CNB CORP /MI/ - FORM 10-K - EX-13

Attached files

file	filename
EX-21 - EX-21 - CNB CORP /MI/	k49030exv21.htm
EX-23 - EX-23 - CNB CORP /MI/	k49030exv23.htm
EX-31.2 - EX-31.2 - CNB CORP /MI/	k49030exv31w2.htm
EX-32.1 - EX-32.1 - CNB CORP /MI/	k49030exv32w1.htm
EX-32.2 - EX-32.2 - CNB CORP /MI/	k49030exv32w2.htm
EX-31.1 - EX-31.1 - CNB CORP /MI/	k49030exv31w1.htm
10-K - FORM 10-K - CNB CORP /MI/	k49030e10vk.htm

EXHIBIT 13

CNB CORPORATION

ANNUAL REPORT
December 31, 2009, 2008 and 2007

CNB CORPORATION
ANNUAL REPORT
December 31, 2009, 2008 and 2007

CONTENTS


FINANCIAL HIGHLIGHTS			1

CONSOLIDATED BALANCE SHEETS			2

CONSOLIDATED STATEMENTS OF INCOME			3

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY			4

CONSOLIDATED STATEMENTS OF CASH FLOWS			5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			36

MANAGEMENT’S DISCUSSION AND ANALYSIS			37

OFFICERS, COMMUNITY ADVISORS AND STAFF			51

DIRECTORS AND DIRECTORS EMERITI			53

CNB CORPORATION

FINANCIAL HIGHLIGHTS


	2009			2008			2007			2006			2005
							(In thousand,except per share data)
Operating Statistics
Interest income	$	12,168		$	14,357		$	16,180		$	14,969		$	13,356
Interest expense		3,500			4,871			5,858			4,672			3,132
Net interest income		8,668			9,486			10,322			10,297			10,224
Income/(loss) before income taxes		1,879			(5,743	)		4,170			4,649			4,528
Net income/(loss)		2,115			(5,225	)		3,088			3,323			3,288
Basic earnings/(loss) per share		1.74			(4.31	)		2.51			2.68			2.66
Diluted earnings/(loss) per share		1.74			(4.31	)		2.50			2.68			2.65
Return/(loss) on average assets (ROA)		0.82	%		(1.99	)%		1.19	%		1.31	%		1.28	%
Return/(loss) on average shareholders’ equity (ROE)		11.19	%		(21.73	)%		12.18	%		13.09	%		13.23	%

Balance Sheet Statistics
Securities	$	56,783		$	49,329		$	50,290		$	56,882		$	74,485
Total loans		151,207			161,848			174,652			167,234			156,326
Deposits		224,558			230,543			225,026			221,365			223,437
Total assets		249,502			253,916			255,193			251,900			252,731

Capital Statistics
Shareholders’ equity	$	20,320		$	17,540		$	24,400		$	24,998		$	24,499
Book value per share		16.74			14.45			20.11			20.17			19.80
Cash dividends per share		—			0.72			2.28			2.28			2.20
Dividend payout ratio		—	%		16.71	%		90.50	%		85.00	%		82.79	%
Average equity to average total assets		7.34	%		9.18	%		9.79	%		10.01	%		9.66	%

Credit Statistics
Net charge-offs to total loans		0.57	%		0.93	%		0.06	%		0.05	%		0.01	%
Nonperforming loans to total loans		5.59	%		3.73	%		0.70	%		0.11	%		0.16	%
Allowance for loan losses to total loans		1.90	%		1.23	%		0.96	%		0.90	%		0.93	%
Allowance for loan losses to nonperforming loans		0.34	x		0.33	x		1.37	x		8.46	x		5.72	x

CNB CORPORATION

CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008


	2009			2008
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	4,055		$	5,188
Interest-bearing deposits with other financial institutions		13,192			—
Federal funds sold		—			18,098

Total cash and cash equivalents		17,247			23,286

Time deposits with other financial institutions		8,669			5,757

Securities available for sale		45,473			37,438
Securities held to maturity		10,302			10,883
Other securities		1,008			1,008

Loans held for sale		—			201
Loans, net of allowance for loan losses of $2,863 in 2009 and $1,996 in 2008		148,171			159,569

Premises and equipment, net		5,921			6,019
Other assets		12,711			9,755


Total assets	$	249,502		$	253,916


LIABILITIES
Deposits:
Noninterest-bearing	$	40,016		$	37,163
Interest-bearing		184,542			193,380

Total deposits		224,558			230,543
Other liabilities		4,624			5,833

Total liabilities		229,182			236,376

SHAREHOLDERS’ EQUITY
Common stock — $2.50 par value; 2,000,000 shares authorized; 1,213,598 shares issued and outstanding in 2009 and 2008		3,034			3,034
Additional paid-in capital		19,509			19,509
Retained earnings (deficit)		(1,456	)		(3,571	)
Accumulated other comprehensive loss, net of tax		(767	)		(1,432	)

Total shareholders’ equity		20,320			17,540


Total liabilities and shareholders’ equity	$	249,502		$	253,916

See accompanying notes to consolidated financial statements.

CNB CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2009, 2008 and 2007


	2009			2008			2007
	(In thousands, except per share data)
INTEREST INCOME
Loans, including fees	$	10,097		$	11,653		$	12,977
Securities:
Taxable		1,295			1,718			2,054
Tax exempt		541			553			489
Other interest income		235			433			660

Total interest income		12,168			14,357			16,180

INTEREST EXPENSE ON DEPOSITS		3,500			4,871			5,858


NET INTEREST INCOME		8,668			9,486			10,322

Provision for loan losses		1,725			1,831			275


NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		6,943			7,655			10,047


NONINTEREST INCOME
Service charges and fees		1,118			1,200			1,194
Net realized gains from sales of loans		429			128			154
Loan servicing fees, net of amortization		(31	)		117			127
Gain on the sale of other real estate owned		3			304			—
Gain (loss) on the sale of premises and equipment		(2	)		—			(12	)
Gains on the sale of securities		1,799			—			—
Other income		355			283			241

Total noninterest income		3,671			2,032			1,704

NONINTEREST EXPENSES
Salaries and employee benefits		3,251			3,608			3,727
Deferred compensation		321			344			311
Pension		303			142			103
Hospitalization		576			648			567
Occupancy		1,053			1,098			1,152
Legal and professional		605			493			396
FDIC Premiums		623			149			26
ORE losses and carrying costs		739			605			73
Securities impairment write-down		37			7,107			—
Other expenses		1,227			1,236			1,226

Total noninterest expense		8,735			15,430			7,581


INCOME (LOSS) BEFORE INCOME TAXES		1,879			(5,743	)		4,170

Income tax expense (benefit)		(236	)		(518	)		1,082


NET INCOME (LOSS)	$	2,115		$	(5,225	)	$	3,088


Basic earnings (loss) per share	$	1.74		$	(4.31	)	$	2.51
Diluted earnings (loss) per share		1.74			(4.31	)		2.50

See accompanying notes to consolidated financial statements.

