**UNITED
        STATES** **SECURITIES
        AND EXCHANGE COMMISSION** ****
 **Washington,
        DC 20549**




**FORM
        10-QSB**
 
 
 (Mark
        One)
  x
        QUARTERLY REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For
                    the quarterly period ended June 30, 2006
                  Commission
                    File Number 333-100460
 
 o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
 For
                  the transition period from ________ to _________
                Commission
                  file number _______________________
 
 **CN
        BANCORP, INC.**
 ( Exact
        name of small business issuer as specified in its charter)
  **Maryland**
              
              **52-1954386**(State
                  or other Jurisdiction of Incorporation or Organization)
              
              (I.R.S.
                  Employer Identification No.)
  **7401
        Ritchie Highway, Glen Burnie 21061**
 (Address
        of principal executive offices)
  **(410)
        760-7000**
 (Issuer’s
        telephone number)
  
  Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
 YES  x NO o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 YES o NO x
  State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of the latest practicable date: At July 25, 2006, the issuer had 1,724,031
        shares of Common Stock outstanding.
  Transitional
        Small Business Disclosure Format (Check one): YES o NO  x
 
 
  **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1.**  **Financial
        Statements**
 
 **CN
        BANCORP, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF FINANCIAL CONDITION**
 **June
        30, 2006 (Unaudited) and December 31, 2005**
 
 (Unaudited)June
                  30,
              
              December
                  31,2006
              
              2005ASSETSCash
                  and due from banks
              
              $
              3,531,724
              
              $
              4,214,570Federal
                  funds sold
              
              
              9,278,404
              
              
              11,262,328Cash
                  and cash equivalents
              
              
              12,810,128
              
              
              15,476,898Interest
                  bearing deposits
              
              
              882,147
              
              
              2,884,893Investment
                  securities - available for sale
              
              
              22,303,320
              
              
              23,881,126Investment
                  securities - held to maturity
              
              
              9,134,449
              
              
              8,162,452Other
                  securities
              
              
              793,800
              
              
              773,800Loans
                    receivable, net of allowance for loan losses of $953,000at June
                    30, 2006 and $864,000 at December 31, 2005
              
              
              94,156,384
              
              
              88,561,597Premises
                  and equipment, net
              
              
              3,812,796
              
              
              3,914,253Cash
                  surrender value of life insurance
              
              
              2,649,248
              
              
              2,600,679Other
                  assets
              
              
              1,301,067
              
              
              1,340,144Total
                  Assets
              
              $
              147,843,339
              
              $
              147,595,842LIABILITIESNon-interest
                  bearing deposits
              
              $
              38,171,696
              
              $
              37,666,022Interest
                  bearing deposits
              
              
              88,336,519
              
              
              89,418,414Total
                  deposits
              
              
              126,508,215
              
              
              127,084,436Securities
                  sold under agreements to repurchase
              
              
              280,113
              
              
              548,367Accounts
                  payable and accrued expenses
              
              
              912,710
              
              
              866,460Total
                  Liabilities
              
              
              127,701,038
              
              
              128,499,263STOCKHOLDERS’
                  EQUITYPreferred
                  stock - $.01 par value; authorized 5,000,000 shares.None
                  issued or outstanding
              
              
              -
              
              
              -Common
                  stock - $10 par value; authorized 5,000,000 shares.Issued
                    and outstanding: 1,721,896 shares at June 30, 2006and
                    1,664,342 at December 31, 2005
              
              
              17,218,961
              
              
              16,643,415Additional
                  paid-in capital
              
              
              983,184
              
              
              950,891Retained
                  earnings
              
              
              2,256,559
              
              
              1,781,794Accumulated
                  other comprehensive loss:Unrealized
                  loss on securities available for sale
              
              
              (316,403
              )
              
              (279,521
              )Total
                  Stockholders’ Equity
              
              
              20,142,301
              
              
              19,096,579Total
                  Liabilities and Stockholders’ Equity
              
              $
              147,843,339
              
              $
              147,595,842
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
  
  **CN
        BANCORP, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
        the Six and Three Months ended June 30, 2006 and 2005
        (Unaudited)**
 
 Six
                  Months Ended
                June
                  30,
              
              Three
                  Months Ended
                June
                  30,2006
              
              2005
              
              2006
              
              2005Interest
                  income:Interest
                  and fees on loans
              
              $
              3,257,421
              
              $
              2,536,754
              
              $
              1,692,891
              
              $
              1,318,265Federal
                  funds sold
              
              
              279,245
              
              
              148,011
              
              
              156,483
              
              
              88,764Interest
                  bearing deposits
              
              
              51,746
              
              
              46,119
              
              
              24,796
              
              
              22,855Securities
              
              
              574,944
              
              
              584,962
              
              
              292,557
              
              
              286,578Total
                  interest income
              
              
              4,163,356
              
              
              3,315,846
              
              
              2,166,727
              
              
              1,716,462Interest
                  expense:Deposits
              
              
              1,225,061
              
              
              875,121
              
              
              649,368
              
              
              454,921Repurchase
                  agreements
              
              
              5,688
              
              
              7,967
              
              
              1,065
              
              
              3,491Total
                  interest expense
              
              
              1,230,749
              
              
              883,088
              
              
              650,433
              
              
              458,412Net
                  interest income
              
              
              2,932,607
              
              
              2,432,758
              
              
              1,516,294
              
              
              1,258,050Provision
                  for loan losses
              
              
              101,925
              
              
              77,349
              
              
              52,845
              
              
              40,851Net
                  interest income after provision for loan losses
              
              
              2,830,682
              
              
              2,355,409
              
              
              1,463,449
              
              
              1,217,199Non-interest
                  income:Fees
                  and service charges from depository accounts
              
              
              483,234
              
              
              417,032
              
              
              252,726
              
              
              222,099Gain
                  on sale of foreclosed personal property
              
              
              25,000
              
              
              -
              
              
              -
              
              
              -Gain
                  on sale of loans
              
              
              -
              
              
              35,437
              
              
              -
              
              
              -Increase
                  in cash surrender value of life insurancepolicies
              
              
              48,569
              
              
              38,607
              
              
              25,157
              
              
              24,540Other
                  income
              
              
              65,522
              
              
              60,516
              
              
              29,572
              
              
              35,756Total
                  non-interest income
              
              
              622,325
              
              
              551,592
              
              
              307,455
              
              
              282,395Non-interest
                  expenses:Compensation
                  and related expenses
              
              
              1,278,058
              
              
              1,177,959
              
              
              652,982
              
              
              598,067Occupancy
                  expense
              
              
              212,696
              
              
              210,557
              
              
              109,507
              
              
              102,402Depreciation
                  and amortization
              
              
              156,689
              
              
              181,101
              
              
              77,592
              
              
              88,217Consulting
                  expense
              
              
              44,993
              
              
              50,334
              
              
              22,373
              
              
              26,281Data
                  processes expense
              
              
              95,961
              
              
              96,515
              
              
              47,344
              
              
              47,975Director
                  fees
              
              
              46,590
              
              
              48,150
              
              
              22,665
              
              
              24,050Marketing
                  expense
              
              
              49,432
              
              
              27,884
              
              
              23,125
              
              
              12,450Equipment
                  maintenance costs
              
              
              67,199
              
              
              59,214
              
              
              34,047
              
              
              30,544Electronic
                  funds transfer fees
              
              
              47,560
              
              
              52,250
              
              
              22,060
              
              
              25,250Stationery
                  and office supplies
              
              
              36,876
              
              
              43,507
              
              
              16,983
              
              
              19,060Other
                  operating expenses
              
              
              317,195
              
              
              281,227
              
              
              168,870
              
              
              143,477Total
                  non-interest expenses
              
              
              2,353,249
              
              
              2,228,698
              
              
              1,197,548
              
              
              1,117,773Income
                  before income taxes
              
              
              1,099,758
              
              
              678,303
              
              
              573,356
              
              
              381,821Income
                  tax expense
              
              
              384,111
              
              
              231,892
              
              
              199,514
              
              
              128,522NET
                  INCOME
              
              $
              715,647
              
              $
              446,411
              
              $
              373,842
              
              $
              253,299Basic
                  earnings per share
              
              $
              .42
              
              $
              .32
              
              $
              .22
              
              $
              .18Diluted
                  earnings per share
              
              $
              .42
              
              $
              .30
              
              $
              .22
              
              $
              .17Dividends
                  declared
              
              $
              .14
              
              $
              .10
              
              $
              .07
              
              $
              .05
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  3
 
 **CN
        BANCORP, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF COMPREHENSIVE INCOME**
 **For
        the Six and Three Months ended June 30, 2006 and 2005
        (Unaudited)**
  Six
                  Months Ended
                June
                    30,
              
