**United
      States**


**Securities
      and Exchange Commission**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





**(Mark
      One)**


**[X]**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





**For
      the fiscal year ended December 31, 2006**





**[  
              ]**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES****EXCHANGE
                ACT OF 1934**





**For
      the transition period from ____to _______**





**Commission
      File Number 333-100460**





CN
      Bancorp, Inc.


(Name
      of
      small business issuer in its charter)




Maryland
            
            52-1954386(State
                or other jurisdiction
                of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)7401
                Ritchie HighwayGlen
                Burnie, Maryland
            
            21061(Address
                of principal executive
                offices)
            
            (Zip
                Code)





Issuer's
      telephone number: 410-760-7000





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: None





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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
o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes
o No
x




Issuer's
      revenues for its fiscal year ended December 31, 2006 were
      $10,191,311.





The
      aggregate market value of the Common Stock held by non-affiliates of the
      registrant, i.e., persons other than directors and executive officers of the
      registrant, is $27,250,625 as of March 6, 2007 based on a stock price of $24.45
      per share, the last reported trade price of the common stock as of March 6,
      2007.





The
      Registrant had 1,728,011 shares of Common Stock outstanding as of March 6,
      2007.





DOCUMENTS
      INCORPORATED BY REFERENCE





PORTIONS
      OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2006,
      ARE
      INCORPORATED BY REFERENCE INTO PART II OF THIS FORM 10-KSB.





Transitional
      Small Business Disclosure Format. YES: ( ) NO: (X)








**FORWARD-LOOKING
      STATEMENTS**





CN
      Bancorp, Inc makes forward-looking statements within the meaning of Section
      27A
      of The Securities Act of 1933 and Section 21E of The Securities Exchange Act
      of
      1934 in filings with the Securities and Exchange Commission (including this
      Annual Report on Form 10-KSB and exhibits thereto) that are subject to risks
      and
      uncertainties. These forward-looking statements include: statements of CN
      Bancorp's goals, intentions, and expectations; estimates of risks and of future
      costs and benefits; assessments of loan quality, probable loan losses,
      liquidity, market risk, off-balance sheet arrangements and interest rate risks,
      and statements of its ability to achieve financial and other goals.
      Forward-looking statements often use words such as “believe,” “expect,” “plan,”
“may,” “will,” “should,” “project,” “contemplate,” “ anticipate,” “forecast,”
“intend” or other words of similar meaning. You can also identify them by the
      fact that they do not relate strictly to historical or current facts. These
      forward-looking statements are subject to significant uncertainties because
      they
      are based upon or are affected by, among other things: the amount and timing
      of
      future changes in interest rates and other economic conditions, management's
      estimates and projections of future interest rates and other economic
      conditions; future laws and regulations, including accounting principles; and
      a
      variety of other matters which, by their nature, are subject to significant
      uncertainties. You should not put undue reliance on any forward-looking
      statements.





Because
      of these uncertainties, the Company’s actual future results may differ
      materially from the results indicated by these forward-looking statements.
      In
      addition, the Company's past results of operations do not necessarily indicate
      its future results. Forward-looking statements speak only as of the date they
      are made, and we undertake no obligation to update publicly any of these
      statements in light of new information or future events.





**PART
      I**





**Item
      1. Description of Business**




**General**





CN
      Bancorp, Inc. was incorporated under the laws of the State of Maryland on
      January 22, 1996, primarily to own all of the outstanding shares of capital
      stock of a proposed national bank to be named County National Bank.





The
      organizers of CN Bancorp, Inc. and County National Bank, most of whom are still
      directors and/or officers today, formed CN Bancorp, Inc. and County National
      Bank to fill what they believed was a need for a new community bank in Anne
      Arundel County, Maryland dedicated to providing excellent customer service
      and
      high quality banking products to the local community





To
      raise
      the capital necessary to organize County National Bank, CN Bancorp, Inc.
      conducted a private placement offering of its common stock. The private
      placement closed in December 1996, with CN Bancorp, Inc. selling all 860,000
      shares that were offered, and raised gross offering proceeds of $8,600,000.
      County National Bank opened for business on December 19, 1996 from its Pasadena,
      Maryland location.





County
      National Bank serves individuals and small to medium sized businesses in Anne
      Arundel County, Maryland, with a specific focus in central and northern Anne
      Arundel County. County National Bank offers a wide range of deposit accounts
      and
      commercial and consumer loans, tax deferred accounts, safe deposit boxes, and
      other services to its customers. County National Bank also offers brokerage
      and
      insurance services to its customers through an affiliation with a broker/dealer.
      Telephone and online banking is available 24 hours a day.





County
      National Bank’s mission statement is to:





·
            Provide
                the highest quality products and personalized services to meet the
                financial needs of our community and customers;
                and


·
            Provide
                sound management to maximize our leadership position, never losing
                sight
                of the well being of our neighbors, friends, employees and
                stockholders.





In
      August
      2001, the Federal Reserve Board approved CN Bancorp, Inc.’s election as a
      financial holding company. This means that, subject to Federal Reserve Board
      regulations, CN Bancorp, Inc. may engage in certain non-banking activities
      that
      are “financial in nature.” For example, financial holding companies may engage
      in or provide insurance underwriting and agency services, investment advisory
      services and merchant banking and underwriting services, and may deal or make
      a
      market in securities. We will consider business opportunities outside of
      commercial banking if a favorable opportunity is presented.




2





**Entry
      into a Material Definitive Agreement**





On
      December 13, 2006, CN Bancorp, Inc. (the “Company”) entered into an Agreement
      and Plan of Merger (the “Merger Agreement”) with Sandy Spring Bancorp, Inc.
      (“Sandy Spring”), whereby Sandy Spring agreed to acquire the Company by way of a
      merger of the Company with and into Sandy Spring, with Sandy Spring being the
      surviving corporation in the merger (the “Merger”). The Merger Agreement also
      provides for the merger of County National Bank, the Company’s wholly owned
      subsidiary, with and into Sandy Spring Bank, a Maryland bank and trust company
      and a wholly owned subsidiary of Sandy Spring (“SSB”). The merger of County
      National Bank and SSB will be governed by a separate merger agreement (the
“Bank
      Merger Agreement”). In connection with the Merger Agreement, certain
      stockholders of the Company who are directors or executive officers of the
      Company and the Bank, entered into a Voting Agreement with Sandy Spring, under
      which they have agreed to vote their shares in favor of the Merger. Sandy
      Spring’s common stock is listed on the Nasdaq Global Select Market under the
      symbol “SASR”.




*The
      Merger Agreement*





Pursuant
      to the Merger Agreement, at the effective time of the Merger, each outstanding
      share of the Company’s common stock will be converted into the right to receive
      either (i) $25.00 in cash (the “Cash Election Price”), or (ii) 0.6657 of a share
      of Sandy Spring common stock (the “Exchange Ratio” and, together with the Cash
      Election Price, the “Merger Consideration”). Each stockholder of the Company
      will be entitled to elect the number of its shares of Company common stock
      to be
      exchanged for the Cash Election Price, subject to a proration which will provide
      that Sandy Spring will pay cash for a minimum of 40% and a maximum of 50% of
      the
      outstanding shares of Company common stock and issue shares of Sandy Spring
      common stock in exchange for a minimum of 50% and a maximum of 60% of the
      outstanding shares of Company common stock. The Merger is intended to be a
      tax-free reorganization as to the portion of the Merger Consideration received
      as Sandy Spring common stock. Outstanding options to purchase Company common
      stock granted under the Company’s equity plans will be automatically converted
      into fully vested options to purchase Sandy Spring common stock, provided that
      Sandy Spring may offer to cash out options for a per share payment equal to
      the
      difference between the Cash Election Price and the per share exercise price
      of
      such option.





The
      Merger Agreement contains customary representations, warranties and covenants,
      including, among others, covenants by the Company that (i) the Company will
      not
      (A) solicit proposals relating to alternative business combination transactions
      involving the Company or its assets or (B) subject to certain exceptions, enter
      into discussions regarding, or provide material non-public information in
      connection with, an alternative business combination transaction involving
      the
      Company or its assets, (ii) the Company will hold a stockholders’ meeting to
      consider the approval of the Merger and the adoption of the Merger Agreement,
      and (iii) the Company’s board of directors will recommend that the Company’s
      stockholders adopt and approve the Merger Agreement and the Merger. The Merger
      Agreement provides that the closing of the Merger is subject to customary
      conditions which include the adoption and approval of the Merger and the Merger
      Agreement by the stockholders of the Company and the receipt of all required
      regulatory approvals. The Merger Agreement also provides for termination rights
      of both Sandy Spring and the Company under certain circumstances, and further
      provides that, upon termination of the Merger Agreement under specified
      circumstances, the Company is required to pay Sandy Spring a termination fee
      of
      $1,764,000.





Under
      the
      Merger Agreement, pending effectiveness of the Merger, the Company will be
      permitted to continue to pay regular quarterly dividends not in excess of $0.07
      per quarter and a special year-end dividend not in excess of that amount. In
      accordance with the Merger Agreement, the Company suspended, effective upon
      execution of the merger agreement, the issuance of shares under its Dividend
      Reinvestment and Stock Purchase Plan. As such, with respect to all dividends,
      if
      any, declared after the date of the Merger Agreement, all shareholders will
      receive payment in cash.





The
      Merger Agreement contains representations and warranties that the Company and
      Sandy Spring made to each other as of the date of the Merger Agreement or other
      specific dates. Such representations and warranties are not intended to amend,
      supplement or supersede any statement contained in any documents filed by the
      Company or Sandy Spring with the Securities and Exchange Commission. The
      statements embodied in those representations and warranties were made solely
      for
      purposes of the Merger Agreement and are subject to important qualifications
      and
      limitations agreed to in connection with negotiating the Merger Agreement.
      Accordingly, you should not rely on the representations and warranties as
      accurate or complete characterizations of the actual state of facts as of any
      specified date since they are modified in important part by the underlying
      disclosure schedules which are not filed publicly and which are subject to
      a
      contractual standard of materiality different from that generally applicable
      to
      stockholders and were used for the purpose of allocating risk between the
      Company and Sandy Spring.




3





The
      foregoing summary is qualified in its entirety by reference to the full text
      of
      the Merger Agreement, a copy of which was previously filed as Exhibit 2.1 to
      our
      Current Report on Form 8-K dated December 13, 2006.





*The
      Bank Merger Agreement*





Pursuant
      to the Bank Merger Agreement, (a) each share of County National Bank common
      stock issued and outstanding and (b) each share of County National Bank common
      stock owned by County National Bank as treasury stock will be cancelled and
      shall cease to exist and no stock of SSB or other consideration shall be
      delivered in exchange therefore. In the Bank Merger Agreement, County National
      Bank and SSB agreed to observe and perform the agreements and covenants of
      their
      respective parent corporations in the Merger Agreement and to take all other
      actions necessary under applicable laws and regulations to consummate the
      transactions contemplated by the Bank Merger Agreement, subject to and in
      accordance with the applicable provisions of the Merger Agreement. The Bank
      Merger Agreement provides for its automatic termination in the event that the
      Company and Sandy Spring terminate the Merger Agreement. The foregoing summary
      is qualified in its entirety by reference to the full text of the Bank Merger
      Agreement, a copy of which was previously filed as Exhibit 2.2 to our Current
      Report on Form 8-K dated December 13, 2006.




*The
      Voting Agreement*





In
      connection with the Merger Agreement, certain stockholders of the Company each
      of whom is a director and/or officer of the Company or County National Bank,
      entered into a Voting Agreement with Sandy Spring under which each such
      stockholder agreed to vote his/her shares in favor of the adoption and approval
      of the Merger and the Merger Agreement. Such stockholders collectively own
      approximately 35% of the outstanding Company common stock. The foregoing summary
      is qualified in its entirety by reference to the full text of the Bank Merger
      Agreement, a copy of which was previously filed as Exhibit 99.1 to our Current
      Report on Form 8-K dated December 13, 2006.





Employment
      Agreements and Other Agreements





In
      connection with the Merger Agreement: (i) Jan W. Clark, the president and chief
      executive officer of Company, entered into an employment agreement with SSB
      which is contingent upon and effective as of the effective time of the merger,
      pursuant to which Mr. Clark would be employed as the president of the County
      National Bank division of SSB; and (ii) John G. Warner, the executive vice
      president of Company, entered into an employment agreement with SSB which is
      contingent upon and effective as of the effective time of the merger, pursuant
      to which Mr. Warner would be employed as the chief operating officer of the
      Company division of SSB. Under these agreements Messrs. Clark and Warner have
      also agreed to certain non-competition covenants covering the three years
      following their termination of employment with SSB.





**Bank
      Location and Market Area**





County
      National Bank serves its customers from branches located in the Glen Burnie,
      Pasadena, Odenton and Millersville areas of Anne Arundel County, Maryland.
      The
      Bank is leasing property in Linthicum, Maryland on which it intends to build
      a
      new branch. The Bank started construction of the branch the first quarter of
      2007.





Central
      and northern Anne Arundel County continues to grow both in commerce and
      population. Baltimore-Washington International Thurgood Marshall Airport,
      located in northern Anne Arundel County, is the fastest growing airport in
      the
      region and among the 30 busiest in North America. Businesses have expanded
      and
      new business enterprises are opening to take advantage of needed aviation
      related ancillary and support services. The local economy is dominated by small
      to mid-size enterprises but also includes larger employers such as Northrup
      Grumman Corporation, Computer Sciences Corporation and General Dynamics
      Corporation. The county’s economy is associated with industry and commerce.
      There are over 5,000 business establishments in the central and northern Anne
      Arundel County market areas. Industries include high technology, communication,
      distribution and computer support services. Environmental related technology,
      regional data centers and the sciences are a growing segment of the commerce
      within the county . The
      housing market remains steady with strong demand in new housing as well as
      in
      the resale of homes in established neighborhoods.




4





**Loan
      Portfolio**





County
      National Bank offers a broad range of loans, including commercial loans, real
      estate loans, consumer loans and residential mortgage and home equity loans.
      Commercial business and commercial real estate loans for owner-occupied
      properties are County National Bank’s primary loan products.





The
      goal
      of County National Bank’s lending program is to meet the credit needs of our
      client base while using sound credit principles to protect the quality of our
      assets. Our business and credit strategy are relationship driven, and we strive
      to provide a reliable source of credit, a variety of credit alternatives and
      personalized advice.





At
      December 31, 2006 County National Bank had a legal lending limit of
      approximately $2.1 million to  any
      one
      borrower, which constitutes approximately 15% of County National Bank’s
      unimpaired capital and surplus. The bank sells participations in loans to other
      lenders and CN Bancorp, Inc. that exceed County National Bank’s lending limits.
      We do not believe that loan participations purchased by County National Bank
      necessarily pose any greater risk of loss than loans that County National Bank
      originates.





The
      following is a description of the types of loans in our loan portfolio and
      the
      anticipated risks associated with each type of loan:





● Commercial
      loans for business purposes including working capital, equipment purchases,
      lines of credit, letters of credit and government contract financing.





Unlike
      residential mortgage loans, which generally are made on the basis of the
      borrower’s ability to repay using his or her employment and other income and
      which are secured by real property which can be valued easily, commercial
      business loans are riskier and typically are made on the basis of the borrower’s
      ability to make repayment from the cash flow of the borrower’s business. As a
      result, the availability of funds for the repayment of commercial business
      loans
      depends substantially on the success of the business itself. Further, the
      collateral securing the loans may depreciate over time, may be difficult to
      appraise and may fluctuate in value based on the success of the
      business.





● Real
      estate loans, including land development and construction loan financing,
      primarily for owner-occupied premises.





Commercial
      real estate loans usually are larger and present more risk than do residential
      mortgage loans. Because payments on loans secured by commercial real estate
      depend on the successful operation or management of the properties that secure
      the loans, repayment can be affected significantly by downturns in the real
      estate market or in the economy. A downturn in the local real estate market
      could adversely affect our customers' ability to pay on time and could affect
      the underlying liquidation value of our collateral, which in turn could
      adversely affect us.





Construction
      loans generally involve a higher degree of credit risk than residential mortgage
      loans. Risk of loss on a construction loan depends largely upon the accuracy
      of
      the initial estimate of the property’s value at completion of construction or
      development compared with the estimated cost of construction and, in the case
      of
      owner-occupied premises, the success of the owner’s business. If the estimate of
      value proves to be inaccurate, the value of the project when completed could
      be
      insufficient to ensure full repayment of the loan.




● Consumer
      loans including automobile and personal loans, including personal lines of
      credit.





Consumer
      loans may present greater credit risk than residential mortgage loans because
      many consumer loans are unsecured or are secured by rapidly depreciating assets
      such as automobiles. Repossessed collateral for a defaulted consumer loan may
      not provide an adequate source of repayment of the outstanding loan balance
      because of the greater likelihood of damage, loss or depreciation. Consumer
      loan
      collections depend on the borrower’s continuing financial stability. If a
      borrower suffers personal financial difficulties, the loan may not be repaid.
      Also, various federal and state laws, including bankruptcy and insolvency laws,
      may limit the amount we can recover on such loans.





● Residential
      mortgage loans, including first and second mortgage loans and home equity loans
      secured by single-family owner-occupied residences.





We
      require private mortgage insurance for loans in excess of 90% of a property’s
      value but we generally do not make loans with loan-to-value ratios in excess
      of
      80%. Generally, our residential mortgage loans are “ARM” loans and we do not
      make 30-year fixed rate mortgage loans. We retain and service our residential
      mortgage loans.




5





Loans
      secured by real estate comprise the majority of the loan portfolio. The majority
      of the borrowers reside, work and/or conduct business in CN Bancorp, Inc.’s
      primary market area of Anne Arundel County, Maryland.





The
      table
      below presents loans by major categories as of the dates indicated.




**December
                31,****2006**
            
            
            **%**
            
            
            **2005**
            
            
            **%***(In
                thousands)*Real
                estate -construction
            
            $
            8,325
            
            
            8
            %
            $
            4,330
            
            
            5
            %Residential
                real estate
            
            
            31,188
            
            
            31
            %
            
            29,307
            
            
            33
            %Commercial
                real estate
            
            
            34,480
            
            
            34
            %
            
            29,421
            
            
            33
            %Commercial-other
            
            
            22,557
            
            
            23
            %
            
            22,367
            
            
            25
            %Consumer
            
            
            3,448
            
            
            4
            %
            
            3,948
            
            
            4
            %99,998
            
            
            100
            %
            
            89,373
            
            
            100
            %Unearned
                loan fees and costs, net
            
            
            (20
            )
            
            
            
            
            53Allowance
                for loan and lease losses
            
            
            (1,010
            )
            
            
            
            
            (864
            )$
            98,968
            
            
            
            
            $
            88,562





The
      table
      below sets forth the maturity distributions of the loan receivable portfolio
      as
      of December 31, 2006




**LOAN
                MATURITIES AS OF DECEMBER 31, 2006****1
                year**
            
            
            
            
            
            **After****Or
                less**
            
            
            **1-5
                years**
            
            
            **5
                years**
            
            
            **Total***(In
                thousands)***Maturity
                of Loans Receivable:**Real
                estate - construction
            
            $
            4,307
            
            $
            657
            
            $
            3,361
            
            $
            8,325Residential
                real estate
            
            
            3,388
            
            
            5,736
            
            
            22,064
            
            
            31,188Commercial
                real estate
            
            
            5,873
            
            
            10,056
            
            
            18,551
            
            
            34,480Commercial
                - other
            
            
            7,233
            
            
            9,835
            
            
            5,489
            
            
            22,557Consumer
            
            
            723
            
            
            1,277
            
            
            1,448
            
            
            3,448Total
                loans receivable
            
            $
            21,524
            
            $
            27,561
            
            $
            50,913
            
            $
            99,998*(In
                thousands)*Fixed
                interest rates
            
            
            
            
            $
            9,926
            
            $
            3,768Floating
                and adjustable interest rates
            
            
            
            
            
            17,635
            
            
            47,145Total
                loans receivable
            
            
            
            
            $
            27,561
            
            $
            50,913




*The
        real estate construction maturities include the permanent loan period, if
        applicable* .


Loan
      and Asset Quality





County
      National Bank has written loan policies that require that certain underwriting,
      documentation and credit analysis standards be met for approval and funding
      of
      loans. Management and third party reviewers periodically review adherence to
      the
      policies. Exceptions to the policies, when made, are documented, justified
      and
      approved by management and/or the Board of Directors. Lending authority (secured
      and unsecured) is assigned to individual officers, the loan committee, the
      executive committee and the full board of directors of County National Bank
      under the loan policies.




6





Delinquent
      loans, and the level thereof, are reviewed monthly and presented to the board
      of
      directors of County National Bank. A listing of loans classified less than
      “pass” according to the loan policy is presented to the audit/compliance
      committee of the board of directors at least quarterly. Generally, loans that
      have payments ninety days or more past due are placed on non-accrual status
      unless there is a reasonable expectation of the timely collection of all amounts
      past due. Payments on non-accrual loans are allocated to principal and interest
      according to the original loan terms unless collection of all amounts due under
      the loan agreement is in doubt, in which case collections are applied to
      principal loan balances.





In
      the
      fourth quarter of 2005, County National Bank had acquired through foreclosure
      a
      boat resulting from the borrower’s loan delinquency. The boat was valued at
      $140,000 and is included in other assets at December 31, 2005. The Bank
      charged-off $52,796 against the allowance for loan losses related to the loan
      in
      2005. In 2006, the Bank sold the boat realizing $165,000 after selling expenses
      and recorded a gain on the sale of $25,000. There was no foreclosed real estate
      owned or other assets acquired through foreclosure, deeds in lieu of foreclosure
      or repossession at December 31, 2006.





At
      December 31, 2006, CN Bancorp has one loan on non-accrual status which is in
      process of collection with a carrying amount of $40,000. The loan is secured
      by
      real estate with an estimated value in excess of that needed to satisfy the
      loan
      amount. The amount of the specific allowance for loan losses for this loan
      is
      $5,000 at December 31, 2006. Unrecognized interest on the loan at December
      31,
      2006 is approximately $2,300. CN Bancorp is not committed to lend funds to
      debtors whose loans are on non-accrual status or are considered
      impaired.





At
      December 31, 2005, CN Bancorp had two loans on non-accrual status which were
      in
      process of collection with carrying amounts totaling $62,332: (1) an impaired
      secured commercial loan in the amount of $49,667; and (2) an unsecured
      commercial loan in the amount of $12,665. The amount of the specific allowance
      for loan losses for these loans was $15,795 at December 31, 2005. Unrecognized
      interest on the loans at December 31, 2005 was approximately $3,600. CN Bancorp
      was not committed to lend funds to debtors whose loans are on non-accrual status
      or are considered impaired .





**Securities
      Portfolio**





CN
      Bancorp, Inc.’s portfolio is composed primarily of notes, bonds and
      mortgage-backed securities issued by the United States government and its direct
      and sponsored agencies and municipal bonds. The portfolio provides a source
      of
      liquidity, collateral for repurchase agreements and public funds as well as
      being a means of diversifying CN Bancorp, Inc.’s earning asset portfolio. While
      CN Bancorp, Inc. generally intends to hold its investment portfolio assets
      until
      maturity, a significant portion of the portfolio is classified as available
      for
      sale. Securities so classified are accounted for at fair value with the
      unrealized appreciation and depreciation reported as a separate component of
      stockholders’ equity, net of income tax effects. Securities classified in the
      held to maturity category are accounted for at amortized cost. CN Bancorp,
      Inc.
      invests in securities for the yield they produce and not to profit from trading
      the securities. There are no trading securities in the portfolio.





The
      table
      below presents the composition and carrying amounts of securities in the
      portfolio as of December 31, 2006 and December 31, 2005.





**SECURITIES****December
                31,**
            
            **December
                31,****2006**
            
            **2005***(In
                thousands)***Available
                for sale securities:**Mortgage-backed
                securities
            
            $
            2,995
            
            $
            3,558U.S
                Government agencies
            
            
            13,283
            
            
            20,32316,278
            
            
            23,881**Held
                to maturity securities:**Mortgage-backed
                securities
            
            
            3,430
            
            
            4,159U.S
                Government agencies
            
            
            3,000
            
            
            4,003Municipal
                bonds
            
            
            1,312
            
            
            -7,742
            
            
            8,162Equity
                securities
            
            
            794
            
            
            774Total
                securities
            
            $
            24,814
            
            $
            32,817




7








The
      tables below show the maturities and average weighted yields for the securities
      portfolio at December 31, 2006. The majority of the mortgage-backed securities
      have final maturity dates of less than seven years.





**MATURITIES
      AND WEIGHTED AVERAGE YIELDS ON SECURITIES**


**AS
      OF DECEMBER 31, 2006**


**Within
                one year**
            
            **After
                one but within five years**
            
            **After
                five**
            
            **Unspecified****Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield***(In
                thousands)*Amortized
                cost basis:U.S.
                Government agencies
            
            $
            7,201
            
            
            3.90
            %
            $
            9,276
            
            
            3.95
            %
            $
            -
            
            
            -
            
            $
            -
            
            
            -Mortgage-backed
                securities
            
            
            160
            
            
            3.40
            %
            
            6,145
            
            
            3.56
            %
            
            230
            
            
            5.20
            %
            
            -
            
            
            -Municipal
                bonds
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,312
            
            
            5.92
            %
            
            -
            
            
            -Equity
                securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            794
            
            
            4.48
            %Total
                securities
            
            $
            7,361
            
            
            3.89
            %
            $
            15,421
            
            
            3.79
            %
            $
            1,542
            
            
            5.81
            %
            $
            794
            
            
            4.48
            %Carrying
                Value:U.S.
                Government agencies
            
            $
            7,157
            
            
            
            
            $
            9,127
            
            
            
            
            $
            -
            
            
            
            
            $
            -Mortgage-backed
                securities
            
            
            158
            
            
            
            
            
            6,031
            
            
            
            
            
            235
            
            
            
            
            
            -Municipal
                bonds
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            1,312
            
            
            
            
            
            -Equity
                securities
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            794Total
                securities
            
            $
            7,315
            
            
            
            
            $
            15,158
            
            
            
            
            $
            1,547
            
            
            
            
            $
            794




*The
      mortgage-backed securities are listed in the schedule above by their stated
      maturity dates; however, monthly principal payments are made, at varying
      amounts, which will shorten the time frames specified above for these
      securities* *.*





**Deposits**





County
      National Bank offers a wide range of interest bearing and non-interest bearing
      deposit accounts, including commercial and retail checking accounts, money
      market accounts, tax deferred accounts, interest bearing statement savings
      accounts and certificates of deposit with fixed and variable rates and a range
      of maturity date options. We pay competitive interest rates on time and savings
      deposits.





The
      average balances and average rates paid on deposits during the years ended
      December 31, 2006 and 2005 are shown in the tables below. All deposits are
      domestic deposits.





**AVERAGE
                DEPOSITS BY MAJOR
                CLASSIFICATION**




**December
                31, 2006**
            
            **December
                31, 2005****Average****Balance**
            
            **Average****Rate**
            
            **Average****Balance**
            
            **Average****Rate***(In
                thousands)*Interest
                bearing:Demand
                deposits
            
            $
            16,997
            
            
            0.95
            %
            $
            14,584
            
            
            0.64
            %Savings
                accounts
            
            
            40,068
            
            
            3.25
            %
            
            40,310
            
            
            2.02
            %Time
                deposits
            
            
            36,475
            
            
            3.76
            %
            
            35,247
            
            
            2.92
            %Non-interest
                bearing:Demand
                deposits
            
            
            37,187
            
            
            
            
            
            37,329Total
            
            $
            130,727
            
            
            2.17
            %
            $
            127,470
            
            
            1.52
            %





The
      table
      below shows the maturities and amounts of time certificates (there are no other
      time deposits) issued in denomination of $100,000 or more at December 31, 2006
      and 2005.




8





**2006**
            
            **2005***(In
                thousands)*Three
                months or less
            
            $
            4,290
            
            $
            1,227Over
                three but within six months
            
            
            2,603
            
            
            2,726Over
                six but within twelve months
            
            
            3,421
            
            
            6,119Over
                twelve months
            
            
            4,946
            
            
            1,437Total
            
            $
            15,260
            
            $
            11,509





**Other
      Borrowed Funds**





CN
      Bancorp, Inc. enters into sales of securities under agreements to repurchase
      the
      same securities with customers, which mature from one day to 30 days from the
      transaction date. These transactions are accounted for as borrowings and are
      secured by notes and bonds in the investment portfolio.





The
      table
      below sets forth information regarding borrowing from repurchase agreements
      during the years ended December 31, 2006 and 2005 .




**December
                31,**
            
            **December
                31,****2006**
            
            **2005***(In
                thousands)*Total
                outstanding at period-end
            
            $
            291
            
            $
            548Average
                interest rate at period-end
            
            
            1.25
            %
            
            1.25
            %Average
                balance during the period
            
            $
            625
            
            $
            1,498Average
                interest rate during the period
            
            
            1.28
            %
            
            0.80
            %Maximum
                balance during the period
            
            $
            3,540
            
            $
            3,346





CN
      Bancorp, Inc. had no long-term debt during 2006 or 2005.





**Other
      Banking and Financial Services**





We
      offer
      commercial customers cash management services such as sweep accounts, account
      reconciliation and wire transfers of funds. Additionally, we make available
      telephone banking, ATM/debit cards, safe deposit boxes, after-hours deposit
      services, travelers’ checks, direct deposit of payroll and ACH origination for
      automated transactions for various accounts.





In
      addition, we offer our customers the ability to access information about their
      accounts and view information about County National Bank’s services and products
      on County National Bank’s website, *www.countynational.com* .
      Online
      banking permits customers to pay bills, transfer funds among accounts, download
      information to financial software packages, and send e-mails to County National
      Bank personnel.





Securities
      brokerage and insurance products are offered to customers through an affiliation
      with a broker/dealer.





County
      National Bank will consider offering additional banking products and services
      as
      warranted by customer demand. We believe that our data processing capability,
      provided through a third party vendor, will be adequate to support the
      introduction of new products and services.




**Competition**





Deregulation
      of financial institutions and acquisitions of banks across state lines has
      resulted in widespread changes in the financial services industry. In our market
      areas in Anne Arundel County, Maryland, we face strong competition from large
      banks headquartered within and outside of Maryland. In addition, we compete
      with
      other community banks, savings and loan associations, credit unions, mortgage
      companies, finance companies and others providing financial services. Many
      of
      our competitors can finance extensive advertising campaigns, maintain extensive
      branch networks and technology investments, and offer services and products
      that
      we cannot or will not offer. Also, some of our competitors have greater
      resources, access to borrowed funds at a lower rate than is available to us
      and
      substantially higher lending limits than that of County National Bank. Some
      of
      our competitors have other advantages, such as tax exemption in the case of
      credit unions, and lesser regulation in the case of mortgage companies and
      finance companies. Deposit competition is strong among institutions in our
      primary market area.




9





**Employees**





County
      National Bank had 41 full time employees and 5 part time employees as of
      December 31, 2006. None of our employees are covered by a collective bargaining
      agreement. We believe that relations with our employees are good. CN Bancorp,
      Inc. has no employees.





**Supervision
      and Regulation**





Both
      CN
      Bancorp, Inc. and County National Bank are subject to extensive state and
      federal banking regulations that impose restrictions on and provide for general
      regulatory oversight of our operations. These laws are generally intended to
      protect depositors and not stockholders. The following references to the laws
      and regulations under which CN Bancorp, Inc. and County National Bank are
      regulated are brief summaries, and are qualified in their entirety by reference
      to such laws and regulations. We cannot predict the nature or the extent of
      the
      effect on our business and earnings that new federal or state legislation may
      have in the future.