CNB CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2009, 2008 and 2007


													Accumulated
													Other
													Comprehensive
							Additional			Retained			Income (Loss),			Total
	Outstanding			Common			Paid-In			Earnings			Net			Shareholders’
	Shares			Stock			Capital			(Deficit)			of Tax			Equity
				(Dollars in thousands, except share data)
Balance January 1, 2007		1,239,512		$	3,099		$	20,482		$	2,235		$	(818	)	$	24,998

Net income											3,088						3,088
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities, net of tax of $115														222			222
Defined benefit pension plan:
Net gain/loss during the period, net of tax of $36														(70	)		(70	)
Transition adjustment recognized, net of tax of $3														(6	)		(6	)
Prior service costs recognized														1			1

Total comprehensive income																	3,235
Cash dividends — $2.28 per share											(2,795	)					(2,795	)
Purchase and retirement of common stock		(25,880	)		(65	)		(973	)								(1,038	)


Balance December 31, 2007		1,213,632			3,034			19,509			2,528			(671	)		24,400

Net loss											(5,225	)					(5,225	)
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities, net of tax of $61														118			118
Defined benefit pension plan:
Net gain/loss during the period, net of tax of $452														(877	)		(877	)
Transition adjustment recognized, net of tax of $1														(3	)		(3	)
Prior service costs recognized														1			1

Total comprehensive loss																	(5,986	)
Cash dividends — $0.72 per share											(874	)					(874	)
Purchase and retirement of common stock		(34	)														—


Balance December 31, 2008		1,213,598			3,034			19,509			(3,571	)		(1,432	)		17,540

Net income											2,115						2,115
Other comprehensive income (loss):
Change in unrealized gains (losses) on available for sale securities, net of tax of $103														196			196
Defined benefit pension plan:
Net gain/loss during the period, net of tax of $241														467			467
Prior service costs recognized														2			2

Total comprehensive income																	2,780

Balance December 31, 2009		1,213,598		$	3,034		$	19,509		$	(1,456	)	$	(767	)	$	20,320

See accompanying notes to consolidated financial statements.

CNB CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2009, 2008 and 2007


	2009			2008			2007
	(In thousands)
Cash flows from operating activities
Net income (loss)	$	2,115		$	(5,225	)	$	3,088
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation, amortization and accretion, net		602			630			119
Provision for loan losses		1,725			1,831			275
Loans originated for sale		(23,116	)		(5,880	)		(9,114	)
Proceeds from sales of loans originated for sale		23,375			5,736			9,012
Gain on sales of investment securities		(1,799	)		—			—
Gain on sales of loans		(429	)		(128	)		(154	)
Gain on sales of other real estate owned properties		(3	)		(304	)		—
Other real estate owned writedowns/losses		430			316			—
Loss on premises and equipment		2			—			12
Net losses on impairment of investment securities		37			7,107			—
Increase (decrease) in deferred tax benefit		157			1,050			—
(Increase) decrease in other assets		(2,087	)		(405	)		162
Increase(decrease) in other liabilities		(498	)		284			137

Total adjustments		(1,604	)		10,237			449

Net cash provided by operating activities		511			5,012			3,537

Cash flows from investing activities
Proceeds from sales of securities available for sale		5,534			—			—
Proceeds from maturities of securities available for sale		35,356			25,207			29,106
Purchase of securities available for sale		(45,935	)		(29,181	)		(17,465	)
Proceeds from maturities of securities held to maturity		3,659			4,483			2,657
Purchase of securities held to maturity		(4,087	)		(6,577	)		(6,903	)
Proceeds from maturities of time deposits		3,492			496			—
Purchase of time deposits		(6,404	)		(6,253	)		—
Net change in portfolio loans		8,246			9,625			(7,955	)
Premises and equipment expenditures		(431	)		(195	)		(324	)
Proceeds from the sale of premises and equipment		5			—			—

Net cash used in investing activities		(565	)		(2,395	)		(884	)

Cash flows from financing activities
Net increase (decrease) in deposits		(5,985	)		5,517			3,661
Dividends paid		—			(2,120	)		(2,816	)
Purchases of common stock		—			—			(1,038	)

Net cash provided by (used) in financing activities		(5,985	)		3,397			(193	)

Net change in cash and cash equivalents		(6,039	)		6,014			2,460

Cash and cash equivalents at beginning of year		23,286			17,272			14,812


Cash and cash equivalents at end of year	$	17,247		$	23,286		$	17,272


Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	3,560		$	4,941		$	5,847
Income taxes		286			342			1,063
Non-cash transactions:
Transfer from loans to other real estate owned		2,077			2,563			606

See accompanying notes to consolidated financial statements.

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements for 2008 and 2007 include CNB Corporation (the Company) and its wholly-owned subsidiary, Citizens National Bank of Cheboygan and the Bank’s wholly-owned subsidiary, CNB Mortgage Corporation (the Bank and the Mortgage Corporation are hereafter collectively referred to as the Bank). All significant intercompany accounts and transactions are eliminated in consolidation. In November 2009, Citizens National Bank of Cheboygan and CNB Mortgage Corporation merged leaving Citizens National Bank of Cheboygan as the survivor. The consolidated financial statements for 2009 include CNB Corporation and its wholly-owned subsidiary, Citizens National Bank of Cheboygan.

Nature of Operations and Concentrations of Credit Risk: The Company is a one-bank holding company which conducts no direct business activities. All business activities are performed by the Bank.

The Bank provides a full range of banking services to individuals, agricultural businesses, commercial businesses and light industries located in its service area. It maintains a diversified loan portfolio, including loans to individuals for home mortgages, automobiles, personal expenditures and loans to business enterprises for current operations and expansion. The Bank offers a variety of deposit accounts, including checking, savings, money market, individual retirement accounts and certificates of deposit.

The principal markets for the Bank’s financial services are the Michigan communities in which the Bank is located and the area immediately surrounding these communities. The Bank serves these markets through seven offices located in Cheboygan, Presque Isle and Emmet Counties in northern lower Michigan.

Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, pension obligation, the value of mortgage servicing rights, other real estate owned properties and fair values of financial instruments are particularly subject to change in the near term.

Cash Flow Reporting: Cash and cash equivalents include cash and due from banks, interest-bearing deposits with other financial institutions and federal funds sold. Net cash flows are reported for customer loan and deposit transactions.

Securities: Securities are classified as held to maturity when management has the positive intent and ability to hold them to maturity and carried at amortized cost. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with temporary unrealized holding gains and losses reported in shareholders’ equity, net of tax. Declines in the fair value of securities below their cost that are

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

other than temporary are reflected as realized losses. In estimating other-than-temporary charges, management considers: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the Company’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

Other securities, which include Federal Reserve Bank stock and Federal Home Loan Bank stock are carried at cost.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market on an aggregate basis.

Loan Income: Interest income is earned on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are past due over 90 days (180 days for residential mortgages).

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance balance required considering past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the assets’ useful lives. For furniture and fixtures the useful life ranges from three to five years while the useful life for buildings is thirty-nine years. These assets are reviewed for impairment when events indicate the carrying amount may not be recoverable. Maintenance and repairs are charged to expense and improvements are capitalized.

Other Real Estate Owned: Real estate properties acquired through, or in lieu of, loan foreclosure are initially recorded at the lower of the loan carrying amount or fair value at acquisition. Any reduction to fair value from the carrying value of the related loan is accounted for as a loan loss. After acquisition, a valuation allowance reduces the reported amount to the lower of the initial amount or fair value less costs to sell. Expenses, gains and losses on disposition, and changes in the valuation allowance are reported in other expenses.

Servicing Rights: Servicing rights represent the allocated value of servicing rights retained on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance.

