2001 Annual Report
CNB BANCORP, Inc.


<PAGE>

DIRECTORS
CNB Bancorp, Inc. and City National Bank and Trust Company

JOHN C. MILLER               PRESIDENT, JOHN C. MILLER, INC.
                             AUTOMOBILE DEALER

FRANK E. PERRELLA            PRESIDENT, SIRA CORP
                             CONSULTANT

ROBERT L. MAIDER             PARTNER, MAIDER & SMITH ATTORNEYS

WILLIAM N. SMITH             CHAIRMAN OF THE BOARD,
                             PRESIDENT AND CHIEF EXECUTIVE OFFICER
                             OF THE COMPANY AND THE SUBSIDIARY BANK

GEORGE A. MORGAN             VICE PRESIDENT AND SECRETARY OF THE COMPANY
                             AND EXECUTIVE VICE PRESIDENT, CASHIER AND
                             TRUST OFFICER OF THE SUBSIDIARY BANK

BRIAN K. HANABURGH           OWNER, D/B/A MCDONALD'S RESTAURANTS
                             FAST FOOD RESTAURANT

CLARK D. SUBIK               PRESIDENT, SUPERB LEATHERS, INC.
                             LEATHER MERCHANDISER

DEBORAH H. ROSE              (RETIRED) VICE PRESIDENT, HATHAWAY AGENCY, INC.
                             GENERAL INSURANCE

THEODORE E. HOYE, III        PRESIDENT, FIRST CREDIT CORP.
                             FINANCING AND INSURING OF MANUFACTURED HOUSING

TIMOTHY E. DELANEY           PRESIDENT, DELANEY CONSTRUCTION CORP.
                             HEAVY/HIGHWAY CONSTRUCTION

RICHARD D. RUBY              PRESIDENT, RUBY & QUIRI, INC.
                             HOME FURNISHINGS RETAILER


HONORARY DIRECTORS

LYDON F. MAIDER            RICHARD E. HATHAWAY           JAMES W. ST. THOMAS
LLOYD POLITSCH             PAUL E. SMITH                 LEON FINKLE
HENRY BUANNO               ROSS H. HIGIER                CLARK EASTERLY, SR.
ALFRED J. WASHBURN         RICHARD P. TATAR


<PAGE>

<TABLE>

FINANCIAL HIGHLIGHTS
(In thousands, except per share data)

<CAPTION>
                                                         2001              2000             1999
<S>                                                      <C>               <C>              <C>
NET INCOME                                               $  4,032          $  3,705         $  3,299
Earnings Per Share
    Basic                                                    1.75              1.56             1.37
    Diluted                                                  1.72              1.54             1.36

CASH DIVIDENDS                                           $  1,520            $1,476         $  1,416
Per Common Share                                             0.66              0.62             0.59

STOCKHOLDERS' EQUITY AT YEAR-END                         $ 34,649          $ 33,993         $ 31,285
Per Common Share                                            15.22             14.49            13.03

RETURN ON AVERAGE STOCKHOLDERS' EQUITY                       11.7%             11.6%            10.5%

RETURN ON AVERAGE ASSETS                                     1.14%             1.12%            1.13%

TOTAL ASSETS AT YEAR-END                                 $359,955          $339,306         $314,908

</TABLE>

Per share figures have been adjusted to reflect the 3 for 2 stock split
effected through the 50% stock dividend declared in July 1999.


                                    - 1 -


<PAGE>

PRESIDENT'S MESSAGE

I am pleased to report that 2001 was another outstanding year for our Company
and the eleventh consecutive year of record earnings, with net income
exceeding $4 million for the first time.

Net income of $4.0 million for 2001 was an increase of 8.8% over the prior
year's result of $3.7 million. More importantly, diluted earnings per share
were $1.72 compared to $1.54 in 2000, an increase of 11.7%.

Total assets increased $20.6 million or 6.1%, resulting in total assets at
year-end of $360.0 million.

Total loans, net of unearned income, increased $8.4 million or 4.5%, to a new
high of $194.9 million.

Total deposits increased $8.8 million or 3.2%, resulting in total deposits at
year-end of $279.2 million. As mentioned in prior annual report messages, we
monitor our deposit growth and compare ourselves to the competition from
information submitted to the Federal Deposit Insurance Corporation. Based
upon the latest available data, we have a 37.3% market share of deposits in
Fulton County. This is a slight increase from last year. We have increased
our market share every year but one since 1988, when we had a market share of
18.9%. We continue to be, by far, the financial institution with the most
deposits in Fulton County; a distinction we have held since 1986.

Stockholders' equity at year-end was $34.6 million, as compared to $34.0
million at the prior year-end. This resulted in a year-end stockholders'
equity to total assets ratio of 9.6%, a ratio that is over twice the
regulatory minimum guideline of 4.0%.

In August, the Board of Directors increased the dividend for the thirty-fifth
consecutive year. The dividend per share for the year was $0.66, an increase
of 6.5%, as compared to $0.62 in 2000. Total dividends paid to stockholders
for the year amounted to $1.5 million.

During the year, the Dividend Reinvestment Stock Purchase Plan was put into
place. The Plan is a convenient way for stockholders to increase their
ownership of CNB Bancorp, Inc. common shares without paying brokerage
commissions. The Plan offers the opportunity to increase stockholder
ownership on a regular basis by reinvesting all or part of cash dividends
received and to invest up to an additional $5,000 per quarter. At this time
179 stockholders are enrolled in the Plan.

In April, Clark Easterly, Sr. retired as an active member of our Board of
Directors after serving nine years. We thank Clark for his years of service
to our organization.

During the year we were saddened by the loss of three honorary directors.
Henry C. Tauber passed away on May 30, 2001. He served on the Board of
Directors for 25 years, retiring in 1984. Theodore E. Hoye, Jr. passed away
on July 24, 2001. He served as a director for 36 years, retiring in 1998.
Edward F. Vonderahe passed away on August 6, 2001. He served as a director
for 18 years, retiring in 1982. The dedication, loyalty and leadership of
these men to our organization will long be remembered.

In May, Donald R. Houghton, Vice President and Manager of our Northville
office, retired after 45 years of service to our Company. Don was employed in
various positions with the subsidiary Bank including auditor, cashier and
mortgage loan officer before becoming the manager of the Northville office
when it opened in 1990. Don's loyalty and commitment were major factors in
the success of that branch. We wish Don many years of health and happiness in
the future.


                                    - 2 -


<PAGE>


At the end of March, Lynne Cirillo retired after 28 years with the subsidiary
Bank. Lynne worked many years at the Fifth Avenue office before being
transferred to the main office where she spent the last seven years as
manager. Lynne's dedication to our Company will be missed. We wish her good
luck in her retirement years.

At the subsidiary Bank we are extremely fortunate to have an experienced and
dedicated staff who understand the importance of quality customer service. In
terms of experience, over 50% of our employees have been with us over five
years and over 30% have been with us for over ten years. A good example of
our staff's dedication is that thirteen of our full-time, non-officer
subsidiary Bank employees had perfect attendance over the last six months of
2001.

Advanced technology has become an important part of banking and we are
actively involved in this development. During the year access to the internet
and e-mail were made available to the staff. Throughout the year considerable
time was spent in developing a state-of-the-art internet web site and on-line
personal banking package. Accounts may be viewed on-line and loan payments
and transfers may be made between accounts. By the time you receive this
report, the web site and personal on-line banking will be operational at
www.citynatlbank.com.

In May 2002, we will celebrate the subsidiary Bank's 115th anniversary. This
milestone gives us the opportunity to reflect on the changes that have
occurred over the years. In addition to the traditional banking services
provided at our seven locations in Fulton and Saratoga counties, we are now
offering insurance products through the Hathaway Agency, Inc. and investment
products through Investor's Market Place. In 2002, we will be opening a new
and more visible office on Broadway in Saratoga Springs with a drive-thru and
ATM for improved customer services.

As we grow and change, I am confident that we will continue the successes
that we have experienced in the past through the efforts of our highly
motivated staff offering quality personal service.

As always, we welcome your comments and suggestions, and please remember to
use our banking services and recommend us to your friends and neighbors.


/s/ William N. Smith

WILLIAM N. SMITH
Chairman of the Board, President and Chief Executive Officer
of the Company and the subsidiary Bank


                                    - 3 -


<PAGE>

Year-End Total Assets
Five Years (1997-2001)
(Thousands)
1997     $222,325
1998     $255,568
1999     $314,908
2000     $339,306
2001     $359,955


Net Income
Five Years (1997-2001)
(Thousands)
1997     $3,101
1998     $3,222
1999     $3,299
2000     $3,705
2001     $4,032


                                    - 4 -


<PAGE>

Basic Earnings Per Share
Five Years (1997-2001)
(Dollars)
1997     $1.29
1998     $1.34
1999     $1.37
2000     $1.56
2001     $1.75


Dividends Per Common Share
Five Years (1997-2001)
(Dollars)
1997     $0.53
1998     $0.56
1999     $0.59
2000     $0.62
2001     $0.66


                                    - 5 -


<PAGE>

FINANCIAL REVIEW

The financial review is a presentation of management's discussion and
analysis of the consolidated financial condition and results of operations of
CNB Bancorp, Inc. (Company) and its subsidiaries, City National Bank & Trust
Company and Hathaway Agency, Inc. The financial review is presented to
provide a better understanding of the financial data contained in this report
and should be read in conjunction with the consolidated financial statements
and other schedules that follow.

Forward-Looking Statements:

In addition to historical information, this Annual Report includes certain
forward-looking statements with respect to the financial condition, results
of operations and business of the Company and its subsidiaries based on
current management expectations. The Company's ability to predict results or
the effect of future plans and strategies is inherently uncertain and actual
results, performance, or achievements could differ materially from those
management expectations. Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, legislative and regulatory changes, monetary and fiscal
policies of the federal government, changes in tax policies, rates and
regulations of federal, state, and local tax authorities, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition of the
subsidiary Bank's loan and securities portfolios, changes in accounting
principles, policies or guidelines, and other economic, competitive,
governmental, and technological factors affecting the Company's operations,
markets, products, services and prices.

Mergers and Acquisitions:

On June 1, 1999, the Company completed the acquisition of Adirondack
Financial Services Bancorp, Inc. (Adirondack), at which time Adirondack
merged with and into CNB Bancorp, Inc. Upon acquisition, Adirondack's
subsidiary Bank, Gloversville Federal Savings and Loan Association, merged
with the Company's subsidiary Bank, City National Bank & Trust Company.

On July 1, 2000, the Company completed the acquisition of Hathaway Agency,
Inc., a general insurance agency. Pursuant to the merger, Hathaway became a
wholly-owned subsidiary of CNB Bancorp, Inc.

Financial Condition:

The table below presents a comparison of average and year-end selected
consolidated balance sheet categories over the past three years, and the
changes in balances for those years (in thousands).


                                    - 6 -

<PAGE>

<TABLE>

Average Consolidated Balance Sheet

<CAPTION>
                                                                                                    Increase/(Decrease)

                                                2001           2000          1999              2001/2000         2000/1999
<S>                                             <C>            <C>           <C>               <C>               <C>
Assets:
    Cash and due from banks                     $  7,932       $  7,678      $  9,068           $   254          ($ 1,390)
    Federal funds sold                             7,265          5,595         9,042             1,670            (3,447)
    Int. bearing deposits with banks               3,022          1,128         1,655             1,894              (527)
    Total securities<F1>                         130,902        122,667       107,914             8,235            14,753
    Loans, net                                   190,532        178,444       150,683            12,088            27,761
    Other assets                                  14,994         16,116        12,500            (1,122)            3,616

        Total Assets                            $354,647       $331,628      $290,862           $23,019           $40,766

Liabilities:
    Demand deposits                              $26,756        $26,972      $ 23,375          ($   216)          $ 3,597
    Savings, NOW and money
      market accounts                            113,416        107,957        95,830             5,459            12,127
    Time deposits                                136,628        137,432       120,133              (804)           17,299
    Notes payable and repurchase
      agreements                                  41,356         25,765        18,682            15,591             7,083
    Other liabilities                              1,959          1,485         1,380               474               105
Stockholders' equity                              34,532         32,017        31,462             2,515               555

        Total Liabilities and Equity            $354,647       $331,628      $290,862           $23,019           $40,766

<FN>

<F1> Includes available for sale securities at fair value, held to maturity
     securities at amortized cost and Federal Reserve Bank and Federal Home Loan
     Bank stock at cost.

</FN>
</TABLE>

<TABLE>

Year-End Consolidated Balance Sheet

<CAPTION>
                                                                                                     Increase/(Decrease)

                                                2001           2000          1999               2001/2000        2000/1999
<S>                                             <C>            <C>           <C>                <C>              <C>
Assets:
    Cash and due from banks                     $ 11,212       $  9,166      $ 12,402           $ 2,046          ($ 3,236)
    Federal funds sold                             8,200          5,400         5,300             2,800               100
    Int. bearing deposits with banks                 317            272         2,128                45            (1,856)
    Total securities<F1>                         133,057        124,767       109,280             8,290            15,487
    Loans, net                                   192,443        183,840       169,716             8,603            14,124
    Other assets                                  14,726         15,861        16,082            (1,135)             (221)

        Total Assets                            $359,955       $339,306      $314,908           $20,649           $24,398

Liabilities:
    Demand deposits                             $ 28,103       $ 26,339      $ 25,671           $ 1,764           $   668
    Savings, NOW and money
      market accounts                            130,311        125,974       121,717             4,337             4,257
    Time deposits                                120,813        118,161       117,692             2,652               469
    Notes payable and repurchase
      agreements                                  44,618         33,128        17,754            11,490            15,374
    Other liabilities                              1,461          1,711           789              (250)              922
Stockholders' equity                              34,649         33,993        31,285               656             2,708

        Total Liabilities and Equity            $359,955       $339,306      $314,908           $20,649           $24,398

<FN>

<F1> Includes available for sale securities at fair value, held to maturity
     securities at amortized cost and Federal Reserve Bank and Federal Home Loan
     Bank stock at cost.

