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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934



For the quarterly period ended     June 30, 2002                            

OR

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

For the transition period from                        to                    

___________________

For Quarter Ended June 30, 2002    Commission file number:  2-96350        

                                 CNB Corporation                           
               (Exact name of registrant as specified in its charter)


  South Carolina                                 57-0792402                 
 (State or other jurisdiction of                (I.R.S. Employer
  incorporation or organization)                 Identification No.)

P.O. Box 320, Conway, South Carolina             29528                     
(Address of principal executive offices)        (Zip Code)


(Registrant's telephone number, including area code):  (803) 248-5721       

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X .  No    .


The number of shares outstanding of the issuer's $10.00 par value common stock as of June 30, 2002 was 716,827.



















CNB Corporation

                                                                     Page

PART I.    FINANCIAL INFORMATION


Item 1.    Financial Statements:

           Consolidated Balance Sheets as of June 30, 2002,                  1
           December 31, 2001 and June 30, 2001

           Consolidated Statement of Income for the Three Months             2
           and Six Months Ended June 30, 2002 and 2001

           Consolidated Statement of Comprehensive Income                    3
           for the Three Months and Six Months Ended
           June 30, 2002 and 2001

           Consolidated Statement of Changes in Stockholders'                4
           Equity for the Six Months Ended June 30, 2002
           and 2001

           Consolidated Statement of Cash Flows for the Six Months           5
           Ended June 30, 2002 and 2001

           Notes to Consolidated Financial Statements                     6-13

Item 2.    Management's Discussion and Analysis of Financial             14-23
           Condition and Results of Operations

Item 3.    Qualitative and Quantitative Disclosures About Market Risk       24

Item 4.    Submission of Matters to a Vote of Security Holders              24


PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                                 25

SIGNATURE                                                                   25





























CNB Corporation and Subsidiary
Consolidated Balance Sheets
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)

ASSETS:

    Cash and due from banks
    Interest bearing deposits with banks
    Investment Securities
      (Fair values of $17,886 at
       June 30, 2002, $21,312 at
       December 31, 2001, and $30,287
       at June 30, 2001)
    Securities Available for Sale
      (Amortized cost of $163,316 at
       June 30, 2002, $137,615 at
       December 31, 2001, and $110,486
       at June 30, 2001)
    Federal Funds sold and securities
       purchased under agreement
       to resell
    Loans:
       Total loans
       Less reserve for possible
          loan losses
         Net loans
    Bank premises and equipment
    Other assets
Total assets

LIABILITIES AND STOCKHOLDERS' EQUITY:
    Deposits:
       Non-interest bearing
       Interest-bearing
          Total deposits
    Federal funds purchased and
       securities sold under agreement
       to repurchase
    Other short-term borrowings
    Other liabilities
 Total liabilities
   Stockholders' equity:
       Common stock, par value $10 per
       share: Authorized 1,500,000 in
       2002 and 2001; issued 718,246 in        2002 and 2001
       Surplus
       Undivided Profits
       Net Unrealized Holding
       Gains (Losses) on
        Available-For-Sale Securities
         Less: Treasury stock
            Total stockholders' equity
           Total liabilities
             and stockholders' equity

June 30,
  2002  
$ 23,670 

 17,254 




167,711 






29,525 
         
307,925 

  (3,984)
303,941 
 11,394 
    9,572  563,067 



94,044 
 369,831 
 463,875 


32,134 
4,013 
   3,914 
 503,936 




7,182 
34,780 
14,682 
2,637
 


    (150)
  59,131 

 563,067 

December 31,
  2001  
$ 27,895 

 20,705 




140,007 






3,950 
         
296,607 

  (3,763)
292,844 
 11,285 
    9,039  505,725 



88,995 
 321,648 
 410,643 


32,821 
2,138 
   6,127 
 451,729 




7,182 
34,774 
10,826 
1,435
 


    (221)
  53,996 

 505,725 

June 30,
  2001  
$ 19,352 

 29,657 




111,871 






40,925 
         
293,501 

  (3,762)
289,739 
 11,375 
    9,585  512,504 



83,718 
 337,641 
 421,359 


29,758 
5,140 
   3,970 
 460,227 




7,182 
34,746 
9,873 
831
 


    (355)
  52,277 

 512,504 









1


CNB Corporation and Subsidiary
Consolidated Statement of Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)





Interest Income:
  Interest and fees on loans
  Interest on investment securities:
    Taxable investment securities
    Tax-exempt investment securities
  Interest on federal funds sold and securities
    purchased under agreement to resell
      Total interest income
Interest Expense:
  Interest on deposits
  Interest on federal funds purchased and     securities sold under agreement to repurchase
  Interest on other short-term borrowings

      Total interest expense
  Net interest income
  Provision for possible loan losses

  Net interest income after provision for possible
    loan losses
  Other income:
    Service charges on deposit accounts
    Gains/(Losses) on available-for-sale securities
    Other operating income
        Total other income

  Other expenses:
    Salaries and employee benefits
    Occupancy expense
    Other operating expenses
        Total operating expenses
  Income before income taxes
    Income tax provision
  Net income

    Per share data:
    Net income per weighted average shares
     outstanding

    Cash dividend paid per share

    Book value per actual number of shares
     outstanding

    Weighted average number of shares outstanding

    Actual number of shares outstanding

Three Months Ended June 30,

Six Months Ended 
June 30,

    2002  


$  5,580

1,886
286

     120
   7,872

2,143

142
      30

   2,315
   5,557

     215


   5,342

793
0
     507
   1,300


   2,357
     482
     913
   3,752
   2,890

     889
   2,001



$   2.79

$      0


$  82.49

 716,720

 716,827

    2001  


$  6,365

1,684
227

     371
   8,647

3,774

264
      42

   4,080
   4,567

     130


   4,437

693
169
     568
   1,430


   2,205
     462
     877
   3,544
   2,323

     714
   1,609



$   2.25

$      0


$  73.15

 714,702

 714,614

   2002  


$  11,151

3,615
571

     183
  15,520

4,318

278
      65

   4,661
  10,859

     490


  10,369

1,570
183
     899
   2,652


   4,720
   969
   1,748
   7,437
    5,584
   1,727
   3,857



$   5.38

$      0


$  82.49

 716,720

 716,827

   2001  


$  13,056

3,263
457

     778
  17,554

7,784

607
      93

   8,484
   9,070

     320


   8,750

1,402
169
     992
   2,563


   4,385
   945
   1,679
   7,009
   4,304

   1,329
   2,975



$   4.16

$      0


$  73.15

 714,702

 714,614













2


CNB Corporation and Subsidiary
Consolidated Statement of Comprehensive Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)