              Three
                  Months Ended
                June
                    30,2006
              
              2005
              
              2006
              
              2005Net
                  income
              
              $
              715,647
              
              $
              446,411
              
              $
              373,842
              
              $
              253,299Change
                  in unrealized gains and(losses)
                  on securities available for sale
              
              
              (60,079
              )
              
              (39,180
              )
              
              (17,249
              )
              
              197,402Tax
                  effect
              
              
              23,197
              
              
              25,335
              
              
              6,660
              
              
              (76,217
              )Other
                  comprehensive income (loss)
              
              
              (36,882
              )
              
              (13,845
              )
              
              (10,589
              )
              
              121,185Total
                  comprehensive income
              
              $
              678,765
              
              $
              432,566
              
              $
              363,253
              
              $
              374,484
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
  4
  **CN
        BANCORP, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ EQUITY**
 **For
        the Six Months ended June 30, 2006 and 2005 (Unaudited** )
 
 Common
                Stock
              
              Additional
                Paid-in
                Capital
              
              Retained
                Earnings
              
              Accumulated
                Other
                Comprehensive
                Income
                  (Loss)
              
              TotalDecember
                  31, 2004
              
              $
              13,845,652
              
              $
              917,340
              
              $
              1,078,002
              
              $
              (146,139
              )
              $
              15,694,855Net
                  income June 30, 2005
              
              
              
              
              
              
              
              
              446,411
              
              
              
              
              
              446,411Change
                    in unrealized gains and losseson
                    securities available for sale, net
              
              
              
              
              
              
              
              
              
              
              
              (13,845
              )
              
              (13,845
              )Sale
                  of common stock under theDividend
                  Reinvestment and StockPurchase
                  Plan (DRIP)
              
              
              43,572
              
              
              18,074
              
              
              
              
              
              
              
              
              61,646Proceeds
                  from warrant exercises
              
              
              486,800
              
              
              
              
              
              
              
              
              
              
              
              486,800Dividends
                  ($.10 per share)
              
              
              
              
              
              
              
              
              (141,793
              )
              
              
              
              
              (141,793
              )Balance
                  at June 30, 2005
              
              $
              14,376,024
              
              $
              935,414
              
              $
              1,382,620
              
              $
              (159,984
              )
              $
              16,534,074December
                  31, 2005
              
              $
              16,643,415
              
              $
              950,891
              
              $
              1,781,794
              
              $
              (279,521
              )
              $
              19,096,579Net
                  income June 30, 2006
              
              
              
              
              
              
              
              
              715,647
              
              
              
              
              
              715,647Change
                    in unrealized gains and losseson
                    securities available for sale, net
              
              
              
              
              
              
              
              
              
              
              
              (36,882
              )
              
              (36,882
              )Sale
                  of common stock under theDividend
                  Reinvestment and StockPurchase
                  Plan (DRIP)
              
              
              67,236
              
              
              32,293
              
              
              
              
              
              
              
              
              99,529Proceeds
                  from warrant exercises
              
              
              508,310
              
              
              
              
              
              
              
              
              
              
              
              508,310Dividends
                  ($.14 per share)
              
              
              
              
              
              
              
              
              (240,882
              )
              
              
              
              
              (240,882
              )Balance
                  at June 30, 2006
              
              $
              17,218,961
              
              $
              983,184
              
              $
              2,256,559
              
              $
              (316,403
              )
              $
              20,142,301
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 5
  **CN
        BANCORP, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
        the Six Months ended June 30, 2006 and 2005**
 **(Unaudited)**
 
 For
                    the Six Months EndedJune
                  30,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  income
              
              $
              715,647
              
              $
              446,411Adjustments
                    to reconcile net income to net cashprovided
                    by operations:Depreciation
                  and amortization
              
              
              156,689
              
              
              181,101Gain
                  on sale of foreclosed personal property
              
              
              (25,000
              )
              
              -Gain
                  on sale of loans
              
              
              -
              
              
              (35,437
              )Deferred
                  income taxes
              
              
              (103,063
              )
              
              (57,317
              )Provision
                  for loan losses
              
              
              101,925
              
              
              77,349Increase
                  in cash surrender value of life insurance
              
              
              (48,569
              )
              
              (38,607
              )Decrease
                  (increase) in other assets
              
              
              25,337
              
              
              (15,957
              )Increase
                  in other liabilities
              
              
              92,151
              
              
              149,034Amortization
                  of premium/discount and other
              
              
              (30,104
              )
              
              20,240Net
                  cash provided by operating activities
              
              
              885,013
              
              
              726,817CASH
                  FLOWS FROM INVESTING ACTIVITIESNet
                  increase in loans
              
              
              (5,696,712
              )
              
              (7,105,737
              )Decrease
                  in interest bearing deposits
              
              
              2,002,746
              
              
              1,519,455Investment
                  in securities - available for sale
              
              
              (2,753,683
              )
              
              -Investment
                  in securities - held to maturity
              
              
              (1,311,940
              )
              
              -Investment
                  in other securities
              
              
              (20,000
              )
              
              (35,900
              )Principal
                  payments and redemption of securities
              
              
              4,641,457
              
              
              2,056,689Proceeds
                  from sales of foreclosed personal property
              
              
              165,000
              
              
              -Proceeds
                  from sales of loans
              
              
              -
              
              
              1,800,000Investment
                  in life insurance
              
              
              -
              
              
              (1,175,000
              )Purchase
                  of property, equipment and leasehold improvements
              
              
              (55,232
              )
              
              (31,962
              )Net
                  cash used by investing activities
              
              
              (3,028,364
              )
              
              (2,972,455
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESNet
                  increase (decrease) in deposits including interest credited
              
              
              (576,221
              )
              
              7,895,590Net
                  increase (decrease) in securities sold under agreements to
                  repurchase
              
              
              (268,254
              )
              
              1,176,549Sales
                  of common stock under DRIP
              
              
              99,529
              
              
              61,646Proceeds
                  from stock warrant exercises
              
              
              508,310
              
              
              486,800Dividends
                  paid
              
              
              (286,783
              )
              
              (125,296
              )Net
                  cash provided (used) by financing activities
              
              
              (523,419
              )
              
              9,495,289NET
                  INCREASE (DECREASE) IN CASH
              
              
              (2,666,770
              )
              
              7,249,651Cash
                  at beginning of period
              
              
              15,476,898
              
              
              9,868,815Cash
                  at end of period
              
              $
              12,810,128
              
              $
              17,118,466SUPPLEMENTAL
                  CASH FLOW INFORMATIONInterest
                  paid
              
              $
              1,221,093
              
              $
              881,755Income
                  taxes paid
              
              $
              556,500
              
              $
              280,154
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
  6
  **CN
        BANCORP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 Note
        A –
        Basis of Presentation
 
 The
        accompanying unaudited consolidated financial statements of CN Bancorp, Inc.
        (the Company) have been prepared in accordance with accounting principles
        generally accepted in the United States of America for interim financial
        information and with the instructions to Form 10-QSB. Accordingly, they do
        not
        include all the information and footnotes required for complete financial
        statements. In the opinion of management, all adjustments and reclassifications
        that are normal and recurring in nature and are considered necessary for
        fair
        presentation have been included. Operating results for the six month period
        ended June 30, 2006 are not necessarily indicative of the results that may
        be
        expected for the year ending December 31, 2006. These unaudited consolidated
        financial statements should be read in conjunction with the audited consolidated
        financial statements and footnotes for the year ended December 31,
        2005.
 
 The
        unaudited consolidated financial statements include the accounts of the Company
        and its wholly-owned subsidiary, County National Bank. All intercompany accounts
        and transactions have been eliminated in the accompanying unaudited consolidated
        financial statements.
 
 Certain
        prior year amounts have been reclassified to conform to the current year’s
        method of presentation.
 