</FN>
</TABLE>

Total assets at December 31, 2001 reached $360.0 million as compared to
$339.3 million at December 31, 2000, an increase of $20.6 million or 6.1%.
Most of the asset growth during 2001 can be attributed to the subsidiary
Bank's continued leveraging strategies, which included the borrowing of an
additional $11.6 million from the Federal Home Loan Bank during the year.
Deposits for the year grew by $8.8 million or 3.2%. Average assets for 2001
totaled $354.6 million, an increase of $23.0 million or 6.9% from the 2000
average of $331.6 million.

Loans, which constitute the subsidiary Bank's largest segment of earning
assets, represented 53.5% of total assets at December 31, 2001. Net loans
increased approximately $8.6 million or 4.7% during 2001. Average net loans
for 2001 increased $12.1 million or 6.8% over 2000. Average loans for
commercial and consumer installment loans increased for the year 11.0% and
18.4%, respectively. Average mortgage loans decreased slightly by 2.8% for
the year. The yield on total loans decreased from 8.48% in 2000 to 8.17% in
2001 primarily due to several reductions in the prime lending rate.

The total securities portfolio, which includes both "available for sale" and
"held to maturity" securities, at

                                    - 7 -


<PAGE>

FINANCIAL REVIEW (Continued)

December 31, 2001 was $133.1 million as compared to $124.8 million the
previous year, an increase of $8.3 million. The increase for 2001 is
attributed to leveraging securities, which includes borrowing from the FHLB
and purchasing investment securities of various types and maturities. The
yield on the portfolio decreased 24 basis points year to year from 6.98% for
2000 to 6.74% for 2001. The decrease in yield for 2001 was a result of the
Federal Reserve Bank's interest rate cuts throughout the year that affected
short-term rates more than longer-term investment rates.

Federal funds sold, which is a source of liquidity for the subsidiary bank,
increased from $5.4 million to $8.2 million year to year. On average, Federal
funds sold increased by $1.7 million or 29.8%. Higher averages were
maintained during 2001 due to an increase of repayments from mortgage backed
securities and bonds being called as a result of lower interest rates in
effect throughout the year.

Deposits continue to be the subsidiary Bank's primary source of funding.
Total deposits at December 31, 2001 reached $279.2 million, an increase of
$8.8 million or 3.2% over the previous year-end. Core deposits, which consist
of demand, savings, NOW, and money market accounts, grew by $6.1 million or
4.0%. Certificates and time deposits of $100,000 or more, primarily
short-term municipal deposits, decreased for the year by $3.3 million or
8.9%. Other time deposits increased $6.0 million or 7.4% which was a result
of various product promotions throughout the year. Average deposits increased
during the year to $276.8 million from $272.4 million, an increase of $4.4
million or 1.6%.

Cash and due from banks increased to $11.2 million at year-end 2001 from $9.2
million at year-end 2000, an increase of 22.3%. Average cash and due from
banks was up slightly year-to-year by $0.3 million.

Other assets decreased slightly for the year by $1.1 million to $14.7 million
at December 31, 2001 from $15.9 million at December 31, 2000, which was
primarily related to goodwill amortization. Average other assets decreased by
$1.1 million year to year.

Stockholders' equity at year-end 2001 was $34.6 million as compared to $34.0
million at year-end 2000. The increase was due mainly to a combination of net
income after dividends of $2.4 million, plus a net unrealized gain of market
value on securities available for sale, net of tax, in the amount of $0.5
million, less a net purchase of treasury stock of $2.3 million. The
consolidated statements of changes in stockholders' equity included in this
annual report detail the changes in equity capital.

Results of Operations:

The comparative consolidated statement of income summarizes income and
expense for the last three years. The Company achieved record earnings for
2001 of $4,032,000 as compared to $3,705,000 for 2000, an increase of
$327,000 or 8.8% over the previous year. Net income for 2000 was 12.3% above
1999 net income of $3,299,000. Basic earnings per share for year 2001 were
$1.75, up 12.2% from 2000 per share earnings of $1.56. Diluted earnings per
share of $1.72 were up 11.7% over 2000 earnings per share of $1.54. The
strong increase in per share earnings was a result of higher net income
divided by fewer shares outstanding due to the repurchase of shares through
the Company's stock repurchase plan. The return on average assets for the
three years ended December 31, 2001, 2000 and 1999 was 1.14%, 1.12% and
1.13%, respectively. The return on average equity for the same periods was
11.7%, 11.6% and 10.5%, respectively.

Net interest income, the most significant component of earnings, is the
amount by which the interest generated from earning assets exceeds the
expense associated with funding those assets. Changes in net interest income
from year to year result from changes in the level and mix of the average
balances (volume) of earning assets and interest-bearing liabilities and from
the yield earned and the cost paid (rate). In the following discussion,
interest income is presented on a fully taxable equivalent basis applying the
statutory Federal income tax rate of 34%. Net interest income for 2001
increased $998,000 or 8.0%. The increase in 2001 was attributable to better
margins on higher average volumes of earning assets and deposits which
produced a higher net interest margin of 4.04% for year 2001 compared to
3.97% for 2000. Higher averages were primarily caused by additional
leveraging and increases in deposits offset by higher volumes of loans and
investment securities. Interest and fees on loans for 2001 increased by
$418,000 or 2.7% from the previous year. The increase in 2001 was due to an
increase in average net loans of $12.1 million, partially offset by a
decrease in yield of 31 basis points from 8.48% in 2000 to 8.17% in 2001.
Interest on securities remained virtually unchanged at $8.8 million for the
year. This was due to the average volumes of securities increasing by $4.2
mil-

                                    - 8 -


<PAGE>


lion or 3.4% for the year, which was virtually offset by a 24 basis point
decrease in yield from 6.98% in 2000 to 6.74% in 2001. Interest on federal
funds sold decreased $96,000 or 27.6%. The decrease in 2001 was a result of a
lower average rate of 3.47% compared to 6.23% in 2000 being partially offset
by a higher average balance due to larger cash prepayments on mortgage backed
securities and more securities being called due to lower interest rates
throughout the year.

For comparison purposes, the table below shows interest income converted to a
fully taxable basis to recognize the income tax savings between taxable and
tax-exempt assets (in thousands).

<TABLE>
<CAPTION>
                                                                                              % Change            % Change
                                           2001           2000           1999                 2001/2000           2000/1999
<S>                                        <C>            <C>            <C>                  <C>                 <C>
Total interest and dividend income         $24,053        $23,760        $19,968               1.2%               19.0%
Total interest expense                      11,408         12,091          9,269              (5.6)               30.4

Net interest and dividend income            12,645         11,669         10,699               8.4                 9.1
Tax equivalent adjustment                      813            791            711               2.8                11.3

Net interest and dividend income
 taxable equivalent basis                  $13,458        $12,460        $11,410               8.0%                9.2%

</TABLE>

Total interest expense decreased $683,000 or 5.6% in 2001 over that of 2000
compared to an increase of $2,822,000 or 30.4% for 2000 over 1999. The
decrease in 2001 was due primarily to lower interest rates on all interest
bearing liabilities. The average rate on interest bearing liabilities for
2001 was 3.91%, a decrease of 54 basis points from 2000. The rate reduction
was partially offset by an increase in volume of $20.2 million from 2000.

Total other income for 2001 increased by $362,000 or 20.5% due primarily to a
full year of insurance commissions of $712,000 from the insurance subsidiary,
Hathaway Agency, Inc., compared to six months commissions of $252,000 for
year 2000. Total other expense in 2001 increased $471,000 or 5.9% over the
preceding year. The 2001 increase includes operating expenses for the
subsidiary Insurance Agency for 12 months instead of six months for year
2000, and also includes a full year of goodwill amortization associated with
the acquisition of Hathaway.

Net interest spread, the difference between the average earning assets yield
and the cost of average interest bearing funds, increased 16 basis points or
4.7% from 2000 to 2001. The net interest margin, net interest income as a
percentage of earning assets, increased 7 basis points or 1.8%. The increases
in net interest spread and net interest margin for 2001 were attributed to
the decline of interest rates affecting shorter term interest bearing
liabilities faster than longer term interest bearing assets.

<TABLE>

Interest rate spread and net interest margin (dollars in thousands):
(Tax equivalent basis)

<CAPTION>

                                                   2001                       2000                      1999

                                             Yearly                     Yearly                    Yearly
                                             Average    Rate            Average   Rate            Average    Rate
<S>                                          <C>        <C>             <C>       <C>             <C>        <C>
Earning assets                               $333,315   7.46%           $313,578  7.84%           $272,492   7.59%
Interest bearing liabilities                  291,400   3.91             271,176  4.45             234,666   3.95

Net interest rate spread                                3.55%                     3.39%                      3.64%

Net interest margin                                     4.04%                     3.97%                      4.19%

</TABLE>

                                    - 9 -


<PAGE>

FINANCIAL REVIEW (Continued)

Capital Resources: Stockholders' equity ended 2001 at $34,649,000, up
$656,000 or 1.9%, due to a combination of net retained earnings and net
unrealized gains in market value of the available-for-sale securities less
net treasury stock purchases. At December 31, 2001, the ratio of
stockholders' equity to total assets was 9.6%, as compared to 10.0% at
December 31, 2000.

On January 31, 2000, the Board of Directors of the Company (Board) approved a
stock repurchase plan (the "Plan") authorizing the repurchase of up to 5% or
120,000 shares of the Company's common stock over a two-year period. On May
29, 2001, the Board extended the plan by authorizing an additional 5% or
approximately 115,000 shares over a new two-year period upon completion of
the original plan. As of December 31, 2001, the Company had purchased 141,706
shares under the plan at an average price of $29.58 per share. The
repurchased shares are held in treasury stock and may be reissued to support
the Company's dividend reinvestment plan, to satisfy the exercise of stock
options, or other corporate purposes.

Banks and bank holding companies are required to meet a ratio of qualifying
total capital to risk-weighted assets. Risk-based assets are the value of
assets carried on the books of the Company, as well as certain off-balance
sheet items, multiplied by an appropriate factor as stipulated in the
regulation. Tier 1 capital consists of common stock and qualifying
stockholders' equity reduced by intangible assets. Total capital consists of
Tier 1 capital plus a portion of allowance for loan losses. Currently, the
minimum risk-based ratios, as established by the Federal Reserve Board, for
Tier 1 and total capital are 4% and 8%, respectively. At December 31, 2001,
the Company had Tier 1 and total risk-based capital ratios of 14.7% and
16.0%, respectively. The Company also maintained a leverage ratio of 8.4% as
of December 31, 2001. The leverage ratio is defined as Tier 1 capital in
relation to fourth quarter average assets.

Liquidity: The primary objective of liquidity management is to ensure
sufficient cash flows to meet all of the Company's funding needs, such as
loan demand and customers' withdrawals from their deposit accounts. While the
primary source of liquidity consists of maturing securities, other sources of
funds are federal funds sold, repayment of loans, sale of securities
available for sale, growth of deposit accounts, and borrowed funds and
securities sold under agreements to repurchase. In addition to existing
balance sheet cash flows, the subsidiary bank maintains lines of credit with
a correspondent bank and the Federal Home Loan Bank (FHLB) to supplement its
short term borrowing needs.

The subsidiary Bank has pledged certain assets as collateral for deposits
from municipalities, FHLB borrowings and repurchase agreements. By utilizing
collateralized funding sources, the subsidiary Bank is able to access a
variety of cost effective sources of funds. Management monitors its liquidity
position on a regular basis and does not anticipate any negative impact to
its liquidity from pledging activities. While there are no known trends or
demands that are likely to affect the subsidiary Bank's liquidity position in
any material way during the coming year, the subsidiary Bank continuously
monitors its basic liquidity on an ongoing basis.

As of December 31, 2001, the Company had various loan commitments and standby
and commercial letter of credit commitments totaling approximately $29.0
million. Included in this amount is approximately $24.1 million in commercial
lines of credit, residential home equity lines of credit and overdraft lines
of credit. Under normal banking conditions these lines are drawn on from time
to time and then repaid so that the full amount of these lines are never
drawn down at any one time.

Provision for loan losses: The Company establishes an allowance for loan
losses based on an analysis of risk factors in its loan portfolio. The
analysis includes concentrations of credit, past loan loss experience,
current economic conditions, amount and composition of the loan portfolio,
estimated fair market value of underlining collateral, delinquencies and
other factors.

The allowance for loan losses as a percentage of loans, net of unearned
discounts is 1.29% at December 31, 2001 compared to 1.47% at December 31,
2000. The decrease is a result of net charge-offs exceeding the loan loss
provision and loan growth in 2001. Non-performing loans as of December 31,
2001 were $0.5 million as compared to $1.1 million in 2000.