Federal
      Bank Holding Company Regulation




CN
      Bancorp, Inc. is a bank holding company under the Bank Holding Company Act
      of
      1956, as amended. As such, CN Bancorp, Inc. is subject to regulation and
      examination by the Federal Reserve Board, and is required to file periodic
      reports and any additional information that the Federal Reserve Board may
      require. The Bank Holding Company Act generally prohibits a bank holding company
      from engaging in activities other than banking, managing or controlling banks
      or
      other permissible subsidiaries and acquiring or retaining direct or indirect
      control of any company engaged in any activities closely related to banking
      or
      managing or controlling banks.





On
      November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
      Act
      of 1999 (“GLBA”). Effective March 11, 2000, pursuant to authority granted under
      the GLBA, a bank holding company may elect to become a financial holding company
      and thereby engage in a broader range of financial and other activities than
      are
      permissible for traditional bank holding companies. In order to qualify for
      the
      election, all of the depository institution subsidiaries of the bank holding
      company must be well capitalized and well managed, as defined by regulation,
      and
      all of its depository institution subsidiaries must have achieved a rating
      of
      satisfactory or better with respect to meeting community credit
      needs.





Pursuant
      to the GLBA, financial holding companies are permitted to engage in activities
      that are “financial in nature” or incidental or complementary thereto and not a
      substantial risk to the safety and soundness of the depository institution
      or
      the financial system in general, as determined by the Federal Reserve Board.
      The
      GLBA identifies several activities as “financial in nature,” including, among
      others, insurance underwriting and agency, investment advisory services,
      merchant banking and underwriting, and dealing or making a market in securities.
      Being designated a financial holding company will allow insurance companies,
      securities brokers and other types of financial companies to affiliate with
      and/or acquire depository institutions. CN Bancorp, Inc. became a financial
      holding company in 2001.





The
      status of CN Bancorp, Inc. as a registered bank holding company under the Bank
      Holding Company Act and a financial holding company under the GLBA does not
      exempt it from certain federal and state laws and regulations applicable to
      corporations generally, including, without limitation, certain provisions of
      the
      federal securities laws.





The
      Federal Reserve Board must approve, among other things, the acquisition by
      a
      proposed bank holding company of control of more than 5% of the voting shares,
      or substantially all the assets, of any bank, or the merger or consolidation
      by
      a bank holding company with another bank holding company. Under the Riegle-Neal
      Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”),
      the restrictions on interstate acquisitions of banks by bank holding companies
      were repealed as of September 29, 1995. The effect of the repeal of these
      restrictions is that, subject to certain time and deposit base requirements,
      CN
      Bancorp, Inc. may acquire a bank located in Maryland or any other state, and
      a
      bank holding company located outside of Maryland can acquire any Maryland-based
      bank holding company or bank.





Subsidiary
      banks of a bank holding company are subject to certain restrictions imposed
      by
      statute on any extensions of credit to the bank holding company or any of its
      subsidiaries, or investments in their stock or other securities, and on taking
      such stock or securities as collateral for loans to any borrower. Further,
      a
      bank holding company and any subsidiary bank are prohibited from engaging in
      certain tie-in arrangements in connection with the extension of credit. The
      Federal Reserve has adopted amendments to its Regulation Y, creating exceptions
      to the Bank Holding Company's anti-tying prohibitions that give bank
      subsidiaries of holding companies greater flexibility in packaging products
      and
      services with their affiliates.




10





In
      accordance with Federal Reserve Board policy, CN Bancorp, Inc. is expected
      to
      act as a source of financial strength to County National Bank and to commit
      resources to support County National Bank in circumstances in which CN Bancorp,
      Inc. might not otherwise do so. The Federal Reserve Board may require a bank
      holding company to terminate any activity or relinquish control of a non-bank
      subsidiary (other than a non-bank subsidiary of a bank) upon the Federal
      Reserve’s determination that such activity or control constitutes a serious risk
      to the financial soundness or stability of any subsidiary depository institution
      of the bank holding company. Further, federal bank regulatory authorities have
      additional discretion to require a bank holding company to divest itself of
      any
      bank or non-bank subsidiary if the agency determines that divestiture may aid
      the depository institution’s financial condition.





The
      Federal Reserve Board imposes risk-based capital measures on bank holding
      companies in order to insure their capital adequacy. CN Bancorp, Inc. is
      currently exempt from most of these risk-based capital measures because of
      its
      size (less assets then prescribed by regulation). However, the Federal Reserve
      Board still requires that CN Bancorp, Inc. remain adequately capitalized and
      have the ability to retire any debt within 25 years from the date it is
      incurred.





CN
      Bancorp, Inc., as a bank holding company, is subject to dividend regulations
      of
      the Federal Reserve System. In general, a small bank holding company that has
      a
      debt to equity ratio greater than 1:1 is not expected to pay corporate dividends
      until such time as its debt to equity ratio declines to 1:1 or less and its
      bank
      subsidiary is otherwise well managed, well capitalized and not under any
      supervisory order. CN Bancorp, Inc. is a small bank holding company, and does
      not have a debt to equity ratio that is greater than 1:1.





State
      Bank Holding Company Regulation





CN
      Bancorp, Inc. is a Maryland-chartered bank holding company and is subject to
      various restrictions on its activities as set forth in Maryland law, in addition
      to those restrictions set forth in federal law.





Under
      Maryland law, an existing bank holding company that desires to acquire a
      Maryland state-chartered bank or trust company, a federally chartered bank
      with
      its main office in Maryland, or a bank holding company that has its principal
      place of business in Maryland, must file an application with the Maryland
      Commissioner of Financial Regulation. In approving the application, the Maryland
      Commissioner of Financial Regulation must consider whether the acquisition
      may
      be detrimental to the safety and soundness of the entity being acquired or
      whether the acquisition may result in an undue concentration of resources or
      a
      substantial reduction in competition in Maryland. The Maryland Commissioner
      of
      Financial Regulation may not approve an acquisition if, on consummation of
      the
      transaction, the acquiring company, together with all its insured depository
      institution affiliates, would control 30% or more of the total amount of
      deposits of insured depository institutions in Maryland. The Maryland
      Commissioner of Financial Regulation has authority to adopt by regulation a
      procedure to waive this requirement for good cause. In a transaction for which
      approval of the Maryland Commissioner of Financial Regulation is not required
      due to an exemption under Maryland law, or for which federal law authorizes
      the
      transaction without application to the Maryland Commissioner of Financial
      Regulation, the parties to the acquisition must provide written notice to the
      Maryland Commissioner of Financial Regulation at least 15 days before the
      effective date of the transaction.





Regulation
      of Depository Institution





*General*





County
      National Bank, as a national banking association whose accounts are insured
      by
      the Bank Insurance Fund (“BIF”) of the Federal Deposit Insurance Corporation up
      to the maximum legal limits, is subject to regulation, supervision and regular
      examinations by the Office of the Comptroller of the Currency. County National
      Bank is a member of the Federal Reserve System and, as such, is subject to
      certain regulations issued by the Federal Reserve Board. County National Bank
      also is subject to applicable banking provisions of Maryland law insofar as
      they
      do not conflict with or are not preempted by federal law. The regulations of
      these various agencies govern most aspects of County National Bank’s business,
      including setting required reserves against deposits, loans, investments,
      mergers and acquisitions, borrowing, dividends and location and number of branch
      offices.





Competition
      among commercial banks, savings and loan associations and credit unions has
      increased following enactment of legislation that greatly expanded the ability
      of banks and bank holding companies to engage in interstate banking or
      acquisition activities. Banks in the Washington, D.C./Maryland/Virginia area
      can, subject to limited restrictions, acquire or merge with a bank in another
      of
      the jurisdictions and can branch de novo in any of the jurisdictions.




11





Banking
      is a business that depends on interest rate differentials. In general, the
      differences between the interest paid by a bank on its deposits and its other
      borrowings and the interest received by a bank on loans extended to its
      customers and securities held in its investment portfolio constitute the major
      portion of a bank’s earnings. Thus, the earnings and growth of County National
      Bank are subject to the influence of economic conditions generally, both
      domestic and foreign, and also on the monetary and fiscal policies of the United
      States and its agencies, particularly the Federal Reserve Board, which regulates
      the supply of money. We cannot predict the nature and timing of changes in
      such
      policies and their impact on County National Bank.





*Branching
      and Interstate Banking*





Beginning
      on June 1, 1997, the federal banking agencies were authorized to approve
      interstate bank merger transactions without regard to whether such a transaction
      is prohibited by the law of any state. Furthermore, under the Riegle-Neal Act,
      interstate acquisitions of branches are permitted if the law of the state in
      which the branch is located permits such acquisitions. The Riegle-Neal Act
      also
      authorizes the Office of the Comptroller of the Currency and Federal Deposit
      Insurance Corporation to approve interstate branching de novo by national and
      non-member banks, respectively, but only in states which specifically allow
      for
      such branching.





The
      District of Columbia, Maryland and Virginia have all enacted laws that permit
      interstate acquisitions of bank branches and permit out-of-state banks to
      establish de novo branches.





*USA
      Patriot Act*




Under
      the
      Uniting and Strengthening America by Providing Appropriate Tools Required to
      Intercept and Obstruct Terrorism Act, commonly referred to as the “USA Patriot
      Act” or the “Patriot Act”, financial institutions are subject to prohibitions
      against specified financial transactions and account relationships, as well
      as
      enhanced due diligence standards intended to detect, and prevent, the use of
      the
      United States financial system for money laundering and terrorist financing
      activities. The Patriot Act requires financial institutions, including banks,
      to
      establish anti-money laundering programs, including employee training and
      independent audit requirements, meet minimum standards specified by the act,
      follow minimum standards for customer identification and maintenance of customer
      identification records, and regularly compare customer lists against lists
      of
      suspected terrorists, terrorist organizations and money launderers.





The
      U.S.
      Treasury Department (“Treasury”) has issued a number of implementing regulations
      that apply various requirements of the USA Patriot Act to financial institutions
      such as CN Bancorp. Those regulations impose new obligations on financial
      institutions to maintain appropriate policies, procedures and controls to
      detect, prevent and report money laundering and terrorist financing. Treasury
      is
      expected to issue a number of additional regulations that will further clarify
      the USA Patriot Act’s requirements.





Failure
      of a financial institution to comply with the USA Patriot Act’s requirements
      could have serious legal and business consequences for the institution. CN
      Bancorp has adopted appropriate policies, procedures and controls to address
      compliance with the requirements of the USA Patriot Act under the existing
      regulations and will continue to revise and update its policies, procedures
      and
      controls to reflect changes required by the USA Patriot Act and Treasury’s
      regulations.





The
      costs
      or other effects of the compliance burdens imposed by the Patriot Act or future
      anti-terrorist, homeland security or anti-money laundering legislation or
      regulations cannot be predicted with certainty.





*Gramm-Leach-Bliley
      Act*




The
      GLBA
      altered substantially the statutory framework for providing banking and other
      financial services in the United States of America. The GLBA, among other
      things, eliminated many of the restrictions on affiliations among banks and
      securities firms, insurance firms, and other financial service providers. A
      bank
      holding company that qualifies as a financial holding company or a subsidiary
      of
      a bank that qualifies as a financial subsidiary is permitted to engage in
      activities that are financial in nature or incidental or complementary to a
      financial activity. The activities that the GLBA expressly lists as financial
      in
      nature include insurance activities, providing financial and insurance advisory
      services, underwriting services, and limited merchant banking activities. To
      become eligible for these expanded activities, a bank holding company must
      be
      approved by the Federal Reserve Board as a financial holding company.




12





The
      GLBA
      also provides new protections against the transfer and use by financial
      institutions of consumers’ nonpublic personal information. A financial
      institution must provide to its customers, at the beginning of the customer
      relationship and annually thereafter, the institution’s policies and procedures
      regarding the handling of customers’ nonpublic personal financial information.
      The new privacy provisions generally prohibit a financial institution from
      providing a customer’s personal financial information to unaffiliated third
      parties unless the institution discloses to the customer that the information
      may be so provided and the customer is given the opportunity to opt out of
      such
      disclosure





*Capital
      Adequacy Guidelines*





The
      Federal Reserve Board, the Office of the Comptroller of the Currency and the
      Federal Deposit Insurance Corporation have all adopted risk-based capital
      adequacy guidelines by which they assess the adequacy of capital in examining
      and supervising banks and bank holding companies and in analyzing bank
      regulatory applications. Risk-based capital requirements determine the adequacy
      of capital based on the risk inherent in various classes of assets and
      off-balance sheet items.





Since
      December 31, 1992, national banks have been expected to meet a minimum ratio
      of
      total qualifying capital (the sum of core capital (Tier 1) and supplementary
      capital (Tier 2)) to risk-weighted assets (a “Total Risk-Based Capital Ratio) of
      8%. At least half of this amount (4%) should be in the form of core capital.





Tier
      1
      capital for national banks generally consists of the sum of common stockholders’
equity and perpetual preferred stock (subject in the case of the latter to
      limitations on the kind and amount of such stock which may be included as Tier
      1
      capital), less goodwill, without adjustment in accordance with Statement of
      Financial Accounting Standards 115. Tier 2 capital consists of the following:
      hybrid capital instruments, perpetual preferred stock which is not otherwise
      eligible to be included as Tier 1 capital, term subordinated debt and
      intermediate-term preferred stock, and, subject to limitations, general
      allowances for loan losses. Assets are adjusted under the risk-based guidelines
      to take into account different risk characteristics, with the categories ranging
      from 0% (requiring no risk-based capital) for assets such as cash, to 100%
      for
      the bulk of assets which are typically held by a commercial bank, including
      certain multi-family residential and commercial real estate loans, commercial
      business loans and consumer loans. Residential first mortgage loans on
      one-to-four-family residential real estate and certain seasoned multi-family
      residential real estate loans, which are not 90 days or more past-due or
      non-performing and which have been made in accordance with prudent underwriting
      standards, are assigned a 50% level in the risk-weighing system, as are certain
      privately issued mortgage-backed securities representing indirect ownership
      of
      such loans. Off-balance sheet items also are adjusted to take into account
      certain risk characteristics.





In
      addition to the risk-based capital requirements, the Office of the Comptroller
      of the Currency and the Federal Deposit Insurance Corporation have established
      a
      minimum 3% Leverage Capital Ratio (Tier 1 capital to total adjusted assets)
      requirement for the most highly-rated banks, with an additional cushion of
      at
      least 100 to 200 basis points for all other banks, which effectively increases
      the minimum Leverage Capital Ratio for such other banks to 4%-5% or more. Under
      the applicable regulations, highest-rated banks are those that the Office of
      the
      Comptroller of the Currency and the Federal Deposit Insurance Corporation
      determines are not anticipating or experiencing significant growth and have
      well
      diversified risk, including no undue interest rate risk exposure, excellent
      asset quality, high liquidity, good earnings and, in general, those which are
      considered a strong banking organization. A bank that has less than the minimum
      Leverage Capital Ratio requirement must submit to the applicable regulator
      for
      review and approval of a reasonable plan describing the means and timing by
      which the bank will achieve its minimum Leverage Capital Ratio requirement.
      A
      bank which fails to file such a plan is deemed to be operating in an unsafe
      and
      unsound manner and could be subject to a cease-and-desist order.





The
      Office of the Comptroller of the Currency’s and the Federal Deposit Insurance
      Corporation’s regulations also provide that any insured depository institution
      with a Leverage Capital Ratio less than 2% is deemed to be operating in an
      unsafe or unsound condition. Operating in an unsafe or unsound manner could
      lead
      the Federal Deposit Insurance Corporation to terminate deposit insurance.
      However, such an institution will not be subject to an enforcement proceeding
      solely on account of its capital ratios if it has entered into and is in
      compliance with a written agreement with the Office of the Comptroller of the
      Currency or the Federal Deposit Insurance Corporation to increase its Leverage
      Capital Ratio to such level as the Office of the Comptroller of the Currency
      or
      the Federal Deposit Insurance Corporation deems appropriate and to take such
      other action as may be necessary for the institution to be operated in a safe
      and sound manner. The capital regulations also provide, among other things,
      for
      the issuance by the Office of the Comptroller of the Currency or the Federal
      Deposit Insurance Corporation or their respective designee(s) of a capital
      directive, which is a final order issued to a bank that fails to maintain
      minimum capital or to restore its capital to the minimum capital requirement
      within a specified time period. Such directive is enforceable in the same manner
      as a final cease-and-desist order.




13





*Prompt
      Corrective Action*





Each
      federal banking agency is required to implement a system of prompt corrective
      action for institutions that it regulates. Under applicable regulations, a
      bank
      will be deemed to be: (i) “well capitalized” if it has a Total Risk-Based
      Capital Ratio of 10% or more, a Tier 1 Risk-Based Capital Ratio of 6% or more,
      a
      Leverage Capital Ratio of 5% or more and is not subject to any written capital
      order or directive; (ii) “adequately capitalized” if it has a Total Risk-Based
      Capital Ratio of 8% or more, a Tier 1 Risk-Based Capital Ratio of 4% or more
      and
      a Leverage Capital Ratio of 4% or more (3% under certain circumstances) and
      does
      not meet the definition of “well capitalized”); (iii) “undercapitalized” if it
      has a Total Risk-Based Capital Ratio that is less than 8%, a Tier 1 Risk-Based
      Capital Ratio that is less than 4% or a Leverage Capital Ratio that is less
      than
      4% (3.3% under certain circumstances); (iv) “significantly undercapitalized” if
      it has a Total Risk-Based Capital Ratio that is less than 6%, a Tier 1
      Risk-Based Capital Ratio that is less than 3% or a Leverage Capital Ratio that
      is less than 3%; and (v) “critically undercapitalized” if it has a ratio of
      tangible equity to total assets that is equal to or less than 2%.





County
      National Bank is classified as well capitalized by its primary regulator in
      its
      latest report.





An
      institution generally must file a written capital restoration plan which meets
      specified requirements with an appropriate federal banking agency within 45
      days
      of the date the institution receives notice or is deemed to have notice that
      it
      is undercapitalized, significantly undercapitalized or critically
      undercapitalized. The federal banking agency must provide the institution with
      written notice of approval or disapproval within 60 days after receiving the
      capital restoration plan, subject to extensions by the applicable agency.





An
      institution required to submit a capital restoration plan must concurrently
      submit a performance guaranty by each company that controls the institution.
      Such guaranty is limited to the lesser of (i) an amount equal to 5% of the
      institution’s total assets at the time the institution was notified or deemed to
      have notice that it was undercapitalized or (ii) the amount necessary at such
      time to restore the relevant capital measures of the institution to the levels
      required for the institution to be classified as adequately capitalized. Such
      a
      guaranty expires after the federal banking agency notifies the institution
      that
      it has remained adequately capitalized for each of four consecutive calendar
      quarters. An institution which fails to submit a written capital restoration
      plan within the requisite period, including any required performance guaranty,
      or fails in any material respect to implement a capital restoration plan, is
      subject to the restrictions in Section 38 of the Federal Deposit Insurance
      Act
      which are applicable to significantly undercapitalized institutions.





A
      critically undercapitalized institution will be placed in conservatorship or
      receivership within 90 days unless the Federal Deposit Insurance Corporation
      formally determines that forbearance from such action would better protect
      the
      deposit insurance fund. Unless the Federal Deposit Insurance Corporation or
      other appropriate federal banking regulatory agency makes specific further
      findings and certifies that the institution is viable and is not expected to
      fail, an institution that remains critically undercapitalized on average during
      the four calendar quarters after the date it becomes critically undercapitalized
      must be placed in receivership. The general rule is that the Federal Deposit
      Insurance Corporation will be appointed as receiver within 90 days after a
      bank
      becomes critically undercapitalized unless extremely good cause is shown and
      the
      federal regulators agree to an extension. In general, good cause is defined
      as
      capital that has been raised and is immediately available for infusion into
      the
      bank except for certain technical requirements that may delay the infusion
      for a
      period of time beyond the 90 day time period.





Immediately
      upon becoming undercapitalized, an institution becomes subject to statutory
      provisions which (i) restrict payment of capital distributions and management
      fees; (ii) require that the appropriate federal banking agency monitor the
      condition of the institution and its efforts to restore its capital; (iii)
      require submission of a capital restoration plan; (iv) restrict the growth
      of
      the institution’s assets; and (v) require prior approval of certain expansion
      proposals. The appropriate federal banking agency for an undercapitalized
      institution also may take any number of discretionary supervisory actions if
      the
      agency determines that any of these actions is necessary to resolve the problems
      of the institution at the least possible long-term cost to the deposit insurance
      fund, subject in certain cases to specified procedures. These discretionary
      supervisory actions include requiring the institution to raise additional
      capital, restricting transactions with affiliates, requiring divestiture of
      the
      institution or the sale of the institution to a willing purchaser, and any
      other
      supervisory action that the agency deems appropriate. Significantly
      undercapitalized and critically undercapitalized institutions are subject to
      these and additional mandatory and permissive supervisory actions.




14





Additionally,
      under Section 11(c)(5) of the FDIA, a conservator or receiver may be appointed
      for an institution where: (i) an institution’s obligations exceed its assets;
      (ii) there is substantial dissipation of the institution’s assets or earnings as
      a result of any violation of law or any unsafe or unsound practice; (iii) the
      institution is in an unsafe or unsound condition; (iv) there is a willful
      violation of a cease-and-desist order; (v) the institution is unable to pay
      its
      obligations in the ordinary course of business; (vi) losses or threatened losses
      deplete all or substantially all of an institution’s capital, and there is no
      reasonable prospect of becoming “adequately capitalized” without assistance;
      (vii) there is any violation of law or unsafe or unsound practice or condition
      that is likely to cause insolvency or substantial dissipation of assets or
      earnings, weaken the institution’s condition, or otherwise seriously prejudice
      the interests of depositors or the insurance fund; (viii) an institution ceases
      to be insured; (ix) the institution is undercapitalized and has no reasonable
      prospect that it will become adequately capitalized, fails to become adequately
      capitalized when required to do so, or fails to submit or materially implement
      a
      capital restoration plan; or (x) the institution is critically undercapitalized
      or otherwise has substantially insufficient capital.





*Regulatory
      Enforcement Authority*





The
      Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”)
      included substantial enhancement to the enforcement powers available to federal
      banking regulators. This enforcement authority included, among other things,
      the
      ability to assess civil money penalties, to issue cease-and-desist or removal
      orders and to initiate injunctive actions against banking organizations and
      institution-affiliated parties, as defined in FIRREA. In general, these
      enforcement actions may be initiated for violations of laws and regulations
      and
      unsafe or unsound practices. Other actions or inactions may provide the basis
      for enforcement action, including misleading or untimely reports filed with
      regulatory authorities. FIRREA significantly increased the amount of and grounds
      for civil money penalties and requires, except under certain circumstances,
      public disclosure of final enforcement actions by the federal banking agencies.





*Deposit
      Insurance*





The
      Federal Deposit Insurance Corporation has adopted a risk-based deposit insurance
      assessment system. The Federal Deposit Insurance Corporation assigns an
      institution to one of three capital categories based on the institution’s
      financial information, as of the reporting period ending seven months before
      the
      assessment period, consisting of (i) well capitalized, (ii) adequately
      capitalized or (iii) undercapitalized, and one of three supervisory
      subcategories within each capital group. The supervisory subgroup to which
      an
      institution is assigned is based on a supervisory evaluation provided to the
      Federal Deposit Insurance Corporation by the institution’s primary federal
      regulator and information that the Federal Deposit Insurance Corporation
      determines to be relevant to the institution’s financial condition and the risk
      posed to the deposit insurance funds. An institution’s assessment rate depends
      on the capital category and supervisory subcategory to which it is assigned.





Assessment
      rates for BIF **** insured
      deposits currently range from 5 basis points to 43 basis points. County National
      Bank has been assigned to a capital and supervisory subcategory that has an
      assessment rate of 5%. In addition, the FDIC imposes assessments to help pay
      off
      the $780 million in annual interest payments on the approximately $8.1 billion
      Financing Corporation noncallable bonds issued in the late 1980s as part of
      the
      government rescue of the thrift industry. The Federal Deposit Insurance
      Corporation is authorized to raise the assessment rates in certain
      circumstances, including to maintain or achieve a designated reserve ratio
      for
      BIF deposits. The Federal Deposit Insurance Corporation has exercised its
      authority to raise rates in the past and may raise insurance premiums in the
      future. If such action is taken by the Federal Deposit Insurance Corporation,
      it
      could have an adverse effect on the earnings of CN Bancorp, Inc.





Under
      the
      Federal Deposit Insurance Act, insurance of deposits may be terminated by the
      Federal Deposit Insurance Corporation upon a finding that the institution has
      engaged in unsafe or unsound practices, is in an unsafe or unsound condition
      to
      continue operations or has violated any applicable law, regulation, rule, order
      or condition imposed by the Federal Deposit Insurance Corporation.





*Transactions
      with Affiliates and Insiders*





County
      National Bank is subject to the provisions of Section 23A and 23B of the Federal
      Reserve Act and Federal Reserve Regulation W of the Federal Reserve Bank which
      place limits on the amount of loans or extensions of credit to affiliates (as
      defined in the Federal Reserve Act), investments in or certain other
      transactions with affiliates and on the amount of advances to third parties
      collateralized by the securities or obligations of affiliates. The law and
      regulation limit the aggregate amount of transactions with any individual
      affiliate to 10% of the capital and surplus of County National Bank and also
      limit the aggregate amount of transactions with all affiliates to 20% of capital
      and surplus. Loans and certain other extensions of credit to affiliates are
      required to be secured by collateral in an amount and of a type described in
      the
      regulation, and the purchase of low quality assets from affiliates is generally
      prohibited. The law and Regulation W also, among other things, prohibit an
      institution from engaging in certain transactions with certain affiliates (as
      defined in the Federal Reserve Act) unless the transactions are on terms
      substantially the same, or at least as favorable to such institution and/or
      its
      subsidiaries, as those prevailing at the time for comparable transactions with
      non-affiliated entities. In the absence of comparable transactions, such
      transactions may only occur under terms and circumstances, including credit
      standards, that in good faith would be offered to or would apply to
      non-affiliated companies. In addition, under Regulation W:




15





·
            a
                bank and its subsidiaries may not purchase a low-quality asset from
                an
                affiliate;


·
            covered
                transactions and other specified transactions between a bank or its
                subsidiaries and an affiliate must be on terms and conditions that
                are
                consistent with safe and sound banking practices; and


·
            with
                some exceptions, each loan or extension of credit by a bank to an
                affiliate must be secured by collateral with a market value ranging
                from
                100% to 130%, depending on the type of collateral, of the amount
                of the
                loan or extension of credit.





Regulation
      W generally excludes all nonbank and nonsavings association subsidiaries of
      banks from treatment as affiliates, except to the extent that the Federal
      Reserve Board decides to treat these subsidiaries as affiliates. The Federal
      Reserve Board has proposed an amendment to Regulation W that would limit the
      aggregate amount of loans that may be purchased by a bank from its affiliates
      to
      no more than 100% of the bank’s capital stock and surplus. This amendment has
      not yet been adopted.





County
      National Bank is subject to the restrictions contained in Section 22(h) of
      the
      Federal Reserve Act and the Federal Reserve Board’s Regulation O thereunder on
      loans to executive officers, directors and principal stockholders. Under Section
      22(h), loans to a director, an executive officer or a greater-than-10%
      stockholder of a bank as well as certain affiliated interests of any of the
      foregoing may not exceed, together with all other outstanding loans to such
      person and affiliated interests, the loans-to-one-borrower limit applicable
      to
      national banks (generally 15% of the institution’s unimpaired capital and
      surplus), and all loans to all such persons in the aggregate may not exceed
      the
      institution’s unimpaired capital and unimpaired surplus. Regulation O also
      prohibits the making of loans in an amount greater than $25,000 or 5% of capital
      and surplus but in any event not over $500,000, to directors, executive officers
      and greater-than-10% stockholders of a bank, and their respective affiliates,
      unless such loans are approved in advance by a majority of the board of
      directors of the bank with any “interested” director not participating in the
      voting. Furthermore, Regulation O requires that loans to directors, executive
      officers and principal stockholders of a bank be made on terms substantially
      the
      same as those that are offered in comparable transactions to unrelated third
      parties unless the loans are made pursuant to a benefit or compensation program
      that is widely available to all employees of the bank and does not give
      preference to insiders over other employees. Regulation O also prohibits a
      depository institution from paying overdrafts over $1,000 of any of its
      executive officers or directors unless they are paid pursuant to written
      pre-authorized extension of credit or transfer of funds plans.





All
      of
      County National Bank’s loans to its and CN Bancorp, Inc.’s executive officers,
      directors and greater-than-10% stockholders, and affiliated interests of such
      persons, comply with the requirements of Regulation W and 22(h) of the Federal
      Reserve Act and Regulation O.





*Loans
      to One Borrower*





County
      National Bank is subject to the statutory and regulatory limits on the extension
      of credit to one borrower. Generally, the maximum amount of total outstanding
      loans that a national bank may have to any one borrower at any one time is
      15%
      of the bank’s unimpaired capital and surplus. A national bank may lend an
      additional 10% on top of the 15% if the amount that exceeds 15% of the bank’s
      unimpaired capital and surplus is fully secured by readily marketable
      collateral.





*Liquidity*





County
      National Bank is subject to the uniform reserve requirements of Federal Reserve
      Board Regulation D, which applies to all depository institutions with
      transaction accounts or non-personal time deposits. Specifically, amounts in
      transaction accounts above $8,500,000 and up to $45,800,000 must have reserves
      held against them in the ratio of 3% of the amount. Amounts above $45,800,000
      require reserves of $1,119,000 plus 10% of the amount in excess of
      $45,800,000.




16




*Dividends*





The
      principal sources of CN Bancorp’s revenues are dividends received from its
      subsidiary bank and interest income it earns on the investment of the funds
      received through common stock sales. The amount of dividends that may be paid
      by
      County National Bank to CN Bancorp, Inc. depends on its earnings and capital
      position and is limited by statute, regulations and policies. As a national
      bank, County National Bank may not pay dividends from its paid-in surplus.
      All
      dividends must be paid out of undivided profits then on hand, after deducting
      expenses, including provisions for loan losses and bad debts. In addition,
      a
      national bank is prohibited from declaring a dividend on its shares of common
      stock until its surplus equals its stated capital, unless there has been
      transferred to surplus no less than one-tenth of the bank’s net profits for the
      preceding two consecutive half-year periods (in the case of an annual dividend).
      The approval of the Office of the Comptroller of the Currency is required if
      the
      total of all dividends declared by a national bank in any calendar year exceeds
      the total of its net profits for that year combined with its retained net
      profits for the preceding two years, less any required transfers to surplus.
      In
      addition, County National Bank may not pay a dividend if, after paying the
      dividend, it would be undercapitalized.





*Community
      Reinvestment Act*





The
      Community Reinvestment Act (“CRA”) requires that, in connection with
      examinations of financial institutions within their respective jurisdictions,
      the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office
      of the Comptroller of the Currency or the Office of Thrift Supervision shall
      evaluate the record of the financial institutions in meeting the credit needs
      of
      their local communities, including low and moderate income neighborhoods,
      consistent with the safe and sound operation of those institutions. The CRA
      does
      not establish specific lending requirements or programs for financial
      institutions nor does it limit an institution’s discretion to develop the types
      of products and services that it believes are best suited to its particular
      community, consistent with the CRA. An institution’s CRA activities are
      considered in, among other things, evaluating mergers, acquisitions and
      applications to open a branch or facility, as well as determining whether the
      institution will be permitted to exercise certain of the powers allowed by
      the
      GLBA. The CRA also requires all institutions to make public disclosure of their
      CRA ratings. County National Bank was last examined for CRA compliance as of
      March 2004 and received a CRA rating of “Satisfactory.”