Company Owned Life Insurance: The Company has purchased life insurance policies on certain directors and executives. Company owned life insurance is recorded at its cash surrender value, or the amount that can be effectively realized at the balance sheet date. At December 31, 2009 and 2008, the cash surrender value of the underlying policies was $3,500,000 and $3,360,000, which is included in other assets on the balance sheet.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Employee Benefits: A defined benefit pension plan covers substantially all employees, with benefits based on years of service and compensation prior to retirement. Contributions to the plan are based on the maximum amount deductible for income tax purposes. The plan was amended to no longer accept new participants as of December 31, 2008. Current participants will receive benefits as originally outlined in the plan. A 401(k) savings and retirement plan has also been established and covers substantially all employees. Contributions to the 401(k) plan are expensed as made.

Stock Compensation: The Company records compensation costs for the fair value of stock based compensation. The stock option plan, created in 1996, ended in May 2006. A new stock option plan has not been adopted and no stock compensation was reported in 2007, 2008 or 2009.

Income Taxes: Income tax expense is the sum of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings Per Share: Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share shows the dilutive effect of additional potential shares issuable under stock options.

Financial Instruments with Off-Balance-Sheet Risk: The Company, in the normal course of business, makes commitments to extend credit which are not reflected in the consolidated financial statements. A summary of these commitments is disclosed in Note 13.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes the net change in unrealized gains (loss) on securities available for sale, and components of the defined benefit pension obligation not yet recognized as components of periodic pension expense, including unrecognized gains or losses, prior service cost, and the unrecognized transition asset. These items are reported in comprehensive income net of tax.

Accumulated other comprehensive income, a component of stockholders’ equity, includes unrealized gains and losses on securities available for sale and amounts related to the defined benefit pension plan as follows at December 31:


	2009			2008
	(In thousands)
Net unrealized gains on available for sale securities	$	625		$	326
Pension components:
Unrecognized net gains (losses)		(1,755	)		(2,463	)
Unrecognized transition asset		—			—
Unrecognized prior service cost		(30	)		(32	)
Tax effects		393			737

Comprehensive income	$	(767	)	$	(1,432	)

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Adoption of New Accounting Standards:

On June 29, 2009, the Financial Accounting Standards Board (FASB) issued an accounting pronouncement establishing the FASB Accounting Standards Codification (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. Other than resolving certain minor inconsistencies in current U.S. generally accepted accounting principles (GAAP), the ASC is not intended to change GAAP, but rather to make it easier to review and research GAAP applicable to a particular transaction or specific accounting issue.

ASC Topic 820, Fair Value Measurement and Disclosure. In April 2009, an amendment to the accounting and reporting standards of fair value measurements and disclosures was issued. The amendment provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This amendment also provides guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of this standard did not have an effect on the Corporation’s financial statements.

ASC Topic 855, Subsequent Events. On May 28, 2009, the FASB issued an accounting pronouncement establishing general standards of accounting for and disclosure of subsequent events, which are events occurring after the balance sheet date but before the date the financial statements are issued or available to be issued. In particular, the pronouncement requires entities to recognize in the financial statements the effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities may not recognize the impact of subsequent events that provide evidence about conditions that did not exist at the balance sheet date but arose after that date.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 2 — SECURITIES

The year end fair values and related gross unrealized gains and losses recognized in accumulated other comprehensive loss for securities available for sale, were as follows:


				Gross		Gross
	Fair			Unrealized		Unrealized
Available for Sale	Value			Gains		Losses
			(In thousands)
2009
U.S. Government and agency	$	26,312		$	179	$	—
Mortgage-backed		9,259			136		—
State and municipal		7,836			285		(21	)
Corporate Obligations		1,020			22		—
Auction rate securities		1,000			—		—
Preferred shares		46			24		—

	$	45,473		$	646	$	(21	)


2008
U.S. Government and agency	$	17,061		$	265	$	—
Mortgage-backed		9,629			78		(38	)
State and municipal		5,955			77		(56	)
Auction rate securities		4,793			—		—

	$	37,438		$	420	$	(94	)

The year end carrying amount, unrecognized gains and losses, and fair value of securities held to maturity were as follows:


			Gross		Gross
	Carrying		Unrecognized		Unrecognized			Fair
Held to Maturity	Amount		Gains		Losses			Value
			(In thousands)
2009
State and municipal	$	10,302	$	556	$	(21	)	$	10,837

2008
U.S. Government and agency	$	2,001	$	19	$	—		$	2,020
State and municipal		8,882		236		(19	)		9,099

	$	10,883	$	255	$	(19	)	$	11,119

At December 31, 2008 the Company held six investments in its auction rate securities investment category. The fair value of these securities was less than amortized cost. Pricing of auction rate securities had suffered from the absence of a liquid functioning secondary market, uncertainty regarding potential losses of financial companies, collateral deficiencies or other challenges encountered by the issuer. At the time, the decline in fair value was not expected to

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 2 — SECURITIES (Continued)

be recovered within a reasonable timeframe based upon available information. For these reasons, during 2008 the Company’s auction rate securities recognized an other-than-temporary impairment charge of $7.1 million. These investment securities were written down through the income statement and a new cost basis was established. The underlying asset for these investments was preferred stock whose fair values continued to be susceptible to change.

During 2009, the Company received the underlying asset of preferred stock from its auction rate security investment in the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The Company is now holding this investment as preferred shares with a fair value of $46,000. This investment had an original cost of $2.0 million. The loss in value of this investment occurred on September 7, 2008 when the U.S. Treasury Department announced a plan to place Freddie Mac into conservatorship. The Company intends to hold this investment for an undetermined amount of time.

During 2009, the Company sold four of its holdings in auction rate securities. Proceeds from the sales totaled $5.5 million. These sales resulted in gains of $1.8 million over the recorded book value.

The Company continues to hold one investment security in the auction rate securities category.

There were no sales of securities during 2008 or 2007.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 2 — SECURITIES (Continued)

Securities with unrealized losses at year end 2009 and 2008, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):


	Less Than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
2009	Value		Loss			Value		Loss		Value		Loss
State and municipal	$	2,198	$	(42	)	$	—	$	—	$	2,198	$	(42	)


	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
2008	Value		Loss			Value		Loss			Value		Loss
Mortgage-backed	$	2,895	$	(37	)	$	1,389	$	(1	)	$	4,284	$	(38	)
State and municipal		1,476		(69	)		999		(6	)		2,475		(75	)


Total temporarily impaired	$	4,371	$	(106	)	$	2,388	$	(7	)	$	6,759	$	(113	)

These unrealized losses remaining on the balance sheet at year end 2009 and 2008 have not been recognized into income because they are not considered to be other-than-temporary. Management considers the unrealized losses to be market driven, resulting from changes in interest rates, and the Company has the intent and ability to hold the securities until their value recovers.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 2 — SECURITIES (Continued)

Contractual maturities of debt securities at year end 2009 are shown below (in thousands). Expected maturities may differ from contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


	Available for sale		Held to Maturity
	Fair		Carrying		Fair
	Value		Amount		Value
Due in one year or less	$	13,460	$	3,380	$	3,412
Due from one to five years		19,083		4,079		4,456
Due from five to ten years		1,905		2,123		2,165
Due after ten years		720		720		804

		35,168		10,302		10,837

Mortgage-backed		9,259		—		—
Auction rate securities		1,000		—		—
Preferred shares		46		—		—

	$	45,473	$	10,302	$	10,837

Securities pledged at December 31, 2009 totaled $10.1 million to secure public deposits and for other purposes. There were no securities pledged at December 31, 2008 to secure public deposits and for other purposes.

