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

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


 X     ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---    ACT OF 1934
       For the fiscal year ended December 31, 2001

                                       OR

       TRANSITION  REPORT  PURSUANT  TO  SECTION 13  or 15(d)  OF THE SECURITIES
---    EXCHANGE ACT OF 1934
       For the transition period from ________ to ________

                           Commission File No: 0-25988


                          CNB Florida Bancshares, Inc.
                         -------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

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

 9715 Gate Parkway North
 Jacksonville, Florida                                               32246
 -------------------------------------                       -------------------
 (Address of principal executive offices)                          (Zip Code)

 Registrant's telephone number, including area code: (904) 997-8484

 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
                                       ---     ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K is 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-K
or any amendment to this Form 10-K.


The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based on the  closing  price of the  Registrant's  common  stock as
quoted on the National  Association of Securities  Dealers  Automated  Quotation
("NASDAQ") on March 15, 2002 was $9.70.

The number of shares of the  Registrant's  common stock  outstanding as of March
15, 2002 was 6,097,953 shares, $0.01 par value per share.


                       DOCUMENTS INCORPORATED BY REFERENCE

The  Registrant's  2002  Annual  Meeting  Proxy  Statement  is  incorporated  by
reference in this report in Part III,  pursuant to  Instruction  G of Form 10-K,
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 30, 2002.

<PAGE>


                                     PART I

                                    BUSINESS


     This Annual Report on Form 10-K contains forward-looking statements,  which
involve risks and uncertainties which are described in this Annual Report and in
other  filings with the  Securities  and Exchange  Commission  (the "SEC").  The
actual  results of CNB Florida  Bancshares,  Inc.  (the  "Company" or "CNB") may
differ   significantly  from  the  results  discussed  in  the   forward-looking
statements. Factors that may cause such differences include, but are not limited
to,  increased  competitive  pressures  among  depository  and  other  financial
institutions,  changes in the interest rate environment that may reduce margins,
general economic or business  conditions in the Company's markets that lead to a
deterioration  in  credit  quality  or  reduced  loan  demand,   legislative  or
regulatory  changes  and  competitors  of the  Company  that  may  have  greater
financial   resources  and  develop   products  or  services  that  enable  such
competitors to compete more  successfully  than the Company.  Other factors that
may cause actual results to differ from the  forward-looking  statements include
customer  acceptance of new products and services,  changes in customer spending
and saving habits and the Company's  success in managing costs  associated  with
expansion.   Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking statements,  which speak only as of the date hereof. The Company
does not  undertake any  obligation  to publicly  release any revisions to these
forward-looking  statements to reflect  events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.

     The  following  discussion  should  be read in  conjunction  with  Selected
Historical  Financial  Information and the Consolidated  Financial Statements of
the Company, which are included in this Form 10-K.

GENERAL

   The Company is a one-bank  holding company  registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"),  which commenced  operations in
1987 by acquiring the capital stock of CNB National Bank (the "Bank"), which was
formed in 1986. The Company relocated its headquarters  from Lake City,  Florida
to  Jacksonville,  Florida  during 2000 in connection  with its expansion  plans
described  below.  The Bank is a  national  banking  association  subject to the
supervision of the Office of the Comptroller of the Currency ("Comptroller"). It
provides traditional deposit,  lending and mortgage products and services to its
commercial and retail  customers  through fifteen full service  branches located
within the following contiguous counties in Northeast Florida:  Alachua,  Baker,
Bradford, Columbia, Duval, St. Johns, Suwannee and Union County. At December 31,
2001,  the  Company  had total  assets of $612.0  million,  total gross loans of
$521.6 million, total deposits of $532.9 million, and total shareholders' equity
of $46.7  million.  Net income for the years ended  December 31, 2001,  2000 and
1999 was $2.9 million, $2.5 million and $2.9 million, respectively.

EVOLUTION OF THE FLORIDA BANKING MARKET

   Significant  changes in interstate banking and branching laws, enacted during
the early 1980s, have allowed bank holding companies to aggressively expand into
new markets that have  attractive  growth rates and  demographics.  As a result,
substantial consolidation of the Florida banking market has occurred. Management
believes  Florida has been  particularly  attractive  to regional  bank  holding
companies  because it is the  fourth  largest  state in the  country in terms of
total population and is among the ten fastest growing states in the country.  As
more out-of-state  bank holding companies enter the Florida market,  the Company
believes that the number of depository institutions  headquartered and operating
in Florida will continue to decline.

   The Company has observed a similar  consolidation trend in the markets in and
around Gainesville and Jacksonville (the "Expansion Markets").  Historically the
Company competed successfully in Columbia,  Suwannee,  Baker, Bradford and Union
Counties (the "Core Markets"),  against larger bank holding companies for middle
market customers.  In the Company's  Expansion  Markets,  many of such customers
have  preferred  the  banking  services  and  products of banks that are locally
headquartered.  Increasingly, however, large regional bank holding companies are
entering the Company's  Expansion  Markets by acquiring such previously  locally
headquartered  banks. For example,  in January 1998, Bank of America Corporation
formerly  known  as  NationsBank   Corporation   completed  its  acquisition  of
Jacksonville-based   Barnett  Banks,  Inc.  ("Barnett"),   which  prior  to  its
acquisition was the largest bank  headquartered  in Florida.  The acquisition of


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Barnett  closely  followed  the  acquisition  of  three of  Jacksonville's  five
community  banks by  SouthTrust  Bank  Corporation  ("SouthTrust")  and  Compass
Bancshares,  Inc.  ("Compass") in 1996 and 1997.  Similarly,  Gainesville  State
Bank,  the  largest  community  bank in  Gainesville  and  Alachua  County  (the
"Gainesville Market"), was acquired by Compass in 1997. As a result, the Company
now competes in its Core  Markets,  and will compete in its  Expansion  Markets,
primarily with SunTrust Banks, Bank of America,  Wachovia,  SouthTrust,  AmSouth
and Compass, all of which are headquartered outside of Florida.

GROWTH OPPORTUNITY FOR THE COMPANY

   Management  believes that a significant  segment of the  historical  customer
base of Barnett and the  customer  bases of other  acquired  community  banks in
Northeast   Florida,   particularly   individuals  and  small  and  medium-sized
businesses,   prefer  the   personalized   service  that   characterized   their
relationships with the locally  headquartered banks that were acquired.  Many of
these  personal  relationships  have  been  disrupted  as the  larger,  regional
financial institutions  increasingly focus on larger corporate customers,  offer
primarily  standardized  loan and  deposit  products  and  services,  and employ
centralized management and more remote decision-making. Thus, Company management
believes there exists a unique  opportunity to address the under-served  banking
needs of  individuals  and small and  medium-sized  businesses  in its Expansion
Markets,  which are  contiguous  and  demographically  similar to the  Company's
existing Core Markets.  Accordingly, the Company's current strategic focus is to
immediately capitalize on this market opportunity. In pursuing this opportunity,
the Company  will  continue to focus on that  specific  segment of the market to
which it has  historically  appealed.  The Company  believes that its historical
strategy  of  providing  personalized  and  consistent  service to its small and
middle-market  corporate  customers and individuals will allow it to continue to
compete  profitably,  not only in the markets  that it  presently  serves but in
other markets as well.

BUSINESS STRATEGY

   The  Company's  primary  goal is to  enhance  profitability  and  shareholder
returns through aggressive but sound growth. The Company's long-term strategy is
to (i) continue to grow its full service  banking  operations by expanding  into
new markets,  (ii) leverage current branch capacity,  (iii) expand its mortgage,
consumer and commercial lending  activities,  and (iv) continue to differentiate
itself   from   its   larger    competitors   by    emphasizing    personalized,
relationship-driven  service  provided  by  a  locally-headquartered   financial
institution.

EXPAND IN UNDER-SERVED MARKETS


   The  consolidation of the banking industry in Northeast Florida has created a
window of opportunity  for the Company to expand its operations in the Expansion
Markets. The Expansion Markets are contiguous and culturally similar to the Core
Markets.  Like the Core Markets,  the Expansion Markets consist in large part of
individuals and small and medium-sized businesses. The Company believes that its
familiarity with meeting the banking needs and expectations of similar customers
in the Core Markets makes the Company particularly  qualified to attract banking
customers  accustomed to banking with community banks in the Expansion  Markets.
The recent consolidation also has dislocated qualified banking professionals who
have strong ties to and an  understanding  of their local  markets.  The Company
believes that it has attracted  and will continue to attract  qualified  banking
professionals,  thereby  benefiting from their experience and their ability,  in
many  instances,  to  bring  with  them the  banking  business  of  their  loyal
customers.  These  factors,  together with the Bank's asset size and its capital
base, position the Company to work more effectively with middle-market customers
than many smaller community banks in the Expansion Markets.

PROVIDE COMMUNITY BANKING SERVICE

   The Company  believes that it can achieve the goals  outlined above through a
continued  commitment  to the  "community  bank  philosophy,"  which  emphasizes
offering a broad range of  personalized  products and services  through  banking
professionals  who understand the banking  industry and the banking needs of the
local communities they serve. Each branch manager and individual loan officer is
given a certain degree of authority and discretion to approve loans and to price
loans and services in order to respond  quickly and  efficiently to the needs of
the Company's customers. In implementing this strategy, the Company will combine
the  experience  and customer  networks of its loan  officers  with  centralized
information  technology  to  effectively  price and provide  customized  banking
services to enhance  overall  profitability.  The Company intends to pursue this


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<PAGE>

strategy  throughout  its Core and Expansion  Markets and operate a multi-office
community bank that emphasizes decision-making at the local level.

   To ensure that the Company's  proposed expansion does not erode its standards
for service and quality,  the Company  created  four  operating  divisions:  the
Southern Division (Alachua County), the TriCounty Division (Baker,  Bradford and
Union counties),  the Suwannee Valley Division  (Columbia and Suwannee Counties)
and the First Coast Division (Duval and St. Johns Counties). This organizational
structure will help to ensure that the Company's  banking  products and services
are tailored to the  individual  markets it serves,  as opposed to the "one size
fits all" approach that generally is followed by larger financial  institutions.
The  divisions  are  headed by  Division  Presidents  who  effectively  have the
authority  to operate the  division as a community  bank,  so long as it is done
within the parameters of the Company's policies.

DEPOSIT PRODUCTS AND SERVICES

   The Company, through its banking subsidiary,  offers various deposit products
and services to its retail and  commercial  customers.  These  products  include
commercial  and retail  checking  accounts,  specialized  low-cost  checking for
customers  who write few checks per month,  money market  accounts for consumers
and commercial  customers,  bundled account  products  including the Generations
Gold(TM) affinity program, NOW accounts and savings accounts.  Additionally, the
Company  offers an  interest-bearing  transaction  account for  seniors  with no
minimum balance  requirements,  no service charge and no per-check  charge.  For
customer convenience and ease of storage, the Company offers image-based monthly
account  statements,  as well as an  automated  telephone  banking  service  for
balance  reporting.  The Company also offers internet  banking  services,  which
allow  customers to check  balances,  transfer funds and pay bills on-line.  The
Company's deposit services include cash management for commercial  customers for
overnight investment,  wire transfer services,  collections,  money orders, safe
deposit boxes and traveler's  checks. The Bank is currently a member of the STAR
(formerly HONOR), PLUS and CIRRUS networks of automated teller machines that may
be used by Bank customers in major cities throughout the United States. The FDIC
insures all  deposits  up to the  maximum  amount  permitted  by law  (generally
$100,000 per depositor subject to aggregation rules).

LOAN PRODUCTS AND LENDING POLICY

GENERAL

   The  Company  provides  to  customers  a full range of short- to  medium-term
commercial,  agricultural,  Small Business  Administration  ("SBA")  guaranteed,
Farmers Home  Administration  guaranteed,  long term  residential  mortgages and
personal loans, both secured and unsecured. Credit is extended consistent with a
comprehensive loan policy that governs advance rates,  maturities and acceptable
collateral.  The Company's loan policy grants lending  authority  using a tiered
schedule  that grants  authority to officers  based on certain  risk  parameters
including the  collateral  type. The Executive Loan Committee must approve loans
exceeding officer authority and exhibiting  certain risk parameters.  Exceptions
to the policy must be  recommended  by the  applicable  officer and  approved by
either a Division President or the Credit  Administrator  within their authority
and approved by the Executive Loan Committee of the Bank's Board of Directors.

COMMERCIAL LOANS

   Commercial  loan products  include  short-term  loans and lines of credit for
working capital  purposes.  These loans are generally  secured by the borrower's
current assets,  typically accounts receivables and inventory.  Other commercial
loan products include  intermediate term loans for farm and non-farm  equipment,
crop loans and SBA guaranteed  loans.  SBA guaranteed  loans include secured and
unsecured  loans for  working  capital,  business  expansion  and  purchases  of
equipment and machinery.

   Lines of credit are subject to annual review and approval, generally no later
than 120 days after the closing of the customer's fiscal year-end.  Advances are
typically  limited  to  75% of  eligible  accounts  receivable  and up to 50% on
inventory.  These  credits  are  usually  monitored  through  the  review  of  a
receivables aging report and borrowing base report.


                                       4
<PAGE>

   Term loans having  maturities  greater than one year are generally secured by
equipment or rolling stock with advances limited to no more than 75% of cost. In
virtually all cases,  the Bank  requires the personal  guaranty of the owners or
major shareholders of the borrower.

   Agricultural  loans are  granted to  experienced  farmers  with  demonstrated
capabilities, acceptable historical cash flows, reasonable cash flow projections
and adequate secondary sources of repayment.

COMMERCIAL REAL ESTATE LOANS

   The Company's  commercial real estate lending products include:  construction
loans,   mini-permanent  and  permanent  financing  for  commercial  properties,
acquisition  and  development  loans for  residential  and  commercial  property
developers and investment property financing.

   Construction loan borrowers are generally required to provide equity equal to
at least 20% of the total cost of the  construction  project  before the Company
will advance funds on the loan.  The Company  advances  funds pursuant to a draw
schedule  and  makes  inspections  prior to each  draw  request.  The  Company's
construction  lending  requirements  also may  include  a plan and cost  review,
depending on the  complexity  of the  project.  The plan and cost review and the
inspections are out-sourced by the Company to qualified professionals.

   Mini-permanent  and permanent  financing  loans are owner  occupied  projects
which demonstrate proven cash flows that result in a debt service coverage ratio
of at least 1.25 to 1, based on a twenty-year amortization.  Mini-permanent loan
amortization may be as long as twenty-five  years, but normally requires balloon
maturities within five to eight years.

   The Company extends  acquisition and development  loans to borrowers who have
historically fulfilled their financial obligations.  The relevant acquisition or
development  project must demonstrate  acceptable  absorption periods and should
have an equity investment of at least 20% of the total project costs. Such loans
typically mature within thirty months.

   Loans on investment property are subject to the same underwriting criteria as
mini-permanent  loans and include a threshold debt service  coverage ratio of at
least 1.25 to 1.

RESIDENTIAL AND CONSUMER LOANS

   Consumer lending products include open- and closed-ended home equity and home
improvement loans,  automobile,  boat, and recreational  vehicle loans and loans
for other asset  purchases.  The Company offers Visa and  MasterCard  credit and
debit card  products to consumers  and  commercial  customers.  Credit cards are
originated in conjunction with a separate  financial  institution  through which
the company has a contractual relationship. Credit decisions and credit risk are
handled entirely by the third party institution.  The Company continues to carry
the  receivables  on card  balances  generated  prior to the  initiation of this
relationship.

   Loans to consumers  are extended  after a credit  evaluation,  including  the
creditworthiness  of the borrower,  the purpose of the credit, and the secondary
source of repayment. Specifically, the lender reviews a credit bureau report for
the borrower's credit history and calculates a debt-to-income ratio based on the
borrower's gross monthly income to fixed debt payments.  A ratio higher than 40%
is generally considered unacceptable.  For automobile loans, the policy requires
a minimum down payment of 10% with maturities based on the age of the vehicle.

   The  Company  offers a  variety  of 1-4  family  residential  loan  products,
including residential construction loans and residential acquisition financing.

   Residential  construction  financing  typically  includes a construction loan
agreement  with a  construction  draw  schedule and third party  inspections.  A
commitment  for  permanent  financing  is  required  prior to  closing.  Typical
residential  construction  loans mature within six to twelve months. The Company
offers a  construction/permanent  package loan  product in  instances  where the
Company acts as the permanent lender.

   Residential loans are originated for the Company's portfolio,  as well as for
sale in the  secondary  market.  The  maximum  loan amount is based on a loan to


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value  ratio of 80% or less,  where the value is equal to the lesser of the cost
or the appraised  value.  A higher loan to value ratio is available when private
mortgage insurance can be obtained.  Most of these loans are originated for sale
in the secondary market and are sold on a servicing  released basis. The Company
services loans originated for its portfolio.

LOAN REVIEW AND NONPERFORMING ASSETS

   The Company's loan review  officer is independent of the loan  production and
administration  process.  The loan  review  officer  has the  responsibility  to
perform timely reviews of portfolio  credits with scope and assessment  criteria
comparable to that of the Bank's regulators.

   All new and renewed secured credits over $500,000 and unsecured  credits over
$100,000 are reviewed.  Additionally, a comprehensive annual review is conducted
on all credits over $750,000,  past dues,  non-performing  assets and other real
estate  owned.  Loan  operations  personnel  review  smaller  credits  utilizing
pre-determined  standards,  which include  documentation  and  compliance,  with
exceptions referred to the loan review officer.  Problem credits,  which include
all  non-performing  assets,  are  reviewed  at  least  quarterly  with  written
documentation  that includes the reason for the problem,  collateral  support, a
plan  for  resolution  of the  problem  and a time  frame  for  the  resolution.
Delinquent  loans are  reviewed at least  weekly and  monitored  by the Board of
Directors of the Bank.

   A written  report is  developed  on the  findings of the various  loan review
functions and reported directly to the Audit Committee of the Company's Board of
Directors,  which meets  quarterly.  The  allowance  for loan losses is reviewed
monthly in order to make the  appropriate  loan loss provision based on the loan
review findings, delinquency trends, historical loan losses and current economic
trends.

INVESTMENT SERVICES

   During 2001, the Company  launched its CNB Financial  Services unit, which is
geared  toward  offering  customers an  alternative  investment  vehicle to bank
products.  These services are being offered through a relationship  with Raymond
James and are being sold  through  brokers who are  employed by the Bank.  It is
expected  that this  business  line will  offer  complementary  alternatives  to
customer  funds  and will  allow  the Bank to  continue  earning  fee  income on
relationships  that may have otherwise left the Bank.  Customer balances related
to CNB Financial  Services are not recorded in the  financial  statements of the
Company since the accounts are held with Raymond  James.  The Company earns fees
based upon the level of funds  invested with Raymond James that were  originated
through CNB Financial Services.  This business unit is in the start-up phase and
did not  materially  contribute  to the Company's  results of operations  during
2001.

ASSET/LIABILITY MANAGEMENT

   The Bank's  asset/liability  policy is carried  out  through  the Bank's risk
management  function.  The Bank manages asset  growth,  liquidity and capital in
order to maximize  income and reduce  interest  rate risk.  The risk  management
group reviews and discusses the ratio of rate-sensitive assets to rate-sensitive
liabilities,  the  ratio  of  allowance  for  loan  losses  to  outstanding  and
nonperforming  loans,  and  other  variables,  such  as  expected  loan  demand,
investment  opportunities,  core deposit  growth  within  specified  categories,
regulatory  changes,  monetary  policy  adjustments and the overall state of the
economy.

INVESTMENT POLICY

   The Bank's investment  portfolio policy is to maximize income consistent with
liquidity, asset quality, regulatory constraints and asset/liability objectives.
The  Bank  invests  primarily  in  direct  obligations  of  the  United  States,
obligations  guaranteed  as to principal  and interest by the United  States and
obligations of agencies of the United States. In addition,  the Bank enters into
federal  funds  transactions  with  its  principal  correspondent  banks.  Other
investments consist primarily of Federal Reserve Bank and Federal Home Loan Bank
stock that are required for the Bank to be a member of, and to conduct  business
with,  such  institutions.  Dividends on such  investments are determined by the
institutions and are payable semi-annually or quarterly.


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<PAGE>

COMPETITION

   Within  each  market  in  which  the  Company  operates  (collectively,   the
"Markets"),  there are competing financial institutions  consisting primarily of
other  commercial  banks,  savings and loan offices and credit  unions.  Certain
non-bank  financial  institutions   affiliated  with  Florida  banks  or  thrift
institutions  offer limited  financial  services,  including lending and deposit
gathering  activities.  The Bank also  competes  for  deposits  and  loans  with
brokerage  firms,  mobile home lenders,  consumer finance  companies,  insurance
companies,  mortgage  banking  companies,  money  market  mutual funds and other
financial institutions.

   In addition,  the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate  Banking and Branching Act") has removed  substantially
all state  barriers to the  acquisition  of banks by  out-of-state  bank holding
companies. In addition, certain 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 also may enter the
Markets by acquiring a financial  institution,  by establishing de novo branches
or by forming de novo banks within the market.

   Competition  for deposit and loan business in the Markets will continue to be
intense  because  of  existing  competitors,  the  accelerating  pace of product
deregulation  and  the  likelihood  of  expansion  into  the  Markets  by  other
institutions.  Many of these institutions have  significantly  greater financial
resources than the Company. 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,  relationship-driven
institution.