 Note
        B – Business
 
 The
        Company was incorporated in January 1996 under the laws of the State of Maryland
        to serve as a bank holding company and financial holding company and formed
        County National Bank (the Bank) as a wholly owned subsidiary. The Company
        is
        registered as a bank holding company and the Bank is chartered as a national
        bank. The Bank opened on December 19, 1996. The Company (as a bank holding
        company) and the Bank (as a nationally chartered bank) are subject to government
        supervision, regulations and control.
 
 The
        Bank’s primary business activity is the solicitation and acceptance of deposits
        from within its market area and the use of such funds in loans and investments.
        The Bank is subject to competition from other financial institutions and
        financial service companies.
 
 Note
        C – Cash and Cash Equivalents
 
 Cash
        and
        cash equivalents in the statement of cash flows include cash on hand,
        non-interest bearing amounts due from correspondent banks and the Federal
        Reserve and Federal funds sold.
 
 Note
        D – Regulatory Capital Requirements
 
 The
        Bank
        meets the three regulatory capital requirements to be a “well capitalized” bank,
        as defined, at December 31, 2005 and June 30, 2006.
 
 Note
        E – Earnings Per Share
 
 Basic
        earnings per share are computed by dividing net income by the weighted average
        shares of common stock outstanding during the period. Diluted earnings per
        share
        are calculated by including the average dilutive common stock equivalents
        outstanding during the period. Dilutive common stock equivalent shares consist
        of warrants and stock options, calculated using the treasury stock
        method.
 
 Six
                  Months
                Ended
                  June 30:
              
              Three
                  Months Ended
                June
                  30:2006
              
              2005
              
              2006
              
              2005Weighted
                  average shares outstanding
              
              
              1,704,120
              
              
              1,409,187
              
              
              1,721,465
              
              
              1,423,406Common
                  stock equivalents
              
              
              13,010
              
              
              101,968
              
              
              12,198
              
              
              97,602Average
                  common shares and equivalents
              
              
              1,717,130
              
              
              1,511,155
              
              
              1,733,663
              
              
              1,521,008Net
                  income
              
              $
              715,647
              
              $
              446,411
              
              $
              373,842
              
              $
              253,299Basic
                  earnings per share
              
              $
              .42
              
              $
              .32
              
              $
              .22
              
              $
              .18Diluted
                  earnings per share
              
              $
              .42
              
              $
              .30
              
              $
              .22
              
              $
              .17
  7
  Note
        F -
        Stock Purchase and Option Plans
 
 Under
        the
        Company’s Employee Stock Purchase Plan (ESPP), the Company is authorized to
        issue up to 50,000 shares of common stock. Under the ESPP, the Company may
        award
        options to employees to purchase common stock at a purchase price for the
        shares
        of the lower of 85% of fair market value of the common stock on the date
        of the
        option grant or on the exercise date of the option. No shares were purchased
        under the ESPP in 2005 or 2006 (2,685 shares purchased in 2004 under the
        plan).
        There are no outstanding options to purchase common shares at June 30, 2006
        under the ESPP.
 
 Under
        the
        Company’s Directors Stock Purchase Plan (DSPP), the Company is authorized to
        issue up to 50,000 shares of common stock. Under the DSPP, the Company may
        award
        options to directors to purchase common stock at fair market value as of
        the
        date of the option grant. No shares have been purchased under the DSPP and
        there
        are no outstanding options to purchase common shares at June 30,
        2006.
 
 Under
        the
        Company’s Stock Option Plan (SOP), the Company is authorized to issue up to
        200,000 shares of common stock for use under the SOP. Under the SOP, the
        Company
        may award options to designated officers and employees to purchase common
        stock
        at the minimum purchase price of fair market value of the common stock on
        the
        date of the option grant. The options have a maximum term of ten years. The
        Board of Directors determines the vesting, term and purchase price for each
        option granted within the parameters of the SOP. On December 7, 2004, the
        Company granted immediately vested options to purchase 51,000 shares of its
        common stock to certain officers and employees under the SOP at the fair
        value
        of the stock on the date of grant for a period of ten years. The exercise
        price
        for these options is $14.20 per share and the options expire on December
        7,
        2014. At June 30, 2006, 46,500 of these options are outstanding. On December
        6,
        2005, the Company granted immediately vested options to purchase an additional
        51,000 shares of its common stock under the plan. The exercise price for
        the
        2005 options is $14.50 per share and the options expire on December 6, 2015.
        At
        June 30, 2006, 51,000 of these options are outstanding.
 
 Note
        G.
        Mortgage Servicing Rights
 
 In
        the
        first quarter of 2005, the Company sold a mortgage loan while retaining
        servicing rights thereto. The Company has developed appropriate policies
        and
        procedures in order to comply with FASB 140 for deferred mortgage servicing
        rights. Among the factors that the Company considers in evaluating impairment
        on
        a periodic basis are the original contract term of the underlying mortgage,
        the
        contractual interest rate, the remaining term of the mortgage, current interest
        rates and management's original and current assumptions as to the anticipated
        life of the mortgage. There were no such sales during the six or three months
        ended June 30, 2006.
 
 Note
        H.
        Recent Accounting Pronouncements
 
 In
        December 2004, the Financial Accounting Standards Board (FASB) issued Statement
        No. 123(R), *Share-Based
        Payment* .
        Statement No. 123(R) revised Statement No. 123, *Accounting
        for Stock-Based Compensation* ,
        and
        supersedes APB Opinion No. 25, *Accounting
        for Stock Issued to Employees* ,
        and its
        related implementation guidance. Statement No. 123(R) requires compensation
        cost
        related to share-based payment transactions to be recognized in the financial
        statements (with limited exceptions). The amount of compensation cost is
        measured based on the grant-date fair value of the equity or liability
        instruments issued. Compensation cost is recognized over the period that
        an
        employee provides service in exchange for the award. This statement was
        effective for the Company, and the Company has adopted the standard, as of
        January 1, 2006. This statement requires the recording of compensation costs
        for
        stock purchase options awarded, if any, under the ESPP, DSPP and SOP plans.
        The
        Company is not required to award options under any of these plans. There
        were no
        options granted under any of these plans during the six or three months ended
        June 30, 2006.
 
 In
        February 2006, the FASB published FASB Statement No. 155, *Accounting
        for Certain Hybrid Financial Instruments* (“SFAS
        No.155” or the “Statement”). SFAS 155 amends FASB Statements No. 133, *Accounting
        for Derivative Instruments and Hedging Activities* and No.
        140, *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities* .
        Among
        other things, the Statement resolves issues related to the financial reporting
        of certain hybrid financial instruments (financial instruments that have
        embedded derivatives) to be accounted for as a whole at fair value if the
        holder
        elects this option. This accounting eliminates the need to bifurcate the
        derivative from its host. The Statement also eliminates certain previous
        guidance that provided that beneficial interests in securitized financial
        assets
        are not subject to the provisions of SFAS No. 133. Lastly, the Statement
        also
        eliminates a restriction on the passive derivative instruments that a qualifying
        special purpose entity may hold. Management does not expect the adoption
        of this
        Statement to have a material impact on the Company’s consolidated financial
        statements.
 
 8
  In
        March
        2006, the FASB published FASB Statement No. 156, *Accounting
        for Servicing of Financial Assets* (“SFAS
        No.156” or the “Statement”). This Statement amends FASB Statement No. 140, *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities* ,
        with
        respect to the accounting for separately recognized servicing assets and
        servicing liabilities. The Statement requires an entity to recognize a servicing
        asset or servicing liability each time it undertakes an obligation to service
        a
        financial asset by entering into a servicing contract in each of several
        specific situations. It also requires all separately recognized servicing
        assets
        and servicing liabilities to be initially measured at fair value, if
        practicable, and permits an entity to choose either of two accepted measurement
        methods for each class of separately recognized servicing assets and servicing
        liabilities. Further, the Statement permits, at its initial adoption, a one-time
        reclassification of available-for-sale securities to trading securities by
        entities with recognized servicing rights. Lastly, the Statement requires
        separate presentation of servicing assets and servicing liabilities subsequently
        measured at fair value and additional disclosures for all separately recognized
        servicing assets and servicing liabilities. SFAS No. 156 is effective for
        fiscal
        years beginning after September 15, 2006. Management does not expect the
        adoption of this Statement to have a material impact on the Company’s
        consolidated financial statements.
  **Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations**
 
 The
        following discussion and analysis of the financial condition and results
        of
        operations of CN Bancorp, Inc. (the Company) should be read in conjunction
        with
        CN Bancorp, Inc.’s consolidated financial statements, including the related
        footnotes, appearing in Part I of this report.
 
