UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
         
FORM 10-K

(Mark One)
    X            Annual Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934

                 For the fiscal year ended December 31, 2002.

                                       or

                 Transition Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934 [No Fee Required]

                 For the Transition Period From            to            .

                      Commission file number 2-96350
                              CNB CORPORATION
           (Exact name of registrant as specified in its charter)

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

1400 Third Avenue, P.O. Box 320, Conway, South Carolina         29528
       (Address of Principal executive offices)               (Zip Code)

     Registrant's telephone number, including area code: (843) 248-5721

        Securities registered pursuant to section 12(b) of the Act:

                                  None

        Securities registered pursuant to Section 12(g) of the Act:

                                                   Name of each exchange
Title of each class                                of which registered  

Common Stock, par value $10.00 per share            None

     Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X  No  

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     As of February 28, 2003, 718,146 shares of Common Stock of CNB Corporation were outstanding and the aggregate market value of such Common Stock held by nonaffiliates (based upon the price at which stock was sold during the 60 days prior to the date of filing) was approximately $64,262,840.

No Documents have been incorporated by reference.

TABLE OF CONTENTS


PART I

PART II

PART III

PART I

ITEM 1.   Description of Business

DESCRIPTION OF CNB CORPORATION

CNB Corporation (the "Company") is a South Carolina business corporation organized for the purpose of becoming a bank holding company for The Conway National Bank (the "Bank") under the Bank Holding Company Act. The Company was organized with $500 of capital on March 8, 1985; received approval from the Board of Governors of the Federal Reserve System on May 15, 1985, to become a bank holding company; and on June 10, 1985, acquired, in exchange for its own shares of common stock, substantially all of the common stock of the Bank. The activities of the Company are subject to the supervision of the Federal Reserve, and the Company may engage directly or through subsidiary corporations in those activities closely related to banking which are specifically permitted under the Bank Holding Company Act and Gramm-Leach-Bliley Act of 1999. See "Supervision and Regulation." Although the Company, after obtaining the requisite approval of the Federal Reserve and any ot her appropriate regulatory agency, may seek to enter businesses closely related to banking or to acquire existing businesses already engaged in such activities, the Company has not conducted, and has no present intent to conduct, negotiations for the acquisition or formation of any entities to engage in other permissible activities other than the acquisition of the Bank. There can be no assurance that the Company will form or acquire any other entity.

The Company and the Bank compete with those banks and other financial institutions that compete with the Bank. See "Competition." In addition, if the Company attempts to form or acquire other entities and engage in activities closely related to banking, the Company will be competing with other bank holding companies, financial holding companies, and companies currently engaged in lines of business or permissible activities in which the Company might engage, many of which have far greater assets and financial resources than the Company and a greater capacity to raise additional debt and equity capital than the Company.

DESCRIPTION OF THE SUBSIDIARY

The Bank is an independent community bank engaged in the general commercial banking business in Horry and Georgetown Counties, South Carolina. The Bank was organized on June 5, 1903 as the Bank of Horry located on Main Street in Conway, South Carolina. The Bank became a national bank operating as The Conway National Bank in 1914. On June 10, 1985, the Bank was reorganized into a bank holding company structure when substantially all of the common stock of the Bank was acquired by CNB Corporation in exchange for its own shares of common stock. In 1960, the Bank opened its first additional office at 1400 Third Avenue in Conway. Since that time, the following offices have been opened: Coastal Centre in Conway, Horry County, (1969); Surfside in Surfside Beach, Horry County, (1971); Northside, north of Myrtle Beach, Horry County, (1977); Red Hill in Conway, Horry County, (1981); Socastee, in the southern portion of Myrtle Beach, Horry County, (1986); Aynor in the Town of Aynor, Horry County, (1991), Myrtle B each in the City of Myrtle Beach, Horry County, (1995), West Conway, in Conway, Horry County, (1998), Murrells Inlet in Murrells Inlet, Georgetown County, (2000) and North Myrtle Beach in the City of North Myrtle Beach, Horry County, (2002). The Surfside office was enlarged in 1977 and 1984, and the Coastal Centre office was expanded in 1980. The Third Avenue office, which houses the Bank's administrative offices and data processing facilities was expanded in 1982 from 11,150 square feet to 33,616 square feet. The Bank employs approximately 230 full-time-equivalent employees at its principal office and eleven branch offices.

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The Bank performs the full range of normal commercial banking functions. Some of the major services provided include checking accounts, NOW accounts, money market deposit accounts, IRA accounts, savings and time deposits of various types and loans to individuals for personal use, home mortgages, home improvement, automobiles, real estate, agricultural purposes and business needs. Commercial lending operations include various types of credit for business, industry, and agriculture. In addition, the Bank offers safe deposit boxes, wire transfer services, bank money orders, 24-hour teller machines on the STAR Network, internet banking, direct deposits and a MasterCard/Visa program. Through a correspondent relationship the Bank offers discount brokerage services. The Bank does not provide trust services; does not sell annuities; and does not sell mutual funds.

The majority of the Bank's customers are individuals and small to medium-sized businesses headquartered within the Bank's service area. The Bank has no material concentration of deposits from any single customer or group of customers. No significant portion of the Bank's loans is concentrated within a single industry or group of related industries. There are no material seasonal factors that would have any adverse effect on the Bank nor does the Bank rely on foreign sources of funds or income.