HISTORICAL GROWTH

   The Bank has  operated  in Lake  City,  Columbia  County,  Florida  since its
organization  in 1986.  In January 1987 the Company was formed as a bank holding
company to facilitate  expansion  opportunities.  In 1988, the Company organized
Citizens  Bank of Live Oak  ("Citizens")  and in 1990  opened  its first de novo
branch in Fort White.  In 1992 and 1993,  the Bank acquired  additional  banking
offices in  Macclenny,  Lake City and Live Oak from  Anchor  Savings  Bank.  The
Company  consummated its first merger with another bank holding company on April
1,  1994,  when  Bradford  Bankshares  ("Bradford")  combined  with the  Company
resulting  in a branch in Starke,  Florida.  On August  31,  1996,  Riherd  Bank
Holding Company  ("Riherd") merged with the Company.  The Riherd merger resulted
in three  additional  offices  for the  Bank,  one of which is  located  in Lake
Butler,  Florida  and two in  Gainesville.  Both  the  Bradford  and the  Riherd
transactions  were accounted for as purchase  transactions.  In August 1997, the
Bank opened its eleventh office, located in Lake City, and in June 1999 expanded
into  Jacksonville  with  its  twelfth  office.   The  Bank  opened  its  second
Jacksonville  branch in February 2001, and opened a St. Augustine branch in June
2001.  In May 2001,  the Bank  purchased  the Lake City and Live Oak branches of
Republic Bank. In connection  with the  transaction,  the Bank closed one of its
existing Live Oak locations.

EMPLOYEES

   As of December 31, 2001, the Bank had 246 full-time equivalent employees. The
Company's  operations  are  conducted  through the Bank and,  consequently,  the
Company does not have any separate employees.

                           SUPERVISION AND REGULATION

GENERAL

   As a  registered  bank  holding  company,  the  Company  is  subject  to  the
supervision  of,  and  regular  inspection  by,  the  Federal  Reserve  Board of
Governors (the "Federal  Reserve") under the BHC Act. The Bank is organized as a
national banking  association,  which is subject to regulation,  supervision and
examination  by the  Comptroller.  The Bank is also subject to regulation by the
Federal Deposit Insurance  Corporation (the "FDIC") and other federal regulatory
agencies.  In  addition,  the Company and the Bank are subject to various  other
laws and  regulations  and  supervision  and  examination  by  other  regulatory
agencies,  all of  which  directly  or  indirectly  affect  the  operations  and
management of the Company and the Bank and their ability to make  distributions.
The  following   discussion   summarizes  certain  aspects  of  those  laws  and


                                       7
<PAGE>

regulations that affect the Company and the Bank.

   The Holding  Company is  regulated by the Federal  Reserve  under the BHC Act
which  requires  every bank holding  company to obtain the prior approval of the
Federal  Reserve before  acquiring more than 5% of the voting shares of any bank
or all or  substantially  all of the  assets of a bank,  and  before  merging or
consolidating  with another bank holding company.  The Federal Reserve (pursuant
to regulation and published policy statement) has maintained that a bank holding
company must serve as a source of financial strength to its subsidiary banks. In
adhering to the Federal Reserve  policy,  the Holding Company may be required to
provide  financial  support for a  subsidiary  bank at a time where  absent such
Federal Reserve policy, the Holding Company may not deem it advisable to provide
such assistance.

   Until March  2000,  a bank  holding  company was  generally  prohibited  from
acquiring  control of any company  which was not a bank and from engaging in any
business other than the business of banking or managing and  controlling  banks.
In April 1997, the Federal  Reserve revised and expanded the list of permissible
non-banking  activities in which a bank holding  company could engage.  However,
limitations   continue  to  exist  under  certain  laws  and  regulations.   The
Gramm-Leach-Bliley  Act repeals certain  regulations  pertaining to bank holding
companies and eliminates many of the previous prohibitions.  Specifically, Title
I of the Gramm-Leach-Bliley Act repeals Sections 20 and 32 of Glass-Steagall Act
(12 U.S.C. 377 and 78, respectively) and is intended to facilitate  affiliations
among banks, securities firms, insurance firms and other financial companies. To
further this goal,  the  Gramm-Leach-Bliley  Act amends Section 4 of the BHC Act
(12 U.S.C.  1843) to authorize  bank holding  companies  and foreign  banks that
qualify as "financial holding companies" to engage in securities,  insurance and
other  activities  that are  financial  in nature or  incidental  to a financial
activity.  The  activities  of bank  holding  companies  that are not  financial
holding companies will continue to be limited to activities authorized currently
under the BHC Act, such as activities  that the Federal  Reserve  previously has
determined in regulations and orders issued under section 4(c)(8) of the BHC Act
to be closely related to banking and permissible for bank holding companies.

   Pursuant to the Interstate  Banking and Branching Act, bank holding companies
are able to acquire  banks in states  other than their  respective  home states,
without regard to the  permissibility of such acquisitions under state laws. The
transaction  would still be subject to any state  requirement  that the Bank has
been  organized and operating for a minimum  period of time,  not to exceed five
years, and the requirement that the respective bank holding company, prior to or
following  the  proposed  acquisition,  controls  no more  than 10% of the total
amount of deposits of insured  depository  institutions in the United States and
less than 30% of such  deposits in that state (or such lesser or greater  amount
set by state law).

   The  Interstate  Banking and  Branching  Act also  authorizes  banks to merge
across state  lines,  thereby  creating  interstate  branches.  Florida does not
prohibit  interstate  branching within the state.  Furthermore,  pursuant to the
Interstate Banking and Branching Act, a bank is now able to open new branches in
a state in which it does not  already  have  banking  operations  if such  state
enacts a law permitting de novo branching.

   Proposals to change the laws and regulations  governing the banking  industry
are frequently  introduced in Congress, in the state legislatures and before the
various  bank  regulatory  agencies.  The  likelihood  and  timing  of any  such
proposals  or bills being  enacted and the impact they might have on the Company
and the Bank cannot be determined at this time.

CAPITAL AND OPERATIONAL REQUIREMENTS

   The Federal Reserve,  the Comptroller and the FDIC have issued  substantially
similar risk-based and leverage capital  guidelines  applicable to United States
banking organizations.  In addition,  those regulatory agencies may from time to
time  require that a banking  organization  maintain  capital  above the minimum
levels,  whether  because of its  financial  condition or actual or  anticipated
growth.  The Federal Reserve  risk-based  guidelines  define a two-tier  capital
framework.   Tier  1  capital  consists  of  common  and  qualifying   preferred
shareholders'  equity,  less certain  intangibles and other adjustments.  Tier 2
capital  consists of subordinated  and other  qualifying debt, and the allowance
for credit  losses up to 1.25% of  risk-weighted  assets.  The sum of Tier 1 and
Tier 2  capital  less  investments  in  unconsolidated  subsidiaries  represents
qualifying total capital,  at least 50% of which must consist of Tier 1 capital.
Risk-based capital ratios are calculated by dividing Tier 1 and total capital by
risk-weighted assets. Assets and off-balance sheet exposures are assigned to one
of four categories of risk weights, based primarily on relative credit risk. The
minimum Tier 1 capital  ratio is 4% and the minimum  total  capital ratio is 8%.


                                       8
<PAGE>

The Company's Tier 1 and total risk-based  capital ratios under these guidelines
at December 31, 2001, were 8.0% and 9.0%, respectively.

   The  leverage  ratio is  determined  by  dividing  Tier 1 capital by adjusted
average  total  assets.  Although the stated  minimum  ratio is 3%, most banking
organizations  are  required  to  maintain  ratios  of at least 100 to 200 basis
points above 3%. The Company's leverage ratio at December 31, 2001 was 6.5%. The
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),  among
other  things,   identifies  five  capital  categories  for  insured  depository
institutions  (well  capitalized,   adequately  capitalized,   undercapitalized,
significantly  undercapitalized and critically  undercapitalized),  and requires
the  respective  federal  regulatory  agencies to implement  systems for "prompt
corrective action" for insured depository  institutions that do not meet minimum
capital requirements within such categories.  FDICIA imposes  progressively more
restrictive  constraints  on operations,  management and capital  distributions,
depending on the category in which an institution is classified. Failure to meet
the  capital  guidelines  could also  subject a banking  institution  to capital
raising  requirements.   An  "undercapitalized"  bank  must  develop  a  capital
restoration  plan and its parent  holding  company  must  guarantee  that bank's
compliance  with the plan. The liability of the parent holding company under any
such  guarantee is limited to the lesser of 5% of the bank's  assets at the time
it became  "undercapitalized"  or the  amount  needed  to comply  with the plan.
Furthermore,  in the event of bankruptcy  of the parent  holding  company,  such
guarantee would take priority over the parent's general unsecured creditors.  In
addition,  FDICIA requires the various regulatory  agencies to prescribe certain
non-capital  standards for safety and soundness  related generally to operations
and management,  asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such standards.

   The  various   regulatory   agencies  have  adopted   substantially   similar
regulations that define the five capital categories  identified by FDICIA, using
the total  risk-based  capital,  Tier 1 risk-based  capital and leverage capital
ratios as the relevant  capital  measures.  Such regulations  establish  various
degrees of  corrective  action to be taken  when an  institution  is  considered
undercapitalized.  Under the regulations,  a "well capitalized" institution must
have a Tier 1 capital  ratio of at least 6%, a total  capital  ratio of at least
10% and a  leverage  ratio  of at  least  5% and  not be  subject  to a  capital
directive  order.  An "adequately  capitalized"  institution  must have a Tier 1
capital  ratio  of at  least  4%,  a total  capital  ratio  of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases.

   Banking agencies have also adopted  regulations which mandate that regulators
take  into   consideration   concentrations   of  credit  risk  and  risks  from
non-traditional  activities, as well as an institution's ability to manage those
risks,  when  determining  the  adequacy  of  an  institution's   capital.  That
evaluation  will  be  made as a part of the  institution's  regular  safety  and
soundness  examination.  Banking  agencies also have adopted  final  regulations
requiring  regulators  to consider  interest  rate risk (when the interest  rate
sensitivity  of an  institution's  assets does not match the  sensitivity of its
liabilities or its off-balance  sheet position) in the determination of a bank's
capital adequacy. Concurrently, banking agencies have proposed a methodology for
evaluating  interest  rate risk.  After  gaining  experience  with the  proposed
measurement   process,   those  banking   agencies  intend  to  propose  further
regulations to establish an explicit risk-based capital charge for interest rate
risk.

DISTRIBUTIONS

   The  Company's  primary  source  of  funds  for  cash  distributions  to  its
shareholders is dividends received from the Bank. The Bank is subject to various
general  regulatory  policies  and  requirements  relating  to  the  payment  of
dividends, including requirements to maintain capital above regulatory minimums.
The appropriate  federal  regulatory  authority is authorized to determine under
certain  circumstances  relating to the financial  condition of the bank or bank
holding  company  that the  payment of  dividends  would be an unsafe or unsound
practice and to prohibit payment of dividends.

   In addition to the foregoing,  the ability of the Company and the Bank to pay
dividends may be affected by the various  minimum capital  requirements  and the
capital and non-capital  standards established under FDICIA, as described above.
The right of the Company,  its  shareholders and its creditors to participate in
any distribution of the assets or earnings of the Bank is further subject to the
prior claims of creditors of the Bank.

"SOURCE OF STRENGTH" POLICY

   According  to Federal  Reserve  policy,  the  Company is expected to act as a
source of financial  strength to the Bank and to commit resources to support the
Bank.



                                       9
<PAGE>

                                   PROPERTIES

   The Bank currently  operates out of fifteen branch offices and a non-customer
operations  center.  All branches have automated teller machines  ("ATMs").  The
Company owns the following properties:

<TABLE>

                                                                      APPROXIMATE SQUARE        YEAR ESTABLISHED/
OFFICE LOCATION                                                            FOOTAGE                   ACQUIRED
------------------------------------------------------------          ------------------        -----------------

<S>                                                                          <C>                       <C>
LAKE CITY (COLUMBIA COUNTY)

    201 North Marion Street (1)  .........................                   22,000                    1986
    145 West Baya Avenue  ................................                   10,100                    1993
    4420 U.S. 90 West  ...................................                    2,900                    1997
    100 North First Street  ..............................                    7,600                    2001
    1 CNB Place, East U.S. 90 (2)  .......................                   20,800                    1996

LIVE OAK (SUWANNEE COUNTY)

    205 White Avenue, S.E.   .............................                    6,000                    1988
    1562 South Ohio Avenue  ..............................                    2,000                    1993
    535 South Ohio Avenue   ..............................                    8,000                    2001

FORT WHITE (COLUMBIA COUNTY)

    Highway 27  ..........................................                    2,200                    1990

MACCLENNY (BAKER COUNTY)

    595 South Sixth Street  ..............................                    4,800                    1992

STARKE (BRADFORD COUNTY)

    606 West Madison Street  .............................                    8,000                    1994

GAINESVILLE (ALACHUA COUNTY)

    5027 Northwest 34th Street  ..........................                    2,000                    1996
    7515 West University Avenue  .........................                   12,000                    2000
    11411 N. State Rd. 121  ..............................                    4,500                    1996

LAKE BUTLER (UNION COUNTY)

    300 West Main Street  ................................                    6,800                    1996

JACKSONVILLE (DUVAL COUNTY)

    9715 Gate Parkway North  .............................                   26,000                    2000

ST. AUGUSTINE (ST. JOHNS COUNTY)

    1980 U.S. 1 South   ..................................                    5,000                    2000

-------------------------
<FN>
(1) Main office.
(2) Location of the operations center.
</FN>
</TABLE>


                                       10
<PAGE>

   The  Company  is  currently   leasing  a  branch  in  the  Mandarin  area  of
Jacksonville  (Duval  County),  which opened in February  2001. The Company also
owns 1.57 acres of unimproved  land in Glen St. Mary,  Florida that was acquired
in 2001. The land will be used for the construction of a branch banking facility
that is expected to open in late 2002.

                                LEGAL PROCEEDINGS

   There are no material  pending  legal  proceedings  to which the Company is a
party or to which any of their  properties  are subject;  nor are there material
proceedings  known to be contemplated  by any  governmental  authority;  nor are
there material  proceedings  known to the Company,  pending or contemplated,  in
which any director,  officer,  affiliate or any principal security holder of the
Bank or the Company,  or any associate of any of the foregoing is a party or has
an interest adverse to the Company.

               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.

             EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT

K. C. Trowell        63        Mr. Trowell is Chairman, Chief Executive  Officer
                               and President of the Company and the Bank. He was
                               elected  to the  Board of  Directors  in 1987 and
                               serves as Chairman of the Executive  Committee of
                               the Board of  Directors  of the  Company  and the
                               Bank.  Mr.  Trowell also serves on the  Executive
                               Committee  of the Bank's Board of  Directors.  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 30
                               years. He has also held management positions with
                               Bank  of   America   in  Lake   City   (and   its
                               predecessors), American Bank of Jacksonville, and
                               Barnett  Banks,  Inc.  in  Jacksonville.  He is a
                               former  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,
                               a  founding  director  of North  Central  Florida
                               Areawide  Development Company, and a former board
                               member  and  chairman  of both Lake City  Medical
                               Center and Columbia County Industrial Development
                               Authority.

G. Thomas Frankland   55       Mr. Frankland is the Executive Vice President and
                               Chief  Financial  Officer of the  Company and the
                               Bank. Mr.  Frankland served as Vice President and
                               Chief Financial Officer of AirNet  Communications
                               Corporation  in  Melbourne,  Florida,  from March
                               1998  until he joined  the  Company  in  November
                               1998.  From  May  1994  until  August  1996,  Mr.
                               Frankland was Vice  Chairman and Chief  Financial
                               Officer of Ideon Group, Inc. ("Ideon"). Following
                               the  acquisition  of Ideon by CUC  International,
                               Inc.  ("CUC"),  in  August  1996,  Mr.  Frankland
                               continued  in  a  consulting  capacity  with  CUC
                               through  December  1997.  Prior to May 1994,  Mr.
                               Frankland  was a partner  with  Price  Waterhouse
                               LLP.  During his 24 years  with Price  Waterhouse
                               LLP,  including  the  seven  years he  served  as
                               managing partner of the Jacksonville  office,  he
                               specialized  primarily in the financial  services
                               industry.  He  currently  serves  on the Board of
                               Directors   of   the    University   of   Florida
                               Foundation,  the  Warrington  College of Business
                               Advisory Council, the Fisher School of Accounting
                               Steering  Committee  and the North  Florida  Land
                               Trust.


                                       11
<PAGE>

Martha S. Tucker     51        Ms. Tucker  has  served  as Senior Vice President
                               and  Controller of the Company and the Bank since
                               July 1997. From 1991 through 1997, Ms. Tucker was
                               Vice President and Cashier of the Bank. From 1988
                               through 1991, Ms. Tucker was Cashier for Citizens
                               Bank of Live Oak,  which  merged into the Bank in
                               November  1992.  From  1986 to 1988,  Ms.  Tucker
                               served  as  Assistant  Cashier  for the  Bank and
                               prior  to 1986  held  management  positions  with
                               NationsBank  of Live Oak (and its  predecessors).
                               Ms.  Tucker is a life-long  resident of Live Oak,
                               Florida   and  has  over  34  years  of   banking
                               experience.  She is a member of the Altrusa  Club
                               and the Suwannee County Chamber of Commerce.

Lloyd D. Adams       54        Mr. Adams serves as the President of the Suwannee
                               Valley  Division of the Bank,  consisting  of the
                               Columbia and Suwannee markets.  Having joined CNB
                               in  May  1998,  he has 28  years  of  experience,
                               primarily  in business  banking.  A native of the
                               area, Mr. Adams is a recognized community leader.
                               He is a  graduate  of Florida  State  University,
                               Florida  School of Banking and the ABA Commercial
                               Lending Graduate School in Norman, Oklahoma.

Robert E. Cameron    57        Mr. Cameron   serves  as  the  Southern  Division
                               President  of the  Bank.  Prior  to  joining  the
                               Company in April 1998,  Mr.  Cameron was a Senior
                               Vice  President of Barnett Bank of Alachua County
                               from 1988 until 1998. He also was a member of the
                               Board  of   Directors   of   United   Gainesville
                               Community Development Board. He has worked in the
                               banking industry for 32 years.  Currently he is a
                               member   of  the  Board  of   Directors   of  the
                               Gainesville  Builders  Association and Child Care
                               Resources.

John D. Kennedy      45        Mr. Kennedy has served as the TriCounty  Division
                               President  of the Bank since  August  1998.  From
                               1996 through 1998,  Mr. Kennedy was the President
                               of the Bank's Macclenny branch. From October 1973
                               until August 1996 he was with The  Citizens  Bank
                               of  Macclenny,   where  he  served  as  President
                               beginning in January 1987.  Mr. Kennedy serves on
                               the Lake City Community  College  Endowment Trust
                               Board.  He is a member of the Board of  Directors
                               of Baker County Council on Aging and Baker County
                               Tip-Off  Club.  He is also  Chairman of the Baker
                               County Education  Foundation and President of the
                               Girls  Softball  League  of  Baker  County.   Mr.
                               Kennedy has 29 years of banking experience.

David H. Sheffield   38        Mr. Sheffield  serves as the First Coast Division
                               President  overseeing banking activities in Duval
                               and St. Johns counties.  Mr. Sheffield joined CNB
                               National Bank in 1999. He has 16 years of banking
                               experience in the Jacksonville market,  primarily
                               in the commercial  lending  functional  area. Mr.
                               Sheffield began his career with Florida  National
                               Bank  in  1986  and  has  held   positions   with
                               Enterprise  National  Bank  of  Jacksonville  and
                               Compass  Bank in various  lending and  management
                               capacities.   Mr.  Sheffield  is  a  graduate  of
                               Clemson  University  with  a  B.S.  in  Financial
                               Management.  He is  also a  graduate  of the  ABA
                               Commercial   Lending   Graduate   School  at  the
                               University of Oklahoma and the Graduate School of
                               Banking  at  Louisiana  State  University.  He is
                               actively   involved  in  various   community  and
                               industry  organizations and is active as an elder
                               at his church.

Suzanne M. Norris    38        Ms. Norris  has  served  as Senior Vice President
                               and Senior Credit  Administrator since July 1997.
                               Ms. Norris came to the Bank in September 1996 and
                               has 16 years of  banking  experience,  working in
                               various  management  and lending  positions  with
                               NationsBank  in St.  Petersburg,  Tampa  and Lake
                               City,   including  acting  as  commercial  market
                               manager/senior  banking  executive  for Lake City
                               and Gainesville from June 1995 to September 1996.
                               Ms.  Norris,  a  graduate  of the  University  of
                               Florida, has been active in the community, having
                               served as the President of the Lake City/Columbia


                                       12
<PAGE>

                               County Chamber of Commerce.  She currently serves
                               on the Board of Trustees for Lake City  Community
                               College,  the Board of  Directors  for the United
                               Way of  Suwannee  Valley  and  Epiphany  Catholic
                               School and is a member of Altrusa.



                                     PART II

      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 15, 2002,  there were 6,097,953
shares of Common Stock issued and  outstanding,  and 518,838  shares  subject to
currently  exercisable  options. On January 29, 1999, the Company's common stock
began trading on the NASDAQ National  Market under the symbol "CNBB",  resulting
from the issuance of 1,250,000  shares of common stock in the Company's  initial
public  offering at $10.25 per common  share.  Proceeds from the offering net of
underwriting   discount  and  expenses   totaled  $11.4  million.   The  Company
contributed $10.0 million of the $11.4 million net proceeds from the offering to
CNB National  Bank in February  1999.  There is no trading  information  for any
prior years,  since there was not an established market for the Company's common
stock.  See Table 12: "Selected  Quarterly Data" in Management's  Discussion and
Analysis of Financial  Condition for the quarterly market price for the last two
fiscal years.