Net Income

Three Months     
Ended        
June 30,      

Six Months     
Ended       
June 30,     

2002   

2001   

2002  

2001  



$2,001 



$1,609 



$3,857 



$2,975 

Other comprehensive income, net of tax

    Unrealized gains/(losses)
      on securities:
    Unrealized holding gains/(losses)
      during period





2,203 





89 





1,202 





733 


Net Comprehensive Income

       
$4,204 

       
$1,698 

       
$5,059 

       
$3,708 

















































3


CNB Corporation and Subsidiary
Consolidated Statement of Changes in Stockholders' Equity
(All Dollar Amounts in Thousands)
(Unaudited)




Common Stock:
($10 par value; 1,500,000 shares authorized)
Balance, January 1
Issuance of Common Stock
Balance at end of period

Six Months Ended
June 30,   

2002 

2001 



 7,182 
   None 
  7,182 



 7,182 
   None 
  7,182 


Surplus:
Balance, January 1
Issuance of Common Stock
Gain on sale of Treasury stock
Balance at end of period



34,774 
None 
      6 
 34,780 



34,732 
None 
     14 
 34,746 


Undivided profits:
Balance, January 1
Net Income
Cash dividends declared
Balance at end of period



10,826 
3,857 
   None 
 14,682 



6,898 
2,975 
   None 
  9,873 


Net unrealized holding gains/(losses) on
Available-for-sale securities:
Balance, January 1
Change in net unrealized gains/(losses)
Balance at end of period




1,435 
  1,202 
  2,637 




98 
   733 
   831 


Treasury stock:
Balance, January 1
(2,134 shares in 2002; 3,256 shares in 2001)
Purchase of treasury stock
Reissue of treasury stock
Balance at end of period
(1,419 shares in 2002; 3,632 shares in 2001)

Total stockholders' equity




(221)
(64)
    135 

   (150)
        
 59,131 




(304)
(156)
    105 

   (355)
        
 52,277 

Note:  Columns may not add due to rounding.




















4


CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)




OPERATING ACTIVITIES
  Net Income
  Adjustments to reconcile net income to
    net cash provided by operating activities
    Depreciation
    Provision for loan losses
    Provision for deferred income taxes
    Loss (gain) on sale of investment
     securities
    (Increase) decrease in accrued interest
     receivable
    (Increase) decrease in other assets
    (Decrease) increase in other liabilities

For the six-month period ended
          June 30,            
       2002               2001  


$  3,857 


319 
490 
(527)

183 

(341)
(192)
    (539)


$  2,975 


303 
320 
404 

169 

(57)
(1,596)
    (476)

        Net cash provided by operating
          activities


   3,250 


   2,042 


INVESTING ACTIVITIES
  Proceeds from sale of investment securities
   available for sale
  Proceeds from maturities of investment
   securities held to maturity
  Proceeds from maturities of investment
   securities available for sale
  Purchase of investment securities held to
   maturity
  Purchase of investment securities
   available for sale
  Decrease (increase) in interest-bearing
    deposits in banks
  (Increase) decrease in federal funds sold
  (Increase) decrease in loans
  Premises and equipment expenditures




6,017 

3,005 

13,696 



(44,785)


(25,575)
(11,318)
  (428)




11,213 

12,558 

30,618 



(63,505)


(31,050)
2,147 
  (1,883)


        Net cash provided by (used for)
          investing activities



 (59,388)



 (39,902)

FINANCING ACTIVITIES
  Dividends paid
  Increase (Decrease) in deposits
  (Decrease) increase in securities sold
    under repurchase agreement
  (Decrease) increase in other
    short-term borrowings


(2,507)
53,232 

(687)

  1,875 


(2,503)
30,629 

7,191 

  1,656 


        Net cash provided by (used for)
          financing activities

        Net increase (decrease) in cash
          and due from banks

CASH AND DUE FROM BANKS, BEGINNING OF YEAR

CASH AND DUE FROM BANKS, June 30, 2002 AND 2001

CASH PAID (RECEIVED) FOR:
  Interest
  Income taxes



  51,913 


(4,225)

  27,895 

$ 23,670 


$  5,204 
$  1,734 



  36,973 


(887)

  20,239 

$ 19,352 


$  8,209 
$  1,354 






5


CNB CORPORATION AND SUBSIDIARY (The "Corporation")

CNB CORPORATION (The "Parent")

THE CONWAY NATIONAL BANK (The "Bank")


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Dollar Amounts in Thousands)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net income per share - Net income per share is computed on the basis of the weighted average number of common shares outstanding, 716,720 for the six-month period ended June 30, 2002 and 714,702 for the six-month period ended June 30, 2001.

NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain average reserve balances either at the Bank or on deposit with the Federal Reserve Bank. The average amount of these reserve balances for the six-month period ended June 30, 2002 and for the years ended December 31, 2001 and 2000 were approximately $9,933, $9,103, and $8,852, respectively.













































6


NOTE 3 - INVESTMENT SECURITIES

Investment securities with a par value of approximately $90,500 at June 30, 2002 and $76,640 at December 31, 2001 were pledged to secure public deposits and for other purposes required by law.

The following summaries reflect the book value, unrealized gains and losses, approximate market value, and tax-equivalent yields of investment securities at June 30, 2002 and at December 31, 2001.





AVAILABLE FOR SALE
  United States Treasury
   

            June  30, 2002             
 Book  Unrealized Holding Fair          
 Value   Gains   Losses   Value Yield(1)


        
$      0


      
$    -


      
$    -


        
$      0


     
    -


Federal agencies
   Within one year
   One to five years
   Six to ten years



14,463
121,789
  10,000
 146,252



197
3,191
   428
 3,816



- -
15
     -
    15



14,660
124,965
  10,428
 150,053



6.00%
5.21 
6.13 
5.33 

  State, county and
  municipal
   One to five years
   Six to ten years
   
  Other Securities
  Total available for sale



7,206
   9,575
  16,781
     283
$163,316



194
   400
   594
     -
$4,410



- -
     -
     -
     -
$   15



7,400
   9,975
  17,375
     283
$167,711



5.29%
6.14 
5.77 
   - 
5.37%


HELD TO MATURITY
  United States Treasury
      


        
$      0


      
     -


            -


        
       0


     
   -%


Federal agencies
   Within one year
   One to Five years



1,847
   5,002
   6,849



48
   145
   193



- -
     -
     -



1,895
   5,147
   7,042



6.37%
6.94 
6.77 

  State, county and
  municipal
   Within one year
   One to five years
   Six to ten years
   
   Total held to maturity



2,757
  5,362
   2,286
  10,405
$ 17,254



39
274
   126
   439
$  632



- -
- -
     -
     -
$    -



2,796
5,636
   2,412
  10,844
$ 17,886



5.98%
6.54 
6.24 
6.32 
6.51%

(1) Tax equivalent adjustment based on a 34% tax rate.