 **Overview**
 
 The
        Company continued its efforts to increase investments in loans during 2006
        to
        better utilize its resources and leverage new capital obtained from the exercise
        of warrants during the last quarter of 2005 and first quarter of 2006. Loans
        increased by 6.3% during the first half of 2006. The recent increases in
        market
        interest rates have resulted in increases in the Company’s interest margins and
        net interest income.
 
 The
        Company plans to change its internet banking and bill paying programs during
        the
        third quarter of 2006 with changes in vendors. The new programs will offer
        additional features, allow for development of future features and generally
        upgrade the quality of the internet banking services provided to customers.
        Along with these changes, the Company anticipates strengthening the security
        of
        its internet banking offerings through stronger access controls for better
        protection of customers’ information and internet activity.
 
 The
        Company continued a pattern of improved operating results as compared to
        prior
        periods for the six months ended June 30, 2006. Key measurements and events
        for
        the period include the following:
 
 ·
              Total
                  assets at June 30, 2006 increased by 0.2% to $147.8 million as
                  compared to
                  $147.6 million as of December 31, 2005.
 
 ·
              Net
                  loans outstanding increased by 6.3% from $89 million as of December
                  31,
                  2005 to $94 million as of June 30,
                  2006.
 
 ·
              Deposits
                  at June 30, 2006 were $126.5 million, a decrease of $.6 million
                  or 0.5%
                  from December 31, 2005.
 
 ·
              The
                  Company’s net income increased to $715,647, or 60.3%, for the six month
                  period ended June 30, 2006 as compared to net income of $446,411
                  for the
                  six month period ended June 30,
                  2005.
 
 ·
              Net
                  interest income, the Company’s main source of income, was $2.9 million
                  during the six month period ended June 30, 2006 compared to $2.4
                  million
                  for the same period in 2005. This represents an increase of 20.6%
                  for the
                  six months ended June 30, 2006 as compared to the same period in
                  2005.
  9
  ·
              Non-interest
                  income increased by $70,733 or 12.8%, for the six month period
                  ended June
                  30, 2006, as compared to the six month period ended June 30, 2005.
 
 ·
              Non-interest
                  expenses increased by $124,551 or 5.6%, for the six month period
                  ended
                  June 30, 2006, as compared to the same period in 2005.
 
 A
        detailed discussion of the factors leading to these changes can be found
        in the
        discussion below.
 
 **CRITICAL
        ACCOUNTING POLICIES**
 
 CN
        Bancorp, Inc.’s consolidated financial statements are prepared in accordance
        with accounting principles generally accepted in the United States and follow
        general practices within the industry in which it operates. Application of
        these
        principles requires management to make estimates, assumptions and judgments
        that
        affect the amounts reported in the financial statements and accompanying
        notes.
        These estimates, assumptions and judgments are based on information available
        as
        of the date of the financial statements; accordingly, as this information
        changes, the financial statements could reflect different estimates, assumptions
        and judgments. Certain policies inherently have a greater reliance on the
        use of
        estimates, assumptions and judgments and as such have a greater possibility
        of
        producing results that could be materially different than originally reported.
        Estimates, assumptions and judgments are necessary when assets and liabilities
        are required to be recorded at fair value, when a decline in the value of
        an
        asset not carried on the financial statements at fair value warrants an
        impairment write-down or valuation reserve to be established, or when an
        asset
        or liability needs to be recorded contingent upon a future event. Carrying
        assets and liabilities at fair value inherently results in more financial
        statement volatility. The fair values and the information used to record
        valuation adjustments for certain assets and liabilities are based either
        on
        quoted market prices or are provided by other third-party sources, when
        available.
 
 The
        most
        significant accounting policies followed by CN Bancorp, Inc. are presented
        in
        Note 1 to the Company’s annual audited consolidated financial statements
        included in Exhibit 13 to its Annual Report on Form 10-KSB for the year ended
        December 31, 2005. These policies, along with the disclosures presented in
        the
        other financial statement notes and in this discussion, provide information
        on
        how significant assets and liabilities are valued in the financial statements
        and how those values are determined. Based on the valuation techniques used
        and
        the sensitivity of financial statement amounts to the methods, assumptions
        and
        estimates underlying those amounts, management has identified the determination
        of the allowance for loan losses as the accounting area that requires the
        most
        subjective or complex judgments, and as such could be most subject to revision
        as new information becomes available.
 
 CN
        Bancorp, Inc. believes it has developed appropriate policies and procedures
        for
        assessing the adequacy of the allowance for loan losses, recognizing that
        this
        process requires a number of assumptions and estimates with respect to its
        loan
        portfolio. CN Bancorp, Inc.’s assessments may be affected in future periods by
        changes in economic conditions, the impact of regulatory examinations and
        the
        discovery of information with respect to borrowers that is not known to
        management at the time of the issuance of the consolidated financial
        statements.
  **FINANCIAL
        CONDITION**
 
 Assets
        increased $247,497 (0.2%) to $147,843,339 at June 30, 2006 from $147,595,842
        at
        December 31, 2005. Increases in loans were generally funded by the use of
        federal funds, interest bearing deposits and proceeds from the exercise of
        stockholders’ warrants during the first quarter of 2006. The loan portfolio
        comprises the majority of CN Bancorp, Inc.’s earning assets. Loans receivable
        (net of the allowance for loan losses, unearned fees and origination costs)
        increased by $5,594,787 (6.3%) to $94,156,384 at June 30, 2006 from $88,561,597
        at December 31, 2005. This increase was primarily attributable to the increase
        in commercial loans and real estate construction loans. Loans receivable,
        net,
        comprised 63.7% of total assets ($147,843,339) at June 30, 2006 and 60.0%
        of
        total assets ($147,595,842) as of December 31, 2005.
  The
        allowance for loan losses was $953,000 (1.0% of
        loans) at June 30, 2006 and $864,000 (0.97% of loans) at December 31, 2005.
        At
        June 30, 2006 non-accrual loans totaled $40,473 and were comprised of two
        commercial loans: a $34,473 loan secured by personal property and a $6,000
        unsecured loan. Specific loss reserves of $23,575 have been established for
        these loans at June 30, 2006. Non-accrual loans at December 31, 2005 of $62,332
        were comprised of a $49,667 commercial loan secured by real estate and a
        $12,665
        unsecured commercial loan. There were no loans past due ninety days and still
        accruing interest at June 30, 2006 or December 31, 2005.
 
 10
  Loans
        receivable, net is comprised of the following:
 
 **June
                  30,**
              
              **December
                  31,****2006**
              
              **2005**Real
                  estate –construction
              
              $
              8,039,863
              
              $
              4,329,827Residential
                  real estate
              
              
              27,701,898
              
              
              29,306,514Commercial
                  real estate
              
              
              31,465,169
              
              
              29,420,805Commercial-other
              
              
              24,334,784
              
              
              22,366,771Installment
                  and other
              
              
              3,563,292
              
              
              3,948,75495,105,006
              
              
              89,372,671Unearned
                  loan fees and costs, net
              
              
              4,378
              
              
              52,926Allowance
                  for loan losses
              
              
              (953,000
              )
              
              (864,000
              )$
              94,156,384
              
              $
              88,561,597
 
 The
        securities portfolio at June 30, 2006 amounted to $32,231,569, a decrease
        of
        $585,809, or 1.8% from the amount at December 31, 2005. Available for sale
        investment securities decreased by $1,577,806 to $22,303,320 at June 30,
        2006
        from $23,881,126 at December 31, 2005. Held to maturity securities increased
        by
        $971,997 to $9,134,449 at June 30, 2006 from $8,162,452 at December 31, 2005
        reflecting the acquisition on municipal bonds during the second quarter of
        2006
        classified as held to maturity. The carrying value of available for sale
        securities includes a net unrealized loss of $515,399 at June 30, 2006
        (reflected as unrealized loss of $316,403 in stockholders’ equity after deferred
        taxes) as compared to a net unrealized loss of $455,320 ($279,521 after deferred
        taxes) as of December 31, 2005. Management believes that none of the unrealized
        losses are “other than temporary”.
 