   Shareholders'  equity at December 31, 2001 was $46.7 million,  as compared to
$44.6  million at December 31, 2000.  On July 15, 1998,  the Company  declared a
two-for-one stock split for shareholders of record on August 10, 1998, effective
August 17, 1998.

   Company  dividends  for 2000 and 2001  consisted  of the payment of quarterly
cash dividends in the amount of $0.05 per common share.

   The  Company's   ability  to  pay  dividends  on  the  Common  Stock  depends
significantly  on the  ability of the Bank to pay  dividends  to the  Company in
amounts sufficient to service its obligations. Such obligations include interest
payments on outstanding long-term debt and may include an obligation to make any
payments with respect to securities  issued in the future which have an equal or
greater  dividend  preference  to the  Common  Stock.  The Bank  may also  issue
additional  capital stock or incur  indebtedness,  subject to certain  borrowing
covenants  outlined  in the  Company's  line of credit  agreement,  as  amended,
entered  into with  another bank during 2001 (see  Management's  Discussion  and
Analysis - Item 7 of Part II). Furthermore,  the regulations of the Comptroller,
regulatory  capital  levels and the net income of the Bank determine its ability
to pay dividends or make other capital distributions.

























                                       13
<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
                             SELECTED FINANCIAL DATA


<TABLE>
                                                              2001           2000            1999           1998           1997
                                                         -------------- --------------- -------------- -------------- --------------
dollars in thousands except per share information.
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>             <C>            <C>            <C>
SUMMARY OF OPERATIONS:
Interest Income                                           $   40,417     $   32,061      $   23,758     $   21,119     $   19,420
Interest Expense                                             (19,629)       (14,736)         (9,052)        (9,417)        (8,663)
                                                          -----------    -----------     -----------    ------------   ------------
Net Interest Income                                           20,788         17,325          14,706         11,702         10,757
Provision for Loan Loss                                       (2,050)        (1,350)         (1,160)          (710)          (440)
                                                          -----------    -----------     -----------    ------------   ------------
Net Interest Income After
   Provision for Loan Losses                                  18,738         15,975          13,546         10,992         10,317
Non-Interest Income                                            5,633          3,338           2,952          2,392          2,153
Non-Interest Expense                                         (19,836)       (15,481)        (11,994)        (9,298)        (7,914)
                                                          -----------    -----------     -----------    ------------   ------------
Income Before Taxes                                            4,535          3,832           4,504          4,086          4,556
Income Taxes                                                  (1,594)        (1,325)         (1,563)        (1,407)        (1,581)
                                                          -----------    -----------     -----------    ------------   ------------
Net Income                                                $    2,941     $    2,507      $    2,941     $    2,679     $    2,975
                                                          ===========    ===========     ===========    ============   ============

------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE: (1)
Basic Earnings                                            $     0.48     $     0.41      $     0.49     $     0.55     $     0.69
Diluted Earnings                                                0.48           0.41            0.48           0.55           0.68
Book Value                                                      7.64           7.32            7.04           6.36           5.98
Dividends                                                       0.20           0.20            0.20           0.20           0.14
Actual Shares Outstanding                                  6,106,453      6,099,376       6,116,070      4,856,770      4,856,770
Basic Weighted Average Shares Outstanding                  6,094,670      6,095,471       5,995,474      4,856,770      4,327,534
Diluted Weighted Average Shares Outstanding                6,188,477      6,134,270       6,069,737      4,897,922      4,406,616

------------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS:
Return on Average Assets                                        0.53%          0.62%           0.91%          0.93%          1.14%
Return on Average Shareholders' Equity                          6.43%          5.74%           7.03%          8.92%         12.38%
Dividend Payout                                                41.67%         48.78%          40.82%         36.36%         20.29%
Efficiency Ratio                                               75.08%         74.92%          67.92%         65.97%         61.30%
Total Risk-Based Capital Ratio                                  9.00%         12.00%          17.25%         16.62%         18.67%
Average Shareholders' Equity to
   Average Assets                                               8.23%         10.82%          13.01%         10.43%          9.22%
Tier 1 Capital to Average Assets/Leverage Ratio                 6.50%          9.80%          12.70%          9.70%         10.20%

------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT YEAR END:
Assets                                                    $   612,021    $   467,593     $  346,076     $   311,565    $   273,331
Gross Loans                                                   521,555        380,821        266,084         187,015        159,649
Deposits                                                      532,891        367,686        288,203         265,109        231,444
Other Borrowings                                               28,148         51,142         12,063          12,570          9,157
Shareholders' Equity                                           46,669         44,636         43,075          30,896         29,025

------------------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
Banking Locations                                                  15             12             12              11             11
Full-Time Equivalent Employees                                    246            212            183             149            144

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

<FN>
(1) Per share data reflects a two-for-one stock split effective August 17, 1998.
</FN>
</TABLE>


                                       14
<PAGE>

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



Forward-Looking Statements

     This Annual Report on Form 10-K contains forward-looking statements,  which
involve risks and uncertainties which are described in this Annual Report and in
other  filings with the  Securities  and Exchange  Commission  (the "SEC").  The
actual  results of CNB Florida  Bancshares,  Inc.  (the  "Company" or "CNB") may
differ   significantly  from  the  results  discussed  in  the   forward-looking
statements. Factors that may cause such differences include, but are not limited
to,  increased  competitive  pressures  among  depository  and  other  financial
institutions,  changes in the interest rate environment that may reduce margins,
general economic or business  conditions in the Company's markets that lead to a
deterioration  in  credit  quality  or  reduced  loan  demand,   legislative  or
regulatory  changes  and  competitors  of the  Company  that  may  have  greater
financial   resources  and  develop   products  or  services  that  enable  such
competitors to compete more  successfully  than the Company.  Other factors that
may cause actual results to differ from the  forward-looking  statements include
customer  acceptance of new products and services,  changes in customer spending
and saving habits and the Company's  success in managing costs  associated  with
expansion.   Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking statements,  which speak only as of the date hereof. The Company
does not  undertake any  obligation  to publicly  release any revisions to these
forward-looking  statements to reflect  events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.

     The  following  discussion  should  be read in  conjunction  with  Selected
Historical  Financial  Information and the Consolidated  Financial Statements of
the Company, which are included in this Form 10-K.

Overview

     The following  analysis reviews  important  factors affecting the financial
condition  and results of  operations  of CNB Florida  Bancshares,  Inc. for the
periods shown.  This section should be read in conjunction with the Consolidated
Financial  Statements and related notes.  This  discussion  should  facilitate a
better  understanding  of the major factors and trends that affect the Company's
financial condition and earnings performance,  and how the Company's performance
during 2001 compares  with prior years.  Throughout  this  section,  CNB Florida
Bancshares, Inc. and its subsidiary, CNB National Bank, are referred to as "CNB"
or "the Company".

     On January 29, 1999,  CNB  completed  its initial  public  offering and its
common  stock  began  trading  on  the  NASDAQ  National   Market,   giving  CNB
shareholders  greater access to purchasing or selling shares of common stock. In
addition,  CNB obtained  additional  capital to support its expansion  plans, as
well as for general corporate  purposes.  The Company  contributed as capital to
CNB  National  Bank $10.0  million of the $11.4  million net  proceeds  from the
offering in February 1999.

     The Company is pleased with the progress made toward its  strategic  growth
initiatives in 2001.  Expansion  activities were completed with the opening of a
second  Jacksonville  branch  (Mandarin)  in the first  quarter  of 2001 and the
opening of the St.  Augustine  branch (US 1 and SR 312) in the second quarter of
2001. On May 11, 2001, the Bank purchased the Lake City and Live Oak branches of
Republic Bank. The Bank acquired  loans,  deposits and premises and equipment of
approximately $12 million,  $62 million and $2 million,  respectively.  The Bank
also recorded a core deposit intangible of $6 million,  which is being amortized
over  its  estimated  life of 10  years.  The Bank  completed  the  purchase  of
unimproved  land  located on US 90 in Glen St. Mary in August 2001 with plans of
opening a new branch in late  2002.  With the  conversion  to an  improved  data
processing  platform  during  the  fourth  quarter of 2000 and the move into the
expanded Operations Center in the first half of 2001, operational support to our
growth initiatives will become more customer focused and cost-efficient.

     The Company  officially  relocated its corporate  offices to  Jacksonville,
Florida effective January 2001.  Operational  headquarters for CNB National Bank


                                       15
<PAGE>

continue to be located in Lake City.

Results of Operations

     For 2001,  the Company's  earnings were $2.9 million,  or $0.48 per diluted
share,  compared to $2.5 million,  or $0.41 per diluted share, and $2.9 million,
or $0.48 per  diluted  share,  in 2000 and  1999,  respectively.  These  results
reflect  growth in net interest  income and  non-interest  income.  Non-interest
expenses continue to reflect the Company's  strategy to expand the CNB franchise
into new markets.  Total assets increased to $612.0 million at December 31, 2001
compared to $467.6 million at December 31, 2000, an increase of 31%. Included in
the results for 2001 is the impact of the  acquisition of the Lake City and Live
Oak branches of Republic Bank in May 2001.

Net Interest Income/Margins

     Net interest  income is the single  largest  source of revenue for the Bank
and  consists of  interest  and fee income  generated  by earning  assets,  less
interest  expense  paid on interest  bearing  liabilities.  The  Company's  main
objective  is to manage its  assets  and  liabilities  to  provide  the  largest
possible  amount  of income  while  balancing  interest  rate,  credit  quality,
liquidity  and capital  risks.  Net interest  income was $20.8 million for 2001,
compared  to $17.3  million  and $14.7  million  for the  comparable  prior year
periods  of 2000 and  1999,  respectively.  The  increases  were due to loan and
deposit growth, partially offset by the impact of lower rates during 2001.

     Average loan growth in 2001 of 47%  contributed  to a $8.4 million,  or 26%
increase  in interest  income over 2000.  Increases  in time,  money  market and
interest bearing deposits, including those accounts acquired from Republic Bank,
were the main  contributors  in the $135.9  million,  or 44%,  growth in average
interest bearing liabilities.

     The Company's net interest margin  decreased to 4.09% in 2001,  compared to
4.75% in 2000.  The decline in the margin is reflective of a drop in the federal
funds  overnight  borrowing  rate of 475 basis  points in 2001  coupled  with an
increase in higher-cost  deposits.  Table 1 presents a comparative earning asset
composition as well as earning asset yields and interest bearing liability rates
for 2001,  2000 and 1999.  Table 1a shows the changes in net interest  income by
category due to shifts in volume and rates for years presented.


























                                       16
<PAGE>


                  Table 1: Average Balances - Yields and Rates


<TABLE>
                                      December 31, 2001                 December 31, 2000                 December 31, 1999
                                 -------------------------------   -------------------------------   -------------------------------
                                             Interest                          Interest                          Interest
                                  Average    Income or   Average    Average    Income or   Average    Average    Income or   Average
                                  Balance     Expense      Rate     Balance     Expense      Rate     Balance     Expense      Rate
                                 ---------  ----------  --------   ---------  ----------  --------   ---------  ----------  --------
                                                                      (dollars in thousands)
<S>                              <C>         <C>          <C>      <C>          <C>         <C>      <C>          <C>         <C>
ASSETS:
 Federal Funds Sold              $  2,773    $   102      3.68 %   $  3,429     $   208     6.07 %   $ 13,285     $   643     4.84 %
 Investment Securities
  Available for Sale               33,167      1,864      5.62       33,314       2,110     6.33       45,082       2,671     5.92
 Investment Securities
  Held to Maturity                  6,278        384      6.12        9,869         572     5.80        9,151         504     5.51
 Loans (1)                        465,551     38,055      8.17      317,491      29,112     9.17      215,861      19,412     8.99
 Interest Bearing Deposits            401         12      2.99          895          59     6.59       10,533         528     5.01
                                 ---------  ----------  --------   ---------  ----------  --------   ---------  ----------  --------

TOTAL EARNING ASSETS              508,170     40,417      7.95      364,998      32,061     8.78      293,912      23,758     8.08
 All Other Assets                  47,705                            38,278                            27,543
                                 ---------                         ---------                         ---------

TOTAL ASSETS                     $555,875                          $403,276                          $321,455
                                 =========                         =========                         =========

LIABILITIES AND
 SHAREHOLDERS' EQUITY:
 NOW & Money Markets             $148,026      3,899      2.63 %   $110,387       3,731     3.38 %   $ 80,132       1,749     2.18 %
 Savings                           18,707        196      1.05       17,095         238     1.39       17,445         245     1.40
 Time Deposits                    235,010     13,656      5.81      151,674       9,019     5.95      131,548       6,731     5.12
 Federal Funds Purchased and
  Repurchase Agreements            14,609        552      3.78        9,565         572     5.98        6,947         327     4.71
 Short Term Borrowings             20,932      1,061      5.07       17,377       1,176     6.77            -           -        -
 Other Borrowings                   4,667        265      5.68            -           -        -            -           -        -
                                 ---------  ----------  --------   ---------  ----------  --------   ---------  ----------  --------

TOTAL INTEREST BEARING
 LIABILITIES                      441,951     19,629      4.44      306,098      14,736     4.81      236,072       9,052     3.83
 Demand Deposits                   64,337                            49,418                            40,761
 Other Liabilities                  3,838                             4,117                             2,813
 Shareholders' Equity              45,749                            43,643                            41,809
                                 ---------                         ---------                         ---------
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY            $555,875                          $403,276                          $321,455
                                 =========                         =========                         =========
                                                          ----                              ----                              ----
INTEREST SPREAD (2)                                       3.51 %                            3.97 %                            4.25 %
                                                          ====                              ====                              ====
                                              ------                             ------                            ------
NET INTEREST INCOME                          $20,788                            $17,325                           $14,706
                                              ======                             ======                            ======

NET INTEREST MARGIN (3)                                   4.09 %                            4.75 %                            5.00 %
                                                        ======                            ======                            ======


-------------------------------------------------
<FN>
(1) Interest  income on average loans includes loan fee recognition of $979,000,
    $969,000 and $697,000 in 2001, 2000 and 1999 respectively.
(2) Represents the average rate earned minus average rate paid.
(3) Represents net interest income divided by total earning assets.
</FN>
</TABLE>


                                       17
<PAGE>

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

<TABLE>
                                                                   NET CHANGE DECEMBER 31,            NET CHANGE DECEMBER 31,
                                                                   2000-2001 ATTRIBUTABLE TO:         1999-2000 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                                             $    (40)  $   (66)   $ (106)       $  (477)   $    42   $ (435)
   Investment Securities Available for Sale                             (9)     (237)     (246)          (697)       136     (561)
   Investment Securities Held to Maturity                             (208)       20      (188)            40         28       68
   Loans                                                            13,577    (4,634)    8,943          9,140        560    9,700
   Interest Bearing Deposits                                           (33)      (14)      (47)          (483)        14     (469)
                                                                  ---------   -------   -------       ---------   -------   ------
      Total                                                         13,287    (4,931)    8,356          7,523        780    8,303


INTEREST EXPENSE:
   NOW & Money Markets                                               1,272    (1,104)      168            661      1,321    1,982
   Savings                                                              23       (65)      (42)            (5)        (2)      (7)
   Time Deposits                                                     4,956      (319)    4,637          1,030      1,258    2,288
   Federal Funds Purchased and Repurchase Agreements                   302      (322)      (20)           124        121      245
   Short Term Borrowings                                               241      (356)     (115)         1,176          -    1,176
   Other Borrowings                                                    265         -       265              -          -        -
                                                                  ---------   -------   -------       ---------   -------   ------
      Total                                                          7,059    (2,166)    4,893          2,986      2,698    5,684
                                                                  ---------   -------   -------       ---------   -------   ------
         Net Interest Income                                      $  6,228   $(2,765)   $3,463        $ 4,537    $(1,918)  $2,619
                                                                  =========   =======   =======       =========   =======   ======

---------------------------------
<FN>
(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.  Changes which
    are not solely due to volume changes or solely due to rate changes have been
    attributed to rate changes.
</FN>
</TABLE>


Non-Interest Income


     Non-interest  income  totaled $5.6 million in 2001, an increase of 69% from
the $3.3  million in 2000,  and a 13%  increase  from 1999.  Service  charges on
deposit account increased $358,000 or 16% in 2001,  compared with $119,000 or 6%
in 2000. Other non-interest income, which includes credit card fees, credit life
insurance  income,  safe deposit box fees,  fees from secondary  market mortgage
loan sales, net gains and losses from sale of securities and other miscellaneous
fees,  increased $1.9 million in 2001 compared to $267,000 in 2000. The increase
in other fee  income in 2001 was  primarily  attributed  to growth in  secondary
market mortgage loan sales, which is reflective of a ramping up of the Company's
mortgage loan origination operations.  Mortgage loan originations also benefited
from the declining rate environment during 2001.

     Non-interest  income as a  percentage  of average  assets was 1.01% in 2001
compared to 0.83% and 0.92% in 2000 and 1999, respectively.

Non-Interest Expense

     Non-interest  expense increased by $4.4 million, or 28%, for 2001, compared
to an increase of $3.5  million,  or 29%, for 2000.  During  2001,  non-interest
expenses as a percentage of average assets decreased to 3.57%, compared to 3.84%
and 3.73% in 2000 and 1999, respectively.

     Salaries and employee  benefits for 2001  increased  $1.7 million from 2000
compared to $2.1 million from 1999.  The increase from 2000 to 2001 reflects the
opening of two new branches in the First Coast market,  the purchase of the Lake
City and Live Oak  branches  of  Republic  Bank  and  increases  in  operational
headcount  to support the  Company's  expansion  strategy.  As a  percentage  of
average total assets,  salaries and employee benefits have decreased to 1.84% in
2001 compared to 2.12% and 2.01% in 2000 and 1999, respectively.


                                       18
<PAGE>

     Occupancy expenses (including furniture, fixtures & equipment) increased to
$3.1 million in 2001  compared to $2.2 million in 2000 and $1.8 million in 1999.
The major factors  affecting the increase in occupancy  expenses relate to lease
expense,  higher real estate taxes,  utilities and depreciation on furniture and
equipment for the new branches opened in Jacksonville and St. Augustine, the two
branches  purchased  from Republic  Bank,  the  relocation  during 2000 into new
facilities in  Jacksonville  and  Gainesville and the expansion of the Lake City
Operations  Center.  CNB  continues  to  monitor  and assess  its  facility  and
equipment needs as it positions itself for future growth and expansion.

     Other operating  expenses at CNB increased 37% in 2001 compared to 2000 and
27% in 2000 compared to 1999. The increase in 2001 was  attributable  to: (1) an
increase  in  postage  and  delivery  expense  of  $120,000,  primarily  due  to
additional courier runs resulting from additional  branches;  (2) an increase of
$174,000 in supplies, with the major contributing factors being start-up cost at
new  branches  and general  growth in  business;  (3) an increase of $146,000 in
marketing expense due to the Company's  advertising and promotion efforts in new
and established  markets;  (4) an increase of $131,000 in legal and professional
costs;  (5) an increase of $454,000 in data  processing  fees resulting from the
conversion to an improved data processing platform and (6) amortization  expense
related to the core deposit  intangible from the Republic Bank acquisition.  The
main  contributing  factors to the increase in other operating  expenses in 2000
was an increase in postage and  delivery due to  additional  courier runs and an
increase of $161,000 in communication costs due to expansion. Other contributing
reasons were increases in legal and professional fees and marketing expense.

     The following  table details the areas of  significance  in other operating
expenses.

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


                                                   Year Ended December 31,
                                              2001          2000          1999
                                            --------      --------      --------
  Data processing                           $  1,104      $    650      $   590
  Advertising and promotion                      687           541          354
  Postage and delivery                           671           551          468
  Legal and professional                         618           487          327
  Telephone                                      595           584          423
  Supplies                                       578           404          299
  Amortization of intangible assets              543           179          179
  Regulatory fees                                255           149          143
  Loan expenses                                  248           194          165
  Administrative                                 211           196          182
  Insurance and bonding                          105            89           72
  Education expense                              101            62           53
  Dues and subscriptions                         100           103           78
  Director fees                                   70            72           57
  Other general operating                         67           174           52
  Other                                          518           287          281
                                                 ---           ---          ---
    Total other operating expenses          $  6,471      $  4,722      $ 3,723
                                               =====         =====        =====

Income Taxes

     The  effective  tax rate for the year ended  December  31,  2001 was 35.1%,
compared to 34.6% for 2000 and 34.7% for 1999.  The  consolidated  provision for
income taxes increased to $1.6 million in 2001, compared to $1.3 million in 2000
and $1.6 million in 1999.


                                       19
<PAGE>

Liquidity and Interest Rate Sensitivity

     Liquidity  is defined as the  ability  of the  Company to meet  anticipated
demands  for  funds  under  credit  commitments  and  deposit  withdrawals  at a
reasonable cost on a timely basis.  Management  measures the Company's liquidity
position by giving  consideration  to both on-and off- balance  sheet sources of
and demands for funds on a daily and weekly  basis.  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 investment  securities available for sale) totaled
$55.0  million and  represented  11.8% of average  total  deposits  during 2001,
compared to $54.4  million  and 16.5% for 2000.  The  Company's  loan to deposit
ratio at December 31, 2001 was 98%, compared to 104% at the end of 2000.