As of the quarter ended June 30, 2002, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity. The net unrealized holding gains/(losses) on available-for-sale securities component of capital is $2,637 as of June 30, 2002.


















7


NOTE 3 - INVESTMENT SECURITIES (Continued)





AVAILABLE FOR SALE
  United States Treasury
   Within one year
   

           December 31, 2001            
 Book  Unrealized Holding Fair          
 Value   Gains   Losses   Value Yield(1)



_______
$     0



______
$    -



______
$    -



_______
$     0



_____
   -%


Federal agencies
   Within one year
   One to five years
   Six to ten years



9,927
96,652
 14,612
121,191



173
2,050
   328
 2,551



- -
174
     -
   174



10,100
98,528
 14,940
123,568



5.60 
5.46 
5.76 
5.51 

  State, county and
  municipal
   One to five years
   Six to ten years
   After ten years

  Other -
   CRA Qualified Investment
    Fund

 
Total available for sale



3,652
11,640
    854
 16,146

       
    278


$137,615



48
149
     3
   200

      
     -


$2,751



29
146
    10
   185

      
     -


$  359



3,671
11,643
    847
 16,161

       
    278


$140,007



5.38 
5.89 
6.34 
5.80 

   - 
   - 


5.54%


HELD TO MATURITY
  United States Treasury


       
$     0


      
     -


      
     -


       
      0


     
   -%


Federal agencies
   Within one year
   One to Five years



3,013
  7,011
 10,024



31
   295
   326



- -
     -
     -



3,044
  7,306
 10,350



5.07 
6.77 
6.26 

  State, county and
  municipal
   Within one year
   One to five years
   Six to ten years
      
   Total held to maturity



1,570
5,931
  3,180
 10,681
$20,705



20
187
    80
   287
$  613



- -
- -
     6
     6
$    6



1,590
6,118
  3,254
 10,962
$21,312



5.88%
6.39 
6.39 
6.31 
6.29%

(1) Tax equivalent adjustment based on a 34% tax rate


As of the quarter ended December 31, 2001, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity. The net unrealized holding gains/(losses) on available-for-sale securities component of capital is $1,435 as of December 31, 2001.
















8


NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES

     The following is a summary of loans at June 30, 2002 and December 31, 2001 by major classification:



Real estate loans - mortage
                  - construction
Commercial and industrial loans
Loans to individuals for household,
  family and other consumer expenditures
Agriculture
All other loans, including overdrafts
     Gross loans
       Less reserve for loan losses
         Net loans

June 30,   December 31,
   2002         2001    

$203,609 
22,717 
47,089 

30,597 
2,350 
   1,563 
 307,925 
  (3,984)
 303,941 

$187,808 
28,324 
44,351 

32,008 
1,316 
   2,800 
 296,607 
  (3,763)
 292,844 




















































9


NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES, continued

     Changes in the reserve for loan losses for the quarter ended and six-month period ended June 30, 2002 and 2001 and the year ended December 31, 2001 are summarized as follows:





Balance, beginning of period
Charge-offs:
   Commercial, financial, and agricultural
   Real Estate - construction and mortgage
   Loans to individuals
       Total charge-offs
Recoveries:
   Commercial, financial, and agricultural
   Real Estate - construction and mortgage
   Loans to individuals
       Total recoveries
Net charge-offs/(recoveries)
Additions charge to operations
Balance, end of period

Quarter Ended    Six Months Ended   December   
June 30,           June 30,         31,     
  2002     2001      2002     2001      2001     


$ 3,885


73
12
    140
$   225

$    76
4
     29
$   109
$   116
$   215
$ 3,984


$ 3,816

140
4
    121
$   265

$    33
0
     48
$    81
$   184
$   130
$ 3,762


$ 3,763

160
     45
    273
$   478

$   120
13
     76
$   209
$   269
$   490
$ 3,984


$ 3,782

183
     29
    255
$   467

$    44
2
     81
$   127
$   340
$   320
$ 3,762


$ 3,782

383
96
    470
$   949

$   106
31
    168
$   305
$   644
$   625
$ 3,763


Ratio of net charge-offs during the period
 to average loans outstanding during the
 period



       
   .03%



       
   .06%



       
   .07%



       
   .12%



       
   .22%

The entire balance is available to absorb future loan losses.

At June 30, 2002 and December 31, 2001 loans on which no interest was being accrued totalled approximately $805 and $633, respectively and foreclosed real estate totalled $40 and $64, respectively; and loans 90 days past due and still accruing totalled $111 and $138, respectively.

OTHER INTEREST-BEARING ASSETS

As of June 30, 2002, the Company does not have any interest-bearing assets that would be required to be disclosed under Item III.C.1. or 2. if such assets were loans.






























10


NOTE 5 - PREMISES AND EQUIPMENT

     Property at June 30, 2002 and December 31, 2001 is summarized as follows:




Land and buildings
Furniture, fixtures and equipment
Construction in progress

Less accumulated depreciation and
   amortization

June 30   
  2002    

$ 14,104  
6,300  
     301  
$ 20,705  

   9,311  
$ 11,394
  

December 31,
  2001    

$ 14,097  
6,175  
      5  
$ 20,277  

   8,992
  
$ 11,285
  

     Depreciation and amortization of bank premises and equipment charged to operating expense was $159 and $319 for the quarter ended and the six-month period ended June 30, 2002, respectively and $650 for the year ended December 31, 2001.

NOTE 6 - CERTIFICATES OF DEPOSIT IN EXCESS OF $100,000

     At June 30, 2002 and December 31, 2001, certificates of deposit of $100,000 or more included in time deposits totaled approximately $94,618 and $68,608 respectively. Interest expense on these deposits was approximately $647 and $1,270 for the quarter ended and the six-month period ended June 30, 2002, respectively, and $4,627 for the year ended December 31, 2001.

NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     At June 30, 2002 and December 31, 2001, securities sold under repurchase agreements totaled $32,134 and $32,821. U.S. Government securities with a book value of $33,498 ($34,307 market value) and $37,599 ($38,631 market value), respectively, are used as collateral for the agreements. The weighted-average interest rate of these agreements was 1.82 percent and 1.91 percent at June 30, 2002 and December 31, 2001.

NOTE 8 - LINES OF CREDIT

     At June 30, 2002, the Bank had unused short-term lines of credit to purchase Federal Funds from unrelated banks totaling $23,000. These lines of credit are available on a one to seven day basis for general corporate purposes of the Bank. All of the lenders have reserved the right to withdraw these lines at their option.

     The Bank has a demand note through the U.S. Treasury, Tax and Loan system with the Federal Reserve Bank of Richmond. The Bank may borrow up to $7,000 under the arrangement at a variable interest rate. The note is secured by U.S. Treasury and Agency Notes with a market value of $6,329 at June 30, 2002. The amount outstanding under the note totaled $2,611 and $653 at June 30, 2002 and December 31, 2001, respectively.

     The Bank also has a line of credit from the Federal Home Loan Bank of Atlanta for $84,304 secured by a lien on the Bank's 1-4 family mortgages. Allowable terms range from overnight to twenty years at varying rates set daily by the FHLB. The amount outstanding under the agreement totalled $1,403 and $1,485 at June 30, 2002 and December 31, 2001, respectively.

NOTE 9 - INCOME TAXES

     Income tax expense for the quarter ended June 30, 2002 and June 30, 2001 on pretax income of $2,890 and $2,323 totalled $889 and $714 respectively. Income tax expense for the six-month period ended June 30, 2002 and June 30, 2001 on pretax income of $5,584 and $4,304 totalled $1,727 and $1,329 respectively. The provision for federal income taxes is calculated by applying the 34% statutory federal income tax rate and increasing or reducing this amount due to any tax-exempt interest, state bank tax (net of federal benefit), business credits, surtax exemption, tax preferences, alternative minimum tax calculations, or other factor. A summary of income tax components and a reconciliation of income taxes to the federal statutory rate are included in fiscal year-end reports.







11


NOTE 9 - INCOME TAXES (Continued)

     The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".

NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES

     From time to time the bank subsidiary is a party to various litigation, both as plaintiff and as defendant, arising from its normal operations. No material losses are anticipated in connection with any of these matters at June 30, 2002.

     Also, in the normal course of business, the bank subsidiary has outstanding commitments to extend credit and other contingent liabilities, which are not reflected in the accompanying financial statements. At June 30, 2002, commitments to extend credit totalled $30,814; financial standby letters of credit totalled $817; and performance standby letters of credit totalled $458. In the opinion of management, no material losses or liabilities are expected as a result of these transactions.

     Additionally, the bank subsidiary has outstanding commitments for the construction of a new branch facility located in North Myrtle Beach, S.C. in the amount of $601 and for the construction of a new main retail office in Conway, S.C. in the amount of $5,093.

NOTE 11 - EMPLOYEE BENEFIT PLAN

     The Bank has a defined contribution pension plan covering all employees who have attained age twenty-one and have a minimum of one year of service. Upon ongoing approval of the Board of Directors, the Bank matches one hundred percent of employee contributions up to three percent of employee salary deferred and fifty percent of employee contributions in excess of three percent and up to five percent of salary deferred. The Board of Directors may also make discretionary contributions to the Plan. For the three-month and six-month periods ended June 30, 2002 and years ended December 31, 2001, 2000 and 1999, $128, $252, $426, $404, and $423, respectively, was charged to operations under the plan.

NOTE 12 - REGULATORY MATTERS

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

     Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Tier I capital to adjusted total assets (Leverage Capital ratio) and minimum ratios of Tier I and total capital to risk-weighted assets. To be considered adequately capitalized under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier I leverage, Tier I risk-based and total risked-based ratios as set forth in the table. The Bank's actual capital ratios are presented in the table below as of June 30, 2002:








Total Capital (to
 risk weighted assets)
Tier I Capital (to
 risk weighted assets)
Tier I Capital (to
 avg.assets

To be     
well capitalized
For           under prompt 
Capital adequacy corrective action
                     Purposes         provisions  
     Actual           Minimum           Minimum   
 Amount  Ratio     Amount   Ratio  Amount    Ratio

$56,667

52,683

52,683

17.06%

15.86 

9.95 

$26,579

13,290

21,174

8.0%

4.0 

4.0 

$33,224

19,935

26,467

10.0%

6.0 

5.0 







12


NOTE 13 - CONDENSED FINANCIAL INFORMATION

     Following is condensed financial information of CNB Corporation (parent company only):

CONDENSED BALANCED SHEET
JUNE 30, 2002
(Unaudited)

ASSETS
   Cash
   Investment in subsidiary
   Fixed assets
   Other assets


$  2,768 
55,320 
1,006 
      37 
$ 59,131 


LIABILITIES AND STOCKHOLDERS' EQUITY
   Other liability
   Stockholders' equity



$      0 
  59,131 
$ 59,131 

CONDENSED STATEMENT OF INCOME
For the six-month period ended June 30, 2002
(Unaudited)


EQUITY IN NET INCOME OF SUBSIDIARY
OTHER INCOME
OTHER EXPENSES
   Net Income


$  3,907 

     (50)
$  3,857 




DISCUSSION OF FORWARD-LOOKING STATEMENTS

Information in the enclosed report, other than historical information, may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, timing of certain business initiatives of the Company, the Company's interest rate risk condition, and future regulatory actions of the Comptroller of the Currency and Federal Reserve System. It is important to note that the Company's actual results may differ materially and adversely from those discussed in forward-looking statements.

































