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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-KSB



(Mark One)



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------



For fiscal year ended December 31, 2003



| ̈ | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 333-74250



CNB BANCORP, INC.

(Name of Small
Business Issuer in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 54-2059214                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|11407 Windsor Blvd., Windsor, VA                               |  | 23487                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



(757) 242-4422

(Issuers Telephone Number, Including Area Code)



Securities registered pursuant to Section 12(b) of the Act: None.



Securities registered pursuant to Section 12(g) of the Act: None.



Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. Yes x No ̈



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



State issuers revenues for its most
recent fiscal year: $225,000.



The aggregate market value of common stock held
by non-affiliates (shareholders each holding less than 5% of an outstanding class of stock, excluding directors and executive officers) of the Company on March 15, 2004 was $4,777,776. This calculation is based upon an estimate of the fair market
value of the Companys common stock at $12.00 per share, which was the price of the last trade of which management is aware prior to this date. There is not an active trading market for the common stock and it is not possible to identify
precisely the market value of the common stock.



APPLICABLE ONLY
TO CORPORATE REGISTRANTS



State the number of shares outstanding of each of the
issuers classes of common equity, as of the latest practicable date: As of March 15, 2004, 561,137 shares of the registrants common stock, $.01 par value, were issued and outstanding.



Transitional Small Business Disclosure format (check one): Yes ̈No x



DOCUMENTS INCORPORATED BY REFERENCE



None.



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TABLE OF CONTENTS



|           |  |                                                                                                                 |  |     
|---------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                 |  | Page
|           | 
|PART I     |  | 3                                                                                                              
|           |  |                                                                                                                
|Item 1.    |  | Description of Business                                                                                         |  | 3   
|Item 2.    |  | Description of Properties                                                                                       |  | 12  
|Item 3.    |  | Legal Proceedings                                                                                               |  | 12  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                             |  | 12  
|Item 5.    |  | Market for Registrants Common Equity and Related Stockholder Matters                                           |  | 12  
|Item 6.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 13  
|Item 7.    |  | Financial Statements                                                                                            |  | 23  
|Item 8.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                            |  | 39  
|Item 8A.   |  | Controls and Procedures                                                                                         |  | 39  
|           | 
|PART III   |  | 39                                                                                                             
|           |  |                                                                                                                
|Item 9.    |  | Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act |  | 39  
|Item 10.   |  | Executive Compensation                                                                                          |  | 40  
|Item 11.   |  | Security Ownership of Certain Beneficial Owners and Management                                                  |  | 42  
|Item 12.   |  | Certain Relationships and Related Transactions                                                                  |  | 43  
|Item 13.   |  | Exhibits, Lists and Reports on Form 8-K                                                                         |  | 43  
|Item 14.   |  | Principal Accountant Fees and Services                                                                          |  | 44  
|           | 
|SIGNATURES |  |                                                                                                                



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PART I



|ITEM 1. | DESCRIPTION OF BUSINESS
|------- | -----------------------



Special Cautionary Notice Regarding Forward-Looking Statements



This Report contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and the
Securities Exchange Act of 1934. Various matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption Managements Discussion and Analysis of Financial Condition and
Results of Operations, may constitute forward-looking statements for purposes of the Securities Act and the Securities Exchange Act. These statements are based on many assumptions and estimates and are not guarantees of future performance and
may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CNB Bancorp, Inc. (the Company or CNB) to be materially different from future results,
performance or achievements expressed or implied by such forward-looking statements. The words expect, anticipate, intend, plan, believe, seek, estimate, and similar
expressions are intended to identify such forward-looking statements. The Companys actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without
limitation:



| |  | The effects of future economic conditions;
| | - | ------------------------------------------



| |  | Governmental monetary and fiscal policies, as well as legislative and regulatory changes;
| | - | -----------------------------------------------------------------------------------------



| |  | The risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest-rate protection agreements,
as well as interest-rate risks;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The effects of competition from other financial institutions and financial service providers operating in the Companys market area and elsewhere, including institutions
operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, and computer and the Internet; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The failure of assumptions underlying the establishment of reserves for possible loan losses and estimations of values of collateral and various financial assets and liabilities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by these cautionary statements.



CNB Bancorp, Inc.



CNB
was incorporated as a Virginia corporation on November 12, 2001, to serve as a bank holding company that holds all of the outstanding capital stock of Citizens National Bank (the Bank), a nationally chartered bank located in Windsor,
Virginia. Other than its investment in the Bank, the Company has no other material asset, nor does it conduct any other business activity.



During organization, the Companys operations, pre-opening expenses and capital costs from April 23, 2001 through the opening of the Bank were funded
by and conducted through CNB Bancorp, LLC (the LLC), a limited liability company formed by the Companys organizing directors. The Company closed its public offering on December 31, 2002. The offering raised $5.4 million, net of
offering expenses. Upon opening the Bank, the Company and the Bank used part of the offering proceeds to reimburse the LLC for operational and pre-opening expenses related to the Company and the Bank and the LLC was subsequently dissolved. The
amount of the pre-opening expenses paid by the LLC was $439,000 and represents the opening retained deficit balance on the consolidated statement of shareholders equity. The proceeds of the offering, net of stock offering costs, are shown as
the beginning balances of common stock and additional paid-in capital on the consolidated statement of shareholders equity. The proceeds of the offering net of offering costs and pre-opening expenses totaled $4.97 million and are shown as the
beginning cash balance on the consolidated statement of cash flows.



We have chosen this holding company structure because we believe it will provide flexibility that would not otherwise be available to us. Subject to Federal Reserve debt guidelines, through a holding company structure, we can assist the
Bank in maintaining its required capital ratios by borrowing money and contributing the proceeds to the Bank as primary capital. Additionally, under provisions of the Gramm-Leach-Bliley Act, a holding company may engage in activities that are
financial in nature or incidental or complementary to a financial activity including some insurance transactions, real estate development activities and merchant banking activities, which a bank may not do. Although we do not presently intend to
engage in these types of activities, we will be able to do so with a proper notice or filing to the Federal Reserve if we believe that there is a need for these services in our market area and that these activities could be profitable.



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Citizens National Bank



Citizens National Bank received final approval to become a national bank from the Office of the Comptroller of Currency (OCC) on April 28, 2003 and
began operations on April 29, 2003. CNB invested capital of $5.25 million in Citizens National Bank immediately prior to the Banks opening, acquiring 100% of the Banks stock. From this initial capital infusion from the Company, the Bank
reimbursed CNB Bancorp, LLC for the respective amounts of its pre-opening expenses.



Market Area and Competition. Our primary service area consists of the 15-mile radius surrounding our main office location in the Town of Windsor, Virginia. This area includes all of the County of Isle of Wight,
the Cities of Franklin and Suffolk, and portions of Southampton, Surry and Sussex Counties.



Isle of Wight County and the adjacent City of Suffolk are growing marketplaces that we believe will support the expected growth of Citizens National Bank. Isle of Wight County grew 18.7% during the last ten years,
increasing its population from 25,053 in 1990 to 29,728 in 2000. Given its consistent economic base, which includes five industrial parks, we believe that Isle of Wight County is positioned to continue its growth trend during the next ten years.



As of December 31, 2003, our primary service area was serviced
by 13 financial institutions with 28 banking offices, and there was only one bank operating in the Town of Windsor. Almost all of the institutions operating within our primary service area are large national, regional or super-regional banks. With
the exception of two local banks, Farmers Bank and SuffolkFirst Bank, none of these financial institutions are headquartered in our primary service area.



All of our competitors have substantially greater resources and lending limits than Citizens National Bank has and provide other services, such as
extensive and established branch networks and trust services, which we either do not expect to provide or will not provide initially. As a result of these competitive factors, Citizens National Bank may have to pay higher interest rates to attract
depositors or extend credit with lower interest rates to attract borrowers.



Lending Policy. The Bank aggressively seeks creditworthy borrowers within its primary service area. As of December 31, 2003, the Banks loan portfolio was comprised of the following:



|                          |  |                          |  
|------------------------- |  | ------------------------ | -
|Loan Classification       |  | Percentage ofTotal Loans |  
|                          | 
|Real estate-related loans |  | 49.2                     | %
|                          | 
|Commercial loans          |  | 30.9                     | %
|                          | 
|Consumer loans            |  | 19.9                     | %



Loan Approval and
Review. The Banks loan approval policies provide for various levels of officer lending authority. When the total amount of loans to a single borrower exceeds an individual officers lending authority, an officer with a higher lending
limit or the Banks director loan committee determines whether to approve the loan request. As part of its lending policy, the Bank does not make loans to its directors or executive officers unless a majority of its disinterested board members
approves the loan and the terms of the loan are no more favorable than would be available to any other borrower similarly situated.



Lending Limits. The Banks lending activities are subject to a variety of lending limits imposed by federal law. Differing limits apply based
on the type of loan and the nature of the borrower, including the borrowers relationship to the Bank. In general, however, the Bank is able to loan any one borrower a maximum amount equal to either:



| |  | 15% of the Banks capital and surplus; or
| | - | -----------------------------------------



| |  | 25% of its capital and surplus if the excess over 15% is within federal guidelines, which provides an exception to the 15% limit for debt secured by readily marketable collateral,
as defined by OCC regulations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Bank complies
with the statutory lending limits, as described above. The Banks legal lending limits will increase or decrease as the Banks capital increases or decreases as a result of, among other reasons, its earnings or losses. The Bank may sell
loan participations to other financial institutions to meet the needs of customers requiring loans above these limits.



Real Estate Loans. The Bank makes and holds real estate-related loans, consisting primarily of mortgage loans, home equity lines of credit and
non-farm, non-residential loans secured by real estate. The Bank is involved in both the originating and servicing of its first and second mortgage loans, and generally requires an aggregated loan-to-value ratio of no more than 80%.



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For construction loans, the Bank requires a first lien position on the land associated with the project with terms not exceeding one year. Loan disbursements
on construction loans require on-site inspections to assure the project is on budget and that the loan proceeds are not being diverted to another project. The loan-to-value ratios for construction loans are typically 80% of the lower of the as-built
appraised value or project cost, and a maximum of 90% if the loan is amortized. The Bank also offers home equity lines of credit, which equaled approximately 3.4% of the Banks total loans, as of December 31, 2003, and have interest rate terms
that are variable rather than fixed.



As of December 31, 2003,
approximately 16.0% of the Banks real estate-related loans had interest rate terms that are variable or carried a term of 12 months or less. Additionally, the terms of the Banks real estate loans generally do not exceed five years. Loans
for construction can present a high degree of risk to the lender and depend upon, among other things, the builders ability to sell the home to a buyer, the buyers ability to obtain permanent financing and the construction projects
ability to produce income in the interim.



Commercial
Loans. The Banks commercial lending is directed principally toward small to medium-size businesses whose demands for funds fall within the legal lending limits of the Bank. The Banks commercial loans are made to individual,
partnership or corporate borrowers, and are obtained for a variety of business purposes. Of the Banks commercial loans as of December 31, 2003, approximately 82.7% were adjustable-rate loans or mature within one year and 17.3% had maturities
extending beyond 12 months but less than 60 months. Risks associated with these loans can be significant and include, but are not limited to, fraud, bankruptcy, economic downturn, deteriorated or non-existing collateral and changes in interest
rates.



Consumer Loans. The Bank makes consumer
loans, consisting primarily of installment loans to individuals for personal, family and household purposes, including loans for automobiles, home improvements and investments. Almost all of the Banks consumer loans are fixed rate loans
generally with maturities ranging from 3 to 5 years. Risks associated with consumer loans include, but are not limited to, fraud, deteriorated or non-existing collateral, general economic downturn and customer financial problems.



Investments. In addition to its loan operations, the Bank makes
other investments primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States and other taxable securities. The Bank also may invest in certificates of deposits in other financial
institutions. The amount invested in such time deposits, as viewed on an institution by institution basis, would not exceed $100,000. Therefore, the amounts invested in certificates of deposit are fully insured by the FDIC. No investment held by the
Bank exceeds any applicable limitation imposed by law or regulation. Our asset and liability management committee reviews the investment portfolio on an ongoing basis to ascertain investment profitability and to verify compliance with the
Banks investment policies.



Deposits. The
Banks core deposits include checking accounts, money market accounts, a variety of certificates of deposit and IRA accounts. The Banks primary sources of deposits are residents of, and businesses and their employees located in Isle of
Wight County. The Bank has obtained its deposits primarily through personal solicitation by its officers and directors, direct mail solicitations and advertisements published in the local media. We plan to continue generating deposits by offering
competitively priced deposit services, including demand deposits, regular savings accounts, money market deposits, certificates of deposit, retirement accounts and other legally permitted deposit or fund transfer services.



Other Banking Services. In addition to its lending and deposit
products and services, the Bank offers mortgage brokering, debit cards, travelers checks, notary public, wire services and other traditional bank services to its customers. With the completion of the permanent main office building, the Bank
also provides safe deposit box rental and ATM services.



Asset and Liability Management. The Bank has established an asset and liability management committee to manage its assets and liabilities. The goal of this committee is to maintain an optimum and stable net interest margin, a
profitable after-tax return on assets and return on equity and adequate liquidity. The committee conducts these management functions within the framework of written loan and investment policies that the Bank has adopted. The committee also attempts
to maintain a balanced position between rate sensitive assets and rate sensitive liabilities. Specifically, the committee charts the Banks assets and liabilities on a matrix by maturity and interest adjustment period and attempts to manage any
gaps in maturity ranges.



Employees. As of December 31,
2003, the Bank has a total of 10 full time equivalent employees. CNB does not have any employees who are not also employees of Citizens National Bank.



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Supervision and Regulation



Both the Company and the Bank are subject to extensive state and federal banking regulations that impose restrictions on and
provide for general regulatory oversight of their operations. These laws are generally intended to protect depositors and not shareholders. The following discussion describes the material elements of the regulatory framework that applies to us.



The Company



The Company owns all of the capital stock of the Bank; therefore, it is a
bank holding company under the Bank Holding Company Act of 1956. As a result, the Company will be primarily subject to the supervision, examination, and reporting requirements of the Bank Holding Company Act and the regulations of the Federal
Reserve. As a bank holding company registered under the Virginia Banking Act, the Virginia Bureau of Financial Institutions, a division of the Virginia State Corporation Commission, will also regulate and monitor all significant aspects of the
Companys operations.



Acquisitions of Banks.The
Bank Holding Company Act requires every bank holding company to obtain the Federal Reserves prior approval before:



| |  | Acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the banks voting shares;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Acquiring all or substantially all of the assets of any bank; or
| | - | ----------------------------------------------------------------



| |  | Merging or consolidating with any other bank holding company.
| | - | -------------------------------------------------------------



Additionally, the Bank Holding Company Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to
create a monopoly or, substantially lessen competition or otherwise function as a restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be
served. The Federal Reserves consideration of financial resources generally focuses on capital adequacy, which is discussed below.



Under the Bank Holding Company Act, if adequately capitalized and adequately managed, the Company or any other bank holding company located in Virginia
may purchase a bank located outside of Virginia. Conversely, an adequately capitalized and adequately managed bank holding company located outside of Virginia may purchase a bank located inside Virginia. In each case, however, restrictions may be
placed on the acquisition of a bank that has only been in existence for a limited amount of time or will result in specified concentrations of deposits.