COMPETITION

The Bank actively competes with other institutions in Horry County and the Waccamaw Neck region of Georgetown County in providing customers with deposit, credit and other financial services. The principal competitors of the Bank include local offices of six regional banks, three state-wide banks, seven locally owned banks in Horry and Georgetown Counties and various other financial and thrift institutions. The regional banks are Bank of America, Centura Bank, First Citizens Bank and Trust Company, Branch Bank and Trust, Carolina First Savings Bank, and Wachovia, N.A. The statewide banks are National Bank of South Carolina, First Federal Savings Bank, and First Palmetto Savings Bank. The locally owned banks are Anderson Brothers Bank, Coastal Federal Savings Bank, Horry County State Bank, Sandhills Bank, Beach First National Bank, Plantation Federal Savings Bank, and Sunbank, N.A. The Bank also competes with credit unions, money market funds, brokerage houses, insurance companies, mortgage companies, leasi ng companies, consumer finance companies and other financial institutions. Significant competitive factors include interest rates on loans and deposits, prices and fees for services, office location, customer service, community reputation, and continuity of personnel.

SUPERVISION AND REGULATION

General

The Company and the Bank are subject to an extensive collection of state and federal banking laws and regulations which impose specific requirements and restrictions on, and provide for general regulatory oversight with respect to, virtually all aspects of the Company's and the Bank's operations. The Company and the Bank are also affected by government monetary policy and by regulatory measures affecting the banking industry in general. The actions of the Federal Reserve System affect the money supply and, in general, the Bank's lending abilities in increasing or decreasing the cost and availability of funds to the Bank. Additionally, the Federal Reserve System regulates the availability of bank credit in order to combat recession and curb inflationary pressures in the economy by open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in the reserve requirements against bank deposits.

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During 1989 and 1991, the United States Congress enacted two major pieces of banking legislation: The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). The FIRREA and FDICIA have significantly changed the commercial banking industry through, among other things, revising and limiting the types and amounts of investment authority, significantly increasing minimum regulatory capital requirements, and broadening the scope and power of federal bank and thrift regulators over financial institutions and affiliated persons in order to protect the deposit insurance funds and depositors. These laws, and the resulting implementing regulations, have subjected the Bank and the Company to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency (OCC). This has resulted in increased administrative, professional and compensation ex penses in complying with a substantially increased number of new regulations and policies. The regulatory structure created by these laws gives the regulatory authorities extensive authority in connection with their supervisory and enforcement activities and examination policies.

The Omnibus Consolidated Appropriations Act was enacted on September 30, 1996. Among the law's many provisions is a resolution of the BIF-SAIF deposit insurance premium disparity, many regulatory burden relief provisions and other bank-related legislation. The BIF-SAIF provisions are contained in the Deposit Insurance Funds Act of 1996.

The Gramm-Leach-Bliley Financial Modernization Act of 1999, effective March 11, 2000, allows bank holding companies to elect to be treated as financial holding companies. Financial holding companies may engage in a broad range of securities, insurance, and other financial activities.

The following is a brief summary of certain statutes, rules and regulations affecting the Company and the Bank. This summary is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and the Bank. Any change in applicable laws or regulations may have a material adverse effect on the business and prospects of the Company and the Bank.

The Company

The Company is a bank holding company within the meaning of the Federal Bank Holding Company Act of 1956, as amended (the "BHCA") and is registered as such with the Federal Reserve. The Company is required to file annual reports and other information regarding its business operations and those of its subsidiaries. It is also subject to supervision and regular examinations.

The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve Board before (i) it or any of its subsidiaries (other than a bank) acquires substantially all of the assets of any bank, (ii) it acquires ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank, or (iii) it merges or consolidates with any other bank holding company.

3

The BHCA and the Federal Change in Bank Control Act, together with regulations promulgated by the Federal Reserve Board, require that, depending on the particular circumstances, either the Federal Reserve Board's approval must be obtained or notice must be furnished to the Federal Reserve Board and not disapproved prior to any person or company acquiring control of a bank holding company, such as the Company, subject to certain exemptions for certain transactions.

Under the BHCA, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, nonbanking activities, unless the Federal Reserve Board, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing loans and certain types of leases, engaging in certain insurance and discount brokerage activities, performing certain data processing services, acting in certain circumstances as a fiduciary or investment or financial adviser, owning savings associations and making investments in certain corporations or projects designed primarily to promote community welfare. The Company is also restricted in its activities by the provisions of the Glass-St egall Act of 1933, which prohibits the Company from owning subsidiaries that are engaged principally in the issue, flotation, underwriting, public sale or distribution of securities. The regulatory requirements to which the Company is subject also set forth various conditions regarding the eligibility and qualifications of its directors and officers.

Under the Gramm-Leach-Bliley Act, the Company may elect to be treated as a financial holding company which would allow the Company to engage in a broad range of securities, insurance, and other financial activities.

The Bank

The Bank is subject to regulation and supervision, of which regular bank examinations are a part, by the Comptroller of the Currency. The Bank is a member of the Federal Deposit Insurance Corporation (the "FDIC") which currently insures the deposits of each member bank to a maximum of $100,000 per depositor. For this protection, each bank pays a statutory assessment and is subject to the rules and regulations of the FDIC. The Company is an "affiliate" of the Bank within the meaning of the Federal Reserve Act and the Federal Deposit Insurance Act, which imposes restrictions on loans by any subsidiary bank to the Company, on investments by any subsidiary bank in the stock or securities of the Company and on the use of such stock or securities as collateral security for loans by any subsidiary bank to any borrower. The Company will also be subject to certain restrictions with respect to engaging in the business of issuing, underwriting and distributing securities.