The Company held securities exceeding 10% of shareholders’ equity from the following states (including its political subdivisions) at December 31:


	2009		2008
	(In thousands)
Michigan	$	13,626	$	9,291

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 3 — LOANS

Year end loans were as follows:


	2009			2008
	(In thousands)
Residential real estate	$	77,152		$	77,533
Consumer		7,002			7,518
Commercial real estate		60,150			67,282
Commercial		6,903			9,314

		151,207			161,647
Deferred loan origination fees, net		(173	)		(82	)
Allowance for loan losses		(2,863	)		(1,996	)


	$	148,171		$	159,569

Activity in the allowance for loan losses is summarized as follows:


	2009			2008			2007
				(In thousands)
Beginning balance	$	1,996		$	1,670		$	1,498
Provision for loan losses		1,725			1,831			275
Charge-offs		(958	)		(1,551	)		(126	)
Recoveries		100			46			23


Ending Balance	$	2,863		$	1,996		$	1,670

There were thirty loans in the real estate mortgage and commercial loan portfolios that were considered impaired as of year end 2009. Ten of the thirty loans considered impaired have a valuation allowance against probable losses.


	Impaired Loans						Valuation Allowance
	2009		2008		2007		2009		2008		2007
			(In thousands)
Balances — December 31:
Impaired loans with valuation allowance	$	5,114	$	1,403	$	518	$	1,880	$	446	$	83
Impaired loans with no valuation allowance		4,011		5,646		707		—		—		—

Total impaired loans	$	9,125	$	7,049	$	1,225	$	1,880	$	446	$	83


Income recorded on loans while considered impaired	$	63	$	104	$	52

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 3 — LOANS (Continued)

Nonperforming loans were as follows:


	2009		2008
	(In thousands)
Loans past due over 90 days still on accrual	$	83	$	295
Nonaccrual loans		8,095		5,356
Troubled debt restructurings		260		393


Total nonperforming loans	$	8,438	$	6,044

NOTE 4 — LOAN SERVICING

For the three years ended December 31, activity for capitalized mortgage servicing rights was as follows:


	2009			2008			2007
	(In thousands)
Mortgage Servicing Rights:
Beginning of year	$	599		$	664		$	618
Additions		170			72			106
Amortization		(210	)		(69	)		(60	)
Impairment valuation allowance		62			(68	)		—


End of year	$	621		$	599		$	664


Loans servicing for others that have servicing rights capitalized	$	73,142		$	73,009		$	74,849

The fair value of mortgage servicing rights is estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration the expected prepayment rates and other economic factors that are based on current market conditions. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. The fair value calculation is performed by a third-party model. At December 31, 2008 the mortgage servicing rights had a valuation impairment of $68,000. At December 21, 2009 $62,000 of the impairment had been recovered. There was no recorded impairment allowance during 2007.

Mortgage loans serviced for others are not reported as assets. Related escrow deposit balances were $114,000 and $105,000 at year end 2009 and 2008.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 5 — PREMISES AND EQUIPMENT

Year end premises and equipment were as follows:


	2008			2008
	(In thousands)
Real estate and buildings	$	7,244		$	7,156
Furniture and fixtures		4,032			4,168

		11,276			11,324
Less accumulated depreciation		(5,355	)		(5,305	)


	$	5,921		$	6,019

Depreciation expense amounted to $522,000, $530,000 and $585,000 in 2009, 2008 and 2007.

NOTE 6 — OTHER REAL ESTATE OWNED

During 2009 and 2008 the Bank foreclosed on certain loans secured by real estate and transferred this real estate collateral to other real estate in each of those years. At the time of acquisition, amounts were charged-off against the allowance for loan losses to bring the carrying amount of these properties to their estimated fair value, less estimated costs to sell. Gains or losses on the sale of other real estate are included in the non-interest income and non-interest expense, respectively, on the income statement.


	2009			2008
	(In thousands)
Balance at beginning of year	$	1,762		$	1,446
Transfers from loans		2,077			2,563
Sales		(750	)		(1,275	)
Charge-off and write-down adjustments		(419	)		(494	)
Donations		(10	)		—
Proceeds from insurance claims		—			(478	)


Balance at end of year	$	2,660		$	1,762

Management periodically reviews the other real estate owned properties for a valuation allowance to determine if the values of these properties have declined since the date of acquisition.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 7 — DEPOSITS

Time deposit accounts individually exceeding $100,000 total $25,148,000 and $27,496,000 at year end 2009 and 2008.

At year end 2009, the scheduled maturities of time deposits are as follows:


	(In thousands)
2010	$	50,022
2011		20,945
2012		3,267
2013		5,801
2014		611


	$	80,646

NOTE 8 — EMPLOYEE BENEFITS

Defined Benefit Retirement Plan: The Company has a defined benefit, noncontributory pension plan which provides retirement benefits for essentially all employees. The plan was amended to no longer accept new participants as of December 31, 2008. Current participants will receive benefits as originally outlined in the plan. The Company uses a December 31 measurement date for its plan. The following sets forth the plan’s funded status and amounts recognized in the financial statements:


	2009			2008
	(In thousands)
Change in benefit obligation:
Beginning benefit obligation	$	(4,589	)	$	(4,288	)
Service cost		(178	)		(170	)
Interest cost		(296	)		(276	)
Actuarial loss (gain)		241			66
Benefits paid		619			79

Ending benefit obligation		(4,203	)		(4,589	)

Change in plan assets, at fair value:
Beginning plan assets		3,293			4,240
Actual return		638			(1,088	)
Employer contribution		600			220
Benefits paid		(619	)		(79	)

Ending plan assets		3,912			3,293


Funded status	$	(291	)	$	(1,296	)

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 8 — EMPLOYEE BENEFITS (Continued)

Amounts recognized in the balance sheet consist of:


	2009			2008
	(In thousands)
Other assets	$	—		$	—
Accrued pension costs — other liabilities		(291	)		(1,296	)

The accumulated benefit obligation for the defined benefit pension plan was $3,283,000 and $3,467,000 at year end 2009 and 2008, respectively.

Components of net periodic benefit cost are as follows:


	2009			2008			2007
	(In thousands)
Service cost	$	178		$	170		$	164
Interest cost on benefit obligation		296			276			301
Expected return on plan assets		(284	)		(344	)		(385	)
Net amortization and deferral		113			40			23


Pension expense	$	303		$	142		$	103

The estimated net (gain)/loss and prior service costs that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $111,000 and $3,000.

The following weighted-average assumptions were used to determine benefit obligations at year end and net cost:


	2009			2008			2007
Weighted Average discount rate		6.50	%		6.50	%		6.50	%
Rate of increase in future compensation		3.00	%		3.00	%		3.00	%
Expected long term return on plan assets		8.00	%		8.00	%		8.00	%

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 8 — EMPLOYEE BENEFITS (Continued)

The Company’s pension plan asset allocation at year end 2009 and 2008, target allocation for 2010, and expected long-term rate of return by asset category are as follows:


				Percentage of Plan						Weighted-
	Target			Assets						Average Expected
	Allocation			at Year end						Long-Term Rate
Asset Category	2010			2009			2008			of Return - 2009
Equity securities		70.0	%		65.1	%		53.4	%		9.45	%
Fixed Income securities		30.0			32.3			38.6			5.20
Other		—			2.6			8.0			3.25

Total		100.0	%		100.0	%		100.0	%		8.00	%

Plan assets are administered by Huntington National Bank as trustee of the plan. Plan assets are invested in diversified mutual funds.