Check
      21




On
      October 28, 2003, President Bush signed into law the Check Clearing for the
      21st
      Century Act, also known as “Check 21.” The new law, which became effective on
      October 28, 2004, gives “substitute checks,” such as a digital image of a check
      and copies made from that image, the same legal standing as the original paper
      check. Some of the major provisions include:





·
            allowing
                check truncation without making it
                mandatory;


·
            requiring
                that every financial institution communicate to accountholders in
                writing
                a description of its substitute check processing program and their
                rights
                under the law;


·
            retaining
                in place the previously mandated electronic collection and return
                of
                checks between financial institutions only when individual agreements
                are
                in place;


·
            requiring
                that when accountholders request verification, financial institutions
                produce the original check (or a copy that accurately represents
                the
                original) and demonstrate that the account debit was accurate and
                valid;
                and


·
            requiring
                recrediting of funds to an individual’s account on the next business day
                after a consumer proves that the financial institution has
                erred.





Consumer
      Credit Reporting





On
      December 4, 2003, President George W. Bush signed the Fair and Accurate Credit
      Transactions Act amending the federal Fair Credit Reporting Act. These
      amendments to the Fair Credit Reporting Act (the “FCRA Amendments”) became
      effective in 2004.




17




The
      FCRA
      Amendments include, among other things:




·
            requirements
                for financial institutions to develop policies and procedures to
                identify
                potential identity theft and, upon the request of a consumer, place
                a
                fraud alert in the consumer's credit file stating that the consumer
                may be
                the victim of identity theft or other
                fraud;


·
            for
                entities that furnish information to consumer reporting agencies
                (which
                would include us), requirements to implement procedures and policies
                regarding the accuracy and integrity of the furnished information,
                and
                regarding the correction of previously furnished information that
                is later
                determined to be inaccurate; and


·
            a
                requirement for mortgage lenders to disclose credit scores to
                consumers.




The
      FCRA
      Amendments also prohibit a business that receives consumer information from
      an
      affiliate from using that information for marketing purposes unless the consumer
      is first provided a notice and an opportunity to direct the business not to
      use
      the information for such marketing purposes (the “opt-out”), subject to certain
      exceptions. We do not share consumer information among our affiliated companies
      for marketing purposes, except as allowed under exceptions to the notice and
      opt-out requirements. Because none of our affiliates is currently sharing
      consumer information with any other affiliate for marketing purposes, the
      limitations on sharing of information for marketing purposes do not have a
      significant impact on us.





Federal
      Deposit Insurance Reform




On
      February 8, 2006, President Bush signed the Federal Deposit Insurance Reform
      Act
      of 2005 (“FDIRA”). Among other things, FDIRA changes the Federal deposit
      insurance system by:




·
            raising
                the coverage level for retirement accounts to
                $250,000;


·
            indexing
                deposit insurance coverage levels for inflation beginning in
                2012;


·
            prohibiting
                undercapitalized financial institutions from accepting employee benefit
                plan deposits;


·
            merging
                the Bank Insurance Fund and Savings Association Insurance Fund into
                a new
                Deposit Insurance Fund (the “DIF”);
                and


·
            providing
                credits to financial institutions that capitalized the FDIC prior
                to 1996
                to offset future assessment
                premiums.




FDIRA
      also authorizes the FDIC to revise the current risk-based assessment system,
      subject to notice and comment and caps the amount of the DIF at 1.50% of
      domestic deposits. The FDIC must issue cash dividends, awarded on a historical
      basis, for the amount of the DIF over the 1.50% ratio. Additionally, if the
      DIF
      exceeds 1.35% of domestic deposits at year-end, the FDIC must issue cash
      dividends, awarded on a historical basis, for half of the amount of the excess.




The
      FDIC
      was required to adopt rules implementing the various provisions of FDIRA by
      November 5, 2006. The rules adopted include:




·
            Inflation
                Index; Certain Retirement Accounts and Employee Benefit Plan Accounts
                (effective 10/12/2006);


·
            One-time
                Assessment Credit (effective
                11/17/2006);


·
            Assessment
                Dividends (effective 1/1/2007);


·
            Operational
                Processes Governing the FDIC’s Deposit Insurance Assessment Statement
                (effective 1/1/2007);


·
            Risk-Based
                Assessment System (effective
                1/1/2007);


·
            Designated
                Reserve Ratio (effective 1/1/2007);
                and


·
            Official
                FDIC Sign and Advertising of FDIC Membership (effective
                11/13/2007).




Other
      Regulations




Interest
      and other charges we collect or contract for are subject to state usury laws
      and
      federal laws concerning interest rates. For example, under the Service Members
      Civil Relief Act, which amended the Soldiers’ and Sailors’ Civil Relief Act of
      1940, a lender is generally prohibited from charging an annual interest rate
      in
      excess of 6% on any obligation of a borrower who is on active duty with the
      United States military.




Our
      loan
      operations are also subject to federal laws applicable to credit transactions,
      such as the following:




·
            The
                Federal Truth-In-Lending Act, governing disclosures of credit terms
                to
                consumer borrowers;




·
            The
                Home Mortgage Disclosure Act of 1975, requiring financial institutions
                to
                provide information to enable the public and public officials to
                determine
                whether a financial institution is fulfilling its obligation to help
                meet
                the housing needs of the community it
                serves;




18




·
            The
                Equal Credit Opportunity Act, prohibiting discrimination on the basis
                of
                race, creed or other prohibited factors in extending
                credit;




·
            The
                Fair Debt Collection Act, governing the manner in which consumer
                debts may
                be collected by collection agencies;
                and




·
            The
                rules and regulations of the various federal agencies charged with
                the
                responsibility of implementing these federal
                laws.




Our
      deposit operations are subject to the following:




·
            The
                Right to Financial Privacy Act, which imposes a duty to maintain
                confidentiality of consumer financial records and prescribes procedures
                for complying with administrative subpoenas of financial records;
                and




·
            The
                Electronic Funds Transfer Act and Regulation E issued by the Federal
                Reserve Board to implement that act, which govern automatic deposits
                to
                and withdrawals from deposit accounts and customers' rights and
                liabilities arising from the use of automated teller machines and
                other
                electronic banking services.




Proposed
      Legislation and Regulatory Actions




New
      regulations and statutes are regularly proposed that contain wide-ranging
      proposals for altering the structures, regulations, and competitive
      relationships of the nation’s financial institutions. We cannot predict whether
      or in what form any proposed regulation or statute will be adopted or the extent
      to which our business may be affected by any new regulation or
      statute.





Effect
      Of Governmental Monetary Policies




Our
      earnings are affected by domestic economic conditions and the monetary and
      fiscal policies of the United States government and its agencies. The Federal
      Reserve Board’s monetary policies have had, and are likely to continue to have,
      an important impact on the operating results of commercial banks through its
      power to implement national monetary policy in order, among other things, to
      curb inflation or combat a recession. The monetary policies of the Federal
      Reserve Board affect the levels of bank loans, investments and deposits through
      its control over the issuance of United States government securities, its
      regulation of the discount rate applicable to member banks and its influence
      over reserve requirements to which member banks are subject. We cannot predict
      the nature or impact of future changes in monetary and fiscal
      policies.





**Item
      2. Description of Properties**





The
      executive offices of CN Bancorp, Inc. and County National Bank are located
      at
      7401 Ritchie Highway, Glen Burnie, Maryland 21061. The following sets forth
      certain information regarding the offices of CN Bancorp, Inc. and County
      National Bank.





*Glen
      Burnie, Maryland*





Since
      July 1997, County National Bank has leased three contiguous parcels from Tate
      Properties, L.L.C.: (1) 0.38 acres of land at 7405 Ritchie Highway, Glen Burnie,
      Maryland on which we constructed a 2,922 square foot branch building; (2) 0.725
      acres of land with a 8,811 square foot building at 7401-7403 Ritchie Highway,
      Glen Burnie, Maryland which we use for our administrative offices; and (3)
      a
      1,290 square foot house on a 0.26 acre lot available for sublease (was
      previously leased to an unrelated tenant for $1,050 per month).





The
      landlord is an entity owned by the family of Creston G. Tate, a stockholder
      and
      director of CN Bancorp, Inc. and a director of County National Bank. The initial
      term of the lease expired in May 2001 and County National Bank is in the second
      five-year renewal period of the lease with a monthly rent payment of $12,706
      at
      December 31, 2006. The monthly rent increases annually based on increases in
      the
      consumer price index for the Washington Baltimore area. The lease contains
      an
      additional five-year renewal option as well as an option for the Bank to
      purchase the parcels from January 1, 2015 until May 1, 2016 at their appraised
      value. County National Bank is responsible for payment of real estate taxes,
      insurance, utilities and maintenance for the parcels.




19





*Pasadena,
      Maryland*





County
      National Bank leases 0.68 acres of land containing a 1,500 square foot building
      at 4001 Mountain Road, Pasadena, Maryland from an unaffiliated party for use
      as
      a bank branch. The initial term of the lease expired in September 2001 and
      County National Bank is in the second five-year renewal period of the lease
      with
      a monthly rent payment of $1,686 per month. The monthly rent increases annually
      based on increases in the consumer price index for the Washington-Baltimore
      area. The lease contains three additional five-year renewal options, a right
      of
      first refusal in the event of the sale of the property and an option for County
      National Bank to purchase the property for its appraised value from January
      1,
      2026 until May 30, 2026. County National Bank is responsible for payment of
      real
      estate taxes, insurance, utilities and maintenance for the
      property.




*Odenton,
      Maryland*





County
      National Bank acquired a 1.1 acre lot at 8759 Piney Orchard Parkway, Odenton,
      Maryland on which we built a 2,116 square foot bank branch. The branch was
      opened in June 1999. This property is lien free. As part of the land purchase,
      the seller agreed to a covenant prohibiting the operation of another banking
      institution in the shopping center in which our branch is located.





*Millersville,
      Maryland*





County
      National Bank leases a building site on Veterans Highway, Millersville, Maryland
      on which it built a new branch office. The owner/landlord of the site is an
      entity owned by the family of Creston G. Tate, a stockholder and director of
      CN
      Bancorp, Inc. and a director of County National Bank. The lease is for a five
      year term beginning in June 2003 but is renewable for seven additional five-year
      terms at the option of the Bank and contains the right of first refusal in
      the
      event of the sale of the property. The monthly rent payment at December 31,
      2006
      is $5,472. The monthly rent increases annually based on increases in the
      consumer price index for the Washington-Baltimore area. The branch was opened
      for business in January 2004.





*Linthicum,
      Maryland*





In
      February 2003, County National Bank leased, effective January 1, 2003, the
      buildings and real property located at 504 and 506 Camp Meade Road, Linthicum,
      Maryland primarily for use as a future branch site. The lease has an initial
      term of five years with four options to renew for five years each. The monthly
      rent increases annually based upon increases in the consumer price index for
      the
      Washington Baltimore area. The monthly rent amount at December 31, 2006 is
      $4,196. County National Bank has sublet one of the buildings for five years
      at
      $2,800 per month. The subtenant has one, five year renewal option but the rent
      amount for the renewal period would be negotiated at the renewal.  The
      Bank
      started construction of the branch the first quarter of 2007.





**Item
      3. Legal Proceedings**





CN
      Bancorp, Inc. and County National Bank are not currently involved in any pending
      legal proceedings other than routine legal proceedings occurring in the ordinary
      course of business.





**Item
      4. Submission of Matters to a Vote of Security Holders -** None





**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters**





*Securities
      Authorized for Issuance Under Equity Compensation Plans.* The
      following table sets forth information regarding outstanding options and other
      rights to purchase common stock granted under the Company’s compensation plans
      as of December 31, 2006:




20





**Equity
      Compensation Plan Information**




**Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding
                options, warrants and rights**
            
            **Weighted
                average exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders (1)
            
            
            97,500
            
            $
            14.36
            
            
            149,815Equity
                compensation plans not approved by security holders (2)
            
            
            -
            
            
            -
            
            
            50,000Total
            
            
            97,500
            
            $
            14.36
            
            
            199,815




(1)  Consists
      of the Company’s Stock Option Plan and the Employee Stock Purchase
      Plan.


(2)  Consists
      of the Company’s Director Stock Purchase Plan.




*COMMON
      STOCK AND DIVIDENDS*





CN
      Bancorp, Inc. common stock is not currently traded on an organized exchange
      or
      on the Nasdaq Stock Market. In August 2002, CN Bancorp, Inc.’s common stock was
      first quoted for trading on the Over the Counter Bulletin Board (“OTCBB”) under
      the symbol “CNBE.” Prior to August 2002, the common stock was traded only in
      private transactions and only on a very limited and sporadic basis. Since August
      2002, the common stock has traded only sporadically and no assurance can be
      given that an active or established market will develop in the foreseeable
      future. The following table sets forth the high and low sales prices for the
      stock during each calendar quarter in 2006 and 2005. These sales may not be
      representative of value due to the infrequency of trades and the limited market
      for our common stock.





2006
            
            2005High
            
            Low
            
            High
            
            LowFirst
                Quarter
            
            $
            16.00
            
            $
            14.35
            
            $
            14.25
            
            $
            13.70Second
                Quarter
            
            
            17.00
            
            
            16.25
            
            
            16.50
            
            
            13.70Third
                Quarter
            
            
            16.05
            
            
            15.65
            
            
            15.50
            
            
            14.05Fourth
                Quarter
            
            
            26.00
            
            
            21.00
            
            
            15.00
            
            
            13.50





CN
      Bancorp, Inc. had 391 stockholders of record at March 6, 2007. Common stock
      outstanding at that date was 1,728,011 shares. In addition, on March 6, 2007,
      CN
      Bancorp, Inc. had outstanding a total of 97,500 shares vested under option
      plans, including 51,000 options to purchase common shares at $14.50 per share
      and 46,500 options to purchase common shares at $14.20 per share.





CN
      Bancorp, Inc. declared four regular dividends (March, June, September and
      December) of $.07 per share ($.28 per share for the year) and one bonus dividend
      (December) of $.07 per share in 2006. In 2005, CN Bancorp, Inc. declared four
      quarterly dividends of $.05 per share ($.20 per share for the year) and one
      bonus dividend (December) of $.05 per share. CN Bancorp, Inc.’s continued
      ability to pay dividends will depend on its compliance with certain dividend
      regulations imposed upon it as a bank holding company by the Federal Reserve
      Board. In addition, CN Bancorp, Inc.’s ability to pay dividends may depend on
      the ability of County National Bank to pay dividends to CN Bancorp, Inc. County
      National Bank may not be able to pay dividends to CN Bancorp, Inc. unless it
      complies with certain regulatory requirements. In addition, CN Bancorp, Inc.
      will consider a number of other factors, including its earning prospects,
      financial condition and cash needs before deciding to pay additional dividends
      in the future.





*Recent
      Sales of Unregistered Securities*





In
      June
      1997, CN Bancorp, Inc. issued warrants to purchase a total of 343,431 shares
      of
      common stock at $10.00 per share to organizers of County National Bank. These
      warrants were exercised in the amount
      of
      50,831 in 2006, 272,600
      shares in 2005 and 20,000 in 2004. The proceeds from the exercises of the
      warrants were used for general corporate purposes. The proceeds from the warrant
      exercises were $508,310 in 2006, $2,726,000 in 2005 and $200,000 in 2004. All
      the warrants were exercised prior to their expiration in March
      2006.




21





There
      were no underwriting discounts or commissions paid with respect to the issuance
      of the common stock upon exercise of the warrants. CN Bancorp, Inc. believes
      that the issuance of the shares of common stock upon exercise of the warrants
      are exempt from the registration requirements of the Securities Act of 1933
      by
      virtue of Section 4(2) of the Securities Act of 1933. The transaction was not
      conducted by any form of general solicitation or general advertising and, in
      connection with the transaction, CN Bancorp, Inc. is taking reasonable care
      to
      assure that the purchasers of the common stock upon exercise of the warrants
      are
      not underwriters within the meaning of Section 2(11) of the Securities Act
      by,
      among other things, placing appropriate restrictive legends on the share
      certificates.





**Item
      6. Management’s Discussion and Analysis**





CN
      Bancorp, Inc. is the bank holding company for County National Bank. CN Bancorp,
      Inc.’s principal asset is its investment in all of the issued and outstanding
      capital stock of County National Bank, and its principal business is commercial
      banking.





County
      National Bank serves individuals and small to medium sized businesses in Anne
      Arundel County, Maryland, with a specific focus in central and northern Anne
      Arundel County. County National Bank offers a wide range of deposit accounts
      and
      commercial and consumer loans, tax deferred accounts, safe deposit boxes, and
      other services to its customers. Telephone and online banking is available
      24
      hours a day.





County
      National Bank’s mission statement is to:




·
            Provide
                the highest quality products and personalized services to meet the
                financial needs of our community and customers;
                and


·
            Provide
                sound management to maximize our leadership position, never losing
                sight
                of the well being of our neighbors, friends, employees and
                stockholders.





County
      National Bank serves its customers from branches in Glen Burnie, Pasadena,
      Odenton and Millersville, Maryland. County National Bank has leased land in
      Linthicum, Maryland on which it plans to build a branch in 2007.





**SUMMARY
      HISTORICAL CONSOLIDATED FINANCIAL DATA**





The
      following table summarizes the selected consolidated financial information
      and
      other financial data. The selected statement of financial condition and
      statement of operations data are derived from the audited consolidated financial
      statements for the years ended December 31, 2006 and 2005. This information
      should be read together with “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations” and our consolidated financial statements
      and the related notes included elsewhere in this annual report. Results for
      past
      periods are not necessarily indicative of results that may be expected for
      any
      future period.




22





**At
                and for the Year Ended December 31,**
            
            **At
                and for the Year Ended December 31,***(In
                thousands except per share data)*
            
            **2006**
            
            **2005****Statement
                of Operations Data:**Interest
                income
            
            $
            8,981
            
            $
            7,091Interest
                expense
            
            
            2,843
            
            
            1,950Net
                interest income
            
            
            6,138
            
            
            5,141Provision
                for loan losses
            
            
            163
            
            
            184Net
                interest income after provision for loan losses
            
            
            5,975
            
            
            4,957Other
                income
            
            
            1,210
            
            
            1,178Other
                expense
            
            
            4,990
            
            
            4,484Income
                before taxes
            
            
            2,195
            
            
            1,651Income
                taxes
            
            
            794
            
            
            567Net
                income
            
            $
            1,401
            
            $
            1,084**Per
                Share Data:**Earnings
                per share, basic
            
            $
            0.82
            
            $
            0.76Earnings
                per share, diluted
            
            
            0.81
            
            
            0.71Cash
                dividends (five dividends in 2006 and 2005)
            
            
            0.35
            
            
            0.25Book
                value per share
            
            
            11.97
            
            
            11.47Tangible
                book value per share
            
            
            11.97
            
            
            11.47Weighted
                average shares outstanding, basic
            
            
            1,715,073
            
            
            1,435,278Weighted
                average shares outstanding, diluted
            
            
            1,738,699
            
            
            1,521,542Shares
                outstanding at end of period
            
            
            1,728,011
            
            
            1,664,342**Statement
                of Financial Condition Data:**Total
                Assets
            
            $
            160,792
            
            $
            147,596Securities
                available for sale, at fair value
            
            
            16,279
            
            
            23,881Securities
                held to maturity, at cost
            
            
            7,742
            
            
            8,162Loans
                receivable, net of unearned income
            
            
            99,978
            
            
            89,426Allowance
                for loan losses
            
            
            1,010
            
            
            864Premises
                and equipment, net
            
            
            3,685
            
            
            3,914Non-interest
                bearing deposits
            
            
            37,947
            
            
            37,666Interest
                bearing deposits
            
            
            100,716
            
            
            89,418Total
                deposits
            
            
            138,663
            
            
            127,084Securities
                sold under agreements to repurchase
            
            
            291
            
            
            548Stockholders'
                  equity including unrealized gainsand losses
            
            
            20,692
            
            
            19,097**Selected
                Performance and Other Ratios:**Return
                on average stockholders' equity
            
            
            6.96
            %
            
            6.54
            %Return
                on average assets
            
            
            0.92
            %
            
            0.74
            %Net
                interest margin
            
            
            4.34
            %
            
            3.80
            %Non-interest
                income to average assets
            
            
            0.79
            %
            
            0.81
            %Non-interest
                expenses to average assets
            
            
            3.27
            %
            
            3.07
            %Dividend
                payout ratio
            
            
            43.07
            %
            
            35.09
            %Number
                of branches
            
            
            4
            
            
            4Allowance
                for loan losses to total loans
            
            
            1.01
            %
            
            0.97
            %Non-performing
                loans to total loans
            
            
            0.04
            %
            
            0.07
            %Allowance
                for loan losses to non-performing loans
            
            
            2,525.00
            %
            
            1,386.13
            %**Applicable
                Company Capital Ratios:**Tier
                1 risk-based capital
            
            
            19.5
            %
            
            19.9
            %Total
                risk-based capital
            
            
            20.5
            %
            
            20.8
            %Leverage
                capital
            
            
            13.1
            %
            
            12.9
            %Stockholders'
                equity to total assets
            
            
            12.9
            %
            
            12.9
            %





23





**FORWARD-LOOKING
      STATEMENTS**





The
      Company makes forward-looking statements within the meaning of Section 27A
      of
      The Securities Act of 1933 and Section 21E of The Securities Exchange Act of
      1934 in filings with the Securities and Exchange Commission (including this
      Annual Report to Stockholders ) that are subject to risks and uncertainties.
      These forward-looking statements include: the Letter from the Chairman,
      President and Chief Executive Officer, Management’s Discussion and Analysis of
      Financial Condition and Results of Operations, statements of CN Bancorp's goals,
      intentions, and expectations; estimates of risks and of future costs and
      benefits; assessments of loan quality, probable loan losses, liquidity, market
      risk, off-balance sheet arrangements and interest rate risks, and statements
      of
      its ability to achieve financial and other goals. Forward-looking statements
      often use words such as “believe,” “expect,” “plan,” “may,” “will,” “should,”
“project,” “contemplate,” “ anticipate,” “forecast,” “intend” or other words of
      similar meaning. You can also identify them by the fact that they do not relate
      strictly to historical or current facts. These forward-looking statements are
      subject to significant uncertainties because they are based upon or are affected
      by, among other things: the amount and timing of future changes in interest
      rates and other economic conditions, management's estimates and projections
      of
      future interest rates and other economic conditions; future laws and
      regulations, including accounting principles; and a variety of other matters
      which, by their nature, are subject to significant uncertainties. You should
      not
      put undue reliance on any forward-looking statements.





Because
      of these uncertainties, the Company’s actual future results may differ
      materially from the results indicated by these forward-looking statements.
      In
      addition, the Company's past results of operations do not necessarily indicate
      its future results. Forward-looking statements speak only as of the date they
      are made, and we undertake no obligation to update publicly any of these
      statements in light of new information or future events.





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




This
      section of the annual report contains certain "forward-looking statements"
      which
      may be identified by the use of words such as "believe," "expect," "anticipate,"
      "should," "planned," "estimated" and "potential." Examples of forward-looking
      statements include, but are not limited to, estimates with respect to our
      financial condition, results of operations and business that are subject to
      various factors which could cause actual results to differ materially from
      these
      estimates and most other statements that are not historical in nature. See
      “Forward-Looking Statements.”




The
      following discussion and analysis of the financial condition and results of
      operations of CN Bancorp, Inc. should be read in conjunction with CN Bancorp,
      Inc.’s audited consolidated financial statements, including the related
      footnotes, included elsewhere in this annual report.





**GENERAL**





Overview





The
      Company continued a pattern of growth during the year ended December 31, 2006.
      This growth has resulted in improved operating results as compared to prior
      periods. Key measurements and events for the year ended December 31, 2006
      include the following:





·
            Total
                assets as of December 31, 2006 increased by 8.9% to $161 million
                as
                compared to $148 million as of December 31, 2005.





·
            Net
                loans outstanding increased by 11.8% to $99 million as of December
                31,
                2006 from $89 million as of December 31,
                2005.





·
            Deposits
                as of December 31, 2006 were $139 million, an increase of $12 million
                or
                9.1% from December 31, 2005.





·
            The
                Company’s net income increased to $1,401,268, or 29.2%, for the year ended
                December 31, 2006 as compared to net income of $1,084,307 for the
                year
                ended December 31, 2005.





·
            Net
                interest income, the Company’s main source of income, was $6.1 million
                during the year ended December 31, 2006 compared to $5.1 million
                for the
                same period in 2005. This represents an increase of 19.4% for the
                year
                December 31, 2006 as compared to 2005.




24




·
            Non-interest
                income increased by $31,142 or 2.6%, for the year ended December
                31, 2006,
                as compared to the year ended December 31, 2005.





·
            Non-interest
                expenses increased by $505,615 or 11.3%, for the year ended December
                31,
                2006, as compared to 2005. The 2006 increase includes $150,000 of
                merger
                related costs which comprised 29.7% of the increase.





A
      detailed discussion of the factors leading to these changes can be found in
      the
      discussion below.





CN
      Bancorp, Inc. has continued to experience growth since it started operations
      in
      December 1996. Assets increased $13,196,656 (8.9%) to $160,792,498 at December
      31, 2006 from $147,595,842 at December 31, 2005. Increases in loans comprised
      the majority of the increase in assets. The increase in assets was funded by
      increases in deposits. Net income increased by 29.2% primarily resulting from
      the increase in earning assets and market interest rate levels.





Agreement
      to Merge





On
      December 13, 2006, the Company entered into an Agreement and Plan of Merger
      (Merger Agreement) with Sandy Spring Bancorp, Inc. (Sandy Spring), whereby
      Sandy
      Spring will acquire the Company by way of a merger of the Company with and
      into
      Sandy Spring. The Merger Agreement also provides for the merger of County
      National Bank with and into Sandy Spring Bank, a Maryland bank and trust
      company, a wholly owned subsidiary of Sandy Spring. Pursuant to the Merger
      Agreement, at the effective time of the merger, each outstanding share of the
      Company’s common stock will be converted into the right to receive either (i)
      $25.00 in cash (Cash Election Price), or (ii) 0.6657 of a share of Sandy
      Spring’s common stock. Each stockholder of the Company will be entitled to elect
      the number of its shares of Company common stock to be exchanged for the Cash
      Election Price, subject to a pro-ration which will provide that Sandy Spring
      will pay cash for a minimum of 40% and a maximum of 50% of the outstanding
      shares of Company common stock and issue shares of Sandy Spring common stock
      in
      exchange for a minimum of 50% and a maximum of 60% of the outstanding shares
      of
      Company common stock. The merger is intended to be a tax-free reorganization
      as
      to the portion of the merger consideration received as Sandy Spring common
      stock. Outstanding options to purchase Company common stock granted under the
      Company’s equity plans will be automatically converted into fully vested options
      to purchase Sandy Spring common stock, provided that Sandy Spring may offer
      to
      cash out options for a per share payment equal to the difference between the
      Cash Election Price and the per share exercise price of such
      option.





The
      Merger Agreement contains customary representations, warranties and covenants.
      The completion of the merger is subject to customary conditions which include
      the adoption and approval of the merger and the Merger Agreement by the
      stockholders of the Company and the receipt of all required regulatory
      approvals. The Merger Agreement also provides for termination rights and
      penalties for termination of the Merger Agreement under stated circumstances.





Critical
      Accounting Policies





CN
      Bancorp, Inc.’s consolidated financial statements are prepared in accordance
      with accounting principles generally accepted in the United States and follow
      general practices within the industries in which it operates. Application of
      these principles requires management to make estimates, assumptions and
      judgments that affect the amounts reported in the financial statements and
      accompanying notes. These estimates, assumptions and judgments are based on
      information available as of the date of the financial statements; accordingly,
      as this information changes, the financial statements could reflect different
      estimates, assumptions and judgments. Certain policies inherently have a greater
      reliance on the use of estimates, assumptions and judgments and as such have
      a
      greater possibility of producing results that could be materially different
      than
      originally reported. Estimates, assumptions and judgments are necessary when
      assets and liabilities are required to be recorded at fair value, when a decline
      in the value of an asset not carried on the financial statements at fair value
      warrants an impairment write-down or valuation reserve to be established, or
      when an asset or liability needs to be recorded contingent upon a future event.
      Carrying assets and liabilities at fair value inherently results in more
      financial statement volatility. The fair values and the information used to
      record valuation adjustments for certain assets and liabilities are based either
      on quoted market prices or are provided by other third-party sources, when
      available.





The
      most
      significant accounting policies followed by CN Bancorp, Inc. are presented
      in
      Note 1 to the consolidated financial statements. These policies, along with
      the
      disclosures presented in the other financial statement notes and in this
      discussion, provide information on how significant assets and liabilities are
      valued in the financial statements and how those values are determined. Based
      on
      the valuation techniques used and the sensitivity of financial statement amounts
      to the methods, assumptions and estimates underlying those amounts, management
      has identified the determination of the allowance for loan losses as the
      accounting area that requires the most subjective or complex judgments, and
      as
      such could be most subject to revision as new information becomes available.




25





CN
      Bancorp, Inc. believes it has developed appropriate policies and procedures
      for
      assessing the adequacy of the allowance for loan losses, recognizing that this
      process requires a number of assumptions and estimates with respect to its
      loan
      portfolio. CN Bancorp, Inc.’s assessments may be impacted in future periods by
      changes in economic conditions, the impact of regulatory examinations and the
      discovery of information with respect to borrowers which is not known to
      management at the time of the issuance of the consolidated financial statements.
      For additional discussion concerning CN Bancorp, Inc.’s allowance for loan
      losses and related matters, see “ *Provision
      for Loan Losses* ”
      below.





The
      Company has adopted Statement No. 123(R), *Share-Based
      Payment,* as of
      January 1, 2006 which requires that compensation cost related to share-based
      payment transactions be recognized in the financial statements (with limited
      exceptions). The amount of compensation cost is measured based on the grant-date
      fair value of the equity or liability instruments issued. Compensation cost
      is
      recognized over the period that an employee provides service in exchange for
      the
      award. This statement requires the recording of compensation costs for stock
      purchase options awarded, if any. The Company is not required to award options
      under any of these plans. There were no options granted under any of these
      plans
      during 2006. Prior to January 1, 2006, CN Bancorp, Inc. had adopted the
      disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
      No.123 *Accounting
      for Stock-Based Compensation* and SFAS
      No. 148 *Accounting
      for Stock-Based Compensation - Transition and Disclosure* ,
      but
      applied Accounting Principal Board Opinion (APB) No. 25, *Accounting
      for Stock Issued to Employees* and
      related interpretations in accounting for its stock option and stock purchase
      plans.





**FINANCIAL
      CONDITION**




The
      loan
      portfolio comprises the majority of CN Bancorp, Inc.’s earning assets. Loans
      receivable (net of the allowance for loan losses, unearned fees and origination
      costs) increased by $10,406,033 (11.8%) from $88,561,597 at December 31, 2005
      to
      $98,967,630 at December 31, 2006. Loans receivable, net, comprise 61.5% of
      assets ($160,792,498) as of December 31, 2006 and 60.0% of assets ($147,595,842)
      at December 31, 2005.





Residential
      real estate loans, excluding construction loans, increased $1,881,205 (6.4%)
      from $29,306,514 at December 31, 2005 to $31,187,719 at December 31, 2006.
      Commercial real estate loans, excluding construction loans, increased $5,059,539
      (17.2%) from $29,420,805 at December 31, 2005 to $34,480,344 at December 31,
      2006. Real estate construction loans increased by $3,995,487 (92.3%) from
      $4,329,827 at December 31, 2005 to $8,325,314 at December 31, 2006. Commercial
      loans increased by $189,633(0.9%) from $22,366,771 at December 31, 2005 to
      $22,556,404 at December 31, 2006. CN Bancorp, Inc. continued to concentrate
      on
      real estate secured lending for predominately owner-occupied properties as
      well
      as commercial loans. Consumer loans decreased by $501,130 (12.7%) from
      $3,948,754 at December 31, 2005 to $3,447,624 at December 31, 2006.