4

DESCRIPTION OF BANK STOCK

The Bank is authorized to issue 199,536 shares and has outstanding 193,536 shares of Bank Stock. The holders of Bank Stock are entitled to one vote per share. Holders of shares of Bank Stock have preemptive rights to purchase additional shares of Bank Stock and have cumulative rights in the elections of directors of the Bank. The National Bank Act generally provides for a majority vote of the Bank Stock to approve an action by the Bank but a two-thirds vote of the outstanding shares of Bank Stock is required to approve certain fundamental changes.

The National Bank Act, 12 U.S.C. Section 55, provides for the pro rata assessment of holders of common stock of a national bank in the event that its capital becomes impaired, such assessment to be enforced by sale to the extent necessary of the stock of the stockholder failing to pay his assessment. However, the Company has been advised that the Comptroller of the Currency has not used this provision in recent years. Accordingly, the shares of Bank Stock are subject to such assessment. However, the Bank's management does not anticipate the Bank Stock being assessed in this manner in the foreseeable future.

The holders of Bank Stock are entitled to receive such dividends as may be declared by the Board of Directors of the Bank out of funds legally available therefor. National banking laws and regulations impose restrictions on the payment of dividends and other distributions to stockholders. The National Bank Act provides that a national bank cannot pay dividends or other distributions to stockholders out of any portion of its capital and surplus, and that no dividend shall be paid by a bank in an amount greater than its "net profits then on hand" (as defined in the National Bank Act), after deduction of statutory "bad debts." In addition, 12 U.S.C. Section 60 provides that the approval of the Comptroller of the Currency is required for the payment of dividends by a national bank if the total of all dividends declared by the bank in any calendar year shall exceed the total of its "net profits" of that year combined with its "retained net profits" of the preceding two y ears. The same section further provides that, until the surplus fund of a national bank shall equal its common capital, no dividends shall be declared unless there has been carried to the surplus fund not less than one-tenth part of the bank's net profits of the preceding half year in the case of quarterly or semiannual dividends, or not less than one-tenth part of its net dividends. Also, under 12 U.S.C. Section 1818, the Comptroller of the Currency can restrict a national bank's dividend payments if they are deemed an unsafe or unsound banking practice.

In the event of the liquidation, dissolution or winding-up of the affairs of the Bank, the holders of outstanding shares of Bank Stock will be entitled to share pro rata according to their respective interests in the Bank's assets and funds remaining after payment or provision for payment of all debts and other liabilities of the Bank.

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DESCRIPTION OF COMPANY STOCK

The Company is authorized to issue 1,500,000 shares of Company Stock and as of December 31, 2002, has 718,246 shares issued and 717,295 shares outstanding. The holders of Company Stock are entitled to one vote per share. Holders of shares of Company Stock do not have pre-emptive rights to purchase any additional shares of Company Stock and do not have cumulative voting rights in the election of directors. Without pre-emptive rights, stockholders could experience dilution of their voting power and of their equity interest in the Company.

The ability of the Company to pay dividends to the holders of the Company Stock depends upon the amount of dividends paid by the Bank to the Company. The holders of shares of Company Stock will be entitled to receive such dividends as may be declared by the Board of Directors of the Company out of the funds legally available therefor. The payment of dividends by the company are subject to the restrictions of South Carolina laws applicable to the declaration of dividends by a business corporation. Under such provisions, dividends may be paid in cash or in property of the Company, including the shares of other corporations, except when the Company is insolvent or would thereby be made insolvent or when the declaration of payment thereof would be contrary to any restrictions in the Company Articles. Dividends may be declared and paid only out of the unreserved and unrestricted earned surplus of the Company.

In the event of the liquidation, dissolution or winding-up of the affairs of the Company, the holders of outstanding shares of Company Stock will be entitled to share pro rata according to their respective interests in the Company's assets and funds remaining after payment or provision for payment of all debts and other liabilities of the Company.

All shares of Company Stock are fully paid and nonassessable.

The Bank is the transfer agent for shares of Company Stock.

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.

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SUPPLEMENTARY DATA

QUARTERLY SHAREHOLDER INFORMATION

CNB CORPORATION
QUARTERLY SHAREHOLDER INFORMATION
(All Dollar Amounts, Except Per Share Data, in Thousands)

Summary of Operating Results by Quarter

SUPPLEMENTARY INFLATION ADJUSTED FINANCIAL DATA

Inflation-adjusted accounting has not been applied to the Company's financial information as management does not believe this type of analysis provides useful information within the financial services industry. The Company currently does not meet the asset size criteria which would make detailed disclosure of inflation adjusted data mandatory.

GUIDE 3.   STATISTICAL DISCLOSURE BY BANK
HOLDING COMPANIES

The following tables present additional statistical information about CNB Corporation and its operation and financial condition and should be read in conjunction with the consolidated financial statements and related notes thereto contained elsewhere in this report.

DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL

The tables on the following 5 pages present selected financial data and an analysis of net interest income.

7

(2) The Company had no out-of-period adjustments or foreign activities. Loan fees of $284 are included in the above interest income. Loans on a non-accrual basis for the recognition of interest income totalling $697 as of December 31, 2002 are included in loans, net of unearned income, for purpose of this analysis.