13


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

Management's Discussion and Analysis is provided to afford a clearer understanding of the major elements of the corporation's results of operations, financial condition, liquidity, and capital resources. The following discussion should be read in conjunction with the corporation's financial statements and notes thereto and other detailed information appearing elsewhere in this report. In addition, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. The accompanying consolidated financial statements include all accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements at June 30, 2002 and for the six-month periods ending June 30, 2002 and 2001 have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial inf ormation and with the instructions to Form 10-Q for the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

DISTRIBUTION OF ASSETS AND LIABILITIES

The Company maintains a conservative approach in determining the distribution of assets and liabilities. Loans, net of unearned income, have only increased 4.9% from $293,501 at June 30, 2001 to $307,925 at June 30, 2002 and have decreased as a percentage of total assets from 57.3% to 54.7% over the same period as loan demand has lessened in our market. Securities and federal funds sold have increased as a percentage of total assets from 35.6% at June 30, 2001 to 38.1% at June 30, 2002 as lending has slowed. This level of investments and federal funds sold provides for a more than adequate supply of secondary liquidity. Management has sought to build the deposit base with stable, relatively non-interest-sensitive deposits by offering the small to medium deposit account holders a wide array of deposit instruments at competitive rates. Non-interest-bearing demand deposits increased as a percentage of total assets from 16.3% at June 30, 2001 to 16.7% at June 30, 2002. As more customer s, both business and personal, are attracted to interest-bearing deposit accounts, we expect the percentage of demand deposits to decline over the long-term. Interest-bearing deposits have decreased slightly from 65.9% of total assets at June 30, 2001 to 65.7% at June 30, 2002 while securities sold under agreement to repurchase have decreased from 5.8% to 5.7% over the same period.

The following table sets forth the percentage relationship to total assets of significant components of the corporation's balance sheet as of June 30, 2002 and 2001:



Assets:
   Earning assets:
   Loans
   Investment securities
   Securities Available for Sale
   Federal funds sold and securities purchased
     under agreement to resell
      Total earning assets
   Other assets
      Total assets

June 30,   
 2002    2001 



54.7%
3.1 
29.8 

  5.2 
 92.8 
  7.2 
100.0%



57.3%
5.8 
21.8 

  8.0 
 92.9 
  7.1 
100.0%



Liabilities and stockholder's equity:
  Interest-bearing liabilities:
    Interest-bearing deposits
    Federal funds purchased and securities sold
      under agreement to resell
    Other short-term borrowings
        Total interest-bearing liabilities
          Noninterest-bearing deposits
    Other liabilities
    Stockholders' equity
        Total liabilities and stockholders' equity





65.7%

5.7 
  .7 
 72.1 
 16.7 
..7 
 10.5 
100.0%





65.9%

5.8 
  1.0 
 72.7 
 16.3 
..8 
 10.2 
100.0%




14


RESULTS OF OPERATION

CNB Corporation experienced earnings for the three-month period ended June 30, 2002 and 2001 of $2,001 and $1,609, respectively, resulting in a return on average assets of 1.46% and 1.28% and a return on average stockholders' equity of 14.14% and 12.58%.

CNB Corporation experienced earnings for the six-month period ended June 30, 2002 and 2001 of $3,857 and $2,975, respectively, resulting in a return on average assets of 1.45% and 1.20% and a return on average stockholders' equity of 13.79% and 11.83%.

The earnings were primarily attributable to net interest margins in each period (see Net Income-Net Interest Income). Other factors include management's ongoing effort to maintain other income at adequate levels (see Net Income - Other Income) and to control other expenses (see Net Income - Other Expenses). This level of earnings, coupled with a conservative dividend policy, have supplied the necessary capital funds to support the growth in total assets. Total assets have increased $50,563 or 9.9% from $512,504 at June 30, 2001 to $563,067 at June 30, 2002. The following table sets forth the financial highlights for the three-month and six-month periods ending June 30, 2002 and June 30, 2001:

CNB Corporation
CNB Corporation and Subsidiary
FINANCIAL HIGHLIGHTS
(All Dollar Amounts, Except Per Share Data, in Thousands)






Net interest income after provision
     for loan losses
Income before income taxes
Net Income
Per Share
Cash dividends declared
   Per Share
Total assets
Total deposits
Loans, net of unearned income
Investment securities and
    securities available for sale
Stockholders' equity
    Book value per share
Ratios (1):
Annualized return on average total
     assets
Annualized return on average
     stockholders'equity

Three-Month Period     
Ended June 30,       
Percent  
Increase 
  2002      2001   (Decrease)

Six-Month Period     
Ended June 30,      
Percent  
Increase 
  2002     2001   (Decrease)


5,342 
2,890 
2,001 
2.79 


563,067 
463,875 
307,925 

184,965 
59,131 
82.49 


1.46%

14.14%


4,437 
2,323 
1,609 
2.25 


512,504 
421,359 
293,501 

141,528 
52,277 
73.15 


1.28%

12.58%


20.4% 
24.4  
24.4  
24.0  
- -  
- -  
9.9% 
10.1  
4.9  

30.7  
13.1  
12.8  


14.1% 

12.4% 


10,369 
5,584 
3,857 
5.38 


563,067 
463,875 
307,925 

184,965 
59,131 
82.49 


1.45%

13.79%


8,750 
4,304 
2,975 
4.16 


512,504 
421,359 
293,501 

141,528 
52,277 
73.15 


1.20%

11.83%


18.5% 
29.7  
29.6  
29.3  
- -  
- -  
9.9% 
10.1  
4.9  

30.7  
13.1  
12.8  


20.8% 

16.6% 

(1) For the three-month period ended June 30, 2002 and June 30, 2001, average total assets amounted to $546,582 and $503,394 with average stockholders' equity totaling $56,594 and $51,158, respectively. For the six-month period ended June 30, 2002 and June 30, 2001, average total assets amounted to $530,391 and $495,982 with average stockholders' equity totaling $55,922 and $50,299 respectively.








15


NET INCOME

Net Interest Income - Earnings are dependent to a large degree on net interest income, defined as the difference between gross interest and fees earned on earning assets, primarily loans and securities, and interest paid on deposits and borrowed funds. Net interest income is effected by the interest rates earned or paid and by volume changes in loans, securities, deposits, and borrowed funds.

Interest rates paid on deposits and borrowed funds and earned on loans and investments have generally followed the fluctuations in market interest rates in 2002 and 2001. However, fluctuations in market interest rates do not necessarily have a significant impact on net interest income, depending on the bank's rate sensitivity position. A rate sensitive asset (RSA) is any loan or investment that can be repriced either up or down in interest rate within a certain time interval. A rate sensitive liability (RSL) is an interest paying deposit or other liability that can be repriced either up or down in interest rate within a certain time interval. When a proper balance between RSA and RSL exists, market interest rate fluctuations should not have a significant impact on earnings. The larger the imbalance, the greater the interest rate risk assumed by the bank and the greater the positive or negative impact of interest rate fluctuations on earnings. The bank seeks to manage its assets and liabilities in a mann er that will limit interest rate risk and thus stabilize long-run earning power. Management believes that a rise or fall in interest rates will not materially effect earnings.