                                    - 10 -


<PAGE>

The Company's allowance for loan losses coverage of non-performing loans
increased as of December 31, 2001 to 470% from 240% at December 31, 2000. The
provision for loan losses was $525,000, $219,000 and $180,000 for the years
2001, 2000 and 1999, respectively. Net loan charge-offs for 2001, 2000 and
1999 were $769,000, $166,000 and $230,000, respectively. The provision for
loan loss is a result of management's overall assessment of the loan
portfolio and the adequacy of the allowance for loan losses.

The Company will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
conditions dictate. Although the Company maintains its allowance at a level
it considers to be adequate to provide for inherent risk of loss in its loan
portfolio, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required in future periods. In addition, the Company's determination as to
the amount of the allowance for loan losses is subject to review by the OCC
as part of its examination process, which may result in the establishment of
an additional allowance based on the OCC's judgment of the information
available to it at the time of examination.

Market Risk: Market risk is the risk of loss from adverse changes in market
prices and interest rates. The subsidiary Bank's market risk arises primarily
from interest rate risk inherent in its lending and deposit acceptance
activities. Although the subsidiary Bank manages other risks, such as credit
and liquidity risk, in the normal course of its business management, it
considers interest rate risk to be its most significant market risk and could
potentially have the largest effect on the Bank's financial condition and
results of operations. The Company does not currently have a trading
portfolio or use derivatives such as swaps or options to manage market and
interest rate risk.

The subsidiary Bank's interest rate risk management is the responsibility of
the Asset/Liability Management Committee (ALCO), which reports to the Board
of Directors. The Committee, comprised of senior management, has developed
policies to measure, manage and monitor interest rate risk. Interest rate
risk arises from a variety of factors, including differences in the timing
between the contractual maturity or the repricing of the subsidiary Bank's
assets and liabilities. For example, the subsidiary Bank's net interest
income is affected by changes in the level of market interest rates as the
repricing characteristics of its loans and other assets do not necessarily
match those of its deposits and borrowings.

In managing exposure, the subsidiary Bank uses interest rate sensitivity
models that measure both net gap exposure and earnings at risk. ALCO monitors
the volatility of its net interest income by managing the relationship of
interest rate sensitive assets to interest rate sensitive liabilities. The
Committee utilizes a simulation model to analyze net income sensitivity to
movements in interest rates. The simulation model projects net interest
income based on an immediate rise or fall in interest rates of 200 basis
points for a twelve-month period. The model is based on the contractural
maturity and repricing characteristics of interest rate assets and
liabilities. The model incorporates assumptions regarding the impact of
changing interest rates on the prepayment rate of certain assets and
liabilities.

The following table shows the approximate effect on the subsidiary Bank's net
interest income on a fully taxable equivalent basis as of December 31, 2001,
assuming an increase or decrease of 200 basis points in interest rates (in
thousands).

Change in Interest Rates        Estimated Net             Change in Net
     (basis points)            Interest Income           Interest Income

           +200                   $14,923                      2.2%
           +100                    14,805                      1.4
              0                    14,605                      0.0
           -100                    14,281                     (2.2)
           -200                    13,370                     (8.5)


                                    - 11 -


<PAGE>

FINANCIAL REVIEW (Continued)

Another tool used to measure interest rate sensitivity is the cumulative gap
analysis. The cumulative gap represents the net position of assets and
liabilities subject to repricing in specified time periods. Deposit accounts
without maturity dates are modeled based on historical run-off
characteristics of these products in periods of rising rates. Loans and
security maturities are based on contractural maturities. At December 31,
2001 the Company had a negative one-year cumulative gap position.

The cumulative gap analysis is merely a snapshot at a particular date and
does not fully reflect that certain assets and liabilities have similar
repricing periods but may in fact reprice at different times within that
period and at differing rate levels. Management, therefore, uses the interest
rate sensitivity gap only as a general indicator of the potential effects of
interest rate changes on net interest income. Management believes that the
gap analysis is a useful tool only when used in conjunction with its
simulation model and other tools for analyzing and managing interest rate
risk.

As of December 31, 2001, the subsidiary Bank was in a liability sensitive
position for one year, which means that more liabilities are scheduled to
mature or reprice within the next year than assets. However, the subsidiary
Bank is in an asset sensitive position beyond one year, which means that more
assets are scheduled to mature than liabilities.

The following table shows the interest rate sensitivity gaps as of December
31, 2001 highlighting the gap percentages within one year.

<TABLE>
<CAPTION>
                                                            Balance Maturing or Subject to Repricing (in Thousands)

                                                                      After 3 Mo.   After One
                                                      Within          But Within    But Within    After
AT DECEMBER 31, 2001                                  3 Months        1 Year        Five Years    Five Years     Total
<S>                                                   <C>             <C>           <C>           <C>            <C>
Interest Earning Assets:
    Securities<F1>                                     $33,889         $23,029      $ 42,018       $ 33,333      $132,269
    Total Loans, net of unearned discount               43,466          21,613        62,697         67,173       194,949
    Other Earning Assets                                 8,517               0             0              0         8,517

        Total Earning Assets                            85,872          44,642       104,715        100,506       335,735

Fair Value Above Cost of Securities
  Available-for-Sale                                                                                                  788
Other Assets                                                                                                       23,432

TOTAL ASSETS                                                                                                     $359,955

Interest-Bearing Liabilities:
    Savings, NOW and MMDA                              $46,062         $     0       $     0       $ 84,249      $130,311
    Time Deposits                                       26,230          62,919        31,664              0       120,813
    Other Interest-Bearing Liabilities                  16,519             280         9,572         18,247        44,618

        Total Interest-Bearing Liabilities              88,811          63,199        41,236        102,496       295,742

Demand Deposits                                                                                                    28,103
Other Liabilities & Equity                                                                                         36,110

TOTAL LIABILITIES & EQUITY                                                                                       $359,955

Interest Rate Sensitivity Gap                         ($ 2,939)       ($18,557)     $ 63,479      ($  1,990)
Cumulative Interest Rate Sensitivity Gap              ($ 2,939)       ($21,496)     $ 41,983       $ 39,993      $ 39,993
                                                                          (6.0)%

<FN>

<F1> Includes Available-for-Sale Securities and Investment Securities at amortized cost and FHLB and FRB stock at cost.

</FN>
</TABLE>


                                    - 12 -


<PAGE>

<TABLE>

FIVE-YEAR FINANCIAL SUMMARY
(In thousands, except per share data)

<CAPTION>

December 31,                                                2001          2000           1999           1998          1997
<S>                                                         <C>           <C>            <C>            <C>           <C>
Consolidated statement of income data
Interest and dividend income:
    Loans                                                   $ 15,785      $ 15,367       $ 12,816       $ 10,598      $  9,990
    Securities<F1>                                             7,942         7,980          6,623          5,603         5,427
    Federal funds sold and other                                 326           413            529            642           346

        Total interest and dividend income                    24,053        23,760         19,968         16,843        15,763

Interest expense:
    Deposits                                                   9,397        10,529          8,303          7,347         6,909
    Borrowings                                                 2,011         1,562            966            570            32

        Total interest expense                                11,408        12,091          9,269          7,917         6,941

Net interest income                                           12,645        11,669         10,699          8,926         8,822
Provision for loan losses                                        525           219            180            220           255

Net interest income after provision
 for loan losses                                              12,120        11,450         10,519          8,706         8,567
Other income                                                   2,124         1,762          1,467          1,121           783
Other expenses                                                 8,403         7,932          7,299          5,224         4,898

Income before income taxes                                     5,841         5,280          4,687          4,603         4,452
Provision for income taxes                                     1,809         1,575          1,388          1,381         1,351

Net income                                                  $  4,032      $  3,705       $  3,299       $  3,222      $  3,101

Per share data:
 Basic earnings per share                                   $   1.75      $   1.56       $   1.37       $   1.34      $   1.29
 Diluted earnings per share                                     1.72          1.54           1.36           1.34          1.29
 Cash dividends paid                                            0.66          0.62           0.59           0.56          0.53
 Cash dividend payout ratio                                     37.7%         39.8%          42.9%          41.7%         41.3%

Selected year-end consolidated
 statement of condition data:
    Total assets                                            $359,955      $339,306       $314,908       $255,568      $222,325
    Securities<F1>                                           133,057       124,767        109,280        107,529        88,289
    Net loans                                                192,443       183,840        169,716        120,257       117,646
    Deposits                                                 279,227       270,474        265,080        206,386       187,655
    Stockholders' equity<F1>                                  34,649        33,993         31,285         31,511        29,679

<FN>

<F1> Securities figures include investment securities, securities available for
     sale, FRB and FHLB stock. Securities available for sale were recorded at fair
     value with any unrealized gain or loss at December 31 included in
     stockholders' equity, on a net of tax basis.

</FN>
</TABLE>

Per share figures have been adjusted to reflect the 3 for 2 stock split
effected through the 50% stock dividend declared in July 1999.


                                    - 13 -


<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)

<CAPTION>
                                                                                       December 31,

                                                                          2001                          2000
<S>                                                                       <C>                           <C>
ASSETS
Cash and cash equivalents
    Non-interest bearing                                                  $ 11,212                      $  9,166
    Interest bearing                                                           317                           272
    Federal funds sold                                                       8,200                         5,400

        Total cash and cash equivalents                                     19,729                        14,838

Securities available for sale, at fair value                               120,249                       106,845

Investment securities, at cost (approximate fair value at
 December 31, 2001 - $10,241; at December 31, 2000 - $15,969)                9,955                        15,653

Investments required by law, stock in Federal Home Loan
 Bank of New York and Federal Reserve Bank of New
 York, at cost                                                               2,853                         2,269

Loans                                                                      211,683                       201,063
    Unearned income                                                        (16,734)                      (14,473)
    Allowance for loan losses                                               (2,506)                       (2,750)

        Net loans                                                          192,443                       183,840

Premises and equipment, net                                                  3,420                         3,432
Accrued interest receivable                                                  1,661                         2,214
Other assets                                                                 9,645                        10,215

        Total assets                                                      $359,955                      $339,306

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
    Demand (non-interest bearing)                                         $ 28,103                      $ 26,339
    Regular savings, NOW and money market accounts                         130,311                       125,974
    Certificates and time deposits of $100,000 or more                      34,061                        37,386
    Other time deposits                                                     86,752                        80,775

        Total deposits                                                     279,227                       270,474

Securities sold under agreements to repurchase                              11,629                        11,788
Notes payable - Federal Home Loan Bank                                      32,989                        21,340
Other liabilities                                                            1,461                         1,711

        Total liabilities                                                  325,306                       305,313

Commitments and contingent liabilities (Note 15)

STOCKHOLDERS' EQUITY
Common stock, $2.50 par value, 5,000,000 shares authorized,
 2,401,695 shares issued                                                     6,004                         6,004
Surplus                                                                      4,418                         4,418
Undivided profits                                                           27,608                        25,199
Accumulated other comprehensive income/(loss)                                  481                           (41)
Treasury stock, at cost; 124,553 shares at December 31, 2001
 and 56,246 shares at December 31, 2000                                     (3,862)                       (1,587)

        Total stockholders' equity                                          34,649                        33,993

        Total liabilities and stockholders' equity                        $359,955                      $339,306

</TABLE>

See accompanying notes to consolidated financial statements.

                                    - 14 -


<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

<CAPTION>
                                                                              Years ended December 31,

                                                                      2001             2000              1999
<S>                                                                   <C>              <C>               <C>
INTEREST AND DIVIDEND INCOME
Interest and fees on loans                                            $15,785          $15,367           $12,816
Interest on federal funds sold                                            252              349               449
Interest on balances due from depository institutions                      74               64                80
Interest on securities available for sale                               7,063            6,953             5,668
Interest on investment securities                                         719              870               860
Dividends on FRB and FHLB stock                                           160              157                95

        Total interest and dividend income                             24,053           23,760            19,968

INTEREST EXPENSE
Interest on deposits:
    Regular savings, NOW and money market accounts                      2,520            2,783             2,270
    Certificates and time deposits of $100,000 or more                  2,292            3,318             2,234
    Other time deposits                                                 4,585            4,428             3,799
Interest on securities sold under agreements to repurchase                584              433               611
Interest on other borrowings                                            1,427            1,129               355

        Total interest expense                                         11,408           12,091             9,269

NET INTEREST INCOME                                                    12,645           11,669            10,699
Provision for loan losses                                                 525              219               180

NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                                       12,120           11,450            10,519

OTHER INCOME
Income from fiduciary activities                                          178              184               163
Service charges on deposit accounts                                       630              473               415
Net gain on sales or calls of securities                                   15               --                70
Insurance commissions                                                     712              252                --
Other income                                                              589              853               819

        Total other income                                              2,124            1,762             1,467

OTHER EXPENSES
Salaries and employee benefits                                          3,998            3,727             3,186
Occupancy expense, net                                                    502              455               363
Furniture and equipment expense                                           469              414               514
External data processing expense                                          897              733               883
Other expense                                                           2,537            2,603             2,353

        Total other expenses                                            8,403            7,932             7,299

INCOME BEFORE INCOME TAXES                                              5,841            5,280             4,687
Provision for income taxes                                              1,809            1,575             1,388

NET INCOME                                                            $ 4,032          $ 3,705           $ 3,299

Earnings per share
    Basic                                                             $  1.75          $  1.56           $  1.37
    Diluted                                                              1.72             1.54              1.36

</TABLE>

See accompanying notes to consolidated financial statements.