 Interest
        bearing deposits declined to $882,147 at June 30, 2006 from $2,884,893 at
        December 31, 2005 because investments in certificates of deposit matured
        and
        were not replaced with other certificates. Additionally, some funds were
        withdrawn from interest bearing accounts, and not replaced as of June 30,
        2006,
        for liquidity management purposes.
 
 Deposits
        are the major source of funds for lending and investment activities. Deposits
        decreased $576,221 (0.5%) to $126,508,215 at June 30, 2006 from $127,084,436
        at
        December 31, 2005. Non-interest bearing deposits increased $505,674 or 1.3%,
        interest bearing demand deposits increased $925,440 or 6.0%, certificates
        of
        deposit increased $2,437,921 or 7.3% and savings deposits decreased $4,445,256
        or 11.0% during the six months ended June 30, 2006. Certificates of deposit
        in
        amounts of $100,000 and over totaled $13,110,149 at June 30, 2006 and
        $11,509,162 at December 31, 2005. Approximately $4.0 million of the decrease
        in
        savings deposits was attributable to one customer’s withdrawal of funds for
        alternative investment.
 
 Deposits
        are comprised of the following:
 
 June
                  30,
              
              December
                  31,2006
              
              2005Non-interest
                  bearing deposits
              
              $
              38,171,696
              
              $
              37,666,022Savings
                  deposits
              
              
              36,055,477
              
              
              40,500,733Interest
                  bearing demand deposits
              
              
              16,326,506
              
              
              15,401,066Certificates
                  of deposit
              
              
              35,954,536
              
              
              33,516,615$
              126,508,215
              
              $
              127,084,436
  Total
        stockholders’ equity was $20,142,301 at June 30, 2006 representing an increase
        of $1,045,722 from December 31, 2005. The increase from December 31, 2005
        was
        attributable to earnings of $715,647 and proceeds from the issuance of common
        stock from the exercise of warrants and dividend re-investments of $607,839
        less
        an increase in unrealized losses on available for sale investment securities,
        net of taxes, of $36,882 and dividends declared of $240,882 ($0.14 per share).
 
 11
 **RESULTS
        OF OPERATIONS**
 
 Six
        Months Ended June 30, 2006 and 2005
 
 *Net
        income*
 
 Net
        income for the six months ended June 30, 2006 was $715,647 or $.42 per share
        (basic and diluted), an increase of $269,236, or 60.3%, from $446,411 or
        $.32
        per share ($.30 per share diluted) during the six months ended June 30, 2005.
        Net income increased during the first half of 2006 as compared to the first
        half
        of 2005 because of the higher interest rate environment during 2006 as well
        as
        more earning assets during the first half of 2006 than the first half of
        2005.
 
 *Net
        Interest Income and Net Interest Margin*
 
 Net
        interest income is the amount by which interest earned on assets exceeds
        the
        interest paid on interest-bearing liabilities. CN Bancorp, Inc.’s principal
        interest earning assets are loans to businesses and individuals.
        Interest-bearing liabilities consist primarily of savings accounts, money
        market
        accounts and certificates of deposit. Generally, changes in net interest
        income
        are measured by net interest rate spread and net interest margin. Net interest
        rate spread is equal to the difference between the average rate earned on
        interest earning assets and the average rate incurred on interest-bearing
        liabilities. Net interest margin represents the difference between interest
        income (including net loan fees earned) and interest expense calculated as
        a
        percentage of average earning assets.
 
 Total
        interest income increased by $847,510 or 25.6% to $4,163,356 for the six
        months
        ended June 30, 2006 as compared to $3,315,846 for the first six months of
        2005.
        This increase in interest income was attributable to the increase in yields
        on
        earning assets during 2006 as well as the increase in average interest earning
        assets. Recent increases in market interest rates have resulted in higher
        yields
        on loans, securities and other investments. Average interest earning assets
        increased by approximately $7,260,000 or 5.5% to $139,498,000 in the first
        six
        months of 2006 as compared to $132,238,000 in the first six months of 2005,
        and
        the yield on the interest earning assets increased to 5.97% in the first
        six
        months of 2006 from 5.02% in the first six months of 2005.
 
 Interest
        expense increased by $347,661 or 39.4% to $1,230,749 for the six months ended
        June 30, 2006 as compared to $883,088 during the first six months of 2005.
        This
        increase was primarily attributable to increased market interest rates,
        particularly their effect on savings accounts whose cost is dependent upon
        the
        short term market interest rates. Average interest bearing liabilities increased
        by approximately $162,000 or 0.2% to $91,854,000 in the six months ended
        June
        30, 2006 as compared to $91,692,000 in the six months ended June 30, 2005,
        and
        the cost of the interest bearing funds increased to 2.68% in the first six
        months of 2006 from 1.93% in the first six months of 2005.
 
 Net
        interest income increased by $499,849 or 20.6% during the six months ended
        June
        30, 2006 as compared to the six months ended June 30, 2005. Net interest
        income
        increased because of the increase in interest earning assets and the increase
        in
        the market interest rates, in particular, because increases in interest income
        during this period of rising interest rates exceeded the increase in interest
        expense from interest bearing deposits. The net interest spread increased
        to
        3.29% in 2006 from 3.09% in 2005. The net interest margin was 4.21% and 3.68%
        in
        the six months ended June 30, 2006 and June 30, 2005, respectively.
 
 12
  The
        tables below present a summary of CN Bancorp, Inc.’s average daily balances,
        rates, interest income and expense, the interest rate spread and net interest
        margins for the six months ended June 30, 2006 and 2005:
 
 **AVERAGE
        BALANCES, RATES AND INTEREST INCOME AND EXPENSE**
 
 **Six
                  Months Ended June 30,****2006**
              
              **2005****Average**
              
              
              
              **Yield/**
              
              **Average**
              
              
              
              **Yield/***(Dollars
                  in thousands)*
              
              **Balance**
              
              **Interest**
              
              **Rate**
              
              **Balance**
              
              **Interest**
              
              **Rate****Assets:**Interest-Earning
                  Assets:Federal
                  funds sold
              
              $
              12,078
              
              $
              279
              
              
              4.62
              %
              $
              10,757
              
              $
              148
              
              
              2.75
              %Interest
                  bearing deposits
              
              
              2,614
              
              
              52
              
              
              3.98
              %
              
              3,692
              
              
              46
              
              
              2.48
              %Investment
                  securities
              
              
              33,377
              
              
              575
              
              
              3.45
              %
              
              36,999
              
              
              585
              
              
              3.16
              %Loans
                  receivable
              
              
              92,336
              
              
              3,257
              
              
              7.05
              %
              
              81,621
              
              
              2,537
              
              
              6.22
              %Allowance
                  for loan losses
              
              
              (907
              )
              
              -
              
              
              -
              
              
              (831
              )
              
              -
              
              
              -91,429
              
              
              3,257
              
              
              7.12
              %
              
              80,790
              
              
              2,537
              
              
              6.28
              %Total
                  Interest Earning Assets
              
              
              139,498
              
              
              4,163
              
              
              5.97
              %
              
              132,238
              
              
              3,316
              
              
              5.02
              %Non-interest
                  Earning Assets
              
              
              10,756
              
              
              
              
              
              
              
              
              10,861Total
                  Assets
              
              $
              150,254
              
              
              
              
              
              
              
              $
              143,099**Liabilities
                  and Stockholders' Equity:**Interest
                  -Bearing Liabilities:Interest
                  bearing demand deposits
              
              $
              17,786
              
              $
              74
              
              
              0.83
              %
              $
              13,979
              
              $
              36
              
              
              0.52
              %Savings
                  accounts
              
              
              38,372
              
              
              548
              
              
              2.86
              %
              
              40,011
              
              
              352
              
              
              1.76
              %Time
                  deposits
              
              
              34,779
              
              
              602
              
              
              3.46
              %
              
              35,560
              
              
              487
              
              
              2.74
              %Securities
                    sold under agreements to repurchase
              