The estimates of weighted average expected long-term rate of return is an estimate based on past performance and actual returns in the future are likely to vary over time.

The overall expected long-term rate of return and risk expectations of the investments in the plan are based on Standard and Poor’s 500 and 5-year Treasury bonds from 1950-2009.

The asset mix of the portfolio will be maintained by periodically re-balancing this account back to the stock and fixed income target allocations stated above.

The investments in the plan are managed for the benefits of the participants. They are structured to meet the cash flow necessary to pay retiring employees. ERISA guidelines for diversification of the investments are followed.

During 2009, the Company contributed $600,000 into the plan. The Company expects to contribute approximately $500,000 to this pension plan in 2010.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 8 — EMPLOYEE BENEFITS (Continued)

Estimated Future Payments

The following benefit payments, which reflect expected future service, are anticipated:


Year End	Benefit Payments
	(In thousands)
2010	$	90
2011		128
2012		121
2013		133
2014		141
Years 2015 - 2020		951

Deferred Compensation Plan: The Company has a deferred compensation plan to provide retirement benefits to certain Directors, at their option, in lieu of annual directors’ fees. The plan was amended as of December 31, 2009 and participants are no longer able to defer compensation in accordance with this plan and no additional benefits will accrue under this plan. The present value of future benefits was accrued annually over the period of active service of each participant using a 6.00% discount rate. Total liabilities under the plan are $2,829,000 and $2,757,000 at December 31, 2009 and 2008 and are included in other liabilities on the balance sheet. The expense for the plan was $278,000, $339,000 and $266,000 in 2009, 2008 and 2007. Distributions under the plan were $206,000, $176,000 and $150,000 in 2009, 2008 and 2007.

The following benefit payments reflect expected future cash flows as anticipated:


Year End	Benefit Payments
	(In thousands)
2010	$	230
2011		218
2012		231
2013		328
2014		326
Years 2015 - 2020		3,276

The Company also has a deferred compensation plan that allows executive officers of the Bank, and certain Directors an opportunity to defer a portion of their compensation. On a monthly basis, the account of each participant accrues interest based on the interest rate determined for that year. Total liabilities under the plan are $738,000 and $719,000 at December 31, 2009 and 2008. The expense of the plan was $43,000, $47,000 and $44,000 in 2009, 2008 and 2007.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 8 — EMPLOYEE BENEFITS (Continued)

401(k) Plan: The Company has a 401(k) savings and retirement plan covering substantially all employees. Under the plan, employees may defer up to the lesser of 100% of their eligible compensation or the limitations set by the IRS. The employees may also make “catch-up” contributions to the extent the IRS allows. During 2009, 2008 and 2007, the Board of Directors elected to contribute a matching contribution equal to 100% of the first 2% and 50% of the next 2% of the employee’s deferred compensation. The Board of Directors elected to change the matching contribution for 2010 to 100% of the first 1%. Employee contributions and the Company’s matching percentages are vested immediately. The Company’s matching percentages are determined annually by the Board of Directors and resulted in total contributions of $82,000, $78,000 and $81,000 in 2009, 2008 and 2007.

NOTE 9 — STOCK OPTIONS

Stock Option Plan: The shareholders approved an incentive stock option plan in May 1996 under which up to 67,005 options, as adjusted for stock splits, may be issued at market prices to employees. The right to exercise the options vests over a one-year period. The exercise price of options granted is equivalent to the market value of underlying stock at the grant date. Shares issued when options are exercised come from authorized but unissued shares. All options outstanding are exercisable. Due to the plan end date, there were no options available for grant as of December 31, 2009 or 2008.

Activity in the option plan for the years ended is summarized as follows:


						Weighted		Weighted
	Number of					Average		Average	Aggregate
	Outstanding			Exercise		Exercise		Contractual	Intrinsic
	Options			Price		Price		Term	Value
Outstanding at January 1, 2008		23,438		$	33.62-57.01	$	49.00
Exercised		—
Expired		(7,676	)	$	33.62-49.38
Forfeitures		(5,216	)	$	51.00-57.01

Outstanding at December 31, 2008		10,546		$	50.00-57.01	$	53.96
Exercised		—
Expired		(5,244	)	$	57.01
Forfeitures		(840	)	$	50.00-51.00

Outstanding at December 31, 2009		4,462		$	50.00	$	50.00	4.0 years		—


Exercisable at December 31, 2009		4,462		$	50.00	$	50.00	4.0 years		—

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 9 — STOCK OPTIONS (Continued)

No compensation expense was required to be recognized under the plan for 2009, 2008 and 2007. There was no unrecognized compensation expense at December 31, 2009.

There were no options granted or exercised in 2009, 2008 and 2007.

NOTE 10 — INCOME TAXES

Income tax expense consists of:


	2009			2008			2007
	(In thousands)
Current expense (benefit)	$	(393	)	$	345		$	1,221
Deferred expense (benefit)		157			(863	)		(139	)

	$	(236	)	$	(518	)	$	1,082

Year end deferred tax assets and liabilities consist of:


	2009		2008
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	730	$	531
Deferred compensation		1,213		1,182
Investment writedown		—		2,416
Capital loss carryforward		1,145		—
Pension liability		642		848
Other		473		121

Total deferred tax assets		4,203		5,098


Deferred tax liabilities
Pension		545		444
Fixed assets		311		344
Mortgage servicing rights		211		204
Unrealized gains on securities available for sale		213		111
Accretion		56		51
Other		60		59

Total deferred tax liabilities		1,396		1,213


Net valuation allowance for capital losses		1,145		1,758

Net deferred tax asset	$	1,662	$	2,127

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 10 — INCOME TAXES (Continued)

Income tax expense (benefit) calculated at the statutory rate of 34% differs from actual income tax expense (benefit) as follows:


	2009			2008			2007
	(In thousands)
Statutory rate applied to income before taxes	$	639		$	(1,952	)	$	1,418
Deduct
Change in valuation allowance		(613	)		1,758			—
Tax-exempt interest income, net		(262	)		(354	)		(311	)
Life insurance		(48	)		(44	)		(50	)
Other		48			74			25


	$	(236	)	$	(518	)	$	1,082

NOTE 11 — EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the basic earnings per share and diluted earnings per share computations is presented below:


	2009		2008			2007
Basic earnings (loss) per share:
Net income (loss) available to common shareholders (in thousands)	$	2,115	$	(5,225	)	$	3,088

Weighted average shares outstanding		1,213,598		1,213,618			1,232,211
Basic earnings(loss) per share	$	1.74	$	(4.31	)	$	2.51


	2009		2008			2007
Diluted earnings (loss) per share:
Net income (loss) available to common shareholders (in thousands)	$	2,115	$	(5,225	)	$	3,088

Weighted average shares outstanding		1,213,598		1,213,618			1,232,211
Add dilutive effects of assumed exercises of stock options		—		—			704


Weighted average dilutive potential shares outstanding		1,213,598		1,213,618			1,232,915

Diluted earnings (loss) per share	$	1.74	$	(4.31	)	$	2.50

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 11 — EARNINGS PER SHARE (Continued)

Stock options for 4,462, 10,546 and 19,407 shares of common stock were not considered in computing diluted earnings per share for 2009, 2008 and 2007 because they were antidilutive.