                                    - 15 -


<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(In thousands, except share data)

<CAPTION>
                                                                                    Accumulated
                                                                                    Other                         Total
                                              Common                   Undivided    Comprehensive  Treasury       Stockholders'
                                              Stock        Surplus     Profits      Income/(Loss)  Stock          Equity
<S>                                           <C>          <C>         <C>          <C>            <C>            <C>
Balance at December 31, 1998                  $4,000       $4,000      $23,165      $   346         $    --       $31,511
Comprehensive income:
    Net income                                    --           --        3,299           --              --         3,299
    Other comprehensive loss                      --           --           --       (2,528)             --        (2,528)

        Total comprehensive income                                                                                    771

Three for two stock split (800,000 shares)     2,000           --       (2,000)          --              --            --

Exercise of stock options
 (1,695 shares issued)                             4           22           --           --              --            26

Stock options issued in connection
 with acquisition                                 --          393           --           --              --           393

Cash dividends ($0.59 per share)                  --           --       (1,416)          --              --        (1,416)

Balance at December 31, 1999                   6,004        4,415       23,048       (2,182)             --        31,285
Comprehensive income:
    Net income                                    --           --        3,705           --              --         3,705
    Other comprehensive income                    --           --           --        2,141              --         2,141
    Total comprehensive income                                                                                      5,846

Treasury stock purchased (62,200 shares)          --           --           --           --          (1,755)       (1,755)

Treasury stock sold
 (exercise of 5,954 stock options)                --           --          (78)          --             168            90

Other                                             --            3           --           --              --             3

Cash dividends ($0.62 per share)                  --           --       (1,476)          --              --        (1,476)

Balance at December 31, 2000                   6,004        4,418       25,199          (41)         (1,587)       33,993
Comprehensive income:
    Net income                                    --           --        4,032           --              --         4,032
    Other comprehensive income                    --           --           --          522              --           522

        Total comprehensive income                                                                                  4,554

Treasury stock purchased (105,765 shares)         --           --           --           --          (3,381)       (3,381)

Treasury stock sold (exercise of stock
 options and dividend reinvestment plan -
 37,458 shares)                                   --           --         (103)          --           1,106         1,003

Cash dividends ($0.66 per share)                  --           --       (1,520)          --              --        (1,520)

Balance at December 31, 2001                  $6,004       $4,418      $27,608      $   481        ($ 3,862)      $34,649

</TABLE>

Cash dividends per share have been adjusted to reflect the 3 for 2 stock
split effected through the 50% stock dividend declared in July 1999.

See accompanying notes to consolidated financial statements.

                                    - 16 -


<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<CAPTION>
                                                                                        Years ended December 31,

                                                                              2001             2000             1999
<S>                                                                           <C>              <C>              <C>
Cash flows from operating activities:
    Net income                                                                $ 4,032          $  3,705         $  3,299
Adjustments to reconcile net income to net cash provided by operating
 activities:
    Decrease/(increase) in interest receivable                                    553              (466)             150
    Decrease/(increase) in other assets                                           140              (550)             883
    (Decrease)/increase in other liabilities                                     (250)              653             (293)
    Deferred income tax expense/(benefit)                                          32               238              (70)
    Goodwill amortization expense                                                 342               331              181
    Depreciation and other amortization expense                                   509               520              542
    Net increase in cash surrender value of bank-owned life insurance            (131)             (124)            (101)
    (Accretion) amortization of discounts/premiums on securities, net             (44)               49              200
    Net gain on securities transactions                                           (15)               --              (70)
    Provision for loan losses                                                     525               219              180

        Total adjustments                                                       1,661               870            1,602

        Net cash provided by operating activities                               5,693             4,575            4,901

Cash flows from investing activities:
    Purchase of investment securities                                          (1,719)           (5,627)          (1,920)
    Purchase of securities available for sale                                 (84,387)          (32,260)         (24,306)
    Net purchase of FRB and FHLB stock                                           (584)             (281)            (552)
    Proceeds from maturities, paydowns and calls of investment securities       7,415             3,396            5,851
    Proceeds from maturities, paydowns and calls of
     securities available for sale                                             71,899            21,920           23,582
    Proceeds from sale of securities available for sale                            --             1,043            3,880
    Net increase in loans                                                      (9,432)          (14,718)            (203)
    Purchase of bank-owned life insurance                                          --                --             (130)
    Purchases of premises and equipment, net                                     (339)             (211)            (252)
    Net cash paid in acquisitions                                                  --              (456)         (10,828)

        Net cash used by investing activities                                 (17,147)          (27,194)          (4,878)

Cash flows from financing activities:
    Net increase in deposits                                                    8,753             5,394            2,256
    (Decrease)/increase in securities sold under agreements to repurchase        (159)            2,207           (3,263)
    Increase in notes payable - FHLB                                           11,649            13,167            1,840
    Treasury stock purchased                                                   (3,381)           (1,755)              --
    Cash dividends paid on common stock                                        (1,520)           (1,476)          (1,416)
    Proceeds from the sale of treasury stock                                    1,003                90               26

        Net cash provided (used) by financing activities                       16,345            17,627             (557)

Net increase/(decrease) in cash and cash equivalents                            4,891            (4,992)            (534)
Cash and cash equivalents beginning of year                                    14,838            19,830           20,364

Cash and cash equivalents end of year                                         $19,729          $ 14,838         $ 19,830

Supplemental disclosures of cash flow information:
    Cash paid during the year:
        Interest                                                              $11,523          $ 11,878         $  9,286
        Income taxes                                                            1,493             1,418            1,065

Supplemental schedule of noncash activities:
    Net reduction in loans resulting from transfers to real estate owned      $   211          $    262         $    285
    Decrease in taxes payable due to exercise of non-qualified stock options      127                --               --
Fair value of non-cash assets acquired in acquisition                              --          $    376         $ 65,464
Fair value of liabilities assumed in acquisition                                   --               269           59,026
Fair value of stock options issued in acquisition                                  --                --              393
</TABLE>


                                    - 17 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of CNB Bancorp, Inc. (Parent Company),
City National Bank and Trust Company (subsidiary Bank) and Hathaway Agency,
Inc. (subsidiary Insurance Agency) conform to accounting principles generally
accepted in the United States of America and general practices within the
banking and insurance fields. The following is a summary of the significant
policies used in the preparation of the consolidated financial statements.

BASIS OF PRESENTATION - The Parent Company is a financial holding company
whose principal activity is the ownership of all outstanding shares of the
subsidiary Bank's and Insurance Agency's stock. The subsidiary Bank is a
commercial bank providing community banking services to individuals, small
businesses and local municipal governments in Fulton County and Saratoga
County, New York. The subsidiary Insurance Agency primarily serves Fulton
County providing various insurance products to businesses and individuals.
Management makes operating decisions and assesses performance based on an
ongoing review of the subsidiary Bank's and Insurance Agency's community
operations. The consolidated financial statements include the accounts of the
Parent Company and its wholly-owned subsidiaries (referred to together as the
"Company") after elimination of all significant intercompany transactions.

SECURITIES - Management determines the appropriate classification of
securities at the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are classified as
investment securities and are stated at amortized cost. If securities are
purchased for the purpose of selling them in the near term, they are
classified as trading securities and are reported at fair value with
unrealized holding gains and losses reflected in current earnings. All other
marketable securities are classified as securities available for sale and are
reported at the fair value, with net unrealized gains or losses reported, net
of income taxes, as a separate component of stockholders' equity. A decline
in the fair value of any security below cost that is deemed other than
temporary is charged to earnings resulting in the establishment of a new cost
basis for the security.

Nonmarketable equity securities, such as Federal Reserve Bank stock and
Federal Home Loan Bank stock, are carried at cost. These investments are
required for membership.

Gains and losses on the disposition of securities are based on the amortized
cost of the specific security sold. Amortization of premiums and accretion of
discounts are recognized in interest income on a level-yield basis to the
earlier of call or maturity date. At December 31, 2001 and 2000, the Company
did not have any securities classified as trading securities.

NET LOANS RECEIVABLE - Loans receivable are reported at the principal amount
outstanding, net of unearned income, net deferred loan fees and costs, and
the allowance for loan losses. Unearned income and net deferred loan fees and
costs are accreted to income using an effective interest method.

When, in the opinion of management, the collection of interest and/or
principal is in doubt, a loan is categorized as non-accrual. Generally, loans
past due greater than 90 days are categorized as non-accrual. Thereafter, no
interest is taken into income until received in cash or until such time as
the borrower demonstrates the ability to make scheduled payments of interest
and principal.

Management considers a loan to be impaired if, based on current information,
it is probable that the subsidiary Bank will be unable to collect all
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or
the fair value of collateral if the loan is collateral dependent. Management
excludes large groups of smaller balance homogeneous loans such as
residential mortgages and consumer loans which are collectively evaluated.
Impairment losses, if any, are recorded through a charge to the provision for
loan losses.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at a
level estimated by management to provide adequately for probable losses
inherent in the loan portfolio. The allowance is increased by provisions for
loan losses charged to operating expense and decreased by loan charge-offs
net of recoveries. Adequacy of the allowance and determination of the amount
to be charged to operating expense are based on an evaluation of the loan
portfolio, its overall composition, size of the individual loans,
concentration by industry, past due and non-accrual loan statistics,
historical loss experience and general economic conditions in the Company's
market area.

While management uses all of the above information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the Company to
recognize additions to the allowance based on their judgments of information
available to them at the time of their examination which may not be presently
available.

                                    - 18 -


<PAGE>

OTHER REAL ESTATE OWNED - Included in other assets is other real estate owned
which consists of properties acquired through foreclosure or by acceptance of
a deed in lieu of foreclosure. These assets are recorded at the lower of the
recorded investment in the loan or fair value of the property, less any
estimated costs of disposal. Loan losses arising from the acquisition of such
assets are charged to the allowance for loan losses and subsequent valuation
write-downs are charged to non-interest expense. Operating costs associated
with the properties are charged to expense as incurred. Gains on the sale of
other real estate owned are included in income when title has passed and the
sale has met the minimum down payment requirements prescribed by generally
accepted accounting principles.

BANK PREMISES AND EQUIPMENT - These assets are reported at cost less
accumulated depreciation. Depreciation is charged to operating expense over
the useful lives of the assets using the straight line method. Maintenance
and repairs are charged to operating expense as incurred.

GOODWILL - Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired for business combinations accounted for
using purchase accounting. Unamortized goodwill of approximately $4.3 million
and $4.6 million is included in other assets at December 31, 2001 and
December 31, 2000, respectively.

INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company's policy is that deferred tax assets are reduced by a valuation
reserve if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In
considering if it is more likely than not that some or all of the deferred
tax assets will not be realized, the Company considers temporary taxable
differences, historical taxes and estimates of future taxable income.

EARNINGS PER COMMON SHARE - Basic earnings per share ("EPS") is computed by
dividing income available to common stockholders (net income less dividends
on perferred stock, if any) by the weighted average number of common shares
outstanding for the period. Entities with complex capital structures must
also present diluted EPS which reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
or converted into common shares that then shared in the earnings of the
entity, such as the Company's stock options.

Basic earnings per common share were computed based on average outstanding
common shares of 2,303,241 in 2001, 2,377,362 in 2000 and 2,400,301 in 1999.
Diluted earnings per common share were computed based on average outstanding
common shares of 2,341,596 in 2001, 2,404,174 in 2000 and 2,423,481 in 1999.
Share amounts have been adjusted to reflect the 3 for 2 stock split effected
through the 50% stock dividend declared in July 1999.

TREASURY STOCK - Treasury stock is recorded at cost. During 2001, the Company
purchased 105,765 shares of treasury stock at an average cost of $31.97. Also
during 2001, the Company sold 37,458 shares at an average price of $26.78 as
a result of the exercise of stock options and the dividend reinvestment plan.

DIVIDEND RESTRICTIONS - Certain restrictions exist regarding the ability of
the subsidiary Bank to transfer funds to the Company in the form of cash
dividends. The approval of the Comptroller of the Currency is required to pay
dividends in any calendar year in excess of the subsidiary Bank's earnings
retained in the current year plus retained net profits, as defined, for the
preceding two years.

TRUST ASSETS - Assets held in fiduciary or agency capacities for customers of
the subsidiary Bank are not included in the accompanying consolidated
statements of condition as such assets are not assets of the subsidiary Bank.
Trust assets under management totaled $31.8 million as of December 31, 2001.

CASH AND CASH EQUIVALENTS - Cash and cash equivalents as shown in the
consolidated statements of condition and consolidated statements of cash
flows consists of cash, due from banks and federal funds sold.

FINANCIAL INSTRUMENTS - The Company is a party to certain financial
instruments with off-balance sheet risk, such as commitments to extend
credit, unused lines of credit, standby letters of credit and commercial
letters of credit. The Company's policy is to record such instruments when
funded.

                                    - 19 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

USE OF ESTIMATES - The preparation of the consolidated financial statements,
in conformity with accounting principles generally accepted in the United
States of America, requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS - In July 2001, the Financial Accounting
Standards Board ("FASB") issued Statement No. 141, "Business Combinations",
and Statement No. 142, "Goodwill and Other Intangible Assets". Statement No.
141 supercedes Accounting Principals Board ("APB") No. 16, "Business
Combinations", and requires all business combinations to be accounted for
under the purchase method of accounting, thus eliminating the pooling of
interests method of accounting. The Statement did not change many of the
provisions of APB No. 16 related to the application of the purchase method.
However, the Statement does specify criteria for recognizing intangible
assets separate from goodwill and requires additional disclosures regarding
business combinations. The Statement is effective for business combinations
initiated after June 30, 2001.