     In addition to core  deposit  growth,  sources of funds  available  to meet
liquidity  demands include cash received  through ordinary  business  activities
such as the  collection  of interest  and fees,  federal  funds  sold,  loan and
investment maturities and lines for the purchase of federal funds by the Company
from its principal correspondent banks. The Bank is also a member of the Federal
Home Loan Bank and has access to short-term  and long-term  funds.  In addition,
the Company entered into a line of credit with one of its correspondent banks in
April 2001.  The  agreement was amended in October 2001 to reflect the following
structures:  (1) a $3 million revolving line of credit maturing on June 30, 2002
with interest floating quarterly at 3-month Libor plus 145 basis points; and (2)
a $10  million  term  loan  maturing  October  3, 2006  with  interest  floating
quarterly at 3-month Libor plus 170 basis points. Semi-annual principal payments
of  approximately  $714,000  begin in 2004.  The Company also entered into a $10
million  pay-fixed  interest rate swap with the same bank.  The fixed rate under
the interest  rate swap is 6.45% and the variable rate is based on 3-month Libor
plus 170 basis points.  The swap matures October 3, 2006 and has been designated
as a cash flow hedge of the variable  interest  payments on the $10 million term
loan noted in (2) above.  The fair value of the  interest  rate swap at December
31, 2001 was approximately  $9,000.  There are no amounts  outstanding on the $3
million line of credit. The term loan, line of credit and interest rate swap are
collateralized by 100% of the common stock of the Bank.

     In connection with the term loan and line of credit agreement,  the Company
is required to maintain compliance with certain covenants and restrictions.  The
following  financial covenants are to be maintained on a quarterly basis and are
calculated at the Bank-level:

     o   Interest  coverage  ratio of  greater  than or  equal to 2.00x  through
         September 30, 2003.
     o   Debt service  coverage  ratio of greater than or equal to 0.85x through
         September  30, 2002;  1.00x from October 1, 2002 through  September 30,
         2003; 1.25x from October 1, 2003 through  September 30, 2004; and 1.50x
         from October 1, 2004 through maturity.
     o   Ratio of  non-performing  assets to total  loans plus other real estate
         owned and repossessed assets of less than or equal to 1.25%.
     o   Maintenance of tier 1 and total risk based capital ratios that meet the
         benchmarks  for  consideration  as  a  "well-capitalized"   institution
         (currently 8% and 10%,  respectively).  Also, maintenance of a leverage
         capital ratio of greater than 6%.

         In  addition, the Company is subject to the following restrictions:

     o   No additional  debt is permitted  without  consent of the lender.
     o   No  increases   in  dividends   paid  by  the  Company  to  its  common
         shareholders are permitted without consent of the lender.

     Failure to  maintain  any of these  covenants  would  place the  Company in
default of the line of credit  agreement.  In such a case,  absent  any  waivers
obtained from the lender,  all amounts  payable could be accelerated  and become
due immediately. As of December 31, 2001, the Company was in compliance with all
covenants.

     The level of commitments to fund additional  borrowings and standby letters
of credit also impacts the Company's liquidity position. These commitments, when
drawn,  are  generally  funded  through  deposit  inflows,  loan and  investment
maturities, interest receipts and, to the extent necessary, short term purchases
of  federal  funds.  The  Company's  borrowing  capacity  under the FHLB is also


                                       20
<PAGE>

available to fulfill commitments to lend. Since many commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash 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.  Commitments to extend credit and
standby letters of credit amount to approximately $122,000,000 and $7,373,000 at
December  31, 2001 and 2000,  respectively,  and expire as outlined in the table
below (in thousands):

                                        Unfunded             Standby
                                       Commitments       Letters of Credit
                                       -----------       -----------------
               2002                    $   37,413           $    5,947
               2003                        21,587                1,366
               2004                        22,122                   60
               2005                         9,479                    -
               2006                         7,227                    -
               Thereafter                  24,172                    -
                                       ----------           ----------
                                       $  122,000           $    7,373
                                       ==========           ==========

     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  instruments  and  instruments  that  are  approaching  maturity.
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.

     The Company's  gap and liquidity  positions are reviewed on a regular basis
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 changes in
interest rates. Based on this internal analysis, at December 31, 2001, a gradual
increase in interest rates of 200 basis points would have increased net interest
income  over the ensuing  twelve-month  period by 1.09%.  A gradual  decrease in
interest  rates of 200 basis points over this same period  would have  decreased
net interest income by 1.11% as compared to a stable rate environment. A similar
200 basis point increase (decrease) would have decreased  (increased) the Bank's
market  value of equity  by 2.36% and  (1.86%),  respectively.  Market  value of
equity is defined as the  difference  between  the  estimated  fair value of the
Company's assets less the estimated fair value of liabilities.

     Table 3, "Rate  Sensitivity  Analysis"  presents rate sensitive  assets and
liabilities,  separating  fixed  and  variable  interest  rate  categories.  The
estimated  fair value of each  instrument  category  is also shown in the table.
While  these  fair  values  are  based  on  management's  judgment  of the  most
appropriate  factors,  there is no  assurance  that,  were the  Company  to have
disposed of such  instruments  on December 31, 2001,  the estimated  fair values
would  necessarily  have been  achieved at that date,  since  market  values may
differ depending on various circumstances.





















                                       21
<PAGE>


Table 3: Rate Sensitivity Analysis
December 31, 2001

<TABLE>

(Dollars in thousands)                                                                                                Fair
                                    1 Year     2 Years    3 Years    4 Years    5 Years    Beyond      TOTAL          Value
                                    ------     -------    -------    -------    -------    ------      -----          -----
INTEREST-EARNING ASSETS:
------------------------

<S>                               <C>          <C>        <C>        <C>        <C>        <C>        <C>          <C>
Gross Loans
     Fixed Rate Loans             $  65,019    $  44,252  $  38,787  $  29,833  $  30,800  $  78,478  $ 287,169    $  296,753
       Average Interest Rate          8.06%        8.34%      8.27%      8.56%      8.09%      7.60%      8.06%

     Variable Rate Loans             78,389       28,740     16,976     17,458     11,432     81,391    234,386       241,228
       Average Interest Rate          5.50%        5.40%      5.90%      5.78%      6.17%      7.67%      6.32%

Investment Securities(1)
     Fixed Rate Investments           3,060            -     18,136          -      4,060      6,630     31,886        32,380
       Average Interest Rate          2.56%                   5.63%                 6.15%      4.80%      5.23%

     Variable Rate Investments            -            -          -          -          -        820        820           833
       Average Interest Rate                                                                   6.20%      6.20%

Federal Funds Sold                    2,100            -          -          -          -          -      2,100         2,100
       Average Interest Rate          1.97%                                                               1.97%

Other Earning Assets(2)               4,431            -          -          -          -          -      4,431         4,431
       Average Interest Rate          5.88%                                                               5.88%
                                  ----------   ---------- ---------- ---------- ---------- ---------- ----------   -----------

Total Interest-Earning Assets     $ 152,999    $  72,992  $  73,899  $  47,291  $  46,292  $ 167,319  $ 560,792    $  577,725
       Average Interest Rate          6.49%        7.18%      7.08%      7.53%      7.45%      7.52%      7.13%
                                  ==========   ========== ========== ========== ========== ========== ==========   ===========

INTEREST-BEARING LIABILITIES:
-----------------------------

NOW                               $  43,313    $       -  $       -  $       -  $       -  $  61,844  $ 105,157    $  105,157
       Average Interest Rate          2.33%                                                    0.50%      2.39%

Money Market                         62,198            -          -          -          -      3,890     66,088        66,088
       Average Interest Rate          3.25%                                                    1.46%      3.14%

Savings                                   -            -          -          -          -     20,250     20,250        20,250
       Average Interest Rate                                                                   0.75%      0.75%

CD's Under $100,000                 131,974        9,929      8,760      2,078        245          -    152,986       154,191
       Average Interest Rate          4.53%        4.84%      4.34%      4.62%      4.52%                 4.54%

CD's $100,000 and Over              105,089        4,829      5,009        624          -          -    115,551       116,726
       Average Interest Rate          4.83%        5.21%      4.63%      6.54%                            4.85%

Securities Sold Under
   Repurchase Agreements and
   Federal Funds Purchased           18,148            -          -          -          -          -     18,148        18,148
       Average Interest Rate          1.62%                                                               1.62%

Other Borrowings(3)                       -            -          -          -     10,000          -     10,000        10,000
       Average Interest Rate                                                        4.30%                 4.30%
                                  ----------   ---------- ---------- ---------- ---------- ---------- ----------   -----------

Total Interest-Bearing Liabilities$ 360,722    $  14,758  $  13,769  $   2,702  $  10,245  $  85,984  $ 488,180    $  490,560
       Average Interest Rate          3.99%        4.96%      4.45%      5.06%      4.31%      0.60%      3.45%
                                  ==========   ========== ========== ========== ========== ========== ==========   ===========

-----------------------------
<FN>
(1) Securities available for sale  are shown at  their amortized cost, excluding
    market value adjustment for net un realized gains of $510,000.
(2) Represents interest bearing deposits with Banks, Federal Reserve Bank Stock,
    Federal Home Loan Bank Stock and other marketab le equity securities.
(3) Other borrowings consists of a  term loan maturing June 30, 2006  that bears
    interest at 3-month Libor plus  170 basis points. The variable rate is reset
    quarterly. The variable interest  payments on the term loan are being hedged
    through an  interest  rate swap.  Under the interest rate swap, the  Company
    pays  a  fixed rate  of interest of  6.45%  and receives  a floating rate of
    interest of  3-month  Libor plus 170 basis points.  Other  terms of the swap
    mirror those of the term debt.
</FN>
</TABLE>

                                       22
<PAGE>

     Core  deposits,  which  represent all deposits  other than time deposits in
excess of $100,000,  averaged 80% of total  average  deposits in 2001 and 83% in
2000.  The Company  closely  monitors its reliance on time deposits in excess of
$100,000. The Bank does not nor has it ever solicited brokered deposits. Table 4
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, 2001

                                                       Amount
                                                     -----------
                                                     (thousands)

               Three Months or Less                  $   35,394
               Three Through Six Months                  29,755
               Six Through Twelve Months                 39,940
               Over Twelve Months                        10,462
                                                     -----------
               Total                                 $  115,551
                                                     ===========

Earning Assets

Loans

     Lending  activities are CNB's single  largest  source of revenue.  Although
management is continually evaluating alternative sources of revenue,  lending is
the major segment of the Company's business and is key to profitability. Average
loans for the year  ended  December  31,  2001 were  $465.6  million,  or 92% of
average earning assets as compared to $317.5 million,  or 87% of average earning
assets for 2000.

     The  commercial   loan  portfolio   includes   commercial,   financial  and
agricultural  loans as well as commercial  real estate loans. As of December 31,
2001, the commercial loan portfolio comprised 54% of total loans compared to 51%
in 2000. During 2001, commercial loans experienced their strongest growth in the
Company's history. This growth was primarily centered in our expansion markets.

     During 2001, real estate mortgages experienced  significant growth of $37.2
million,  or 31%.  As of  December  31,  2001,  the real  estate  mortgage  loan
portfolio (including loans held for sale) was 30% of total loans compared to 32%
in 2000.

     As of  December  31,  2001 the  Company  had  total  gross  loans of $521.6
million,  compared to $380.8 million at December 31, 2000, an increase of $140.7
million or 37%. The  composition  of the Company's  loan  portfolio for the past
five years is presented in Table 5.


                       Table 5: Loan Portfolio Composition


<TABLE>
                                                                      As of December 31,
Types of Loans                                     2001          2000         1999         1998         1997
--------------                                   -------       -------      -------      -------      -------
                                                                           (thousands)

<S>                                            <C>          <C>           <C>          <C>          <C>
Commercial, Financial and Agricultural         $  280,453   $   192,540   $  136,937   $   85,208   $   69,238
Real Estate - Construction                         41,064        33,648       18,926        8,527        3,336
Real Estate - Mortgages Held for Sale               9,908           962            -            -            -
Real Estate - Mortgage                            147,973       119,701       86,275       72,357       68,561
Installment and Consumer                           42,157        33,970       23,946       20,923       18,514
                                                   ------        ------       ------       ------       ------



Total Loans, Net of Unearned Discount             521,555       380,821      266,084      187,015      159,649
Less: Allowance for Loan Losses                    (5,205)       (3,670)      (2,671)      (1,875)      (1,495)
                                                ---------     ---------     --------     --------     --------
Net Loans                                     $   516,350   $   377,151   $  263,413   $  185,140   $  158,154
                                                =========     =========     ========     ========     ========
</TABLE>


                                       23
<PAGE>

     Table 6 sets forth the maturity distribution for selected components of the
Company's  loan  portfolio as of December 31, 2001.  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

<TABLE>
                                                                December 31, 2001

                                               0-12            1-5           Over 5
                                             Months           Years           Years             Total
                                            --------        ---------      ----------        -------------
                                                                           (thousands)

<S>                                         <C>             <C>            <C>                <C>
Commercial, Financial & Agricultural        $ 58,813        $ 117,307      $ 104,333          $ 280,453
Real Estate - Construction                    18,895           22,169              -             41,064
All Other Loans                               65,700           78,802         55,536            200,038
                                            ---------       ----------     ----------         ----------
Total                                       $143,408        $ 218,278      $ 159,869          $ 521,555
                                            =========       ==========     ==========         ==========

Fixed Interest Rate                         $ 65,019        $ 143,672      $  78,478          $ 287,169
Variable Interest Rate                      $ 78,389        $  74,606      $  81,391          $ 234,386

</TABLE>

     Loan  concentrations are considered to exist where there are amounts loaned
to multiple  borrowers engaged in similar activities which collectively would be
similarly  impacted by economic or other  conditions  and when the total of such
amounts exceed 25% of total capital. Due to the lack of diversified industry and
the relative  proximity of markets  served,  the Company has  concentrations  in
geographic  as well as in  types  of  loans  funded.  The  Bank's  four  largest
concentration   categories  are:  Land  Development,   Commercial  Real  Estate,
Professional and Residential Real Estate.

Loan Quality

     Non-performing  assets consist of non-accrual loans, loans past due 90 days
or more and still accruing interest,  other real estate owned and repossessions.
Non-performing  assets  increased from $1.5 million at December 31, 2000 to $2.9
million at December 31,  2001.  Non-performing  assets as a percentage  of total
assets  increased  to  0.47%  in 2001  from  0.32%  in  2000.  The  increase  in
non-performing assets is attributed to continued seasoning of the Company's loan
portfolio,  particularly  in the  newer  markets,  and the  general  decline  in
economic activity during 2001.

     Management  is  continually  analyzing  its loan  portfolio in an effort to
recognize and resolve its problem assets as quickly and efficiently as possible.
Table 7 sets forth certain categories of risk elements on non-performing  assets
for the past five years.


                         Table 7: Non-Performing Assets


<TABLE>
                                                                December 31,
                                         2001          2000         1999         1998        1997
                                     -----------   -----------  ------------ ------------ -----------
                                                           (dollars in thousands)

<S>                                   <C>           <C>          <C>          <C>          <C>
Non-Accrual Loans                     $  1,377      $    579     $    549     $   1,393    $   1,045
Past Due Loans 90 Days or
    More and Still Accruing              1,271           840          180            22          158
Other Real Estate Owned &
    Repossessions                          229            56          102           613          320
                                        --------      --------     --------      --------     -------
  Total Non-Performing Assets         $  2,877      $  1,475     $    831     $   2,028    $   1,523
                                        ========      ========     ========      ========     =======

Percent of Total Assets                  0.47%         0.32%        0.24%         0.65%        0.56%
                                        ========      ========     ========      ========     =======
</TABLE>

                                       24
<PAGE>

     The allowance for loan loss is an amount that  management  believes will be
adequate  to  absorb   inherent   losses  on  existing  loans  that  may  become
uncollectible  based on  evaluations  of the  collectibility  of the loans.  The
allowance for loan loss is established through a provision for loan loss charged
to  expense.  Loans  are  charged  against  the  allowance  for loan  loss  when
management  believes that the  collectibility of the principal is unlikely.  The
evaluation of collectibility  takes into consideration such objective factors as
changes in the nature and volume of the loan  portfolio,  levels  maintained  by
other peer banks and historical loss  experience.  The evaluation also considers
certain subjective factors such as overall portfolio quality, review of specific
problem loans and current  economic  conditions  that may affect the  borrowers'
ability to pay. The  determination  of the allowance  for loan losses  considers
both specifically identified impaired loans, as well as expected losses on large
groups of smaller-balance  homogeneous loans that are collectively evaluated for
impairment.  The  level of the  allowance  for  loan  loss is also  impacted  by
increases  and  decreases  in  loans  outstanding,  since  either  more  or less
allowance is required as the amount of the Company's credit exposure changes. To
the extent actual loan losses differ  materially from  management's  estimate of
these subjective  factors,  loan  growth/run-off  accelerates or the mix of loan
types changes,  the level of the provision for loan loss, and related allowance,
can and will fluctuate.

     The  allowance for loan losses on December 31, 2001,  was $5.2 million,  or
1.00% of total  loans  outstanding,  net of  unearned  income  compared  to $3.7
million,  or 0.96% on December 31, 2000.  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

<TABLE>
                                                                           December 31,
                                2001                 2000                  1999                  1998                 1997
                                ----                 ----                  ----                  ----                 ----
                                    Percent              Percent               Percent               Percent              Percent
                                   of Loans             of Loans              of Loans              of Loans             of Loans
                                    in Each              in Each               in Each               in Each              in Each
                                   Category             Category              Category              Category             Category
                                   to Total             to Total              to Total              to Total             to Total
                           Amount     Loans     Amount     Loans      Amount     Loans      Amount     Loans     Amount     Loans
                          -------- ---------   -------- ---------    -------- ---------    -------- ---------   -------- ---------
                                                                      (dollars in thousands)
<S>                        <C>        <C>        <C>       <C>        <C>        <C>        <C>        <C>       <C>        <C>
Commercial, Financial
   and Agricultural        $3,669     53.8%      $2,607    50.5%      $1,670     51.5%      $1,061     45.6%     $  932     43.4%
Real Estate-Construction       25      7.9%          15     8.8%          12      7.1%           6      4.5%          9      2.1%
Real Estate-Mortgage          484     30.3%         293    31.7%         220     32.4%         127     38.7%        163     42.9%
Consumer                      932      8.0%         734     9.0%         769      9.0%         621     11.2%        391     11.6%
Unallocated                    95        -           21       -            -        -           60        -           -        -
                           -------   -------    --------  -------     -------   -------     -------   -------    -------   -------
   Total                   $5,205      100%     $ 3,670     100%      $2,671      100%      $1,875      100%     $1,495      100%
                           =======   =======    ========  =======     =======   =======     =======   =======    =======   =======
</TABLE>

























                                       25
<PAGE>

     Table 9: "Activity in Allowance for Loan Losses" indicates  activity in the
allowance for loan losses for the last five years.

                 Table 9: Activity in Allowance for Loan Losses


<TABLE>
                                                            2001          2000          1999          1998          1997
                                                            ----          ----          ----          ----          ----
                                                                                (dollars in thousands)

<S>                                                        <C>           <C>           <C>           <C>           <C>
Balance at Beginning of Year                               $  3,670      $  2,671      $  1,875      $  1,495      $  1,396
Allowance Acquired by Acquisition                               110             -             -             -             -
Loans Charged-Off:
   Commercial, Financial and Agricultural                       410            75           312           123           160
   Real Estate - Mortgage                                        59            40            13             3             -
   Consumer                                                     406           409           309           296           248
                                                           --------      --------      --------      --------      --------
      Total Loans Charged-Off                                  (875)         (524)         (634)         (422)         (408)
Recoveries on Loans Previously Charged-Off:
   Commercial, Financial and Agricultural                       116            32           188            41            24
   Real Estate - Mortgage                                        17             -             -             7             -
   Consumer                                                     117           141            82            44            43
                                                           --------      --------      --------      --------      --------
      Total Loan Recoveries                                     250           173           270            92            67
                                                           --------      --------      --------      --------      --------
               Net Loans Charged-Off                           (625)         (351)         (364)         (330)         (341)
                                                           --------      --------      --------      --------      --------
Provision for Loan Losses
  Charged to Expense                                          2,050         1,350         1,160           710           440
                                                           --------      --------      --------      --------      --------
Ending Balance                                             $  5,205      $  3,670      $  2,671      $  1,875      $  1,495
                                                           ========      ========      ========      ========      ========

Total Loans Outstanding                                    $521,555   $   380,821      $266,084      $187,015      $159,649
Average Loans Outstanding                                  $465,551   $   317,491      $215,861      $171,048      $155,168
Allowance for Loan Losses
   to Loans Outstanding                                       1.00%         0.96%         1.00%         1.00%         0.94%
Net Charge-Offs to
   Average Loans Outstanding                                  0.13%         0.11%         0.17%         0.19%         0.22%

</TABLE>

Investment Portfolio

     The Company uses its securities  portfolio to assist in maintaining  proper
interest rate sensitivity in the balance sheet, to provide  securities to pledge
as  collateral  for public funds and  repurchase  agreements,  and to provide an
alternative  investment  for  available  funds.  The  total  recorded  value  of
securities  was $37.1  million at December 31, 2001, a decrease of 9% from $40.7
million at December 31, 2000.