8

(2) The Company had no out-of-period adjustments or foreign activities. Loan fees of $295 are included in the above interest income. Loans on a non-accrual basis for the recognition of interest income totalling $633 as of December 31, 2001 are included in loans, net of unearned income, for purpose of this analysis.

9

(2) The Company had no out-of-period adjustments or foreign activities. Loan fees of $237 are included in the above interest income. Loans on a non-accrual basis for the recognition of interest income totalling $305 as of December 31, 2000 are included in loans, net of unearned income, for purpose of this analysis.

                                      10

CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 2002 and 2001
(Dollars in Thousands)

(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.

11

CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 2001 and 2000
(Dollars in Thousands)

(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.

12

CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 2000 and 1999
(Dollars in Thousands)

(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.

13

INVESTMENT SECURITIES

The purpose of the investment policy of the Bank is to ensure that the investment securities portfolio shall be managed to maximize portfolio yield over the long term in a manner that is consistent with liquidity needs, pledging requirements, asset/liability strategies, and safety/soundness concerns. Specific investment objectives include the desire to: ensure adequate liquidity for loan demand, deposit fluctuations, and other changes in balance sheet mix; manage interest rate risk; maximize the institution's overall return; ensure collateral is available for pledging; and manage asset-quality diversification of the bank's assets. During 2002 and 2001, investment securities comprised a higher percentage of total assets due to weakened loan demand within our market. At December 31, 2002 and 2001, the Loans/Total Assets ratio had dropped to 57.2% and 58.6%, respectively, as compared to 62.8% at December 31, 2000, and investment securities have correspondingly risen as a percentage of tota l assets.

The following summaries reflect the book value, unrealized gains and losses, approximate market value, and tax-equivalent yields on investment securities at December 31, 2002, 2001, and 2000.

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

As of the quarter ended December 31, 2002, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity.

                                            14

INVESTMENT SECURITIES, continued

(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.

15

INVESTMENT SECURITIES, continued

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

As of the quarter ended December 31, 2000, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity.

                                               16

The Company engages, through the Bank, in a full compliment of lending activities, including commercial, consumer, installment and real estate loans.

Real Estate Loans

One of the primary components of the Bank's loan portfolio are loans secured by first or second mortgages on residential and commercial real estate. These loans will generally consist of commercial real estate loans, construction and development loans and residential real estate loans (including home equity and second mortgage loans). Interest rates may be fixed or adjustable. The bank seeks to manage credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, generally does not exceed 80%. In addition, the Bank typically requires personal guarantees of the principal owners of the property. The Bank may also facilitate mortgage loans for sale into the secondary market, earning a fee, but avoiding the interest rate risk of holding long-term, fixed-rate loans. The principal economic risk associated with all loans, including real estate loans, is the creditworth iness of the Bank's borrowers. The ability of a borrower to repay a real estate loan will depend upon a number of economic factors, including employment levels and fluctuations in the value of real estate. In the case of a real estate construction loan, there is generally no income from the underlying property during the construction period, and the developer's personal obligations under the loan may be limited. Each of these factors increases the risk of nonpayment by the borrower. In the case of a real estate purchase loan, the borrower may be unable to repay the loan at the end of the loan term and may thus be forced to refinance the loan at a higher interest rate, or, in certain cases, the borrower may default as a result of its inability to refinance the loan. In either case, the risk of nonpayment by the borrower is increased. The Bank will also face additional credit risks to the extent that it engages in making adjustable rate mortgage loans ("ARMs"). In the case of an ARM, as intere st rates increase, the borrower's required payments increase periodically, thus increasing the potential for default. The marketability of all real estate loans, including ARMs, is also generally affected by the prevailing level of interest rates.

Commercial Loans

The Bank makes loans for commercial purposes in various lines of business. The commercial loans will include both secured and unsecured loans for working capital (including inventory and receivables), loans for business expansion (including acquisition of real estate and improvements), and loans for purchases of equipment.

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LOAN PORTFOLIO

LENDING ACTIVITIES (Continued)

Consumer Loans

The Bank makes a variety of loans to individuals for personal and household purposes, including secured and unsecured installment and term loans, home equity loans and lines of credit and unsecured revolving lines of credit such as credit cards. The secured installment and term loans to consumers will generally consist of loans to purchase automobiles, boats, recreational vehicles, mobile homes and household furnishings, with the collateral for each loan being the purchased property. The underwriting criteria for home equity loans will generally be the same as applied by the Bank when making a first mortgage loan, as described above, but more restrictive for home equity lines of credit. Consumer loans generally involve more credit risks than other loans because of the type and nature of the underlying collateral or because of the absence of any collateral. Consumer loan repayments are dependent on the borrower's continuing financial stability and are likely to be adversely affected by j ob loss, divorce and illness. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the case of default. In most cases, any repossessed collateral will not provide an adequate source of repayment of the outstanding loan balance. Although the underwriting process for consumer loans includes a comparison of the value of the security, if any, to the proposed loan amount, the Bank cannot predict the extent to which the borrower's ability to pay, and the value of the security, will be affected by prevailing economic and other conditions.

Loan Approval and Review

The Bank's loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds an individual officer's lending authority, the loan request will be considered and approved by an officer with a higher lending limit or by the Credit Committee as established by the Board of Directors. The Loan Committee of the Board of Directors determines the lending limits for the Bank's loan officers. The Bank has an in-house lending limit to a single borrower of 10% of capital. An unsecured limit (aggregate) for the Bank is set at 100% of total capital.