Statement No. 142 requires acquired intangible assets (other than goodwill)
to be amortized over their useful economic life, while goodwill and any
acquired intangible asset with an indefinite economic life would not be
amortized, but would be reviewed for impairment on an annual basis based upon
guidelines specified by the Statement. Statement No. 142 also requires
additional disclosures pertaining to goodwill and intangible assets. The
provisions of Statement No. 142 are required to be adopted starting with
fiscal years beginning after December 15, 2001. Therefore, the Company
adopted the Statement on January 1, 2002. For any goodwill and other
intangibles acquired after June 30, 2001, the non-amortization and
amortization provisions of this Statement are effective immediately. The
Company will perform the first of the required impairment tests of goodwill
during the quarter ending March 31, 2002. Based on management's initial
evaluation, the Company does not anticipate that any transitional impairment
losses will be required to be recognized as a cumulative effect of a change
in accounting principle.

At December 31, 2001, the Company had goodwill of approximately $4.3 million
and had amortization expense related to goodwill of approximately $0.3
million, or $.15 per diluted share for the fiscal year ended December 31,
2001. It is anticipated that the adoption of Statement No. 142 will have an
effect on the Company's results of operations since the implementation of the
new standard will reduce expected non-interest expense by approximately $0.3
million and increase earnings per diluted share by approximately $.15 per
share for 2002.

The Company adopted the provisions of Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective January 1, 2001.
Statement No. 133, as amended by Statement No. 137 and Statement No. 138,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. As of January 1, 2001 and during the year of 2001, the
Company did not have any derivative instruments or derivative instruments
embedded in other contracts. Therefore, the adoption of Statement No. 133, as
amended, did not have any effect on the Company's consolidated financial
statements.

ACQUISITION - On July 1, 2000, the Company acquired Hathaway Agency, Inc.
(Hathaway), a local insurance agency. At the date of the acquisition,
Hathaway had approximately $1,300,000 in assets, $300,000 in liabilities and
$1,000,000 in shareholders' equity. Pursuant to the merger agreement,
Hathaway became a wholly-owned subsidiary of CNB Bancorp, Inc.

Upon consummation of the acquisition, each preferred share of Hathaway was
exchanged for $100 in cash which totaled approximately $700,000 and each
common share of Hathaway was exchanged for $2,432 in cash which totaled
approximately $600,000. In addition, under a non-compete agreement each
preferred and common shareholder of Hathaway will receive payments over a
period of five years totaling, in the aggregate, approximately $300,000.

The acquisition was accounted for using purchase accounting in accordance
with APB Opinion No. 16. Under purchase accounting, the purchase price is
allocated to the respective assets acquired and liabilities assumed based on
their fair values. The acquisition of Hathaway resulted in approximately
$300,000 in excess of cost over net assets acquired ("goodwill"). Covenant
not to compete payments are being expenses as paid over the five-year period
of the covenant.

On June 1, 1999, the Company acquired Adirondack Financial Services Bancorp,
Inc. (Adirondack) and its wholly-owned subsidiary, Gloversville Federal
Savings and Loan Association. At the date of the merger, Adirondack had
approximately $68.5 million in assets, $56.4 million in deposits and $9.5
million in shareholders' equity. Pursuant to the merger agreement, Adirondack
was merged into CNB Bancorp, Inc. and Gloversville Federal Savings and Loan
Association was merged into City National Bank and Trust Company. The
combined bank now operates as one institution under the name of City National
Bank and Trust Company.

Under consummation of the merger, each share of Adirondack received $21.92 in
cash which totaled approximately $14.6 million. In addition, under the merger
agreement, the Company agreed to issue 35,614 stock options to purchase CNB
Bancorp, Inc. stock at an exercise price of $15.22 per share. The estimated
fair value of these options as of the acquisition date was $11.04 per share.
The issuance of these options was included in the computation of goodwill,
with the offsetting increase to surplus.

                                    - 20 -


<PAGE>

The acquisition was accounted for using purchase accounting in accordance
with APB No. 16. The acquisition of Adirondack resulted in approximately $4.8
million in excess of cost over net assets acquired ("goodwill"). The results
of operations of Adirondack have been included in the Company's consolidated
statements of income for periods subsequent to the date of acquisition.

RECLASSIFICATIONS - Amounts in the prior years' financial statements are
reclassified, whenever necessary, to conform to the presentation in the
current years' financial statements.


Note 2: RESERVE REQUIREMENTS

The subsidiary Bank is required to maintain certain reserves of cash and/or
deposits with the Federal Reserve Bank. The amount of this reserve
requirement, included in cash and cash equivalents, was approximately
$3,993,000 and $2,915,000 at December 31, 2001 and 2000, respectively.


Note 3: SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of securities available for sale as of December 31 are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                   2001

                                                                          Gross               Gross        Estimated
                                                        Amortized         Unrealized          Unrealized   Fair
                                                        Cost              Gains               Losses       Value
<S>                                                     <C>               <C>                 <C>          <C>
Debt securities available for sale:
    U.S. Treasury securities                           $  2,130           $   32              $ --         $  2,162
    Obligations of U.S. Government agencies              61,941              572               214           62,299
    Collateralized mortgage obligations:
        U.S. Government agencies                         22,415              124               145           22,394
        Corporate securities                              1,055               --                 3            1,052
    Other corporate securities                            8,123              215               206            8,132
    Obligations of states and political subdivisions     22,687              462               114           23,035

        Total debt securities available for sale        118,351            1,405               682          119,074

Equity securities available for sale:
    Corporate securities                                  1,110               65                --            1,175

        Total equity securities available for sale        1,110               65                --            1,175

        Total securities available for sale            $119,461           $1,470              $682         $120,249
</TABLE>

<TABLE>
<CAPTION>
                                                                                   2000

                                                                          Gross               Gross        Estimated
                                                        Amortized         Unrealized          Unrealized   Fair
                                                        Cost              Gains               Losses       Value
<S>                                                     <C>               <C>                 <C>          <C>
Debt securities available for sale:
    U.S. Treasury securities                            $  3,218             $ 22              $ --         $  3,240
    Obligations of U.S. Government agencies               62,923              150               474           62,599
    Collateralized mortgage obligations:
        U.S. Government agencies                          14,846               44               163           14,727
        Corporate securities                               9,671               62               127            9,606
    Obligations of states and political subdivisions      16,126              455                65           16,516

        Total debt securities available for sale         106,784              733               829          106,688

Equity securities available for sale:
    Corporate securities                                     128               29                --              157

        Total equity securities available for sale           128               29                --              157

        Total securities available for sale             $106,912             $762              $829         $106,845
</TABLE>

                                    - 21 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amortized cost and estimated fair value of debt securities available for
sale at December 31, 2001, by contractual maturity, are shown in the
accompanying table (in thousands). Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties. Collateralized
mortgage obligations are included in this schedule based on the contractual
maturity date.

<TABLE>
<CAPTION>
                                                          Amortized               Estimated
                                                          Cost                    Fair Value
<S>                                                       <C>                     <C>
Due in one year or less                                   $  2,124                $  2,157
Due after one year through five years                       19,608                  19,678
Due after five years through ten years                      22,122                  22,477
Due after ten years                                         74,497                  74,762

        Total debt securities available for sale          $118,351                $119,074
</TABLE>

There were no sales of securities available for sale during 2001. Proceeds
from sales of securities available for sale during 2000 and 1999 were
$1,043,000 and $3,880,000, respectively. There were no gains on sales during
2000. Gross gains in 1999 were $70,000. There were no losses on sales during
2000 and 1999.

The fair value of all securities available for sale pledged to secure public
deposits and for other purposes as required or permitted by law at December
31, 2001 and 2000 were $79,848,000 and $83,803,000, respectively. Actual
deposits secured by these securities at December 31, 2001 and 2000 were
$44,286,000 and $45,896,000, respectively. Repurchase agreements secured by
these securities at December 31, 2001 and 2000 were $11,629,000 and
$11,788,000, respectively.


Note 4: INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of investment securities as of December 31 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                   2001

                                                                            Gross              Gross        Estimated
                                                         Amortized          Unrealized         Unrealized   Fair
                                                         Cost               Gains              Losses       Value
<S>                                                      <C>                <C>                <C>          <C>
Obligations of U.S. Government agencies                  $   42             $  1               $--          $    43
Obligations of states and political subdivisions          7,913              289                 4            8,198
Corporate securities                                      2,000               --                --            2,000

        Total investment securities                      $9,955             $290               $ 4          $10,241
</TABLE>

<TABLE>
<CAPTION>
                                                                                   2000

                                                                            Gross              Gross        Estimated
                                                         Amortized          Unrealized         Unrealized   Fair
                                                         Cost               Gains              Losses       Value
<S>                                                      <C>                <C>                <C>          <C>
Obligations of U.S. Government agencies                  $ 1,693            $  2               $ 5          $ 1,690
Obligations of states and political subdivisions          11,960             321                 2           12,279
Corporate securities                                       2,000              --                --            2,000

        Total investment securities                      $15,653            $323               $ 7          $15,969
</TABLE>

The amortized cost and estimated fair value of investment securities at
December 31, 2001, by contractual maturity, are shown in the accompanying
table (in thousands). Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.

                                                 Amortized       Estimated
                                                 Cost            Fair Value

Due in one year or less                          $2,344          $ 2,376
Due after one year through five years             2,870            3,011
Due after five years through ten years            2,128            2,226
Due after ten years                               2,613            2,628

        Total investment securities              $9,955          $10,241

There were no sales of investment securities during 2001, 2000 and 1999. In
2001, one investment security was called at a premium producing a gain of
$15,000. No investment securities were called at premiums during 2000 and
1999.

                                    - 22 -


<PAGE>

The amortized cost of all investment securities pledged to secure public
deposits as required by law at December 31, 2001 and 2000 were $4,078,000 and
$5,286,000, respectively. Actual deposits secured by these securities at
December 31, 2001 and 2000 were $3,699,000 and $4,701,000, respectively.


Note 5: LOANS

Loans are comprised of the following at December 31 (in thousands):

                                                  2001             2000

Commercial and commercial real estate             $ 48,979         $ 44,790
Residential real estate                             85,977           88,517
Installment                                         76,727           67,756

        Total loans                               $211,683         $201,063

Non-accrual loans at December 31, 2001, 2000 and 1999 were $374,000, $936,000
and $1,507,000, respectively. The difference between the interest collected
on these loans and recognized as income, and the amounts which would have
been accrued is not significant. There were loans ninety days past due and
still accruing interest of $159,000, $210,000 and $108,000 as of December 31,
2001, 2000 and 1999, respectively.

As of December 31, 2001 and 2000, respectively, there were $374,000 and
$936,000 of commercial loans that were placed on non-accrual status and were
classified as impaired loans. As of December 31, 2001 and 2000, $40,000 and
$186,000 of the allowance for loan losses was allocated to the impaired
loans, respectively. During 2001, 2000 and 1999, the average balance of
impaired loans was $601,000, $1,188,000 and $275,000, respectively. Interest
income of $17,000, $103,000 and $2,000 was recognized on impaired loans,
while such loans were impaired, during 2001, 2000 and 1999, respectively.

The subsidiary Bank's primary business area consists of the Counties of
Fulton and Saratoga and, therefore, there are certain concentrations of loans
and loan commitments within that geographic area. Accordingly, a substantial
portion of its debtors' ability to honor their contracts is dependent upon
the economy of this region. At December 31, 2001 and 2000, the only area of
industry concentration that existed within the subsidiary Bank's commitments
were to the leather and leather-related industries. Outstanding commitments
to this segment were $4.2 million as of December 31, 2001 and $4.7 million as
of December 31, 2000. These figures represent 14.4% and 17.9% of the total
loan commitments outstanding at the end of each respective year. Loans
outstanding to this segment were $5.3 million as of December 31, 2001 and
$5.9 million as of December 31, 2000. These figures represent 2.5% and 2.9%
of gross loans outstanding at the end of each respective year.

In the ordinary course of business, the subsidiary Bank has made loans to
certain directors and executive officers of the Company, its subsidiaries,
and other related parties. Such transactions are on substantially the same
terms, including interest rates and collateral on loans, as comparable
transactions made to others. Total loans to these persons and companies on
December 31, 2001 and 2000 amounted to $3,956,000 and $4,809,000,
respectively. During 2001, $7,650,000 of new loans were made and repayments
totaled $8,503,000.


Note 6: ALLOWANCE FOR LOAN LOSSES

A summary of the changes in the allowance for loan losses is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                  2001                    2000                   1999
<S>                                               <C>                     <C>                    <C>
Balance at beginning of year                      $2,750                  $2,697                 $1,580
Provision charged to income                          525                     219                    180
Loans charged off                                   (996)                   (239)                  (281)
Recoveries of loans charged off                      227                      73                     51
Merger-related acquisition                            --                      --                  1,167

Balance at end of year                            $2,506                  $2,750                 $2,697
</TABLE>


Note 7: PREMISES AND EQUIPMENT

Premises and equipment at December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     2001                   2000
<S>                                                  <C>                    <C>
Land                                                 $   687                $   687
Premises and leasehold improvements                    3,306                  3,236
Equipment, furniture and fixtures                      2,905                  2,656

                                                       6,898                  6,579
Less: Accumulated depreciation                        (3,478)                (3,147)

        Total premises and equipment                 $ 3,420                $ 3,432
</TABLE>

Depreciation expense amounted to $351,000, $347,000 and $464,000 for the
years 2001, 2000 and 1999, respectively.