     Securities are classified as either  held-to-maturity or available-for-sale
and are  recorded  at  amortized  cost  and  fair  market  value,  respectively.
Securities  available-for-sale,  which  made  up  89% of  the  total  investment
portfolio at December 31, 2001, had a value of $33.0 million.  Securities in the
available-for-sale portfolio are recorded at fair value on the balance sheet and
unrealized gains and losses  associated with these securities are recorded,  net
of tax, as accumulated other comprehensive  income (loss). At December 31, 2001,
accumulated  other  comprehensive  income  included  a net  unrealized  gain  of
$326,000, compared to a $33,000 net unrealized loss at December 31, 2000.

     As a  percent  of  total  earning  assets,  the  investment  portfolio  has
decreased  to a level of 7% at December  31,  2001 compared to 10% at the end of
2000.  The  decrease  in the size  of  the  portfolio  relative to total earning
assets is directly related to the increase in loan growth.

     The Company invests  primarily in direct  obligations of the United States,
obligations guaranteed as to the principal and interest by the United States and
obligations  of agencies of the United States.  In addition,  the Company enters


                                       26
<PAGE>

into federal funds  transactions  with its principal  correspondent  banks.  The
Federal Reserve Bank and Federal Home Loan Bank also require equity  investments
to be maintained by the Company.

     The following tables sets forth the maturity  distribution and the weighted
average yields of the Company's investment portfolio.


          Table 10: Maturity Distribution of Investment Securities (1)
                                December 31, 2001

<TABLE>

Dollars in Thousands                           Held to Maturity                       Available for Sale
------------------------------------------------------------------------------------------------------------------------------------

                                           Amortized       Estimated              Amortized       Estimated
                                             Cost         Market Value              Cost         Market Value
                                             ----         ------------              ----         ------------
<S>                                       <C>             <C>                    <C>             <C>
U.S. Government Agencies
and Corporations:
  One Year or Less                        $        -      $         -            $    2,970      $     2,976
  Over One Through Five Years                  4,060            4,057                17,900           18,474
                                          -----------     ------------           -----------     ------------
Total U.S. Government Agencies
  and Corporations                             4,060            4,057                20,870           21,450

Obligations of State and Political
 Subdivisions:
  One Year or Less                                 -                -                    90               91
  Over One Through Five Years                      -                -                   236              241
  Over Ten Years                                   -                -                   609              640
                                          -----------     ------------           -----------     ------------
Total Obligations of State and
 Political Subdivisions                            -                -                   935              972

Mortgage-Backed Securities (2):
 Over Five Through Ten Years                       -                -                 4,777            4,671
 Over Ten Years                                    -                -                 2,064            2,063
                                          -----------     ------------           -----------     ------------
Total Mortgage-Backed Securities                   -                -                 6,841            6,734

Other Securities:
 Over Ten Years (3)                                -                -                 3,847            3,847
                                          -----------     ------------           -----------     ------------
Total Other Securities                             -                -                 3,847            3,847
                                          -----------     ------------           -----------     ------------
Total Securities                          $    4,060      $     4,057            $   32,493      $    33,003
                                          ===========     ============           ===========     ============
-----------------------------
<FN>
(1) All securities,  excluding Obligations of State and  Political Subdivisions,
    are taxable.
(2) Represents  investments  in mortgage-backed  securities which are subject to
    early repayment.
(3) Represents  investment  in  Federal  Reserve Bank and Federal Home Loan Bank
    stock and other marketable equity securities.
</FN>

</TABLE>

            Table 10a: Weighted Average Yield by Range of Maturities

                                                         December 31,
                                                    2001             2000
                                                    ----             ----

One Year or Less                                    2.56%            6.49%
Over One through Five Years                         5.72             6.00
Over Five through Ten Years                         4.95             6.18
Over Ten Years (1)                                  4.96             6.45

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


                                       27
<PAGE>

Capital Resources

     Shareholders' equity at December 31, 2001 was $46.7 million, as compared to
$44.6  million at December 31, 2000.  In 2001,  the Board of Directors  declared
dividends totaling $0.20 per share,  consistent with 2000. At December 31, 2001,
the Company's common stock had a book value of $7.64 per share compared to $7.32
per share at the end of 2000.

     On January 29, 1999 the Company began trading on the NASDAQ National Market
under the symbol  "CNBB" after issuing  1,250,000  shares of common stock in the
initial public  offering at $10.25 per common share.  Proceeds from the offering
net of underwriting discount and expenses totaled $11.4 million, which were used
to support expansion plans and for general corporate purposes.

     The  Company  is  subject  to  various  regulatory   capital   requirements
administered by the federal banking agencies.  Under capital adequacy guidelines
the Company must meet  specific  capital  guidelines  that involve  quantitative
measures of its assets,  liabilities,  and  certain  off-balance  sheet items as
calculated  under   regulatory   accounting   practices.   Capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.

     Quantitative  measures as defined by regulation  and  established to ensure
capital  adequacy  require  the Bank to maintain  minimum  amounts and ratios of
Total and Tier 1  capital  to  risk-weighted  assets  and of Tier 1  capital  to
average  assets.  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." As of December 31, 2001, the Bank meets all
capital adequacy requirements to which it is subject.

     At December  31,  2001,  the  Company's  Tier 1 capital,  total  risk-based
capital  and Tier 1  leverage  ratios  were 8.0%,  9.0% and 6.5%,  respectively.
Selected  capital ratios at year end 2001 as compared to 2000 are shown in Table
11.

                            Table 11: Capital Ratios


                                  December 31,     Well Capitalized   Regulatory
                                2001       2000      Requirements      Minimums
                              --------   --------    ------------      --------

Risk Based Capital Ratios:
     Tier 1 Capital Ratio        8.0%      11.1%         6.0%           4.0%

     Total Capital to
       Risk-Weighted Assets      9.0%      12.0%        10.0%           8.0%

Tier 1 Leverage Ratio            6.5%       9.8%         5.0%           4.0%













                                       28
<PAGE>

Quarterly Financial Information

     Table 12 sets forth, for the periods indicated,  certain  consolidated 2001
and 2000 quarterly  financial  information of the Company.  This  information is
derived from the Company's unaudited financial  statements which include, in the
opinion  of  management,  all  normal  recurring  adjustments  which  management
considers necessary for a fair presentation of the results for such periods. The
results for any quarter are not necessarily indicative of results for any future
period.

                        Table 12: Selected Quarterly Data

<TABLE>
                                                               2001                                     2000
                                                 -----------------------------------      -----------------------------------
(dollars in thousands, except per share data)
                                                  4Q        3Q        2Q        1Q         4Q        3Q        2Q        1Q
-----------------------------------              ----      ----      ----      ----       ----      ----      ----      ----

<S>                                             <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>
Summary of Operations:
   Net interest income                          $  5,653  $  5,332  $  5,101  $  4,702   $  4,562  $  4,358  $  4,311  $  4,094
   Provision for loan losses                        (600)     (550)     (500)     (400)      (400)     (350)     (300)     (300)
                                                --------- --------- --------- ---------  --------- --------- --------- ---------
   Net interest income after
     provision for loan loss                       5,053     4,782     4,601     4,302      4,162     4,008     4,011     3,794
    Other income  (excluding securities
      transactions)                                1,676     1,372     1,437     1,019        939       848       780       771
   Securities gains, net                             129        -          -         -          -         -         -         -
   Other expenses                                 (5,518)   (5,197)   (4,733)   (4,388)    (4,135)   (3,891)   (3,758)   (3,697)
                                                --------- --------- --------- ---------  --------- --------- --------- ---------
   Income before income tax expense                1,340       957     1,305       933        966       965     1,033       868
   Income tax expense                               (476)     (333)     (462)     (323)      (335)     (333)     (359)     (298)
                                                --------- --------- --------- ---------  --------- --------- --------- ---------
   Net income                                   $    864  $    624   $   843  $    610   $    631  $    632  $    674  $    570
                                                ========= ========= ========= =========  ========= ========= ========= =========
Per Common Share:
   Basic earnings per common share              $   0.14  $   0.10   $  0.14  $   0.10   $   0.10  $   0.10  $   0.11  $   0.09
   Diluted earnings per common share                0.14      0.10      0.14      0.10       0.10      0.10      0.11      0.09
   Dividends declared                               0.05      0.05      0.05      0.05       0.05      0.05      0.05      0.05
   Book value                                       7.64      7.61      7.53      7.43       7.32      7.23      7.13      7.09
   Market price
         High                                      10.31     12.61     13.63     15.00       9.25      8.75      8.50      9.38
         Low                                        9.11      9.00     10.35      8.00       7.25      7.13      7.13      7.25
         Close                                     10.00      9.65     12.95     13.94       8.00      8.50      7.75      7.63

Balance Sheet Data (end of quarter):
   Assets                                       $612,021  $601,792  $576,959  $502,329   $467,593  $433,540  $398,489  $373,483
   Loans, net                                    516,350   504,036   475,507   410,947    377,151   346,457   313,127   290,077
   Deposits                                      532,891   522,754   489,476   400,028    367,686   339,497   329,304   322,472
   Shareholders' Equity                           46,669    46,242    45,911    45,308     44,636    44,042    43,566    43,306

</TABLE>




















                                       29
<PAGE>


            QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     On  January  28,  1997,  the SEC  adopted  amendments  to  Regulation  S-K,
Regulation  S-X, and various forms  (Securities Act Release No. 7386) to clarify
and expand existing  requirements for disclosures  about  derivatives and market
risks inherent in derivatives and other financial  instruments.  As noted below,
at  December  31,  2001,  the  Company  was a party  to a single  interest  rate
derivative contract. The Company also holds other financial  instruments,  which
include  investments,  loans  and  deposit  liabilities.  The  release  requires
quantitative  and  qualitative  disclosures  about market risk.  See the section
titled "Liquidity and Interest Rate  Sensitivity" for further  discussion on the
Company's management of interest rate risk.

     The Company's sole derivative  contract is a $10 million notional  interest
rate swap that was entered into as a hedge of interest rate risk inherent in the
Company's $10 million term loan.  Under the terms of the swap,  the Company will
receive a variable rate of interest equal to 90-day Libor plus 170 basis points,
reset  quarterly.  The Company will pay a fixed rate of interest  equal to 6.45%
for the life of the  contract.  All cash  flows  are  computed  based on the $10
million  notional amount and are settled  quarterly on a net basis. The contract
matures October 3, 2006 and the notional amount will be reduced by $714,286 on a
semi-annual  basis  beginning April 2004. The fair value of the swap at December
31, 2001 was  approximately  $9,000.  The swap is being  accounted for as a cash
flow hedge of the variable  interest  payments  under the $10 million term debt.
For additional information, see Notes 2 and 8 of Notes to Consolidated Financial
Statements.

     Non-derivative  financial instruments that have market risk are included in
Table 3: "Rate Sensitivity  Analysis".  These instruments are shown by maturity,
separated by fixed and variable interest rates. The estimated fair value of each
instrument  category is also shown in the table.  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  instruments at
December  31,  2001,  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,  2001  would not
necessarily be considered to apply at subsequent dates.

                          CRITICAL ACCOUNTING POLICIES

     A  critical  accounting  policy is one that is both very  important  to the
portrayal of the Company's  financial  condition and requires  management's most
difficult,  subjective or complex  judgments.  The circumstances that make these
judgments  difficult,  subjective  or  complex  have to do with the need to make
estimates about the effect of matters that are inherently uncertain.

     Based on this definition,  the Company's primary critical accounting policy
is the  establishment  and  maintenance  of an  allowance  for  loan  loss.  The
allowance for loan loss is established through a provision for loan loss charged
to  expense.  Loans  are  charged  against  the  allowance  for loan  loss  when
management  believes that the  collectibility of the principal is unlikely.  The
allowance  is an amount  that  management  believes  will be  adequate to absorb
inherent  losses  on  existing  loans  that may  become  uncollectible  based on
evaluations  of the  collectibility  of the  loans.  The  evaluations  take into
consideration  such objective factors as changes in the nature and volume of the
loan  portfolio,  levels  maintained  by other  peer banks and  historical  loss
experience.  The evaluation also considers  certain  subjective  factors such as
overall portfolio quality, review of specific problem loans and current economic
conditions  that may affect  the  borrowers'  ability  to pay.  The level of the
allowance  for loan loss is also  impacted by increases  and  decreases in loans
outstanding,  since  either more or less  allowance is required as the amount of
the Company's credit exposure  changes.  To the extent actual loan losses differ
materially  from  management's   estimate  of  these  subjective  factors,  loan
growth/run-off  accelerates or the mix of loan types  changes,  the level of the
provision for loan loss, and related allowance, can and will fluctuate.

     The  accounting  for the Company's  core deposit  intangible  asset is also
subject to significant  estimates about future  results.  In connection with the
acquisition of the Lake City and Live Oak branches of Republic Bank, the Company
recorded a core deposit intangible of approximately $6,000,000.  This intangible
asset is being amortized on a straight-line basis over its estimated useful life
of 10 years.  The life of this asset was based on the estimated future period of

                                       30
<PAGE>

benefit to the Company of the depositor  relationships  acquired.  To the extent
that the deposit  accounts  acquired leave the Company faster than  anticipated,
the amount of the core deposit  intangible  that is amortized  each period could
increase  significantly,  thus shortening its useful life.  Through December 31,
2001,  the  performance  of acquired  accounts  did not differ  materially  from
expectations.

                              FINANCIAL STATEMENTS


     The consolidated  financial statements that follow have been audited by the
Company's independent  certified public accountants,  Arthur Andersen LLP. Their
opinion on the  Company's  consolidated  financial  statements  is also included
therein.























                                       31
<PAGE>



















                          CNB Florida Bancshares, Inc.


                                 and Subsidiary


                        Consolidated Financial Statements

























                                       32
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




To CNB Florida Bancshares, Inc.:

We have audited the accompanying  consolidated statements of financial condition
of CNB FLORIDA  BANCSHARES,  INC. (a Florida  corporation)  AND SUBSIDIARY as of
December 31, 2001 and 2000 and the related  consolidated  statements  of income,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2001. 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 auditing standards generally accepted
in the United States. 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 financial  statements  referred to above present fairly, in
all material respects,  the  financial position of CNB Florida Bancshares,  Inc.
and  Subsidiary  as of  December  31,  2001 and 2000  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.


ARTHUR ANDERSEN LLP




Jacksonville, Florida
January 23, 2002












                                       33
<PAGE>


                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY


                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


<TABLE>
                                                                                                    December 31,
                                                                                               2001           2000
                                                                                             -----------------------
                                                                                             (dollars in thousands)

                                                        ASSETS
<S>                                                                                          <C>            <C>
  Cash and due from banks                                                                    $ 17,993       $ 20,769
  Federal funds sold                                                                            2,100              -
  Interest-bearing deposits in other banks                                                        584            129
                                                                                             ---------      ---------
     Total cash and cash equivalents                                                           20,677         20,898

  Investment securities available for sale                                                     33,003         33,236
  Investment securities held to maturity                                                        4,060          7,460
  Loans, net                                                                                  516,350        377,151
  Premises and equipment, net                                                                  26,167         22,433
  Intangible assets, net                                                                        6,802          1,033
  Other assets                                                                                  4,962          5,382
                                                                                             ---------      ---------
     Total assets                                                                            $612,021       $467,593
                                                                                             =========      =========
                                          LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
  Non-interest bearing demand                                                                $ 72,859       $ 52,082
  Savings, NOW and money market                                                               191,495        129,865
  Time under $100,000                                                                         152,986        115,406
  Time $100,000 and over                                                                      115,551         70,333
                                                                                             ---------      ---------
     Total deposits                                                                           532,891        367,686
Securities sold under repurchase agreements and federal funds purchased                        18,148         21,142
Other borrowings                                                                               10,000         30,000
Other liabilities                                                                               4,313          4,129
                                                                                             ---------      ---------
     Total liabilities                                                                        565,352        422,957
                                                                                             ---------      ---------
COMMITMENTS AND CONTINGENCIES (Note 19)

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,
  6,106,453 shares issued and outstanding for 2001 and
  6,099,376 shares issued and outstanding for 2000                                                 61             61
Additional paid-in capital                                                                     30,533         30,581
Retained earnings                                                                              15,749         14,027
Accumulated other comprehensive income (loss), net of taxes                                       326            (33)
                                                                                             ---------      ---------
     Total shareholders' equity                                                                46,669         44,636
                                                                                             ---------      ---------
     Total liabilities and shareholders' equity                                              $612,021       $467,593
                                                                                             =========      =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       34
<PAGE>

                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>

                                                                                                     Year Ended December 31,
                                                                                              2001            2000            1999
                                                                                            --------        --------        --------
                                                                                              (dollars and shares in thousands)

INTEREST INCOME
<S>                                                                                         <C>             <C>             <C>
    Interest and fees on loans                                                              $ 38,055        $ 29,112        $ 19,412
    Interest on investment securities available for sale                                       1,864           2,110           2,671
    Interest on investment securities held to maturity                                           384             572             504
    Interest on federal funds sold                                                               102             208             643
    Interest on interest-bearing deposits                                                         12              59             528
                                                                                            --------        --------        --------
        Total interest income                                                                 40,417          32,061          23,758
                                                                                            --------        --------        --------

INTEREST EXPENSE
    Interest on deposits                                                                      17,751          12,988           8,725
    Interest on repurchase agreements and federal funds purchased                                552             572             327
    Interest on other borrowings                                                               1,326           1,176               -
                                                                                            --------        --------        --------
        Total interest expense                                                                19,629          14,736           9,052
                                                                                            --------        --------        --------
NET INTEREST INCOME                                                                           20,788          17,325          14,706

PROVISION FOR LOAN LOSS                                                                        2,050           1,350           1,160
                                                                                            --------        --------        --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS                                             18,738          15,975          13,546
                                                                                            --------        --------        --------
NON-INTEREST INCOME

    Service charges                                                                            2,599           2,241           2,122
    Secondary market mortgage sales                                                            1,917             345             106
    Other fees and charges                                                                       988             752             724
    Gain on sale of securities                                                                   129               -               -
                                                                                            --------        --------        --------
        Total non-interest income                                                              5,633           3,338           2,952
                                                                                            --------        --------        --------
NON-INTEREST EXPENSE
    Salaries and employee benefits                                                            10,252           8,539           6,461
    Occupancy and equipment expenses                                                           3,113           2,220           1,810
    Other operating expenses                                                                   6,471           4,722           3,723
                                                                                            --------        --------        --------
        Total non-interest expense                                                            19,836          15,481          11,994
                                                                                            --------        --------        --------
INCOME BEFORE INCOME TAXES                                                                     4,535           3,832           4,504

INCOME TAXES                                                                                   1,594           1,325           1,563
                                                                                            --------        --------        --------
NET INCOME                                                                                  $  2,941        $  2,507        $  2,941
                                                                                            ========        ========        ========
EARNINGS PER SHARE

    Basic earnings per share                                                                $   0.48        $   0.41        $   0.49
                                                                                            ========        ========        ========
    Basic weighted average shares outstanding                                                  6,095           6,095           5,995
                                                                                            ========        ========        ========
    Diluted earnings per share                                                              $   0.48        $   0.41        $   0.48
                                                                                            ========        ========        ========
    Diluted weighted average shares outstanding                                                6,188           6,134           6,070
                                                                                            ========        ========        ========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       35
<PAGE>


                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY


                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>



                                                                                                       Accumulated
                                                                                                          Other
(dollars and shares in thousands)                       Common Stock       Additional                 Comprehensive      Total
                                                       ---------------      Paid-In     Retained      Income (Loss),  Shareholders'
                                                       Shares    Value      Capital     Earnings      Net of Taxes       Equity
                                                       ------    -----      -------     --------      ------------       ------

<S>                                                     <C>       <C>      <C>          <C>              <C>            <C>
BALANCE, December 31, 1998                              4,856     $ 49     $ 19,465     $ 10,964         $  418         $ 30,896

Comprehensive income:
    Net income                                                                             2,941
    Change in unrealized gain on investment
    securities available for sale, net of $(568) taxes                                                     (955)
           Total comprehensive income                                                                                      1,986
Cash dividends ($0.20 per share)                                                          (1,159)                         (1,159)
Issuance of common stock, net of offering cost          1,250       12       11,356                                       11,368
Exercise of stock options                                   2                     9                                            9
Repurchase of common stock                                (10)                  (96)                                         (96)
Issuance of restricted stock                               18                    71                                           71
                                                        -----     ----     --------     --------         ------         --------
BALANCE, December 31, 1999                              6,116       61       30,805       12,746           (537)          43,075

Comprehensive income:
    Net income                                                                             2,507
    Change in unrealized gain on investment
    securities available for sale, net of $300 taxes                                                        504
        Total comprehensive income                                                                                         3,011
Cash dividends ($0.20 per share)                                                          (1,226)                         (1,226)
Exercise of stock options                                  33                   113                                          113
Repurchase of common stock                                (50)                 (395)                                        (395)
Issuance of restricted stock                                                     58                                           58
                                                        -----     ----     --------     --------         ------         --------
BALANCE, December 31, 2000                              6,099       61       30,581       14,027            (33)          44,636