CLASSIFICATION OF LOANS

The following is a summary of loans, in thousands of dollars, at December 31, 2002, 2001, 2000, 1999, and 1998 by major classification:

MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES

The Company's loan portfolio consisted of approximately $234,201 and $220,786 in fixed rate loans as of December 31, 2002 and 2001, respectively. At December 31, 2002, and 2001, fixed rate loans with maturities in excess of one year amounted to approximately $185,966 and $169,151, respectively. Variable rate loans are those on which the interest rate can be adjusted to changes in the Bank's prime rate. Fixed rate loans are those on which the interest rate generally cannot be changed for the term of the loan.

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RISK ELEMENTS

The following information relates to certain assets which are defined as risk elements by the Securities and Exchange Commission. All loans which meet the criteria set forth by the Securities and Exchange Commission are detailed below, regardless of the likelihood of collection in full or in part. All loans classified for regulatory purposes as loss, doubtful, substandard, or especially mentioned that have not been disclosed do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources or represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrower to comply with the loan repayment terms. As a matter of practice, loans which management has serious concerns about the borrower being able to pay are put into a non-accrual status and disclosed under Risk Elements. Management reviews these loans periodic ally and feels that the current reserve for possible loan losses adequately provides coverage for actual loss potential. Other interest-bearing assets considered a risk element, if any, are also detailed in this section.

NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS

The following schedule summarizes the amount of nonaccrual, past due, and restructured loans, in thousands of dollars, for the periods ended December 2002, 2001, 2000, 1999, 1998:

Information relating to interest income on nonaccrual and renegotiated loans outstanding for the year ended December 31, 2002, 2001, and 2000 is as follows:

Accruing loans which are contractually past due 90 days or more are graded substandard within the Bank's internal loan grading system and come under heightened scrutiny. Typically, a loan will not remain in the 90 days past due category, but will either show improvement or migrate to non-accrual loans. Loans are placed in a non-accrual status when, in the opinion of management, the collection of additional interest is questionable. Thereafter no interest is taken into income unless received in cash or until such time as the borrower demonstrates the ability to pay principal and interest.

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POTENTIAL PROBLEM LOANS

In addition to those loans disclosed under "Risk Elements", there are certain loans in the portfolio which are presently current but about which management has concerns regarding the ability of the borrower to comply with present loan repayment terms. Management maintains a loan review of the total loan portfolio to identify loans where there is concern that the borrower will not be able to continue to satisfy present loan repayment terms. Such problem loan identification includes the review of individual loans, loss experience, and economic conditions. Problem loans include both current and past due loans.

As of December 31, 2002, loans which management had serious concerns about the borrower being able to repay were put into a non-accrual status which are disclosed under "Risk Elements".

FOREIGN OUTSTANDINGS

As of the year ended December 31, 2002, the Company had no foreign loans outstanding.

LOAN CONCENTRATIONS

As of the year ended December 31, 2002, the Company did not have any concentration of loans exceeding 10% of total loans which are not otherwise disclosed as a category of loans pursuant to Item III. A. of Guide 3.

OTHER INTEREST-BEARING ASSETS

As of December 31, 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.

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SUMMARY OF LOAN LOSS EXPERIENCE

Loan loss experience for each reported period, in thousands of dollars, is summarized as follows:

The reserve for loan losses is maintained at the greater of 1.20% of net loans or an amount that bears the same ratio to eligible loans as net charge-offs to average eligible loans over the past six years. In addition, the Asset/ Liability Management Committee and the Loan Committee review the adequacy of the reserve quarterly and make recommendations as to the desired amount of the reserve. Determination of the adequacy of the reserve is based on the above ratios and, but not limited to, considerations of classified and internally-identified problem loans, the current trend in delinquencies, the volume of past-due loans, and current or expected economic conditions

The Board of Directors maintains an independent Loan Review function which has established controls and procedures to monitor loan portfolio risk on an on-going basis. Credit reviews on all major relationships are conducted on a continuous basis as is the monitoring of past-due trends and classified assets. The function utilizes various methodologies in its assessment of the adequacy of the Reserve for Loan Losses. Three primary measurements are reported to the Board of Directors on a quarterly basis, the Graded Loan Method based on a bank-wide risk grading model, the Migration Analysis Method which tracks risk patterns on charged-off loans for the previous 10 years, and the Historical Experience Method based on net charge-offs. Additionally, the function annually conducts an independent economic assessment, addresses portfolio risk by industry concentration, reviews loan policy changes and marketing strategies for any effect on portfolio risk, and conducts tests addressing portfolio performance by type of portfolio, collateral type, and loan officer performance.

Based upon all relevant factors, Management anticipates net charge-offs to be approximately $700 during 2003.

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DEPOSITS

AVERAGE DEPOSITS BY CLASSIFICATION

The following table sets forth the classification of average deposits for the indicated period, in the thousands of dollars:

AVERAGE RATES PAID ON DEPOSITS

The following table sets forth average rates paid on categories of interest-bearing deposits for the periods indicated:

MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE

The following table sets forth the maturity of time deposits of $100,000 or more, in thousands of dollars, at December 31, 2002:

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RETURN ON EQUITY AND ASSETS

The following table presents certain ratios relating to the Company's equity and assets:

SHORT-TERM BORROWINGS

Federal funds purchased and securities sold under repurchase agreements are short-term borrowings which generally mature within 90 days from the dates of issuance. No other category of short-term borrowings had an average balance outstanding during the reported period which represented 30 percent or more of stockholders' equity at the end of the period.