The
      allowance for loan losses was $1,010,000 (1.01% of loans) at December 31, 2006.
      The allowance was $864,000 (0.97% of loans) at December 31, 2005. At December
      31, 2006, non-accrual loans totaled $40,000 as compared to $62,332 at December
      31, 2005. Loans charged off in 2006 totaled $35,210 as compared to $140,728
      during 2005. Recoveries on charged off loans were $18,294 during 2006 as
      compared to $20,418 in 2005.





During
      2003, the Bank sold loan participations to family members of a director of
      the
      Bank and the Company on a non-recourse basis. Under these transactions, the
      family members acquired undivided percentage interests in specific loans held
      by
      the Bank. The participations were sold under the same terms and conditions
      as
      loan participations sold to non-related entities. The total amount of the loan
      participations sold was $2,058,741. The total loan participation amount
      outstanding at December 31, 2006 and December 31, 2005 was $601,950 and
      $673,026, respectively.





The
      securities portfolio at December 31, 2006 amounted to $24,814,135, a decrease
      of
      $8,003,243, or 24.4% from the amount at December 31, 2005. Funds obtained
      through security repayments were invested primarily in overnight funds and
      loans. Available for sale investment securities decreased to $16,278,622 at
      December 31, 2006 from $23,881,126 at December 31, 2005. Held to maturity
      securities decreased  to
      $7,741,713 at December 31, 2006 from $8,162,452 at December 31, 2005. The
      carrying value of available for sale securities includes net unrealized losses
      of $303,986 at December 31, 2006 (reflected as unrealized losses of $186,617
      in
      stockholders’ equity after deferred taxes) as compared to net unrealized losses
      of $455,320 ($279,521 net of taxes) as of December 31, 2005. Unrealized losses
      (and unrealized gains) are the result of interest rate levels differing from
      those existing at the time of securities’ acquisition and, as to mortgage backed
      securities, actual and estimated prepayment speeds. These unrealized losses
      are
      considered temporary as they reflect fair values on December 31, 2006 and 2005
      and are subject to change daily as interest rates fluctuate. CN Bancorp has
      the
      intent and the ability to hold the securities to the maturity of the securities
      or the time required for the value of the securities to equal or exceed their
      cost.




26





Deposits
      are the major source of funds for lending and investment activities. Deposits
      increased $11,578,741 (9.1%) to $138,663,177 at December 31, 2006 from
      $127,084,436 at December 31, 2005. Non-interest bearing deposits increased
      0.7%,
      savings deposits increased 13.2%, interest bearing demand deposits decreased
      7.2% and certificates of deposit increased 21.1% during the year ended December
      31, 2006. Included in the December 31, 2006 and 2005 savings deposits are two
      savings accounts of related customers with total balances of approximately
      $8
      million.





Total
      stockholders’ equity was $20,692,366 at December 31, 2006 representing an
      increase of $1,595,787 from December 31, 2005. The increase from December 31,
      2005 was attributable to the proceeds from the sale of stock under the Dividend
      Reinvestment and Stock Purchase Plan of $196,790, proceeds of $508,310 from
      sales of stock in connection with warrants being exercised, earnings of
      $1,401,268, a decrease in unrealized losses on available for sale investment
      securities of $92,904 less dividends of $603,485 ($0.35 per share).





At
      December 31, 2006, we continued to exceed all regulatory capital requirements
      to
      be considered a “well capitalized” financial institution under federal
      regulations.





**RESULTS
      OF OPERATIONS**





*Net
      income*





Net
      income for the year ended December 31, 2006 was $1,401,268, an increase of
      $316,961, or 29.2%, from $1,084,307 during 2005. Net income increased in 2006
      as
      compared to 2005 because increases in net interest income and non-interest
      income exceeded increases in operating expenses. Net interest income increased
      by 19.4% and non-interest income increased 2.6% during 2006 versus 2005 while
      operating expenses increased by 11.3% during the same period. Net income was
      adversely affected during 2006 by merger related expenses in the amount of
      $150,000. These efforts resulted in the execution of a merger agreement during
      December 2006.





CN
      Bancorp, Inc.’s return on average equity was 6.96% in 2006 and 6.54% in 2005 as
      net income increased as market interest rates increased in 2006, the Company
      is
      operating more efficiently and utilizing the capital raised in late 2004. The
      return on average assets was 0.92% in 2006 and 0.74% in 2005.





*Net
      Interest Income and Net Interest Margin*





Net
      interest income is the amount by which interest earned on assets exceeds the
      interest paid on interest-bearing liabilities. CN Bancorp, Inc.’s principal
      interest earning assets are loans to businesses and individuals.
      Interest-bearing liabilities consist primarily of savings accounts, money market
      accounts and certificates of deposit. Generally, changes in net interest income
      are measured by net interest rate spread and net interest margin. Net interest
      rate spread is equal to the difference between the average rate earned on
      interest-earning assets and the average rate incurred on interest-bearing
      liabilities. Net interest margin represents the difference between interest
      income (including net loan fees earned) and interest expense calculated as
      a
      percentage of average earning assets.





Total
      interest income increased by $1,890,432 or 26.6% to $8,981,348 for the year
      ended December 31, 2006 as compared to 2005. This increase was primarily
      attributable to the increase in market interest rates and the increase in
      interest bearing assets during 2006. Average interest earning assets increased
      by $6,222,000 to $141,453,000 in 2006 and the yield on the interest earning
      assets increased to 6.35% in 2006 from 5.24% in 2005.





Interest
      expense increased by $893,187 or 45.8% to $2,843,309 for the year ended December
      31, 2006 as compared to 2005. This increase was primarily attributable to the
      rising market interest rates during 2006 and the increase in interest bearing
      liabilities during 2006. Average interest bearing liabilities increased by
      $2,526,000 to $94,165,000 in 2006 and the cost of the interest bearing funds
      increased to 3.02% in 2006 from 2.13% in 2005.





Net
      interest income increased by $997,245, or 19.4%, during 2006 as compared to
      2005. Net interest income increased because the average balance of interest
      earning assets increased more than the interest bearing liabilities. The net
      interest spread was 3.33% in 2006 as compared to 3.12% in 2005 due to interest
      rates on interest bearing assets increasing at a faster rate than rates on
      interest bearing liabilities. The net interest margin was 4.34% in 2006 and
      3.80% in 2005.




27





The
      tables below present a summary of CN Bancorp, Inc.’s average daily balances,
      rates, interest income and expense, the interest rate spread and net interest
      margins for the years ended December 31, 2006 and 2005.





**AVERAGE
                BALANCES, RATES AND INTEREST INCOME AND
                EXPENSE**




**Years
                Ended December 31,***(in
                thousands)*
            
            
            
            **2006**
            
            
            
            
            
            **2005****Average**
            
            
            
            **Yield/**
            
            **Average**
            
            
            
            **Yield/****Balance**
            
            **Interest**
            
            **Rate**
            
            **Balance**
            
            **Interest**
            
            **Rate****Assets:****Interest-Earning
                Assets:**Federal
                funds sold
            
            $
            14,995
            
            $
            757
            
            
            5.05
            %
            $
            12,285
            
            $
            405
            
            
            3.30
            %Interest
                bearing deposits
            
            
            2,330
            
            
            94
            
            
            4.03
            %
            
            3,282
            
            
            94
            
            
            2.86
            %Investment
                securities
            
            
            29,821
            
            
            1,076
            
            
            3.61
            %
            
            36,086
            
            
            1,162
            
            
            3.22
            %Loans
                receivable
            
            
            95,257
            
            
            7,054
            
            
            7.41
            %
            
            84,411
            
            
            5,430
            
            
            6.43
            %Allowance
                for loan losses
            
            
            (950
            )
            
            -
            
            
            -
            
            
            (833
            )
            
            -
            
            
            -94,307
            
            
            7,054
            
            
            7.48
            %
            
            83,578
            
            
            5,430
            
            
            6.50
            %**Total
                Interest Earning Assets**
            
            
            141,453
            
            
            8,981
            
            
            6.35
            %
            
            135,231
            
            
            7,091
            
            
            5.24
            %Non-interest
                earning assets
            
            
            11,077
            
            
            
            
            
            
            
            
            10,964**Total
                Assets**
            
            $
            152,530
            
            
            
            
            
            
            
            $
            146,195**Liabilities
                and Stockholders' Equity:****Interest
                -Bearing Liabilities:**Interest
                bearing demand deposits
            
            $
            16,997
            
            $
            161
            
            
            0.95
            %
            $
            14,584
            
            $
            93
            
            
            0.64
            %Savings
                accounts
            
            
            40,068
            
            
            1,302
            
            
            3.25
            %
            
            40,310
            
            
            816
            
            
            2.02
            %Time
                deposits
            
            
            36,475
            
            
            1,372
            
            
            3.76
            %
            
            35,247
            
            
            1,029
            
            
            2.92
            %Securities
                sold under agreementsto
                repurchase
            
            
            625
            
            
            8
            
            
            1.28
            %
            
            1,498
            
            
            12
            
            
            0.80
            %**Total
                Interest Bearing Liabilities**
            
            
            94,165
            
            
            2,843
            
            
            3.02
            %
            
            91,639
            
            
            1,950
            
            
            2.13
            %**Non-interest
                Bearing Liabilities:**Demand
                deposits
            
            
            37,187
            
            
            
            
            
            
            
            
            37,329Other
            
            
            1,039
            
            
            
            
            
            
            
            
            652**Total
                Liabilities**
            
            
            132,391
            
            
            
            
            
            
            
            
            129,620Stockholders'
                equity
            
            
            20,139
            
            
            
            
            
            
            
            
            16,575**Total
                Liabilities and Equity**
            
            $
            152,530
            
            
            
            
            
            
            
            $
            146,195Net
                Interest Income
            
            
            
            
            $
            6,138
            
            
            
            
            
            
            
            $
            5,141Net
                Interest Spread
            
            
            
            
            
            
            
            
            3.33
            %
            
            
            
            
            
            
            
            3.11
            %Net
                Interest Margin
            
            
            
            
            
            
            
            
            4.34
            %
            
            
            
            
            
            
            
            3.80
            %Ratio
                of Interest-Earning AssetsTo
                Interest-Bearing Liabilities
            
            
            150.22
            %
            
            
            
            
            
            
            
            147.57
            %




*Yields
      on securities are calculated based on amortized cost.*


*Nonaccruing
      loans are included in the average loan balances outstanding.*





The
      tables below present the relative contribution of changes in volumes and changes
      in rates to the changes in net interest income for 2006 and 2005. The change
      in
      the interest income and interest expense attributable to the combined impact
      of
      both volume and rate has been allocated proportionately to the change due to
      volume and the change due to rate.




28





**RATE/VOLUME
                ANALYSIS**




**2006
                vs. 2005**
            
            **2005
                vs. 2004****Increase
                (Decrease)**
            
            **Increase
                (Decrease)****Volume**
            
            **Rate**
            
            **Total**
            
            **Volume**
            
            **Rate**
            
            **Total****Interest-Earning
                Assets:**Federal
                funds and interest bearingdeposits
                with banks
            
            $
            62,154
            
            $
            289,391
            
            $
            351,545
            
            $
            (8,432
            )
            $
            270,072
            
            $
            261,640Securities
            
            
            (206,510
            )
            
            121,180
            
            
            (85,330
            )
            
            156,622
            
            
            47,028
            
            
            203,650Loans
                receivable
            
            
            706,749
            
            
            917,468
            
            
            1,624,217
            
            
            555,677
            
            
            355,646
            
            
            911,323**Net
                Change in Interest Income**
            
            
            562,393
            
            
            1,328,039
            
            
            1,890,432
            
            
            703,867
            
            
            672,746
            
            
            1,376,613**Interest
                Bearing Liabilities:**Interest
                bearing deposits
            
            
            3,160
            
            
            894,134
            
            
            897,294
            
            
            133,086
            
            
            578,330
            
            
            711,416Note
                payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Securities
                sold under agreementsto
                repurchase
            
            
            (6,950
            )
            
            2,843
            
            
            (4,107
            )
            
            (4,975
            )
            
            680
            
            
            (4,295
            )**Net
                Change in Interest Expense**
            
            
            (3,790
            )
            
            896,977
            
            
            893,187
            
            
            128,111
            
            
            579,010
            
            
            707,121**Change
                in Net Interest Income**
            
            $
            566,183
            
            $
            431,062
            
            $
            997,245
            
            $
            575,756
            
            $
            93,736
            
            $
            669,492





*Provision
      for Loan Losses*




The
      provision for loan losses represents the amount charged against earnings to
      increase the allowance for loan losses to the level deemed appropriate by
      management. The provision for loan losses and the allowance for loan losses
      are
      based on management’s ongoing assessment of CN Bancorp, Inc.’s credit exposure
      and consideration of certain other relevant factors.





The
      adequacy of the allowance for loan losses is evaluated based upon loan
      categories except for loans rated substandard, doubtful or loss, which are
      evaluated separately and assigned loss amounts based upon the evaluation. Loss
      ratios are applied to each category of loan to determine estimated loss amounts.
      Categories of loans are identified as consumer (secured and unsecured),
      commercial (secured and unsecured) and mortgage loans (residential and
      commercial real estate). Loss ratios are determined based upon losses incurred
      adjusted for the effect of current economic conditions (currently
      strengthening), any industry concentration or identified weakness in an industry
      (none currently), credit management and underwriting policies changes and
      secured versus unsecured nature of loan category.





At
      December 31, 2006, the range of the loss ratios used to determine estimated
      losses by loan category were: consumer loans - 1.55% to 2.10%; commercial loans
      - 1.16% to 1.96%; and mortgage loans - 0.30% to 1.05%. Additional losses are
      estimated resulting from additional identified risks factors, such as loans
      with
      underwriting exceptions, the level and direction of payment delinquencies and
      the level of unsecured credit. These additional loss estimates are not allocated
      to the separate loan categories.





The
      adequacy of the allowance for loan losses is reviewed at least quarterly. Loans
      are assigned a risk rating based upon rating criteria consistent with regulatory
      definitions. The risk rating is adjusted, as necessary, if loans become
      delinquent, if significant adverse information is discovered regarding the
      underlying credit and, in the case of commercial loans and commercial real
      estate loans, the normal periodic review of the underlying credit indicate
      that
      a change in risk rating is appropriate. An estimated “low” and “high” loss
      percentage is applied to loans in each risk rating. These loss percentages
      increase as the loan risk rating increases. Loans rated as substandard, doubtful
      or loss are evaluated separately and assigned loss amounts based upon the
      separate evaluation. Risks factors identified beyond individual loan risks,
      such
      as economic conditions, underwriting exceptions and loan concentrations are
      quantified based upon management’s estimations of loss exposure. Loss
      percentages used are generally based upon management’s best estimates
      considering losses incurred. Estimated “low” and “high” allowance for loan loss
      amounts are derived by accumulating the estimated losses using the “low” and
“high” loss percentages for each risk rating and adding losses based upon
      separate loan evaluations and identified other risks. The actual allowance
      for
      loan losses is compared to this range to ascertain that it is reasonably
      situated within the range. During 2006, there were no significant changes in
      estimation methods or assumptions that affected the methodology for assessing
      the appropriateness of the allowance. In addition, on at least a quarterly
      basis, the recorded allowance for loan losses (as a percent of loans) is
      compared to peer group levels to ascertain the reasonableness of the
      estimate.




29





At
      December 31, 2006, the “low” and “high” allowance determination resulted in a
“low” allowance of .81% of loans and a “high” allowance of 1.11% of loans. The
      actual allowance for loan losses was 1.01% of loans.





The
      provision for loan losses was $162,916 during the year ended December 31, 2006
      as compared to $184,310 for the year ended December 31, 2005, an 11.6% decrease.
      The decrease in provision for loan losses reflects the decrease in loan losses
      incurred during 2006 as well as the general low level of losses experienced
      during the last several years.





The
      allowance for loan losses represents 1.01% and 0.97% of loans receivable at
      December 31, 2006 and December 31, 2005, respectively. CN Bancorp, Inc. has
      no
      exposure to foreign countries or foreign borrowers. Management believes that
      the
      allowance for loan losses is adequate for each period presented.





The
      table
      below sets forth the period end loans receivable balances and summarizes CN
      Bancorp, Inc.’s loan loss experience for the periods presented as well as
      certain ratios related to net charge-offs and the allowance for loan losses
      as a
      percent of the total loan portfolio.




**Year
                Ended December 31,****2006**
            
            **2005****Allowance
                for loan losses:**Beginning
                balance
            
            $
            864,000
            
            $
            800,000Charge-offs:Mortgage
                loans
            
            
            -
            
            
            (50,027
            )Commercial
                loans
            
            
            (6,665
            )
            
            -Consumer
                loans
            
            
            (28,545
            )
            
            (90,701
            )(35,210
            )
            
            (140,728
            )Recoveries:Commercial
                loans
            
            
            6,665
            
            
            10,938Consumer
                loans
            
            
            11,629
            
            
            9,48018,294
            
            
            20,418Net
                charge-offs
            
            
            (16,916
            )
            
            (120,310
            )Provision
                for loan losses
            
            
            162,916
            
            
            184,310Ending
                balance
            
            $
            1,010,000
            
            $
            864,000**Ratios:**Net
                charge-offs to average loans
            
            
            0.02
            %
            
            0.14
            %Net
                charge-offs to provision for loan losses
            
            
            10.38
            %
            
            65.28
            %Allowance
                for loan losses to loans receivable
            
            
            1.01
            %
            
            0.97
            %





The
      table
      below presents information regarding non-performing loans at December 31, 2006
      and 2005.





**NON-PERFORMING
                LOANS**




**December
                31,**
            
            **December
                31,****2006**
            
            **2005**Non-accruing
                loans
            
            $
            40,000
            
            $
            62,332Accruing
                loans past due 90 days or longer
            
            
            -
            
            
            -Total
                non-performing loans
            
            $
            40,000
            
            $
            62,332Non-accruing
                loans:Interest
                  income not recorded on non-accruing loans
            
            $
            2,300
            
            $
            3,646Interest
                  income included in net incomefor period on non-accruing loans
                  collections
            
            
            -
            
            
            -Ratios:Non-performing
                loans to total loans
            
            
            0.04
            %
            
            0.07
            %Non-performing
                loans to total assets
            
            
            0.02
            %
            
            0.04
            %Allowance
                  for loan losses to non-performing loans
            
            
            2,525.00
            %
            
            1,386.13
            %Commitments
                  to lend additional funds tonon-performing loan
                  customers
            
            
            -
            
            
            -Restructured
                loans:
            
            
            None
            
            
            None




30





The
      table
      below illustrates the estimated breakdown of the allowance for loan losses
      as
      allocated to various segments of the loan portfolio.




**ALLOWANCE
                  FOR LOAN LOSSES BY CATEGORY****December
                31, 2006**
            
            **December
                31, 2005****Allocated
                Allowance****Amount**
            
            **%
                of Loans in each Category to Total Loans****Receivable**
            
            **Allocated
                Allowance****Amount**
            
            **%
                of Loans in each Category to Total Loans****Receivable***(In
                thousands)*Consumer
                loans
            
            $
            115
            
            
            3.4
            %
            $
            95
            
            
            4.4
            %Home
                Equity loans
            
            
            24
            
            
            11.1
            %
            
            26
            
            
            11.8
            %Real
                estate loans
            
            
            448
            
            
            62.9
            %
            
            284
            
            
            58.8
            %Commercial
                loans
            
            
            375
            
            
            22.6
            %
            
            348
            
            
            25.0
            %Unallocated
                to loan type
            
            
            48
            
            
            
            
            
            111$
            1,010
            
            
            100.0
            %
            $
            864
            
            
            100.0
            %





*Non-interest
      Income*





Non-interest
      income consisted primarily of fees and charges from depository accounts,
      increases in cash surrender value of life insurance policies, gains on sale
      of
      assets and other income. Non-interest income increased $31,142 or 2.6%, to
      $1,209,963 for the year ended December 31, 2006 as compared to $1,178,821 during
      2005. This increase was primarily attributable to the increase in overdraft
      fees, continued increases in the number of customer accounts, usage of debit
      cards by customers and the use of owned ATM machines by non-customers. Also
      contributing to the increase in non-interest income was a $25,000 gain on the
      sale of foreclosed personal property and the increase in earnings on owned
      life
      insurance policies of $9,951 or 11.3% resulting from the higher interest rate
      environment during 2006 and additional investment in life insurance policies.
      These increases were partially offset by the lack of any gain on sales of loans
      during 2006, compared to a gain on sale of loans of $35,437 during 2005. The
      sale of loans is not a usual activity for the Company.




*Non-interest
      Expense*





Non-interest
      expense was $4,989,643 during the year ended December 31, 2006 representing
      an
      increase of $505,615 or 11.3%, as compared to $4,484,028 during 2005. The
      expense category comprising the largest changes in 2006 as compared to 2005
      were: increase in compensation and related benefits of $223,508 (9.3%); increase
      in occupancy expenses of $32,645 (7.5%); increase in marketing and advertising
      expenses of $55,880 (75.0%); the decrease in depreciation and amortization
      expenses of $32,345 (9.4%); the increase in directors’ fees of $17,330 (18.0%);
      and, merger related activities expenses of $150,000 in 2006 (none in 2005).
      The
      increase in compensation and benefits resulted from normal salary increases
      and
      increased benefit costs. Occupancy costs increased because of higher energy
      costs and normal rent increases. Marketing expenses rose during 2006 as the
      Company increased its image advertising efforts. Depreciation and amortization
      expense declined as more assets were fully amortized during 2006 and 2005.
      Directors’ fees increased reflecting merger efforts. Merger related activities
      expenses are comprised primarily of legal fees relating to review and
      negotiations of merger proposals and the final agreement to merge.





*Income
      Taxes*





Income
      tax expense was $794,175 (36.2% of pre-tax income) for the year ended December
      31, 2006 as compared to $566,970 (34.3% of pre-tax income) for 2005. The
      increase in the effective tax rate in 2006 versus 2005 reflects the
      non-deductibility of $67,000 of merger related expenses and higher state income
      taxes, as the amount of state tax-exempt interest income became a smaller
      portion of income before income taxes.




31





**ASSET/LIABILITY
      MANAGEMENT**





A
      principal objective of CN Bancorp, Inc.’s asset/liability management policy is
      to minimize exposure to changes in interest rates by an ongoing review of the
      maturity and re-pricing of interest-earning assets and interest-bearing
      liabilities. The asset/liability committee and the executive committee of the
      board of directors of County National Bank oversee this review.





The
      executive committee establishes policies to control interest rate sensitivity.
      Interest rate sensitivity is the volatility of a bank’s earnings resulting from
      movements in the market interest rates. Management monitors rate sensitivity
      in
      order to reduce vulnerability to interest rate fluctuations while maintaining
      adequate capital levels and acceptable levels of liquidity. Monthly financial
      reports provide management with information to evaluate and manage rate
      sensitivity and adherence to policy. CN Bancorp, Inc.’s asset/liability policy’s
      goal is to manage assets and liabilities in a manner that stabilizes net
      interest income and net economic value within a broad range of interest rate
      environments. Adjustments to the mix of assets and liabilities are made
      periodically in an effort to achieve dependable, steady growth in net interest
      income regardless of the behavior of interest rates in general.





As
      part
      of the interest rate risk sensitivity analysis, the asset/liability committee
      examines the extent to which CN Bancorp, Inc.’s assets and liabilities are
      interest rate sensitive and monitors the interest rate sensitivity gap. An
      interest rate sensitive asset or liability is one that, within a defined time
      period, either matures or experiences an interest rate change in line with
      general market rates. The interest rate sensitivity gap is the difference
      between interest-earning assets and interest-bearing liabilities scheduled
      to
      mature or re-price within such time period. A gap is considered positive when
      the amount of interest rate sensitive assets exceeds the amount of interest
      rate
      sensitive liabilities. A gap is considered negative when the amount of interest
      rate sensitive liabilities exceeds the interest rate sensitive assets. During
      a
      period of rising interest rates, a negative gap would tend to adversely affect
      net interest income, while a positive gap would tend to result in an increase
      in
      net interest income. During a period of declining interest rates, a negative
      gap
      would tend to result in an increase in net interest income, while a positive
      gap
      would tend to adversely affect net interest income. If re-pricing of assets
      and
      liabilities were equally flexible and moved concurrently, the impact of any
      increase or decrease in interest rates on net interest income would be
      minimal.





CN
      Bancorp, Inc. currently has a negative gap over the short term, which suggests
      that the net yield on interest bearing assets and liabilities may decrease
      during periods of rising interest rates. However, a simple interest rate “gap”
analysis by itself may not be an accurate indicator of how net interest income
      will be affected by changes in interest rates. Income associated with
      interest-earning assets and costs associated with interest-bearing liabilities
      may not be affected uniformly by changes in interest rates. In addition, the
      magnitude and duration of changes in interest rates may have a significant
      impact on net interest income. Although certain assets and liabilities may
      have
      similar maturities or periods of re-pricing, they may react in different degrees
      to changes in market interest rates. Interest rates on certain types of assets
      and liabilities fluctuate in advance of changes in general market interest
      rates, while interest rates on other types may lag behind changes in general
      market rates. In the event of a change in interest rate, prepayment and early
      withdrawal levels also could deviate significantly from those assumed in
      calculating the interest-rate gap. The ability of many borrowers to service
      their debts also may decrease in the event of an interest rate
      increase.





The
      table
      below presents CN Bancorp, Inc.’s interest rate sensitivity at December 31,
      2006. The table is based upon the earlier of the assets and liabilities
      re-pricing date or their maturity date.




32


**RATE
        SENSITIVITY ANALYSIS**




**December
                  31, 2006****0-3**
            
            **4-6**
            
            **7-12**
            
            **>1&<5*****(in
                thousands)***
            
            **Months**
            
            **Months**
            
            **Months**
            
            **Years**
            
            **5
                YRS +**
            
            **Total****Assets**Loans
            
            $
            32,623
            
            $
            5,459
            
            $
            8,935
            
            $
            46,749
            
            $
            6,212
            
            $
            99,978Securities,
                at cost
            
            
            1,000
            
            
            711
            
            
            5,875
            
            
            15,262
            
            
            1,476
            
            
            24,324Federal
                funds sold
            
            
            23,613
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            23,613Interest
                bearing deposits
            
            
            1,891
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,891Bank-owned
                life insurance
            
            
            2,698
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,698Total
            
            
            61,825
            
            
            6,170
            
            
            14,810
            
            
            62,011
            
            
            7,688
            
            
            152,504






**December
                31, 2006***Continued*
            
            
            **0-3**
            
            
            **4-6**
            
            
            **7-12**
            
            
            **>1&<5*****(in
                thousands)***
            
            
            **Months**
            
            
            **Months**
            
            
            **Months**
            
            
            **Years**
            
            
            **5
                YRS +**
            
            
            **Total****Liabilities**Savings/MoneyMarket/NOW
            
            
            60,128
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            60,128Certificates
                of deposit
            
            
            7,767
            
            
            7,423
            
            
            10,457
            
            
            14,941
            
            
            -
            
            
            40,588Repurchase
                agreements
            
            
            291
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            291Total
            
            
            68,186
            
            
            7,423
            
            
            10,457
            
            
            14,941
            
            
            -
            
            
            101,007**GAP:**Period
            
            $
            (6,361
            )
            
            (1,253
            )
            
            4,353
            
            
            47,070
            
            
            7,688
            
            $
            51,497Cumulative
            
            
            
            
            $
            (7,614
            )
            $
            (3,261
            )
            $
            43,809
            
            $
            51,497




**LIQUIDITY**





Liquidity
      represents CN Bancorp, Inc.’s ability to efficiently manage cash flows to
      support the lending activities and the requirements of depositors. Liquidity
      is
      essential to fund fluctuations in the balance sheet and provide funds for
      growth. Liquidity needs may be met by converting assets into cash or obtaining
      sources of additional funding.





Liquidity,
      which generally is maintained in cash and amounts due from banks and federal
      funds sold, totaled $27,410,288 at December 31, 2006 compared to $15,476,898
      at
      December 31, 2005. Additional sources of asset liquidity include funds held
      in
      time deposits, cash flow from operations and the investment and loan portfolios.
      Liquidity needs may also be met by selling securities available for sale,
      selling loans, raising additional capital or borrowing funds. Securities
      classified as available-for-sale, which can provide additional sources of
      liquidity, totaled $16,278,622 and $23,881,126 as of December 31, 2006 and
      December 31, 2005, respectively. However, because most of these securities
      were
      in an unrealized loss position at December 31, 2006, and because management
      has
      the intent and ability to hold these securities until recovery or maturity,
      management does not consider the sale of these securities to be a source of
      liquidity at December 31, 2006.





Potential
      liability liquidity sources include our ability to attract additional deposits
      at competitive interest rates. In addition, CN Bancorp, Inc. has established
      a
      $1.5 million unsecured federal funds borrowing facility and a $15 million
      secured borrowing facility with a correspondent commercial bank as a reliable
      source for short-term funds. Borrowings under the secured facility would be
      collateralized by securities in the investment portfolio. CN Bancorp, Inc.
      has
      never borrowed funds under this facility.





Management
      believes that CN Bancorp, Inc. has sufficient liquidity to meet its needs.
      Maturing certificates of deposit are usually retained as we offer competitive
      rates on certificates of deposit. Management is not aware of any known trends,
      events or uncertainties that will have or are reasonably likely to have a
      material effect on our liquidity, capital or operations, nor are we aware of
      any
      current recommendation by regulatory authorities, which if implemented, would
      have a material effect on liquidity, capital or operations.




33





CN
      Bancorp, Inc. is a single bank holding company with no current business
      operations other than managing its investment in County National Bank, investing
      in loan participations from County National Bank and holding cash. CN Bancorp,
      Inc. pays its expenses from cash received from its loan participation portfolio,
      stock sales and from dividends, if any, from County National Bank. County
      National Bank may only pay dividends to CN Bancorp, Inc. if it complies with
      certain regulatory requirements.





**CAPITAL
      ADEQUACY**





The
      Company and the Bank are required to maintain capital ratios in accordance
      with
      guidelines adopted by the federal banking regulators. These guidelines are
      commonly known as Risk Based Capital Guidelines. Under these guidelines, banks
      are rated as “well capitalized,” “adequately capitalized,” “undercapitalized,”
“significantly undercapitalized” or “critically undercapitalized” based upon its
      capital levels. Banks that are classified as undercapitalized,” “significantly
      undercapitalized” or “critically undercapitalized” are subject to increased
      regulatory oversight.





Risk-based
      capital standards require a bank to have Tier 1 capital of at least 4% and
      total
      capital (including Tier 1 capital) of at least 8% of risk-weighted assets to
      be
      considered “adequately capitalized.” The standards require a bank to have Tier 1
      capital of at least 6% and total capital (including Tier 1 capital) of at least
      10% of risk-weighted assets to be considered “well capitalized.” Tier 1 capital
      includes common stockholders’ equity, plus the net unrealized depreciation (or
      less the unrealized net appreciation) on securities available for sale, net
      of
      tax, less intangible assets.





The
      table
      below compares the Company’s and the Bank’s risk-based capital ratios and
      leverage ratio to the minimum regulatory requirements for the indicated
      periods.