NOTE 12 — RELATED PARTY TRANSACTIONS

Certain directors and executive officers of the Company and the Bank (including family members, affiliates and companies in which they are principal owners) had loans outstanding with the Bank in the ordinary course of business. A summary of the aggregate loans outstanding to these individuals follows:


	2009			2008
	(In thousands)
Balance outstanding, January 1	$	1,988		$	2,316
New loans and rewrites		1,044			1,129
Payments and payoffs		(1,332	)		(1,387	)
Change in persons included		(5	)		(70	)


Balance outstanding, December 31	$	1,695		$	1,988

Related party deposits totaled $3,317,000 and $3,712,000 at year end 2009 and 2008.

NOTE 13 — COMMITMENTS, OFF-BALANCE-SHEET RISK, AND CONTINGENCIES

There are various contingent liabilities that are not reflected in the financial statements, including claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on the financial condition or result of operations of the Company.

At year end 2009 and 2008, reserves of $2,551,000 and $1,817,000 were required as deposits with the Federal Reserve or as cash on hand. These reserves do not earn interest.

Some financial instruments are used in the normal course of business to meet the financing needs of customers and to reduce exposure to interest rate changes. These financial instruments include commitments to extend credit and standby letters of credit. These involve, to a varying degree, credit and interest-rate risk in excess of the amount reported in the financial statements.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 13 — COMMITMENTS, OFF-BALANCE-SHEET RISK, AND CONTINGENCIES (Continued)

Exposure to credit loss if the other party does not perform is represented by the contractual amount for commitments to extend credit and standby letters of credit. The same credit policies are used for commitments and conditional obligations as are used for loans.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being used, the total commitments do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments to guarantee a customer’s performance to a third party.

A summary of the unused contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:


	2009		2008
	(In thousands)
Commitments to extend credit	$	20,317	$	22,388
Standby letters of credit		532		316

The fair values of these commitments are not material. Substantially all of these commitments are at variable or uncommitted rates.

NOTE 14 — FAIR VALUE MEASUREMENTS

The Company utilizes fair value measurements to record fair value adjustments of certain assets and liabilities and to determine fair value disclosure. The following presents information about the Company’s assets measured at fair value on a recurring basis at December 31, 2009 and the valuation techniques used by the Company to determine those fair values.

Fair Value Hierarchy

Under SFAS 157, the Company groups assets and liabilities at fair value into three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1: In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the company has the ability to access.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 14 — FAIR VALUE MEASUREMENTS (Continued)

Level 2: Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs included quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3: Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related assets or liabilities.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirely are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements required judgment and considers factors specific to each asset or liability.

The Company uses the following methods and significant assumptions to estimate fair vaule:

Securities: Where quoted market prices are available in an active market, securities are classified as level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then Level 2 valuations are estimated by (1) using quoted market prices of securities with similar characteristics and (2) model pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Level 3 valuations of securities include a discounted cash flow analysis whose significant fair value inputs can generally be verified and typically involve little judgment by management.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 14 — FAIR VALUE MEASUREMENTS (Continued)

Disclosures concerning assets measured at fair value are as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis
(In thousands)


	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs		Balance at December
	(Level 1)		(Level 2)		(Level 3)		31,
Assets
2009
Investment securities:
Available-for-sale	$	36,637	$	—	$	8,836	$	45,473
2008
Investment securities:
Available-for-sale	$	26,691	$	3,792	$	6,955	$	37,438

Fair value measurement for available-for-sale securities is based upon quoted prices, if available. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. The Company did not have any securities classified as Level 2 as of December 31, 2009.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
(In thousands)


	Investment
	securities-available-for-sale
Balance at December 31, 2008	$	6,955
Total realized and unrealized gains (losses) included in income		—
Total unrealized gains (losses) included in other comprehensive income		218
Net purchases, sales, calls and maturities		1,663
Net transfers in/out of Level 3		—

Balance at December 31, 2009	$	8,836

Available-for-sale investment securities categorized as Level 3 assets primarily consist of bonds issued by local municipalities. The Company estimates the fair value of these assets based on the present value of expected future cash flows using management’s best estimate of key assumptions, including forecasted interest yield and payment rates, credit quality and a discount rate commensurate with the current market and other risks involved.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 14 — FAIR VALUE MEASUREMENTS (Continued)

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets and liabilities. As a result, the unrealized gains and losses for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

Assets Measured at Fair Value on a Nonrecurring Basis at December 31,

(In thousands)


			Prices in Active
			Markets for		Significant Other		Significant		Total Losses for
	Balance at December		Identical Assets		Observable Inputs		Unobservable Inputs		the Period Ended
	31		(Level 1)		(Level 2)		(Level 3)		December 31
Assets
2009
Impaired loans accounted for under FAS 114	$	248		—		—	$	248	$	(211	)
Other real estate owned		1,336		—		—		1,336		(343	)
2008
Impaired loans accounted for under FAS 114	$	339					$	339	$	(202	)
Other real estate owned		980		—		—		980		(192	)

Impaired loans accounted for under FAS 114 categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payments ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). The losses for the period ending December 31, 2009 represents charge-offs of loan balances written down through the allowance for loan losses.

The Company’s other real estate owned is held at an estimated realizable value and that value changes periodically with the real estate market. Losses for the period associated with other real estate owned represent valuation adjustments and are write downs through the income statement.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 15 — FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate fair values for financial instruments. The carrying amount is considered to estimate fair value for cash and variable rate loans or deposits that reprice frequently and fully. Securities fair values are based on quoted market prices or, if no quotes are available, on the rate and term of the security and on information about the issuer. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, the fair value is estimated by discounted cash flow analysis or underlying collateral values, where applicable. The fair value of off-balance-sheet items approximates cost and is not considered significant to this presentation.

The estimated year end values of financial instruments were:


	2009						2008
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
				(In thousands)
Assets
Cash and cash equivalents	$	17,247		$	17,247		$	23,286		$	23,286
Time deposits with other financial institutions		8,669			8,669			5,757			5,757
Securities available for sale		45,473			45,473			37,438			37,438
Securities held to maturity		10,302			10,837			10,883			11,119
Other securities		1,008			1,008			1,008			1,008
Loans held for sale		—			—			201			204
Loans, net		148,171			148,376			159,569			162,566
Accrued interest receivable on loans		544			544			608			608

Liabilities
Deposits
Noninterest-bearing	$	(40,016	)	$	(40,016	)	$	(37,163	)	$	(37,163	)
Interest bearing		(184,542	)		(185,023	)		(193,380	)		(194,258	)
Accrued interest payable on deposits		(87	)		(87	)		(147	)		(147	)

NOTE 16 — REGULATORY CAPITAL

The Bank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 16 — REGULATORY CAPITAL (Continued)

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

The minimum requirements are:


	Capital to Risk-
	Weighted Assets						Tier 1 Capital
	Total			Tier 1			To Average Assets
Well Capitalized		10	%		6	%		5	%
Adequately Capitalized		8	%		4	%		4	%
Undercapitalized		6	%		3	%		3	%

The Bank was categorized as well capitalized at year end. There are no conditions or events since year-end that management believes has changed the Bank’s category. Actual capital levels (in millions) and minimum required levels were:


											Minimum Required
											To Be Well
						Minimum Required					Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2009

Total capital (to risk weighted assets) Bank	$	22.9		14.9	%	$	12.3		8.0	%	$	15.4		10.0	%
Tier 1 capital (to risk weighted assets) Bank		21.0		13.6			6.1		4.0			9.2		6.0
Tier 1 capital (to average assets) Bank		21.0		8.4			10.0		4.0			12.5		5.0

2008

Total capital (to risk weighted assets) Bank	$	20.8		12.2	%	$	13.7		8.0	%	$	17.1		10.0	%
Tier 1 capital (to risk weighted assets) Bank		18.8		11.0			6.8		4.0			10.3		6.0
Tier 1 capital (to average assets) Bank		18.8		7.3			10.4		4.0			13.0		5.0

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 16 — REGULATORY CAPITAL (Continued)

One of the principal sources of cash for the Company is dividends from the Bank. Regulatory agencies can place dividend restrictions on the Bank based on their evaluation of its financial condition. No restrictions are currently imposed by regulatory agencies on the Bank other than the limitations found in the regulations which govern the payment of dividends to the Company. Under the most restrictive of these regulations, in 2010, the Bank is limited to paying dividends of the Company’s net income of 2010 and the retained net income of the prior two calendar years.