The following is a summary of short-term borrowings at December 31 of each reported period, in thousands of dollars:

The following information relates to short-term borrowings outstanding during 2002, 2001, and 2000:

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ITEM 2.   PROPERTIES

The Company's subsidiary, The Conway National Bank, has eleven permanent offices in Horry County and one permanent office in Georgetown County, for a total of twelve offices. The principal office, located at 1400 Third Avenue in Conway, houses the Bank's administrative offices and data processing facilities. This three-story structure, which was significantly expanded in 1982, contains approximately 33,616 square feet. In addition, the Bank has a 632 square foot building for express banking services adjacent to the principal office. The Bank has a two-story office on Main Street in Conway containing 8,424 square feet. Bank offices are housed in one-story facilities at the Coastal Centre in Conway (3,500 square feet with an adjacent 675 square foot building for express banking services), Red Hill in Conway (3,760 square feet) West Conway in Conway (3,286 square feet) Surfside in Surfside Beach (6,339 square feet), Northside, north of Myrtle Beach (2,432 square feet), Socastee in the southern portion of My rtle Beach (3,498 square feet), Aynor in The Town of Aynor (2,809 square feet), Myrtle Beach in the City of Myrtle Beach (12,000 square feet), Murrells Inlet in Murrells Inlet, Georgetown County (3,600 square feet) and North Myrtle Beach in the City of North Myrtle Beach (3,600 square feet). Of the twelve offices, the bank owns the principal office, the office at Red Hill, West Conway, Surfside Beach, Northside, Main Street, Socastee, Aynor, Myrtle Beach, Murrells Inlet and North Myrtle Beach. One facility, Coastal Centre in Conway, is leased by the Bank under a long-term lease with renewal options. In addition to the existing facilities, the Company has purchased two future office sites. The sites consist of 1.1 acres on Highway 701 north of Conway and 3.24 acres on Highway 9 west of North Myrtle Beach. The company anticipates building offices on the other sites within the next three to five years, depending on market conditions. Additionally, the Bank has contracted to build a new $5.1 million 24,000 sq uare foot banking office at the principal site with plans to convert the existing 33,616 square foot building into an operations center. Anticipated completion of this project is in the fourth quarter of 2003.

ITEM 3.   LEGAL PROCEEDINGS

There were no material legal proceedings against the Company or its subsidiary, The Conway National Bank, as of December 31, 2002.

There were no administrative or judicial proceedings arising under Section 8 of the Federal Deposit Insurance Act.

There were no material proceedings to which any director, officer, or owner of record of more than 5% of the voting securities of the Company or any associate is a party adverse to the Company.

There are other legal proceedings pending against the Company or its subsidiary, The Conway National Bank, in the ordinary course of business. In the opinion of management, based upon the opinion of counsel, liabilities arising from these proceedings, if any, would not have a material adverse effect on the financial position of the Company.

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ITEM 4.   SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On May 14, 2002, at the Annual Meeting of CNB Corporation, the security holders:

1) Nominated and elected five directors to serve for a three-year term; and

2) Ratified the appointment of Elliott Davis, LLC as independent auditors for the
   Company and its subsidiary for the year ending December 31, 2002.

PART II

ITEM 5. MARKET PRICE OF REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS

As of December 31, 2002, there were approximately 725 holders of record of Company stock. There is no established market for shares of Company stock and only limited trading in such shares has occurred since the formation of the Company on June 10, 1985. Most of the limited trading transactions have been effected through the efforts of officers of the Company in matching interested purchasers with shareholders who have expressed an interest in selling their shares of Company stock. Some private trading of Company stock has occurred without any participation in the transaction by the officers of the Company other than to effect the transfer on the Company's shareholder records. Accordingly, management of the Company is not aware of the prices at which all shares of Company stock have traded. The following table sets forth the prices known to management of the Company at which shares of Company stock have traded in each quarter within the two most recent fiscal years.

Holders of shares of Company stock are entitled to such dividends as may be declared from time to time by the Board of Directors of the Company. The Company paid an annual cash dividend of $3.75 per share in 2002, $3.50 per share in 2001, 2000, 1999 and 1998, $3.00 per share in 1997, 1996 and 1995, $2.00 per share in 1994, 1993 and 1992, $1.50 per share in 1991, and $1.00 per share in the years 1985 through 1990. In addition, the Company may from time to time pay a stock dividend. The Company paid a 20% stock dividend in September 2000, a 25% stock dividend in September 1997, a 20% stock dividend in September 1994, a 50% stock dividend in July 1989, a 20% stock dividend in August 1987 and a 15% stock dividend in November 1985. There can be no assurance, however, as to the payment of dividends by the Company in the future since payment will be dependent upon the earnings and financial condition of the Company and the Bank and other related factors.

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ITEM 6. SELECTED FINANCIAL DATA
CNB Corporation
FINANCIAL SUMMARY
(All Dollar Amounts, Except Per Share Data, in Thousands)

The following table sets forth certain selected financial data relating to the Company and subsidiary and is qualified in its entirety by reference to the more detailed financial statements of the Company and subsidiary and notes thereto included elsewhere in this report.

*Restated for a 20% stock dividend issued during 2000.

ITEM 7.  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 Company's financial condition, results of operations, liquidity, and capital resources. The following discussion should be read in conjunction with the Company's financial statements and notes thereto and other detailed information appearing elsewhere in this report.