              
              917
              
              
              6
              
              
              1.31
              %
              
              2,142
              
              
              8
              
              
              .75
              %Total
                  Interest Bearing Liabilities
              
              
              91,854
              
              
              1,230
              
              
              2.68
              %
              
              91,692
              
              
              883
              
              
              1.93
              %Non-interest
                  Bearing Liabilities:Demand
                  deposits
              
              
              37,798
              
              
              
              
              
              
              
              
              34,896Other
              
              
              859
              
              
              
              
              
              
              
              
              524Total
                  Liabilities
              
              
              130,511
              
              
              
              
              
              
              
              
              127,112Stockholders'
                  Equity
              
              
              19,743
              
              
              
              
              
              
              
              
              15,987Total
                  Liabilities and Equity
              
              $
              150,254
              
              
              
              
              
              
              
              $
              143,099Net
                  Interest Income
              
              
              
              
              $
              2,933
              
              
              
              
              
              
              
              $
              2,433Net
                  Interest Spread
              
              
              
              
              
              
              
              
              3.29
              %
              
              
              
              
              
              
              
              3.09
              %Net
                  Interest Margin
              
              
              
              
              
              
              
              
              4.21
              %
              
              
              
              
              
              
              
              3.68
              %Ratio
                    of Interest-Earning
                    Assets to Interest-Bearing Liabilities
              
              
              151.87
              %
              
              
              
              
              
              
              
              144.22
              %
  *Yields
        on securities are calculated based on amortized cost.*
 *Nonaccruing
        loans are included in the average loan balances outstanding.*
 
 The
        table
        below presents the relative contribution of changes in volumes and changes
        in
        rates to the changes in net interest income for the first six months of 2006
        versus the first six months of 2005. The change in the interest income and
        interest expense attributable to the combined impact of both volume and rate
        has
        been allocated proportionately to the change due to volume and the change
        due to
        rates.
 
 **2006
                  vs. 2005****Increase
                  (Decrease)****Volume**
              
              **Rate**
              
              **Total****Interest-Earning
                  Assets:**Federal
                  funds sold and interest bearing deposits in banks
              
              $
              4,715
              
              $
              132,146
              
              $
              136,861Securities
              
              
              (61,760
              )
              
              51,742
              
              
              (10,018
              )Loans
                  receivable
              
              
              335,200
              
              
              385,467
              
              
              720,667Net
                  Change in Interest Income
              
              
              278,155
              
              
              569,355
              
              
              847,510
 
 13
 
 **2006
                  vs. 2005****Increase
                  (Decrease)***Continued*
              
              **Volume**
              
              **Rate**
              
              **Total****Interest
                  Bearing Liabilities:**Interest
                  bearing deposits
              
              
              (938
              )
              
              350,878
              
              
              349,940Securities
                  sold under agreements to repurchase
              
              
              (4,555
              )
              
              2,276
              
              
              (2,279
              )Net
                  Change in Interest Expense
              
              
              (5,493
              )
              
              353,154
              
              
              347,661Change
                  in Net Interest Income
              
              $
              283,648
              
              $
              216,201
              
              $
              499,849
  *Provision
        for Loan Losses*
  The
        provision for loan losses represents the amount charged against earnings
        to
        increase the allowance for loan losses to the level deemed appropriate by
        management. The provision for loan losses and the allowance for loan losses
        are
        based on management’s ongoing assessment of CN Bancorp, Inc.’s credit exposure
        and consideration of certain other relevant factors.
 
 The
        adequacy of the allowance for loan losses is evaluated based upon loan
        categories except for loans rated substandard, doubtful or loss, which are
        evaluated separately and assigned loss amounts based upon the evaluation.
        Loss
        ratios are applied to each category of loan to determine estimated loss amounts.
        Categories of loans are identified as consumer (secured and unsecured),
        commercial (secured and unsecured) and mortgage loans (residential and
        commercial real estate). Loss ratios are determined based upon losses incurred
        adjusted for the effect of current economic conditions, any industry
        concentration or identified weakness in an industry, credit management and
        underwriting policies changes and secured versus unsecured nature of loan
        category. At June 30, 2006, the range of the loss ratios used to determine
        estimated losses by loan category were: consumer loans - 1.3% to 1.9%;
        commercial loans - 0.9% to 1.7%; and mortgage loans - 0.3% to 0.8%. Additional
        losses are estimated resulting from additional identified risks factors,
        such as
        loans with underwriting exceptions, the level and direction of payment
        delinquencies and the level of unsecured credit. These additional loss estimates
        are not allocated to the separate loan categories.
 
 The
        adequacy of the allowance for loan losses is also reviewed at least quarterly
        using risk ratings applied to the loans based upon rating criteria consistent
        with regulatory definitions. The risk rating is adjusted, as necessary, if
        loans
        become delinquent, if significant adverse information is discovered regarding
        the underlying credit and, in the case of commercial loans and commercial
        real
        estate loans, the normal periodic review of the underlying credit indicate
        that
        a change in risk rating is appropriate. An estimated “low” and “high” loss
        percentage is applied to loans in each risk rating. These loss percentages
        increase as the loan risk rating increases. Loans rated as substandard, doubtful
        or loss are evaluated separately and assigned loss amounts based upon the
        separate evaluation. Risks factors identified beyond individual loan risks,
        such
        as economic conditions, underwriting exceptions and loan concentrations are
        quantified based upon management’s estimations of loss exposure. Loss
        percentages used are generally based upon management’s best estimates
        considering losses incurred. Estimated “low” and “high” allowance for loan loss
        amounts are derived by accumulating the estimated losses using the “low” and
“high” loss percentages for each risk rating and adding losses based upon
        separate loan evaluations and identified other risks. The actual allowance
        for
        loan losses is compared to this range to ascertain that it is reasonably
        situated within the range. In addition, on at least a quarterly basis, the
        recorded allowance for loan losses (as a percent of loans) is compared to
        peer
        group levels to ascertain the reasonableness of the estimate. At June 30,
        2006,
        the actual allowance for loan losses was between the “low” and “high” allowance
        amounts.
 
 The
        provision for loan losses was $101,925 during the six months ended June 30,
        2006
        as compared to $77,349 for the six months ended June 30, 2005 reflecting
        increases in loan amounts and the composition of the loan portfolio including
        increased construction loans.
 
 The
        allowance for loan losses represents 1.00% and 0.97% of loans receivable
        at June
        30, 2006 and December 31, 2005, respectively. CN Bancorp, Inc. has no exposure
        to foreign countries or foreign borrowers. Management believes that the
        allowance for loan losses is adequate for each period presented.
 
 14
  The
        table
        below summarizes CN Bancorp, Inc.’s loan loss experience for the six months
        ended June 30, 2006 and June 30, 2005 as well as certain ratios related to
        net
        charge-offs and the allowance for loan losses (ALL) as a percentage of the
        total
        loan portfolio.
 
 **Six
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30, 2006**
              
              **June
                  30, 2005****Allowance
                  for loan losses:**Beginning
                  balance
              
              $
              864,000
              
              $
              800,000Charge-offs:Commercial
                  loans
              
              
              (6,664
              )
              
              -Real
                  estate loans - residential
              
              
              -
              
              
              (50,027
              )Consumer
                  loans
              
              
              (10,630
              )
              
              (22,408
              )Recoveries:Commercial
                  loans
              
              
              -
              
              
              10,938Consumer
                  loans
              
              
              4,369
              
              
              4,148Net
                  charge-offs
              
              
              (12,925
              )
              
              (57,349
              )**Six
                  Months Ended**
              
              
              **Six
                  Months Ended****June
                  30, 2006**
              
              
              **June
                  30, 2005****Allowance
                  for loan losses (continued):**Provision
                  for loan losses
              
              
              101,925
              
              
              77,349Ending
                  balance
              
              $
              953,000
              
              $
              820,000**Ratios:**Net
                  charge-offs to average loans
              
              
              0.01
              %
              
              0.07
              %Net
                  charge-offs to provision for loan losses
              
              
              12.68
              %
              
              74.14
              %Allowance
                  for loan losses to loans receivable
              