NOTE 17 — PARENT COMPANY CONDENSED FINANCIAL STATEMENTS

Following are condensed parent company financial statements:

CONDENSED BALANCE SHEETS
December 31, 2009 and 2008


	2009		2008
	(In thousands)
ASSETS
Cash	$	52	$	70
Investment in subsidiary		20,271		17,476
Other Assets		1		1


Total assets	$	20,324	$	17,547


LIABILITIES AND SHAREHOLDERS’ EQUITY
Other liabilities	$	4	$	7
Shareholders’ equity		20,320		17,540


Total liabilities and shareholders’ equity	$	20,324	$	17,547

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 17 — PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (Continued)

CONDENSED STATEMENTS OF INCOME
Years ended December 31, 2009, 2008 and 2007


	2009			2008			2007
	(In thousands)
Dividends from subsidiary	$	—		$	906		$	3,832
Operating expenses		(23	)		(40	)		(40	)


Income before income taxes and equity in undistributed income of subsidiary		(23	)		866			3,792

Income tax benefit		8			13			14

Equity in undistributed (overdistributed) income of subsidiary		2,130			(6,104	)		(718	)


Net income (loss)	$	2,115		$	(5,225	)	$	3,088


	2009			2008			2007
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	2,115		$	(5,225	)	$	3,088
Equity in (undistributed) overdistributed net income of subsidiary		(2,130	)		6,104			718
Change in dividends receivable		—			1,266			—
Change in other assets		—			13			(14	)
Change in other liabilities		(3	)		(1,246	)		(21	)

Net cash from operating activities		(18	)		912			3,771

Cash flows from financing activities:
Dividends paid		—			(874	)		(2,795	)
Net shares purchased		—			—			(1,038	)

Net cash from financing activities		—			(874	)		(3,833	)

Net change in cash and cash equivalents		(18	)		38			(62	)

Cash at beginning of year		70			32			94

Cash at end of year	$	52		$	70		$	32

(Continued)

CNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007

NOTE 18 — QUARTERLY FINANCIAL DATA (UNAUDITED)


			Net
	Interest		Interest		Net			Earnings Per Share
	Income		Income		Income			Basic			Diluted
	(In thousands, except per share data)
2009
First quarter	$	3,207	$	2,218	$	322		$	0.27		$	0.27
Second quarter		3,151		2,219		805			0.66			0.66
Third quarter		2,918		2,050		(382	)		(0.31	)		(0.31	)
Fourth quarter		2,892		2,181		1,370			1.12			1.12

2008
First quarter	$	3,888	$	2,543	$	467		$	0.38		$	0.38
Second quarter		3,579		2,368		462			0.38			0.38
Third quarter		3,572		2,332		(1,545	)		(1.27	)		(1.27	)
Fourth quarter		3,318		2,243		(4,609	)		(3.80	)		(3.80	)

(Continued)


		Plante & Moran, PLLC
		Suite 400
		634 Front Avenue N.W.
		Grand Rapids, MI 49504
		Tel: 616.774.8221
		Fax: 616.774.0702
		plantemoran.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
Of CNB Corporation
Cheboygan, Michigan

We have audited the consolidated balance sheet of CNB Corporation as of December 31, 2009 and 2008, and the related consolidated statement of income, changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.


		Plante & Moran, PLLC

Grand Rapids, Michigan
March 25, 2010

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

This discussion provides information about the consolidated financial condition and results of operations of CNB Corporation (the Company) and its wholly-owned subsidiary, Citizens National Bank of Cheboygan (the Bank). During 2008 and 2007 the Bank owned a subsidiary, CNB Mortgage Corporation, collectively referred to as the Bank during those years. In November 2009, Citizens National Bank of Cheboygan and CNB Mortgage Corporation merged leaving Citizens National Bank of Cheboygan as the survivor. The consolidated financial statements for 2009 include CNB Corporation and its wholly-owned subsidiary, Citizens National Bank of Cheboygan. This discussion should be read in conjunction with the consolidated financial statements beginning on page 2 and the related footnotes.

Financial Condition

As of December 31, 2009 total assets of the Company were $249.5 million which represents a decrease of $4.4 million or 1.7% from December 31, 2008. The Company recognized a 6.6% decrease in the loan portfolio. Deposits decreased by 2.6% during 2009 while the Company’s equity increased $2.8 million during 2009.

Cash and Cash Equivalents

The Company’s balances of cash and cash equivalents decreased $6.0 million from 2008 to 2009. During the year, $910,000 of cash was provided by operating activities, while $964,000 was used in investing activities and $6.0 million was used in financing activities. The balances maintained in cash and cash equivalents vary based on daily fluctuations in loan and deposit balances. Sufficient cash is maintained on a daily basis to meet the anticipated liquidity needs of the Company for customer transactions and to clear checks drawn on other financial institutions. The amount of clearings can vary by as much as $3.0 million in one day, causing the Company’s cash position to vary.

Securities

The Company maintains securities portfolios that include obligations of federal agencies and government sponsored entities as well as securities issued by states and political subdivisions, auction rate money market preferred investments and preferred stocks. Security balances increased $7.5 million during 2009. Securities available for sale represent 80.1% of the portfolio. Currently, the Company primarily maintains a short-term securities portfolio. The Company will continue to monitor the rate environment and may extend the maturities of the investment portfolio in the future. It is management’s expectation that the Company will moderately increase the securities portfolio in 2010 as loan demand continues to be slow due to the current economic environment.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

The chart below shows the change in each of the categories of the portfolio.


	2009			2008			2007
	(In thousands)
U.S. Government and agency	$	7,250		$	6,760		$	(9,004	)
Mortgage-backed		(370	)		(609	)		(252	)
Tax exempt state and municipal		2,431			455			(407	)
Taxable state and municipal		870			1,640			55
Corporate obligations		1,020			—			—
Auction rate securities		(3,793	)		(9,207	)		3,016
Preferred shares		46			—			—
Other securities		—			—			—


Total change in securities	$	7,454		$	(961	)	$	(6,592	)

Holdings in U.S. government and agencies increased due to additional volume in the securities portfolio. Due to the uncertainty of the auction rate securities market, the Company attempted to decrease its holdings in the auction rate securities investments at the beginning of 2008. Starting in early 2008, while the Company was attempting to liquidate its holdings in auction rate securities, the market for these types of investments ceased to exist. The collapse of this market had a profound impact on the value of these auction rate investments. Therefore, as of December 31, 2008 the entire portfolio of auction rate securities was deemed to be “other than temporarily impaired” as defined in FAS 115.