Change in Bank Control.Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with
related regulations, require Federal Reserve approval prior to any person or company acquiring control of a bank holding company. Control is refutably presumed to exist if an individual or company acquires 25% or more of any class of
voting securities of the bank holding company. Control is also presumed to exist, although refutable, if a person or company acquires 10% or more, but less than 25%, of any class of voting securities and either:



| |  | the bank holding company has registered securities under Section 12 of the Securities Act of 1934; or
| | - | -----------------------------------------------------------------------------------------------------



| |  | no other person owns a greater percentage of that class of voting securities immediately after the transaction.
| | - | ---------------------------------------------------------------------------------------------------------------



Our common stock will be subject to registration under the Securities
Exchange Act of 1934. The regulations provide a procedure for challenging the rebuttable presumption of control.



Permitted Activities. A bank holding company is generally permitted under the Bank Holding Company Act to engage in or acquire direct or indirect
control of more than 5% of the voting shares of any company engaged in the following activities:



| |  | Banking or managing or controlling banks; and
| | - | ---------------------------------------------



| |  | Any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



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Activities that the Federal Reserve has found to be so closely related to banking as to be a proper
incident to the business of banking include:



| |  | Factoring accounts receivable;
| | - | ------------------------------



| |  | Making, acquiring, brokering or servicing loans and usual related activities;
| | - | -----------------------------------------------------------------------------



| |  | Leasing personal or real property;
| | - | ----------------------------------



| |  | Operating a non-bank depository institution, such as a savings association;
| | - | ---------------------------------------------------------------------------



| |  | Trust company functions;
| | - | ------------------------



| |  | Financial and investment advisory activities;
| | - | ---------------------------------------------



| |  | Conducting discount securities brokerage activities;
| | - | ----------------------------------------------------



| |  | Underwriting and dealing in government obligations and money market instruments;
| | - | --------------------------------------------------------------------------------



| |  | Providing specified management consulting and counseling activities;
| | - | --------------------------------------------------------------------



| |  | Performing selected data processing services and support services;
| | - | ------------------------------------------------------------------



| |  | Acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| |  | Performing selected insurance underwriting activities.
| | - | ------------------------------------------------------



Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding companys continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of
its bank subsidiaries.



In addition to the permissible bank
holding company activities listed above, a bank holding company may qualify and elect to become a financial holding company, permitting the bank holding company to engage in activities that are financial in nature or incidental or complementary to
financial activity. The Bank Holding Company Act expressly lists the following activities as financial in nature:



| |  | Lending, trust and other banking activities;
| | - | --------------------------------------------



| |  | Insuring, guaranteeing, or indemnifying against loss or harm, or providing and issuing annuities, and acting as principal, agent, or broker for these purposes, in any state;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Providing financial, investment, or advisory services;
| | - | ------------------------------------------------------



| |  | Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly;
| | - | -----------------------------------------------------------------------------------------------------------------



| |  | Underwriting, dealing in or making a market in securities;
| | - | ----------------------------------------------------------



| |  | Other activities that the Federal Reserve may determine to be so closely related to banking or managing or controlling banks as to be a proper incident to managing or controlling
banks;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Foreign activities permitted outside of the United States if the Federal Reserve has determined them to be usual in connection with banking operations abroad;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Merchant banking through securities or insurance affiliates; and
| | - | ----------------------------------------------------------------



| |  | Insurance company portfolio investments.
| | - | ----------------------------------------



To qualify to become a financial holding company, the Bank and any other depository institution subsidiary of the Company must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least satisfactory. Additionally, the Company must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve
with 30 days written notice prior to engaging in a permitted financial activity. While the Company meets the qualification standards applicable to financial holding companies, the Company has not yet elected to become a financial holding
company at this time.



Support of Subsidiary
Institutions. Under Federal Reserve policy, the Company is expected to act as a source of financial strength for the Bank and to commit resources to support the Bank. This support may be required at times when, without this Federal Reserve
policy, the Company might not be inclined to provide it. In addition, any capital loans made by the Company to the Bank will be repaid only after its deposits and various other obligations are repaid in full. In the unlikely event of the
Companys bankruptcy, any commitment by it to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.



The Bank



Since the Bank is chartered as a national bank, it is primarily subject to
the supervision, examination and reporting requirements of the National Bank Act and the regulations of the Office of the Comptroller of the Currency. The Office of the Comptroller of the Currency regularly examines the Banks operations and
has the authority to approve or disapprove mergers,



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the establishment of branches and similar corporate actions. The Office of the Comptroller of the Currency also has the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law. Additionally, the Banks deposits are insured by the FDIC to the maximum extent provided by law. The Bank is also subject to numerous state and federal statutes and
regulations that affect its business, activities and operations.



Branching.National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located. Under current Virginia law, the Bank may open branch offices
throughout Virginia with the prior approval of the Office of the Comptroller of the Currency. In addition, with prior regulatory approval, the Bank will generally be able to acquire existing banking operations in Virginia.Furthermore,
federal legislation has been passed which permits interstate branching. These laws permit out-of-state acquisitions by bank holding companies, interstate branching by banks if allowed by state law, and interstate merging by banks.



Prompt Corrective Action.The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) in which all institutions are placed. Federal banking regulators are required to take various mandatory supervisory actions and
are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow
exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category.



An institution that is categorized as undercapitalized,
significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to various limitations. The controlling holding companys obligation to fund a capital restoration plan is limited to the lesser of 5% of an undercapitalized subsidiarys assets at the time it
became undercapitalized or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging
in any new line of business, except under an accepted capital restoration plan or with FDIC approval. The regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than
capital.



FDIC Insurance Assessments.The FDIC has
adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The system assigns an institution to one of three capital
categories: (1) well capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the undercapitalized category
including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. The FDIC also assigns an institution to one of three supervisory subgroups based on a
supervisory evaluation that the institutions primary federal regulator provides to the FDIC and information that the FDIC determines to be relevant to the institutions financial condition and the risk posed to the deposit insurance
funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institutions capital group and supervisory subgroup. In addition, the FDIC imposes assessments to help pay off the $780 million in annual interest payments on
the $8 billion Financing Corporation bonds issued in the late 1980s as part of the government rescue of the thrift industry. This assessment rate is adjusted quarterly.



The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.



Community Reinvestment Act. The Community Reinvestment Act requires that, in connection with examinations of
financial institutions within their respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the Comptroller of the Currency, shall evaluate the record of each financial institution in meeting the credit needs of its local
community, including low and moderate-income neighborhoods. These facts are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional
requirements and limitations on the Bank. Since our aggregate assets will not be more than $250 million, under the Gramm-Leach-Bliley Act, we are generally subject to a Community Reinvestment Act examination only once every 60 months if we receive
an outstanding rating, once every 48 months if we receive a satisfactory rating and as needed if our rating is less than satisfactory.Additionally, we must publicly disclose the terms of various Community
Reinvestment Act-related agreements.



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Other Regulations. Interest and other charges collected or contracted for by the Bank are subject
to state usury laws and federal laws concerning interest rates. For example, under the Soldiers and Sailors Civil Relief Act of 1940, a lender is generally prohibited from charging an annual interest rate in excess of 6% on any
obligation for which the borrower is a person on active duty with the United States military.



The Banks loan operations are subject to federal laws applicable to credit transactions, such as the:



| |  | federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
| | - | ------------------------------------------------------------------------------------------



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



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



| |  | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;
| | - | ---------------------------------------------------------------------------------------------------------------



| |  | Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;
| | - | ---------------------------------------------------------------------------------------------------------------



| |  | Soldiers and Sailors Civil Relief Act of 1940, governing the repayment terms of, and property rights underlying, secured obligations of persons in military service; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws.
| | - | -------------------------------------------------------------------------------------------------------------------------



The deposit operations of the Bank are subject to:



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



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



Capital Adequacy



The Company and the Bank are required to comply with the capital adequacy standards established by the Federal Reserve, in the case of the Company, and
the Office of the Comptroller of the Currency, in the case of the Bank. The Federal Reserve has established a risk-based and a leverage measure of capital adequacy for bank holding companies. Since the Companys consolidated total assets do not
exceed $150 million, under the Federal Reserves capital guidelines, our capital adequacy is measured on a bank-only basis, as opposed to a consolidated basis. The Bank is also subject to risk-based and leverage capital requirements adopted by
the Office of the Comptroller of the Currency, which are substantially similar to those adopted by the Federal Reserve for bank holding companies.



The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance-sheet items, such as letters of credit and unfunded loan commitments, are assigned to broad risk
categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items.



The minimum guideline for the ratio of total capital to risk-weighted assets is 8%. Total capital consists of two
components, Tier 1 Capital and Tier 2 Capital. Tier 1 Capital generally consists of common stock, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock, and a limited amount of qualifying
cumulative perpetual preferred stock, less goodwill and other specified intangible assets. Tier 1 Capital must equal at least 4% of risk-weighted assets. Tier 2 Capital generally consists of subordinated debt, other preferred stock, and a limited
amount of loan loss reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1 Capital. At December 31, 2003, the consolidated ratio of total capital to risk-weighted assets was 55.6% and the consolidated ratio of Tier 1 Capital to
risk-weighted assets was 54.9%.



In addition, the Federal
Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill and other specified intangible assets, of 3% for bank holding
companies that meet specified criteria, including having the highest regulatory rating and implementing the Federal Reserves risk-based capital measure for market risk. All other bank holding companies generally are required to maintain a
leverage ratio of at least 4%. At December 31, 2003, the consolidated leverage ratio was 35.2%. The guidelines also



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provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without reliance on intangible assets. The Federal Reserve considers the leverage ratio and other indicators of capital strength in evaluating proposals for expansion or new activities.



Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. As described
above, significant additional restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable capital requirements.



Payment of Dividends



The Company is a legal entity separate and distinct from the Bank. The principal sources of the Companys cash flow, including cash flow to pay
dividends to its shareholders, are dividends that the Bank pays to its sole shareholder, the Company. Statutory and regulatory limitations apply to the Banks payment of dividends to the Company as well as to the Companys payment of
dividends to its shareholders.



The Bank is required by federal
law to obtain prior approval of the Office of the Comptroller of the Currency for payments of dividends if the total of all dividends declared by our board of directors in any year will exceed (1) the total of the Banks net profits for that
year, plus (2) the Banks retained net profits of the preceding two years, less any required transfers to surplus.



The payment of dividends by the Company and the Bank may also be affected by other factors, such as the requirement to maintain adequate capital above
regulatory guidelines. If, in the opinion of the Office of the Comptroller of the Currency, the Bank were engaged in or about to engage in an unsafe or unsound practice, the Office of the Comptroller of the Currency could require, after notice and a
hearing, that the Bank stop or refrain engaging in the practice. The federal banking agencies have indicated that paying dividends that deplete a depository institutions capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the
federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.



Restrictions on Transactions with Affiliates



The Company and the Bank are subject to the provisions of Section 23A of the
Federal Reserve Act. Section 23A places limits on the amount of:



| |  | a banks loans or extensions of credit to affiliates;
| | - | -----------------------------------------------------



| |  | a banks investment in affiliates;
| | - | ----------------------------------



| |  | assets a bank may purchase from affiliates, except for real and personal property exempted by the Federal Reserve;
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and
| | - | -----------------------------------------------------------------------------------------------------------------



| |  | a banks guarantee, acceptance or letter of credit issued on behalf of an affiliate.
| | - | ------------------------------------------------------------------------------------



The total amount of the above transactions is limited in amount, as to any one affiliate, to 10% of a banks capital
and surplus and, as to all affiliates combined, to 20% of a banks capital and surplus. In addition to the limitation on the amount of these transactions, each of the above transactions must also meet specified collateral requirements. The Bank
must also comply with other provisions designed to avoid the taking of low-quality assets.



The Company and the Bank will also be subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibit an institution from engaging in the above transactions with affiliates
unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.



The Bank will also be subject to restrictions on extensions of credit to its
executive officers, directors, principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable
transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features.



10



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Privacy



Financial institutions are required to disclose their policies for collecting and protecting confidential information.
Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer or when
the financial institution is jointly sponsoring a product or service with a nonaffiliated third party. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in
telemarketing, direct mail marketing or other marketing to consumers.



Consumer Credit Reporting



On December 4, 2003, the President signed the Fair and Accurate Credit Transactions Act (the FAIR Act), amending the federal Fair Credit Reporting Act (the FCRA). These amendments to the FCRA (the FCRA Amendments) will become
effective as early as February 2004, but more likely in the third or fourth quarter of 2004, depending on implementing regulations to be issued by the Federal Trade Commission and the federal bank regulatory agencies.



The FCRA Amendments include, among other things:



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



| |  | new consumer notice requirements for lenders that use consumer report information in connection with risk-based credit pricing programs;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



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



| |  | a new requirement for mortgage lenders to disclose credit scores to consumers.
| | - | ------------------------------------------------------------------------------



Prior to the effective date of the FCRA Amendments, the Company and its subsidiary will implement policies and procedures to comply with the new rules.



The FCRA Amendments also will prohibit a business that
receives consumer information from an affiliate from using that information for marketing purposes unless the consumer is first provided a notice and an opportunity to direct the business not to use the information for such marketing purposes (the
opt-out), subject to certain exceptions. The Company and its subsidiary also will implement procedures to comply with these new rules prior to the effective date of the rules. We do not plan to share consumer information among our
affiliated companies for marketing purposes, except as may be allowed under exceptions to the notice and opt-out requirements. Because no affiliate of the Company is currently sharing consumer information with any other affiliate of the Company for
marketing purposes, the new limitations on sharing of information for marketing purposes will not have a significant impact on the Company.



Anti-Terrorism Legislation



The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, signed by the
President on October 26, 2001, imposed new requirements and limitations on specified financial transactions and account relationships, intended to guard against money laundering and terrorism. Most of these requirements and limitations took effect
in 2002. Additional know your customer rules became effective in June 2003, requiring the Bank [and its securities broker-dealer affiliate] to establish a customer identification program under Section 326 of the USA PATRIOT Act. The
Company and its subsidiary implemented procedures and policies to comply with those rules prior to the effective date of each of the rules.



Proposed Legislation and Regulatory Action



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



Effect of Governmental Monetary Polices



Our
earnings will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Banks monetary policies have had, and are likely to continue to have, an
important impact on the operating results of commercial banks through its power to implement national monetary policy in order,



11



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among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve affect the levels of bank loans, investments and
deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject. We cannot predict
the nature or impact of future changes in monetary and fiscal policies.



Selected Statistical Information



The Bank has
been open for business eight months. As a result, the Companys historical financial information is limited and is insufficient to cause the selected statistical information required under the Securities Act to be meaningful. Consequently, the
selected statistical information has been omitted. For information concerning the Companys historical financial performance, see Part II-Item 6. Managements Discussion and Analysis of Financial Condition and Results of
Operations and Part II-Item 7. Financial Statements of this Form 10-KSB.



|ITEM 2. | DESCRIPTION OF PROPERTIES
|------- | -------------------------



Banking operations began in the second quarter of 2003 at a temporary modular facility that is located on the site for our permanent office building,
located at 11407 Windsor Blvd., Windsor, Virginia. We leased the modular facility at a monthly rate of approximately $4,500 until the completion of the construction of our permanent facility. Construction of our permanent office building, with
approximately 7,000 square feet of finished office space with space for expansion, began in August, 2003. We began operations in the permanent office building during March 2004.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



No matter was submitted to a vote of holders of the Companys securities during the fourth quarter of the fiscal year covered by this Report.



PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
|------- | ---------------------------------------------------------------------



In December 2002, the Company completed its initial public offering of its common stock. This offering was registered under
the Securities Act of 1933, and raised $5.4 million in net proceeds through the sale of 561,137 shares of common stock. Out of the net proceeds of the offering, $5.25 million was used to capitalize the Bank in exchange for 100% of its outstanding
common stock as required by the Banks primary regulator. No unregistered securities of the Company were sold or issued during the period covered by this Report.