                                    - 23 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8: TIME DEPOSITS

The approximate amount of contractual maturities of time deposit accounts for
the years subsequent to December 31, 2001 are as follows (in thousands):

Years ended December 31,

      2002                                      $ 89,148
      2003                                        17,206
      2004                                        11,765
      2005                                         2,218
      2006                                           476

          Total                                 $120,813


Note 9: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

For the years ended December 31, 2001 and 2000, the average balance of
Securities Sold Under Agreements to Repurchase was $10,971,000 and
$7,524,000, respectively. The highest month end balances for these borrowings
during 2001 and 2000 were $11,629,000 and $11,788,000, respectively. The
average rate paid for these borrowings during 2001 and 2000 was 5.33% and
5.75%, respectively.

The underlying securities associated with customer repurchase agreements are
under the control of the subsidiary Bank. All customer repurchase agreements
at December 31, 2001 matured within two days. The underlying securities
associated with repurchase agreements with the Federal Home Loan Bank (FHLB)
and brokerage firms are held in collateral accounts for our account until
maturity of the agreements. All FHLB and brokerage firm repurchase agreements
have stated maturities of ten years or less.


Note 10: NOTES PAYABLE - FEDERAL HOME LOAN BANK

Information on the borrowings is summarized as follows (dollars in
thousands):

                    Floating Rate and Fixed Rate Advances

                      Balance at          Interest Rate as
Maturity Date      December 31, 2001    of December 31, 2001    Call Date

12/08/2003            $ 1,000                4.870%             03/07/2002
02/03/2004              1,000                4.800              02/03/2002
01/27/2005              1,000                6.150              01/27/2002
11/22/2005              2,000                5.920              02/22/2002
12/13/2010              2,000                5.090              03/13/2002
01/11/2011              2,000                4.600              07/11/2002
01/11/2011              2,000                4.910              01/11/2004
02/28/2011              1,000                4.460              02/28/2003
03/08/2011              2,000                4.820              03/08/2004
05/02/2011              2,000                4.720              04/30/2004
11/28/2011              1,000                4.020              11/28/2004
05/01/2002*             2,000                2.044                   *
06/23/2003*             2,000                1.961                   *
11/28/2003*             1,000                2.196                   *
02/05/2004*             1,000                2.310                   *
05/14/2004*             2,000                2.056                   *
04/18/2005*             2,000                2.461                   *
06/15/2005*             2,000                1.936                   *
07/12/2005*             2,000                2.380                   *
08/30/2005*             1,000                2.116                   *

Total                 $32,000

*These borrowings are non-callable but retain a monthly or quarterly
repricing frequency to the current 1-month or 3-month LIBOR rate plus or
minus 0 to 10 basis points. The interest on these borrowings is calculated on
an actual/360-day basis and is payable monthly or quarterly to the Federal
Home Loan Bank depending on the repricing frequency.

                                    - 24 -


<PAGE>

            Monthly Amortizing Fixed Rate Advances

                           Balance at             Interest Rate as
Maturity Date           December 31, 2001       of December 31, 2001

10/28/2003                  $ 165                       5.038%
11/10/2003                    433                       5.412
10/28/2005                    242                       5.228
10/28/2008                    149                       5.436

    Total                   $ 989

These borrowings call for monthly payments of principal and interest of
approximately $35,000 per month. Interest on these advances is calculated on
a 30/360 day basis.

At December 31, 2001 and 2000, the subsidiary Bank had available lines of
credit with correspondent banks and the Federal Home Loan Bank of
$112,708,000 and $106,476,000, respectively. Advances on these lines are
secured by the subsidiary Bank's real estate mortgages, investment
securities, available-for-sale securities and Federal Home Loan Bank stock.
At December 31, 2001 and 2000, advances outstanding on these lines with the
Federal Home Loan Bank were $32,989,000 and $21,340,000, respectively.


Note 11: EMPLOYEE BENEFIT PLANS

Pension Plan - The subsidiary Bank is a member of the New York State Bankers
Retirement System and offers a non-contributory defined benefit retirement
plan to substantially all full-time employees. Benefit payments to retired
employees are based upon their length of service and percentages of average
compensation during the final three to five years of employment.
Contributions are intended to provide not only for benefits attributed to
service to date, but also for those expected to be earned in the future.
Assets of the plan are primarily invested in equity and debt securities.

The following table sets forth the plan's funded status as of a September 30
measurement date, and the amounts recognized in the accompanying consolidated
financial statements (dollars in thousands).

<TABLE>
<CAPTION>
                                                            2001                    2000
<S>                                                         <C>                     <C>
Change in projected benefit obligation:
     Projected benefit obligation at beginning of year      $3,467                  $3,252
     Service cost                                              171                     173
     Interest cost                                             264                     239
     Benefits paid                                            (209)                   (137)
     Expenses paid                                             (28)                    (33)
     Assumption changes and other                              450                     (27)

     Projected benefit obligation at end of year             4,115                   3,467

Change in plan assets:
     Fair value of plan assets at beginning of year          4,444                   4,023
     Actual (loss)/return on plan assets                      (364)                    413
     Employer contribution                                     235                     178
     Benefits paid                                            (209)                   (137)
     Expenses paid                                             (28)                    (33)

     Fair value of plan assets at end of year                4,078                   4,444

     Funded status                                             (37)                    977
     Unrecognized net actuarial loss/(gain)                    908                    (159)
     Unrecognized prior service cost                           106                     (19)
     Unrecognized transition asset                              (2)                     (2)

     Prepaid pension cost                                   $  975                  $  797

Weighted average assumptions as of September 30
     Discount rate                                            6.75%                   7.75%
     Rate of compensation increase                            4.00                    4.50
     Expected return on plan assets                           8.50                    8.50
</TABLE>


<TABLE>
<CAPTION>
                                                             2001                    2000                   1999
<S>                                                          <C>                     <C>                    <C>
Components of net periodic pension cost:
     Service cost                                            $ 171                   $ 173                  $ 147
     Interest cost                                             264                     239                    202
     Expected return on plan assets                           (375)                   (338)                  (292)
     Amortization of unrecognized prior service cost            (2)                     (2)                    (2)
     Amortization of unrecognized transition asset              (1)                     (1)                    (1)

     Net periodic pension cost                               $  57                   $  71                  $  54
</TABLE>


                                    - 25 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The subsidiary Bank has a Supplemental Executive Retirement Plan for key
management personnel. The subsidiary Bank's expense for the years ended
December 31, 2001, 2000 and 1999 was approximately $58,000, $62,000 and
$59,000, respectively.

The subsidiary Bank has also established a Supplemental Life Insurance
Plan/Split Dollar for all officers, vice president and above, with at least
ten years of service to the Company. Under the terms of this plan, upon the
death of a participant, the beneficiary receives an amount equal to three
times the final year's salary of the participant. The subsidiary Bank has
invested approximately $2.3 million for this coverage and is receiving an
annual tax-free return. The cash surrender value of the bank-owned life
insurance is included in other assets and was approximately $2.7 million and
$2.6 million as of December 31, 2001 and December 31, 2000, respectively.

Profit Sharing Plan - The subsidiary Bank has a non-contributory profit
sharing plan under which contributions are made by the subsidiary Bank to a
separate trust for the benefit of the subsidiary Bank's participating
employees. Annual contributions to the plan are determined by the board of
directors of the subsidiary Bank. Contributions are accrued during the year
and are distributed December 31st of each year. The subsidiary Bank's
contribution to the plan for 2001, 2000 and 1999 was $146,000, $140,000 and
$130,000, respectively.

Other than certain life insurance benefits which are provided to a closed
group of retirees, the Company does not provide post-retirement benefits to
employees. The costs associated with the life insurance to the closed group
of retirees is not significant in 2001, 2000 or 1999.


Note 12: STOCK BASED COMPENSATION

On October 20, 1998, the Company's shareholders approved the CNB Bancorp,
Inc. Stock Option Plan (Stock Option Plan) which permits the issuance of
options to selected employees. The primary objective of the Stock Option Plan
is to provide employees with a proprietary interest in the Company and as an
incentive to encourage such persons to remain with the Company.

Under the Stock Option Plan, 240,000 shares of authorized but unissued common
stock are reserved for issuance upon option exercises. The Company also has
the alternative to fund the Stock Option Plan with treasury stock. Options
under the plan may be either non-qualified stock options or incentive stock
options. Each option entitles the holder to purchase one share of common
stock at an exercise price equal to the fair market value on the date of the
grant. Options expire no later than ten years following the date of the
grant.

On June 26, 2001, 35,850 options were awarded at an exercise price of $32.50
per share. These options have a ten-year term with fifty percent vesting one
year from the date of the grant and the remaining fifty percent vesting two
years from the date of the grant.

A summary of the status of the Company's  stock option plans as of December
31, 2001,  2000 and 1999 and changes during the year is presented below:

<TABLE>
<CAPTION>
                                                2001                         2000                          1999

                                                     Weighted                      Weighted                     Weighted
                                                     Average                       Average                      Average
                                                     Exercise                      Exercise                     Exercise
                                      Shares         Price         Shares          Price        Shares          Price
<S>                                   <C>            <C>           <C>             <C>          <C>             <C>
Options:
    Outstanding at beginning of year  232,115        $23.83        238,069         $23.61        98,250         $23.67
    Granted                            35,850         32.50             --             --       105,900          26.25
    Issued in acquisition                  --            --             --             --        35,614          15.22
    Exercised                         (34,968)        22.72         (5,954)         15.22        (1,695)         15.22
    Cancelled                          (1,739)        26.25             --             --            --             --

    Outstanding at year-end           231,258         25.32        232,115          23.83       238,069          23.61

    Exercisable at year-end           181,163        $24.70        160,046         $24.21       103,678         $23.23

</TABLE>

The following table summarizes information about the Company's stock options
at December 31, 2001:

<TABLE>
<CAPTION>
                                               Weighted Average
Exercise                                       Remaining
Price                  Outstanding             Contract Life              Exercisable
<S>                    <C>                     <C>                        <C>
$32.50                  35,850                 9.5 years                       --
 26.25                 103,990                 7.3 years                  103,990
 23.67                  67,428                 6.8 years                   67,428
 15.22                  23,990                 6.7 years                    9,745

                       231,258                                            181,163
</TABLE>


                                    - 26 -


<PAGE>

Companies not using a fair value based method of accounting for employee
stock options or similar plans must provide pro forma disclosure of net
income and earnings per share as if that method of accounting had been
applied. The fair value of each option grant, excluding the options granted
in connection with the acquisition of Adirondack, is estimated on the date of
the grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 2001 and 1999:
dividend yield of 2.11% and 2.16%, respectively; expected volatility of 18.8%
and 15.0%, respectively; risk free interest rate of 4.81% and 5.54%,
respectively; and an expected life of five years for grants awarded in both
years. Based on the aforementioned assumptions, the Company has estimated
that the fair value of the options granted on June 26, 2001 was $6.60 and the
options granted on April 20, 1999 was $5.04. Had the Company determined
compensation cost based on the fair value at the grant dates for these
options, the pro forma disclosures for the Company for the years ending
December 31, 2001, 2000 and 1999 would be as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                        2001                       2000                      1999
<S>                                     <C>                        <C>                       <C>
Net income:
     As reported                        $4,032                     $3,705                    $3,299
     Pro forma                           3,996                      3,526                     2,900

Basic earnings per share:
     As reported                          1.75                       1.56                      1.37
     Pro forma                            1.73                       1.48                      1.21

Diluted earnings per share:
     As reported                          1.72                       1.54                      1.36
     Pro forma                            1.71                       1.47                      1.20
</TABLE>

Because the Company's employee stock options have characteristics
significantly different from those of traded options for which the
Black-Scholes model was developed, and because changes in the subjective
input assumptions can materially affect the fair value estimate, the existing
models, in management's opinion, do not necessarily provide a reliable single
measure of the fair value of its employee stock options.