Comprehensive income:
    Net income                                                                             2,941
    Change in unrealized gain on investment
    securities available for sale, net of $210 taxes                                                        353
    Change in fair value of cash flow hedges, net
      of $3 taxes                                                                                             6
        Total comprehensive income                                                                                         3,300
Cash dividends ($0.20 per share)                                                          (1,219)                         (1,219)
Exercise of stock options                                  31                   166                                          166
Repurchase of common stock                                (24)                 (234)                                        (234)
Issuance of restricted stock                                                     20                                           20
                                                        -----     ----     --------     --------         ------         --------
BALANCE, December 31, 2001                              6,106     $ 61     $ 30,533     $ 15,749         $  326         $ 46,669
                                                        =====     ====     ========     ========         ======         ========

</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       36
<PAGE>



                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>



                                                                                           Year Ended December 31,

                                                                                       2001            2000            1999
                                                                                     ---------       ---------      ---------

                                                                                                     (dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                  <C>                   <C>            <C>
     Net income                                                                      $   2,941      $   2,507      $   2,941
    Adjustments to reconcile net income to net cash provided by operating activities:
        Net gain on sale of securities available for sale                                 (129)             -              -
        Depreciation and amortization                                                    2,046          1,176            971
        Provision for loan loss                                                          2,050          1,350          1,160
        Investment securities (accretion) amortization, net                                 (6)            13           (278)
        Non-cash compensation                                                               20             58             71
        Deferred income tax benefit                                                       (715)          (370)          (242)
        Changes in assets and liabilities:
           Other assets                                                                    928         (1,469)            82
           Other liabilities                                                               194          1,394           (255)
                                                                                     ---------      ---------      ---------
              Net cash provided by operating activities                                  7,329          4,659          4,450
                                                                                     ---------      ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES
    Net increase in loans                                                             (129,012)      (115,088)       (79,433)
    Purchases of investment securities available for sale                              (42,840)        (1,068)       (20,413)
    Purchases of investment securities held to maturity                                      -              -         (8,754)
    Proceeds from sales of investment securities available for sale                      1,726              -              -
    Proceeds from called investment securities available for sale                       14,100            472          3,000
    Proceeds from called investment securities held to maturity                          3,395          1,245              -
    Proceeds from maturities of investment securities available for sale                27,946          3,287         40,442
    Proceeds from maturities of investment securities held to maturity                       3          1,852          1,064
    Purchases of premises and equipment                                                 (3,356)        (9,035)        (4,432)
    Branches acquired from Republic Bank                                                41,921              -              -
                                                                                     ---------      ---------      ---------
              Net cash used in investing activities                                    (86,117)      (118,335)       (68,526)
                                                                                     ---------      ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in deposits                                                           102,848         79,483         23,094
    Net (decrease) increase in securities sold under repurchase agreements
      and  federal funds purchased                                                      (2,994)         9,079           (507)
    Net (decrease) increase in FHLB advances                                           (30,000)        30,000              -
    Proceeds from other borrowings                                                      10,000              -              -
    Cash dividends                                                                      (1,219)        (1,226)        (1,159)
    Issuance of common stock                                                                 -              -         11,368
    Repurchase of common stock                                                            (234)          (395)           (96)
    Proceeds from exercise of stock options                                                166            113              9
                                                                                     ---------      ---------      ---------
              Net cash provided by financing activities                                 78,567        117,054         32,709
                                                                                     ---------      ---------      ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                      (221)         3,378        (31,367)
CASH AND CASH EQUIVALENTS, beginning of year                                            20,898         17,520         48,887
                                                                                     ---------      ---------      ---------
CASH AND CASH EQUIVALENTS, end of year                                               $  20,677      $  20,898      $  17,520
                                                                                     =========      =========      =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       37
<PAGE>




                   CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION AND BASIS OF PRESENTATION
    Organization and Nature of Operations
    CNB Florida  Bancshares,  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.  The Bank is a member  of the  Federal  Reserve  System  and  conducts
    business from fifteen (15) banking offices in north Florida.


    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.  The Company follows  generally  accepted
    accounting  principles  and  reporting  practices  applicable to the banking
    industry in the United  States.  Certain  amounts  relating to 2000 and 1999
    have been reclassified to conform with current year presentation.


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    Use of Estimates in Preparation of Consolidated Financial Statements
    The  preparation  of financial  statements  in  conformity  with  accounting
    principles  generally  accepted in the United States requires  management to
    make estimates and  assumptions  that affect the reported  amounts of assets
    and liabilities  and disclosure of contingent  assets and liabilities at the
    date of the financial  statements  and the reported  amounts of revenues and
    expenses during the reporting period. Actual results could differ from those
    estimates.

    Investment Securities
             Available for Sale
             Securities available for sale represent investment  securities that
             are used for asset/liability management,  liquidity and other funds
             management  purposes.  These  securities may be sold in response to
             changes in interest  rate risk,  prepayment  risk or other  similar
             economic factors. These securities are recorded at fair value, with
             unrealized gains and losses, net of deferred income taxes, recorded
             in the accumulated other  comprehensive  income (loss) component of
             shareholders'  equity.  Fair  value is  estimated  based on  dealer
             quotes.

             Held to Maturity
             Securities held to maturity represent  investment  securities where
             the Company has both the intent and ability to hold the  securities
             to  maturity.  These  securities  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.   Investment  securities  are
    periodically  reviewed for other than temporary declines in value. If such a
    decline  is  determined  to have  occurred,  the  amount of the  decline  is
    transferred  from other  comprehensive  income and  immediately  recorded in
    current period earnings.  There have been no other than temporary impairment
    losses recorded during the years ended December 31, 2001, 2000 and 1999.


                                      38
<PAGE>

    Loans, Loan Fees and Interest Income
    Loans are stated at the amount of unpaid principal,  reduced by an allowance
    for loan loss.  Interest  on  substantially  all loans  other  than  certain
    installment loans is calculated by using the simple interest method on daily
    balances of the principal amounts outstanding.

    Loan fees,  net of loan  origination  costs,  are deferred and  amortized as
    yield  adjustments  over the respective  loan terms using a method that does
    not differ  significantly from the interest method. For 2001, 2000 and 1999,
    net  loan  fees  included  in  interest  income  amounted  to  approximately
    $979,000, $969,000 and $697,000, respectively.

    Allowance for Loan Loss
    The  allowance for loan loss is an amount that  management  believes will be
    adequate  to  absorb  inherent  losses on  existing  loans  that may  become
    uncollectible  based on evaluations of the  collectibility of the loans. The
    allowance  for loan loss is  established  through a provision  for loan loss
    charged to expense.  Loans are charged  against the  allowance for loan loss
    when  management  believes  that  the  collectibility  of the  principal  is
    unlikely.  The evaluation of collectibility  takes into  consideration  such
    objective factors as changes in the nature and volume of the loan portfolio,
    levels  maintained by other peer banks and historical loss  experience.  The
    evaluation  also  considers  certain  subjective  factors  such  as  overall
    portfolio  quality,  review of specific  problem loans and current  economic
    conditions that may affect the borrowers'  ability to pay. The determination
    of the  allowance  for loan  loss  considers  both  specifically  identified
    impaired   loans,   as  well  as   expected   losses  on  large   groups  of
    smaller-balance  homogeneous  loans  that  are  collectively  evaluated  for
    impairment.  The level of the  allowance  for loan loss is also  impacted by
    increases  and  decreases  in loans  outstanding,  since either more or less
    allowance  is  required  as the  amount  of the  Company's  credit  exposure
    changes.   To  the  extent  actual  loan  losses  differ   materially   from
    management's  estimate  of these  subjective  factors,  loan  growth/run-off
    accelerates or the mix of loan types changes, the level of the provision for
    loan loss, and related allowance, can and will fluctuate.

    Accrual of interest is  discontinued  on loans that are 90 days or more past
    due, unless  substantially  collateralized and in the process of collection,
    or  sooner  if, in the  opinion  of  management,  the  borrower's  financial
    condition is such that collection of principal or interest is doubtful.

    Loans Held for Sale
    Loans held for sale include  residential  mortgage loans originated with the
    intent to sell in the secondary  market.  Loans held for sale are carried at
    the lower of cost or market value.  Any amount by which cost exceeds  market
    value  is  accounted  for as a  valuation  allowance,  with  changes  in the
    valuation  allowance   reflected  in  earnings.   There  were  no  valuation
    allowances at December 31, 2001 and 2000.

    Premises and Equipment
    Premises and equipment are stated at cost,  less  accumulated  depreciation.
    Depreciation is computed using the  straight-line  method over the estimated
    useful  lives of the  assets,  which  ranged  from  five to  forty  years at
    December  31,  2001.  Maintenance  and  repairs  are  charged  to expense as
    incurred. Gains and losses on dispositions are reflected in income.

    Long-lived   assets  are   evaluated   regularly  for   other-than-temporary
    impairment.  If  circumstances  suggest that their carrying value may not be
    recoverable, an impairment test is performed comparing the carrying value of


                                       39
<PAGE>

    the asset to estimated  undiscounted cash flows. If assets are considered to
    be impaired, a charge is recorded to the extent that fair value is less than
    carrying value.

    Other Real Estate Owned
    Real estate properties acquired through, or in lieu of, loan foreclosure are
    initially recorded at fair value at the date of foreclosure,  establishing a
    new  cost  basis.  After  foreclosure,   management   periodically  performs
    valuations and the real estate is carried at the lower of carrying amount or
    at fair value, less cost to sell.

    Intangibles

    The Company has  intangible  assets with carrying  amounts of  approximately
    $6,802,000  and  $1,033,000  at December  31,  2001 and 2000,  respectively.
    Intangible  assets  consist of core deposits and goodwill of $6,156,000  and
    $646,000,  respectively. Core deposit intangibles are being amortized over a
    10-year period using the straight-line  method.  Goodwill is being amortized
    over a 15-year period on a  straight-line  method.  Amortization of goodwill
    was  approximately  $70,000 for 2001,  2000 and 1999.  Amortization  expense
    related to core deposit intangibles was $473,000,  $109,000 and $109,000 for
    2001,  2000 and 1999  respectively.  Periodically,  the Company  reviews its
    intangible  assets for events or changes in circumstances  that may indicate
    that the carrying amounts of the assets are not recoverable.

    As noted in Recently Issued Accounting  Pronouncements,  the Company adopted
    the  provisions  of  Statement of Financial  Accounting  Standards  No. 142,
    Goodwill and Other Intangibles ("SFAS 142") on January 1, 2002. As a result,
    goodwill  will no longer be  amortized,  but  instead  will be  periodically
    evaluated for impairment.

    Interest Rate Contract
    As more fully  described  in Note 8,  "Other  Borrowings,"  during  2001 the
    Company  entered  into a  pay-fixed  interest  rate  contract  as a hedge of
    interest  rate risk  related to a term loan  entered  into with a bank.  The
    interest rate contract is accounted for under the provision of SFAS No. 133,
    Accounting  for  Derivatives  and Hedging  Activities,  which  requires  all
    derivatives  to be stated at fair value and was  adopted  by the  Company on
    January 1, 2001. Because the Company was not a party to derivative contracts
    at adoption of this standard, the adoption did not have a material impact of
    the  financial  position  or  results of  operations  of the  Company.  Upon
    entering into the interest rate swap,  the contract was designated as a cash
    flow hedge of the forecasted variable interest payments to be made under the
    term loan. The interest rate swap is recorded in the financial statements at
    fair value, with changes in value reflected in other  comprehensive  income.
    Unrealized  gains and losses on the interest rate contract are  reclassified
    from  other  comprehensive  income  to  interest  expense  when  the  hedged
    transaction impacts earnings.  The effectiveness of the hedging relationship
    is evaluated at least every three months. There was no hedge ineffectiveness
    for the year ended  December 31, 2001.  The  interest  rate  contract had an
    unrealized  gain,  net of taxes,  at December  31,  2001 of $6,000.  Of this
    amount,  approximately  $147,000  of  pre-tax  expense  is  expected  to  be
    reclassified  from other  comprehensive  income to interest expense over the
    next  twelve  months.  This  estimate is based on market  interest  rates on
    December 31, 2001 and is subject to variability to the extent interest rates
    fluctuate over this time period.


                                       40
<PAGE>

    Income Taxes
    The Company uses the asset and  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  that is  included  in the  consolidated
    income tax return, as determined by the separate return method.

    Earnings Per Share
    Basic earnings per share is calculated  based on the weighted average number
    of  shares  of  common  stock  outstanding.  Diluted  earnings  per share is
    calculated  based on the weighted  average  number of shares of common stock
    and common  stock  equivalents  outstanding.  Common stock  equivalents  are
    determined  using the treasury  method for diluted shares  outstanding.  The
    difference  between  diluted and basic  shares  outstanding  is common stock
    equivalents from stock options and restricted stock  outstanding  during the
    years ended December 31, 2001, 2000 and 1999.

    Supplemental 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.  Generally,  federal  funds are  purchased  and sold for one-day
    periods and all cash  equivalents  have an  original  maturity of 90 days or
    less. Cash paid for interest was approximately $19,029,000,  $13,330,000 and
    $9,206,000  during  2001,  2000 and  1999,  respectively,  and cash paid for
    income taxes was approximately $2,025,000,  $1,759,000 and $1,720,000 during
    2001, 2000 and 1999, respectively.

    Recently Issued Accounting Pronouncements
    In July 2001,  the Financial  Accounting  Standards  Board  ("FASB")  issued
    Statement of Financial Accounting  Standards No. 141, Business  Combinations
    ("SFAS  141").  SFAS 141  requires  the purchase  method of  accounting  for
    business  combinations  initiated  after June 30,  2001 and  eliminates  the
    pooling-of-interests  method.  The Company will apply the provisions of SFAS
    141 to any future acquisitions.

    In July  2001,  the FASB  also  issued  SFAS No.  142,  Goodwill  and  Other
    Intangibles  ("SFAS  142").  SFAS 142  requires,  among  other  things,  the
    discontinuance  of  goodwill   amortization  and  includes   provisions  for
    reassessment   of  the  useful  lives  of  existing   intangibles   and  the
    identification of reporting units for purposes of assessing potential future
    impairments  of goodwill.  SFAS 142 also  requires the Company to complete a
    two-step  transitional  goodwill  impairment  test.  The  first  step of the
    impairment  test must be completed  six months from the date of adoption and
    the second step must be completed as soon as possible, but no later than the
    end of the year of initial  application.  The Company adopted the provisions
    of SFAS 142 on January 1, 2002. The adoption of this standard did not have a
    material  impact on the  financial  position or results of operations of the
    Company.  In  addition,  the Company  completed  the  transitional  goodwill
    impairment  test  during  the  first  quarter  of 2002 and  determined  that
    goodwill at  transition  was not impaired.  For the year ended  December 31,
    2001, the Company recorded goodwill amortization expense of $70,000.

                                       41
<PAGE>

    In July 2001, the SEC released Staff  Accounting  Bulletin  ("SAB") No. 102,
    Selected Loan Loss Allowance  Methodology and Documentation  Issues. SAB No.
    102 expresses the SEC staff's views on the  development,  documentation  and
    application of a systematic methodology in determining an allowance for loan
    loss in accordance with generally accepted  accounting  principles.  The SAB
    stresses  that  the   methodology   for  computing  the  allowance  be  both
    disciplined and consistent, and emphasizes that the documentation supporting
    the  allowance  and  provision  must be  sufficient.  SAB No.  102  provides
    guidance  that  is  consistent  with  the  Federal  Financial   Institutions
    Examination Council's ("FFIEC"),  Policy Statement on Allowance for Loan and
    Lease  Losses   Methodologies   and  Documentation  for  Banks  and  Savings
    Institutions,  which was also issued in July 2001. SAB No. 102 is applicable
    only to banks and savings  institutions.  The adoption of this  bulletin did
    not have a material impact on reported results of operations of the Company.

    In June 1998,  the FASB  issued  SFAS No.  133,  Accounting  for  Derivative
    Instruments  and Hedging  Activities as amended.  The statement  establishes
    accounting  and reporting  standards for derivative  instruments  (including
    certain  derivative  instruments  imbedded in other contracts).  The Company
    adopted  the  statement  on January 1, 2001.  Because  the Company was not a
    party to derivative contracts at adoption of this standard, the adoption did
    not  have a  material  impact  on  the  financial  position  or  results  of
    operations of the Company.

    In September  2000,  the FASB issued SFAS No. 140,  Accounting for Transfers
    and Servicing of Financial  Assets and  Extinguishments  of  Liabilities,  a
    replacement  of SFAS No.  125.  The  statement  revises  the  standards  for
    accounting for  securitizations  and other transfers of financial assets and
    collateral and requires certain disclosures.  The disclosure requirements of
    the statement were  effective for fiscal year ending  December 31, 2000. The
    adoption  of the  remaining  provisions  of this  standard  did  not  have a
    material  impact on  reported  results of  operations  of the  Company.  The
    remaining provisions were effective April 1, 2001.





                                       42
<PAGE>



3.  INVESTMENT SECURITIES
    Amortized cost and estimated fair value of investment  securities  available
    for sale at December 31, 2001 and 2000 are as follows (in thousands):
<TABLE>



2001                                                U.S.         State,      Mortgage-
                                                 Government    County, and    Backed
                                                  Agencies      Municipal    Securities   Other       Total
                                                  --------      ---------    ----------   -----       -----


<S>                                               <C>            <C>         <C>         <C>        <C>
Amortized cost ......................             $ 20,870       $  935      $ 6,841     $ 3,847    $ 32,493
Gross unrealized:
Gains ...............................                  580           37           13           -         630
Losses ..............................                    -            -         (120)          -        (120)
                                                  --------       ------      -------     -------    --------
Estimated fair value ................             $ 21,450       $  972      $ 6,734     $ 3,847    $ 33,003
                                                  ========       ======      =======     =======    ========
</TABLE>


<TABLE>

2000
                                          U.S.          U.S.         State,       Mortgage-
                                        Treasury     Government   County, and      Backed
                                       Securities     Agencies      Municipal    Securities      Other        Total
                                       ----------     --------      ---------    ----------      -----        -----

<S>                                    <C>            <C>            <C>           <C>          <C>         <C>
Amortized cost ......................  $  7,494       $ 20,000       $  1,025      $  1,846     $ 2,924     $ 33,289
Gross unrealized:
Gains ...............................        21              -             22             4          66          113
Losses ..............................         -           (166)             -             -           -         (166)
                                       --------       --------       --------      --------     -------        -----
Estimated fair value ................  $  7,515       $ 19,834       $  1,047      $  1,850     $ 2,990     $ 33,236
                                       ========       ========       ========      ========     =======     ========
</TABLE>

    Amortized  cost and estimated  fair value of investment  securities  held to
    maturity at December 31, 2001 and 2000 are as follows (in thousands):

<TABLE>


2001                                                                                           U.S.
                                                                                             Government
                                                                                              Agencies     Total
                                                                                              --------     -----

<S>                                                                                          <C>           <C>
      Amortized cost  ..............................................................         $ 4,060     $ 4,060
      Gross unrealized:
      Gains  .......................................................................               -           -
      Losses  ......................................................................              (3)         (3)
                                                                                             -------       -----
      Estimated fair value  ........................................................         $ 4,057     $ 4,057
                                                                                             =======       =====
</TABLE>


<TABLE>

      2000                                                                          U.S.        Mortgage-
                                                                                 Government      Backed
                                                                                  Agencies      Securities    Total
                                                                                  --------      ----------    -----


<S>                                                                               <C>              <C>       <C>
      Amortized cost   .................................................          $ 7,457          $  3      $ 7,460
      Gross unrealized:
      Gains  ...........................................................                -             -            -
      Losses  ..........................................................               (2)            -           (2)
                                                                                  -------          ----      -------
      Estimated fair value  ............................................          $ 7,455          $  3      $ 7,458
                                                                                  =======          ====      =======
</TABLE>


    Interest  income earned on tax-exempt  securities in 2001, 2000 and 1999 was
    approximately  $48,000,  $52,000 and  $87,000,  respectively.  Dividends  of
    approximately  $226,000,  $146,000  and  $113,000  on stock  of the  Federal

                                       43
<PAGE>

    Reserve  Bank and the  Federal  Home Loan Bank are  included  in interest on
    investment   securities   available  for  sale  in  2001,   2000  and  1999,
    respectively.


    The amortized  cost and  estimated  fair value of securities at December 31,
    2001, by contractual maturity, are shown below (in thousands):

<TABLE>


                                                             Investment Securities         Investment Securities
                                                               Available for Sale            Held to Maturity
                                                           -------------------------     ------------------------
                                                            Amortized      Estimated     Amortized      Estimated
                                                              Cost        Fair Value       Cost        Fair Value
                                                              ----        ----------       ----        ----------



Due in:
<S>                                                         <C>             <C>          <C>             <C>
One year or less .......................................    $ 3,060         $ 3,067      $     -         $     -
After one through five years ...........................     18,136          18,715        4,060           4,057
After five through ten .................................          -               -            -               -
Over ten years .........................................        609             640            -               -
Mortgage-backed securities and others ..................     10,688          10,581            -               -
                                                            -------         -------      -------         -------
                                                            $32,493         $33,003      $ 4,060         $ 4,057
                                                            =======         =======      =======         =======
</TABLE>

At  December  31,  2001,  securities  with an  amortized  cost of  approximately
$30,416,000  and an  estimated  fair  value of  approximately  $30,921,000  were
pledged to secure public funds,  treasury tax and loan deposits,  and repurchase
agreements.