There is currently no public trading market for the Companys common stock. To the Companys knowledge, the last
price at which our stock was sold was $12.00 per share on February 19, 2004. As of December 31, 2003, we had approximately 910 shareholders of record.



To date, the Company has not paid cash dividends on its common stock. The Companys board of directors currently intends to retain earnings to
support future operations and therefore do not anticipate paying cash dividends in the foreseeable future. All of the Companys outstanding shares of common stock are entitled to share equally in dividends from funds legally available when, and
if, declared by the board of directors.



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|ITEM 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



The following discussion provides information about the major components of the results of operations and financial
condition, liquidity, and capital resources of CNB. This discussion and analysis should be read in conjunction with the Companys Consolidated Financial Statements and Notes to Consolidated Financial Statements.



Overview



The Company is headquartered in Windsor, Virginia and conducts its primary operations through its wholly owned subsidiary,
Citizens National Bank. The Bank is a community bank serving Isle of Wight County and the surrounding areas of Suffolk and Southampton County with one full service branch.



Like most financial institutions, our profitability depends largely upon net interest income, which is the difference
between the interest received on earning assets, such as loans and investment securities, and the interest paid on interest-bearing liabilities, principally deposits and borrowings. Our results of operations are also affected by our provision for
loan losses; non-interest expenses, such as salaries, employee benefits, and occupancy expenses; and non-interest income, such as mortgage loan fees and service charges on deposit accounts.



Economic conditions, competition and federal monetary and fiscal policies
also affect financial institutions. For example, 2003 was characterized by steady low interest rates intended to stabilize the economy and stimulate industrial economic growth. Lending activities are also influenced by regional and local economic
factors, such as housing supply and demand, competition among lenders, customer preferences and levels of personal income and savings in our primary market area.



The Company began operations on April 29, 2003. By December 31, 2003, total assets were $13.5 million, consisting primarily
of securities of $6.3 million, loans, net of allowance for loan losses, of $5.5 million and premises and equipment of $1.3 million. Total deposits at December 31, 2003 were $9.0 million, of which $7.9 million were interest bearing. For the period
from April 29, 2003 to December 31, 2003, the Company has a net operating loss of $592,000.



Critical Accounting Policies



The financial condition and results of operations presented in the consolidated financial statements, accompanying notes to the consolidated financial statements and managements discussion and analysis are, to a large degree,
dependent upon the accounting policies of the Company. The selection and application of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change.



Presented below is a discussion of those accounting policies that management
believes are the most important to the portrayal and understanding of the Companys financial condition and results of operations. These critical accounting policies require managements most difficult, subjective and complex judgments
about matters that are inherently uncertain. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations
is a reasonable likelihood.



Allowance for Loan Losses



The Company monitors and maintains an allowance for loan losses to absorb an
estimate of probable losses inherent in the loan portfolio. The Company maintains policies and procedures that address the systems of controls over the following areas of maintenance in the allowance: the systematic methodology used to determine the
appropriate level of the allowance to provide assurance they are maintained in accordance with accounting principles generally accepted in the United States of America; the accounting policies for loan charge-offs and recoveries; the assessment and
measurement of impairment in the loan portfolio; and the loan grading system.



The Company evaluates various loans individually for impairments required by SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan 
Income Recognition and Disclosures. Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management. The evaluations
are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment.



For loans without individual measures of impairment, the Company makes
estimates of losses for groups of loans as required by SFAS No. 5, Accounting for Contingencies. Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and general collateral type. A loss rate reflecting
the expected loss inherent in a group of loans is derived



13



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based upon estimates of default rates for a given loan grade, the predominant collateral type for the group and the terms of the loan. The resulting estimate
of losses for groups of loans are adjusted for relevant environmental factors and other conditions of the portfolio of loans and leases, including: borrower and industry concentrations; levels and trends in delinquencies, charge-offs and recoveries;
changes in underwriting standards and risk selection; level of experience, ability and depth of lending management; and national and local economic conditions.



The amount of estimated impairment for individually evaluated loans and groups of loans is added together for a total estimate of loans losses. This
estimate of losses is compared to the allowance for loans losses of the Company as of the evaluation date and, if the estimate of losses is greater than the allowance, an additional provision to the allowance would be made. If the estimate of losses
is less than the allowance, the degree to which the allowance exceeds the estimate is evaluated to determine whether the allowance falls outside a range of estimates. If the estimate of losses is below the range of reasonable estimates, the
allowance would be reduced by way of a credit to the provision for loan losses. The Company recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used, and therefore a
reasonable range around the estimate of losses is derived and used to ascertain whether the allowance is too high. If different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new
estimate of probable losses, an additional provision for loan losses would be made, which amount may be material to the Consolidated Financial Statements.



Accounting for Income Taxes



Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and
tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.



The Company has
recorded a 100% deferred tax valuation allowance related to various temporary differences, principally consisting or the provision for loan losses and its net operating loss carryforwards. Since the Company has only been in operation since April 29,
2003 and has not shown a profit since opening, it is managements opinion that it is prudent at this time to only recognize the deferred tax asset to the extent that income tax benefits are realized. The Company feels since it does not have a
proven earnings record, that it is more likely than not that some portion of the deferred tax asset may not be realized.



Results of Operations



Net Income(Loss)



It is
normal for new banks to experience operating losses in their formative years through start up and operating expenses. Eight months of operations resulted in net (loss) from operating activities of $592,000 for the period ended December 31, 2003.
This created a loss per basic and diluted share of ($1.06). Return on average assets (ROA) measures how effectively CNB employs its assets to produce net income. For the period from inception to December 31, 2003, ROA was (8.65%). Return on average
equity (ROE), another measure of earnings performance, indicates the amount of net income earned in relation to the total equity capital invested. ROE for the same period was (18.88%). Average equity to average assets was 45.8% at December 31, 2003.



14



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TABLE 1: Average Balances, Interest Income and Expense, Yields and Rates



The following table shows the average balance sheet for the year ended
December 31, 2003. In addition, the amount of interest earned on earning assets, with related yields and interest on interest bearing liabilities, together with rates, is shown.



|                                           |  |                |        |   |                        |   |               |  |      |  
|------------------------------------------ |  | -------------- | ------ | - | ---------------------- | - | ------------- |  | ---- | -
|(Dollars in thousands)                     |  | AVERAGEBALANCE |        |   | INTERESTINCOME/EXPENSE |   | YIELD/RATE(1) | 
|Assets:                                    |  |                |        |   |                        |   |               |  |      |  
|Securities, taxable                        |  | $              | 2,803  |   |                        | $ | 50            |  | 2.64 | %
|Loans                                      |  |                | 2,845  |   |                        |   | 123           |  | 6.39 | %
|Federal funds sold                         |  |                | 3,472  |   |                        |   | 24            |  | 1.02 | %
|                                           |  |                |        |   |                        |   |               |  |      |  
|Total earnings assets                      |  |                | 9,120  |   |                        | $ | 197           |  | 3.19 | %
|Less: Allowance for loan losses            |  |                | (19    | ) |                        |   |               |  |      |  
|Total non-earning assets                   |  |                | 1,018  |   |                        |   |               |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Total Assets                               |  | $              | 10,119 |   |                        |   |               |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Liabilities and shareholders equity:      |  |                |        |   |                        |   |               |  |      |  
|Interest bearing deposits:                 |  |                |        |   |                        |   |               |  |      |  
|Checking                                   |  | $              | 335    |   |                        | $ | 2             |  | 0.88 | %
|Money market savings                       |  |                | 530    |   |                        |   | 4             |  | 1.12 | %
|Regular savings                            |  |                | 356    |   |                        |   | 3             |  | 1.25 | %
|Time Deposits:                             |  |                |        |   |                        |   |               |  |      |  
|$100,000 and over                          |  |                | 1,029  |   |                        |   | 21            |  | 3.02 | %
|Under $100,000                             |  |                | 2,389  |   |                        |   | 44            |  | 2.72 | %
|                                           |  |                |        |   |                        |   |               |  |      |  
|Total interest bearing deposits            |  |                | 4,639  |   |                        | $ | 74            |  | 2.36 | %
|Non-interest bearing liabilities:          |  |                |        |   |                        |   |               |  |      |  
|Demand deposits                            |  |                | 831    |   |                        |   |               |  |      |  
|Other liabilities                          |  |                | 15     |   |                        |   |               |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Total liabilities                          |  |                | 5,485  |   |                        |   |               |  |      |  
|Shareholders equity                       |  |                | 4,634  |   |                        |   |               |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Total Liabilities and Shareholders equity |  | $              | 10,119 |   |                        |   |               |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Net interest income                        |  |                |        |   |                        | $ | 123           |  |      |  
|                                           |  |                |        |   |                        |   |               |  |      |  
|Interest rate spread                       |  |                |        |   |                        |   |               |  | 0.83 | %
|                                           |  |                |        |   |                        |   |               |  |      |  
|Interest expense to average earning assets |  |                |        |   |                        |   |               |  | 1.20 | %
|                                           |  |                |        |   |                        |   |               |  |      |  
|Net interest margin                        |  |                |        |   |                        |   |               |  | 1.99 | %
|                                           |  |                |        |   |                        |   |               |  |      |  



|(1) | The yields/rates have been computed and annualized based upon the commencement of operations on April 29, 2003.
|--- | ---------------------------------------------------------------------------------------------------------------



Net Interest Income



Net interest income, CNBs primary source of consolidated earnings, is the amount by which interest generated from
earning assets exceeds the expense of funding those assets. Changes in volume and mix of interest earning assets and interest bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest
income. As the Bank did not begin its operations until April 29, 2003, it had limited operations from which to generate revenues. Other factors affecting net interest income included paying higher interest rates to attract depositors and extending
credit with lower interest rates to attract borrowers. For the period from April 29, 2003 to December 31, 2003, interest income and interest expense were $197,000 and $74,000, respectively. Interest expense was adjusted by $5,000 for financial
statement purposes to reflect the capitalization of interest on the construction of the new banking facility during the period.



Non-Interest Income



Non-interest income has been and will continue to be an important factor for increasing profitability. Management recognizes this and continues to review
and consider areas where non-interest income can be increased. Fees generated from non-



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sufficient fund/overdraft accounts represented $16,000 of income in other fees and commissions. During the fourth quarter of 2003, the Bank began brokering
fixed rate mortgages, which provided $2,000 of other operating income. The other main source of other operating income was generated from shares owned in a local title insurance agency. The Company anticipates higher non-interest income in 2004,
resulting from the addition of safe deposit boxes, an ATM, and mortgage broker fees.



TABLE 2: Non-Interest Income



|                                    |  |                              |   
|----------------------------------- |  | ---------------------------- | --
|(Dollars in thousands)              |  | Period EndedDecember 31,2003
|Service charges on deposit accounts |  | $                            | 2 
|Other fees and commissions          |  |                              | 17
|Other operating income              |  |                              | 9 
|                                    |  |                              |   
|Total non-interest income           |  | $                            | 28
|                                    |  |                              |   



Non-Interest Expense



Improving operating efficiency is as important to
management as enhancing non-interest income. Higher non-interest expenses are expected during the first years of operation. Non-interest expenses incurred during 2003 anticipated to decrease in future years include occupancy expense, professional
fees, advertising and other expenses such as training and stationary and printing. Occupancy expense is expected to decrease in the second quarter of 2004 with the completion of the permanent main office building. In 2003, the Company held two
leases on temporary offices, which were terminated in March, 2004. Professional fees and advertising expenses are also anticipated to decrease in 2004 as a compared to 2003, a result of continuing operation, not start-up operation. Costs for
training and stationary and printing represented $18,000 and $14,000, respectively, of other operating expenses.



TABLE 3: Non-Interest Expense



|                           |  |                              |    
|-------------------------- |  | ---------------------------- | ---
|(Dollars in thousands)     |  | Period EndedDecember 31,2003
|Personnel                  |  | $                            | 351
|Occupancy and equipment    |  |                              | 87 
|Professional fees          |  |                              | 45 
|Advertising                |  |                              | 29 
|Computer services          |  |                              | 51 
|Other operating expenses   |  |                              | 129
|                           |  |                              |    
|Total non-interest expense |  | $                            | 692
|                           |  |                              |    



Summary of Loan Loss Experience



The allowance for loan losses is an estimate of the
amount that will be adequate to provide for potential losses in CNBs loan portfolio. Managements methodology in evaluating the adequacy of the allowance for loan losses considers potential specific losses, as well as the volume, growth
and composition of the loan portfolio. Once past loan loss experience has been established, it will also be included in the evaluation. General economic trends as well as any conditions affecting individual borrowers may also affect the level of
loan losses. The allowance is periodically examined by bank regulators for adequacy. Examiners take into account factors such as the methodology used to calculate the allowance and the size of allowance in comparison to peer financial institutions.



CNBs Loan Committee and Board of Directors review
problem loans monthly, including their effect on the allowance for loan losses. In managements opinion, the allowance for loan losses is adequate to absorb the current estimated risk of loss in the loan portfolio. CNBs management
continually evaluates the adequacy of the allowance for loan losses, and changes in the provision are based on the analyzed inherent risk of the loan portfolio. The allowance is increased by the provision for loan losses and reduced by loans charged
off, net of recoveries. The following table summarizes loans charged off, recoveries of loans previously charged off and additions to the reserve that have been charged to operating expense for the periods indicated. We have no lease financing or
foreign loans.



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TABLE 4: Allowance for Loan Losses



|                                           |  |                              |   
|------------------------------------------ |  | ---------------------------- | --
|(Dollars in thousands)                     |  | Period EndedDecember 31,2003
|Allowance, beginning of period             |  | $                            |  
|Provision for loan losses                  |  |                              | 56
|                                           |  |                              |   
|Total provision for loan losses            |  |                              | 56
|Loans charged off                          |  |                              |  
|Recoveries of loans previously charged off |  |                              |  
|                                           |  |                              |   
|Allowance, end of period                   |  | $                            | 56
|                                           |  |                              |   



The allocation of the
allowance at December 31, 2003 and the ratio of related outstanding loan balances to total loans are as follows:



TABLE 5: Allocation of Allowance for Loan Losses



|                          |  |                          |    |                                          |        |  
|------------------------- |  | ------------------------ | -- | ---------------------------------------- | ------ | -
|(Dollars in thousands)    |  | Allowance forLoan Losses |    | Percent of Loanin Category toTotal Loans |       
|Commercial and industrial |  | $                        | 11 |                                          | 30.89  | %
|Real estate commercial    |  |                          | 11 |                                          | 29.31  |  
|Real estate consumer      |  |                          | 5  |                                          | 19.87  |  
|Consumer installment      |  |                          | 9  |                                          | 19.93  |  
|Unallocated               |  |                          | 20 |                                          | N/A    |  
|                          |  |                          |    |                                          |        |  
|Balance, December 31      |  | $                        | 56 |                                          | 100.00 | %
|                          |  |                          |    |                                          |        |  



Financial Condition



Summary



A financial institutions primary sources of revenue are generated by its earning assets, while its major expenses are
produced by the funding of those assets with interest-bearing liabilities. Effective management of these sources and uses of funds is essential in attaining profitability while maintaining an acceptable level of risk. At December 31, 2003, the
Company had $13.5 million in total assets. Interest-earning assets and interest-bearing liabilities were $12.0 million and $7.9 million, respectively.