              
              1.00
              %
              
              0.96
              %
  *Non-interest
        Income*
 
 Non-interest
        income consisted primarily of fees and charges from depository accounts,
        increases in cash surrender value of life insurance policies, gains on sale
        of
        assets and other income. Non-interest income increased $70,733 or 12.8%,
        to
        $622,325 for the six months ended June 30, 2006 as compared to $551,592 for
        the
        six months ended June 30, 2005. This increase was primarily attributable
        to
        increased service fees on depository accounts of $66,202 or 15.9%. Also,
        contributing to the increase in non-interest income was a $25,000 gain on
        the
        sale of foreclosed personal property and the increase in earnings on owned
        life
        insurance policies of $9,962 or 25.8% resulting from the higher interest
        rate
        environment during 2006 and additional investment in life insurance policies.
        These increases were partially offset by the lack of any gain on sales of
        loans
        during the six months ended June 30, 2006, compared to a gain on sale of
        loans
        of $35,437 during the six months ended June 30, 2005. The sale of loans is
        not a
        usual activity for the Company.
  *Non-interest
        Expense*
 
 Non-interest
        expense was $2,353,249 during the six months ended June 30, 2006 representing
        an
        increase of $124,551 or 5.6%, as compared to $2,228,698 during the six months
        ended June 30, 2005. Compensation and benefits increased $100,099 (8.5%)
        because
        of normal salary increases and the increased number of employees necessary
        to
        manage the growing lending and depository activities of the institution.
        Depreciation and amortization expenses declined by $24,412 or 13.5% as
        previously acquired assets have become fully depreciated. Marketing expenses
        increased $21,548 (77.3%) reflecting increased marketing activity. Stationery
        and supplies expenses declined in 2006 by $6,631 (15.2%) because of cost
        control
        efforts during 2006. The increased size of the Company has resulted in more
        deposit and loan accounts and associated activity resulting in increased
        electronic funds transfer fees as well as other operating expenses.
 
 15
  *Income
        Taxes*
 
 Income
        tax expense was $384,111 (34.9% of pre-tax income) for the six months ended
        June
        30, 2006 as compared to $231,892 (34.2% of pre-tax income) for the six months
        ended June 30, 2005. The proportion of interest income exempt from state
        income
        taxes to total taxable income during the six months ended June 30, 2006 as
        compared to the same period of 2005 has declined resulting in an increase
        in the
        Company’s effective total income tax rate.
 
 Three
        Months Ended June 30, 2006 and 2005
 
 *Net
        income*
 
 Net
        income for the three months ended June 30, 2006 was $373,842 or $.22 per
        share
        (basic and diluted), an increase of $120,543, or 47.6%, from $253,299 or
        $.18
        per share ($.17 per share diluted) during the three months ended June 30,
        2005.
        Increases in net interest income and other income were partially offset by
        increases in operating expenses.
 
 Total
        interest income increased by $450,265 or 26.2% to $2,166,727 for the three
        months ended June 30, 2006 as compared to $1,716,462 for the three months
        ended
        June 30, 2005. This increase in interest income was primarily attributable
        to
        the increase in market interest rates as well as an increase in interest
        earning
        assets during 2006.
 
 Interest
        expense increased by $192,021 or 41.9% to $650,433 for the three months ended
        June 30, 2006 as compared to $458,412 during the three months ended June
        30,
        2005. This increase was primarily attributable to a rising rate environment
        during 2006 causing increases in interest rates for deposited funds.
 
 Net
        interest income increased by $258,244, or 20.5% during the three months ended
        June 30, 2006 versus the same period of 2005 because the positive effect
        of the
        increase in interest bearing assets more than offset the increased cost of
        deposited funds.
 
 *Provision
        for Loan Losses*
 
 The
        provision for loan losses was $52,845 during the three months ended June
        30,
        2006 as compared to $40,851 for the three months ended June 30, 2005.
 
 *Non-interest
        Income*
 
 Non-interest
        income consisted primarily of fees and charges from depository accounts,
        increases in cash surrender value of life insurance policies and other income.
        Non-interest income increased $25,060 or 8.9%, to $307,455 for the three
        months
        ended June 30, 2006 as compared to $282,395 for the three months ended June
        30,
        2005. This increase was primarily attributable to increases in fees and services
        charges from deposit account activity of $30,627 in the second quarter of
        2006
        as compared to the second quarter of 2005.
 
 *Non-interest
        Expense*
 
 Non-interest
        expense was $1,197,548 during the three months ended June 30, 2006 representing
        an increase of $79,775 or 7.1%, as compared to $1,117,773 during the three
        months ended June 30, 2005. Compensation and benefits increased $54,915 (9.2%)
        because of additional personnel and normal salary and benefit increases.
        Marketing expenses increased in 2006 by $10,675 (85.7%) reflecting increased
        marketing activity. Depreciation and amortization expenses declined by $10,625
        or 12.0% as previously acquired assets have become fully depreciated. The
        increase in other operating expenses of $25,393 (17.7%) includes a $10,000
        loss
        on a customer’s uncollected deposited check. The increased size of the Company
        has resulted in more deposit and loan accounts and associated activity resulting
        in increased electronic funds transfer fees as well as other operating expenses.
 
 *Income
        Taxes*
 
 Income
        tax expense was $199,514 (34.8% of pre-tax net income) for the three months
        ended June 30, 2006 as compared to $128,522 (33.7% of pre-tax net income)
        for
        the three months ended June 30, 2005. The proportion of interest income exempt
        from state income taxes to total taxable income during the three months ended
        June 30, 2006 as compared to the same period of 2005 has declined resulting
        in
        an increase in the Company’s effective total income tax rate.
 
 16
  **LIQUIDITY**
 
 Liquidity
        represents CN Bancorp, Inc.’s ability to efficiently manage cash flows to
        support the lending activities and the requirements of depositors. Liquidity
        is
        essential to fund operations and growth. Liquidity needs may be met by
        converting assets into cash or obtaining sources of additional funding.
 
 Liquidity,
        which generally consists of cash and amounts due from banks and federal funds
        sold, totaled $12,810,128 at June 30, 2006 compared to $15,476,898 at December
        31, 2005. Additional sources of asset liquidity include interest bearing
        deposits and cash flow from the investment and loan portfolios. Securities
        classified as available-for-sale, which can provide additional sources of
        liquidity, totaled $22,303,320 and $23,881,126 as of June 30, 2006 and December
        31, 2005, respectively. However, because most of these securities were in
        an
        unrealized loss position at June 30, 2006, and because management has the
        intent
        and ability to hold these securities until recovery or maturity, management
        does
        not consider the sale of these securities to be a source of liquidity as
        of June
        30, 2006.
 
 Potential
        liability liquidity sources include our ability to attract additional deposits
        at competitive interest rates. In addition, CN Bancorp, Inc. has established
        a
        $1.5 million unsecured fed funds borrowing facility and a $15 million secured
        borrowing facility with a correspondent commercial bank as a reliable source
        for
        short-term funds. Borrowings under the secured facility would be collateralized
        by securities in the investment portfolio. CN Bancorp, Inc. has never borrowed
        funds under this facility.
  Management
        believes that CN Bancorp, Inc. has sufficient liquidity to meet its needs.
        Maturing certificates of deposit are usually retained as we offer competitive
        rates on certificates of deposit and therefore are generally not a source
        of
        liquidity needs. Management is not aware of any demands, trends, commitments,
        or
        events that would result in CN Bancorp, Inc.’s inability to meet anticipated or
        unexpected liquidity needs.
 
 CN
        Bancorp, Inc. is a single bank holding company with investments in loan
        participations acquired from County National Bank as well as its investment
        in
        County National Bank. It also maintains funds in a banking account. CN Bancorp,
        Inc. pays its expenses from earnings on loan participations and its own cash.
        Dividends from County National Bank would also provide cash if such dividends
        were paid. County National Bank may only pay dividends to CN Bancorp, Inc.
        if it
        complies with certain regulatory requirements.
  **OFF-BALANCE
        SHEET ARRANGEMENTS**
 
 Standby
        letters of credit are conditional commitments issued by County National Bank
        to
        guarantee the performance of a customer to a third party. The credit risk
        involved in issuing letters of credit is essentially the same as that involved
        in extending loan facilities to customers. County National Bank holds collateral
        supporting those commitments for which collateral is deemed necessary. County
        National Bank has not been required to perform on any financial guarantees
        and
        has not recorded or incurred any losses on its commitments. The issuance
        of
        letters of credit is not a significant activity of County National Bank.
        Outstanding letters of credit at June 30, 2006 total $1,960,921 ($1,960,855
        at
        December 31, 2005).
 