4.  LOANS, ALLOWANCE FOR LOAN LOSS AND NONPERFORMING ASSETS

    Loans at December  31, 2001 and 2000 were  comprised  of the  following  (in
    thousands):
<TABLE>

                                                                                 2001                     2000
                                                                              ---------                ---------
<S>                                                                           <C>                      <C>
Commercial, financial, and agricultural .............................         $ 280,453                $ 192,540
Real estate--construction ...........................................            41,064                   33,648
Real estate--mortgages held for sale ................................             9,908                      962
Real estate--mortgage ...............................................           147,973                  119,701
Installment and consumer lines ......................................            42,157                   33,970
                                                                              ---------                ---------
    Total loans, net of unearned interest and fees ..................           521,555                  380,821
Less allowance for loan loss ........................................            (5,205)                  (3,670)
                                                                              ---------                ---------
     Net loans ......................................................         $ 516,350                $ 377,151
                                                                              =========                =========
</TABLE>




                                       44
<PAGE>

    Activity in the allowance for loan loss account was as follows for the years
    ended December 31, 2001, 2000 and 1999 (in thousands):
<TABLE>


                                                                           2001             2000         1999
                                                                         -------           -------      -------
<S>                                                                      <C>               <C>          <C>
Balance beginning of year ..................................             $ 3,670           $ 2,671      $ 1,875
Provision ..................................................               2,050             1,350        1,160
Charge-offs ................................................                (875)             (524)        (634)
Recoveries .................................................                 250               173          270
Republic acquisition .......................................                 110                 -            -
                                                                         -------           -------      -------
Balance at end of year .....................................             $ 5,205           $ 3,670      $ 2,671
                                                                         =======           =======      =======
</TABLE>

    Nonaccrual loans totaled  approximately  $1,377,000 and $579,000 at December
    31,  2001 and  2000,  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 $96,000, $25,000 and $23,000, in 2001, 2000 and 1999,
    respectively.  In addition to nonaccrual loans, nonperforming assets include
    other real estate  owned  related to property  acquired  by  foreclosure  in
    settlement  of debt and  repossessed  assets.  Other real  estate  owned and
    repossessed  assets was  approximately  $229,000 and $56,000 at December 31,
    2001  and  2000,  respectively,  and is  included  in  other  assets  in the
    accompanying consolidated statements of financial condition.

    The Company recognizes income on impaired loans primarily on the cash basis.
    Impaired  loans  are  considered  to be loans  with a  probability  that the
    creditor  will be  unable  to  collect  all  amounts  due  according  to the
    contractual terms of the loan agreement.  Any change in the present value of
    expected  cash flows is  recognized  through  the  allowance  for loan loss.
    Impaired loan  information  for the year ended  December 31, 2001,  2000 and
    1999 is as follows (in thousands):

<TABLE>


                                                                                     2001          2000          1999
                                                                                     ----          ----          ----

<S>                                                                                 <C>           <C>           <C>
Impaired loans with an allowance ...........................................        $1,361        $1,041        $  686
                                                                                    ======        ======        ======
Allowance for impaired loans ...............................................        $  204        $  213        $  159
                                                                                    ======        ======        ======
Interest income recognized on impaired loans during the year ...............        $   66        $   40        $   21
                                                                                    ======        ======        ======
</TABLE>


    The  average   balance  of  impaired  loans  during  2001,   2000  and  1999
    approximated $1.0 million.

5.  PREMISES AND EQUIPMENT
    Premises  and  equipment  were  comprised  of the  following  components  at
    December 31 (in thousands):

<TABLE>

                                                                        2001           2000
                                                                     --------       --------
<S>                                                                  <C>            <C>
Buildings and improvements .............................             $ 20,011       $ 15,731
Equipment and furnishings ..............................                8,475          6,974
Land ...................................................                5,224          4,738
Construction in progress ...............................                    5          1,421
                                                                     --------       --------
                                                                       33,715         28,864
Less accumulated depreciation ..........................               (7,548)        (6,431)
                                                                     --------       --------
                                                                     $ 26,167       $ 22,433
                                                                     ========       ========
</TABLE>


                                       45
<PAGE>


    Depreciation expense was approximately $1,503,000, $997,000 and $792,000 for
    2001, 2000 and 1999, respectively.

6.  TIME DEPOSITS

    At December 31, 2001, the scheduled  maturities of  certificates  of deposit
    are as follows (in thousands):



            2002  ......................................       $237,063
            2003  ......................................         14,758
            2004  ......................................         13,769
            2005  ......................................          2,702
            2006 and thereafter  .......................            245
                                                               --------
                                                               $268,537
                                                               ========


7.  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. These transactions do not satisfy
    the financial  instrument sale criteria  outlined under  generally  accepted
    accounting principles.  Therefore, the investment securities remain recorded
    on the Company's balance sheet, while the related repurchase  agreements are
    reflected as borrowed funds.  The daily average balance of these  agreements
    during 2001,  2000 and 1999 was  approximately  $12,284,000,  $7,666,000 and
    $6,854,000,  respectively.  Interest  expense  in  2001,  2000  and 1999 was
    approximately $443,000, $447,000 and $322,000, respectively, resulting in an
    average  rate paid of 3.61% in 2001,  5.83% in 2000 and  4.70% in 1999.  The
    highest  amount  outstanding  during 2001,  2000 and 1999 was  approximately
    $19,136,000, $16,542,000 and $10,700,000, respectively.

8.  OTHER BORROWINGS

    During 2001 and 2000 the Bank  received  funding from Federal Home Loan Bank
    advances.  The  advances  were  collateralized  by a portion  of the  Bank's
    residential mortgage portfolio and the average rate paid in 2001 and 2000 on
    the advances  was 5.06% and 6.77%,  respectively.  Interest  expense paid on
    Federal Home Loan Bank  advances was  approximately  $1,061,000  in 2001 and
    $1,176,000 in 2000. The highest amount  outstanding during 2001 and 2000 was
    $40,000,000   and   $30,000,000,   respectively.   There  were  no  balances
    outstanding at December 31, 2001 and $30,000,000 outstanding at December 31,
    2000.

    In April  2001,  the Company  entered  into a 364-day,  $10 million  line of
    credit with a bank.  The  contractual  agreement  provides  for  interest at
    90-day Libor plus 145 basis points and is  collateralized  by the  Company's
    investment  in CNB  National  Bank.  During  2001,  the  Company  drew  down
    $7,000,000 under this line and incurred  interest  expense of $97,000.  This
    line of credit was modified in October 2001 as discussed below.

    In  October  2001,  the  line of  credit  agreement  was  modified  into two
    facilities as follows:

      o  Facility A: $3,000,000 line of credit maturing June 30, 2002.  Interest
         is variable at 90-day Libor plus 145 basis points.
      o  Facility B: $10,000,000 term loan maturing October 3, 2006. Interest is
         variable  at  90-day  Libor  plus 170  basis  points  and was  4.30% at
         December 31, 2001.  Semi-annual principal payments of $714,286 begin in
         April 2004, with the remainder due at maturity.


                                       46
<PAGE>

    In connection with the line of credit agreement,  the Company is required to
    maintain  compliance with certain covenants and restrictions.  The following
    financial  covenants  are to be  maintained  on a  quarterly  basis  and are
    calculated at the Bank-level:

      o  Interest  coverage  ratio of  greater  than or  equal to 2.00x  through
         September 30, 2003.

      o  Debt service  coverage  ratio of greater than or equal to 0.85x through
         September  30, 2002;  1.00x from October 1, 2002 through  September 30,
         2003; 1.25x from October 1, 2003 through  September 30, 2004; and 1.50x
         from October 1, 2004 through maturity.

      o  Ratio of  non-performing  assets to total  loans plus other real estate
         owned and repossessed assets of less than or equal to 1.25%.

      o  Maintenance of tier 1 and total risk based capital ratios that meet the
         benchmarks  for  consideration  as  a  "well-capitalized"   institution
         (currently 8% and 10%,  respectively).  Also, maintenance of a leverage
         capital ratio of greater than 6%.

         In addition, the Company is subject to the following restrictions:

      o  No additional debt is permitted without consent of the lender.

      o  No  increases   in  dividends   paid  by  the  Company  to  its  common
         shareholders are permitted without consent of the lender.

    Failure  to  maintain  any of these  covenants  would  place the  Company in
    default of the line of credit agreement.  In such a case, absent any waivers
    obtained  from the lender,  all amounts  payable  could be  accelerated  and
    become  due  immediately.  As of  December  31,  2001,  the  Company  was in
    compliance with all covenants.

    At December 31, 2001,  there was $10,000,000  outstanding  under Facility B,
    consisting of the original $7,000,000 and an additional  $3,000,000 received
    at the origination  date of the term loan. There have been no advances under
    Facility A through December 31, 2001. The Company did not have any long-term
    debt outstanding during 2000.

    In addition to the amended  line of credit  agreement,  the Company  entered
    into a $10,000,000 notional pay-fixed interest rate swap with the same bank.
    The fixed rate under the interest  rate swap is 6.45% and the variable  rate
    is based on 90-day  Libor  plus 170 basis  points.  The  interest  rate swap
    matures  October 3, 2006 and has been designated as a cash flow hedge of the
    variable  interest  payments  on  the  $10,000,000  term  loan  noted  above
    (Facility  B).  Interest  expense on Facility B during 2001,  including  the
    impact of the interest rate swap, was $165,000.  The notional  amount of the
    interest rate swap amortizes in the same manner as Facility B.








                                       47
<PAGE>


 9.    OTHER OPERATING EXPENSES

      Components of other operating expenses are as follows for the years ended
      December 31, 2001, 2000 and 1999 (in thousands):

                                                  2001        2000        1999
                                                 ------      ------      ------
Data processing .......................          $1,104      $  650      $  590
Advertising and promotion .............             687         541         354
Postage and delivery ..................             671         551         468
Legal and professional ................             618         487         327
Telephone .............................             595         584         423
Supplies ..............................             578         404         299
Amortization of intangible assets .....             543         179         179
Regulatory fees .......................             255         149         143
Loan expense ..........................             248         194         165
Administrative ........................             211         196         182
Insurance and bonding .................             105          89          72
Education expense .....................             101          62          53
Dues and subscriptions ................             100         103          78
Directors fees ........................              70          72          57
Other general operating ...............              67         174          52
Other .................................             518         287         281
                                                 ------      ------      ------
                                                 $6,471      $4,722      $3,723
                                                 ======      ======      ======















                                       48
<PAGE>

10. INCOME TAXES

    The income tax provision  (benefit)  for the years ended  December 31, 2001,
    2000 and 1999 consisted of the following components (in thousands):
<TABLE>

                                                                          2001           2000         1999
                                                                        -------        -------       -------
<S>                                                                     <C>            <C>           <C>
Current:
     Federal .........................................                  $ 1,958        $ 1,432       $ 1,598
     State ...........................................                      351            263           207
                                                                        -------        -------       -------
         Total .......................................                  $ 2,309        $ 1,695       $ 1,805
                                                                        =======        =======       =======
Deferred:
     Federal .........................................                  $  (611)       $  (315)      $  (244)
     State ...........................................                     (104)           (55)            2
                                                                        -------        -------       -------
         Total .......................................                  $  (715)       $  (370)      $  (242)
                                                                        =======        =======       =======
Total:
     Federal .........................................                  $ 1,347        $ 1,117       $ 1,354
     State ...........................................                      247            208           209
                                                                        -------        -------       -------
         Total .......................................                  $ 1,594        $ 1,325       $ 1,563
                                                                        =======        =======       =======
</TABLE>


    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, 2001 and 2000 are as
    follows:


<TABLE>


                                                                                                         2001           2000
                                                                                                       -------         -------
<S>                                                                                                    <C>             <C>
Deferred tax liabilities:
     Property and equipment ..............................................................             $  (755)        $  (697)
     Unrealized gain on investment securities available for sale ........................                (194)              -
     Unearned loan fees ..................................................................                 (68)            (78)
                                                                                                       -------         -------
                                                                                                        (1,017)           (775)
Deferred tax assets:
     Loan loss provisions ................................................................               1,776           1,191
     Unrealized loss on investment securities available for sale .........................                   -              20
     Intangible assets ...................................................................                 179             125
     Other items .........................................................................                 185              20
                                                                                                       -------         -------
                                                                                                         2,140           1,356
                                                                                                       -------         -------
Net deferred tax asset ...................................................................             $ 1,123         $   581
                                                                                                       =======         =======
</TABLE>








                                       49
<PAGE>

    The reasons for the  differences  between the statutory  federal  income tax
    rate and the  effective  tax rate are  summarized  as follows  for the years
    ended December 31, 2001, 2000 and 1999:


<TABLE>

                                                                              2001          2000           1999
                                                                              ----          ----           ----

<S>                                                                           <C>           <C>            <C>
Statutory rates .....................................................         34.0%         34.0%          34.0%
Increase (decrease) resulting from:
     Effect of tax-exempt income ....................................         (2.1)         (2.7)          (2.7)
     State income taxes, net ........................................          3.6           2.5            2.5
     Nondeductible expenses .........................................         (0.3)          0.8            0.9
                                                                              ----          ----           ----
                                                                              35.2%         34.6%          34.7%
                                                                              ====          ====           ====
</TABLE>



11. COMPREHENSIVE INCOME


    The  Company's  comprehensive  income  consists of net income and changes in
    unrealized  gains  (losses) on  securities  available for sale and cash flow
    hedges, net of income taxes.



    Comprehensive income for the years ended December 31, 2001, 2000 and 1999 is
    calculated as follows (in thousands):
<TABLE>

                                                                                           2001             2000             1999
                                                                                           ----             ----             ----

<S>                                                                                       <C>              <C>              <C>
Unrealized gain (loss) recognized in other comprehensive
       income (net):
     Available for sale securities ..............................................         $   563          $   804          $(1,523)
     Interest rate swap designated as cash flow hedge ...........................               9                -                -
                                                                                          -------          -------          -------
     Total unrealized gains (loss) before income taxes ..........................             572              804           (1,523)
     Income taxes ...............................................................             213              300             (568)
                                                                                          -------          -------          -------
       Net of tax ...............................................................         $   359          $   504          $  (955)
                                                                                          =======          =======          =======

Amounts reported in net income:
     Gain on sale of securities .................................................         $   129          $     -          $     -
     Interest rate swap designated as cash flow hedge ...........................             (54)               -                -

     Net amortization (accretion) ...............................................              (6)              13             (278)
                                                                                          -------          -------          -------
     Reclassification adjustment ................................................              69               13             (278)
     Income taxes ...............................................................             (26)              (5)              96
                                                                                          -------          -------          -------
       Reclassification adjustment, net of tax ..................................         $    43          $     8          $  (182)
                                                                                          =======          =======          =======

Amounts reported in other comprehensive income:
     Net unrealized gain (loss) arising during period, net of tax ...............         $   402          $   512          $(1,137)
     Reclassification adjustment, net of tax ....................................             (43)              (8)         $   182
                                                                                          -------          -------          -------
     Unrealized gain (loss) recognized in other comprehensive
       income (net) .............................................................             359              504             (955)
     Net income .................................................................           2,941            2,507            2,941
                                                                                          -------          -------          -------
       Total comprehensive income ...............................................         $ 3,300          $ 3,011          $ 1,986
                                                                                          =======          =======          =======
</TABLE>




                                       50
<PAGE>



 12.  LOANS TO RELATED PARTIES

      Certain officers and directors, and companies in which they held a 10% or
      more beneficial ownership, were indebted to (or in some cases, guaranteed
      loans by) the Bank. An analysis of such activities follows (in thousands):


                                                         2001             2000
                                                       -------          -------


Balance, January 1 ............................        $ 7,093          $ 3,690
    Participations ............................           (758)               -
    New loans and advances ....................          2,482            4,936
    Repayments (excluding renewals) ...........           (594)          (1,533)
                                                       -------          -------
Balance, December 31 ..........................        $ 8,223          $ 7,093
                                                       =======          =======


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

13. 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,  2001,  the  Bank had
    approximately $4,014,000 of retained earnings available for dividends to the
    Company without being required to seek special regulatory approvals.

14. EQUITY
    Dividends Declared
    The Company  declared  cash  dividends of $0.20 per share in 2001,  2000 and
    1999.

    Common Stock
    During  February  1999,  the Company sold  1,250,000  shares of common stock
    resulting in proceeds of  approximately  $11.4 million,  net of underwriting
    discount and expenses.

15. STOCK BASED COMPENSATION
    Stock Options
    The Company has long-term  incentive plans that provide  stock-based awards,
    including  stock  options  to  certain  key  employees.  The  terms  of  the
    Performance-Based  Incentive  Plan  ("the  Plan"),  which were  approved  by
    shareholders  at the annual  meeting in April  1998,  allowed  for a maximum
    grant of 540,000 shares.  In May 2001,  shareholders  approved a proposal to
    amend the number of shares that may be granted under the long-term incentive
    component of the Plan to 800,000 shares.  Prior to the approval of the Plan,
    there were issued and outstanding  options  totaling 166,766 of which 33,306
    were exercised in 2000 and 18,626 were exercised in 2001.  There are 245,650
    shares  remaining  to be issued  under  the Plan as of  December  31,  2001.
    Generally,  the options  granted  under the Plan become  exercisable  over a
    three to four year period  following the year of grant, and expire ten years
    after the date of the grant.  The grant  price of all options has been equal
    to the  estimated  fair  market  value of a share of stock as of the date of
    grant.



                                       51
<PAGE>

    Options  outstanding  and the activity for December 31, 2001,  2000 and 1999
    are presented below:

<TABLE>

                                                             2001                       2000                     1999
                                                      ----------------------   -----------------------   ----------------------
                                                                  Weighted-                 Weighted-                Weighted-
                                                                  Average                   Average                  Average
                                                      Shares     Grant Price   Shares      Grant Price   Shares     Grant Price
                                                      ------     -----------   ------      -----------   ------     -----------
<S>                                                  <C>          <C>          <C>          <C>          <C>          <C>
Employee stock option plans:
   Outstanding at beginning of year ............     621,760      $   7.58     552,566      $   7.63     359,766      $   6.26
     Options granted ...........................      72,500          9.60     102,500          8.64     214,600          9.92
     Options exercised .........................      30,876          5.39      33,306          3.41       1,800          5.00
     Options forfeited .........................      25,750          8.86           -          -         20,000          8.00
                                                     -------      --------     -------      --------     -------      --------
   Outstanding at end of year ..................     637,634      $   8.34     621,760      $   7.58     552,566      $   7.63
                                                     =======      ========     =======      ========     =======      ========
   Options exercisable at year-end  ............     493,087      $   7.97     391,784      $   7.40     258,466      $   5.90
                                                     =======      ========     =======      ========     =======      ========

Weighted-average fair value of options                            $   3.17                  $   2.86                  $   2.59
     granted during the year  ..................                  ========                  ========                  ========

</TABLE>

    The Company  applies the provisions of Accounting  Principles  Board Opinion
    No. 25,  "Accounting  for Stock Issued to  Employees," in accounting for its
    stock  option and award  plans and has adopted  the  disclosure-only  option
    under  Statement  of  Financial  Accounting  Standards,  ("SFAS")  No.  123,
    Accounting  for  Stock-Based  Compensation.  If the  Company had adopted the
    accounting  provisions of SFAS 123 and recognized expense for the fair value
    of employee stock options  granted in 2001,  2000 and 1999, over the vesting
    life of the  options,  pro  forma net  income  would be as  indicated  below
    (dollars in thousands, except per share data):

<TABLE>


                                                               As Reported                          Pro Forma
                                                    ----------------------------          -----------------------------
                                                     2001       2000        1999           2001        2000        1999
                                                     ----       ----        ----           ----        ----        ----


<S>                                                 <C>         <C>        <C>            <C>         <C>        <C>
Net income  .............................           $2,941      $2,507     $2,941         $2,818      $2,407     $ 2,658
Basic earnings per common share  ........           $ 0.48      $ 0.41     $ 0.49         $ 0.46      $ 0.39      $ 0.44
Diluted earnings per common share  ......           $ 0.48      $ 0.41     $ 0.48         $ 0.46      $ 0.39      $ 0.44
</TABLE>


    In determining the pro forma  disclosures  above,  the fair value of options
    granted   was   estimated   on  the  grant  date  using  the   Black-Scholes
    option-pricing  model. The Black-Scholes model was developed to estimate the
    fair value of traded  options,  which have  different  characteristics  than
    employee stock options,  and changes to the subjective  assumptions  used in
    the  model  can  result  in  materially  different fair value estimates. The




                                       52
<PAGE>








    weighted-average  grant date fair values of the options granted during 2001,
    2000 and 1999 were based on the following assumptions:


<TABLE>

                                                           Risk-Free                        Dividend
                                                         Interest Rates                       Yield
                                                     -------------------------       ------------------------
                                                     2001      2000       1999       2001      2000      1999
                                                     ----      ----       ----       ----      ----      ----

<S>                                                  <C>       <C>        <C>        <C>       <C>       <C>
     Performance-Based Incentive and other stock
     option plans  ...........................       3.75%     6.52%      5.89%      2.08%     2.50%     2.03%

</TABLE>

<TABLE>

                                                            Expected Lives                           Volatility
                                                     --------------------------------        ------------------------------
                                                     2001          2000          1999        2001         2000         1999
                                                     ----          ----          ----        ----         ----         ----

<S>                                                <C>           <C>            <C>          <C>           <C>         <C>
     Performance-Based Incentive and other stock
     option plans  ...........................     6 years       6 years        6 years      36%           30%         20%
</TABLE>



    Compensation  expense under the fair  value-based  method is recognized over
    the vesting period of the related stock options.  Accordingly, the pro forma
    results  of  applying  SFAS  No.  123 in  2001,  2000  and  1999  may not be
    indicative of future amounts.