**RISK-BASED
                CAPITAL RATIOS**




**Minimum
                Ratios****December
                31,**
              **2006**
            
            **December
                31,**
              **2005**
            
            **To
                be “Adequately Capitalized”**
            
            **To
                be “Well Capitalized”**Total
                capital:Company
            
            
            20.5
            %
            
            20.8
            %
            
            8.0
            %
            
            N/ABank
            
            
            14.2
            %
            
            13.6
            %
            
            8.0
            %
            
            10.0
            %Tier
                ICompany
            
            
            19.5
            %
            
            19.9
            %
            
            4.0
            %
            
            N/ABank
            
            
            13.2
            %
            
            12.7
            %
            
            4.0
            %
            
            6.0
            %Leverage
                TotalCompany
            
            
            13.1
            %
            
            12.9
            %
            
            4.0
            %
            
            N/ABank
            
            
            8.5
            %
            
            8.0
            %
            
            4.0
            %
            
            5.0
            %





At
      December 31, 2006 and 2005, CN Bancorp, Inc. exceeded the capital requirements
      necessary to be considered a “well capitalized” financial institution under
      federal regulations.





**EFFECTS
      OF INFLATION**





CN
      Bancorp, Inc.’s asset and liability structure is primarily monetary in nature.
      As such, asset and liability values tend to move in concert with inflation.
      Changes in interest rates may have a more significant impact on financial
      performance than the effects of the general levels of inflation. Interest rates
      do not necessarily move in the same direction or at the same magnitude as prices
      of other goods and services, and may frequently reflect government policy
      initiatives or economic factors not measured by price index. CN Bancorp, Inc.
      strives to manage its interest sensitive assets and liabilities in order to
      offset the effects of rate changes and inflation.




34





**OFF-BALANCE
      SHEET ARRANGEMENTS**





Standby
      letters of credit are conditional commitments issued by County National 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 to customers. County National Bank holds collateral
      supporting those commitments for which collateral is deemed necessary. County
      National Bank has not been required to perform on any financial guarantees
      and
      has not incurred any losses on its commitments. The issuance of letters of
      credit is not a significant activity of County National Bank. Outstanding
      letters of credit at December 31, 2006 total $2,002,067 ($1,960,855 at December
      31, 2005).





Commitments
      to extend credit are agreements to lend funds to customers as long as there
      are
      no violations of any condition established in the loan contracts. Commitments
      generally have fixed expiration dates or other termination clauses and may
      require payment of a fee. Since many of the commitments are expected to expire
      without being drawn upon, the total commitment amounts do not necessarily
      represent future cash requirements. The Bank evaluates each customer’s credit
      worthiness on a case-by-case basis. The amount of collateral obtained, if it
      is
      deemed necessary by County National Bank upon extension of credit, is based
      on
      management’s credit evaluation of the customer. Collateral held varies but may
      include real estate (commercial and consumer property), accounts receivable,
      inventory, plant and equipment as well as income producing properties.
      Commitments to extend credit total $12,226,451 at December 31, 2006 ($14,822,411
      at December 31, 2005). We believe that we have adequate resources to fund all
      loan commitments.





County
      National Bank has entered into leases for its branches and office space, most
      of
      which contain renewal options. The minimum net noncancelable future rental
      commitments at December 31, 2006 were as follows:





**Year
                Ending****December
                31,**2007
            
            $
            255,1202008
            
            
            200,0642009
            
            
            172,7042010
            
            
            172,7042011
            
            
            78,704





With
      the
      exception of the foregoing, the Company has no off-balance sheet arrangements,
      as defined, that have or are reasonably likely to have, a current or future
      effect on its financial condition, changes in financial condition, revenues
      or
      expenses, results of operations, liquidity, capital expenditures or capital
      resources that are material to investors.





**Item
      7. Financial Statements**




35





*Letterhead*





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








The
      Board
      of Directors and Stockholders


CN
      Bancorp, Inc.


Glen
      Burnie, Maryland





We
      have
      audited the accompanying consolidated statement of financial condition of CN
      Bancorp, Inc. and Subsidiary as of December 31, 2006, and the related
      consolidated statements of operations, comprehensive income, stockholders'
      equity, and cash flows for the year then ended. These financial statements
      are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these financial statements based on our audit. The financial
      statements of CN Bancorp, Inc. and Subsidiary as of December 31, 2005, were
      audited by other auditors whose report dated January 20, 2006, expressed an
      unqualified opinion on those statements.





We
      conducted our audit in accordance with standards of the Public Company
      Accounting Oversight Board in the United States of America. Those standards
      require that we plan and perform the audit to obtain reasonable assurance about
      whether the financial statements are free of material misstatement. We were
      not
      engaged to perform an audit of the Company's internal control over financial
      reporting. Our audit included consideration of internal control over financial
      reporting as a basis for designing audit procedures that are appropriate in
      the
      circumstances, but not for the purpose of expressing an opinion on the
      effectiveness of the Company's internal control over financial reporting.
      Accordingly, we express no such opinion. An audit also includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audit provides a reasonable basis for our
      opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of CN Bancorp, Inc. and Subsidiary
      as
      of December 31, 2006, and the results of its operations and its cash flows
      for the year then ended in conformity with accounting principles generally
      accepted in the United States of America.








/s/Rowles
      & Company, LLP





Baltimore,
      Maryland


January
      25, 2007




36





*Letterhead*





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Stockholders and Board of Directors


CN
      Bancorp, Inc.


Glen
      Burnie, Maryland





We
      have
      audited the accompanying consolidated statements of financial condition of
      CN
      Bancorp, Inc. and Subsidiary, as of December 31, 2005 and 2004, and the related
      consolidated statements of operations, comprehensive income, stockholders’
equity and cash flows for the years then ended. These consolidated financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Accordingly, we express no such
      opinion. An audit also includes examining, on a test basis, evidence supporting
      the amounts and disclosures in the consolidated financial statements, assessing
      the accounting principles used and significant estimates made by management,
      as
      well as evaluating the overall consolidated financial statement presentation.
      We
      believe that our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of CN Bancorp, Inc. and
      Subsidiary, as of December 31, 2005 and 2004 and the consolidated results of
      their operations and their cash flows for the years then ended in conformity
      with accounting principles generally accepted in the United States of
      America.








/s/
      Beard
      Miller Company LLP





Baltimore,
      Maryland


January
      20, 2006




37





**CN
      BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION**


**December
      31, 2006 and 2005**





**2006**
            
            **2005****ASSETS**Cash
                and due from banks
            
            $
            3,797,606
            
            $
            4,214,570Federal
                funds sold
            
            
            23,612,682
            
            
            11,262,328Cash
                and cash equivalents
            
            
            27,410,288
            
            
            15,476,898Interest
                bearing deposits
            
            
            1,890,666
            
            
            2,884,893Investment
                securities - available for sale (Note 2)
            
            
            16,278,622
            
            
            23,881,126Investment
                securities - held to maturity (Note 2)
            
            
            7,741,713
            
            
            8,162,452Other
                securities (Note 2)
            
            
            793,800
            
            
            773,800Loans
                receivable, net of allowance for loan losses of $1,010,000in
                2006 and $864,000 in 2005 (Note 3)
            
            
            98,967,630
            
            
            88,561,597Property,
                equipment and leasehold improvements, net (Note 4)
            
            
            3,685,217
            
            
            3,914,253Cash
                surrender value of life insurance policies
            
            
            2,698,392
            
            
            2,600,679Other
                assets
            
            
            1,326,170
            
            
            1,340,144Total
                Assets
            
            $
            160,792,498
            
            $
            147,595,842**LIABILITIES**Non-interest
                bearing deposits
            
            $
            37,946,831
            
            $
            37,666,022Interest
                bearing deposits (Note 5)
            
            
            100,716,346
            
            
            89,418,414Total
                deposits
            
            
            138,663,177
            
            
            127,084,436Securities
                sold under agreements to repurchase (Note 6)
            
            
            291,030
            
            
            548,367Accounts
                payable and accrued expenses
            
            
            1,145,925
            
            
            866,460Total
                Liabilities
            
            
            140,100,132
            
            
            128,499,263Commitments
                (Note 9)**STOCKHOLDERS’
                EQUITY (Notes 7, 8 and 10)**Preferred
                stock - $.01 par value; authorized 5,000,000 shares.Issued
                and outstanding: none at December 31, 2006 and 2005
            
            
            -
            
            
            -Common
                stock - $10 par value; authorized 5,000,000 shares.Issued
                and outstanding: 1,728,011 shares at December 31,2006
                and 1,664,342 at December 31, 2005
            
            
            17,280,107
            
            
            16,643,415Additional
                paid in capital
            
            
            1,019,299
            
            
            950,891Retained
                earnings
            
            
            2,579,577
            
            
            1,781,794Accumulated
                other comprehensive loss:Unrealized
                losses on securities available for sale
            
            
            (186,617
            )
            
            (279,521
            )Total
                Stockholders’ Equity
            
            
            20,692,366
            
            
            19,096,579Total
                Liabilities and Stockholders’ Equity
            
            $
            160,792,498
            
            $
            147,595,842





The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.




38





**CN
      BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For
      the years ended December 31, 2006 and 2005**





**2006**
            
            **2005**Interest
                income:Interest
                and fees on loans
            
            $
            7,054,228
            
            $
            5,430,011Federal
                funds sold
            
            
            756,931
            
            
            405,290Interest
                bearing deposits
            
            
            93,923
            
            
            94,019Securities
            
            
            1,076,266
            
            
            1,161,596Total
                interest income
            
            
            8,981,348
            
            
            7,090,916Interest
                expense:Other
                deposits
            
            
            2,835,495
            
            
            1,938,201Repurchase
                agreements
            
            
            7,814
            
            
            11,921Total
                interest expense
            
            
            2,843,309
            
            
            1,950,122Net
                interest income
            
            
            6,138,039
            
            
            5,140,794Provision
                for loan losses (Note 3)
            
            
            162,916
            
            
            184,310Net
                interest income after provision for loan losses
            
            
            5,975,123
            
            
            4,956,484Non-interest
                income:Fees
                and service charges from depository accounts
            
            
            950,486
            
            
            938,330Increase
                in cash surrender value of life insurance policies
            
            
            97,713
            
            
            87,762Other
                income
            
            
            136,764
            
            
            117,292Gain
                on sale of foreclosed personal property
            
            
            25,000
            
            
            -Gain
                on sale of loans
            
            
            -
            
            
            35,437Total
                non-interest income
            
            
            1,209,963
            
            
            1,178,821Non-interest
                expenses:Compensation
                and related expenses
            
            
            2,616,163
            
            
            2,392,655Occupancy
                expense
            
            
            466,298
            
            
            433,653Depreciation
                and amortization
            
            
            311,326
            
            
            343,671Consulting
                expense
            
            
            95,860
            
            
            89,213Data
                processes expense
            
            
            197,095
            
            
            192,529Director
                fees
            
            
            113,430
            
            
            96,100Advertising
                and marketing expense
            
            
            130,384
            
            
            74,504Equipment
                maintenance costs
            
            
            130,393
            
            
            120,119Electronic
                funds transfer fees
            
            
            87,500
            
            
            92,126Stationery
                and office supplies
            
            
            80,830
            
            
            86,246Merger
                related activities costs
            
            
            150,000
            
            
            -Other
                operating expenses
            
            
            610,364
            
            
            563,212Total
                non-interest expenses
            
            
            4,989,643
            
            
            4,484,028Income
                before income taxes
            
            
            2,195,443
            
            
            1,651,277Income
                tax expense (Note 11)
            
            
            794,175
            
            
            566,970NET
                INCOME
            
            $
            1,401,268
            
            $
            1,084,307Basic
                earnings per share
            
            $
            .82
            
            $
            .76Diluted
                earnings per share
            
            $
            .81
            
            $
            .71Dividends
                declared per share
            
            $
            .35
            
            $
            .25





The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.




39





**CN
      BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME**


**For
      the years ended December 31, 2006 and 2005**





**2006**
            
            **2005**Net
                income
            
            $
            1,401,268
            
            $
            1,084,307Change
                in unrealized gains and(losses)
                on securities available for sale
            
            
            151,334
            
            
            (233,897
            )Tax
                effect
            
            
            (58,430
            )
            
            100,515Other
                comprehensive loss
            
            
            92,904
            
            
            (133,382
            )Total
                comprehensive income
            
            $
            1,494,172
            
            $
            950,925





The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.




40





**CN
      BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**For
      the years ended December 31, 2006 and 2005**





CommonStock
            
            Additional
              Paid
                in
              Capital
            
            Retained
              Earnings
            
            Accumulated
              Other
              Comprehensive
              Income
                (Loss)
            
            TotalBalance
                December 31, 2004
            
            $
            13,845,652
            
            $
            917,340
            
            $
            1,078,002
            
            $
            (146,139
            )
            $
            15,694,855Net
                income in 2005
            
            
            
            
            
            
            
            
            1,084,307
            
            
            
            
            
            1,084,307Net
                change in unrealized gains and(losses)
                on securities available for sale
            
            
            
            
            
            
            
            
            
            
            
            (133,382
            )
            
            (133,382
            )Sale
                of common stock under theDividend
                Reinvestment and StockPurchase
                Plan
            
            
            71,763
            
            
            33,551
            
            
            
            
            
            
            
            
            105,314Proceeds
                from warrant exercises
            
            
            2,726,000
            
            
            
            
            
            
            
            
            
            
            
            2,726,000Dividends
                ($.25 per share)
            
            
            
            
            
            
            
            
            (380,515
            )
            
            
            
            
            (380,515
            )Balance
                December 31, 2005
            
            
            16,643,415
            
            
            950,891
            
            
            1,781,794
            
            
            (279,521
            )
            
            19,096,579Net
                income in 2006
            
            
            
            
            
            
            
            
            1,401,268
            
            
            
            
            
            1,401,268Net
                change in unrealized gains and(losses)
                on securities available for sale
            
            
            
            
            
            
            
            
            
            
            
            92,904
            
            
            92,904Sale
                of common stock under theDividend
                Reinvestment and StockPurchase
                Plan
            
            
            128,382
            
            
            68,408
            
            
            
            
            
            
            
            
            196,790Proceeds
                from warrant exercises
            
            
            508,310
            
            
            
            
            
            
            
            
            
            
            
            508,310Dividends
                ($.35 per share)
            
            
            
            
            
            
            
            
            (603,485
            )
            
            
            
            
            (603,485
            )Balance
                December 31, 2006
            
            $
            17,280,107
            
            $
            1,019,299
            
            $
            2,579,577
            
            $
            (186,617
            )
            $
            20,692,366





The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.




41





**CN
      BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


***For
      the years ended December 31, 2006 and 2005***




**2006**
            
            **2005**CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                income
            
            $
            1,401,268
            
            $
            1,084,307Adjustments
                to reconcile net income to net cashprovided
                by operations:Depreciation
                and amortization
            
            
            311,326
            
            
            343,671Gain
                on sale of foreclosed personal property
            
            
            (25,000
            )
            
            -Gain
                on sale of loans
            
            
            -
            
            
            (35,437
            )Deferred
                income taxes
            
            
            (141,240
            )
            
            (107,533
            )Provision
                for loan losses
            
            
            162,916
            
            
            184,310Increase
                in cash surrender value of life insurance policies
            
            
            (97,713
            )
            
            (87,762
            )Increase
                in other assets
            
            
            (43,216
            )
            
            (204,803
            )Increase
                in other liabilities
            
            
            203,978
            
            
            302,977Amortization
                of premiums and discounts
            
            
            (55,352
            )
            
            8,515Net
                cash provided by operating activities
            
            
            1,716,967
            
            
            1,488,245CASH
                FLOWS FROM INVESTING ACTIVITIESNet
                increase in loans
            
            
            (10,568,949
            )
            
            (11,651,132
            )Decrease
                (increase) in interest bearing deposits
            
            
            994,227
            
            
            1,502,390Investment
                in securities - available for sale
            
            
            (4,740,093
            )
            
            (3,966,092
            )Investment
                in securities - held to maturity
            
            
            (1,311,940
            )
            
            -Investment
                in other securities
            
            
            (20,000
            )
            
            (35,900
            )Principal
                payments and redemption of securities
            
            
            14,281,962
            
            
            8,253,334Proceeds
                from sales of foreclosed personal property
            
            
            165,000
            
            
            -Proceeds
                from sale of loans
            
            
            -
            
            
            1,800,000Investment
                in life insurance policies
            
            
            -
            
            
            (1,175,000
            )Purchase
                of property, equipment and leasehold improvements
            
            
            (82,290
            )
            
            (78,737
            )Net
                cash used by investing activities
            
            
            (1,282,083
            )
            
            (5,351,137
            )CASH
                FLOWS FROM FINANCING ACTIVITIESNet
                increase in deposits including interest credited
            
            
            11,578,741
            
            
            6,883,298Net
                increase (decrease) in securities sold under agreements to
                repurchase
            
            
            (257,337
            )
            
            25,827Proceeds
                from warrant exercises
            
            
            508,310
            
            
            2,726,000Sales
                of common stock under Dividend Reinvestment Plan
            
            
            196,790
            
            
            105,314Dividends
                paid
            
            
            (527,998
            )
            
            (269,464
            )Net
                cash provided by financing activities
            
            
            11,498,506
            
            
            9,470,975NET
                INCREASE (DECREASE) IN CASH
            
            
            11,933,390
            
            
            5,608,083Cash
                at beginning of period
            
            
            15,476,898
            
            
            9,868,815Cash
                at end of period
            
            $
            27,410,288
            
            $
            15,476,898SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            2,813,482
            
            $
            1,943,101Income
                taxes paid
            
            $
            911,586
            
            $
            495,154





The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.




42





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. The Company and its Significant Accounting Policies**





CN
      Bancorp, Inc. (the Company) was incorporated in January, 1996 under the laws
      of
      the State of Maryland to serve as a bank holding company and formed County
      National Bank (the Bank) as a wholly owned subsidiary. The Company is registered
      as a bank holding company and the Bank is chartered as a national bank. The
      Bank
      opened on December 19, 1996. The Company (as a bank holding company) and the
      Bank (as a nationally chartered bank) are subject to government supervision,
      regulations and control.





The
      Bank’s primary business activity is the solicitation and acceptance of deposits
      from within its market area and the use of such funds in loans and investments.
      The Bank is subject to competition from other financial institutions and
      financial service companies.





Merger
      Agreement





On
      December 13, 2006, the Company entered into an Agreement and Plan of Merger
      (Merger Agreement) with Sandy Spring Bancorp, Inc. (Sandy Spring), whereby
      Sandy
      Spring will acquire the Company by way of a merger of the Company with and
      into
      Sandy Spring. The Merger Agreement also provides for the merger of County
      National Bank with and into Sandy Spring Bank, a Maryland bank and trust
      company, a wholly owned subsidiary of Sandy Spring. Pursuant to the Merger
      Agreement, at the effective time of the merger, each outstanding share of the
      Company’s common stock will be converted into the right to receive either (i)
      $25.00 in cash (Cash Election Price), or (ii) 0.6657 of a share of Sandy
      Spring’s common stock. Each stockholder of the Company will be entitled to elect
      the number of its shares of Company common stock to be exchanged for the Cash
      Election Price, subject to a pro-ration which will provide that Sandy Spring
      will pay cash for a minimum of 40% and a maximum of 50% of the outstanding
      shares of Company common stock and issue shares of Sandy Spring common stock
      in
      exchange for a minimum of 50% and a maximum of 60% of the outstanding shares
      of
      Company common stock. The merger is intended to be a tax-free reorganization
      as
      to the portion of the merger consideration received as Sandy Spring common
      stock. Outstanding options to purchase Company common stock granted under the
      Company’s equity plans will be automatically converted into fully vested options
      to purchase Sandy Spring common stock, provided that Sandy Spring may offer
      to
      cash out options for a per share payment equal to the difference between the
      Cash Election Price and the per share exercise price of such
      option.





The
      Merger Agreement contains customary representations, warranties and covenants.
      The completion of the merger is subject to customary conditions which include
      the adoption and approval of the merger and the Merger Agreement by the
      stockholders of the Company and the receipt of all required regulatory
      approvals. The Merger Agreement also provides for termination rights and
      penalties for termination of the Merger Agreement under stated circumstances.
      Under the Merger Agreement, the Company will be permitted to continue to pay
      regular quarterly dividends not in excess of $0.07 per quarter and was required
      to suspend the issuance of shares under its Dividend Reinvestment and Stock
      Purchase Plan. As such, with respect to all dividends, if any, declared after
      the date of the Merger Agreement, all shareholders will receive payment in
      cash.





The
      Company has agreed to discontinue awarding options and any other rights to
      acquire common shares of the Company under the Company’s Dividend Reinvestment
      and Stock Purchase Plan, the Stock Option Plan, the Employee Stock Purchase
      Plan
      and the Director Stock Purchase Plan from the agreement date to the completion
      of the merger.





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, County National Bank. All inter-company accounts and
      transactions have been eliminated in consolidation.





Use
      of
      Estimates





The
      financial statements have been prepared in conformity with accounting principles
      generally accepted in the United States of America. The preparation of the
      financial statements requires management to make




43


**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. The Company and its Significant Accounting Policies -
      Continued**





estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosures of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenue and expenses during the reporting
      period. Actual results could differ significantly from those estimates. Material
      estimates that are particularly susceptible to significant change in the
      near-term relate to the determination of the allowance for loan losses. See
      below for a discussion of the determination of that estimate.





Investment
      Securities





Available-for-sale
      securities consist of bonds and notes not classified as trading securities
      or as
      held-to-maturity securities. These securities are reported at their fair value
      with the unrealized holding gains and losses, net of tax, reported as a net
      amount in a separate component of stockholders’ equity until realized. Gains and
      losses on the sale of available-for-sale securities are determined using the
      specific identification method. Premiums and discounts are recognized in
      interest income using the interest method over the period to
      maturity.





Securities
      for which the Company has the positive intent and ability to hold to maturity
      are reported at cost, adjusted for premiums and discounts that are recognized
      in
      interest income using the interest method over the period to maturity. A charge
      to operations would occur if the fair value of the securities declines below
      cost and the Company’s intention or ability to hold the securities to maturity
      changes.





Declines
      in the fair value of individual held-to-maturity and available-for-sale
      securities below their cost that are other than temporary would result in
      write-downs of the individual securities to their fair value. In estimating
      other-then-temporary impairment losses, management considers (1) the length
      of
      time and the extent to which the fair value has been less than cost, (2) the
      financial condition and near-term prospects of the issuer, and (3) the intent
      and ability of the Company to retain its investment in the issuer for a period
      of time sufficient to allow for any anticipated recovery in the fair value.
      The
      related write-downs would be included in earnings as realized
      losses.





Other
      Securities





As
      a
      member of the Federal Reserve Bank of Richmond (Federal Reserve) and the Federal
      Home Loan Bank of Atlanta (FHLB), the Company is required to acquire and hold
      stock in these entities. Ownership of stock in these entities is restricted
      to
      members and can only be sold to and acquired from the respective entities at
      par. The Company also owns stock in Atlantic Central Bankers Bank (ACBB) and
      Maryland Financial Bank (MFB), banks that generally offers product and services
      only to other banks. Ownership of the ACBB shares is restricted to banks, and
      there is no active market for the ACBB or the MFB shares. As there is no readily
      determinable fair value for these securities, they are carried at
      cost.





Loans
      and Allowance for Loan Losses





Loans
      receivable that management has the intent and ability to hold for the
      foreseeable future or until maturity or pay-off are reported at their
      outstanding principal balance adjusted for any charge-offs, the allowance for
      loan losses and any unamortized deferred fees, costs, premiums and discounts.
      Loan origination fees and certain direct origination costs are capitalized
      and
      recognized as an adjustment of the yield of the related loan.





The
      accrual of interest on loans is discontinued when, in management’s opinion, the
      full collection of principal or interest is in doubt, or a scheduled loan
      payment has become over ninety days past due, unless the obligation is well
      secured and in the process of collection. Interest received on non-accrual
      loans
      generally is either applied against principal or reported as interest income,
      according to management’s judgment as to the collectibility of
      principal.





The
      Company determines and recognizes impairment of loans in accordance with the
      provisions of Statement of Financial Accounting Standards No. 114, *Accounting by Creditors for Impairment of a Loan* as
      amended by Statement 118, *Accounting by Creditors for Impairment of a Loan - Income
      Recognition*




44




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. The Company and its Significant Accounting Policies -
      Continued**





*and
      Disclosures* .
      A loan
      is determined to be impaired when, based on current information and events,
      it
      is probable that the Company will be unable to collect all amounts due according
      to the contractual terms of the loan agreement. A loan is not considered
      impaired during the period of delay in payment if the Company expects to collect
      all amounts due, including past-due interest. An impaired loan is measured
      at
      the present value of its expected future cash flows discounted at the loan’s
      effective interest rate or at the loan’s observable market price or the fair
      value of the collateral if the loan is collateral dependent. Statement No.
      114
      is generally applicable to all loans except large groups of smaller-balance
      homogeneous loans that are evaluated collectively for impairment unless such
      loans are subject to a restructuring agreement. Interest payments received
      are
      recognized as interest income or, if ultimate collectibility of principal is
      in
      doubt, are applied to principal.





The
      allowance for loan losses is increased by charges to income and decreased by
      charge-offs (net of recoveries). Management’s periodic determination and
      evaluation of the adequacy of the allowance assesses various factors including;
      inherent losses in all significant loans; known deterioration in concentrations
      of credit, certain classes of loans or collateral; historical loss experiences;
      results of independent reviews of loan quality and the allowance for loan
      losses; trends in portfolio quality, maturity and composition; volumes and
      trends in delinquencies and non-accrual loans, risk management policies and
      practices; lending policies and procedures; economic conditions and downturns
      in
      specific local industries; loss history; and the experience and quality of
      lending management and staff. Estimated losses in the portfolio are determined
      by applying loss ratios to loan categories, other than impaired loans and loans
      considered substandard or doubtful, which are evaluated separately, to determine
      loss estimates.





The
      determination of the allowance for loan losses involves the use of various
      subjective estimates by management and may result in over or under estimations
      of the amount of inherent losses in the loan portfolio. To review the adequacy
      of the allowance, on a least a quarterly basis, management analyzes the loan
      portfolio through risk ratings. Each loan, other than impaired loans and loans
      considered substandard or doubtful, which are evaluated separately, is assigned
      a risk rating and estimated “low” and “high” loss percentages are applied to the
      loans in each rating. Management determines the loss percentages based upon
      its
      best estimates considering losses incurred. The allowance for loan losses is
      compared to this “low” and “high” range to ascertain that it is situated within
      the range.





The
      allowance is also compared on at least a quarterly basis to peer group levels.
      Management believes that the recorded allowance for loan losses is appropriate.





Property,
      Equipment and Leasehold Improvements





Property,
      equipment and leasehold improvements are stated at cost less accumulated
      depreciation and amortization. Depreciation is charged to operations over the
      estimated useful lives of the assets using the straight-line method. Leasehold
      improvements are amortized to operations over the shorter of the lease term
      (including renewal options and purchase rights) or the life of the
      improvement.





Bank
      Owned Life Insurance





The
      Bank
      invests in bank owned life insurance (BOLI) as a source of funding for employee
      benefit expenses. BOLI involves the purchase of life insurance by the Bank
      on a
      select group of officers. The Bank is the owner and beneficiary of the policies.
      This life insurance is carried at the cash surrender value of the underlying
      policies. Income from the increase in the cash surrender value of the policies
      is included in other income.





Transfers
      of Financial Assets





Transfers
      of financial assets are accounted for as sales when control over the assets
      has
      been surrendered. Control over transferred assets is deemed to be surrendered
      when (1) the assets have been isolated from the Company, (2) the transferee
      obtains the right (free of conditions that constrain it from taking advantage
      of
      that right) to pledge or exchange the transferred assets, and (3) the Company
      does not maintain effective control over the transferred assets through an
      agreement to repurchase them before their maturity.




45




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. The Company and its Significant Accounting Policies -
      Continued**





Securities
      Sold under Agreements to Repurchase





Securities
      sold under agreements to repurchase are accounted for as borrowings and recorded
      as a liability at the amount of the repurchase obligation. These transactions
      mature the next business day. The Company’s repurchase obligations are secured
      by Company owned securities with market values exceeding the obligations. These
      securities are segregated from other, non-pledged securities.





Deferred
      Income Taxes





Deferred
      income taxes are recognized for temporary differences between the financial
      reporting basis and the income tax basis of assets and liabilities based on
      enacted tax rates expected to be in effect when such amounts are realized or
      settled. Deferred tax assets are recognized only to the extent that it is more
      likely than not that such amounts will be realized based on consideration of
      available evidence. The effect on deferred tax assets and liabilities of a
      change in tax rates is recognized in income in the period that includes the
      enactment date.





Concentration
      of Credit Risk





The
      Company grants loans to customers primarily in its market area in Maryland.
      The
      concentration of credit by type of loan is set forth in Note 3 below. The
      debtors’ ability to honor their contracts, including borrowing agreements, may
      be influenced by the economic conditions in the Company’s lending
      area.





The
      Company sells federal funds, which are not insured by the Federal Deposit
      Insurance Corporation, to up to three banking entities.





Comprehensive
      Income or Loss





Unrealized
      gains and losses on available for sale securities, net of tax, are reported
      as a
      separate component of the equity section in the consolidated statement of
      financial condition. Changes in the net unrealized gains and losses are
      components of comprehensive income or loss and are not included in reported
      net
      income or loss.





Advertising
      Costs





The
      Company expenses advertising costs as incurred.





Earnings
      Per Share





Basic
      EPS
      is computed based upon income available to common shareholders and the weighted
      average number of common shares outstanding for the period. Diluted EPS reflects
      the potential dilution that could occur if securities or other contracts to
      issue common stock were exercised or converted into common stock or resulted
      in
      the issuance of common stock that would share in the earnings of the Company.
      The determination of the amount of common stock equivalents arising from
      warrants and options issued by the Company requires the use of the average
      market price of the common shares during the year. The Company’s common shares
      are traded on the over-the-counter bulletin board (OTCBB) market. The volume
      of
      trading activity is light; therefore, management used the average price of
      all
      reported buy and sell transactions during the year ended December 31, 2006
      and
      2005 of $18.07and $14.52 per share, respectively, to determine dilutive shares
      during 2006 and 2005.




46




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. The Company and its Significant Accounting Policies -
      Continued**





The
      weighted average number of common shares and dilutive securities (comprised
      of
      warrants and options) and resultant per share computations are as
      follows:





2006
            
            2005Weighted
                average shares outstanding
            
            
            1,715,073
            
            
            1,435,278Common
                stock equivalents
            
            
            23,626
            
            
            86,264Average
                common shares and equivalents
            
            
            1,738,699
            
            
            1,521,542Net
                income
            
            $
            1,401,268
            
            $
            1,084,307Basic
                earnings per share
            
            $
            .82
            
            $
            .76Diluted
                earnings per share
            
            $
            .81
            
            $
            .71





Stock
      Options





The
      Company has adopted Statement No. 123(R), *Share-Based
      Payment* ,
      as of
      January 1, 2006 which requires that compensation cost related to share-based
      payment transactions be recognized in the financial statements (with limited
      exceptions). The amount of compensation cost is measured based on the grant-date
      fair value of the equity or liability instruments issued. Compensation cost
      is
      recognized over the period that an employee provides service in exchange for
      the
      award. This statement requires the recording of compensation costs for options
      or shares sold under the Company’s compensatory stock purchase and option plans,
      if any. The Company is not required to award options under any of these plans.
      There were no options granted under any of these plans during 2006.





