------
   SHAREHOLDERS' EQUITY
     Common stock                                         19,379         16,397
     Additional paid-in capital                       12,682,601      9,784,369
     Retained earnings                                 6,901,006      4,966,357
     Unrealized gain (loss) on securities                 65,847        (13,227)
                                                    ------------   ------------
         Total Shareholders' Equity                   19,668,833     14,753,896
                                                    ------------   ------------
         TOTAL LIABILITIES AND SHAREHOLDERS'
           EQUITY                                   $ 22,343,333   $ 16,002,107
                                                    ============   ============
 Statements of Operations

   Equity in undistributed Bank earnings            $    492,150   $    625,904
   Dividend income                                     1,913,114      1,315,266
   Interest income                                        27,452         12,088
   Non-interest income                                       408         16,594
   Interest expense                                     (132,506)      (161,467)
   Non-interest expense                                  (42,058)       (26,568)
   Income tax benefits                                    54,721         59,439
                                                    ------------   ------------
         Net income                                 $  2,313,281   $  1,841,256
                                                    ============   ============


                                     - 20 -
<PAGE>

                           CNB, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19 - CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY) (CONTINUED)

                                                        Year Ended December 31,
                                                         1996          1995
                                                      -----------   -----------
Statements of Cash Flows

  OPERATING ACTIVITIES
   Net income                                         $ 2,313,281   $ 1,841,256
   Adjustments to reconcile net income to cash
    provided by operating activities:
     Undistributed earnings of subsidiary                (492,150)     (625,904)
   Changes in year-end balances of:
     Other assets                                        (171,542)       29,052
     Other liabilities                                        539        15,765
                                                      -----------   -----------
      Net Cash Provided By Operating Activities         1,650,128     1,260,169
                                                      -----------   -----------

  INVESTING ACTIVITIES
   Cash received in acquisition                             4,190          --
   Cash used in acquisition                            (2,674,367)         --
                                                      -----------   -----------
      Net Cash Used In Investing Activities            (2,670,177)         --
                                                      -----------   -----------

  FINANCING ACTIVITIES
   New borrowings under notes payable                   2,650,000          --
   Payments on notes payable                             (950,000)     (750,000)
   Redemption of convertible subordinated
     debentures                                          (274,250)         --
   Cash dividends                                        (378,632)     (295,151)
                                                      -----------   -----------
      Net Cash Provided By (Used In)
        Investing Activities                            1,047,118    (1,045,151)
                                                      -----------   -----------

      Net Increase in Cash and Cash Equivalents            27,069       215,018

      Cash and Cash Equivalents:
        Beginning of Year                                 317,620       102,602
                                                      -----------   -----------

        End of Year                                   $   344,689   $   317,620
                                                      ===========   ===========


                                    - 21 -



                                       1
<PAGE>

Item 8. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure

      Neither the Registrant nor the Bank has changed its accountants during the
two (2) most recent fiscal years nor had any disagreement with their accountants
with respect to accounting or financial disclosures.



                                PART III

Except for the information relating to the Company's sole executive officer and
its key employees, the material required by items 9 through 12 is hereby
incorporated by reference from the Company's definitive proxy statement pursuant
to Instruction E of Form 10-KSB. The Company will file its definitive Proxy
Statement with the Commission prior to April 15, 1997.

K. C. Trowell          58     Mr. Trowell, Chairman, President and Chief
                              Executive Officer of the Company and the Bank was
                              elected to the Board of Directors in 1987 and
                              serves as Chairman of the Executive Committee. Mr.
                              Trowell also serves on the Investment, Marketing
                              and Compensation Committees. Although Mr. Trowell
                              serves on the Compensation Committee, he abstains
                              from voting on decisions which involve his own
                              compensation. He has served as the Chairman and
                              Chief Executive Officer of the Company since its
                              inception in 1987. Mr. Trowell is a Lake City,
                              Florida, native and has been actively involved in
                              commercial banking management in North Florida for
                              over twenty-five years. He has also held
                              management positions with NationsBank of Lake City
                              (and its predecessors), American Bank of
                              Jacksonville, and Barnett Banks, Inc. He presently
                              serves as Chairman of the Board of Trustees of
                              Florida Bankers Insurance Trust. He is a past
                              director of Community Bankers of Florida, past
                              director of the Columbia County Committee of 100,
                              past director of North Central Florida Areawide
                              Development Company, and a former board member and
                              chairman of Lake City Medical Center and Columbia
                              County Industrial Development Authority.