    The following table summarizes  information about stock options  outstanding
    at December 31, 2001.
<TABLE>

                                                Outstanding                      Exercisable
                                   ------------------------------------      -----------------------
                                                 Average       Average                      Average
                Exercise                           Life        Exercise                     Exercise
              Price Range          Shares        (Years)        Price         Shares         Price
              -----------          ------        -------        -----         ------         -----

              <S>                  <C>            <C>         <C>             <C>          <C>
              $3.06-$3.64          13,844         1.50        $  3.64         13,844       $  3.64
              $4.00-$4.68          56,558         4.54           4.16         56,558          4.16
              $5.00-$8.00         229,732         7.24           7.66        227,065          7.65
              $9.00-$10.25        337,500         8.07           9.70        195,620          9.76
                                  -------         ----        -------        -------       -------
              Total               637,634         7.32        $  8.34        493,087       $  7.97
                                  =======         ====        =======        =======       =======

</TABLE>


    Restricted Stock
    The  Company   awarded   17,500  shares  of   restricted   stock  under  the
    Performance-Based  Incentive Plan. The weighted  average price of restricted
    stock  vested  during  2001,  2000 and  1999 was  $9.00,  $8.64  and  $8.00,
    respectively.  Compensation expense is recorded on restricted stock over the
    related vesting period.  Compensation  expense is measured based on the fair
    value of shares issued at the date of grant. At December 31, 2001, there was
    no unrecognized restricted stock expense.



                                       53
<PAGE>


16. EARNINGS PER SHARE
    The following table sets forth the computation of basic and diluted earnings
    per share for the years ended  December 31, 2001,  2000 and 1999 (dollars in
    thousands, except per share data):
<TABLE>


                                                                                     2001                 2000                 1999
                                                                                     ----                 ----                 ----
<S>                                                                                 <C>                  <C>                  <C>
Numerator:
  Net income ........................................................               $2,941               $2,507               $2,941
  Preferred stock dividends .........................................                    -                    -                    -
                                                                                     -----                -----                -----
  Numerator for basic earnings per share
    Income to common shareholders ...................................                2,941                2,507                2,941
  Effect of dilutive securities:
    Preferred stock dividends .......................................                    -                    -                    -
                                                                                     -----                -----                -----
  Numerator for diluted earnings per share
    Income available to common shareholders .........................               $2,941               $2,507               $2,941
                                                                                    ======               ======               ======


Denominator:
       Denominator for basic earnings per share
         Weighted-average shares                                                 6,094,670            6,095,471            5,995,474
       Effects of dilutive securities:
         Common stock options                                                       93,807               38,799               74,263
                                                                               -----------          -----------          -----------
       Dilutive potential common shares                                             93,807               38,799               74,263
                                                                               -----------          -----------          -----------
       Denominator for diluted earnings per share
         Adjusted weighted-average shares                                        6,188,477            6,134,270            6,069,737
                                                                               -----------          -----------          -----------
Basic Earnings Per Share                                                       $      0.48          $      0.41          $      0.49
                                                                               ===========          ===========          ===========
Diluted Earnings Per Share                                                     $      0.48          $      0.41          $      0.48
                                                                               ===========          ===========          ===========
</TABLE>


    For  the  years  ended  December  31,  2000  and  1999,  shares  that  could
    potentially  be issued under options and  potentially  dilute basic earnings
    per  share in the  future  that  were not  included  in the  computation  of
    dilutive  earnings per share because to do so would have been  antidilutive,
    totaled  275,145  and  117,842,  respectively.  There were no  anti-dilutive
    shares for the year ended December 31, 2001.

17. EMPLOYEE BENEFITS
    Profit-Sharing Plan
    The Company sponsors a 401(k) profit-sharing plan in which substantially all
    full-time and part-time  employees  are eligible to  participate.  This plan
    allows  eligible  employees to defer a portion of their salaries on a pretax
    basis. The Company matches these deferrals on a pro rata basis as defined in
    the plan.  Contributions and administrative expenses related to the plan and
    paid by the  plan  sponsor  totaled  approximately  $274,000,  $214,000  and
    $100,000 for the years ended December 31, 2001, 2000 and 1999, respectively.


                                       54
<PAGE>


<PAGE>


    Health and Welfare Plan
    The Company also  provides  health care,  dental care,  disability  and life
    insurance benefits to all full-time  employees.  Total cost related to these
    benefits for 2001, 2000 and 1999 were approximately  $653,000,  $561,000 and
    $453,000,  respectively.  Beginning in April 2001,  full-time  employees who
    elected health care and/or dental care coverage  contributed to a portion of
    the monthly premium cost.


18. CAPITAL

    The  Company  is  subject  to  various   regulatory   capital   requirements
    administered  by  the  federal  banking  agencies.  Under  capital  adequacy
    guidelines,  the Company must meet specific capital  guidelines that involve
    quantitative  measures of its assets,  liabilities,  and certain off-balance
    sheet items as calculated under  regulatory  accounting  practices.  Capital
    amounts and classification are also subject to qualitative  judgments by the
    regulators   about   components,   risk   weightings,   and  other  factors.

    Quantitative  measures as defined by regulation  and  established  to ensure
    capital  adequacy require the Bank to maintain minimum amounts and ratios of
    Total and Tier I capital  to  risk-weighted  assets and of Tier I capital to
    average  assets.  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."  As of December 31, 2001,  the Bank
    meets all capital adequacy requirements to which it is subject.

    The following  table  summarizes the actual and required  capital levels and
    ratios for the Company and the Bank at December 31, 2001 and 2000.
<TABLE>

                                                                           Adequately              Well
                                                         Actual            Capitalized          Capitalized
                                                         Amount    Ratio     Amount     Ratio     Amount     Ratio
                                                       ---------- -------- ----------- -------- ----------- -------
<S>                                                     <C>         <C>     <C>          <C>     <C>         <C>
     As of December 31, 2001:
          Total capital (to risk-weighted assets):
             Consolidated  .......................      $44,745     9.0%    $39,688      8.0%    $49,611     10.0%
             Bank  ...............................       51,729    10.4%     39,667      8.0%     49,584     10.0%

          Tier I capital (to risk-weighted assets):
             Consolidated  .......................       39,540     8.0%     19,844      4.0%     29,767      6.0%
             Bank  ...............................       46,524     9.4%     19,834      4.0%     29,750      6.0%

          Tier I capital (to average assets):
             Consolidated  .......................       39,540     6.5%     24,242      4.0%     30,302      5.0%
             Bank  ...............................       46,524     7.7%     24,175      4.0%     30,219      5.0%

     As of December 31, 2000:
          Total capital (to risk-weighted assets):
             Consolidated  .......................       47,306    12.0%     31,559      8.0%     39,448     10.0%
             Bank  ...............................       37,959     9.9%     30,838      8.0%     38,548     10.0%

          Tier I capital (to risk-weighted assets):
             Consolidated  .......................       43,636    11.1%     15,779      4.0%     23,669      6.0%
             Bank  ...............................       34,289     8.9%     15,419      4.0%     23,129      6.0%

          Tier I capital (to average assets):
             Consolidated  .......................       43,636     9.8%     17,862      4.0%     22,328      5.0%
             Bank  ...............................       34,289     7.8%     17,500      4.0%     21,875      5.0%
</TABLE>


                                       55
<PAGE>
 19.  COMMITMENTS AND CONTINGENCIES
     Financial Instruments With Off-Balance Sheet Risk
     The financial  statements do not reflect various commitments and contingent
     liabilities, or off-balance sheet risks, that arise in the normal course of
     business  to  meet  the  financing   needs  of  customers.   These  include
     commitments to extend credit and to honor standby 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.

     The  Company's  maximum  exposure to credit loss under  standby  letters of
     credit and  commitments to extend credit is represented by the  contractual
     amount of those  instruments.  The Company uses the same credit policies in
     establishing  commitments  and  issuing  letters  of  credit as it does for
     on-balance sheet instruments.

     Commitments  to extend credit are  agreements to lend to a customer so long
     as there is no  violation of any  condition  established  in the  contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses  and may  require  payment  of a fee.  Since many  commitments  are
     expected to expire without being drawn upon, the total  commitment  amounts
     do not  necessarily  represent  future  cash  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.
     Commitments  to extend  credit  amount to  approximately  $122,000,000  and
     $77,000,000 at December 31, 2001 and 2000, respectively.

     Standby letters of credit are conditional commitments issued by the Bank to
     guarantee the  performance of a customer to a third party.  The credit risk
     involved  in  issuing  letters  of credit is  essentially  the same as that
     involved in  extending  loan  facilities.  The  Company  had  approximately
     $7,373,000  and  $6,760,000  of standby  letters of credit  outstanding  at
     December 31, 2001 and 2000,  respectively.  The Company does not anticipate
     any  material  losses as a result of  participating  in standby  letters of
     credit or commitments to extend credit.

     Concentrations of Credit Risk
     The Bank originates  residential and commercial real estate loans and other
     consumer and  commercial  loans  primarily in the north  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.

     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,  2001  and  2000  was   approximately   $250,000   and  $8.8   million,
     respectively.  The decline in the required  reserve level from 2000 to 2001
     was due to a change by the Company in the  application  of Federal  Reserve
     regulations surrounding the definition of transaction accounts.



                                       56
<PAGE>


     Legal Contingencies
     The Company is a defendant in certain  claims and legal actions  arising in
     the  ordinary  course of  business.  In the  opinion of  management,  after
     consultation with legal counsel,  the ultimate disposition of these matters
     is not  expected  to have a  material  adverse  effect on the  consolidated
     financial condition, operations, or liquidity of the Company.

20.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Many of the  Company's  assets and  liabilities  are  short-term  financial
     instruments  whose  carrying  values  approximate  fair value.  These items
     include  cash and due from  banks,  interest-bearing  deposits  with  other
     banks,  federal funds sold, federal funds purchased,  securities sold under
     repurchase  agreements  and other  short term  borrowings.  In cases  where
     quoted market prices are not available,  fair values are based on estimates
     using  present value or other  valuation  techniques.  The  resulting  fair
     values may be significantly affected by the assumptions used, including the
     discount rates and estimates of future cash flows.

     The  methods  and  assumptions  used to  estimate  the  fair  value  of the
     Company's other financial instruments are as follows:

              Investment Securities
              Fair values for  investment  securities are based on quoted market
              prices.  If a quoted market price is not available,  fair value is
              estimated using market prices for similar securities.

              Loans
              The loan  portfolio is  segregated  into  categories  and the fair
              value of each loan  category is  calculated  using  present  value
              techniques  based on projected  cash flows and estimated  discount
              rates.  The  calculated  present  values  are then  reduced  by an
              allocation of the allowance for loan loss against each  respective
              loan category.

              Deposits
              The fair values of non-interest  bearing  deposits,  NOW accounts,
              money  market  accounts,  and  savings  accounts  are the  amounts
              payable  on  demand  at the  reporting  date.  The  fair  value of
              fixed-maturity  certificates  of  deposit is  estimated  using the
              rates  currently   offered  for  deposits  of  similar   remaining
              maturities.

              Interest Rate Swap
              The  interest  rate swap is  recorded  at fair  value of $9,000 at
              December  31,  2001.  Fair  value is  based  on a dealer  quote at
              December 31, 2001,  which is estimated  from market  interest rate
              curves as of the valuation date.


              Commitments to Extend Credit and Standby Letters of Credit
              The  estimated  fair values for other  financial  instruments  and
              off-balance  sheet loan  commitments are considered to approximate
              carrying  amounts at December 31, 2001 and 2000 and are based upon
              fees charged to enter into similar arrangements as of these dates.



                                       57
<PAGE>
     The  Company's  financial  instruments  that  have  estimated  fair  values
     differing from their respective carrying values are presented as follows at
     December 31, 2001 and 2000 (in thousands):

<TABLE>
                                                                        2001                             2000
                                                              --------------------------       --------------------------
                                                              Carrying        Estimated        Carrying        Estimated
                                                               Amount         Fair Value        Amount         Fair Value
                                                               ------         ----------        ------         ----------


<S>                                                           <C>              <C>             <C>              <C>
     Financial assets:
           Investment securities held to maturity  .....      $  4,060         $  4,057        $  7,460         $  7,458
           Net loans  ..................................      $516,350         $532,776        $377,151         $376,983
     Financial liabilities:
           Time deposits  ..............................      $268,537         $270,917        $185,739         $185,627

</TABLE>



     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  financial  instruments  at December 31, 2001, 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, 2001 are not  necessarily  indicative
     of fair values at future dates.


21.  BRANCH ACQUISITIONS
     On May 11, 2001, the Company  purchased the Lake City and Live Oak branches
     of Republic Bank. The Company  acquired loans and deposits of approximately
     $12,000,000 and $62,000,000, respectively. The Company also recorded a core
     deposit  intangible of approximately  $6,000,000,  which is being amortized
     over its  estimated  life of 10 years.  The results of  operations of these
     branches are included in the results of  operations of the Company from the
     date of acquisition forward.
















                                       58
<PAGE>


22.  CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY)


                        Statement of Financial Condition
                           December 31, 2001 and 2000

                                     Assets


<TABLE>
                                                                                            2001               2000
                                                                                        ------------       ------------
                                                                                             (dollars in thousands)

<S>                                                                                     <C>                <C>
     Cash and cash equivalents  ...............................................         $    2,764         $      372
     Investment in CNB National Bank  .........................................             53,563             35,153
     Premises and equipment, net  .............................................                  -              8,800
     Other assets  ............................................................                345                339
                                                                                        ------------       ------------
             Total assets  ....................................................         $   56,672         $   44,664
                                                                                        ============       ============

                      Liabilities and Shareholders' Equity


     LIABILITIES
     Other borrowings  ........................................................         $   10,000         $        -
     Other liabilities  .......................................................                  3                 28
                                                                                        ------------       ------------
             Total liabilities  ...............................................             10,003                 28
                                                                                        ------------       ------------
     SHAREHOLDERS' EQUITY
     Common stock  ............................................................                 61                 61
     Additional paid-in capital  ..............................................             30,533             30,581
     Retained earnings  .......................................................             15,749             14,027
     Accumulated other comprehensive income (loss), net of taxes  .............                326                (33)
                                                                                        ------------       ------------
             Total shareholders' equity  ......................................             46,669             44,636
                                                                                        ------------       ------------
                  Total liabilities and shareholders' equity  .................         $   56,672         $   44,664
                                                                                        ============       ============

</TABLE>












                                       59
<PAGE>

                               Statement of Income

<TABLE>
                                                                                      For the Year Ended December 31,
                                                                                   2001             2000            1999
                                                                                ----------       ----------      ----------
                                                                                           (dollars in thousands)


<S>                                                                              <C>               <C>             <C>
     Dividend income  ................................................           $   824           $ 2,755         $ 1,679
     Interest income  ................................................                25                71             298
     Interest expense  ...............................................              (265)                -               -
                                                                                 --------          --------        --------
     Net interest and dividend income  ...............................               584             2,826           1,977
     Noninterest income ..............................................                 6                 2               -
     Noninterest expense .............................................              (154)             (451)         (1,016)
     Realized gains (losses) on available for sale securities  .......               125               (50)              -
                                                                                 --------          --------        --------
     Income before income taxes and equity
       in undistributed net income of subsidiary  ....................               561             2,327             961
     Income tax benefit ..............................................                98               160             268
                                                                                 --------          --------        --------
     Income before equity in undistributed net income of subsidiary ..               659             2,487           1,229
     Equity in undistributed net income of subsidiary  ...............             2,282                20           1,712
                                                                                 --------          --------        --------
     Net income  .....................................................           $ 2,941           $ 2,507         $ 2,941
                                                                                 ========          ========        ========

</TABLE>






















                                       60
<PAGE>

                            Statement of Cash Flows
<TABLE>
                                                                                      For the Year Ended December 31,
                                                                                   2001             2000            1999
                                                                                 --------          --------        --------
                                                                                          (dollars in thousands)

<S>                                                                              <C>               <C>             <C>
     Cash flows from operating activities:
          Net income  .................................................          $  2,941          $  2,507        $  2,941
          Adjustments to reconcile net income to net cash provided by
            (used in) operating activities:
             Undistributed earnings of subsidiary  ....................            (2,282)              (20)         (1,712)
             Depreciation  ............................................                87                41               -
             Non-cash compensation  ...................................                20                58              71
             Realized gains on available for sale securities  .........              (125)                -               -
          Changes in assets and liabilities:
             Other assets  ............................................              (110)              187          (1,891)
             Other liabilities  .......................................               (25)               28             (10)
                                                                                 --------          --------        --------
               Net cash provided by (used in) operating activities  ...               506             2,801            (601)
                                                                                 --------          --------        --------
     Cash flows from investing activities:
          Cash paid related to investment in subsidiary  ..............            (7,000)                -         (10,000)
          Cash paid related to land purchase  .........................                 -                 -          (1,339)
          Purchases - buildings and improvements  .....................                 -            (5,010)              -
          Proceeds from sale of available for sale securities  ........               173                 -               -
          Purchase of available for sale securities  ..................                 -               (98)              -
                                                                                 --------          --------        --------
               Net cash used in investing activities  .................            (6,827)           (5,108)        (11,339)
                                                                                 --------          --------        --------
     Cash flows from financing activities:
          Proceeds from other borrowings  .............................            10,000                 -               -
          Cash dividends  .............................................            (1,219)           (1,226)         (1,159)
          Proceeds from exercise of stock options  ....................               166               113          11,377
          Payment to repurchase common stock  .........................              (234)             (395)            (96)
                                                                                 --------          --------        --------
               Net cash provided by (used in) financing activities  ...             8,713            (1,508)         10,122
                                                                                 --------          --------        --------
     Net increase (decrease) in cash and cash equivalents  ............             2,392            (3,815)         (1,818)
     Cash and cash equivalents, beginning of year  ....................               372             4,187           6,005
                                                                                 --------          --------        --------
     Cash and cash equivalents, end of year  ..........................          $  2,764          $    372        $  4,187
                                                                                 ========          ========        ========

</TABLE>


      During 2001, the Parent Company  transferred  its Deerwood and Gainesville
      buildings,  land and  related  equipment  having a combined  value of $8.7
      million to the Bank as a capital contribution.








                                       61
<PAGE>


           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                            AND FINANCIAL DISCLOSURE.

None

                                    PART III

Except for the information  relating to the Company's executive officers and its
key  employees,  the  material  required  by  items  10  through  13  is  hereby
incorporated by reference from the Company's definitive proxy statement pursuant
to  Instruction  G of Form 10-K.  The  Company  will file its  definitive  Proxy
Statement with the Commission prior to April 30, 2002.

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).
        10(i)    Bennett Brown Employment  Agreement  (Incorporated by reference
                 to  Exhibit  10 of the  Company's  June 30,  1999 10-Q filed on
                 August 16, 1999).
        10(ii)   K. C. Trowell Employment  Agreement  (Incorporated by reference
                 to Exhibit 10 (i) to the Company's  Pre-Effective Amendment No.
                 1 to its Registration Statement on Form S-2 filed as of January
                 26, 1999).
        10(iii)  G. Thomas Frankland  Employment   Agreement   (Incorporated  by
                 reference  to  Exhibit 10 (ii) to the  Company's  Pre-Effective
                 Amendment No. 1 to its Registration Statement on Form S-2 filed
                 as of January 26, 1999).
        10(iv)   1998   Performance-Based   Incentive  Plan   (Incorporated   by
                 reference to Exhibit 99 to the Company's Registration Statement
                 on Form S-8 filed December 7, 1998).
        21       Subsidiaries of the Registrant.
        23       Consent of Arthur Andersen LLP,  independent  certified  public
                 accountants.
        99       Letter  to  the  Commission  regarding  Arthur  Andersen  LLP's
                 quality control system.


Report of Form 8-K:
-------------------

        The Company did not file a form 8-K during the last quarter of 2001.











                                       62
<PAGE>

                                   SIGNATURES

     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 Florida Bancshares, Inc.
                                                  ----------------------------
                                                          (Registrant)

                                         By:      ____________________________
                                                  G. Thomas Frankland
                                                  Executive Vice President
                                                  and Chief Financial Officer

                                         Date:    March 28, 2002

     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/ Thomas R. Andrews
   ----------------------           Director                 March 28, 2002
   Thomas R. Andrews

   /s/ Audrey S. Bullard
   ----------------------           Director                 March 28, 2002
   Audrey S. Bullard

   /s/ Raymon J. Land
   ----------------------           Director                 March 28, 2002
   Raymon J. Land

   /s/ Jon W. Pritchett
   ----------------------           Director                 March 28, 2002
   Jon W. Pritchett

   /s/ Marvin H. Pritchett
   ----------------------           Director                 March 28, 2002
   Marvin H. Pritchett

   /s/ William J. Streicher
   ----------------------           Director                 March 28, 2002
   William J. Streicher

   /s/ Halcyon E. Skinner
   ----------------------           Director                 March 28, 2002
   Halcyon E. Skinner

   /s/ K. C. Trowell
   ----------------------     Chairman, CEO & Director       March 28, 2002
   K. C. Trowell

   /s/ G. Thomas Frankland
   ----------------------      Executive Vice President      March 28, 2002
   G. Thomas Frankland       and Chief Financial Officer
                            (Principal Financial Officer)

   /s/ Martha S. Tucker
   ----------------------           Controller               March 28, 2002
   Martha S. Tucker        (Principal Accounting Officer)

                                       63