The Company has adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of the Company's financial statements. The significant accounting policies of the Company are described in the footnotes to the consolidated financial statements.

Certain accounting policies involve significant judgments and assumptions by management which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.

The Company believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of its consolidated financial statements. Refer to the MD&A under Provision and Allowance for Loan Losses section for a detailed description of the Company's estimation process and methodology related to the allowance for loan losses.

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The Company maintains a conservative approach in determining the distribution of assets and liabilities. Loans, net of unearned income, increased .3% from $295,648 at December 31, 2000 to $296,607 at December 31, 2001; and 9.8% from December 31, 2001 to $325,622 at December 31, 2002. Loan growth is attributed to overall business development efforts to meet business and personal loan demand in our market area. Loan demand in our market area declined in 2001 due to recessionary pressures coupled with the effects of the September 11 terrorist attacks on consumer confidence but showed signs of recovery in 2002. Loans, net of unearned income, decreased as a percentage of total assets from 62.8% at year-end 2000 to 58.6% at year-end 2001 and decreased to 57.2% at year-end 2002. Correspondingly, investment securities and federal funds sold increased as a percentage of total assets from 29.9% at year-end 2000 to 32.8% at year-end 2001 and increased to 35.5% at year-end 2002 as investments have been utilized to bal ance the growth in loan outstandings. Investments and federal funds sold provide for an adequate supply of secondary liquidity. Year-end other assets as a percentage of total assets increased from 7.3% in 2000 to 8.6% in 2001 due to the purchase of the existing Surfside Beach office site in early 2001. Management has sought to build the deposit base with stable, relatively non-interest-rate sensitive deposits by offering the small to medium account holders a wide array of deposit instruments at competitive rates. Non-interest-bearing demand deposits have grown from 16.2% at December 31, 2000 to 17.6% at December 31, 2001 and 2002. Demand deposits are expected to decline over the long-term as more customers utilize interest-bearing deposit and repo accounts. Interest-bearing liabilities as a percentage of total assets have declined from 72.3% at December 31, 2000 to 70.5% at December 31, 2001 and 70.4% at December 31, 2002.

The following table sets forth the percentage relationship to total assets of significant components of the Company's balance sheet as of December 31, 2002, 2001 and 2000:

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CNB Corporation and subsidiary recognized earnings in 2002, 2001 and 2000 of $7,182, $6,435,and $6,311, respectively, resulting in a return on average assets of 1.31%, 1.28%, and 1.36% and a return on average stockholders' equity of 12.19%, 12.25% and 13.42%. The earnings were primarily attributable to favorable 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). These strong earnings, coupled with a conservative dividend policy, have supplied the necessary capital funds to support bank operations. Total assets were $569,490 at December 31, 2002 as compared to $505,725 at December 31, 2001 and $471,076 at December 31, 2000. The following table sets forth the financial highlights for fiscal years 2002, 2001, and 2000.

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

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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 investment securities, and interest paid on deposits and borrowed funds. Net interest income is affected by the interest rates earned or paid and by volume changes in loans, investment securities, deposits, and borrowed funds.

The Bank maintained net interest margins in 2002, 2001 and 2000 of 4.5%, 4.2%, and 4.6%, respectively, as compared to management's long-term target of 4.5%. The 2001 net interest margin fell to 4.2% 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 shrank from $19,847 in 2000 to $19,621 in 2001 and grew to 22,859 in 2002. During the three-year period, total fully-tax-equivalent interest income decreased by .7% from $34,672 in 2000 to $34,443 in 2001 and decreased 7.3% in 2002 to $31,927. Over the same period, total interest expense showed little change from $14,825 in 2000 to $14,822 in 2001 and decreased 38.8% to $9,068 in 2002. Fully-tax-equivalent net interest income as a percentage of average total earning assets was 4.6% in 2000, 4.2% in 2001 and 4.5% in 2002.

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, 2001, and 2000. 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 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 manner that will limit interest rate risk and thus stabilize long-run earning power. The following table sets forth the Bank's static gap rate sensitivity position at each of the time intervals indicated. The table illustrates the Bank's rate sensitivity position on specific dates and may not be indicative of the position at other points in time. Management believes that a rise or fall in interest rates will not materially effect earnings.

Interest Rate Sensitivity Analysis

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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 during the ongoing in-house problem loan identification process. The Company includes the provisions of SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", as amended by SFAS 118, in the allowance for loan losses (see NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES). The provision for possible loan losses was $985 in 2002, $625 in 2001 and $820 in 2000. Net loan charge-offs totalled $593 in 2002, $644 in 2001, and $489 in 2000 with net charge-offs being centered in consumer purpose loans during each period. The reserve for possible loan losses as a percentage of net loans was 1.29% at December 31, 200 2, 1.28% at December 31, 2001, and 1.30% at December 31, 2000. The decreased provision during 2001 was due to a decrease in the rate of loan growth.

Securities Transactions - Net unrealized gains/(losses) in the investment securities portfolio were $7,170 at December 31, 2002, $2,999 at December 31, 2001, and $455 at December 31, 2000. The market value of investment securities rose in 2001 and 2002 as overall market rates declined. No security gains/(losses) were taken in 2000, but gains of $169 and $183 were taken in 2001 and 2002 on sales of $11,213 and $6,199 in short-term available-for-sale securities, respectively. 2001 gains were taken while selling securities near maturity and investing further out on a steeply-sloping yield curve. 2002 gains were taken to supplement liquidity.