Loan Portfolio



CNBs loan portfolio is its largest and most profitable component of earning assets, totaling 46.4% of interest-earning assets at December 31, 2003.
The Company, through the bank, engages in a wide range of lending activities, which include one-to-four family and multi-family residential mortgage loans, commercial real estate loans, construction loans, land acquisition and development loans,
consumer loans, and commercial business loans. CNB continues to emphasize loan portfolio growth and diversification as a means of increasing earnings while minimizing credit risk.



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TABLE 6: Loan Portfolio



|                             |  |                  |      
|---------------------------- |  | ---------------- | -----
|(Dollars in thousands)       |  | December 31,2003
|Commercial and industrial    |  | $                | 1,721
|Real estate construction     |  |                  | 109  
|Real estate mortgage:        |  |                  |      
|Residential (1-4 family)     |  |                  | 809  
|Home equity lines            |  |                  | 189  
|Non-farm, non-residential(1) |  |                  | 1,630
|Agricultural                 |  |                  | 3    
|Consumer installment         |  |                  | 1,111
|                             |  |                  |      
|Total loans                  |  | $                | 5,572
|                             |  |                  |      



Non-farm,
non-residential loans are typically owner-occupied commercial buildings. At December 31, 2003, non-farm, non-residential loans were 29.3% of the total portfolio. Commercial, industrial and agricultural loan portfolio consists of secured and
unsecured loans to small businesses, comprising 30.9% of the total portfolio.



CNBs unfunded loan commitments totaled $909,000 at December 31, 2003.



The following table reflects the maturity distribution of selected loan categories at December 31, 2003.



TABLE 7: Remaining Maturities of Selected Loan Categories



|                       |  |                                         |       |                            |   |    
|---------------------- |  | --------------------------------------- | ----- | -------------------------- | - | ---
|(Dollars in thousands) |  | Commercial and Industrial, Agricultural |       | Real Estate - Construction
|Variable Rate:         |  |                                         |       |                            |   |    
|Within 1 year          |  | $                                       | 1,059 |                            | $ |   
|1 to 5 years           |  |                                         | 125   |                            |   |   
|After 5 years          |  |                                         |      |                            |   |   
|Fixed Rate:            |  |                                         |       |                            |   |    
|Within 1 year          |  |                                         | 241   |                            |   | 9  
|1 to 5 years           |  |                                         | 299   |                            |   | 100
|After 5 years          |  |                                         |      |                            |   |   
|                       |  |                                         |       |                            |   |    
|Total Maturities       |  | $                                       | 1,724 |                            | $ | 109
|                       |  |                                         |       |                            |   |    



Loans are placed on
non-accrual status when collection of principal and interest is doubtful, generally when a loan becomes 90 days past due. There are three negative implications for earnings when a loan is placed on non-accrual status. First, all interest accrued but
unpaid at the date that the loan is placed on non-accrual status is either deducted from interest income or written off as a loss. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid.
Finally, there may be actual losses that may require that additional provision for loan losses be charged against earnings. For real estate loans, upon foreclosure, the balance of the loan is transferred to Other Real Estate Owned (OREO)
and carried at the lower of the outstanding loan balance or the fair market value of the property based on current appraisals and other current market trends. If a write down of the OREO property is necessary at the time of foreclosure, the amount
is charged-off against the allowance for loan losses. A review of the recorded property value is performed in conjunction with normal loan reviews, and if market conditions indicate that the recorded value exceeds the fair market value, additional
write downs of the property value are charged directly to operations.



Nonperforming assets consist of non-accrual loans, loans restructured due to debtors financial difficulties, loans past due 90 days or more as to interest or principal and still accruing, and other real estate owned, which is real
estate acquired through foreclosure and repossession. Non-accrual loans are those loans on which recognition of interest income has been discontinued. Restructured loans generally allow for an extension of the original repayment period or a
reduction or deferral of interest or principal because of deterioration in the financial position of the borrower. Loans, whether secured or unsecured, are generally



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placed on non-accrual status when principal and/or interest is 90 days or more past due, or sooner if it is known or expected that the collection of all
principal and/or interest is unlikely. Any loan past due 90 days or more, if not classified as non-accrual based on a determination of collectibility, is classified as a past-due loan. Other real estate owned is initially recorded at the lower of
cost or estimated market value at the date of acquisition. A provision for estimated losses is recorded when a subsequent decline in value occurs.



At December 31, 2003, the Company did not have any nonperforming assets, loans classified for regulatory purposes as loss or doubtful, delinquent loans,
or other real estate owned. There were no other loans classified for regulatory purposes as substandard or special mention which (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or (ii) represent material credits about which any information causes management to have serious doubts as to the ability of the borrowers to comply with the loan repayment terms. We have no loans
in our portfolio to borrowers in foreign countries.



Loan
concentrations exist when large amounts of money are loaned to multiple borrowers who would be similarly impacted by economic or other conditions. The loan portfolio is concentrated in various commercial, real estate and consumer loans to
individuals and entities located in our primary service area. Accordingly, the ultimate collectibility of the loans is largely dependent upon economic conditions of our primary service area. Other than our geographic concentrations due to our
physical location and the loan type concentrations as shown in the above table, we have no other concentrations of loans that exceed 10% of our total loan portfolio as of December 31, 2003.



We have no other interest-bearing assets that would be required to be
disclosed as nonperforming assets if they were loans.



Securities Portfolio



The investment portfolio plays a primary role in the
management of interest rate sensitivity of the Company and generates substantial interest income. In addition, the portfolio serves as a source of liquidity. Table 8 presents information pertaining to the composition of the securities portfolio. CNB
manages its investment portfolio consistent with established policies that include guidelines for maturity distribution, rate sensitivity, and liquidity needs. The investment portfolio consists of securities available for sale, which may be sold in
response to established policies. These securities are carried at estimated fair value, which was $6.3 million at December 31, 2003.



TABLE 8: Securities Available for Sale, Maturity Distribution and Average Yields



|                                                |  |               |       |           |   |                      |  |      |  
|----------------------------------------------- |  | ------------- | ----- | --------- | - | -------------------- |  | ---- | -
|(Dollars in thousands)                          |  | AmortizedCost |       | FairValue |   | WeightedAverageYield | 
|U.S. government agencies and corporations:      |  |               |       |           |   |                      |  |      |  
|Maturing within 1 year                          |  | $             | 2,800 |           | $ | 2,799                |  | 0.95 | %
|Maturing within 1 to 5 years                    |  |               | 3,350 |           |   | 3,319                |  | 2.89 |  
|Maturing after 5 years                          |  |               |      |           |   |                     |  |     |  
|                                                |  |               |       |           |   |                      |  |      |  
|Total U.S. government agencies and corporations |  |               | 6,150 |           |   | 6,118                |  | 2.00 |  
|                                                |  |               |       |           |   |                      |  |      |  
|Other securities, restricted:                   |  |               |       |           |   |                      |  |      |  
|Maturing within 1 year                          |  |               |      |           |   |                     |  |     |  
|Maturing within 1 to 5 years                    |  |               |      |           |   |                     |  |     |  
|Maturing after 5 years                          |  |               | 162   |           |   | 162                  |  | 5.93 |  
|                                                |  |               |       |           |   |                      |  |      |  
|Total other securities, restricted              |  |               | 162   |           |   | 162                  |  | 5.93 |  
|                                                |  |               |       |           |   |                      |  |      |  
|Total securities:                               |  |               |       |           |   |                      |  |      |  
|Maturing within 1 year                          |  |               | 2,800 |           |   | 2,799                |  | 0.95 |  
|Maturing within 1 to 5 years                    |  |               | 3,350 |           |   | 3,319                |  | 2.89 |  
|Maturing after 5 years                          |  |               | 162   |           |   | 162                  |  | 5.93 |  
|                                                |  |               |       |           |   |                      |  |      |  
|Total Maturities                                |  | $             | 6,312 |           | $ | 6,280                |  | 2.11 | %
|                                                |  |               |       |           |   |                      |  |      |  



Deposits



Deposits are an important funding source and primary supply of CNBs
growth. The Companys strategy has been to increase its core deposits at the same time that it controls its cost of funds. CNBs deposit base is comprised of demand deposits,



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savings and money market accounts, time deposits and individual retirement accounts. These deposits are provided by individuals and businesses located within
the communities served.



Table 9 presents the average deposit
balances and average rates paid for the period ended December 31, 2003. Table 10 details maturities of certificates of deposit with balances of $100,000 or more at December 31, 2003.



TABLE 9: Average Deposits and Rates Paid



|                                |  |                  |       |      |      |  
|------------------------------- |  | ---------------- | ----- | ---- | ---- | -
|                                |  | December 31,2003 |      
|(In thousands)                  |  | Amount           |       | Rate |     
|Non-interest bearing deposits   |  | $                | 831   |      |      |  
|                                |  |                  |       |      |      |  
|Interest bearing accounts:      |  |                  |       |      |      |  
|Interest checking               |  |                  | 335   |      | 0.88 | %
|Regular savings                 |  |                  | 356   |      | 1.25 |  
|Money market accounts           |  |                  | 530   |      | 1.12 |  
|Time deposits:                  |  |                  |       |      |      |  
|$100,000 and greater            |  |                  | 1,029 |      | 3.02 |  
|Under $100,000                  |  |                  | 2,389 |      | 2.72 |  
|                                |  |                  |       |      |      |  
|Total interest bearing deposits |  |                  | 4,639 |      | 2.36 | %
|                                |  |                  |       |      |      |  
|Total                           |  | $                | 5,470 |      |      |  
|                                |  |                  |       |      |      |  



TABLE 10: Maturities of
Certificates of Deposits with Balances of $100,000 or More



|                       |  |                   |   |                   |   |                    |  |             |     |       |   |                         |  |   |       |  |       |  
|---------------------- |  | ----------------- | - | ----------------- | - | ------------------ |  | ----------- | --- | ----- | - | ----------------------- |  | - | ----- |  | ----- | -
|(Dollars in thousands) |  | WithinThreeMonths |   | Threeto SixMonths |   | Six toTwelveMonths |  | OverOneYear |     | Total |   | Percentof TotalDeposits | 
|At December 31, 2003   |  | $                 |  |                   | $ | 202                |  | $           | 200 |       | $ | 1,344                   |  | $ | 1,746 |  | 19.38 | %



Liquidity and Interest Rate
Sensitivity



Liquidity represents an institutions
ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks,
federal funds sold, short-term investments, securities classified as available for sale as well as loans and securities maturing within one year. As a result of CNBs management of liquid assets and the ability to generate liquidity through
liability funding, management believes CNB maintains overall liquidity sufficient to satisfy its deposits requirements and meet its customers credit needs.



Although maintaining and increasing deposits will serve as the primary source of liquidity, CNB maintains additional sources
of liquidity through a federal funds line with Community Bankers Bank. The Company did not have to purchase federal funds at any time during 2003. At December 31, 2003, cash, federal funds sold, securities available for sale, and loans maturing
within one year were 99.8% of total deposits and liabilities.



The Companys primary component of market risk is interest rate volatility. Fluctuations in interest rates will impact both the level of interest income and interest expense and the market value of the Companys interest earning
assets and interest bearing liabilities. The primary technique for managing interest rate risk exposure is management of the interest sensitivity gap. The interest sensitivity gap is defined as the difference between the amount of interest earning
assets anticipated to mature or re-price within a specific time period and the amount of interest bearing liabilities anticipated to mature or re-price within that same time period. During a period of rising interest rates, a positive
gap implies that net interest income would be positively affected because the yield of the Companys interest earning assets is likely to rise more quickly than the cost of its interest bearing liabilities. In a period of falling interest
rates, the opposite effect on net income is likely to occur. Table 11 sets forth the amounts of interest earning assets and interest bearing liabilities outstanding at December 31, 2003.



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TABLE 11: Interest Rate Sensitivity



|                                                                     |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|-------------------------------------------------------------------- |  | ----------- | ----- | - | ------------ | - | ------ | ---------- |  | - | ----------- | - |  | ----- | ------ | - |  | - | ------
|(Dollars in thousands)                                               |  | 0 - 3Months |       |   | 3 - 12Months |   |        | 1 - 5Years |  |   | Over 5Years |   |  | Total
|Interest Earning Assets                                              |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|Securities                                                           |  | $           | 2,799 |   |              | $ |       |            |  | $ | 3,319       |   |  | $     | 162    |   |  | $ | 6,280 
|Loans                                                                |  |             | 1,933 |   |              |   | 789    |            |  |   | 2,378       |   |  |       | 472    |   |  |   | 5,572 
|Federal funds sold                                                   |  |             | 148   |   |              |   |       |            |  |   |            |   |  |       |       |   |  |   | 148   
|                                                                     |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|Total                                                                |  | $           | 4,880 |   |              | $ | 789    |            |  | $ | 5,697       |   |  | $     | 634    |   |  | $ | 12,000
|Cumulative totals                                                    |  | $           | 4,880 |   |              | $ | 5,669  |            |  | $ | 11,366      |   |  | $     | 12,000 |   |  |   |       
|Interest Bearing Liabilities                                         |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|Interest checking(1)                                                 |  | $           | 586   |   |              | $ |       |            |  | $ |            |   |  | $     |       |   |  | $ | 586   
|Savings(1)                                                           |  |             | 537   |   |              |   |       |            |  |   |            |   |  |       |       |   |  |   | 537   
|Money Market(1)                                                      |  |             | 955   |   |              |   |       |            |  |   |            |   |  |       |       |   |  |   | 955   
|Time Deposits                                                        |  |             | 739   |   |              |   | 1,821  |            |  |   | 3,242       |   |  |       |       |   |  |   | 5,802 
|                                                                     |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|Total                                                                |  | $           | 2,817 |   |              | $ | 1,821  |            |  | $ | 3,242       |   |  | $     |       |   |  | $ | 7,880 
|Cumulative totals                                                    |  | $           | 2,817 |   |              | $ | 4,638  |            |  | $ | 7,880       |   |  | $     | 7,880  |   |  |   |       
|                                                                     |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       
|Interest sensitivity gap                                             |  | $           | 2,063 |   |              | $ | (1,032 | )          |  | $ | 2,455       |   |  | $     | 634    |   |  | $ | 4,120 
|Cumulative interest sensitivity gap                                  |  | $           | 2,063 |   |              | $ | 1,031  |            |  | $ | 3,486       |   |  | $     | 4,120  |   |  |   |       
|Cumulative interest sensitivity gap to total interest earning assets |  |             | 17.19 | % |              |   | 8.59   | %          |  |   | 29.05       | % |  |       | 34.33  | % |  |   |       
|                                                                     |  |             |       |   |              |   |        |            |  |   |             |   |  |       |        |   |  |   |       



|(1) | Non-maturity, interest sensitive, deposits are classified as repriceable within 0-3 months, under the assumption that rates are subject to change weekly, at the
discretion of management.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Capital Resources



The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance, and changing competitive conditions and economic forces. Management reviews the adequacy of capital on an ongoing basis and seeks to maintain a structure that will assure an adequate level of capital
to support anticipated asset growth and to absorb potential losses.



At December 31, 2003, consolidated shareholders equity was $4.3 million or 32.1% of total assets compared to $5.0 or 97% of total assets at April 29, 2003 (date of inception). The Companys common stock had a tangible book value
of $7.74 per share at December 31, 2003.