The Bank maintained net interest margins for the three-month and six-month periods ended June 30, 2002, of 4.47% and 4.51%, respectively, and 4.02% and 4.03%, respectively, for the same periods in 2001. 2002 margins meet or exceed management's long-term target of 4.50%, but 2001 net interest margins fell due to an unusually rapid decline in market interest rates lowering returns available on loans and investments while interest costs on liabilities did not decline as quickly due to strong competitive pressure.

Fully-tax-equivalent net interest income showed a 21.8% increase from $4,684 for the three-month period ended June 30, 2001 to $5,704 for the three-month period ended June 30, 2002. During the same period, total fully-tax-equivalent interest income decreased by 8.5% from $8,764 to $8,019 and total interest expense decreased by 43.3% from $4,080 to $2,315. Fully-tax-equivalent net interest income as a percentage of total earning assets has shown an increase of .45% from 4.02% for the three-month period ended June 30, 2001 to 4.47% for the three-month period ended June 30, 2002.

Fully-tax-equivalent net interest income showed a 19.9% increase from $9,305 for the six-month period ended June 30, 2001 to $11,153 for the six-month period ended June 30, 2002. During the same period, total fully-tax-equivalent interest income decreased by 11.1% from $17,789 to $15,814 and total interest expense decreased by 45.1% from $8,484 to $4,661. Fully-tax-equivalent net interest income as a percentage of total earning assets has shown an increase of .48% from 4.03% for the six-month period ended June 30, 2001 to 4.51% for the six-month period ended June 30, 2002.

The tables on the following four pages present selected financial data and an analysis of net interest income.



















16


CNB Corporation and Subsidiary
Selected Financial Data





Assets:
  Earning assets:
   Loans, net of unearned
    income    
   Securities:
    Taxable
    Tax-exempt
   Federal funds sold and
    securities purchased     under agreement to resell
      Total earning assets
    Other assets
      Total assets

Liabilities and stockholder equity
   Interest-bearing     liabilities:
   Interest-bearing deposits
   Federal funds purchased     and securities sold     under agreement to     repurchase
   Other short-term     borrowings
       Total interest-bearing
         liabilities
   Noninterest-bearing     deposits
   Other liabilities
   Stockholders' equity
      Total liabilities        and stockholders'        equity
   Net interest income as a     percent of total earning     assets

(1)  Tax-equivalent      adjustment based on a      34% tax rate

Three Months Ended 6/30/02  Three Months Ended 6/30/01  
Avg.    Interest Avg. Ann.  Avg.    Interest  Avg. Ann. 
Balance Income/  Yield or   Balance Income/    Yield or 
Expense    Rate             Expense(1)  Rate    




$306,033

147,128
26,935


  30,580
 510,676
  35,906
$546,582





$363,045



30,530

   2,358

$395,933

  90,404
3,651
  56,594


$546,582


$510,676




$  5,580

1,886
433


     120
   8,019







2,143



142

      30

$  2,315









$  5,704



$    147




7.29%

5.13 
6.43 


1.57 
6.28 







2.36 



1.86 

5.09 

2.34 









4.47 




$295,999

115,301
19,661


  35,632
 466,593
  36,801
$503,394





$338,174



27,298

   2,991

$368,463

  79,619
4,154
  51,158


$503,394


$466,593




$  6,365

1,684
344


     371
   8,764







3,774



264

      42

$  4,080









$  4,684



$    117




8.60%

5.84 
7.00 


4.16 
7.51 







4.46 



3.87 

5.62 

4.43 









4.02 


Ratios:
Annualized return on average total assets
Annualized return on average stockholders' equity
Cash dividends declared as a percent of net income
Average stockholders' equity as a percent of:
  Average total assets
  Average total deposits
  Average loans
Average earning assets as a percent of
average total assets



1.46 
14.14 


11.08 
12.48 
18.49 

93.43 



1.28 
12.58 


10.16 
12.24 
17.28 

92.69 




17


CNB Corporation and Subsidiary
Selected Financial Data





Assets:
  Earning assets:
   Loans, net of unearned     income
   Securities:
    Taxable
    Tax-exempt
   Federal funds sold and
    securities purchased     under agreement to     resell
      Total earning assets
    Other assets
      Total assets

Liabilities and stockholder equity
   Interest-bearing     liabilities:
   Interest-bearing deposits
   Federal funds purchased     and securities sold     under agreement to     repurchase
   Other short-term     borrowings
       Total interest-
    bearing liabilities
   Noninterest-bearing     deposits
   Other liabilities
   Stockholders' equity
      Total liabilities        and stockholders'        equity
   Net interest income as a     percent of total earning     assets

(1)  Tax-equivalent      adjustment based on a      34% tax rate

Six Months Ended 6/30/02   Six Months Ended 6/30/01    
Avg.    Interest Avg. Ann. Avg.     Interest  Avg. Ann. 
Balance Income/  Yield or  Balance  Income/   Yield or  
Expense    Rate             Expense(1)  Rate    




$303,713

139,794
26,805



  24,667
 494,979
  35,412
$530,391





$351,370



29,922

   3,171

$384,463

  86,398
3,608
  55,922


$530,391


$494,979




$ 11,151

3,615
865



     183
  15,814







4,318



278

      65

$  4,661









$ 11,153



$    294




7.34%

5.17 
6.45 



1.48 
6.39 







2.46 



1.86 

4.10 

2.42 









4.51 




$296,474

112,177
19,717



32,920
 461,288
  34,694
$495,982





$334,567



27,795

   3,124

$365,486

  76,119
4,078
  50,299


$495,982


$461,288




$ 13,056

3,263
692



778
  17,789






7,784



607

      93

$  8,484









$  9,305



$    235




8.81%

5.82 
7.02 



4.73 
7.71 






4.65 



4.37 

5.95 

4.64 









4.03 


Ratios:
Annualized return on average total assets
Annualized return on average stockholders' equity
Cash dividends declared as a percent of net income
Average stockholders' equity as a percent of:
  Average total assets
  Average total deposits
  Average loans, net of unearned income
Average earning assets as a percent of
average total assets



1.45 

13.79 



10.54 
12.77 
18.41 

93.32 



1.20 

11.83 



10.14 
12.25 
16.97 

93.00 




18


CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Three Months Ended June 30, 2002 and 2001
(Dollars in Thousands)