 Commitments
        to extend credit are agreements to lend funds to customers as long as there
        are
        no violations of any condition established in the loan contracts. Commitments
        generally have fixed expiration dates or other termination clauses and may
        require payment of a fee. Since many of the commitments are expected to expire
        without being drawn upon, the total commitment amounts do not necessarily
        represent future cash requirements. County National Bank evaluates each
        customer’s credit worthiness on a case-by-case basis. The amount of collateral
        obtained, if it is deemed necessary by County National Bank upon extension
        of
        credit, is based on management’s credit evaluation of the counter party.
        Collateral held varies but may include accounts receivable, inventory, property,
        plant and equipment as well as income producing properties. Commitments to
        extend credit total $16,888,862 at June 30, 2006 ($14,822,411 at December
        31,
        2005). We believe that we have adequate resources to fund all loan
        commitments.
 
 17
  County
        National Bank has entered into leases for its branches and office space,
        most of
        which contain renewal options. The minimum net noncancelable future rental
        commitments at December 31, 2005 were as follows:
 
 **Year
                  Ending****December
                  31,**2006
              
              $
              226,5602007
              
              
              212,8622008
              
              
              173,9982009
              
              
              147,5282010
              
              
              147,5282011
              
              
              61,470
  **CAPITAL
        ADEQUACY**
 
 Risk-based
        capital provides the basis for which all banks are evaluated by regulators
        in
        terms of capital adequacy by assigning varying risk weights to the individual
        assets held by a bank. Weights are also assigned to the “credit-equivalent”
amounts of certain off-balance sheet items. Under applicable regulations,
        banks
        are rated as “well capitalized,” “adequately capitalized,” “undercapitalized,”
“significantly undercapitalized” or “critically undercapitalized” based upon
        their capital levels. Banks that are classified as “undercapitalized,”
“significantly undercapitalized” or “critically undercapitalized” are subject to
        increased regulatory oversight. The table below provides a comparison of
        CN
        Bancorp, Inc.’s consolidated (Company) and County National Bank’s (Bank)
        risk-based capital ratios and leverage ratios to the minimum regulatory
        requirements for the indicated periods.
 
 **Minimum
                  Ratios****June
                  30,**
                **2006**
              
              **December
                  31,**
                **2005**
              
              **To
                  be “Adequately Capitalized”**
              
              **To
                  be “Well Capitalized”**Total
                  capital:Company
              
              
              21.1
              %
              
              20.8
              %
              
              8.0
              %
              
              N/ABank
              
              
              13.9
              %
              
              13.6
              %
              
              8.0
              %
              
              10.0
              %Tier
                  I:Company
              
              
              20.1
              %
              
              19.9
              %
              
              4.0
              %
              
              -Bank
              
              
              12.9
              %
              
              12.7
              %
              
              4.0
              %
              
              6.0
              %Leverage
                  Total:Company
              
              
              13.1
              %
              
              12.9
              %
              
              4.0
              %
              
              -Bank
              
              
              8.2
              %
              
              8.0
              %
              
              4.0
              %
              
              5.0
              %
 
 At
        June
        30, 2006 and December 31, 2005, CN Bancorp, Inc. exceeded the capital
        requirements and the Bank exceeded the capital requirements necessary to
        be
        considered a “well capitalized” financial institution under federal
        regulations.
 
 **EFFECTS
        OF INFLATION**
 
 CN
        Bancorp, Inc.’s asset and liability structure is primarily monetary in nature.
        As such, asset and liability values tend to move in concert with inflation.
        Changes in interest rates may have a more significant impact on financial
        performance than the effects of the general levels of inflation. Interest
        rates
        do not necessarily move in the same direction or at the same magnitude as
        prices
        of other goods and services, and may frequently reflect government policy
        initiatives or economic factors not measured by price index. CN Bancorp,
        Inc.
        strives to manage its interest sensitive assets and liabilities in order
        to
        offset the effects of rate changes and inflation.
 
 18
  **FORWARD
        LOOKING STATEMENTS**
 
 This
        report contains forward-looking statements within the meaning of
        Section 27A of the Securities Act of 1933 and Section 21E of the
        Securities Exchange Act of 1934. Forward-looking statements also may be included
        in other statements that we make. All statements that are not descriptions
        of
        historical facts are forward-looking statements, which are subject to risks
        and
        uncertainties. These statements can generally be identified by the use of
        forward-looking terminology such as “believes,” “expects,” “intends,” “may,”
“will,” “should,” “anticipates” or similar terminology. These forward-looking
        statements may include, among others: statements of goals, intentions, and
        expectations; estimates of risks and of future costs and benefits; assessments
        of probable loan losses and market risk; and statements of the ability to
        achieve financial and other goals.
 
 Our
        forward-looking statements are based on information available to us today,
        and
        we will not update these statements. These forward-looking statements are
        subject to significant uncertainties because they are based upon or are affected
        by: management's estimates and projections of future interest rates, market
        behavior and other economic conditions; future laws and regulations; and
        a
        variety of other matters which, by their nature, are subject to significant
        uncertainties. Because of these uncertainties, the Company’s actual future
        results may differ materially from those indicated. In addition, the Company's
        past results of operations do not necessarily indicate its future
        results.
 
 **Item
        3. Controls and Procedures**
 
 CN
        Bancorp, Inc.’s management, under the supervision and with the participation of
        its Chief Executive Officer and the Chief Financial Officer, evaluated as
        of the
        last day of the period covered by this report, the effectiveness of the
        Company’s disclosure controls and procedures, as defined in Rule 15d-15 under
        the Securities Exchange Act of 1934. Based on that evaluation, the Chief
        Executive Officer and Chief Financial Officer concluded that the Company’s
        disclosure controls and procedures were effective as of June 30, 2006. There
        were no changes in the Company’s internal control over financial reporting (as
        defined in Rule 15d-15 under the Securities Exchange Act of 1934) during
        the
        quarter ended June 30, 2006, that have materially affected, or are reasonably
        likely to materially affect, the Company’s internal control over financial
        reporting
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 CN
        Bancorp, Inc. is not involved in any pending legal proceedings other than
        routine legal proceedings occurring in the ordinary course of
        business.
 
 **Item
        2.**   **Unregistered
        Sales of Equity Securities and Use of Proceeds.**
 
 None.
 
 There
        were no purchases of CN Bancorp, Inc. common stock made by, or on behalf
        of, CN
        Bancorp, Inc. or any affiliated purchaser during the first six months of
        2006.
  **Item
        3.**   **Defaults
        Upon Senior Securities**
 
 None
 
 **Item
        4.**   **Submission
        of Matters to a Vote of Security Holders**
 
 At
        the
        Company's annual shareholders' meeting held on May 15, 2006, the shareholders
        of
        the Company elected Carl L. Hein, Jr. (1,408,802 votes for and none withheld)
        and John G. Warner (1,408,802 votes for and none withheld) as directors for
        three-year terms. There were no solicitations in opposition to management's
        nominees and all such nominees were elected. These director-nominees were
        incumbent directors previously elected by the shareholders to three-year
        terms.
        Directors continuing in office are Jan W. Clark, John E. DeGrange, Sr., Gerald
        V. McDonald and Creston G. Tate. During the same meeting, the shareholders
        ratified the appointment of Rowles & Company, LLP as the independent
        auditors for the Company for the 2006 fiscal year by 1,408,094 votes for
        ratification, 354 votes against and 354 votes abstained.
  19
 
 **Item
        5.**   **Other
        information**
 
 None
 
 **Item
        6.**   **Exhibits**
 
 **Exhibits**
 
 31.1
              Rule
                  13a-14(a) Certification of Chief Executive Officer
  31.2
              Rule
                  13a-14(a) Certification of Chief Financial Officer
 32.1
                Rule
                    13a-14(b) Certification of Chief Executive Officer
  32.2
                Rule
                    13a-14(b) Certification of Chief Financial Officer
  
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  CN
                  Bancorp, Inc.Date :
                July
                26, 2006
              By:
              /s/ Jan
                W.
                ClarkJan
                W. ClarkPresident
                  and Chief Executive Officer
 Date : July 26, 2006
              By:
              /s/ Michael
                T. StormMichael
                T. StormChief
                Financial Officer
 
 20