Note 13: INCOME TAXES

The following is a summary of the components of income tax expense for the
years ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                            2001                    2000                   1999
<S>                                                         <C>                     <C>                    <C>
Current tax expense:
     Federal                                                $1,567                  $1,207                 $1,152
     State                                                     210                     130                    306
     Total current tax expense                               1,777                   1,337                  1,458

Deferred tax expense (benefit):
     Federal                                                    26                     218                     22
     State                                                       6                      20                    (92)

     Total deferred tax expense (benefit)                       32                     238                    (70)

Provision for income taxes                                  $1,809                  $1,575                 $1,388
</TABLE>

The provision for income taxes is less than the amount computed by applying
the U.S. Federal income tax rate of 34% to income before taxes as follows (in
thousands):

<TABLE>
<CAPTION>
                                                            2001                   2000                    1999

                                                                   % of                   % of                    % of
                                                                   Pretax                 Pretax                  Pretax
                                                     Amount        Income   Amount        Income    Amount        Income
<S>                                                  <C>           <C>      <C>           <C>       <C>           <C>
Tax expense at statutory rate                        $1,986        34.0%    $1,795        34.0%     $1,594        34.0%
Increase (decrease) resulting from:
    Tax-exempt interest income                         (506)       (8.7)      (487)       (9.2)       (438)       (9.3)
    State tax expense, net of federal deductions        140         2.4        107         2.0         125         2.7
    Elimination of valuation allowance                   --          --         --          --        (163)       (3.5)
    Interest expense incurred to carry
     tax-exempt bonds                                    63         1.1         67         1.3          51         1.1
    Amortization of goodwill                            129         2.2        125         2.4          58         1.2
    Other                                                (3)         --        (32)       (0.7)        161         3.4

Provision for income taxes                           $1,809        31.0%    $1,575        29.8%     $1,388        29.6%
</TABLE>


                                    - 27 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Significant temporary differences that give rise to the deferred tax assets
and liabilities as of December 31, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                              2001                    2000
<S>                                                                           <C>                     <C>
Deferred tax assets:
    Allowance for loan losses                                                 $  976                  $1,071
    Accrued pension liability                                                    146                     125
    Covenant not to compete                                                       34                      --
    Loan fees                                                                     19                      24
    Other                                                                         46                     100

        Total gross deferred tax assets                                        1,221                   1,320

Deferred tax liabilities:
    Premises and equipment, primarily due to accelerated depreciation            (69)                   (100)
    Securities discount accretion                                                (80)                    (80)
    Prepaid pension cost                                                        (380)                   (402)
    Purchase accounting adjustments                                             (176)                   (190)

        Total gross deferred tax liabilities                                    (705)                   (772)

        Net deferred tax asset end of year                                       516                     548
        Net deferred tax asset beginning of year                                 548                     786

Deferred tax expense                                                          $   32                  $  238
</TABLE>

In addition to the deferred tax assets and liabilities described above, the
Company also has a deferred tax liability of $307,000 at December 31, 2001
related to the unrealized gain on securities available for sale as of
December 31, 2001. The Company had a deferred tax asset of $26,000 at
December 31, 2000 related to the unrealized loss on securities available for
sale as of December 31, 2000.

Deferred tax assets are recognized subject to management's judgement that
realization is more likely than not. In considering if it is more likely than
not that some or all of the deferred tax assets will not be realized, the
Company considers temporary taxable differences, historical taxes and future
taxable income. Based primarily on the sufficiency of historical taxable
income, management believes it is more likely than not that the remaining net
deferred tax asset at December 31, 2001 and 2000 will be realized.


Note 14: COMPREHENSIVE INCOME

Comprehensive income represents the sum of net income and items of "other
comprehensive income" which are reported directly in stockholders' equity,
such as the net unrealized gain or loss on securities available for sale. The
Company has reported its comprehensive income or loss for 2001, 2000 and 1999
in the consolidated statements of changes in stockholders' equity.

The Company's accumulated other comprehensive income, which is included in
stockholders' equity, represents the after-tax net unrealized gain/(loss) on
securities available for sale at the consolidated balance sheet date. The
Company's other comprehensive income, which is attributable to gains and
losses on securities available for sale, consisted of the following
components for the years ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                             2001            2000            1999
<S>                                                                          <C>             <C>             <C>
Net unrealized holding gains (losses) arising during the year,
 net of taxes of ($333) in 2001, ($1,366) in 2000 and $1,650 in 1999         $522            $2,141          ($2,486)
Reclassification adjustment for net realized gains included in
 income, net of taxes of $0 in 2001, $0 in 2000 and $28 in 1999                --                --              (42)

Other comprehensive income (loss), net of taxes of ($333) in 2001,
 ($1,366) in 2000 and $1,622 in 1999                                         $522            $2,141          ($2,528)
</TABLE>


Note 15: COMMITMENTS AND CONTINGENT LIABILITIES

Various commitments and contingent liabilities arise in the normal conduct of
the subsidiary Bank's business that include certain financial instruments
with off-balance sheet risk to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, unused
lines of credit, standby letters of credit and commercial letters of credit.
Those instruments involve, to varying degrees, elements of credit risk in
excess of the amount recognized on the consolidated statements of financial
condition. The contract amounts of those instruments reflect the extent of
involvement the subsidiary Bank has in particular classes of financial
instruments. The subsidiary Bank's exposure to credit loss in the event of
nonperformance by the other party to the commitments to extend credit, unused
lines of credit, standby letters of credit and commercial letters of credit
are represented by the contractual notional amount of those instruments. The
subsidiary Bank uses the same credit policies in

                                    - 28 -


<PAGE>

making commitments as it does for on-balance sheet instruments.

Contract amounts of financial instruments that represent credit risk as of
December 31, 2001 and 2000 at fixed and variable rates are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                       2001

                                                                     Fixed            Variable         Total
<S>                                                                  <C>              <C>              <C>
Commitment and unused lines of credit:
    Home equity loans                                                $   --           $ 4,571          $ 4,571
    Commercial loans                                                  2,850            18,153           21,003
    Overdraft loans                                                   1,390                --            1,390
    Mortgage loans                                                    1,866                --            1,866

                                                                      6,106            22,724           28,830
Standby & commercial letters of credit                                   --               125              125

Total commitments                                                    $6,106           $22,849          $28,955
</TABLE>

<TABLE>
<CAPTION>
                                                                                       2000

                                                                     Fixed            Variable         Total
<S>                                                                  <C>              <C>              <C>
Commitment and unused lines of credit:
    Home equity loans                                                $   --           $ 4,656          $ 4,656
    Commercial loans                                                  3,888            15,821           19,709
    Overdraft loans                                                   1,339                --            1,339
    Mortgage loans                                                      495                --              495

                                                                      5,722            20,477           26,199
Standby & commercial letters of credit                                   --                91               91

Total commitments                                                    $5,722           $20,568          $26,290
</TABLE>

Commitments to extend credit and unused lines of credit are agreements to
lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being fully drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The subsidiary Bank evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral, if any, required by the
subsidiary Bank upon the extension of credit is based on management's credit
evaluation of the customer. Mortgage and home equity loan commitments are
secured by a lien on real estate. Collateral on extensions of credit for
commercial loans varies but may include accounts receivable, inventory,
property, plant and equipment, and income producing property.

Standby and commercial letters of credit are conditional commitments issued
by the subsidiary Bank to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support borrowing
arrangements. The credit risk involved in issuing standby letters of credit
and commercial letters of credit is essentially the same as that involved in
extending loan facilities to customers.

The Company and its subsidiaries may, from time to time, be defendants in
legal proceedings relating to the conduct of their business. In the best
judgments of management, the consolidated financial position of the Company
and its subsidiaries would not be affected materially by the outcome of any
pending legal proceedings.


Note 16: REGULATORY CAPITAL REQUIREMENTS

National banks are required to maintain minimum levels of regulatory capital
in accordance with regulations of the Office of the Comptroller of the
Currency ("OCC"). The Federal Reserve Board ("FRB") imposes similar
requirements for consolidated capital of bank holding companies. The OCC and
FRB regulations require a minimum leverage ratio of Tier 1 capital to total
adjusted average assets of 3.0% to 4.0% depending on the institution and
minimum ratios of Tier 1 and total capital to risk-weighted assets of 4.0%
and 8.0%, respectively.

Under its prompt corrective action regulations, the OCC is required to take
certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized bank. Such actions could have a direct
material effect on a bank's financial statements. The regulations establish a
framework for the classification of banks into five categories: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, a bank is
considered well capitalized if it has a leverage (Tier 1) capital ratio of at
least 5.0% (based on total adjusted average assets); a Tier 1 risk-based
capital ratio of at least 6.0%; and a total risk-based capital ratio of at
least 10.0%.

The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgements by the regulators
about capital components, risk weightings and other factors.

As of December 31, 2001 and 2000, the Company and the subsidiary Bank met all
capital adequacy requirements to which they are subject. Further, the most
recent OCC notification categorized the subsidiary Bank as a well-capitalized
bank under the


                                    - 29 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

prompt corrective action regulations. There have been no conditions or events
since that notification that management believes have changed the subsidiary
Bank's capital classification.

The following is a summary of the actual capital amounts and ratios as of
December 31, 2001 and 2000 for the Company (consolidated) and the subsidiary
Bank (dollars in thousands):

<TABLE>
<CAPTION>
                                                             2001                                     2000

                                                   Amount            Ratio                  Amount            Ratio
<S>                                                <C>               <C>                    <C>               <C>
Consolidated
    Leverage (Tier 1) capital                      $29,961            8.4%                  $29,482            8.9%
    Risk-based capital:
        Tier 1                                      29,961           14.7                    29,482           15.5
        Total                                       32,496           16.0                    31,858           16.8

Subsidiary Bank
    Leverage (Tier 1) capital                      $28,466            8.0%                  $28,087            8.5%
    Risk-based capital:
        Tier 1                                      28,466           14.0                    28,087           14.8
        Total                                       30,981           15.3                    30,457           16.1
</TABLE>


Note 17: PARENT COMPANY ONLY FINANCIAL INFORMATION

The following presents the financial condition of the Parent Company as of
December 31, 2001 and 2000 and the results of its operations and cash flows
for the years ended December 31, 2001, 2000 and 1999 (in thousands):

<TABLE>

CONDENSED STATEMENTS OF CONDITION (Parent only)

<CAPTION>
                                                                                     At December 31,

                                                                              2001                   2000
<S>                                                                           <C>                    <C>
ASSETS
Cash                                                                          $   314                $   189
Securities available for sale, at fair value                                      156                    140
Investment in subsidiaries                                                     34,197                 33,652
Other assets                                                                       --                     30

    Total assets                                                              $34,667                $34,011

LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred taxes payable - FASB No. 115                                         $    18                $    12
Other liabilities                                                                  --                      6

    Total liabilities                                                              18                     18

STOCKHOLDERS' EQUITY
Common stock                                                                  $ 6,004                $ 6,004
Surplus                                                                         4,418                  4,418
Undivided profits                                                              27,608                 25,199
Treasury stock, at cost                                                        (3,862)                (1,587)
Accumulated other comprehensive income/(loss)                                     481                    (41)

    Total stockholders' equity                                                 34,649                 33,993

    Total liabilities and stockholders' equity                                $34,667                $34,011
</TABLE>

<TABLE>

CONDENSED STATEMENTS OF INCOME (Parent only)

<CAPTION>

                                                                                              Years ended December 31,

                                                                                        2001           2000          1999
<S>                                                                                     <C>            <C>           <C>
Income
    Dividends from subsidiaries                                                         $4,025         $ 4,718       $ 16,214
    Dividends on securities available for sale                                               6               4             --

        Total dividend income                                                            4,031           4,722         16,214

Expenses
    Salaries and employee benefits                                                          --               3             --
    Other expense                                                                           49              19              3

        Total expenses                                                                      49              22              3

Income before income taxes and equity in(distributions in excess of)
 undistributed net income of subsidiaries                                                3,982           4,700         16,211
Income tax benefit                                                                          17              30             --

Income before equity in (distribution in excess of) undistributed
 net income of subsidiaries                                                              3,999           4,730         16,211
Equity in (distribution in excess of) undistributed net income of subsidiaries              33          (1,025)       (12,912)

Net income                                                                              $4,032         $ 3,705       $  3,299
</TABLE>


                                    - 30 -


<PAGE>

<TABLE>

CONDENSED STATEMENTS OF CASH FLOWS (Parent only)

<CAPTION>
                                                                          Years ended December 31,

                                                             2001                    2000                  1999
<S>                                                          <C>                     <C>                   <C>
Cash flows from operating activities:
    Net income                                               $ 4,032                 $ 3,705               $  3,299
    Decrease/(increase) in other assets                           30                     (30)                    --
    (Decrease)/increase in other liabilities                      (6)                      6                     --
    Other                                                         --                       3                     --
    (Equity in)/distributions in excess of
     undistributed net income                                    (33)                  1,025                 12,912

Net cash provided by operating activities                      4,023                   4,709                 16,211

Cash flows from investing activities:
    Purchase of Adirondack Financial Service Bancorp, Inc.        --                      --                (14,714)
    Purchase of Hathaway Agency, Inc.                             --                  (1,433)                    --
    Purchase of available for sale securities                     --                    (110)                    --
    Proceeds from sales of available for sale securities          --                      50                     --

Net cash used by investing activities                             --                  (1,493)               (14,714)

Cash flows from financing activities:
    Proceeds from the sale of treasury stock                   1,003                      90                     26
    Treasury stock purchased                                  (3,381)                 (1,755)                    --
    Cash dividends paid on common stock                       (1,520)                 (1,476)                (1,416)

Net cash used by financing activities                         (3,898)                 (3,141)                (1,390)

Net increase in cash                                             125                      75                    107
Cash beginning of year                                           189                     114                      7

Cash end of year                                             $   314                 $   189               $    114
</TABLE>


Note 18: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the subsidiary Bank's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the subsidiary Bank's financial instruments, fair value estimates
are based on judgments regarding future expected net cash flows, current
economic conditions, risk characteristics of various financial instruments,
and other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.

Fair value estimates are based on existing on-and-off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include the net deferred tax asset
and premises and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimates of fair
value. In addition, there are significant intangible assets that the fair
value estimates do not recognize, such as the value of "core deposits", the
subsidiary Bank's branch network, trust relationships and other items
generally referred to as "goodwill".

The following methods and assumptions were used to estimate the fair value of
each class of financial instrument.

Cash and Cash Equivalents

For these short-term instruments, carrying value approximates fair value.