Joyce A. Bruner        44     Ms. Bruner has served, since the opening of the
                              Bank in 1986, as Vice President, Cashier, Senior
                              Operations Officer and, most recently, Senior Vice
                              President and Senior Administrative Officer. She
                              also serves as Secretary of the Company. Prior to
                              joining the Bank during its organizational phase,
                              Ms. Bruner served as Operations Officer for
                              NationsBank of Lake City (and its predecessors)
                              for a period of three years where she had
                              responsibility for branch operations.

Martha S. Williams     46     Ms. Williams has served as Vice President and
                              Cashier of the Bank since 1991. From 1988 through
                              1991, Ms. Williams was Cashier for Citizens Bank
                              of Live Oak, which merged into the Bank in
                              November 1992. From 1986 to 1988, Ms. Williams
                              served as Assistant Cashier for the Bank and prior
                              to 1986 held management positions with NationsBank
                              of Live Oak (and its predecessors). Ms. Williams
                              is a life-long resident of the Live Oak, Florida,
                              area where she is a member of the Altrusa Club and
                              the Chamber of Commerce. In addition, Ms. Williams
                              volunteers for Hospice of North Florida.

Robert W. Woodard      47     Mr. Woodard has served as Senior Vice President
                              and Commercial Banking Manager of the Bank since
                              July, 1993. Prior to his employment by the Bank in
                              August, 1992, he held positions with Barnett Bank
                              of North Central Florida and Sun Bank. Mr. Woodard
                              is currently Treasurer of the Lake City Rotary
                              Club, Director of the United Way of Suwannee
                              Valley, and is a member of the Chamber of
                              Commerce, City of Lake City Planning and Zoning
                              Board and the Columbia County Industrial
                              Development Authority.


                                       23
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K

Exhibits.    

            3(i)  Articles of Incorporation (Incorporated by reference to
                  Exhibit 3.3 to the Company's Registration Statement No.
                  33-71082, as amended, on Form S-4 filed February 8,1994).

            3(ii) By-laws (Incorporated by reference to Exhibit 3.4 to the
                  Company's Registration Statement No. 33-71082, as amended, on
                  Form S-4 filed February 8, 1994).

            9     Voting Trust Agreement dated December 31, 1996.

           10     Employment Agreement Amendment of November 15, 1995, among K.
                  C. Trowell, the Company and the Bank. (Original agreement
                  dated August 3, 1987, as amended, is incorporated by reference
                  to Exhibit 10 to the Company's Form 10-KSB/A as filed December
                  31, 1995).

           21     Subsidiaries of the Registrant.

           27     Financial Data Schedule.

Reports on Form 8-K.  No report on Form 8-K was filed by the Registrant during 
                      the quarter ended December 31, 1996.


                                       24
<PAGE>

                            S I G N A T U R E S

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                    CNB, INC. 
                                           ----------------------------
                                                  (Registrant)


                               By:         /s/ K. C. Trowell
                                           ----------------------------
                                           K. C. Trowell
                                           President, Principal Executive
                                           Officer, and Chief Financial Officer

                               Date:       March 19 1997

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

               Signature                     Title                   Date
               ---------                     -----                   ----


     /s/ Audrey S. Bullard                  Director            March 19, 1997
     ----------------------------
     Audrey S. Bullard


     /s/ Seymour Chotiner                   Director            March 19, 1997
     ----------------------------
     Seymour Chotiner


     /s/ Marvin H. Pritchett                Director            March 19, 1997
     ----------------------------
     Marvin H. Pritchett


     /s/ Helen B. Real                      Director            March 19, 1997
     ----------------------------
     Helen B. Real


     /s/ T. Allison Scott                   Director            March 19, 1997
     ----------------------------
     T. Allison Scott


     /s/ William J. Streicher               Director            March 19, 1997
     ----------------------------
     William J. Streicher


     /s/ K. C. Trowell                      Director            March 19, 1997
     ----------------------------
     K. C. Trowell


     /s/ Martha S. Williams                 Vice President,     March 19, 1997
     ----------------------------           Cashier
     Martha S. Williams                           


                                       25

<PAGE>

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


                                ----------------


                                   FORM 10-KSB
                                  ANNUAL REPORT


                                ----------------


                         SUBSIDIARIES OF THE REGISTRANT


                                ----------------


                                    CNB, Inc.


                                ----------------