Prior
      to
      January 1, 2006, the Company had adopted the disclosure-only provisions of
      SFAS
      No.123 *Accounting
      for Stock-Based Compensation* and SFAS
      No. 148 *Accounting
      for Stock-Based Compensation - Transition and Disclosure* ,
      but
      applies Accounting Principal Board Opinion (APB) No. 25, *Accounting
      for Stock Issued to Employees* and
      related interpretations in accounting for its plans. No compensation expense
      related to the Plans was recorded in 2005. If the Company had elected to
      recognize compensation cost based on fair value at the grant dates for the
      option awards under the compensatory plans consistent with the method prescribed
      by SFAS No. 123, net income and earnings per share would have been reduced
      to
      the pro forma amounts as set forth below in 2005:





2005Net
                income, as reported
            
            $
            1,084,307Less
                  pro forma stock- based compensation expense determined under fair
                  value
                  method, net of related taxes for SOP options:
            
            
            164,281Pro
                forma net income
            
            $
            920,026Net
                income per share:Basic
                - as reported
            
            $
            .76Basic
                - pro forma
            
            
            .64Diluted
                - as reported
            
            
            .71Diluted
                - pro forma
            
            
            .60





The
      weighted average fair value of the stock options granted in December 2005 of
      $3.22 per option was estimated using the Black-Scholes option-pricing model
      with
      the following assumptions: Dividend yield- 1.40%; risk free interest rate-
      4.42%
      to 4.51%; expected volatility- 12% and average life- 4 to10 years.





Reclassification





Certain
      prior year’s amounts have been reclassified to conform to the current year’s
      method of presentation.




47





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      2.**  **Investment
      Securities**





Investment
      securities are summarized as follows:


*AVAILABLE-FOR-
        SALE SECURITIES*




Gross
            
            Gross
            
            EstimatedAmortized
            
            Unrealized
            
            Unrealized
            
            FairCost
            
            Gains
            
            Losses
            
            ValueDecember
                31, 2006:Mortgage-backed
                securities
            
            $
            3,105,245
            
            $
            4,245
            
            $
            114,627
            
            $
            2,994,863U.S.
                Government agency notes
            
            
            13,477,363
            
            
            1,215
            
            
            194,819
            
            
            13,283,759$
            16,582,608
            
            $
            5,460
            
            $
            309,446
            
            $
            16,278,622December
                31, 2005:Mortgage-backed
                securities
            
            $
            3,670,094
            
            $
            -
            
            $
            112,180
            
            $
            3,557,914U.S.
                Government agency notes
            
            
            20,666,352
            
            
            -
            
            
            343,140
            
            
            20,323,212$
            24,336,446
            
            $
            -
            
            $
            455,320
            
            $
            23,881,126




*HELD-TO-MATURITY
        SECURITIES*




December
                31, 2006:Mortgage-backed
                securities
            
            $
            3,429,547
            
            $
            -
            
            $
            120,812
            
            $
            3,308,735Municipal
                bonds
            
            
            1,312,084
            
            
            9,911
            
            
            1,287
            
            
            1,320,708U.S.
                Government agency notes
            
            
            3,000,082
            
            
            -
            
            
            54,444
            
            
            2,945,638$
            7,741,713
            
            $
            9,911
            
            $
            176,543
            
            $
            7,575,081December
                31, 2005:Mortgage-backed
                securities
            
            $
            4,159,164
            
            $
            -
            
            $
            122,050
            
            $
            4,037,114U.S.
                Government agency notes
            
            
            4,003,288
            
            
            -
            
            
            76,360
            
            
            3,926,928$
            8,162,452
            
            $
            -
            
            $
            198,410
            
            $
            7,964,042





There
      were no sales of securities during 2006 or 2005.





Securities
      with a carrying amount of $292,004 (cost of $292,693 and fair value of $292,004)
      are pledged to customers under repurchase agreements at December 31, 2006.
      Securities with a carrying amount of $250,182 (cost of $250,182 and fair value
      of $247,600) are pledged to a local municipality as partial security for
      performance letters of credit issued for the benefit of the
      municipality.





The
      stated maturity of securities available-for-sale and held-to-maturity are as
      follows at December 31, 2006:




Available-for-Sale
            
            
            Held-to-MaturityAmortized
            
            
            Fair
            
            
            Amortized
            
            
            FairCost
            
            
            Value
            
            
            Cost
            
            
            ValueMatures
                within 1 year
            
            $
            6,360,701
            
            $
            6,314,562
            
            $
            1,000,727
            
            $
            990,400Matures
                after 1 through 5 years
            
            
            9,991,526
            
            
            9,729,434
            
            
            5,428,902
            
            
            5,263,973Matures
                beyond 5 years
            
            
            230,381
            
            
            234,626
            
            
            1,312,084
            
            
            1,320,708$
            16,582,608
            
            $
            16,278,622
            
            $
            7,741,713
            
            $
            7,575,081




Below
      are
      schedules of securities with unrealized losses at December 31, 2006 and 2005.
      Unrealized losses (and unrealized gains) are the result of interest rate levels
      differing from those existing at the time of securities’ acquisition and, as to
      mortgage backed securities, actual and estimated prepayment speeds. These
      unrealized losses are considered temporary as they reflect fair values on
      December 31, 2006 and are




48





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      2.**  **Investment
      Securities - Continued**





subject
      to change daily as interest rates fluctuate. The Company has the intent and
      the
      ability to hold the securities to the maturity of the securities or the time
      required for the value of the securities to equal or exceed their
      cost.




**December
                31, 2006**
            
            Continuous
                Unrealized Losses for Less than 12 Months
            
            Continuous
                Unrealized Losses for 12 Months or MoreUnrealized
            
            
            
            
            
            UnrealizedFair
                Value
            
            #
            
            Losses
            
            Fair
                Value
            
            #
            
            LossesMortgage-backed
                securities:Available
                for Sale
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            2,760,237
            
            
            5
            
            $
            114,627Held
                to Maturity
            
            
            -
            
            
            -
            
            
            -
            
            
            3,308,735
            
            
            6
            
            
            120,812-
            
            
            -
            
            
            -
            
            
            6,068,972
            
            
            11
            
            
            235,439U.S.
                Government agency notes:Available
                for Sale
            
            
            3,469,080
            
            
            4
            
            
            6,271
            
            
            9,515,382
            
            
            8
            
            
            188,548Held
                to Maturity
            
            
            -
            
            
            -
            
            
            -
            
            
            2,945,638
            
            
            3
            
            
            54,4443,469,080
            
            
            4
            
            
            6,271
            
            
            12,461,020
            
            
            11
            
            
            242,992Municipal
                bonds- Held to Maturity
            
            
            201,518
            
            
            1
            
            
            1,287
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            3,670,598
            
            
            5
            
            $
            7,558
            
            $
            18,529,992
            
            
            22
            
            $
            478,431





**December
                31, 2005**
            
            Continuous
                Unrealized Losses for Less than 12 Months
            
            Continuous
                Unrealized Losses for 12 Months or MoreUnrealized
            
            
            
            
            
            UnrealizedFair
                Value
            
            #
            
            Losses
            
            Fair
                Value
            
            #
            
            LossesMortgage-backed
                securities:Available
                for Sale
            
            $
            361,444
            
            
            1
            
            $
            1,614
            
            $
            3,196,470
            
            
            5
            
            $
            110,566Held
                to Maturity
            
            
            -
            
            
            -
            
            
            -
            
            
            4,037,114
            
            
            6
            
            
            122,050361,444
            
            
            1
            
            
            1,614
            
            
            7,233,584
            
            
            11
            
            
            232,616U.S.
                Government agency notes:Available
                for Sale
            
            
            -
            
            
            -
            
            
            -
            
            
            20,323,212
            
            
            17
            
            
            343,140Held
                to Maturity
            
            
            -
            
            
            -
            
            
            -
            
            
            3,926,928
            
            
            3
            
            
            76,360-
            
            
            -
            
            
            -
            
            
            24,250,140
            
            
            20
            
            
            419,500Total
            
            $
            361,444
            
            
            1
            
            $
            1,614
            
            $
            31,483,724
            
            
            31
            
            $
            652,116





Other
      Securities





As
      a
      requirement for membership in the Federal Reserve and the FHLB, the Company
      is
      required to acquire and hold stock in these entities. The amount of stock that
      the Company is required to own is determined by separate formulas used by each
      entity. The Company also voluntarily acquired stock in ACBB and MFB. The Company
      records the Federal Reserve, FHLB, ACBB and MFB shares at cost. Investment
      in
      the shares of these entities is as follows:




December
                31,2006
            
            
            2005Federal
                Reserve Bank of Richmond stock
            
            $
            282,000
            
            $
            282,000Federal
                  Home Loan Bankof Atlanta stock
            
            
            286,800
            
            
            266,800Atlantic
                  Central BankersBank stock
            
            
            75,000
            
            
            75,000Maryland
                  Financial Bankstock
            
            
            150,000
            
            
            150,000$
            793,800
            
            $
            773,800




49




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      3. Loans and Allowance for Loan Losses**





The
      Bank
      grants commercial and consumer loans to customers primarily in its market area
      of Anne Arundel County in Maryland. The principal categories of the loan
      portfolio are as follows:





December
                31,2006
            
            2005Commercial
                loans
            
            $
            22,556,404
            
            $
            22,366,771Consumer
                loans
            
            
            3,447,624
            
            
            3,948,754Real
                Estate loans:Commercial
                real estate
            
            
            34,480,344
            
            
            29,420,805Residential
                real estate
            
            
            31,187,719
            
            
            29,306,514Construction
            
            
            8,325,314
            
            
            4,329,827Total
                real estate loans
            
            
            73,993,377
            
            
            63,057,146Total
            
            
            99,997,405
            
            
            89,372,671Deferred
                (fees) and costs, net
            
            
            (19,775
            )
            
            52,926Allowance
                for loan losses
            
            
            (1,010,000
            )
            
            (864,000
            )$
            98,967,630
            
            $
            88,561,597





The
      allowance for loan losses activity for the years ended December 31, 2006 and
      2005 is as follows:




2006
            
            2005Balance
                at beginning of period
            
            $
            864,000
            
            $
            800,000Provision
                for loan losses
            
            
            162,916
            
            
            184,310





Less:
                Commercial loans charged off
            
            
            6,665
            
            
            -Mortgage
                loans charged off
            
            
            -
            
            
            50,027Consumer
                loans charged off
            
            
            28,545
            
            
            90,70135,210
            
            
            140,728Recoveries:
                Commercial loans
            
            
            6,665
            
            
            10,938Consumer
                loans
            
            
            11,629
            
            
            9,48018,294
            
            
            20,418Balance
                at end of period
            
            $
            1,010,000
            
            $
            864,000





At
      December 31, 2006, CN Bancorp has one loan on non-accrual status which is in
      process of collection with a carrying amount of $40,000. The loan is secured
      by
      real estate with an estimated value in excess of that needed to satisfy the
      loan
      amount. The amount of the specific allowance for loan losses for this loan
      is
      $5,000 at December 31, 2006. Unrecognized interest on the loan at December
      31,
      2006 is approximately $2,300. CN Bancorp is not committed to lend funds to
      debtors whose loans are on non-accrual status or are considered
      impaired.





At
      December 31, 2005, CN Bancorp had two loans on non-accrual status which were
      in
      process of collection with carrying amounts totaling $62,332: (1) an impaired
      secured commercial loan in the amount of $49,667; and (2) an unsecured
      commercial loan in the amount of $12,665. The amount of the specific allowance
      for loan losses for these loans was $15,795 at December 31, 2005. Unrecognized
      interest on the loans at December 31, 2005 was approximately $3,600. CN Bancorp
      was not committed to lend funds to debtors whose loans where on non-accrual
      status or considered impaired.





At
      December 31, 2006 and 2005, the balance of commercial and real estate loans
      serviced by the Company for others under loan participation agreements was
      $3,458,700 and $3,608,047, respectively. The related mortgage servicing rights
      are not material and are included in other assets.




50




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      3. Loans and Allowance for Loan Losses- Continued**





Certain
      officers and directors (and companies in which they have a 10% or more
      beneficial ownership) have loans with the Bank. The activity of these loans
      during 2006 and 2005 is as follows:





2006
            
            2005Total
                loans at beginning of year
            
            $
            6,642,101
            
            $
            4,235,607New
                loans and funding during the year
            
            
            1,546,712
            
            
            2,889,347Existing
                loans to new officers and directors
            
            
            -
            
            
            1,237,963Repayments
                during the year
            
            
            (1,277,297
            )
            
            (1,720,816
            )Total
                loans at end of year
            
            $
            6,911,516
            
            $
            6,642,101





**Note
      4. Property, Equipment and Leasehold Improvements**





Property,
      equipment and leasehold improvements are as follows at December 31:





UsefulLives
            
            2006
            
            2005Land
            
            
            Not
                applicable
            
            $
            387,768
            
            $
            387,768Building
            
            
            40
                years
            
            
            466,945
            
            
            521,877Leasehold
                improvements
            
            
            15
                to 40 years
            
            
            2,617,208
            
            
            2,617,208Furniture
                and equipment
            
            
            3
                to 15 years
            
            
            1,489,454
            
            
            1,803,474Construction
                in process
            
            
            Not
                applicable
            
            
            115,067
            
            
            113,7085,076,442
            
            
            5,444,035Accumulated
                depreciationand
                amortization
            
            
            
            
            
            1,391,225
            
            
            1,529,782Net
            
            
            
            
            $
            3,685,217
            
            $
            3,914,253




Construction
      in process is comprised of costs of preparing building site for new branch
      facilities.





**Note
      5. Deposits**





Deposit
      balances are summarized below as of December 31:




2006
            
            2005Non-interest
                bearing accounts
            
            $
            37,946,831
            
            $
            37,666,022NOW
                accounts
            
            
            6,690,636
            
            
            6,688,476Money
                market accounts
            
            
            7,598,156
            
            
            8,712,590Savings
                accounts
            
            
            45,839,426
            
            
            40,500,733Time
                deposit accounts:Less
                than $100,000
            
            
            25,328,537
            
            
            22,007,453$100,000
                or more
            
            
            15,259,591
            
            
            11,509,162$
            138,663,177
            
            $
            127,084,436





The
      time
      deposit accounts mature and/or re-price as follows: within one year -
      $25,634,338; one to two years - $8,643,478; two to three years - $3,256,693;
      three to four years - $2,963,850; four to five years - $89,769.





**Note
      6. Other Borrowed Funds**





The
      Bank
      enters into sales of securities under agreements to repurchase the same
      securities, which mature the next business day. Securities pledged as collateral
      for securities sold under agreements to repurchase include various debt
      securities having an aggregate carrying amount of $292,004 and $555,311 at
      December 31, 2006 and 2005, respectively. The cost of and fair value of the
      securities were $292,693 and $292,004 at December 31, 2006 and $555,311 and
      $548,963 at December 31, 2005, respectively.




51





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      6. Other Borrowed Funds - Continued**





Information
      concerning securities sold under agreements to repurchase at and during the
      year
      ended December 31, 2006 and 2005 is summarized as follows:





2006
            
            
            2005Total
                outstanding at year-end
            
            $
            291,030
            
            $
            548,367Average
                balance during the year
            
            $
            624,842
            
            $
            1,498,356Average
                interest rate during the year
            
            
            1.28
            %
            
            .80
            %Maximum
                balance during the year
            
            $
            3,540,047
            
            $
            3,345,763





The
      Bank
      has established a $1.5 million unsecured federal funds borrowing facility and
      a
      $15 million secured borrowing facility with a correspondent commercial bank.
      Borrowings under the secured facility would be collateralized by securities
      in
      the investment portfolio. The Bank has not borrowed funds under these
      facilities.





**Note
      7. Capital Stock**





The
      Company sold warrants to purchase common stock to the Company’s organizers.
      Under the warrants, 343,431 shares of common stock could have been issued at
      the
      price of $10.00 per share. The warrants were exercisable on or after March
      20,
      1998 and they expired on March 20, 2006. Warrants representing 50,831 shares
      were exercised in 2006, 272,600 shares in 2005 and 20,000 shares in 2004. None
      of these warrants were outstanding at December 31, 2006.





In
      April
      2004, the Board of Directors approved the Company’s Dividend Reinvestment and
      Stock Purchase Plan (DRIP) which authorizes up to 200,000 shares of common
      stock
      for use under the DRIP. Under the DRIP, the shareholder may receive dividends
      paid on the common stock of the Company that they own in additional shares
      of
      common stock of the Company. Shareholders are also allowed to purchase
      additional shares of common stock on the dividend payment dates up to a maximum
      value of $5,000. The shares are sold under this plan at the fair market value
      of
      the stock on the dividend declaration date. During 2006, 12,838 shares of common
      stock were issued under the DRIP. During 2005, 7,176 shares of common stock
      were
      issued under the DRIP. There are remaining 174,651 shares of stock available
      for
      use under the DRIP at December 31, 2006.





The
      Company is authorized to issue 5,000,000 shares of $.01 par value preferred
      stock. No preferred stock has been offered or issued.





**Note
      8. Stock Options**





In
      May
      2004, the shareholders approved the Company’s Employee Stock Purchase Plan
      (ESPP) authorizing up to 50,000 shares of common stock for use under the ESPP.
      Under the ESPP, the Company may award options to employees to purchase common
      stock at the purchase price for the shares at the lower of 85% of fair market
      value of the common stock on the date of the option grant or on the exercise
      date of the option. During 2004, 2,685 shares were purchased by employees under
      the ESPP. There are no outstanding options to purchase common shares at December
      31, 2006 or 2005 under the ESPP. No shares were granted or sold under the plan
      during 2006 and 2005.





In
      April
      2004, the Board of Directors approved the Company’s Director Stock Purchase Plan
      (DSPP) authorizing up to 50,000 shares of common stock for use under the DSPP.
      Under the DSPP, the Company may award options to directors to purchase common
      stock at fair market value as of the date of the option grant. No shares were
      purchased during 2006, 2005 or 2004 under the DSPP and there are no outstanding
      options to purchase common shares at December 31, 2006.





In
      May
      2004, the shareholders approved the Company’s Stock Option Plan (SOP)
      authorizing up to 200,000 shares of common stock for use under SOP. Under the
      SOP, the Company may award options to designated officers and employees to
      purchase common stock at the minimum purchase price of fair market value of
      the
      common stock on the date of the option grant. The options have a maximum term
      of
      ten years.




52





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      8. Stock Options - Continued**





The
      Board
      of Directors determines the vesting, term and purchase price for each option
      granted within the parameters of the SOP.





At
      December 31, 2006 outstanding options, all of which are fully vested, under
      the
      SOP were: options to purchase 51,000 shares of its common stock at $14.50 per
      share, which options expire in December 2015; options to purchase 46,500 shares
      of common stock at $14.20 per share, which options expire in December 2014.
      No
      options were exercised in 2006 or 2005.





The
      intrinsic value of the outstanding options to purchase common stock at December
      31, 2006 is shown below. All of the outstanding options are fully vested.





Number
                of Shares
            
            Expiration
                Date
            
            Exercise
                price
            
            Intrinsic
                Value46,500
            
            
            December
                2014
            
            $
            14.20
            
            $
            492,90051,000
            
            
            December
                2015
            
            $
            14.50
            
            
            525,30097,500
            
            
            
            
            
            
            
            $
            1,018,200




**Note
      9. Commitments**





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





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 to customers. The Bank holds collateral supporting those
      commitments for which collateral is deemed necessary. The Bank has not been
      required to perform on any financial guarantees and has not recorded or incurred
      any losses on its commitments.





A
      summary
      of the Bank’s commitments at December 31, 2006 and 2005 follows:





2006
            
            2005Commitments
                to extend credit
            
            $
            12,226,451
            
            $
            14,822,411Standby
                letters of credit
            
            $
            2,002,067
            
            $
            1,960,855





The
      Bank
      has entered into leases for its branches and office space which contain renewal
      options as well as options or rights to purchase the leased property at fair
      value (comprised substantially of the ground under the facilities). The minimum
      net non-cancelable future rental commitments at December 31, 2006 are as
      follows:





Year
                EndingDecember
                31,2007
            
            $
            255,1202008
            
            
            200,0642009
            
            
            172,7042010
            
            
            172,7042011
            
            
            78,704





The
      related net rent expense was $244,589 and $228,226 in 2006 and 2005,
      respectively.




53




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      10. Regulatory Matters**





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





The
      Company and the Bank must maintain minimum capital and other requirements of
      regulatory authorities when declaring and paying dividends. The Company and
      the
      Bank have complied with such capital requirements.





Quantitative
      measures established by regulation to ensure capital adequacy require the
      Company and the Bank to maintain minimum amounts and ratios (set forth in the
      table below) of total and Tier I capital (as defined in the regulation) to
      risk-weighted assets (as defined), and of Tier I capital to average assets
      (as
      defined). Management


believes,
      as of December 31, 2006, that the Company and the Bank meet capital adequacy
      requirements to which they are subject.





As
      of
      December 31, 2006, the most recent notification from the regulators categorized
      the Bank as well capitalized under the regulatory framework for prompt
      corrective action. To be categorized as well capitalized the Bank must meet
      minimum total risk-based, Tier I risk-based and Tier I leverage ratios. There
      are no conditions or events since that notification that management believes
      have changed the Company’s and the Bank’s category.





Actual
      capital amounts and ratios are presented in the table below:




To
                be
            
            
            
            To
                be“Adequately
            
            
            
            “WellActual
            
            
            
            Capitalized”
            
            
            
            Capitalized”Amount
            
            
            Ratio
            
            
            
            Amount
            
            
            
            
            
            Ratio
            
            
            
            Amount
            
            
            
            
            
            RatioDecember
                31, 2006Total
                Capital*(a)*:Company
            
            $
            21,393,211
            
            
            20.5
            %
            
            $
            8,343,242
            
            
            >
            
            
            8.0
            %
            
            
            N/ABank
            
            
            13,864,080
            
            
            14.2
            %
            
            
            7,803,540
            
            
            >
            
            
            8.0
            %
            
            $
            9,754,425
            
            
            >
            
            
            10.0
            %Tier
                I Capital*(a)*:Company
            
            
            20,383,211
            
            
            19.5
            %
            
            
            4,171,621
            
            
            >
            
            
            4.0
            %
            
            
            N/ABank
            
            
            12,854,080
            
            
            13.2
            %
            
            
            3,901,770
            
            
            >
            
            
            4.0
            %
            
            
            5,852,655
            
            
            >
            
            
            6.0
            %Tier
                I Capital*(b)*:Company
            
            
            20,383,211
            
            
            13.1
            %
            
            
            6,248,826
            
            
            >
            
            
            4.0
            %
            
            
            N/ABank
            
            
            12,854,080
            
            
            8.5
            %
            
            
            6,028,172
            
            
            >
            
            
            4.0
            %
            
            
            7,535,215
            
            
            >
            
            
            5.0
            %December
                31, 2005Total
                Capital*(a)*:Company
            
            $
            19,827,137
            
            
            20.8
            %
            
            $
            7,619,946
            
            
            >
            
            
            8.0
            %
            
            
            N/ABank
            
            
            12,390,126
            
            
            13.6
            %
            
            
            7,282,221
            
            
            >
            
            
            8.0
            %
            
            $
            9,102,776
            
            
            >
            
            
            10.0
            %Tier
                I Capital*(a)*:Company
            
            
            18,963,137
            
            
            19.9
            %
            
            
            3,809,973
            
            
            >
            
            
            4.0
            %
            
            
            N/ABank
            
            
            11,526,126
            
            
            12.7
            %
            
            
            3,641,111
            
            
            >
            
            
            4.0
            %
            
            
            5,461,666
            
            
            >
            
            
            6.0
            %Tier
                I Capital*(b)*:Company
            
            
            18,963,137
            
            
            12.9
            %
            
            
            5,898,699
            
            
            >
            
            
            4.0
            %
            
            
            N/ABank
            
            
            11,526,126
            
            
            8.0
            %
            
            
            5,740,928
            
            
            >
            
            
            4.0
            %
            
            
            7,176,160
            
            
            >
            
            
            5.0
            %


**


*(a)* *to
      risk weighted assets*


*(b)* *to
      average assets*




54





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      11. Income Taxes**





Income
      tax expense consists of the following for the years ended December 31, 2006
      and
      2005:





2006
            
            2005Current:Federal
            
            $
            808,713
            
            $
            600,955State
            
            
            126,702
            
            
            73,548935,415
            
            
            674,503Deferred:Federal
            
            
            (118,416
            )
            
            (93,608
            )State
            
            
            (22,824
            )
            
            (13,925
            )(141,240
            )
            
            (107,533
            )$
            794,175
            
            $
            566,970





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




2006
            
            2005Amount
            
            Rate
            
            Amount
            
            RateTax
                at statutory rates
            
            $
            746,451
            
            
            34.0
            %
            $
            561,434
            
            
            34.0
            %State
                income taxes net offederal
                tax benefit
            
            
            68,560
            
            
            3.1
            %
            
            39,354
            
            
            2.4
            %Increase
                in cash surrendervalue
                of life insurance
            
            
            (33,222
            )
            
            (1.5
            )%
            
            (29,839
            )
            
            (1.8
            )%Non-deductible
                merger costs
            
            
            22,780
            
            
            1.0
            %
            
            -
            
            
            -Municipal
                bond interest
            
            
            (11,904
            )
            
            (0.5
            )%
            
            -
            
            
            -Other
            
            
            1,510
            
            
            0.1
            %
            
            (3,979
            )
            
            (.3
            )%$
            794,175
            
            
            36.2
            %
            $
            566,970
            
            
            34.3
            %








The
      deferred income tax account is comprised of the following at December 31, 2006
      and 2005:





2006
            
            2005Deferred
                tax assets:Allowance
                for loan losses
            
            $
            360,997
            
            $
            303,240Deferred
                compensation plan
            
            
            165,308
            
            
            107,858Unrealized
                losses on securities, net
            
            
            117,369
            
            
            175,799643,674
            
            
            586,897Deferred
                tax liabilities:Accumulated
                depreciation
            
            
            126,846
            
            
            173,608Other
            
            
            21,055
            
            
            326147,901
            
            
            173,934Net
                deferred tax assets
            
            $
            495,773
            
            $
            412,963





Federal
      and state income taxes payable of $227,191 ($190,341 Federal and $36,850 state)
      in 2006 and $177,278 ($166,536 Federal and $10,742 state) in 2005 are included
      in other liabilities.





**Note
      12. Related Party Transactions**





The
      Bank
      leases two properties from entities controlled by a director and stockholder
      of
      the Company. One property is used for the Bank’s operations offices and a branch
      facility. The lease expires in May 2011 but is renewable at the option of the
      Bank for an additional five-year period. The monthly payment under this lease
      at
      December 31, 2006 is $12,706. Lease payments made for these facilities totaled
      $150,062 in 2006 and $145,163 in 2005. The other leased property is used as
      a
      branch facility that opened in January 2004. The lease expires in May 2008
      but
      is renewable at the option of the Bank for seven additional five-year




55




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      12. Related Party Transactions - Continued**





periods.
      The monthly payment under this lease at December 31, 2006 is $5,472. Lease
      payments of $64,774 and $62,513 were made under this lease during 2006 and
      2005,
      respectively.





During
      2003, the Bank sold loan participations to family members of a director of
      the
      Bank and the Company on a non-recourse basis. Under these transactions, the
      family members acquired undivided percentage interests in specific loans held
      by
      the Bank. The participations were sold under the same terms and conditions
      as
      loan participations sold to non-related entities. The total loan participation
      amount outstanding at December 31, 2006 and December 31, 2005 was $601,950
      and
      $673,026, respectively.





**Note
      13. Retirement Plans**





The
      Company has entered into Supplemental Executive Retirement Plan and Consulting
      Agreements (SERPs) with several officers under which the Company has agreed
      to
      provide retirement benefits to the officers. The balance of each officer’s
      unfunded SERP liability account will determine the amount of the benefit to
      each
      officer at retirement as this balance will be paid to the officer over ten
      years
      after retirement. Until retirement, the SERP liability accounts are increased
      by
      the after Federal income tax effect of the increases in the cash surrender
      value
      of life insurance policies acquired by the Company. During 2005, new SERP
      agreements were established with additional officers and the existing SERPs
      were
      enhanced. The Company invested $1,175,000 in new life insurance policies in
      2005
      to fund the new/enhanced benefits. During 2006 and 2005, $140,122 and $126,350,
      respectively were added to the SERP liability balances and charged to
      compensation expense. The balance of all SERP liability accounts was $401,707
      at
      December 31, 2006 and $261,585 at December 31, 2005.





The
      Bank
      has a 401(k) profit sharing plan for those employees who meet the eligibility
      requirements set forth in the plan. The plan does not require the Bank to match
      the participants’ contributions; however, the Bank expensed $44,616 and $45,324
      for matching the contributions in 2006 and 2005, respectively.





**Note
      14. Fair Value of Financial Instruments**




The
      estimated fair values of the Company’s financial instruments at December 31,
      2006 and 2005 are summarized below. The fair values of a significant portion
      of
      these financial instruments are estimates derived using present value techniques
      and may not be indicative of the net realizable or liquidation values. Also,
      the
      calculation of estimated fair values is based on market conditions at a specific
      point in time and may not reflect current or future fair values.





December
                31, 2006
            
            December
                31, 2005Carrying
              Amount
            
            Fair
              Value
            
            Carrying
              Amount
            
            Fair
              ValueFinancial
                assets:Cash
                and due from banks
            
            $
            3,797,606
            
            $
            3,797,606
            
            $
            4,214,570
            
            $
            4,214,570Federal
                funds sold
            
            
            23,612,682
            
            
            23,612,682
            
            
            11,262,328
            
            
            11,262,328Interest
                bearing deposits
            
            
            1,890,666
            
            
            1,890,666
            
            
            2,884,893
            
            
            2,884,893Investment
                securities (total)
            
            
            24,814,135
            
            
            24,647,503
            
            
            32,817,378
            
            
            32,618,968Loans,
                net
            
            
            98,967,630
            
            
            98,304,952
            
            
            88,561,597
            
            
            88,691,945Accrued
                interest receivable
            
            
            585,383
            
            
            585,383
            
            
            595,131
            
            
            595,131Mortgage
                servicing rights
            
            
            14,031
            
            
            14,031
            
            
            26,321
            
            
            26,321





Financial
                liabilities:Non-interest
                bearing deposits
            
            $
            37,946,831
            
            $
            37,946,831
            
            $
            37,666,022
            
            $
            37,666,022Interest
                bearing deposits
            
            
            100,716,346
            
            
            100,926,241
            
            
            89,418,414
            
            
            89,519,351





56





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      14. Fair Value of Financial Instruments - Continued**




Financial
                liabilities - continued:Securities
                sold under agreementsto
                repurchase
            
            
            291,030
            
            
            291,030
            
            
            548,367
            
            
            548,367Accrued
                interest payable
            
            
            83,398
            
            
            83,398
            
            
            53,571
            
            
            53,571Off-balance
                sheet commitments
            
            
            -
            
            
            -
            
            
            -
            
            
            -





The
      fair
      value of cash and due from banks, federal funds sold, interest bearing deposits,
      accrued interest receivable and mortgage serving rights are equal to the
      carrying amounts. The fair values of Government agency securities and
      mortgage-backed securities are determined using market quotations. Loans
      receivable were discounted using a single discount rate, comparing the current
      rates at which similar loans would be made to borrowers with similar credit
      ratings and for the same remaining maturities. The fair value of variable rate
      loans is estimated to equal the carrying amount. The valuation of loans is
      adjusted for possible credit losses.





The
      fair
      value of non-interest bearing deposits, interest-bearing checking, savings,
      and
      money market deposit accounts, securities sold under agreements to repurchase,
      and accrued interest payable are equal to the carrying amounts. The fair value
      of fixed-maturity time deposits is estimated based on interest rates currently
      offered for deposits of similar remaining maturities.