TABLE 12: Capital
Analysis



|                                       |  |                  |        |  
|-------------------------------------- |  | ---------------- | ------ | -
|(In thousands)                         |  | December 31,2003 |       
|Tier 1 Capital:                        |  |                  |        |  
|Common stock                           |  | $                | 6      |  
|Capital surplus                        |  |                  | 5,401  |  
|Retained earnings (deficit)            |  |                  | (1,031 | )
|                                       |  |                  |        |  
|Total Tier 1 capital                   |  |                  | 4,376  |  
|Tier 2 Capital:                        |  |                  |        |  
|Allowance for loan losses              |  |                  | 56     |  
|                                       |  |                  |        |  
|Total risk-based capital               |  | $                | 4,432  |  
|                                       |  |                  |        |  
|Risk weighted assets                   |  | $                | 7,970  |  
|CAPITAL RATIOS:                        |  |                  |        |  
|Tier 1 risk-based capital ratio        |  |                  | 54.91  | %
|Total risk-based capital ratio         |  |                  | 55.61  | %
|Tier 1 capital to average total assets |  |                  | 35.18  | %



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Off-Balance Sheet Arrangements



We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of our customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Standby letters of credit are written conditional commitments issued by a bank to guarantee the performance of a customer to a third party. Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. Our exposure to credit loss in the event of non-performance by the other
party to the instrument is represented by the contractual notional amount of the instrument.



Because certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We use the same credit policies in making commitments to
extend credit as we do for on-balance-sheet instruments. Collateral held for commitments to extend credit varies but may include accounts receivable, inventory, property, plant, equipment, and income-producing commercial properties.



Our off-balance-sheet financial instruments whose contract amounts
represented credit risk as of December 31, 2003 were unfulfilled loan commitments of $909,000. The Company did not have any standby letter of credit as of December 31, 2003.



No losses are anticipated as a result of the commitments and we do not feel that they are reasonably likely to have a
material effect on our consolidated financial condition.



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##### Table of Contents

|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------



The following financial statements are included in this Item 7:



| |  | Consolidated Financial Statements:
| | - | ----------------------------------



| | 1. | Consolidated Balance Sheet dated as of December 31, 2003.
| | -- | ---------------------------------------------------------



| | 2. | Consolidated Statement of Operations for period ended December 31, 2003.
| | -- | ------------------------------------------------------------------------



| | 3. | Consolidated Statement of Changes in Shareholders Equity for period ended December 31, 2003.
| | -- | ---------------------------------------------------------------------------------------------



| | 4. | Consolidated Statement of Cash Flows for period ended December 31, 2003.
| | -- | ------------------------------------------------------------------------



| | 5. | Notes to Consolidated Financial Statements.
| | -- | -------------------------------------------



| |  | Independent Auditors Report
| | - | ----------------------------



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##### Table of Contents

CNB BANCORP, INC.

CONSOLIDATED BALANCE SHEET



|                                                                                             |  |                  |        |  
|-------------------------------------------------------------------------------------------- |  | ---------------- | ------ | -
|(Dollars in thousands)                                                                       |  | December 31,2003 |       
|Assets                                                                                       |  |                  |        |  
|Cash and due from banks                                                                      |  | $                | 196    |  
|Federal funds sold                                                                           |  |                  | 148    |  
|Securities available-for-sale, at fair value (amortized cost of $6,312 on December 31, 2003) |  |                  | 6,280  |  
|Loans net of allowance for loan losses of $56                                                |  |                  | 5,516  |  
|Premises and equipment, net                                                                  |  |                  | 1,299  |  
|Other assets                                                                                 |  |                  | 89     |  
|                                                                                             |  |                  |        |  
|Total assets                                                                                 |  | $                | 13,528 |  
|                                                                                             |  |                  |        |  
|Liabilities and Shareholders Equity                                                         |  |                  |        |  
|Liabilities                                                                                  |  |                  |        |  
|Non-interest bearing deposits                                                                |  | $                | 1,129  |  
|Interest bearing deposits                                                                    |  |                  | 7,880  |  
|                                                                                             |  |                  |        |  
|Total deposits                                                                               |  |                  | 9,009  |  
|Accrued interest payable                                                                     |  |                  | 16     |  
|Other liabilities                                                                            |  |                  | 159    |  
|                                                                                             |  |                  |        |  
|Total liabilities                                                                            |  |                  | 9,184  |  
|Shareholders Equity                                                                         |  |                  |        |  
|Common stock, $.01 par, 10,000,000 shares authorized, 561,137 issued and outstanding         |  |                  | 6      |  
|Additional paid-in capital                                                                   |  |                  | 5,401  |  
|Retained earnings (deficit)                                                                  |  |                  | (1,031 | )
|Accumulated other comprehensive (loss)                                                       |  |                  | (32    | )
|                                                                                             |  |                  |        |  
|Total shareholders equity                                                                   |  |                  | 4,344  |  
|                                                                                             |  |                  |        |  
|Total liabilities and shareholders equity                                                   |  | $                | 13,528 |  
|                                                                                             |  |                  |        |  



See Notes to Consolidated Financial
Statements.



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CNB BANCORP, INC.

CONSOLIDATED STATEMENT OF OPERATIONS



|                                                    |  |                                                       |       |  
|--------------------------------------------------- |  | ----------------------------------------------------- | ----- | -
|(Dollars in thousands)                              |  | For the Periodfrom April 29, 2003to December 31, 2003 |      
|Interest Income                                     |  |                                                       |       |  
|Loans                                               |  | $                                                     | 123   |  
|Investment securities, taxable                      |  |                                                       | 50    |  
|Federal funds sold                                  |  |                                                       | 24    |  
|                                                    |  |                                                       |       |  
|Total Interest Income                               |  |                                                       | 197   |  
|                                                    |  |                                                       |       |  
|                                                    | 
|Interest Expense,                                   |  |                                                       |       |  
|Deposits                                            |  |                                                       | 69    |  
|                                                    |  |                                                       |       |  
|Total Interest Expense                              |  |                                                       | 69    |  
|                                                    |  |                                                       |       |  
|Net Interest Income                                 |  |                                                       | 128   |  
|Provision for Loan Losses                           |  |                                                       | 56    |  
|                                                    |  |                                                       |       |  
|Net Interest Income after Provision for Loan Losses |  |                                                       | 72    |  
|                                                    | 
|Non-Interest Income                                 |  |                                                       |       |  
|Service charges on deposit accounts                 |  |                                                       | 2     |  
|Other fees and commissions                          |  |                                                       | 17    |  
|Other income                                        |  |                                                       | 9     |  
|                                                    |  |                                                       |       |  
|Total Non-Interest Income                           |  |                                                       | 28    |  
|                                                    |  |                                                       |       |  
|                                                    | 
|Non-Interest Expense                                |  |                                                       |       |  
|Personnel                                           |  |                                                       | 351   |  
|Occupancy and equipment                             |  |                                                       | 87    |  
|Professional fees                                   |  |                                                       | 45    |  
|Advertising                                         |  |                                                       | 29    |  
|Computer services                                   |  |                                                       | 51    |  
|Other                                               |  |                                                       | 129   |  
|                                                    |  |                                                       |       |  
|Total Non-Interest Expense                          |  |                                                       | 692   |  
|                                                    |  |                                                       |       |  
|Net (Loss)                                          |  | $                                                     | (592  | )
|                                                    |  |                                                       |       |  
|Earnings (loss) per share, basic and diluted        |  | $                                                     | (1.06 | )
|                                                    |  |                                                       |       |  



See Notes to Consolidated Financial
Statements.



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CNB BANCORP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

For the Period from April 29, 2003 to December
31, 2003



|                                                                               |  |                      |  |             |   |                          |   |                           |  |   |                                     |   |  |                     |     |   |       |   |      |   |  |   |       |  
|------------------------------------------------------------------------------ |  | -------------------- |  | ----------- | - | ------------------------ | - | ------------------------- |  | - | ----------------------------------- | - |  | ------------------- | --- | - | ----- | - | ---- | - |  | - | ----- | -
|(Dollars in thousands)                                                         |  | Shares ofCommonStock |  | CommonStock |   | AdditionalPaid-inCapital |   | RetainedEarnings(Deficit) |  |   | AccumulatedOtherComprehensive(Loss) |   |  | Comprehensive(Loss) |     |   | Total |  
|Balance - April 29, 2003                                                       |  | 561,137              |  | $           | 6 |                          | $ | 5,401                     |  | $ | (439                                | ) |  | $                   |    |   |       |   |      |   |  | $ | 4,968 |  
|Comprehensive income (loss):                                                   |  |                      |  |             |   |                          |   |                           |  |   |                                     |   |  |                     |     |   |       |   |      |   |  |   |       |  
|Net loss                                                                       |  |                     |  |             |  |                          |   |                          |  |   | (592                                | ) |  |                     |    |   |       | $ | (592 | ) |  |   | (592  | )
|Other comprehensive (loss), unrealized (loss) on securities available for sale |  |                     |  |             |  |                          |   |                          |  |   |                                    |   |  |                     | (32 | ) |       |   | (32  | ) |  |   | (32   | )
|                                                                               |  |                      |  |             |   |                          |   |                           |  |   |                                     |   |  |                     |     |   |       |   |      |   |  |   |       |  
|Total comprehensive (loss):                                                    |  |                     |  |             |  |                          |   |                          |  |   |                                    |   |  |                     |    |   |       | $ | (624 | ) |  |   |       |  
|                                                                               |  |                      |  |             |   |                          |   |                           |  |   |                                     |   |  |                     |     |   |       |   |      |   |  |   |       |  
|Balance - December 31, 2003                                                    |  | 561,137              |  | $           | 6 |                          | $ | 5,401                     |  | $ | (1,031                              | ) |  | $                   | (32 | ) |       |   |      |   |  | $ | 4,344 |  
|                                                                               |  |                      |  |             |   |                          |   |                           |  |   |                                     |   |  |                     |     |   |       |   |      |   |  |   |       |  



See Notes to Consolidated Financial
Statements.



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CNB BANCORP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                                         |  |                                                       |         |  
|------------------------------------------------------------------------ |  | ----------------------------------------------------- | ------- | -
|(Dollars in thousands)                                                   |  | For the Periodfrom April 29, 2003to December 31, 2003 |        
|Cash Flows From Operating Activities                                     |  |                                                       |         |  
|Reconciliation of net (loss) to net cash (used in) operating activities: |  |                                                       |         |  
|Net (loss)                                                               |  | $                                                     | (592    | )
|Provision for loan losses                                                |  |                                                       | 56      |  
|Depreciation and amortization                                            |  |                                                       | 28      |  
|Changes in:                                                              |  |                                                       |         |  
|Interest receivable                                                      |  |                                                       | (47     | )
|Other assets                                                             |  |                                                       | (48     | )
|Interest payable                                                         |  |                                                       | 16      |  
|Other liabilities                                                        |  |                                                       | 159     |  
|                                                                         |  |                                                       |         |  
|Net cash (used in) operating activities                                  |  |                                                       | (428    | )
|                                                                         |  |                                                       |         |  
|                                                                         | 
|Cash Flows From Investing Activities                                     |  |                                                       |         |  
|Purchase of available-for-sale securities                                |  |                                                       | (13,662 | )
|Proceeds from calls and maturities of available-for-sale securities      |  |                                                       | 7,350   |  
|Purchase of property and equipment                                       |  |                                                       | (1,321  | )
|Net increase in loans                                                    |  |                                                       | (5,572  | )
|                                                                         |  |                                                       |         |  
|Net cash (used in) investing activities                                  |  |                                                       | (13,205 | )
|                                                                         |  |                                                       |         |  
|                                                                         | 
|Cash Flows From Financing Activities                                     |  |                                                       |         |  
|Net increase in non-interest bearing deposits                            |  |                                                       | 1,129   |  
|Net increase in interest bearing deposits                                |  |                                                       | 7,880   |  
|                                                                         |  |                                                       |         |  
|Net cash provided by financing activities                                |  |                                                       | 9,009   |  
|                                                                         |  |                                                       |         |  
|Net (decrease) in cash and cash equivalents                              |  | $                                                     | (4,624  | )
|                                                                         | 
|Cash and Cash Equivalents                                                |  |                                                       |         |  
|Beginning                                                                |  |                                                       | 4,968   |  
|                                                                         |  |                                                       |         |  
|Ending                                                                   |  | $                                                     | 344     |  
|                                                                         |  |                                                       |         |  
|                                                                         | 
|Supplemental Disclosures of Cash Flow Information                        |  |                                                       |         |  
|Cash payments for interest                                               |  | $                                                     | 53      |  
|                                                                         |  |                                                       |         |  
|Change in unrealized (loss) on available for sale securities             |  | $                                                     | (32     | )
|                                                                         |  |                                                       |         |  



See Notes to Consolidated Financial
Statements.



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CNB BANCORP, INC.



Notes to Consolidated Financial Statements



NOTE 1: Organization and Significant Accounting Policies



CNB Bancorp, Inc. (the Company or CNB) was organized on November 12, 2001 to serve as a Virginia
bank holding company for Citizens National Bank (the Bank). The Bank was organized as a national bank under the laws of the United States of America to engage in a general banking business serving the community in and around Windsor,
Virginia. The Company was in organization during the period from April 23, 2001 through April 28, 2003. The financial statements reflect the costs associated with the period prior to the opening of the Bank as an accumulated deficit as of that date.
These costs include salaries, legal and professional fees and other relevant expenditures. During this period, the Company had a net loss of $434,000.



The Bank commenced regular operations on April 29, 2003 and is a member of the Federal Deposit Insurance Corporation. It is subject to the regulations of
the Office of the Comptroller of the Currency and the State Corporation Commission of Virginia. Consequently, it undergoes periodic examinations by these regulatory authorities.



In a common stock offering ending on December 31, 2002, the Company sold 561,137 shares of its Common Stock par value $.01
per share, at $10 per share. Of the proceeds, $6,000 was credited to common stock and $5.4 million was credited to surplus.



The accounting and reporting policies of the Company and its subsidiary conform to accounting principles generally accepted in the United States of
America and to general practices within the banking industry. The following is a summary of the more significant policies.



Principles of Consolidation



The consolidated financial statements of CNB Bancorp, Inc. and its subsidiary include the accounts of all companies. All material intercompany balances
and transactions have been eliminated.



Use of Estimates



In preparing consolidated financial statements in
conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the
allowance for loan losses and the valuation of net deferred assets.



Cash and Cash Equivalents



For purposes of
reporting cash flows, cash and cash equivalents included cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.



Securities



Debt securities that management has the positive intent and ability to hold
to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as available for
sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.



Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair market
value of held to maturity and available for sale securities below their cost that are deemed to other than temporary are reflected in earnings as realized losses. Gains and losses on the sale of securities are recorded on the trade date and are
determined on the basis of the cost of the specific securities sold using the specific identification method.



Restricted Securities



The Company has elected to maintain an investment in the capital stock of certain correspondent banks. No ready market exists for this stock, and it has
no quoted market value. The Companys investment in these stocks is recorded at cost.



Restricted securities included Federal Reserve Bank and Community Bankers Bank stock.



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Loans



The Companys subsidiary bank grants mortgages, commercial and consumer loans to customers. A substantial portion of the loan portfolio is
represented by mortgage loans throughout the Isle of Wight and Southampton counties of Virginia. The ability of debtors to honor their contracts is dependent upon the real estate and general economic conditions of this area.



Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances less the allowance for loan losses. Interest income is accrued on the unpaid principal balance.



The accrual of interest on mortgage and commercial loans is discontinued at
the time the loan is 90 days delinquent unless the credit is well-secured and in the process of collection. Personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an
earlier date if collection of principal or interest is considered doubtful.



All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. The interest on these loans is accounted for the cash-basis or cost-recovery method,
until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonable assured.



Allowance for Loan Losses



The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibity of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.



The allowance for loan losses is evaluated on a regular basis
by management and is based upon managements periodic review of the collectibility of the loans in light of historical experience, once established, the nature and volume of the loan portfolio, adverse situations that may affect the
borrowers ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information
becomes available.