Securities Available for Sale & Investment Securities

The fair value of securities available for sale and investment securities,
except certain state and municipal securities, is estimated on bid prices
published in financial newspapers or bid quotations received from securities
dealers. The fair value of certain state and municipal securities is not
readily available through market sources other than dealer quotations, so
fair value estimates are based on quoted market prices of similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued. The estimated fair value of stock in the Federal
Reserve Bank and Federal Home Loan Bank is assumed to be its cost given the
lack of a public market for these investments and the historical experience
that these securities are redeemed at cost.


                                    - 31 -


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Loans

Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, consumer,
and real estate. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and nonperforming
categories.

The fair value of performing loans is calculated by discounting scheduled
cash flows through the contractual estimated maturity using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
loan. The estimate of maturity is based on the term of the loans to maturity,
adjusted for estimated prepayments.

Fair value for nonperforming loans is based on recent external appraisals and
discounting of cash flows. Estimated cash flows are discounted using a rate
commensurate with the risk associated with the estimated cash flows.
Assumptions regarding credit risk, cash flows, and discount rates are
judgmentally determined using available market information and specific
borrower information.

Accrued Interest Receivable

For accrued interest receivable, a short-term instrument, carrying value
approximates fair value.

Deposit Liabilities

The fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings, NOW accounts and money market accounts is
estimated to be the amount payable on demand. The fair value of certificates
and time deposits is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for deposits
of similar remaining maturities. These fair value estimates do not include
the benefit that results from the low-cost funding provided by the deposit
liabilities compared to the cost of borrowing funds in the market.

Securities Sold Under Agreements to Repurchase

For those short-term instruments that mature in one to ninety days, carrying
value approximates fair value. For those instruments that mature in more than
ninety days, the fixed borrowing rate is compared to rates for similar
advances and a premium or discount is calculated.

Notes Payable - Federal Home Loan Bank

For these instruments that mature in more than ninety days the current
borrowing rate is compared to rates for similar advances and a premium or
discount is calculated.

Accrued Interest Payable

For accrued interest payable, a short-term instrument, carrying value
approximates fair value.

Commitments to Extend Credit, Standby and Commercial Letters of Credit, and
Financial Guarantees Written

The fair value of commitments to extend credit and unused lines of credit is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed rate loan commitments, fair
value also considers the difference between current levels of interest rates
and the committed rates. The fair value of financial guarantees written and
letters of credit is based on fees currently charged for similar agreements
or on the estimated cost to terminate them or otherwise settle the
obligations with the counterparties. Fees, such as these are not a major part
of the subsidiary Bank's business. Therefore, carrying value approximates
fair value and the amounts are not significant.


                                    - 32 -


<PAGE>

Financial Instruments

The estimated fair values of the Company's financial instruments at December
31 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                    2001                               2000

                                                          Carrying       Estimated           Carrying       Estimated
                                                          Amount         Fair Value          Amount         Fair Value
<S>                                                       <C>            <C>                 <C>            <C>
Financial Assets:
    Cash and cash equivalents                             $ 19,729       $ 19,729            $ 14,838       $ 14,838
    Securities available for sale<F1>                      123,102        123,102             109,114        109,114
    Investment securities                                    9,955         10,241              15,653         15,969
    Loans (net of unearned income)                         194,949        195,389             186,590        185,213
        Less allowance for loan losses                       2,506             --               2,750             --

            Net loans                                      192,443        195,389             183,840        185,213
     Accrued interest receivable                             1,661          1,661               2,214          2,214

Financial Liabilities:
    Deposits
        Non-interest bearing demand                       $ 28,103       $ 28,103            $ 26,339       $ 26,339
        Savings, NOW and money market                      130,311        130,311             125,974        125,974
        Certificates of deposit and other time             120,813        122,679             118,161        118,611

            Total deposits                                 279,227        281,093             270,474        270,924
        Securities sold under agreements to repurchase      11,629         11,873              11,788         11,788
        Notes Payable - FHLB                                32,989         33,372              21,340         21,341
        Accrued interest payable                               432            432                 547            547

<FN>

<F1> Includes investments required for membership in FRB and FHLB.

</FN>
</TABLE>


                                    - 33 -


<PAGE>

INDEPENDENT AUDITORS' REPORT

To The Board of Directors and Stockholders of CNB Bancorp, Inc.:

We have audited the accompanying consolidated statements of condition of CNB
Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2001. 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 auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNB
Bancorp, Inc. and subsidiaries at December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

/s/ KPMG LLP

Albany, New York
February 8, 2002


                                    - 34 -


<PAGE>

UNAUDITED INTERIM FINANCIAL INFORMATION
(In thousands, except per share data)

The following is a summary of unaudited quarterly financial information for
each quarter of 2001 and 2000.

<TABLE>
<CAPTION>
                                                       Three             Three            Three             Three
                                                       Months Ended      Months Ended     Months Ended      Months Ended
                                                       March 31, 2001    June 30, 2001    Sept. 30, 2001    Dec. 31, 2001
<S>                                                    <C>               <C>              <C>               <C>
Total interest and dividend income                     $6,100            $6,128           $6,065            $5,760
Total interest expense                                  3,061             3,061            2,884             2,402

Net interest income                                     3,039             3,067            3,181             3,358

Provision for loan losses                                 140                70              185               130

Noninterest income                                        611               544              531               438
Noninterest expense                                     2,055             2,092            2,016             2,240

Income before income taxes                              1,455             1,449            1,511             1,426
Provision for income taxes                                450               448              477               434

Net income                                             $1,005            $1,001           $1,034            $  992

Earnings per share:
    Basic                                              $ 0.43            $ 0.43           $ 0.46            $ 0.44
    Diluted                                              0.42              0.43             0.45              0.43
</TABLE>

<TABLE>
<CAPTION>
                                                       Three             Three            Three             Three
                                                       Months Ended      Months Ended     Months Ended      Months Ended
                                                       March 31, 2000    June 30, 2000    Sept. 30, 2000    Dec. 31, 2000
<S>                                                    <C>               <C>              <C>               <C>
Total interest and dividend income                     $5,673            $5,961           $6,028            $6,098
Total interest expense                                  2,775             2,967            3,130             3,219

Net interest income                                     2,898             2,994            2,898             2,879

Provision for loan losses                                  37                62               60                60

Noninterest income                                        345               371              567               479
Noninterest expense                                     1,857             1,923            2,005             2,147

Income before income taxes                              1,349             1,380            1,400             1,151
Provision for income taxes                                409               407              456               303

Net income                                             $  940            $  973           $  944            $  848

Earnings per share:
    Basic                                              $ 0.39            $ 0.41           $ 0.40            $ 0.36
    Diluted                                              0.39              0.40             0.39              0.36
</TABLE>


                                    - 35 -


<PAGE>

DESCRIPTION OF BUSINESS

CNB Bancorp, Inc., a New York corporation, organized in 1988, is a registered
financial holding company headquartered in Gloversville, New York. Its
wholly-owned subsidiary, City National Bank and Trust Company, was organized
in 1887 and is also headquartered in Gloversville, New York, with five
branches located in the county of Fulton and one branch located in the county
of Saratoga. The subsidiary Bank is a full service commercial bank that
offers a broad range of demand and time deposits; consumer, mortgage, and
commercial loans; and trust and investment services. The subsidiary Bank is a
member of the Federal Deposit Insurance Corporation and the Federal Reserve
System and is subject to regulation and supervision of the Federal Reserve
Bank and the Office of the Comptroller of the Currency. On July 1, 2000, CNB
Bancorp, Inc. acquired another wholly-owned subsidiary, Hathaway Agency,
Inc., which was organized in 1915 and is also headquartered in Gloversville,
New York. The subsidiary Insurance Agency specializes in commercial,
industrial and not-for-profit businesses, as well as insuring the personal
automobiles and homes of the people of Fulton County. The insurance agency is
under the supervision of the New York State Insurance Department.


MARKET AND DIVIDEND INFORMATION
CNB BANCORP, INC.

The common capital stock - $2.50 par value is the only registered security of
the Company and is inactively traded. The range of prices of this security
known to management based on records of the Company and as supplied by Ryan,
Beck and Co. on a quarterly basis and the quarterly cash dividends paid for
the most recent two years are shown below:

<TABLE>
<CAPTION>
                                                                      2001

                                         High             Low                 Close               Dividend Paid
<S>                                     <C>               <C>                 <C>                 <C>
First Quarter                           $29.875           $27.375             $29.125             $ .16
Second Quarter                           34.500            28.000              33.000               .16
Third Quarter                            39.000            31.000              32.500               .17
Fourth Quarter                           35.000            29.500              29.500               .17

Number of shareholders on December 31                         692
</TABLE>

<TABLE>
<CAPTION>
                                                                      2000

                                         High             Low                 Close               Dividend Paid
<S>                                     <C>               <C>                 <C>                 <C>
First Quarter                           $30.500           $26.250             $27.500             $ .15
Second Quarter                           28.750            25.250              28.500               .15
Third Quarter                            29.000            28.125              28.750               .16
Fourth Quarter                           28.750            27.250              27.375               .16

Number of shareholders on December 31                         698
</TABLE>

A copy of Form 10K (Annual Report) for 2001, filed with the Securities and
Exchange Commission by the Company, is available to shareholders free of
charge by written request to:
           George A. Morgan, Vice President and Secretary
           CNB Bancorp, Inc., 10-24 N. Main Street, P.O. Box 873,
           Gloversville, NY 12078


                                   - 36 -


<PAGE>


                        CNB BANCORP, INC.

OFFICERS
WILLIAM N. SMITH..........CHAIRMAN OF THE BOARD AND PRESIDENT
GEORGE A. MORGAN.................VICE-PRESIDENT AND SECRETARY
MICHAEL J. FRANK....................................TREASURER
BRIAN R. SEELEY.......................................AUDITOR



               CITY NATIONAL BANK & TRUST COMPANY

ADMINISTRATION
WILLIAM N. SMITH..........CHAIRMAN OF THE BOARD AND PRESIDENT
GEORGE A. MORGAN....................EXECUTIVE VICE-PRESIDENT,
                                   CASHIER, AND TRUST OFFICER

LENDING
DAVID W. MCGRATTAN......................SENIOR VICE-PRESIDENT
MICHAEL J. PEPE................................VICE-PRESIDENT
MICHAEL G. LISKY...............................VICE-PRESIDENT
BILL ARGOTSINGER...............................VICE-PRESIDENT
MARY E. IANNOTTI.....................ASSISTANT VICE-PRESIDENT
GARY R. CANFIELD.....................ASSISTANT VICE-PRESIDENT
KATHRYN E. SMULLEN...................ASSISTANT VICE-PRESIDENT

OPERATIONS
RONALD J. BRADT.........................SENIOR VICE-PRESIDENT
DENISE L. CERASIA..............................VICE-PRESIDENT
PAULA K. TUCKER...............................SYSTEMS OFFICER

FINANCE
MICHAEL J. FRANK...............VICE-PRESIDENT AND COMPTROLLER

COMPLIANCE
GEORGE E. DOHERTY..............................VICE-PRESIDENT

HUMAN RESOURCES
DEBORAH A. BRANDIS.............................VICE-PRESIDENT
CAROLE A. GOTTUNG............................TRAINING OFFICER

MARKETING
LAWRENCE D. PECK...............................VICE-PRESIDENT

TRUST
DEBORAH M. BUCK.................................TRUST OFFICER

INVESTMENT SERVICES
RICHARD DIXON......................FINANCIAL SERVICES OFFICER

AUDIT
BRIAN R. SEELEY.......................................AUDITOR


BRANCH OFFICES

ELIZABETH J. SIMONDS.......................VICE-PRESIDENT AND
                                         BRANCH ADMINISTRATOR

GLOVERSVILLE - NORTH MAIN STREET
JOANNE SHY.......................................AVP, MANAGER

GLOVERSVILLE - FIFTH AVENUE
ROSEANN LAURIA...................................AVP, MANAGER
KAREN SCHERMERHORN.............................BRANCH OFFICER

PERTH
AMY PRAUGHT......................................AVP, MANAGER

NORTHVILLE
CONSTANCE A. ROBINSON............................AVP, MANAGER

JOHNSTOWN
TAMMY L. WARNER..................................AVP, MANAGER
TAMMY MALAGISI.................................BRANCH OFFICER

SARATOGA
PETER E. BROWN...................................AVP, MANAGER

HATHAWAY AGENCY, INC.
WILLIAM R. FIELDER..................................PRESIDENT


<PAGE>

                             City National Bank
                              and Trust Company


                               BANKING OFFICES

                                 MAIN OFFICE
                           10-24 North Main Street
                            Gloversville, NY 12078

                        TRUST AND INVESTMENT SERVICES
                             52 North Main Street
                            Gloversville, NY 12078

                        FREMONT STREET DRIVE-UP OFFICE
                            Gloversville, NY 12078

                             FIFTH AVENUE OFFICE
                               185 Fifth Avenue
                            Gloversville, NY 12078

                               JOHNSTOWN OFFICE
                           142 North Comrie Avenue
                             Johnstown, NY 12095

                              NORTHVILLE OFFICE
                              231 Bridge Street
                             Northville, NY 12134

                                 PERTH OFFICE
                            4178 State Highway 30
                                Town of Perth
                             Amsterdam, NY 12010

                           SARATOGA SPRINGS OFFICE
                                 295 Broadway
                          Saratoga Springs, NY 12866

                              OTHER ATMs LOCATED
                    Nathan Littauer Hospital, Gloversville
                            Holiday Inn, Johnstown
                    Walmart Distribution Center, Johnstown