Earning Assets:
Loans, Net of unearned
 Income (2)
Investment securities:
 Taxable
 Tax-exempt
Federal funds sold and
 Securities purchased under
 agreement to resell

Total Earning Assets

Interest-bearing
 Liabilities:

Interest-bearing deposits
Federal funds purchased and
 securities sold under
 agreement to repurchase
Other short-term borrowings

Total Interest-bearing
 Liabilities
Interest-free Funds
 Supporting Earning Assets

Total Funds Supporting
Earning Assets

Interest Rate Spread
Impact of Non-interest-
 bearing Funds on Net Yield
 on Earning Assets

Net Yield on Earning Assets


Average
Volume
2002 



306,033

147,128
26,935


 30,580

510,676




363,045


30,530
  2,358


395,933

114,743


       
510,676


Average
Volume
2001 



295,999

115,301
19,661


 35,632

466,593




338,174


27,298
  2,991


368,463

 98,130


       
466,593



Yield/Rate
2002 (1) 



7.29%

5.13%
6.43%


1.57%

6.28%




2.36%


1.86%
5.09%


2.34%



     
1.81%

3.94%


 .53%

4.47%



Yield/Rate
2001 (1) 



8.60%

5.84%
7.00%


4.16%

7.51%




4.46%


3.87%
5.62%


4.43%



     
3.49%

3.08%


 .94%

4.02%


Interest  
Earned/Paid 
2002 (1)  



5,580

1,886
433


  120

8,019




2,143


142
   30


2,315



     
2,315





     
5,704


Interest  
Earned/Paid
2001 (1)  



6,365

1,684
344


  371

8,764




3,774


264
   42


4,080



     
4,080





     
4,684




Variance



(785)

202 
89 


  (251)

  (745)




(1,631)


(122)
   (12)


(1,765)



       
(1,765)


Change
Due to
Rate 



(969)

(205)
(28)


  (230)

(1,432)





(1,775)


(137)
    (4)


(1,916)



       
(1,916)


Change
Due to
Volume



216 

465 
127 


 (52)

 756 




277 


31 
  (9)


 299 



     
 299 

Change
Due to
Rate X
Volume



(32)

(58)
(10)


  31 

 (69)




(133)


(16)
   1 


 (148)



     
(148)

(1)  Tax-equivalent adjustment based on a 34% tax rate.

(2)  Includes non-accruing loans which does not have a material effect on the Net      Yield on Earning Assets.

19


CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Six Months Ended June 30, 2002 and 2001
(Dollars in Thousands)






Earning Assets:
Loans, Net of unearned
 Income (2)
Investment securities:
 Taxable
 Tax-exempt
Federal funds sold and
 Securities purchased under
 agreement to resell

Total Earning Assets

Interest-bearing
 Liabilities:

Interest-bearing deposits
Federal funds purchased and
 securities sold under
 agreement to repurchase
Other short-term borrowings

Total Interest-bearing
 Liabilities
Interest-free Funds
 Supporting Earning Assets

Total Funds Supporting
Earning Assets

Interest Rate Spread
Impact of Non-interest-
 bearing Funds on Net Yield
 on Earning Assets

Net Yield on Earning Assets


Average
Volume
2002 



303,713

139,794
26,805


 24,667

494,979




351,370


29,922
  3,171


384,463

110,516


       
494,979


Average
Volume
2001 



296,474

112,177
19,717


 32,920

461,288




334,567


27,795
  3,124


365,486

 95,802


       
461,288



Yield/Rate
2002 (1) 



7.34%

5.17%
6.45%


1.48%

6.39%




2.46%


1.86%
4.10%


2.42%



     
1.88%

3.97%


 .54%

4.51%



Yield/Rate
2001 (1) 



8.81%

5.82%
7.02%


4.73%

7.71%




4.65%


4.37%
5.95%


4.64%



     
3.68%

3.07%


 .96%

4.03%


Interest  
Earned/Paid 
2002 (1)  



11,151

3,615
865


   183

15,814




4,318


278
    65


 4,661



      
 4,661





      
11,153


Interest  
Earned/Paid
2001 (1)  



13,056

3,263
692


   778

17,789




7,784


607
    93


 8,484



      
 8,484





      
 9,305




Variance



(1,905)

352 
173 


  (595)

(1,975)




(3,466)


(329)
   (28)


(3,823)



       
(3,823)


Change
Due to
Rate 



(2,179)

(365)
(56)


  (535)

(3,135)




(3,664)


(349)
   (29)


(4,042)



       
(4,042)


Change
Due to
Volume



319 

804 
249 


 (195)

 1,177 




391 


46 
     1 


  438 



      
  438 

Change
Due to
Rate X
Volume



(45)

(87)
(20)


 135 

 (17)




(193)


(26)
   - 


(219)



     
(219)

(1)  Tax-equivalent adjustment based on a 34% tax rate.

(2)  Includes non-accruing loans which does not have a material effect on the Net      Yield on Earning Assets.

20


NET INCOME (continued)

Provision for Possible Loan Losses - It is the policy of the bank to maintain the reserve for possible loan losses at the greater of 1.20% of net loans or the percentage based on the actual loan loss experience over the previous five years. In addition, management may increase the reserve to a level above these guidelines to cover potential losses identified in the portfolio.

The provision for possible loan losses was $215 for the three-month period ended June 30, 2002 and $130 for the three-month period ended June 30, 2001. Net loan charge-offs/(recoveries) totaled $116 for the three-month period ended June 30, 2002 and $184 for the same period in 2001.

The provision for possible loan losses was $490 for the six-month period ended June 30, 2002 and $320 for the six-month period ended June 30, 2001. Net loan charge-offs/(recoveries) totaled $269 for the six-month period ended June 30, 2002 and $340 for the same period in 2001.

The reserve for possible loan losses as a percentage of net loans was 1.31% at June 30, 2002 and 1.30% at June 30, 2001. The increased provision during the six-month period ended June 30, 2002 was to maintain the reserve at the previous year's level.

Securities Transactions - Security gains of $183 were taken during the first quarter of 2002 and $169 during the second quarter of 2001. 2002 gains were taken to supplement liquidity and 2001 gains were taken while selling securities near maturity and investing further out on a steeply-sloping yield curve. At June 30, 2002, December 31, 2001, and June 30, 2001 market value appreciation/(depreciation) in the securities portfolio totaled $5,027, $2,999, and $2,015. As indicated, market value has increased in 2002 due to falling market interest rates.