**Note
      15. Parent Company Financial Information**





Information
      as to the financial position of CN Bancorp, Inc. as of December 31, 2006 and
      2005 and results of operations and cash flows for the years then ended
      follows:




*Statements
              of
              Financial Condition*2006
            
            2005AssetsCash
                in bank and on hand
            
            $
            1,656,547
            
            $
            3,406,752Loans
                receivable
            
            
            6,023,170
            
            
            4,059,558Investment
                in subsidiary
            
            
            13,163,236
            
            
            11,659,569Investment
                in stock of Maryland Financial Bank
            
            
            150,000
            
            
            150,000Other
                assets
            
            
            26,310
            
            
            13,280$
            21,019,263
            
            $
            19,289,159




Liabilities
                and Stockholders’ equityDividends
                payable
            
            $
            241,922
            
            $
            166,434Other
                payables
            
            
            84,975
            
            
            26,146326,897
            
            
            192,580Stockholders’
                equity
            
            
            20,692,366
            
            
            19,096,579$
            21,019,263
            
            $
            19,289,159




*Statements
                of Operations*
            
            2006
            
            2005Dividends
                from bank subsidiary
            
            $
            -
            
            $
            -Interest
                income
            
            
            407,396
            
            
            273,525Less
                expenses:Management
                fees
            
            
            140,000
            
            
            120,000Merger
                related activities costs
            
            
            150,000
            
            
            -Other
                administrative expenses
            
            
            90,710
            
            
            93,425380,710
            
            
            213,425Income
                before equity in undistributed net incomeof
                bank subsidiary and income tax expense
            
            
            26,686
            
            
            60,100Income
                tax expense
            
            
            36,181
            
            
            23,211Income
                (loss) before equity in undistributed net incomeof
                bank subsidiary
            
            
            (9,495
            )
            
            36,889Equity
                in undistributed net income of bank subsidiary
            
            
            1,410,763
            
            
            1,047,418Net
                income
            
            $
            1,401,268
            
            $
            1,084,307




57




**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      15. Parent Company Financial Information - Continued**




*Statements
                of Cash Flows*
            
            2006
            
            2005Cash
                flows from operating activities:Net
                income
            
            $
            1,401,268
            
            $
            1,084,307Equity
                in undistributed earnings of bank subsidiary
            
            
            (1,410,763
            )
            
            (1,047,418
            )Increase
                in other assets
            
            
            (13,030
            )
            
            (280
            )Increase
                (decrease) in payables
            
            
            58,830
            
            
            (2,855
            )Net
                cash provided by operating activities
            
            
            36,305
            
            
            33,754Cash
                flows from investing activities:Increase
                in loans receivable
            
            
            (1,963,612
            )
            
            (715,853
            )Net
                cash used in investing activities
            
            
            (1,963,612
            )
            
            (715,853
            )




Cash
                flows from financing activities:Sales
                of stock under Dividend Reinvestment Plan
            
            
            196,790
            
            
            105,314Proceeds
                from warrant exercises
            
            
            508,310
            
            
            2,726,000Dividends
            
            
            (527,998
            )
            
            (269,464
            )Net
                cash provided by financing activities
            
            
            177,102
            
            
            2,561,850




Increase
                (decrease) in cash and cash equivalents
            
            
            (1,750,205
            )
            
            1,879,751Cash
                and cash equivalents at beginning of period
            
            
            3,406,752
            
            
            1,527,001Cash
                and cash equivalents at end of period
            
            $
            1,656,547
            
            $
            3,406,752





**Note
      16. Recent Accounting Pronouncements**





In
      February 2006, the FASB published FASB Statement No. 155, *Accounting
      for Certain Hybrid Financial Instruments* (“SFAS
      No.155” or the “Statement”). SFAS 155 amends FASB Statements No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* and No.
      140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* .
      Among
      other things, the Statement resolves issues related to the financial reporting
      of certain hybrid financial instruments (financial instruments that have
      embedded derivatives) to be accounted for as a whole at fair value if the holder
      elects this option. This accounting eliminates the need to bifurcate the
      derivative from its host. The Statement also eliminates certain previous
      guidance that provided that beneficial interests in securitized financial assets
      are not subject to the provisions of SFAS No. 133. Lastly, the Statement also
      eliminates a restriction on the passive derivative instruments that a qualifying
      special purpose entity may hold. The adoption of this Statement did not have
      a
      material impact on the Company’s consolidated financial statements.





In
      March
      2006, the FASB published FASB Statement No. 156, *Accounting
      for Servicing of Financial Assets* (“SFAS
      No.156” or the “Statement”). This Statement amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* ,
      with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. The Statement requires an entity to recognize a servicing
      asset or servicing liability each time it undertakes an obligation to service
      a
      financial asset by entering into a servicing contract in each of several
      specific situations. It also requires all separately recognized servicing assets
      and servicing liabilities to be initially measured at fair value, if
      practicable, and permits an entity to choose either of two accepted measurement
      methods for each class of separately recognized servicing assets and servicing
      liabilities. Further, the Statement permits, at its initial adoption, a one-time
      reclassification of available-for-sale securities to trading securities by
      entities with recognized servicing rights. Lastly, the Statement requires
      separate presentation of servicing assets and servicing liabilities subsequently
      measured at fair value and additional disclosures for all separately recognized
      servicing assets and servicing liabilities. SFAS No. 156 is effective for fiscal
      years beginning after September 15, 2006. The adoption of this Statement did
      not
      have a material impact on the Company’s consolidated financial
      statements.




58





**CN
      BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      16. Recent Accounting Pronouncements - Continued**





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value and expands disclosures about fair value measurements. SFAS will be
      applied prospectively and is effective for fiscal years beginning after November
      15, 2007 and interim periods within those fiscal years. SFAS 157 is not expected
      to have a material impact on the Company’s consolidated financial statements.





In
      September 2006 the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 106 and 132R* .
      Under
      this standard, companies must recognize a net liability or asset to report
      the
      funded status of their defined benefit pension and other postretirement benefit
      plans on their balance sheets. The effective date of the recognition and
      disclosure provisions for calendar year public companies is for the calendar
      years ending after December 15, 2006. SFAS 158 did not have a material impact
      on
      the Company’s consolidated financial statements since the Company does not have
      any defined benefit plans.





FASB
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - and interpretation of FASB Statement No.
      109* clarifies
      the accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, *Accounting
      for Income Taxes.* This
      Interpretation prescribes a recognition and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. FIN 48 is effective for fiscal years
      beginning after December 15, 2006.





**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





CN
      Bancorp, Inc. dismissed Beard Miller Company LLP (Beard Miller) as CN Bancorp,
      Inc.’s independent registered public accounting firm effective on March 1, 2006.
      Beard Miller served as the Company’s independent registered accounting firm to
      audit the Company’s consolidated financial statements as of and for the years
      ended December 31, 2005, 2004 and 2003. Beard Miller’s reports on the
      consolidated financial statements of the Company as of and for the years ended
      December 31, 2005, 2004 and 2003 did not contain an adverse opinion or
      disclaimer of opinion and were not qualified or modified as to uncertainty,
      audit scope or accounting principles. There were no disagreements with Beard
      Miller on any matters of accounting principles or practices, financial statement
      disclosures or auditing scope or procedures, which disagreements, if not
      resolved to the satisfaction of Beard Miller, would have caused Beard Miller
      to
      make reference to the subject matter of the disagreement in their reports on
      the
      financial statement for such periods.




CN
      Bancorp, Inc. appointed Rowles & Company, LLP (Rowles) as the Company’s new
      independent registered public accounting firm effective on March 1, 2006. Rowles
      will serve as the Company’s independent registered public accounting firm to
      audit the Company’s consolidated financial statements as of and for the year
      ended December 31, 2006. Prior to the engagement, the Company had not consulted
      with Rowles regarding accounting principles to specific completed or
      contemplated transactions, the type of audit opinion that Rowles might render
      on
      the financial statements or any financial reporting issues. The Company has
      authorized Beard Miller to respond fully to any inquiries by Rowles regarding
      matters related to the items described herein.





**Item
      8A. Controls and Procedures**





CN
      Bancorp, Inc.’s management, under the supervision and with the participation of
      its Chief Executive Officer and the Chief Financial Officer, evaluated as of
      the
      last day of the period covered by this report, the effectiveness of the design
      and operation of the Company’s disclosure controls and procedures, as defined in
      Rule 15d-15 under the Securities Exchange Act of 1934. Based on that evaluation,
      the Chief Executive Officer and Chief Financial Officer concluded that the
      Company’s disclosure controls and procedures were effective as of the end of the
      period covered by this report. There were no significant changes in the
      Company’s internal control over financial reporting (as defined in Rule 15d-15
      under the Securities Act of 1934) during the year ended December 31, 2006,
      that
      have materially affected, or are reasonably likely to materially affect, the
      Company’s internal control over financial reporting




59





PART
      III





**Item
      9. Directors, Executive Officers, Promoters, Control Persons and Corporate
      Governance; Compliance with Section 16(a) of the Exchange
      Act**





CN
      Bancorp, Inc.’s directors and executive officers and County National Bank’s
      directors and executive officers are as follows:





**Name**
            
            
            **Age**
            
            
            **Position**Jan
                W. Clark
            
            
            70
            
            
            Chairman
                of the Board of Directors, and President and Chief Executive Officer
                of CN
                Bancorp, Inc.; Director, President and Chief Executive Officer of
                County
                National BankJohn
                E. DeGrange, Sr.
            
            
            63
            
            
            Vice
                Chairman of the Board of Directors of CN Bancorp, Inc.; Vice Chairman
                of
                the Board of Directors of County National BankCarl
                L. Hein, Jr.
            
            
            79
            
            
            Director
                and Treasurer of CN Bancorp, Inc.;
              Director
                and Treasurer of County National BankGerald
                V. McDonald
            
            
            71
            
            
            Director
                of CN Bancorp, Inc.; Chairman of the Board of Directors of County
                National
                BankCreston
                G. Tate
            
            
            79
            
            
            Director
                of CN Bancorp, Inc.; Director of County National BankJohn
                G. Warner
            
            
            64
            
            
            Director
                and Executive Vice President of CN Bancorp, Inc.; Director and Executive
                Vice President of County National BankF.
                Paul Dorr, Jr.
            
            
            66
            
            
            Director
                of County National BankRobert
                P. Musselman, Sr.
            
            
            66
            
            
            Director
                of County National BankWade
                H. Ritchie III
            
            
            47
            
            
            Director
                of County National BankDaljit
                S. Sawhney
            
            
            64
            
            
            Director
                of County National BankLeRoy
                C. Taylor
            
            
            72
            
            
            Director
                of County National BankK.
                Patricia Wellford
            
            
            65
            
            
            Director
                of County National BankMichael
                T. Storm
            
            
            56
            
            
            Chief
                Financial Officer of CN Bancorp, Inc.; Senior Vice President and
                Chief
                Financial Officer of County National BankMichael
                L. Derr
            
            
            56
            
            
            Vice
                President, County National Bank





Messrs.
      DeGrange and Tate’s terms as directors of CN Bancorp, Inc. expire at the 2007
      annual meeting of stockholders of CN Bancorp, Inc.





Messrs.
      McDonald and Clark’s terms as directors of CN Bancorp, Inc. expire at the 2008
      annual meeting of stockholders of CN Bancorp, Inc.





Messrs.
      Hein and Warner’s terms as directors of CN Bancorp, Inc. expire at the 2009
      annual meeting of stockholders of CN Bancorp, Inc.





*Jan
      W. Clark* is the
      chairman of the board of directors and president and chief executive officer
      of
      CN Bancorp, Inc., and he is a director and president and chief executive officer
      of County National Bank. He has held these positions since 1996, with the
      exception of his position as chairman, which he assumed in May 2000. Mr. Clark
      was the former president and chief executive officer of another bank located
      in
      Glen Burnie, Maryland, having served in that capacity from 1991 to March 1995.
      Mr. Clark was a director of that bank and its holding company from 1988-1995,
      where he served on various board of directors’ committees. Mr. Clark also served
      as a director of North Arundel Savings Bank, FSB from 1975 to 1988. Prior to
      1991, Mr. Clark was a principal of the accounting firm of Clark and Anderson,
      of
      which he was one of the founders. He has been a certified public accountant
      since 1969.





*John
      E. DeGrange, Sr* .
      has
      been a director of CN Bancorp, Inc. and of County National Bank since 1996.
      He
      became vice chairman of the board of directors of County National Bank in May
      1999 and vice chairman of the board of directors of CN Bancorp, Inc., in May
      2000. Mr. DeGrange was the president of DeGrange Lumber Company, Inc. from
      1962
      until November 1995, and from 1965 until 1996 he was an officer of The DeGrange
      Company, a company formed to hold real estate for DeGrange Lumber Company,
      Inc.
      Mr. DeGrange was a director of a local bank from 1984 to 1995 as well as the
      treasurer of that bank’s holding company from 1993 to 1995. Since 1996, Mr.
      DeGrange has been a self-employed painting contractor.




60





*Carl
      L. Hein, Jr.* is a
      director and the treasurer of CN Bancorp, Inc. and a director and the treasurer
      of County National Bank. He has served in those capacities since 1996. Mr.
      Hein
      is currently the president of Hein Bros, Inc. and has served in that capacity
      for over 20 years. Hein Bros, Inc. is a third generation business located in
      Glen Burnie, Maryland and is a major supplier of heating fuel to retail and
      commercial customers. The company provides maintenance service for heating
      and
      air conditioning systems in addition to its fuel and heating and oil sales.





*John
      G. Warner* has
      served as executive vice president of CN Bancorp, Inc. and County National
      Bank
      and as a director of CN Bancorp, Inc. and of County National Bank since 1996.
      From 1991 until 1996, Mr. Warner was a consultant in the construction industry.
      From 1990 to 1991, Mr. Warner was president of First Federal Savings Bank of
      Annapolis. From 1989 to 1990, Mr. Warner was a senior vice president in the
      lending division of First Annapolis Savings Bank. Prior to those positions,
      Mr.
      Warner served in management capacities for over 25 years with several commercial
      banks, including Maryland National Bank and State National Bank of which he
      was
      the president.





*Gerald
      V. McDonald* has been
      a director of CN Bancorp, Inc. since 2001. He has served as a director of County
      National Bank since 1997 and presently serves as Chairman of the Board. Mr.
      McDonald owned and served as the president of Chesapeake Optical Company, a
      manufacturer of prescription lenses, from 1967 until he sold the company in
      2002. He currently has consulting arrangements with that company. Since 1978,
      Mr. McDonald also has been the president of Ferguson Test Kits, a manufacturer
      of drug test kits. He is also a general partner of Chesapeake Group Enterprises
      and Miles Center Associates.





*Creston
      G. Tate* has been
      a director of CN Bancorp, Inc. and of County National Bank since 1996. Mr.
      Tate
      is the president and chief executive officer of Tate Chrysler Plymouth (Glen
      Burnie); Tate Dodge, Inc.; Tate Dodge, Chrysler Plymouth; Tate Chrysler Plymouth
      of Frederick, Inc.; and Tate Chevrolet, Geo, BMW, Inc., and has served in those
      capacities for over 35 years.





*F.
      Paul Dorr, Jr.* has been
      a director of County National Bank since 1999. Since 1958, Mr. Dorr has owned,
      and served as the president of, F.P. Dorr & Sons, Inc., an automotive
      service company located in Crownsville, Maryland . Mr.
      Dorr
      was a director of a local bank from 1986 to 1995.





*Robert
      P. Musselman, Sr.* has
      been
      a director of County National Bank since 1996. Mr. Musselman currently is the
      president of Musselman’s Dodge, Inc. and has served in that capacity for over
      five years. Mr. Musselman owns a number of businesses in the Anne Arundel County
      area including Musselman’s Dodge, Inc., Robert Musselman’s Body Shop, Inc.,
      Modern Builders Plus, Drum Point Associates, Trigroup, LLC and Terrie’s Auto
      Sales. Mr. Musselman was a director of a saving bank from 1986 to
      1989.





*Wade
      H. Ritchie* III was
      elected to the Board of Directors of County National Bank in 2005. Mr. Ritchie
      is a Certified Public Accountant and, since 1989, he has been a principal and
      Vice President in the public accounting firm of Clark and Anderson, P.A. He
      has
      served on the Peer Review Committee for the Maryland Association of Certified
      Public Accountants for twelve years. He also serves as the Treasurer for the
      North Arundel Hospital Foundation Board.





*Dr.
      Daljit Singh Sawhney* has been
      a director of County National Bank since 1996. Dr. Sawhney currently practices
      medicine in Glen Burnie, Maryland and is president of Sawhney-Khandelival,
      P.A.
      Dr. Sawhney has served in this capacity since 1975. Dr. Sawhney received his
      medical training at the Amritson Medical College in Punjab, India and served
      his
      internship at Harbor Hospital Center in Baltimore. Dr. Sawhney also is executive
      vice president of Sawhney Neurology, P.A. and president of Crain Towers, Inc.,
      a
      real estate concern.





*LeRoy
      C. Taylor* has been
      a director of County National Bank since 1996, and has served as chairman of
      the
      Bank’s audit committee since 1996. Since 1975, Mr. Taylor has been a certified
      public accountant in private practice in Baltimore and Glen Burnie, Maryland.
      Mr. Taylor is a member of the Maryland Association of Certified Public
      Accountants and was a director of the North Anne Arundel County Chamber of
      Commerce in 1985.





*K.
      Patricia Wellford* has
      been
      a director of County National Bank since 1996. Mrs. Wellford was a director
      of a
      local bank from 1990 to 1995. Mrs. Wellford serves as a director of the Odenton
      Heritage Society, the Hospice of the Chesapeake, the Odenton Health Association
      and as an advisory director of the Greater Odenton Improvement Association.
      From
      1994 to 1998, Ms. Wellford served as an administrative aide to a Maryland state
      delegate. She has been retired since 1998.




61





*Michael
      T. Storm* has been
      the senior vice president and chief financial officer of County National Bank
      since 1998 and chief financial officer of CN Bancorp since 2001. Prior to
      joining County National Bank, he was a self-employed banking consultant during
      1997. He was the executive vice president and chief financial officer of
      Annapolis National Bank from 1990-1997.





*Michael
      L. Derr* joined
      County National Bank in May 2001 as a vice president. From 1999 until 2001,
      he
      served as senior vice president and chief operating officer of Harbor Capital
      National Bank in Rockville, Maryland. Prior to joining the organizing efforts
      of
      Harbor Capital National Bank, Mr. Derr was president of MLD Consulting, Inc.,
      a
      bank consulting company, which he founded in 1998. Mr. Derr previously served
      as
      assistant vice president and vice president of operations at a local bank from
      1989 to 1998. From 1972 to 1989, Mr. Derr held various positions, including
      vice
      president of operations, at another banking institution.





The
      directors of CN Bancorp, Inc. are divided into three classes, with each class
      containing one-third of the total number of directors, as near as is possible.
      Each director serves for a term ending on the date of the third annual meeting
      of stockholders following the annual meeting at which such director was elected.
      Pursuant to the charter of CN Bancorp, Inc., the term of office of one of the
      three classes of directors expires each year. The officers of CN Bancorp, Inc.
      are elected annually by the board of directors following the annual meeting
      of
      stockholders and serve for terms of one year or until their successors are
      duly
      elected and qualified except where a longer term is expressly provided in an
      employment contract duly authorized and approved by the board of directors
      of CN
      Bancorp, Inc.





Directors
      of County National Bank are elected annually by CN Bancorp, Inc., its sole
      stockholder.




The
      Company has adopted a Code of Ethics that applies to all directors, officers
      and
      employees of CN Bancorp, Inc. and subsidiaries.




*Committees
      and Meeting of the Board of Directors*





Meetings. The
      Board of Directors of the Company met 13 times during 2006 and the Board of
      Directors of County National Bank met 14 times during 2006. All members of
      the
      both Boards of Directors attended at least 75% of the meetings held by the
      Board
      of Directors and by all committees on which such member served during the 2006
      fiscal year or any portion thereof.




Audit
      Committee .
      The
      Board of Directors has a standing Audit Committee. The Audit Committee is
      responsible for the selection, review and oversight of the Company's independent
      accountants, the approval of all audit, review and attest services provided
      by
      the independent accountants, the integrity of the Company's reporting practices
      and the evaluation of the Company's internal controls and accounting procedures.
      It also periodically reviews audit reports with the Company's independent
      auditors. The Audit Committee of the Company is also responsible for the
      pre-approval of all non-audit services provided by its independent auditors.
      Non-audit services are only provided by the Company's independent accountants
      to
      the extent permitted by law. Pre-approval is required unless a "de minimus"
      exception is met. To qualify for the "de minimus" exception, the aggregate
      amount of all such non-audit services provided to the Company must constitute
      not more than 5% of the total amount of revenues paid by the Company to its
      independent auditors during the fiscal year in which the non-audit services
      are
      provided; such services were not recognized by the Company at the time of the
      engagement to be non-audit services; and the non-audit services are promptly
      brought to the attention of the committee and approved prior to the completion
      of the audit by the committee or by one or more members of the committee to
      whom
      authority to grant such approval has been delegated by the committee. The Audit
      Committee of the Company is comprised of Mr. Gerald McDonald (Chairman), Mr.
      John E. DeGrange, Sr. and Mr. Carl L. Hein, Jr. Each of the members of the
      Audit
      Committee is independent, as determined under the definition of independence
      under Rule 4350(d) of the Nasdaq Stock Market. The Board of Directors has
      adopted a written charter for the Audit Committee. During 2006, the Audit
      Committee met eleven times. The Board of Directors of County National Bank
      also
      has an Audit Committee, which also met eleven times during 2006, comprised
      of
      the members of the Company’s Audit Committee plus Mr. Wade H. Ritchie III, CPA
      and Mr. LeRoy Taylor, CPA.





The
      Board
      of Directors of the Company has determined that the Company does not currently
      have an “audit committee financial expert,” as defined under the rules of the
      Securities and Exchange Commission, serving on its Audit Committee. The Company
      believes that all of the members of the Audit Committee are qualified to serve
      on the committee and have the experience and knowledge to perform the duties
      required of the committee. The Company does not have any independent directors
      who would qualify as an audit committee financial expert, as defined. The
      Company believes that it has been, and may continue to be, impractical to
      recruit such a director unless and until the Company is significantly
      larger.




62





Nominations. The
      nominating committee consists of all of the members of the Board of Directors
      who are "independent directors" within the meaning of Rule 4200(a)(15) of the
      Nasdaq Stock Market. The nominating committee is responsible for the evaluation
      of nominees for election as director, the nomination of director candidates
      for
      election by the shareholders and evaluation of sitting directors. The Board
      has
      not developed a formal policy for the identification or evaluation of nominees.
      In general, when the Board determines that expansion of the Board or replacement
      of a director is necessary or appropriate, the nominating committee will review,
      through candidate interviews with members of the Board and management,
      consultation with the candidate's associates and through other means, a
      candidate's honesty, integrity, reputation in and commitment to the community,
      judgment, personality and thinking style, willingness to invest in the Company,
      residence, willingness to devote the necessary time, potential conflicts of
      interest, independence, understanding of financial statements and issues, and
      the willingness and ability to engage in meaningful and constructive discussion
      regarding Company issues. The committee would review any special expertise,
      for
      example, that qualifies a person as an audit committee financial expert,
      membership or influence in a particular geographic or business target market,
      or
      other relevant business experience. To date the Company has not paid any fee
      to
      any third party to identify or evaluate, or to assist it in identifying or
      evaluating, potential director candidates.





The
      nominating committee will consider director candidates nominated by shareholders
      during such times as the Company is actively considering obtaining new
      directors. Candidates recommended by shareholders will be evaluated based on
      the
      same criteria described above. Shareholders desiring to suggest a candidate
      for
      consideration should send a letter to the Company's Secretary and include:
      (a) a
      statement that the writer is a shareholder (providing evidence if the person's
      shares are held in street name) and is proposing a candidate for consideration;
      (b) the name and contact information for the candidate; (c) a statement of
      the
      candidate's business and educational experience; (d) information regarding
      the
      candidate's qualifications to be director, including but not limited to an
      evaluation of the factors discussed above which the Board would consider in
      evaluating a candidate; (e) information regarding any relationship or
      understanding between the proposing shareholder and the candidate; (f)
      information regarding potential conflicts of interest; and (g) a statement
      that
      the candidate is willing to be considered and willing to serve as director
      if
      nominated and elected. Because of the small size of the Company and the limited
      need to seek additional directors, there is no assurance that all shareholder
      proposed candidates will be fully considered, that all candidates will be
      considered equally, or that the proponent of any candidate or the proposed
      candidate will be contacted by the Company or the Board, and no undertaking
      to
      do so is implied by the willingness to consider candidates proposed by
      shareholders.





Compensation. The
      Company does not have a standing compensation committee or a charter; rather
      County National Bank’s Human Resources Committee evaluates officer and employee
      compensation issues subject to the approval of the County National Bank’s (Bank)
      Board of Directors. (All members of the Company’s Board of Directors are members
      of the Bank Board of Directors). Bank management makes recommendations to the
      Human Resources Committee as to employee benefit programs and officer and
      employee compensation. The compensation of senior officers, including the
      President/CEO and Executive Vice President, is reviewed and approved directly
      by
      the Chairman of the Human Resources Committee. The members of the Human Resource
      Committee are directors Mr. John E. DeGrange, Jr., Chairman, Mr. Carl L. Hein,
      Jr., Mr. Gerald V. McDonald and Mrs. K. Patricia Wellford, all of whom are
      “independent directors” as defined under Rule 4200(a) of the Nasdaq Stock
      Market. Mr. Michael L. Derr, VP is a non-voting member of this committee
      providing liaison between management and the committee. This Committee met
      twice
      during 2006. Neither the Company nor the Human Resources Committee engaged
      compensation consultants during the year.





Shareholder
      Communications. Company
      shareholders who wish to communicate with the Board of Directors or an
      individual director may write to CN Bancorp, Inc. 7401 Ritchie Highway, Glen
      Burnie, Maryland 21060, Attention Shirley Palmer, Corporate Secretary or to
      the
      attention of an individual director or Chairman of the Board. Your letter should
      indicate that you are a shareholder, and whether you own your shares in street
      name. Letters received will be retained until the next Board meeting, when
      they
      will be available to the addressed director or the Chairman of the Board. There
      is no assurance that all communications will receive a response.





Director
      Attendance at the Annual Meeting .
      The
      Board believes it is important for all directors to attend the Annual Meeting
      of
      Shareholders in order to show their support for the Company and to provide
      an
      opportunity for shareholders
      to communicate any concerns to them. Accordingly, the Company encourages all
      Company and County National Bank directors to attend each Annual Meeting of
      Shareholders unless they are unable to attend by reason of personal or family
      illness or pressing matters. All of the Directors attended the last stockholder
      meeting in May 2006.




63





*Audit
      Committee Report*





The
      Audit
      Committee has been appointed to assist the Board of Directors in fulfilling
      the
      Board's oversight responsibilities by reviewing the financial information that
      will be provided to the shareholders and others, the systems of internal
      controls established by management and the Board and the independence and
      performance of the Company's audit process.





The
      Audit
      Committee has:





(1)
      Reviewed and discussed with management the audited financial statements included
      in the Company's Annual Report and Form 10-KSB;





(2)
      Discussed with Rowles & Company, LLP, the Company's independent auditors,
      the matters required to be discussed by statement of Auditing Standards No.
      61,
      as amended, as adopted by the Public Company Accounting Oversight
      Board





(3)
      Received the written disclosures and letter from Rowles & Company, LLP as
      required by Independence Standards Board Standard No.1; and





(4)
      Discussed with Rowles &
      Company, LLP its
      independence.




Based
      on
      these reviews and discussions, the Audit Committee has recommended to the Board
      of Directors that the audited financial statements be included in the Company's
      annual report on Form 10-KSB for the year ended


December
      31, 2006. The Audit Committee has also considered whether the amount and nature
      of non-audit services provided by Rowles & Company, LLP is compatible with
      the auditor's independence.





The
      Audit
      Committee of the Company is comprised of Mr. Gerald McDonald (Chairman), Mr.
      John E. DeGrange, Sr. and Mr. Carl L. Hein, Jr.




Compliance
      with Section 16(a) of the Exchange Act





Not
      Applicable. CN Bancorp, Inc.’s officers, directors and 10% or greater
      stockholders are not required to file reports required pursuant to Section
      16(a)
      of the Exchange Act.





**Item
      10. Executive Compensation**





The
      following table summarizes the total compensation paid for the fiscal year
      2006
      to the president and chief executive officer of CN Bancorp, Inc. and County
      National Bank, and to each other named officer whose compensation exceeded
      $100,000 for the year ended December 31, 2006 (the “named executive officers”).
      Compensation is paid by County National Bank, and CN Bancorp, Inc pays no
      additional compensation.





***SUMMARY
      COMPENSATION TABLE***





**Name
                and Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **All
                Other****Compensation
                (1)**
            
            **Total***Jan
                W. Clark,*President and CEO,
            
            
            2006
            
            $
            205,571
            
            $
            10,500
            
            $
            69,549
            
            $
            285,619CN
                Bancorp, Inc. andCounty
                National Bank*John
                G. Warner,*Executive Vice President,
            
            
            2006
            
            $
            187,858
            
            $
            9,500
            
            $
            52,978
            
            $
            250,063CN
                Bancorp, Inc.,Executive
                Vice President and COO,County
                National Bank*Michael
                T. Storm,*Chief Financial Officer,
            
            
            2006
            
            $
            139,839
            
            $
            8,500
            
            $
            28,063
            
            $
            176,402CN
                Bancorp, Inc.Senior
                Vice President and CFO,County
                National Bank*Michael
                L. Derr,*Vice
                President
            
            
            2006
            
            $
            121,506
            
            $
            7,500
            
            $
            47,486
            
            $
            176,492County
                National Bank*Ralph
                F. Ebbenhouse,*Vice
                President
            
            
            2006
            
            $
            110,103
            
            
            -
            
            $
            7,954
            
            $
            118,057County
                National Bank




64




(1)
      Amounts include the increase in the vested interest in Supplemental Executive Retirement Plan (SERP), car allowances, life insurance premiums and
      contributions to benefit plans. For 2006, these amounts totaled $53,945, $9,000,
      $840 and $5,764, respectively, for Mr. Clark; $38,207, $9,000, $840 and $4,931,
      respectively, for Mr. Warner; $16,267, $7,200, $664 and $3,932, respectively,
      for Mr. Storm; $43,580, $0, $544 and $3,362, respectively, for Mr. Derr, and;
      $0, $4,500, $482 and $2,972, respectively, for Mr. Ebbenhouse.




*Employment
      Agreements*





Jan
      W.
      Clark and John G. Warner each have an employment agreement with County National
      Bank as amended and restated effective as of August 21, 2006. Each agreement
      is
      effective for an initial term of three years and is subject to automatic
      successive one-year renewals at the end of each year so that the remaining
      term
      continues to be three years, unless written notice of non-renewal is provided
      to
      the them between ten and 30 days prior to the anniversary date of the agreement.
      Pursuant to the agreements, Mr. Clark will serve as President and Chief
      Executive Officer of the County National Bank and the Company, and Mr. Warner
      will serve as Executive Vice President of the County National Bank and the
      Company. Each agreement provides for an annual salary, subject to annual merit
      increases, and for an annual bonus determined by the board of directors at
      its
      discretion. Both agreements also provide for participation in any bonus,
      incentive and other executive compensation programs as are made available to
      senior management of the County National Bank from time to time, which include
      an annual automobile allowance and life insurance benefits. Each agreement
      provides that the executive will not be compensated for his service as a
      director.