Other Income -  Other income, net of any securities gains/(losses), increased by 13.3% from $4,562 in 2000 to $5,168 in 2001 and grew 2.2% from $5,168 in 2001 to $5,280 in 2002. Other income rose in 2000, 2001 and 2002 due to continued growth in deposit account activity, higher merchant discount income and increased 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 4.6% from $13,961 in 2000 to $14,606 in 2001 and 10.6% from $14,606 in 2001 to $16,159 in 2002. The components of other expenses are salaries and employee benefits of $8,620, $9,282, and $10,147; occupancy and furniture and equipment expenses of $1,821, $1,876, and $2,134; and other operating expenses of $3,520, $3,448, and $3,878 for 2000, 2001, and 2002, respectively. The increase in salaries and employee benefits reflects compensation increments, the increased costs of providing employee benefits, and an increase from 210 to 230 full-time equivalent employees over the three-year period. The addition of the Murrells Inlet office in 2000, the 2000 purchase of the Surfside Office which was previously a leasehold interest, and the addition of the North Myrtle Beach Office in 2002 impacted occupancy and furniture and equipment expense. Looking ahead, non-interest expense should grow in 2003 due to the construction of the new $5.1 million Main Office Banking Center.

Income Taxes - Provisions for income taxes decreased 3.7% from $2,920 in 2000 to $2,812 in 2001 and increased 21.4% from $2,812 in 2001 to $3,413 in 2002. The decrease in income taxes in 2001 was due to only a slight increase in income before income taxes coupled with a 20.9% increase in nontaxable income from $770 in 2000 to $931 in 2001. Income tax liability increased in 2002 due to a 14.6% increase in income before income taxes from $9,247 in 2001 to $10,595 in 2002.

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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; has the ability, on a short-term basis, to borrow funds from the Federal Reserve System; and has a line of credit from the Federal Home Loan Bank of Atlanta (see NOTE 8-LINES OF CREDIT). The Company has cash balances on hand of $5,719, $5,248, and $4,776 at December 31, 2002, 2001, and 2000 with liabilities, consisting of cash dividends payable, totalling $2,690, $2,507, and $2,502, respectively. Management feels that liquidity sources are more than adequate to meet funding needs.

OFF-BALANCE SHEET RISK

The Company, through the operations of the Bank, makes contractual commitments to extend credit in the ordinary course of business. These commitments are legally binding agreements to lend money to customers of the Bank at predetermined interest rates for a specified period of time. In addition to commitments to extend credit, the Bank also issues standby letters of credit which are assurances to a third party that they will not suffer a loss if the Bank's customer fails to meet its contractual obligation to a third party. The Bank may also have outstanding commitments to buy/sell securities. At December 31, 2002, the Bank had issued commitments to extend credit of $37.5 million, standby letters of credit of $1.1 million, and commitments to purchase securities of $7 million (see NOTE 10-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK). The majority of the commitments and standby letters of credit typically mature within one year and past experience indicates that many of the com mitments and standby letters of credit will expire unused. However, through its various sources of liquidity, the Bank believes that it will have the necessary resources to meet these obligations should the need arise.

Neither the Company nor the Bank is involved in other off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements, or transactions that could result in liquidity needs or other commitments or significantly impact earnings.

Obligations under noncancelable operating lease agreements totaled $25 thousand at December 31, 2002. These obligations are payable over several years as shown in NOTE 11 - COMMITMENTS AND CONTINGENCIES.

Total stockholders' equity was $61,125, $53,996, and $48,606 at December 31, 2002, 2001, and 2000, representing 10.73%, 10.68%, and 10.32% of total assets, respectively. At December 31, 2002, the Bank exceeds quantitative measures established by regulation to ensure capital adequacy (see NOTE 15 - REGULATORY MATTERS). Capital is considered sufficient by management to meet current and prospective capital requirements and to support anticipated growth in bank operations.

Inflation normally has the effect of accelerating the growth of both a bank's assets and liabilities. One result of this inflationary effect is an increased need for equity capital. Income is also affected by inflation. While interest rates have traditionally moved with inflation, the effect on net income is diminished because both interest earned on assets and interest paid on liabilities vary directly with each other. In some cases, however, rate increases are delayed on fixed-rate instruments. Loan demand normally declines during periods of high inflation. Inflation has a direct impact on the Bank's non-interest expense. The Bank responds to inflation changes through re-adjusting non-interest income by repricing services.

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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 other 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 that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. (See NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES).

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.

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.

a) Based on their evaluation of the Company's disclosure controls and procedures as of February 11, 2003, the Company's chief executive officer and chief financial officer concluded that the effectiveness of such controls and procedures was adequate.

(b) There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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35

The Directors and Stockholders
CNB Corporation
Conway, South Carolina

     We have audited the accompanying consolidated balance sheets of CNB Corporation and Subsidiary as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders' equity, comprehensive income and cash flows for each of the years in the three year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CNB Corporation and Subsidiary at December 31, 2002 and 2001 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

Elliott Davis, LLC                                      

Greenville, South Carolina
January 17, 2003

Internationally - Moore Stephens Elliott Davis, LLC

36

The accompanying notes are an integral part of these consolidated financial statements.

37

The accompanying notes are an integral part of these consolidated financial statements.
38

The accompanying notes are an integral part of these consolidated financial statements.

39.

The accompanying notes are an integral part of these consolidated financial statements

41

                                                                                       43                                                                 (Continued)