Other Income - Other income, net of any gains/losses on security transactions, increased by 3.1% from $1,261 for the three-month period ended June 30, 2001 to $1,300 for the three-month period ended June 30, 2002.

Other income, net of any gains/losses on security transactions, increased by 3.1% from $2,394 for the six-month period ended June 30, 2001 to $2,469 for the six-month period ended June 30, 2002.

This increase in the three-month and six-month period ended June 30, 2002 other income was due to an increase in deposit account volumes and higher merchant discount income, offset by a slow-down in the refinancing volume in the mortgage loan department. Effective July 1, 2001, overall service charge rates were increased which will correspondingly increase future non-interest income levels.

Other Expenses - Other expenses increased by 5.9% from $3,544 for the three-month period ended June 30, 2001 to $3,752 for the three-month period ended June 30, 2002. The major components of other expenses are salaries and employee benefits which increased 6.9% from $2,205 to $2,357; occupancy expense which increased 4.3% from $462 to $482; and other operating expenses which increased by 4.1% from $877 to $913.

Other expenses increased by 6.1% from $7,009 for the six-month period ended June 30, 2001 to $7,437 for the six-month period ended June 30, 2002. The major components of other expenses are salaries and employee benefits which increased 7.6% from $4,385 to $4,720; occupancy expense which increased 2.5% from $945 to $969; and other operating expense which increased by 4.1% from $1,679 to $1,748.

21


The increase in the three-month and six-month period ended June 30, 2002 salaries and employee benefits was due to normal pay increments and the increased costs of providing employee benefits, particularly health insurance coverage. Looking ahead, occupancy expense will grow in the second half of 2002 due to the addition of the North Myrtle Beach Office, and in 2003 due to the construction of a new $5.3 million dollar Main Office Retail Center.

Income Taxes - Provisions for income taxes increased 24.5% from $714 for the three-month period ended June 30, 2001 to $889 for the three-month period ended June 30, 2002. Income before income taxes less interest on tax-exempt investment securities increased by 24.2% from $2,096 for the three-month period ended June 30, 2001 to $2,604 for the same period in 2002. State tax liability increased as income before income taxes increased 24.4% from $2,323 to $2,890 during the same period.

Provisions for income taxes increased 29.9% from $1,329 for the six-month period ended June 30, 2001 to $1,727 for the six-month period ended June 30, 2002. Income before income taxes less interest on tax-exempt investment securities increased by 30.3% from $3,847 for the six-month period ended June 30, 2001 to $5,013 for the same period in 2002 and state tax liability increased as income before income taxes increased 29.7% from $4,304 to $5,584 during the same period.

LIQUIDITY

The bank's liquidity position is primarily dependent on short-term demands for funds caused by customer credit needs and deposit withdrawals and upon the liquidity of bank assets to meet these needs. The bank's liquidity sources include cash and due from banks, federal funds sold and short-term investments. In addition, the bank has established federal funds lines of credit from correspondent banks and has the ability to borrow funds from the Federal Reserve System and the Federal Home Loan Bank of Atlanta. Management feels that short-term and long-term liquidity sources are more than adequate to meet funding needs.

CAPITAL RESOURCES

Total stockholders' equity was $59,131, $53,996, $48,606 and $43,712 at June 30, 2002, December 31, 2001, December 31, 2000, and December 31, 1999, representing 10.50%, 10.68%, 10.32%, and 9.59% of total assets, respectively. At June 30, 2002, the Bank exceeds quantitative measures established by regulation to ensure capital adequacy (see NOTE 12 - REGULATORY MATTERS). Capital is considered sufficient by management to meet current and prospective capital requirements and to support anticipated growth in bank operations.













22


EFFECTS OF REGULATORY ACTION

The Federal Deposit Insurance Corporation (FDIC) reduced FDIC insurance premium rates during 1995 which has had a positive effect on subsequent earnings and should favorably impact future year's income. Effective March 11, 2000, the Gramm-Leach-Bliley Act of 1999 allows bank holding companies to elect to be treated as financial holding companies which may engage in a broad range of securities, insurance, and other financial activities. At this time, neither the Company nor the Bank plan to enter these new lines of business. The management of the Company and the Bank is not aware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on liquidity, capital resources, or operations.

ACCOUNTING ISSUES

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board and do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

RISKS AND UNCERTAINTIES

In the normal course of its business the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different basis, than its interest-earning assets. Credit risk is the risk of default on the Company's loan portfolio that results from borrower's inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable and the valuation of real estate held by the Company.

The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions from the regulators' judgments based on information available to them at the time of their examination.

 

 

 

 

 

 

 

 

23


QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk arises principally from interest rate risk inherent in its lending, deposit and borrowing activities. Management actively monitors and manages its interest rate risk exposure. In addition to other risks which the Company manages in the normal course of business, such as credit quality and liquidity risk, management considers interest rate risk to be a significant market risk that could potentially have a material effect on the Company's financial condition and results of operations (See Net Income - Net Interest Income). Other types of market risks, such as foreign currency risk and commodity price risk, do not arise in the normal course of the Company's business activities.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

An Annual Meeting of shareholders of CNB Corporation was held in the main office building of The Conway National Bank at 1400 Third Avenue, Conway, South Carolina, at 4:15 p.m., Conway, South Carolina time, on May 14, 2002.

The purpose of the Annual Meeting was to: (1) elect five Directors; and (2) ratify the appointment of Elliott Davis, LLC as the Company's independent public accountant for the fiscal year ending December 31, 2002.

Proxies for the meeting were solicited pursuant to Regulation 14 under the Act; there was no solicitation in opposition to the management's nominees as listed in the proxy statement; and all of such nominees were elected.

There were 483,473 of the 716,727 shares issued present or represented by proxy and all shares were voted for the election of the five Directors listed as management's nominees in the proxy statement; and for the ratification of Elliott Davis, LLC as the Company's 2002 independent public accountant.

 

 

 

 

 

 

24


EXHIBITS AND REPORTS ON FORM 8-K


See Exhibit Index appearing below.

(b)  Reports on Form 8-K - No reports on Form 8-K were filed during the
     quarter covered by this report.

EXHIBIT INDEX

All exhibits, the filing of which are required with this Form, are not applicable.




CNB Corporation





SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




                                  CNB Corporation
                                    (Registrant)



                                  Paul R. Dusenbury
                                  _________________________________________

                                  Paul R. Dusenbury
                                  Treasurer
                                 (Chief Financial and Accounting Officer)


Date:  August 13, 2002

25