Each
      agreement also contains severance provisions that call for payments to Mr.
      Clark
      or Mr. Warner, as the case may be, in the event that they are terminated without
      cause or in connection with a change in control as defined in the agreements.
      If
      the agreement is not renewed as provided therein and the employee is
      involuntarily terminated without cause, then Mr. Clark or Mr. Warner will
      receive an amount equal to his base salary, incentive compensation awarded
      prior
      to his termination, and any benefits to which he is entitled (or the cash
      equivalent of such benefits) for a period equal to the remaining term of the
      agreement and 12 months thereafter. The amounts payable for the initial
      six-month period will be paid one day after six months from the date of the
      employee’s termination, with the remainder paid on the Bank’s regular payroll
      dates. In the event of the employee’s total disability or death, the employee or
      his beneficiary will receive the same amounts on the Bank’s regular payroll
      dates but only for the reminder of the term of the agreement and not for the
      12-month period thereafter. If the employee is involuntarily terminated for
      cause or voluntarily terminates his employment he is entitled only to his base
      pay and benefits due and owing through the date of such termination. Incentive
      compensation awarded to the employee, but not paid as of the date of
      termination, will be forfeited.





If
      the
      agreement is terminated following a change in control, then Mr. Clark or Mr.
      Warner will receive a lump-sum payment equal to the sum of (a) the excess of
      (i)
      2.99 times the employee’s average annual taxable compensation paid by County
      National Bank during the most recent five taxable years ending before the date
      of the change in control over (ii) the aggregate present value of all other
      payments to Mr. Clark or Mr. Warner in the nature of compensation that are
      treated for federal income tax purposes as contingent on the change in control,
      plus (b) a pro-rated annual bonus equal to the greater of the Mr. Clark’s or Mr.
      Warner’s target or actual bonus for the year in which the agreement terminates.
      These payments would be approximately $513,000 and $496,000 to Mr. Clark and
      Mr.
      Warner, respectively, as of December 31, 2006. In addition, pursuant to the
      agreement all of Mr. Clark’s or Mr. Warner’s employee’s stock awards will
      immediately vest, and each will be entitled to medical coverage (or the cash
      equivalent thereof) for up to two years.





In
      addition to the foregoing payments, under certain conditions Mr. Clark and
      Mr. Warner each will be entitled to gross-up payments to the extent such
      payments result in the imposition of any excise tax, interest or penalties.
      Each
      agreement contains confidentiality, non-competition and non-solicitation
      provisions.




65





In
      connection with the Agreement and Plan of Merger with Sandy Spring Bancorp,
      Inc., as discussed in Item 1 above: (i) Jan W. Clark, the president and chief
      executive officer of Company, entered into an employment agreement with SSB
      which is contingent upon and effective as of the effective time of the merger,
      pursuant to which Mr. Clark would be employed as the president of the County
      National division of SSB; and (ii) John G. Warner, the executive vice president
      of Company, entered into an employment agreement with SSB which is contingent
      upon and effective as of the effective time of the merger, pursuant to which
      Mr.
      Warner would be employed as the chief operating officer of the Company division
      of SSB. Under these agreements Messrs. Clark and Warner have also agreed to
      certain non-competition covenants covering the three years following their
      termination of employment with SSB.





Michael
      T. Storm is a party to an “at will” letter agreement with County National Bank
      dated December 31, 1997, effective January 1, 1998. The agreement provides for an annual salary, subject to annual merit increases.
      Although the agreement is silent with respect to bonuses, County National Bank
      may also pay discretionary bonuses to Mr. Storm. If County National Bank
      terminates employment without cause, Mr. Storm is entitled to receive his salary
      and COBRA premiums for six months either in a lump sum payment or monthly
      installments.





Michael
      L. Derr is a party to an “at will” letter agreement with County National Bank
      dated March 20, 2001, effective April 30, 2001. The agreement provides for an annual salary, subject to annual merit increases.
      Although the agreement is silent with respect to bonuses, County National Bank
      may also pay discretionary bonuses to Mr. Derr.





***OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END***





The
      following table sets forth information concerning all option holdings for the
      fiscal year ended December 31, 2006 for each of the named executive
      officers.





**OPTIONS****Name**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options-**
              **Exercisable**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options-**
              **Un-exercisable**
            
            **Option**
              **Exercise**
              **Price**
            
            **Option**
              **Expiration**
              **Date**Jan
                W. Clark
            
            
            6,500
            
            
            -
            
            $
            14.20
            
            
            12/6/20146,500
            
            
            -
            
            $
            14.50
            
            
            12/5/2015John
                G. Warner
            
            
            6,500
            
            
            -
            
            $
            14.20
            
            
            12/6/20146,500
            
            
            -
            
            $
            14.50
            
            
            12/5/2015Michael
                T. Storm
            
            
            6,500
            
            
            -
            
            $
            14.20
            
            
            12/6/20146,500
            
            
            -
            
            $
            14.50
            
            
            12/5/2015Michael
                L. Derr
            
            
            6,500
            
            
            -
            
            $
            14.20
            
            
            12/6/20146,500
            
            
            -
            
            $
            14.50
            
            
            12/5/2015Ralph
                F. Ebbenhouse
            
            
            2,500
            
            
            -
            
            $
            14.20
            
            
            12/6/20145,000
            
            
            -
            
            $
            14.50
            
            
            12/5/2015





*Supplemental
      Executive Retirement Plan*





County
      National Bank has purchased bank owned life insurance, referred to as BOLI,
      as
      an investment and as a means of funding retirement benefits for certain
      executives. These policies, of which County National Bank is the sole
      beneficiary, are owned by County National Bank, have been paid for in their
      entirety and are intended to generate income to satisfy its obligations under
      Supplemental Executive Retirement Plan and Consulting Agreements (SERPs) entered
      into by County National Bank with the executives. County National Bank intends
      to hold the policies until the death of the named insured officers. However,
      County National Bank can liquidate the policies for their cash surrender value
      but to do so would subject County National Bank to income taxes on the total
      earnings on the policies, which taxes have not been accrued. County National
      Bank has entered into the SERPs as part of its effort to attract and retain
      qualified executives.





County
      National Bank has entered into SERPs with Jan W. Clark, John G. Warner, Michael
      T. Storm, Michael L. Derr, Ralph F. Ebbenhouse, Janet King and Douglas W.
      DeVaughn. Under the SERPs, County National Bank has agreed to pay certain
      benefits to each executive upon retirement, which is defined in the SERPs as
      65
      years of age, voluntary resignation, involuntary termination or death. While
      the
      executive is employed, County National Bank maintains a pre-retirement account
      as a liability account on its books for the benefit of the executive. The
      pre-retirement account is increased or decreased each year by the earnings
      on a
      life insurance policy (or policies), adjusted for tax benefits in some cases,
      until the executive’s termination of employment, death or retirement. Four of
      the SERPs contain personal services/consulting provisions whereby payments,
      other than payments of the pre-retirement accounts, depend upon services to
      be
      rendered by the executives after retirement.




66





The
      following table lists the death benefit payable to County National Bank upon
      the
      death of the seven executives as of December 31, 2006 along with the related
      cash surrender value of the life insurance (CSV) recorded as an asset. Also
      included are the balances of the pre-retirement accounts as of December 31,
      2006. There are not separate policies for Mr. Storm or Mrs. King; rather, life
      insurance is carried on Mr. Derr for Mr. Storm’s benefits and Mr. Ebbenhouse for
      Mrs. King’s benefits.





**Name**
            
            **Death
                Benefit Payable to****Bank**
            
            **Related
                CSV**
            
            **Pre-retirement
                Account****Balance**Jan
                W. Clark
            
            $
            1,665,231
            
            $
            1,034,053
            
            $
            166,592John
                G. Warner
            
            
            1,306,426
            
            
            695,280
            
            
            119,665Michael
                L. Derr
            
            
            1,225,234
            
            
            565,812
            
            
            43,580Michael
                T. Storm
            
            
            -
            
            
            -
            
            
            43,580Ralph
                F. Ebbenhouse
            
            
            554,786
            
            
            268,714
            
            
            9,357Janet
                King
            
            
            -
            
            
            -
            
            
            9,357Douglas
                W. DeVaughn
            
            
            353,275
            
            
            134,533
            
            
            9,533Total
            
            $
            4,104,952
            
            $
            2,698,392
            
            $
            401,664





Pursuant
      to the SERPs, if the executive is continuously employed from the effective
      date
      of the SERP to retirement age, the executive is entitled to receive the balance
      in his pre-retirement account in 120 equal monthly installments commencing
      30
      days following retirement. In addition, under the SERPS with Misters Clark,
      Warner, Derr and Storm, County National Bank will pay the executive for personal
      services each year (and partial year), if rendered, subsequent to the
      executive’s retirement until the executive’s death.





If
      the
      executive dies while there is a balance in the executive’s pre-retirement
      account, County National Bank will pay the balance in a lump sum to the
      executive’s designated beneficiary. If the executive voluntarily resigns or is
      terminated without cause with less than five years of service prior to
      retirement, the executive has no rights to the balance in his pre-retirement
      account. If the executive voluntarily resigns or is terminated without cause
      with five or more years of service prior to retirement, the executive is
      entitled to receive 100% of the balance in his pre-retirement account either
      over 120 equal payments commencing 30 days after the executive reaches
      retirement age or as otherwise determined by the Board of Directors. From the
      time of termination of employment to the date the executive reaches retirement
      age, the balance in the executive’s pre-retirement account earns interest at the
      same interest rate as that paid by County National Bank on its retail statement
      savings accounts.





If
      the
      executive is terminated for cause (as defined in the SERP), the executive
      forfeits all rights under the SERP. If the executive is terminated without
      cause
      or voluntarily resigns after a change of control (as defined in the SERP) of
      CN
      Bancorp, Inc. or County National Bank, the executive is entitled to benefits
      following retirement age as if the executive had been continuously employed
      from
      the effective date of the SERP to retirement age, and the executive remains
      eligible for the death benefits described above.





The
      SERPs
      are unfunded and the rights of the named executives to the benefits under the
      SERP are that of a general creditor of County National Bank.





*Employer
      Benefit Plans*





All
      directors, officers and employees of County National Bank are eligible to
      participate in County National Bank’s loan program pursuant to which such
      persons are eligible to receive loans from County National Bank at 100 basis
      points (one percent) below the prevailing market rate for equivalent loans,
      subject to satisfaction with County National Bank’s underwriting standards for
      such loans.





County
      National Bank currently provides health care benefits, including medical,
      disability and group life insurance, subject to certain deductibles and
      copayments, for its full time employees.




67





County
      National Bank maintains a 401(k) profit sharing plan for employees who meet
      the
      eligibility requirements set forth in the plan. Pursuant to the plan, County
      National Bank may make a discretionary matching contribution and/or a
      discretionary profit sharing contribution to the plan. All such contributions
      must comply with the federal pension laws non-discrimination requirements and
      the terms of the plan. In determining whether to make a discretionary
      contribution, County National Bank’s board of directors evaluates County
      National Bank’s current and future prospects and management’s desire to reward
      and retain employees and attract new employees. County National Bank may also
      make discretionary contributions so as to comply with the federal pension laws.





*Director
      Compensation*





CN
      Bancorp Inc. does not currently pay any fees to its directors.





County
      National Bank does not currently pay any fees to its two inside directors,
      Jan
      W. Clark and John G. Warner. An inside director is a director who is also an
      employee of the Bank.





Outside
      directors of County National Bank are paid $600 per month for meetings attended.
      Outside directors who are members of the executive committee of the board of
      directors receive an additional $300 per month. Outside directors who are
      members of the loan committee and perform appraisal review services receive
      an
      additional $250 per month regardless of the number of reviews performed. Outside
      directors receive $75 for any other committee meeting attended.





***DIRECTOR
      COMPENSATION***


***(All
      of the below are County National Bank directors)***





**Name**
            
            **Total
                Fees Earned**
              **Or
                Paid in**
              **Cash**John
                E. DeGrange, Sr.
            
            $
            18,255F.
                Paul Dorr, Jr.
            
            
            9,225Carl
                L. Hein, Jr.
            
            
            13,725Gerald
                V. McDonald
            
            
            14,100Robert
                P. Musselman, Sr.
            
            
            7,800Wade
                H. Ritchie III
            
            
            10,200Daljit
                Singh Sawhney
            
            
            8,400Creston
                G. Tate
            
            
            12,975LeRoy
                C. Taylor
            
            
            9,150K.
                Patricia Wellford
            
            
            9,600





*Employee
      Stock Purchase Plan*





The
      stockholders of CN Bancorp, Inc. approved the Employee Stock Purchase Plan
      in
      May 2004. 50,000 shares of CN Bancorp, Inc.’s common stock is reserved under
      this plan for employees to buy such shares in amounts determined by the Board
      of
      Directors. The purchase price under this plan is eighty-five percent of the
      “fair market value” of the common stock at the date of grant of the right to
      purchase shares, or at the date of exercise of the right, whichever is lower.
      Employees (including officers) must meet certain minimum weekly work hours
      and
      be employed by CN Bancorp, Inc. or subsidiaries for a least a year to be
      eligible under this plan. During 2004, 2,685 shares of common stock were sold
      to
      employees under this plan for $11.99 per share. No shares were granted or sold
      under the plan during 2006 or 2005 and there are no outstanding grants at
      December 31, 2006. Under the Agreement and Plan of Merger with Sandy Spring
      Bancorp, Inc., the ESPP was suspended.





*Stock
      Option Plan*





The
      stockholders of CN Bancorp, Inc. approved the Stock Option Plan in May 2004.
      The
      Stock Option Plan provides for discretionary awards of options to purchase
      up to
      an aggregate of 200,000 shares of CN Bancorp, Inc. common stock to officers
      and
      key employees of the Company and subsidiaries as determined by a committee
      of
      directors at the fair market value of the common stock on the date of grant.
      The
      term of the options can extend to ten years. The options granted to employees
      may be incentive stock options, which are intended to be eligible for favorable
      tax treatment to the employee, and options to employees or directors may be
      nonqualified stock options. The Company did not grant any stock options during
      2006. There are 97,500 options outstanding at December 31, 2006 under the plan.
      Under the Agreement and Plan of Merger with Sandy Spring Bancorp, Inc., the
      Stock Option Plan was suspended subject to the terms of the existing outstanding
      options.




68





*Director
      Stock Purchase Plan*





The
      Board
      of Directors of CN Bancorp, Inc. approved the Director Stock Purchase Plan
      (DSPP) in 2004. The purpose of this plan is to encourage directors to acquire
      shares in the Company. 50,000 shares of CN Bancorp, Inc.’s common stock is
      reserved under this plan for directors to buy such shares in amounts determined
      by the Board of Directors. The purchase price under this plan is the “fair
      market value” of the common stock at the date of grant. The exercise date on the
      awarded grants may not be later than twelve months after the date of grant.
      No
      shares were purchased during 2006 or 2005 under this plan and there are no
      outstanding options to purchase common shares at December 31, 2006 . Under
      the
      Agreement and Plan of Merger with Sandy Spring Bancorp, Inc., the DSPP was
      suspended.





**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth the beneficial ownership of CN Bancorp, Inc.’s common
      stock as
      of
      March 6, 2007 by
      (i)
      persons believed by CN Bancorp, Inc. to beneficially own more than 5% of the
      common stock; (ii) CN Bancorp, Inc.’s and County National Bank’s directors and
      executive officers; and (iii) all directors and executive officers of CN
      Bancorp, Inc. as a group. Unless otherwise noted below, we believe that each
      person named in the table has or will have the sole voting and sole investment
      power with respect to each of the securities reported as owned by such person.


**Name
                and Address**
              **of
                Beneficial Owner****(1)**
            
            **Shares
                of Common Stock******
            
            **Options
                to Purchase Common Stock****(c)**
            
            **Total
                Number of**
              **Shares**
              **Beneficially
                Owned****(a)**
            
            **Percentage**
              **of**
              **Ownership****(b)**Jan
                W. Clark(2)
            
            
            26,643
            
            
            13,000
            
            
            39,643
            
            
            2.28
            %John
                E. DeGrange, Sr.(3)
            
            
            32,500
            
            
            -
            
            
            32,500
            
            
            1.88
            %Michael
                L. Derr(4)
            
            
            1,213
            
            
            13,000
            
            
            14,213
            
            
            0.82
            %F.
                Paul Dorr(5)
            
            
            4,158
            
            
            -
            
            
            4,158
            
            
            0.24
            %Carl
                L. Hein, Jr.(6)
            
            
            51,500
            
            
            -
            
            
            51,500
            
            
            2.98
            %Gerald
                V. McDonald(7)
            
            
            42,767
            
            
            -
            
            
            42,767
            
            
            2.47
            %Robert
                P. Musselman, Sr.
            
            
            139,500
            
            
            -
            
            
            139,500
            
            
            8.07
            %Wade
                H. Ritchie III
            
            
            6,000
            
            
            
            
            
            6,000
            
            
            0.35
            %Daljit
                S. Sawhney(8)
            
            
            74,977
            
            
            -
            
            
            74,977
            
            
            4.34
            %Michael
                T. Storm(9)
            
            
            830
            
            
            13,000
            
            
            13,830
            
            
            0.79
            %Creston
                G. Tate
            
            
            200,000
            
            
            -
            
            
            200,000
            
            
            11.57
            %LeRoy
                C. Taylor
            
            
            3,620
            
            
            -
            
            
            3,620
            
            
            0.21
            %John
                G. Warner
            
            
            23,576
            
            
            13,000
            
            
            36,576
            
            
            2.10
            %K.
                Patricia Wellford
            
            
            6,182
            
            
            -
            
            
            6,182
            
            
            0.36
            %Directors
                and Officers as a Group (14 people)
            
            
            613,466
            
            
            52,000
            
            
            665,466
            
            
            37.39
            %







(a) The
      total
      number of shares beneficially owned includes shares of common stock owned by
      the
      named persons as of the date noted above and shares of common stock subject
      to
      options held by the named persons that are exercisable as of, or within 60
      days
      of, said date.





(b) The
      shares of common stock subject to options are deemed outstanding for the purpose
      of computing the percentage ownership of the person holding the options, but
      are
      not deemed outstanding for the purpose of computing the percentage ownership
      of
      any other person.





(c) In
      December 2005, CN Bancorp, Inc. issued options to purchase common stock at
      $14.50 per share to certain officers and employees under the Stock Option Plan.
      The options are fully vested, immediately exercisable and expire in December
      2015. In December 2004, CN Bancorp, Inc. issued options to purchase common
      stock
      at $14.20 per share to certain officers and employees under the Stock Option
      Plan. The options are fully vested, immediately exercisable and expire in
      December 2014. The 13,000 shares under option noted above per officer are
      comprised of 6,500 shares of the 2004 option grant and 6,500 of the 2005 option
      grant.




69





(1) The
      address of each person listed in the foregoing table is the address of CN
      Bancorp, Inc., 7401 Ritchie Highway, Glen Burnie, Maryland 21061




(2) Mr.
      Clark has sole investment power with respect to 16,353 shares and 13,000 shares
      issuable under options, and shares investment and voting power with his wife
      with respect to 10,290 shares.





(3) Mr.
      DeGrange has sole investment and voting power with respect to 16,200 shares
      and
      shares investment and voting power with his wife with respect to 6,300 shares.
      Includes 10,000 shares owned by DeGrange Lumber Company, Inc.





(4) Mr. Derr
      has sole investment power with respect to 1,007 shares and 13,000 shares
      issuable under options and shares investment and voting power with his wife
      as
      to 206 shares.





(5) Mr.
      Dorr
      has sole investment power with respect to 4,058 shares and investment and voting
      power with his wife as to 100 shares.





(6) Mr. Hein
      has sole investment and voting power with respect to 39,050 shares. He is the
      personal representative for the estate of his deceased wife that controls 12,450
      shares.





(7) Mr.
      McDonald has sole investment power with respect to 20,659 shares and shares
      investment and voting power with his wife with respect to 22,108
      shares.





(8) Mr.
      Sawhney has sole investment power with respect to 49,867 shares investment
      and
      voting power with his wife with respect to 25,110 shares.





(9) Mr.
      Storm has sole investment power with respect to 13,000 shares issuable under
      options and shares investment and voting power with his wife as to all other
      shares.





**Item
      12. Certain Relationships and Related Transactions, and Director
      Independence**





**Warrants**





On
      June
      16, 1997, CN Bancorp, Inc. issued and sold to Jan W. Clark, a family general
      partnership controlled by John E. DeGrange, Sr., Carl L. Hein, Henry L. Hein,
      Robert P. Musselman, Sr., Shirley S. Palmer, Daljit Singh Sawhney, Creston
      G.
      Tate, LeRoy C. Taylor, John G. Warner and K. Patricia Wellford, for $0.01 each,
      a warrant to purchase one share of CN Bancorp, Inc. common stock for each share
      purchased by such persons in CN Bancorp, Inc.’s private placement offering in
      1996. Each of the these individuals, other than Ms. Palmer, is a current or
      former director of CN Bancorp, Inc. and/or County National Bank. Ms. Palmer
      previously was the assistant secretary of CN Bancorp, Inc. and is currently
      its
      secretary. Each of these individuals was an organizer of County National Bank.
      CN Bancorp, Inc. issued warrants to purchase a total of 343,431 shares to these
      persons. The warrants were exercisable at $10.00 per share, which was the price
      at which shares were offered in the private placement offering. The warrants
      became exercisable in March 1998, and expired in March 2006. Warrants
      representing 20,000 shares were exercised in 2004, 272,600 shares in 2005 and
      50,831 shares in 2006. There are no shares remaining under these warrants at
      December 31, 2006.





**Lease**





We
      lease
      space for our administrative offices and for County National Bank’s Glen Burnie
      branch and Millersville branch from entities controlled by Creston G. Tate,
      a
      director of CN Bancorp, Inc. and County National Bank. The terms of the leases
      are described in Item 2 - “Description of Properties”. During the year ended
      December 31, 2006, we paid $64,774 pursuant to these leases, We believe that
      the
      lease terms are at least as favorable as those that could be obtained from
      an
      unrelated third party.





70




**Banking
      Transactions**





Our
      directors and officers and the business and professional organizations with
      which they are associated have and will continue to have banking transactions,
      including deposit accounts, loans and loan participations, with County National
      Bank in the ordinary course of business. Any loans and loan commitments are
      made
      in accordance with all applicable laws and on substantially the same terms,
      including interest rates and collateral, as those prevailing at the time for
      comparable loans with unrelated persons. In the opinion of management, these
      transactions do not and will not involve more than the normal risk of
      collectibility or present other unfavorable features. Loans to directors and
      officers must comply with County National Bank’s lending policies and statutory
      lending limits, and directors with a personal interest in any loan application
      are excluded from considering any such loan application.





In
      2003,
      County National Bank sold loan participations to family members of Gerald V.
      McDonald, a director of the Company and the Chairman of the Board of County
      National Bank, on a non-recourse basis. Under these transactions, the family
      members acquired undivided percentage interests in specific loans held by County
      National Bank. The participations were sold under the same terms and conditions
      as loan participations sold to non-related entities. The total loan
      participation amount outstanding at December 31, 2006 and December 31, 2005
      was
      $601,950 and $673,026, respectively.





**Director
      Independence**





Our
      Board
      of Directors has determined that the following directors are “independent
      directors” as defined in Rule 4200(a)(15) of the Nasdaq Stock Market: John E.
      DeGrange, Sr., Carl L. Hein, Jr., Gerald V. McDonald, Creston G. Tate, F. Paul
      Dorr, Jr., Robert P. Musselman, Sr., Wade H. Ritchie III, Daljit S. Sawhney, LeRoy
      C.
      Taylor and K.
      Patricia Wellford.





**Item
      13. Exhibits**





3.1
            Amended
                Articles of Incorporation of CN Bancorp, Inc.(1)


3.2
            Amended
                and Restated Bylaws of CN Bancorp, Inc.(1)


4.1
            Rights
                of Holders of Common Stock (as contained in the Amended Articles
                of
                Incorporation included herein as Exhibit 3.1)(1)


4.2
            Form
                of Common Stock Certificate(1)


4.3
            Form
                of Warrant Exercisable for $10.00 per Share(1)


4.4
            Form
                of Warrant Exercisable for $12.00 per Share(1)


10.1
            Agreement
                and Plan of Merger dated December 13, 2006 between Sandy Spring Bancorp,
                Inc. and CN Bancorp, Inc.(12)


+10.3
            Employment
                Agreement between County National Bank and Jan W. Clark dated August
                21,
                2006(11)


+10.4
            Employment
                Agreement between County National Bank and John G. Warner dated August
                21,
                2006(11)


10.7
            Ground
                Lease Agreement dated July 1, 1996 between Tate Dodge, Inc. and County
                National Bank(1)


10.8
            First
                Amendment to Ground Lease Agreement dated July 1, 1997 among Tate
                Dodge,
                Inc., Tate Properties, L.L.C. and County National Bank(1)


10.9
            Ground
                Lease Agreement dated September 16, 1996 between Grace Anna Muhl
                and
                County National Bank(1)


10.10
            Lease
                dated January 1, 2003 between Ara and Mary Lou Ayanian and County
                National
                Bank(2)


10.11
                Amended
                    and Restated Executive Supplemental Retirement Plan and ConsultingAgreement
                    between County National Bank and Jan W. Clark dated June 18,
                    2002(3)


+10.12
            Amended
                and Restated Executive Supplemental Retirement Plan and Consulting
                Agreement between County National Bank and John G. Warner dated June
                18,
                2002(3)


+10.13
            Amended
                and Restated Executive Supplemental Retirement Plan and Consulting
                Agreement between County National Bank and Michael L. Derr dated
                June 18,
                2002(3)


+10.14
            Amended
                and Restated Executive Supplemental Retirement Plan and Consulting
                Agreement between County National Bank and Michael T. Storm dated
                June 18,
                2002(3)


10.15
            Ground
                Lease Agreement between Tate Veterans Highway, LLC and County National
                Bank(3)


+10.16
            CN
                Bancorp, Inc. Stock Option Plan(4)


+10.17
            Form
                of Incentive Stock Option Agreement for Stock Option Plan(6)


+10.18
            CN
                Bancorp, Inc. Director Stock Purchase Plan(5)


+10.19
            Director
                Stock Purchase Plan Offer and Acceptance Forms(6)


+10.20
            Letter
                Agreement between Michael T. Storm and County National Bank dated
                December
                31, 1997(6)




71




+10.21
            Letter
                Agreement between Michael L. Derr and County National Bank dated
                March 20,
                2001(6)


+10.22
            Terms
                of Director Cash Compensation


+10.23
            Salary
                Increases and Bonuses to Executive Officers


10.24
            Dividend
                Reinvestment and Stock Purchase Authorization Form(7)


+10.25
            Unfunded
                (Director) Deferred Compensation Agreement(8)


+10.26
            Executive
                Supplemental Retirement Plan Agreement between County National Bank
                and
                Ralph F. Ebbenhouse(10)


14
            Code
                of Ethics (revised)(9)


21.1
            Subsidiaries
                of CN Bancorp, Inc.(1)


23.1
                Consent
                    of Rowles & Company,
                    LLP


23.2
                Consent
                    of Beard Miller Company
                    LLP


31.1
            Rule
                13a-14(a) /15d-14(a) Certification -
                CEO


31.2
            Rule
                13a-14(a) /15d-14(a) Certification -
                CFO


32.1
            Certification
                of Periodic Financial Report pursuant to 18 U.S.C. Section 1350 -
                CEO


32.2
            Certification
                of Periodic Financial Report pursuant to 18 U.S.C. Section 1350 -
                CFO





(1) Filed by
      CN Bancorp, Inc. as an exhibit to, and are hereby incorporated by reference
      from, CN Bancorp, Inc.'s Registration Statement on Form SB-2, as amended, under
      the Securities Act of 1933, Registration Number 333-100460.





(2) Filed
      as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.'s
      2002 Form 10KSB.





(3) Filed as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.'s
      2003 Form 10KSB.





(4) Filed as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      Registration Statement on Form S-8, under the Securities Act of 1933, as amended
      (Registration Number 333-116380).





(5) Filed as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      Registration Statement on Form S-8, under the Securities Act of 1933, as amended
      (Registration Number 333-116359).





(6)
      F iled
      as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.'s
      2004 Form 10KSB and amendment thereto.





(7) Filed as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      Registration Statement on Form S-3, under the Securities Act of 1933, as amended
      (Registration Number 333-114355).





(8) Filed
      as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      Form 8-K filed on December 16, 2004.





(9) Filed
      as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      Form 8-K filed on June 28, 2004.





(10) Filed as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.'s
      2005 Form 10KSB.





(11) Filed
      as
      an exhibit to, and is hereby incorporated by reference from CN Bancorp, Inc.’s
      September 2006 Form 10-QSB filed on November 7, 2006.





(12) Filed
      as
      Exhibit 2.1 to CN Bancorp, Inc.’s Current Report on Form 8-K dated December 13,
      2006 and incorporated herein by reference.





The
      exhibits denominated with a "+" are compensatory plans or
      arrangements.





**Item
      14. Principal Accountant Fees and Services**





The
      Company engaged Rowles as its independent accountant for 2006. Beard Miller
      was
      its independent accountant during 2005. All services from the independent
      accountants during 2006 and 2005 were pre-authorized and requested by the Audit
      Committee of the Company prior to the services being performed. Below is a
      schedule of fees by related service for Rowles and Beard Miller during 2006
      and
      2005, respectively.




72





**2006**
            
            **2005**
            
            **Comments**Audit
                fees
            
            $
            30,500
            
            $
            29,124
            
            
            Audit
                services and reviews of SEC filingsAudit-Related
                fees
            
            
            -
            
            
            -Tax
                fees
            
            
            3,000
            
            
            3,000
            
            
            Preparation
                of income and related tax returnsAll
                Other fees
            
            
            -
            
            
            -$
            33,500
            
            $
            32,124





The
      Audit
      Committee is required to approve all audit and non-audit services, if any,
      provided by its independent accountant prior to such services being rendered.
      Non-audit services can only be provided by the Company’s independent accountant
      to the extent permitted by law. There were no services provided by Beard Miller
      or Rowles pursuant to the *de
      minimus* exception to the pre-approval requirement contained in the rules of the
      Securities and Exchange Commission.





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




CN
              Bancorp,
              Inc.Date:
              March 6,
              2007
            By:
            /s/
              Jan W.
              ClarkJan W. ClarkPresident and Chief Executive
              Officer





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated :





Name
            
            Position
            
            Date/s/Jan
                W. Clark
              Jan
                W. Clark
            
            Chairman
                of the Board of Directors,
              President,
                Chief Executive Officer,
              (Principal
                Executive Officer)
            
            March
                6, 2007/s/
                Michael T. Storm
              Michael
                T. Storm
            
            Chief
                Financial Officer (Principal Financial and Accounting
                Officer)
            
            March
                6, 2007/s/
                John E. DeGrange, Sr
              John
                E. DeGrange, Sr.
            
            Vice
                Chairman of the Board of Directors
            
            March
                6, 2007/s/
                Carl L. Hein, Jr.
              Carl
                L. Hein, Jr.
            
            Treasurer
                and Director
            
            March
                6, 2007/s/Gerald
                V. McDonald
              Gerald
                V. McDonald
            
            Director
            
            March
                6, 2007/s/
                Creston G. Tate
              Creston
                G. Tate
            
            Director
            
            March
                6, 2007/s/
                John G. Warner
              John
                G. Warner
            
            Executive
                Vice President and Director
            
            March
                6, 2007





**SUPPLEMENTAL
      INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF
      THE
      EXCHANGE ACT BY NON-REPORTING ISSUERS**




Subsequent
      to the date of this filing, CN Bancorp, Inc. intends to provide proxy materials
      to its security holders in connection with its annual meeting of security
      holders. A copy of such proxy materials will be furnished to the Securities
      and
      Exchange Commission for its information and CN Bancorp, Inc. understands that
      such materials will not be considered to be filed or subject to the liabilities
      of Section 18 of the Exchange Act.




73