A loan is considered impaired when, based
on current information and events, it is probable that the Companys subsidiary bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered
by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including
the length of the delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by either the present value
of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans
are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.



Loan Fees and Costs



Loan origination and commitment fees and direct loan costs are being recognized as collected and incurred. The use of this method of recognition does not
produce results that are materially different from results which would have been produced if such costs and fees were deferred and amortized as an adjustment of the loan yield over the life of the related loan.



Premises and Equipment



Land is carried at cost. Buildings and equipment are carried at cost less
accumulated depreciation computed using a straight-line method over the estimated useful lives of the assets. Estimated useful lives range from ten to forty years for buildings and from three to ten years for equipment, furniture, and fixtures.
Maintenance and repairs are charged to expense as incurred and major improvements are capitalized.



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Foreclosed Property



Assets acquired through, or in lieu of, loan foreclosure are held for sale. They are initially recorded at the lower of the
Banks cost or the assets fair market value at the date of foreclosure, less estimated selling costs thus establishing a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management.
Adjustments are made to the lower of the carrying amount or fair market value of the assets less selling costs. Revenue and expenses from operations and valuation changes are included in net expenses from foreclosed assets. The Bank had no
foreclosed assets during the period ended December 31, 2003.



Income Taxes



Deferred income tax assets and
liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary difference between the book and tax bases of the various balance sheet
assets and liabilities and gives current recognition to changes in tax rates and laws. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.



Earnings per Share



Basic earnings per share represents income available to
common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding is dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and warrants, and are determined using the treasury stock
method.



Advertising Costs



The Company follows the policy of charging the costs of advertising to
expense as incurred. The Company expensed $29,000 for advertising costs for the period from April 29, 2003 through December 31, 2003.



Comprehensive Income



Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets
and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items, along with net income are components of comprehensive
income.



Recent Accounting Pronouncements



In December 2002, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which amends SFAS No. 123 to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. The provisions of the Statement were effective December 31, 2002. Management currently intends to continue to
account for stock-based compensation under the intrinsic value method set forth in Accounting Principles Board (APB) Opinion 25 and related interpretations. For this reason, the transition guidance of SFAS No. 148 does not have an impact
on the Companys consolidated financial position or consolidated results of operations. The Statement does amend existing guidance with respect to required disclosures, regardless of the method of accounting used. The revised disclosure
requirements are presented herein.



In November 2002, the FASB
issued FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The recognition requirements of the Interpretation were effective beginning January 1, 2003. The initial adoption of the Interpretation did not materially affect the Company, and management does not
anticipate that the recognition requirements of this Interpretation will have a materially adverse impact on either the Companys consolidated financial position or consolidated results of operations in the future.



In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46). This Interpretation provides guidance with respect to the identification of variable interest entities and when the assets, liabilities, noncontrolling interests,
and results of operations of a variable interest entity need to be included in a companys consolidated financial statements. The Interpretation requires consolidation by business enterprises of variable interest entities in cases where (a) the
equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, which is provided through other interests



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that will absorb some or all of the expected losses of the entity, or (b) in cases where the equity investors lack one or more of the essential
characteristics of a controlling financial interest, which include the ability to make decisions about the entitys activities through voting rights, the obligations to absorb the expected losses of the entity if they occur, or the right to
receive the expected residual returns of the entity if they occur. The implementation of FIN 46 did not have a significant impact on either the Companys consolidated financial position or consolidated results of operations.



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities.The Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging
activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Statement is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging
relationships designated after June 30, 2003 and is not expected to have an impact on the Companys consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity.This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of these instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities. Adoption of the Statement did not result in an impact on the Companys
consolidated financial statements.



In November 2003, the
FASBs Emerging Issues Task Force (EITF) reached a consensus on a new disclosure requirement related to unrealized losses on investment securities. The new disclosure requires a table of securities which have unrealized losses as of the
reporting date. The table must distinguish between those securities which have been in a continuous unrealized loss position for twelve months or more and those securities which have been in a continuous unrealized loss position for less than twelve
months. The table is to include the aggregate unrealized losses of securities whose fair values are below book values as of the reporting date, and the aggregate fair value of securities whose fair values are below book values as of the reporting
date. In addition to the quantitative disclosure, FASB requires a narrative discussion that provides sufficient information to allow financial statement users to understand the quantitative disclosures and the information that was considered in
determining whether impairment was not other-than-temporary. The new disclosure requirements apply to fiscal years ending after December 15, 2003. The Company has included the required disclosures in their consolidated financial statements.



In December 2003, the FASB issued a revised version of SFAS
No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits an amendment of FASB Statements No. 87, 88 and 106.This Statement revises employers disclosures about pension plans and other
postretirement benefits. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, No. 88, and No. 106. This Statement retains the disclosure requirements contained in the original FASB Statement No. 132,
which it replaces. However, it requires additional disclosures to those in the original Statement 132 about the assets, obligations, cash flows, and net periodic benefit costs of defined benefit pension plans and other defined benefit postretirement
plans. The required information should be provided separately for pension plans and for other postretirement benefit plans. The disclosures for earlier annual periods presented for comparative purposes are required to be restated for (a) the
percentages of each major category of plan assets held, (b) the accumulated benefit obligation, and (c) the assumptions used in the accounting for the plans. This Statement is effective for financial statements with fiscal years ending after
December 15, 2003. The interim-period disclosures required by this Statement are effective for interim periods beginning after December 15, 2003. The Company currently does not have any plans that meet the requirements of SFAS No. 132 and,
therefore, is not required to make any additional disclosure.



NOTE 2:
Securities



The amortized cost and fair value of
securities available for sale as of December 31, 2003, are as follows:



|                                     |  |                   |       |                      |   |                         |  |   |           |   |  |   |      
|------------------------------------ |  | ----------------- | ----- | -------------------- | - | ----------------------- |  | - | --------- | - |  | - | -----
|                                     |  | December 31, 2003
|(Dollars in thousands)               |  | AmortizedCost     |       | GrossUnrealizedGains |   | GrossUnrealized(Losses) |  |   | FairValue
|U.S. Government and federal agencies |  | $                 | 6,150 |                      | $ | 7                       |  | $ | (39       | ) |  | $ | 6,118
|Other securities, restricted         |  |                   | 162   |                      |   |                        |  |   |          |   |  |   | 162  
|                                     |  |                   |       |                      |   |                         |  |   |           |   |  |   |      
|                                     |  | $                 | 6,312 |                      | $ | 7                       |  | $ | (39       | ) |  | $ | 6,280
|                                     |  |                   |       |                      |   |                         |  |   |           |   |  |   |      



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The amortized cost and estimated fair value of securities at December 31, 2003, by contractual maturity,
are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.



|                                      |  |                   |       |           |   |      
|------------------------------------- |  | ----------------- | ----- | --------- | - | -----
|                                      |  | December 31, 2003
|(Dollars in thousands)                |  | AmortizedCost     |       | FairValue
|Due in one year or less               |  | $                 | 2,800 |           | $ | 2,799
|Due after one year through five years |  |                   | 3,350 |           |   | 3,319
|Other securities, restricted          |  |                   | 162   |           |   | 162  
|                                      |  |                   |       |           |   |      
|                                      |  | $                 | 6,312 |           | $ | 6,280
|                                      |  |                   |       |           |   |      



Proceeds from the
maturities and the calls of securities available for sale in 2003 were $7.4 million. There were no realized gains or losses.



The primary purpose of the investment portfolio is to generate income and meet liquidity needs of the Company through readily saleable financial
instruments. The portfolio is made up of fixed rate bonds, whose prices move inversely with rates. At the end of any accounting period, the investment portfolio has unrealized gains and losses. The Company monitors the portfolio which is subject to
liquidity needs, market rate changes and credit risk changes to see if adjustments are needed. The primary concern in a loss situation is the credit quality of the business behind the instrument. The primary cause of impairements is the decline in
the prices of the bonds as rates have risen. There are approximately eight accounts in the portfolio that have unrealized losses at December 31, 2003. These losses are relative to the market rates and the timing of purchases and are not a material
concern.



|                                     |  |                     |       |                  |   |     |  
|------------------------------------ |  | ------------------- | ----- | ---------------- | - | --- | -
|                                     |  | Less than 12 months |      
|(Dollars in thousands)               |  | FairValue           |       | UnrealizedLosses |  
|U.S. Government and federal agencies |  | $                   | 4,511 |                  | $ | (39 | )



NOTE 3: Loans



The composition of loans is summarized as follows:



|                                  |  |                  |      
|--------------------------------- |  | ---------------- | -----
|(Dollars in thousands)            |  | December 31,2003
|Loans secured by real estate:     |  |                  |      
|Construction                      |  | $                | 109  
|Secured by 1-4 family residential |  |                  | 998  
|Non-farm, non-residential         |  |                  | 1,630
|Other real estate loans           |  |                  | 3    
|Commercial and industrial loans   |  |                  | 1,721
|Loans to individuals              |  |                  | 1,111
|                                  |  |                  |      
|Total loans                       |  |                  | 5,572
|Less: Allowance for loan losses   |  |                  | 56   
|                                  |  |                  |      
|Net loans                         |  | $                | 5,516
|                                  |  |                  |      



NOTE 4: Allowance for Loan Losses



Changes in the allowance for loan losses are as follows:



|                                       |  |                  |   
|-------------------------------------- |  | ---------------- | --
|(Dollars in thousands)                 |  | December 31,2003
|Balance, beginning                     |  | $                |  
|Provision charged to operating expense |  |                  | 56
|                                       |  |                  |   
|Balance, ending                        |  | $                | 56
|                                       |  |                  |   



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The Company had no non-accrual status, impaired loans, or loans 90 days past due and still accruing
interest at December 31, 2003.



NOTE 5: Premises and Equipment



Premises and equipment as of December 31, 2003 consists
of the following:



|                                  |  |   |      
|--------------------------------- |  | - | -----
|(Dollars In thousands)            |  |  
|Land                              |  | $ | 301  
|Furniture, fixtures and equipment |  |   | 154  
|Construction in progress          |  |   | 866  
|                                  |  |   |      
|                                  |  |   | 1,321
|Less accumulated depreciation     |  |   | 22   
|                                  |  |   |      
|                                  |  | $ | 1,299
|                                  |  |   |      



Depreciation expense
was $22,000 for the period ended December 31, 2003.



At
December 31, 2003, the Company had two leases agreements for the operations office and the temporary banking facility. The monthly rental payments total $4,800. Total rent expense from April 29, 2003 to December 31, 2003 was $38,400. The leases are
renewable on a monthly basis, and were terminated during March, 2004.



NOTE
6: Deposits



The aggregate amount of time deposits in
denominations of $100,000 or more at December 31, 2003 was $1.7 million. At December 31, 2003, the scheduled maturities of time deposits are as follows:



|                       |  |   |      
|---------------------- |  | - | -----
|(Dollars in thousands) |  |  
|2004                   |  | $ | 1,964
|2005                   |  |   | 1,010
|2006                   |  |   | 873  
|2007                   |  |   | 234  
|2008                   |  |   | 1,721
|                       |  |   |      
|                       |  | $ | 5,802
|                       |  |   |      



Overdrawn deposit
accounts totaling $4,000 at December 31, 2003 were reclassified from deposits to loans.



NOTE 7: Earnings per Share



At December 31,
2003, the weighted average number of shares outstanding for calculating basic and diluted earnings(loss) per share was 561,137. The Company has not granted stock options and all 102,500 warrants outstanding were considered anti-dilutive, therefore,
basic and diluted earnings(loss) per share was $(1.06) for the period ended December 31, 2003.



NOTE 8: Warrants



As of
December 31, 2003, there were 102,500 warrants at an exercise price of $10 issued and outstanding. All of these warrants were held by the organizing directors of the Company and will vest in increments over a four year period.



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NOTE 9: Income Taxes



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31,
2003 are presented below:



|                                      |  |   |      |  
|------------------------------------- |  | - | ---- | -
|(Dollars in thousands)                |  |   |     
|Deferred tax assets                   |  |   |      |  
|Pre-opening expenses                  |  | $ | 144  |  
|Allowance for loan losses             |  |   | 19   |  
|Net operating loss                    |  |   | 187  |  
|                                      |  |   |      |  
|Deferred tax assets                   |  |   | 350  |  
|Deferred tax liabilities              |  |   |      |  
|Fixed assets, net                     |  |   | (18  | )
|                                      |  |   |      |  
|Less: Valuation allowance             |  |   | (332 | )
|                                      |  |   |      |  
|Net deferred tax assets/(liabilities) |  | $ |     |  
|                                      |  |   |      |  



The provision for
income taxes charged to operations for the period ended December 31, 2003, consists of the following:



|                              |  |   |      |  
|----------------------------- |  | - | ---- | -
|(Dollars in thousands)        |  |   |     
|Current tax expense           |  | $ |     |  
|Deferred tax (benefit)        |  |   | (332 | )
|Change in valuation allowance |  |   | 332  |  
|                              |  |   |      |  
|                              |  | $ |     |  
|                              |  |   |      |  



Under the provisions
of the Internal Revenue Code, the Company has approximately $551,000 of net operating loss carryforwards which can be offset against future taxable income. The carryforwards expire December 31, 2018. The full realization of the tax benefits
associated with the carryforwards depends predominately upon the recognition of ordinary income during the carryforward period.



NOTE 10: Employee Benefit Plans



The Company has a 401(k) Profit Sharing Plan covering employees who are at least 18 years of age. Employees may contribute compensation subject to certain
limits based on federal tax laws. The Bank makes discretionary matching contributions equal to 50 percent of an employees compensation contributed to the Plan up to 12 percent of the employees compensation. Employer contributions vest to
the employee over a five-year period.



For the period ended
December 31, 2003, expense attributable to this retirement plan amounted to $13,000.



NOTE 11: Related Party Transactions



Loans to
directors and officers totaled $1,220,000 at December 31, 2003. New advances and repayments equaled $1,353,000 and $133,000, respectively.



NOTE 12: Stock Option Plan



The Company sponsors a stock option plan, which provides the ability to grant equity-based incentives in the form of either incentive or nonqualified
options. Equity compensation is generally perceived as providing recipients with the incentive to focus their efforts toward the continued success of the issuer and serves to align their interests with the interests of shareholders. The plan
provides for a total of 84,170 shares of common stock to be reserved for issuance pursuant to options that may be granted under the plan, subject to adjustment for certain recapitalizations. At December 31, 2003, the Company had not granted stock
options under the plan.



NOTE 13: Regulatory Requirements and Restrictions



The Company (on a consolidated basis) and the Bank are
subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the Companys and Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the



34



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##### Table of Contents

Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Companys and the Banks assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors. Prompt
corrective action provisions are not applicable to bank holding companies.



Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (as set forth in the following table) of total and Tier 1 Capital (as
defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2003, that the Company and the Bank meets all capital adequacy requirements
to which they are subject. As of December 31, 2003, the most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management
believes have changed the Banks category. The Companys and Banks actual capital amounts (in thousands) and ratios as of December 31, 2003 are also presented in the table.



|                                         |  |        |       |       |                           |   |        |                                                                     |       |  |      |        |  |       |     |  |       |  
|---------------------------------------- |  | ------ | ----- | ----- | ------------------------- | - | ------ | ------------------------------------------------------------------- | ----- |  | ---- | ------ |  | ----- | --- |  | ----- | -
|                                         |  | Actual |       |       | MinimumCapitalRequirement |   |        | MinimumTo Be WellCapitalizedUnder PromptCorrectiveAction Provisions |      
|(Dollars in thousands)                   |  | Amount |       | Ratio |                           |   | Amount |                                                                     | Ratio |  |      | Amount |  | Ratio |    
|As of December 31, 2003:                 |  |        |       |       |                           |   |        |                                                                     |       |  |      |        |  |       |     |  |       |  
|Total Capital (to Risk-Weighted Assets)  |  |        |       |       |                           |   |        |                                                                     |       |  |      |        |  |       |     |  |       |  
|Consolidated                             |  | $      | 4,432 |       | 55.61                     | % |        | $                                                                   | 638   |  | 8.00 | %      |  |       | N/A |  | N/A   |  
|Bank                                     |  | $      | 4,264 |       | 53.50                     | % |        | $                                                                   | 638   |  | 8.00 | %      |  | $     | 797 |  | 10.00 | %
|Tier 1 Capital (to Risk-Weighted Assets) |  |        |       |       |                           |   |        |                                                                     |       |  |      |        |  |       |     |  |       |  
|Consolidated                             |  | $      | 4,376 |       | 54.91                     | % |        | $                                                                   | 319   |  | 4.00 | %      |  |       | N/A |  | N/A   |  
|Bank                                     |  | $      | 4,208 |       | 52.80                     | % |        | $                                                                   | 319   |  | 4.00 | %      |  | $     | 478 |  | 6.00  | %
|Tier 1 Capital (to Average Assets)       |  |        |       |       |                           |   |        |                                                                     |       |  |      |        |  |       |     |  |       |  
|Consolidated                             |  | $      | 4,376 |       | 35.18                     | % |        | $                                                                   | 498   |  | 4.00 | %      |  |       | N/A |  | N/A   |  
|Bank                                     |  | $      | 4,208 |       | 33.83                     | % |        | $                                                                   | 498   |  | 4.00 | %      |  | $     | 622 |  | 5.00  | %



NOTE 14: Financial Instruments with
Off-Balance-Sheet Risk and Credit Risk



The Company is a
party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and commercial lines of credit.
Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Companys exposure to credit loss is represented by the contractual amount of
these commitments. The same credit policies are used in making commitments as for on-balance-sheet instruments.



Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. Those lines of credit may not
be drawn upon to the total extent to which the Company is committed. At December 31, 2003, the Company had unfunded commitments under lines of credit of $909,000.



Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.



The Company evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on managements credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties. At
December 31, 2003, the Company did not have any commitments to extend credit.



Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and
private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
The Bank generally holds collateral supporting those commitments, if deemed necessary. At December 31, 2003, the Bank did not have any commercial or standby letters of credit.



35



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##### Table of Contents

The Company had approximately $76,000 in deposits in financial institutions in excess of amounts insured
by the Federal Deposit Insurance Corporation (FDIC) at December 31, 2003.



NOTE 15: Fair Value of Financial Instruments and Interest Rate Risk



The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:



Cash and Short-Term Investments.For those short-term instruments,
the carrying amount is a reasonable estimate of fair value.



Securities.For securities, fair values are based on quoted market prices or dealer quotes.



Loans.For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The
fair values of other loans were estimated using discounted cash flow analyses, using interest rates currently being offered.



Accrued Interest.The carrying amounts of accrued interest approximate fair values.



Deposits.The fair value of demand deposits, savings accounts, and certain money market deposits is the amount
payable on demand at the reporting date. For all other deposits, the fair value is determined using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar products.



Unused Portions of Lines of Credit.The fair value of unused loan
commitments is estimated considering the remaining terms of the agreement and the difference between the current levels of interest rate and the committed rate. The fair value of the unused portions of lines of credit is deemed immaterial.



The estimated fair values, and related carrying
amounts, of the Companys financial instruments are as follows:



|                                |  |                   |       |                     |   |      
|------------------------------- |  | ----------------- | ----- | ------------------- | - | -----
|                                |  | December 31, 2003
|(Dollars in thousands)          |  | CarryingAmount    |       | EstimatedFair Value
|Financial assets:               |  |                   |       |                     |   |      
|Cash and short-term investments |  | $                 | 344   |                     | $ | 344  
|Securities                      |  |                   | 6,280 |                     |   | 6,280
|Loans                           |  |                   | 5,516 |                     |   | 5,491
|Accrued interest receivable     |  |                   | 47    |                     |   | 47   
|Financial liabilities:          |  |                   |       |                     |   |      
|Non-interest bearing deposits   |  |                   | 1,129 |                     |   | 1,129
|Interest bearing deposits       |  |                   | 7,880 |                     |   | 7,945
|Accrued interest payable        |  |                   | 16    |                     |   | 16   
|                                |  |                   |       |                     |   |      



The Company assumes
interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Companys financial instruments will change when interest rate levels change, and that change
may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely
to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do
so in a falling rate environment. Management monitors rate and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the
Companys overall interest rate risk.



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##### Table of Contents

NOTE 16: Parent Company Condensed Financial Information



Financial information for the parent company is as follows (dollars in
thousands):



|                                                                                  |  |                                                      |       |  
|--------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ----- | -
|Balance Sheet                                                                     |  | December 31, 2003                                    |      
|Assets                                                                            |  |                                                      |       |  
|Cash                                                                              |  | $                                                    | 176   |  
|Investments in subsidiary                                                         |  |                                                      | 4,176 |  
|                                                                                  |  |                                                      |       |  
|Total Assets                                                                      |  | $                                                    | 4,352 |  
|                                                                                  |  |                                                      |       |  
|Liabilities and shareholders equity                                              |  |                                                      |       |  
|Other liabilities                                                                 |  | $                                                    | 8     |  
|Shareholders equity                                                              |  |                                                      | 4,344 |  
|                                                                                  |  |                                                      |       |  
|Total liabilities and shareholders equity                                        |  | $                                                    | 4,352 |  
|                                                                                  |  |                                                      |       |  
|                                                                                  | 
|Statement of Operations                                                           |  | For the periodfrom April 29, 2003to December 31,2003 |      
|Equity in undistributed net (loss) of subsidiary                                  |  | $                                                    | (554  | )
|Other expenses                                                                    |  |                                                      | (38   | )
|                                                                                  |  |                                                      |       |  
|Net (loss)                                                                        |  | $                                                    | (592  | )
|                                                                                  |  |                                                      |       |  
|                                                                                  | 
|Statement of Cash Flows                                                           |  | For the periodfrom April 29, 2003to December 31,2003 |      
|Operating activities:                                                             |  |                                                      |       |  
|Net (loss)                                                                        |  | $                                                    | (592  | )
|Adjustments to reconcile net (loss) to net cash provided by operating activities: |  |                                                      |       |  
|Equity in undistributed (loss) of subsidiary                                      |  |                                                      | 554   |  
|Increase in other liabilities                                                     |  |                                                      | 8     |  
|                                                                                  |  |                                                      |       |  
|Net cash provided by operating activities                                         |  |                                                      | (30   | )
|                                                                                  |  |                                                      |       |  
|Cash at beginning of year                                                         |  |                                                      | 206   |  
|                                                                                  |  |                                                      |       |  
|Cash at end of year                                                               |  | $                                                    | 176   |  
|                                                                                  |  |                                                      |       |  



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##### Table of Contents

INDEPENDENT AUDITORS REPORT



Board of Directors and Shareholders

CNB
Bancorp, Inc.

Windsor, Virginia



We have audited the accompanying consolidated balance sheet of CNB Bancorp, Inc. and subsidiary as of December 31, 2003, and the related statements of operations, changes
in shareholders equity, and cash flows for the period from April 29, 2003 through December 31, 2003. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.



We conducted our audit in accordance
with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides 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
subsidiary as of December 31, 2003, and the results of their operations and their cash flows for the period from April 29, 2003 through December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.



/s/ Illegible



Winchester, Virginia

January 20, 2004



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##### Table of Contents

|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None.



|ITEM 8A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



As of the end of the period covered by this report, our management, including our Chief Executive Officer and Chief Financial Officer, reviewed and
evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) that is required to be included in our periodic filings with the Securities and Exchange
Commission. There have been no significant changes in our internal controls or, to managements knowledge, in other factors that could significantly affect those internal controls subsequent to the date we carried out our evaluation, and there
has been no corrective actions with respect to significant deficiencies or material weaknesses.



PART III



|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|------- | ---------------------------------------------------------------------------------------------------------------



Directors and Executive Officer Biographies



Allen E. Brown, 58, has been a director of the Company since November
12, 2001. He has been the Vice President and manager of Nu-Image Inc., a window and glass company since 1986.



Judy Brown,57, has been a director of the Company since November 12, 2001. She also serves as Vice President and Bank Manager of Citizens National
Bank. In 2001, she retired from the position of Vice President, Branch Manager and Director of Public Relations and Senior Events of Farmers Bank. She has 36 years of experience in the banking industry.



Douglas A. Chesson, 43, has been a director of the Company since
November 12, 2001. He serves as the President and Chief Executive Officer of CNB and Citizens National Bank, and has over 18 years of banking and lending experience with F & M Bank  Atlantic, formerly, United Community Bank, which was
originally the Bank of Sussex and Surry.



Larry Darden,
48, has been a director of the Company since November 12, 2001. He has been a self-employed farmer for his entire career with his base of operations in the Carrsville area in Isle of Wight County, Virginia.



Dr. Harold Demsko, 44, has been a director of the Company since
November 12, 2001. He has been practicing dentistry in Windsor, Virginia since 1985.



James E. Laine, 59, has been a director of the Company since November 12, 2001. He has been the owner/manager of Wakefield Peanut Company since 1974.



Susan Worrell OConnell, 34, has been a director of the Company
since November 12, 2001. She is a coordinator with Southeastern Cooperative Educational Programs. She previously served as a Program Support Specialist, providing services for students with autism since 1993. Mrs. OConnell is the daughter of
Gene Worrell, another director of the Company.



Marcia
Patterson, 45, has been a director of the Company since November 12, 2001. She currently manages various investment properties and has operated a refinishing shop in Windsor, Virginia since 1996.



William Pope, 78, has been a director of the Company since November
12, 2001. He retired from a successful sales career in the field of agriculture in 1983.



Dr. Gerald Scheimberg, 56, has been a director of the Company since November 12, 2001. Currently he serves as the President of Foot Care of Hampton Roads PC. Until May of 2000, Dr. Scheimberg served as the Vice
President of Podiatry, Ltd.



Clem E. Dalton, 64, has
been a director of the Company since June 5, 2002. He has been co-owner and Vice President of Dales Garage Used Cars and Wrecker Service, Inc since 1996.



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Michael G. Smith,52, has been a director of the Company since November 12, 2001. He has been the
President of M. G. Smith Building Company Inc., a regional construction company since 1984.



Gene Stewart Tyler, SR/WA, ASA, 60, has been a director of the Company since November 12, 2001. He has served as owner and Agent-Appraiser for Right of Way Acquisitions & Appraisals, Inc., a real estate
appraisal company, since 1981. He is a Licensed Certified General Real Estate Appraiser, a licensed Real Estate instructor and a licensed Real Estate Broker in the Commonwealth of Virginia.



Gene Worrell, 73, has been a director of the Company since November
12, 2001. He retired from as a co-owner of Worrells Woodworking in 1992 after 30 years of selling building materials and fabricating cabinets in the Town of Windsor. His daughter, Susan Worrell OConnell, also serves as a director.



Executive Officers



Currently, the Company has four executive officers. The following table provides: (a) his or her name; (b) his or her age at
December 31, 2003; (c) how long he or she has been an officer of the Company; and (d) his or her positions with the Company and the Bank:



|                       |  |                  |  |                                                                  
|---------------------- |  | ---------------- |  | -----------------------------------------------------------------
|Name (Age)             |  | Officer Since    |  | Position with the Company and the Bank                           
|Douglas A. Chesson, 43 |  | July 16, 2001    |  | President and Chief Executive Officer of the Company and the Bank
|Elizabeth T. Beale, 31 |  | April 10, 2003   |  | Vice President, Chief Financial Officer & Cashier of the Bank    
|Judy D. Brown, 57      |  | February 1, 2003 |  | Vice President and Bank Manager of the Bank                      
|Jerry R. Bryant, 54    |  | March 1, 2003    |  | Vice President and Senior Loan Officer of the Bank               



Audit Committee



The Company, through the Bank, has an audit committee that recommends to the
Banks, and therefore to the Companys, Board of Directors the independent public accountants to be selected to audit the Banks and the Companys annual financial statements and determines whether all audits and exams required
by law are being performed fully, properly and in a timely fashion. The audit committee also evaluates internal accounting controls, reviews the adequacy of the internal audit budget, personnel and audit plan. The Banks audit committee
consists of Allen Brown, Susan OConnell, Marcia Patterson, Gerald Scheimberg, and Michael Smith. Each member of the committee is deemed to be an independent director under Nasdaq Stock Market listing standards currently in effect. The
Banks audit committee does not have a financial expert, as defined by the Securities and Exchange Commission; however, the Board of Directors feels that, collectively, the audit committees financial acumen is more than
adequate and therefore a financial expert, as defined by the SEC, is not necessary for there to be a satisfactory discharge of the committees responsibilities to the Board of Directors and the Companys shareholders.



Section 16 Reports



The Company has no securities registered under Section 12(g) of the Securities Exchange Act, accordingly, no Section 16
reports were required to be filed during the period covered by this report.



Code of Ethics



The Company has adopted a Code
of Ethics that applies to its principal executive, financial and accounting officers, as well as other employees. A copy of the Companys Code of Ethics has not been posted to any web site because the Company nor the Bank has an official web
site. However, a copy may be obtained, without charge, upon written request addressed to CNB Bancorp, Inc. at P.O. Box 100, Windsor, VA 23487, Attention: Corporate Secretary. The request may be delivered by letter to the address set forth above or
by fax to the attention of the Companys Corporate Secretary at 757-242-3733.



|ITEM 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------



Summary Compensation Table



The following table shows information for 2003, 2002 and 2001 with regard to compensation for services rendered in all capacities to the Company by its
President and Chief Executive Officer, Douglas A. Chesson. Currently, no other executive officer receives compensation of $100,000 or more. All compensation paid through April 28, 2003 was paid by CNB Bancorp, LLC. From April 29, 2003, all
compensation was paid through Citizens National Bank.



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##### Table of Contents

|                              |  |                     |     |  |            |  |          |  |                             |     |  |                          |  |                  |  |                |  |                            |    
|----------------------------- |  | ------------------- | --- |  | ---------- |  | -------- |  | --------------------------- | --- |  | ------------------------ |  | ---------------- |  | -------------- |  | -------------------------- | ---
|                              |  |                     |     |  |            |  |          |  |                             |     |  | Long-Term Compensation   |  |                  | 
|                              |  | Annual Compensation |     |  | Awards     |  | Payouts  |  |                             |    
|Name and Position             |  | Year                |     |  | Salary ($) |  | Bonus($) |  | Other AnnualCompensation($) |     |  | RestrictedStockAwards($) |  | Options/ SARs(#) |  | LTIPPayouts($) |  | All Other Compensation ($) |    
|Douglas A. Chesson,           |  | 2003                |     |  | 86,769     |  | 12,000   |  |                            | (1) |  | 0                        |  | 0                |  | 0              |  | 5,206                      | (2)
|President and Chief Executive |  | 2002                |     |  | 75,000     |  | 0        |  |                            | (1) |  | 0                        |  | 0                |  | 0              |  | 4,500                      | (2)
|Officer                       |  | 2001                | (3) |  | 34,375     |  | 0        |  |                            | (1) |  | 0                        |  | 0                |  | 0              |  | 1,875                      | (2)

---

|(1) | The aggregate value of other annual compensation does not meet the minimum amount required for disclosure under the Securities and Exchange
Commissions regulations and is therefore omitted.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Consists primarily of contributions to the Companys 401(k) made by the Company on behalf of Mr. Chesson.
|--- | ---------------------------------------------------------------------------------------------------------



|(3) | July  December 31, 2001.
|--- | -------------------------



Option Grants in Fiscal Year 2003 to Named Executive Officers



The Company did not grant any options during fiscal year 2003.



Outstanding Stock Options to Named Executive Officers



There are no outstanding stock options granted to the named executive
officer.



Employment Agreement



We have negotiated the terms of an employment agreement with
Douglas A. Chesson, under which Mr. Chesson will serve as President and Chief Executive Officer of the Company and Citizens National Bank. The agreement was executed upon the opening of Citizens National Bank. Under the terms of the agreement, Mr.
Chessons compensation will include:



| |  | A base salary of $75,000 per year until the opening of Citizens National Bank, at which time his salary will increase to $92,000 per year;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | A cash bonus of $12,000 upon the opening of Citizens National Bank;
| | - | -------------------------------------------------------------------



| |  | Eligibility to receive an annual incentive bonus based on the net income of Citizens National Bank;
| | - | ---------------------------------------------------------------------------------------------------



| |  | Incentive stock options to purchase 5% of the number of shares of common stock sold in the original offering at an exercise price equal to the fair market value on the date of
grant.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Other customary benefits such as health and life insurance, use of an automobile, travel expenses and membership to business and social organizations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



The initial term of the employment agreement is three years. The initial
three-year term expires in July, 2004. At that time, the agreement will be renewable for one-year periods upon the mutual agreement of Mr. Chesson and the Company. The Company may terminate Mr. Chessons employment at any time for
cause, which is defined in the agreement as, among other things, disability, dishonesty, willful disregard or gross neglect in relation to the duties, interests and/or obligations that Mr. Chesson owes to the Company. However, Mr.
Chesson may only be terminated for cause upon the affirmative vote of at least 51% of the members of our board of directors. Upon any termination for cause, Mr. Chesson will not be entitled to any severance compensation.
Additionally, Mr. Chesson may resign his employment at any time without liability by providing 90 days prior written notice. Upon his resignation, Mr. Chesson will not receive any severance compensation upon the expiration of the 90-day notice
period. Additionally, upon a change of control of the Company as defined in his agreement, Mr. Chesson will be entitled to severance compensation in an amount equal to 2.99 times his annual base salary in the event that he is terminated without
cause within the first six months following a change of control, or if he resigns during the six month period following the change of control because he was not given reasonably equivalent duties and responsibilities.



The agreement also provides generally that for a period of twelve months
following the termination of Mr. Chessons employment, he will not compete with us in the banking business or solicit our customers or employees. These non-competition and non-solicitation provisions will not apply following a change of control
as defined in the agreement.



Director
Compensation



We do not intend to compensate the directors
of the Company and Citizens National Bank separately for their services as directors until net profits of the Company and Citizens National Bank exceed their net losses since inception on a cumulative basis. Thereafter, the Company and Citizens
National Bank will adopt reasonable compensatory policies for their directors.



Organizing Directors Shares and Warrants



The Company issued to each organizing director a warrant to purchase one share of common stock for each share the organizer
purchases in the Companys initial public offering for which they are the beneficial holder, up to an aggregate of 102,500 shares. These warrants will generally vest in increments over four years and will be exercisable at a price of $10.00 per
share.



41



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##### Table of Contents

|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------



The following table indicates the number of shares beneficially owned by the Companys directors and executive officers, as of December 31, 2003.
Information relating to beneficial ownership of the Company is based upon beneficial ownership concepts set forth in rules promulgated under the Securities Exchange Act of 1934, as amended. Under these rules a person is deemed to be a
beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of such security, or investment power, which includes the power to dispose or to
direct the disposition of such security. Under the rules, more than one person may be deemed to be a beneficial owner of the same securities. A person is also deemed to be a beneficial owner of any security of which that person has the right to
acquire beneficial ownership within sixty (60) days of December 31, 2003. Except as set forth below, the Company knows of no person who owns or controls, directly or indirectly, in excess of five percent of the outstanding common stock of the
Company.



|                                                             |  |                                     |  |                                            |  
|------------------------------------------------------------ |  | ----------------------------------- |  | ------------------------------------------ | -
|Name                                                         |  | Number of Shares Beneficially Owned |  | Percentage of Shares Beneficially Owned(1) |  
|Class I Directors:                                           |  |                                     |  |                                            |  
|Chesson, Douglas A.(2)                                       |  | 8,600                               |  | 1.53                                       | %
|Darden, J. Larry                                             |  | 5,850                               |  | 1.04                                       | %
|Laine, James E.                                              |  | 20,000                              |  | 3.56                                       | %
|Smith, Michael G.                                            |  | 16,606                              |  | 2.96                                       | %
|Tyler, G. Stewart                                            |  | 12,800                              |  | 2.28                                       | %
|Class II Directors:                                          |  |                                     |  |                                            |  
|Brown, Judy D.                                               |  | 11,150                              |  | 1.99                                       | %
|Dalton, Clem E.                                              |  | 10,850                              |  | 1.93                                       | %
|Demsko, Harold F.                                            |  | 18,400                              |  | 3.28                                       | %
|Pope, William E.                                             |  | 7,733                               |  | 1.38                                       | %
|Worrell, Gene E.                                             |  | 12,750                              |  | 2.27                                       | %
|Class III Directors:                                         |  |                                     |  |                                            |  
|Brown, Allen E.                                              |  | 5,500                               |  |                                            | *
|OConnell, Susan W.                                          |  | 10,250                              |  | 1.83                                       | %
|Patterson, Marcia C.                                         |  | 11,250                              |  | 2.00                                       | %
|Scheimberg, Gerald D.                                        |  | 9,250                               |  | 1.65                                       | %
|Executive Officer:                                           |  |                                     |  |                                            |  
|Jerry D. Bryant                                              |  | 2,000                               |  |                                            | *
|All Directors and Executive Officers as a Group (15 persons) |  | 162,989                             |  | 29.03                                      | %
|Five Percent Shareholders:                                   |  |                                     |  |                                            |  
|Tommy J. Duncan                                              |  | 31,750                              |  | 5.66                                       | %

---

|(*) | Less than 1%.
|--- | -------------



|(1) | Percentages are based on 561,137 shares outstanding, plus the number of shares beneficially owned by the named persons in connection with the vested portion of his
or her exercisable option and/or warrant.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Chesson is also the President and Chief Executive Officer of the Company and Citizens National Bank.
|--- | --------------------------------------------------------------------------------------------------------



42



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##### Table of Contents

The following table provides information regarding compensation plans under which equity securities of
the Company are authorized for issuance. All data is presented as of December 31, 2003.



Equity Compensation Plan Table



|                                                           |  |                                                                                             |     |  |                                                                             |       |                                                                                                                                             |       
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------
|                                                           |  | (a)                                                                                         |     |  | (b)                                                                         |       | (c)                                                                                                                                        
|Plan category                                              |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |     |  | Weighted-average exercise price of outstanding options, warrants and rights |       | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|Equity compensation plans approved by security holders     |  |                                                                                            |     |  |                                                                             | N/A   |                                                                                                                                             | 56,113
|Equity compensation plans not approved by security holders |  | 102,500                                                                                     | (1) |  | $                                                                           | 10.00 |                                                                                                                                             | N/A   
|Total                                                      |  | 102,500                                                                                     |     |  | $                                                                           | 10.00 |                                                                                                                                             | 56,113



|(1) | Represents 102,500 shares underlying organizers warrants issued in connection with the Companys initial public offering.
|--- | --------------------------------------------------------------------------------------------------------------------------



|ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



The Company and the Bank have banking and other business transactions in the ordinary course of business with directors and officers of the Company and
the Bank and their affiliates, including members of their families, corporations, partnerships or other organizations in which such directors and officers have a controlling interest. These transactions take place on substantially the same terms
(including price, interest rate and collateral) as those prevailing at the same time for comparable transactions with unrelated parties. In the opinion of management, these transactions do not involve more than the normal risk of collectibility or
present other unfavorable features to the Company or the Bank.



|ITEM 13. | EXHIBITS, LISTS AND REPORTS ON FORM 8-K
|-------- | ---------------------------------------



|(a) | Exhibits
|--- | --------



|               |  |                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit                                                                                                                                   
|               | 
|3.1            |  | Articles of Incorporation.(1)                                                                                                             
|               | 
|3.2            |  | Bylaws.(1)                                                                                                                                
|               | 
|4.1            |  | See Articles of Incorporation at Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.                                                     
|               | 
|10.1           |  | Lease Agreement by and between Windsor Office Group and Citizens National Bank (in organization) dated June 1, 2001 (temporary office).(1)
|               | 
|10.2           |  | Form of Escrow Agreement by and between CNB Bancorp, Inc. and Community Bankers Bank.(1)                                                 
|               | 
|10.3           |  | Form of Employment Agreement by and among Citizens National Bank (in organization), CNB Bancorp, Inc. and Douglas A. Chesson.(1)          



43



---

##### Table of Contents

|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|     | 
|10.4 |  | Form of CNB Bancorp, Inc. Organizing Director Warrant Agreement.(1)                                                    
|     | 
|10.5 |  | Operating Agreement of CNB Bancorp, LLC.(1)                                                                            
|     | 
|10.6 |  | Form of Organizing Director Contribution Agreement.(1)                                                                 
|     | 
|10.7 |  | Employment Agreement by and among Citizens National Bank, CNB Bancorp, Inc. and Jerry R. Bryant                        
|     | 
|10.8 |  | CNB Bancorp, Inc. 2003 Stock Incentive Plan                                                                            
|     | 
|14.1 |  | Code of Ethics                                                                                                         
|     | 
|21.1 |  | Subsidiaries of CNB Bancorp, Inc.                                                                                      
|     | 
|24.1 |  | Power of Attorney (appears on the signature pages to this Annual Report on Form 10-KSB).                               
|     | 
|31.1 |  | Certification of Chief Executive Officer                                                                               
|     | 
|31.2 |  | Certification of Chief Financial Officer                                                                               
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|(1) | Incorporated herein by reference to exhibit of same number in the Companys Registration Statement on Form SB-2, as amended.
|--- | ----------------------------------------------------------------------------------------------------------------------------



|(b) | Reports on Form 8-K filed in the fourth quarter of 2003:
|--- | --------------------------------------------------------



None.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



The following table shows the amounts paid by the Company to its independent auditors for the last two fiscal years.



|                   |  |      |        |      |   |      
|------------------ |  | ---- | ------ | ---- | - | -----
|Category           |  | 2003 |        | 2002
|Audit Fees(1)      |  | $    | 22,597 |      | $ | 4,701
|Audit Related Fees |  |      |       |      |   |     
|Tax Fees(2)        |  |      | 1,500  |      |   | 500  
|All Other Fees     |  |      |       |      |   |     
|                   |  |      |        |      |   |      
|Total              |  | $    | 24,097 |      | $ | 5,201
|                   |  |      |        |      |   |      



|(1) | Audit of year end financial statements and review of quarterly and annual Forms 10-QSB and 10-KSB with the Securities and Exchange Commission.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Preparation of federal and state corporate income tax returns.
|--- | --------------------------------------------------------------



44



---

##### Table of Contents

SIGNATURES



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



|                                      |  |                          
|------------------------------------- |  | -------------------------
|CNB BANCORP, INC.                    
|                                      | 
|By:                                   |  | /s/    Douglas A. Chesson
|                                      |  |                          
|Douglas A. Chesson                   
|President and Chief Executive Officer



Date: March 25, 2004



POWER OF ATTORNEY



KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears on the signature page to this Report constitutes and appoints Douglas A. Chesson as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place,
and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits hereto, and other documents in connection herewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.



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



|                                         |  |                                                                            |  |               
|---------------------------------------- |  | -------------------------------------------------------------------------- |  | --------------
|Signature                                |  | Title                                                                      |  | Date          
|                                         |  |                                                                           
|/s/ Douglas A. ChessonDouglas A. Chesson |  | Director, President, Chief Executive Officer (principal executive officer) |  | March 25, 2004
|                                         |  |                                                                           
|/s/ J. Larry DardenJ. Larry Darden       |  | Director                                                                   |  | March 25, 2004
|                                         |  |                                                                           
|/s/ James E. LaineJames E. Laine         |  | Director                                                                   |  | March 25, 2004
|                                         |  |                                                                           
|/s/ G. Stewart TylerG. Stewart Tyler     |  | Director                                                                   |  | March 25, 2004
|                                         |  |                                                                           
|/s/ Michael G. SmithMichael G. Smith     |  | Director                                                                   |  | March 25, 2004





---

##### Table of Contents

|                                                     |  |                                                                      |  |               
|---------------------------------------------------- |  | -------------------------------------------------------------------- |  | --------------
|Signature                                            |  | Title                                                                |  | Date          
|                                                     |  |                                                                     
|/s/ Judy D. BrownJudy D. Brown                       |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Harold F. DemskoHarold F. Demsko                 |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ William E. PopeWilliam E. Pope                   |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Clem E. DaltonClem E. Dalton                     |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Gene WorrellGene Worrell                         |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Allen E. BrownAllen E. Brown                     |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Marcia Collins PattersonMarcia Collins Patterson |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Gerald D. ScheimbergGerald D. Scheimberg         |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Susan Worrell OConnellSusan Worrell OConnell   |  | Director                                                             |  | March 25, 2004
|                                                     |  |                                                                     
|/s/ Elizabeth T. BealeElizabeth T. Beale             |  | Chief Financial Officer (principal accounting and financial officer) |  | March 25, 2004





---

##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                           
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                               
|              | 
|3.1           |  | Articles of Incorporation.(1)                                                                                                             
|              | 
|3.2           |  | Bylaws.(1)                                                                                                                                
|              | 
|4.1           |  | See Articles of Incorporation at Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.                                                     
|              | 
|10.1          |  | Lease Agreement by and between Windsor Office Group and Citizens National Bank (in organization) dated June 1, 2001 (temporary office).(1)
|              | 
|10.2          |  | Form of Escrow Agreement by and between CNB Bancorp, Inc. and Community Bankers Bank.(1)                                                 
|              | 
|10.3          |  | Form of Employment Agreement by and among Citizens National Bank (in organization), CNB Bancorp, Inc. and Douglas A. Chesson.(1)          
|              | 
|10.4          |  | Form of CNB Bancorp, Inc. Organizing Director Warrant Agreement.(1)                                                                       
|              | 
|10.5          |  | Operating Agreement of CNB Bancorp, LLC.(1)                                                                                               
|              | 
|10.6          |  | Form of Organizing Director Contribution Agreement.(1)                                                                                    
|              | 
|10.7          |  | Employment Agreement by and among Citizens National Bank, CNB Bancorp, Inc. and Jerry R. Bryant                                           
|              | 
|10.8          |  | CNB Bancorp, Inc.2003 Stock Incentive Plan                                                                                                
|              | 
|14.1          |  | Code of Ethics                                                                                                                            
|              | 
|24.1          |  | Power of Attorney (appears on the signature pages to this Annual Report on Form 10-KSB).                                                  
|              | 
|31.1          |  | Certification of Chief Executive Officer                                                                                                  
|              | 
|31.2          |  | Certification of Chief Financial Officer                                                                                                  
|              | 
|32.1          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                   

---

|(1) | Incorporated herein by reference to exhibit of same number in the Companys Registration Statement on Form SB-2, as amended.
|--- | ----------------------------------------------------------------------------------------------------------------------------