Securities investments as a total increased 15.1% during the year. The Company maintains a short-term investment portfolio with maturities averaging less than two years. The Company will continue to monitor the rate environment and may extend the maturities of the investment portfolio in the future. The chart below shows the percentage composition of the portfolio as of December 31.


	2009			2008
U.S. Government and agency		46.34	%		38.65	%
Mortgage backed		16.31	%		19.52	%
Tax exempt state and municipal		26.61	%		25.70	%
Taxable state and municipal		5.33	%		4.37	%
Corporate obligations		1.80	%		—
Auction rate securities		1.76	%		9.72	%
Preferred shares		0.08	%		—
Other securities		1.77	%		2.04	%


		100.00	%		100.00	%

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Securities available for sale are recorded at fair value and securities held to maturity are recorded at amortized cost. The net unrealized gain on securities available for sale at December 31, 2009 was $412,000, net of taxes. The unrealized gains and losses are temporary since they are a result of market changes rather than a reflection of credit quality. Management has no specific intent to sell these securities at the present time.

Overall, the Company has historically maintained a conservative security portfolio with the majority of the mix of its investments spread amongst U.S. Government and agency securities and issues of governmental units in its service area. The maturities of the investment portfolio have typically been very short, two years or less, providing liquidity in addition to quality to the balance sheet. Investments in mortgage backed securities are not part of the subprime sector.

During 2010, management feels that there will be sufficient liquidity to increase the maturity of the investment portfolio.

Loans

Total loans decreased $10.6 million or 6.7% during 2009, with the primary decrease in commercial real estate loans of $7.1 million or 4.4%. As a full service lender, the Company offers a variety of personal and commercial loans.

Home mortgages comprise a large portion of the loan portfolio. The Company generally retains the ownership of adjustable rate loans and short to medium-term fixed-rate loans and originates and sells long-term single family residential fixed-rate mortgage loans to the secondary market. This practice allows the Company to meet the housing credit needs of its service area while maintaining an appropriate interest rate sensitivity and liquidity position. The Company does not engage in subprime lending and does not have any loans that it would consider to be subprime mortgage loans. The Company originated $23.1 million in loans for sale in 2009 and $5.9 million in 2008 as compared to $9.1 million in 2007. For the most part, activity in 2009 included mainly refinances as borrowers took advantage of the continued low rate environment. Although the real estate market in our service area has declined, it has not been affected by the current economy as much as some areas in the state of Michigan. Management anticipates the volume of mortgage refinancing in 2010 will decrease comparable to 2009 as most borrowers have already taken advantage of the decreasing rate environment. In addition to mortgage loans, the Company makes loans for personal and business use, secured and unsecured, to customers in its service area. Overall total loan growth is not expected in 2010.

Current economic conditions warrant the bank adhering to conservative, strict credit underwriting standards. All loans are domestic. An annual review of loan concentrations at December 31, 2009 indicated the pattern of loans in the portfolio has not changed. There is no individual industry with more than a 10% concentration, except for all tourism-related businesses which, when combined, represent 12.7% of total loans.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Allowance for Loan Losses

The allowance for loan losses represents that amount which management estimates is adequate to provide for probable incurred losses in the loan portfolio. Management determines the adequacy of the allowance for loan losses by reviewing selected loans (including large loans, nonaccrual loans, problem loans and delinquent loans) and establishes specific loss allowances on these loans. Historical loss information, local economic conditions and other factors are considered in establishing allowances on the remaining loan portfolio. The allowance is increased by provisions charged to expense and reduced by charge-offs, net of recoveries.

The quality of the Company’s loan portfolio is indicative of the current economic conditions with non-performing loans at 5.59% of total loans at December 31, 2009 and 3.73% at December 31, 2008. Net loans charged off decreased to .57% of total loans during 2009 and .92% in 2008. Allowance for loan losses was increased in 2009 due to increased credit quality concerns and a continued overall unstable economic environment. The Company continues to identify loss potential for individual loans and groups of loans. A provision expense of $1.7 million was recorded in 2009 while $1.8 million was recorded during 2008 and $275,000 in 2007 due to net charge-offs and responding to overall loan quality.

Credit Quality

The Company continues to maintain a manageable level of asset quality as a result of actively monitoring delinquencies, nonperforming assets and potential problem loans. The Company performs an ongoing review of all large credits to watch for any deterioration in quality. Nonperforming loans are comprised of: (1) loans accounted for on a nonaccrual basis; (2) loans contractually past due 90 days or more as to interest or principal payments (but not included in the nonaccrual loans in (1) above); and (3) other loans whose terms have been renegotiated to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower (exclusive of loans in (1) or (2) above). The aggregate amount of nonperforming loans is shown in the table below.


	2009			2008
	(Dollars in thousands)
Nonaccrual loans	$	8,095		$	5,356
Loans past due 90 days or more still on accrual		83			295
Troubled debt restructurings		260			393


Total nonperforming	$	8,438		$	6,044


Percent of total loans		5.59	%		3.73	%

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Deposits

Deposits decreased $6.0 million or 2.6% during 2009. The majority of the Company’s deposits are derived from core customers, as a result of long-term personal, business and public relationships. Deposit rates are monitored continually to assure that the Company pays a competitive rate. As the interest rate environment changes the Company will in turn change the rates it offers its customers.

As of December 31, 2009, the loan to deposit ratio was 67.3% compared to 70.2% at December 31, 2008. This ratio decreased due to a decrease in the Company’s loan portfolio. Management’s emphasis is on a stable loan portfolio with a targeted loan to deposit ratio at a minimum of 65.0%. Any change in asset mix from securities to higher yielding loans provides an increase in the net interest margin.

As of December 31, 2009, long-term debt obligations consist of the Company’s time deposits which are presented in Note 7 to the consolidated financial statements.

Equity

Total equity for the Company at year end 2009 was $20.3 million compared to $17.5 million in 2008. There is no formal stock repurchase plan in effect at this time although; the Company occasionally repurchases stock at its discretion. During 2009 the Company did not repurchase any stock and less than $1,000 worth of stock was repurchased during 2008. Accumulated other comprehensive income increased by $196,000 related to an improved market value of the Company’s available for sale securities and by $469,000 related to the adjustment to reflect the impact of the change in the pension liability as was implemented in 2006 due to SFAS No. 158.

In response to the Emergency Economic Stabilization Act passed by the federal government on October 3, 2008 the Company, after evaluating the programs available under the Act, determined that it would not participate in the Capital Purchase Program (CPP). CPP provides for the U.S. Treasury to make preferred stock investments in financial institutions under specific criteria and with specific requirements placed upon participating institutions.

The Bank is considered to be well capitalized as it relates to the capital adequacy guidelines administered by federal banking agencies.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Liquidity and Funds Management

Effective liquidity management ensures that the cash flow requirements of the Company’s depositors and borrowers, as well as the operating cash needs of the Company are met. The Company’s primary source of funds is dividends from the Bank. The Company manages its liquidity position to provide cash necessary to pay dividends to shareholders and satisfy other operating requirements.

The Company’s most readily available sources of liquidity are interest bearing deposits with other financial institutions, federal funds sold, securities classified as available for sale and securities classified as held to maturity maturing within one year. These sources of liquidity are supplemented by new deposits and by loan payments received from customers. As of December 31, 2009, the Company held $13.2 million in interest bearing deposits with other financial institutions, no federal funds sold, $45.5 million in securities available for sale, and $3.4 million in held to maturity securities maturing within one year. These short-term assets represent 27.6% of total deposits as of December 31, 2009. Historically, the Company’s security portfolio has been short term in nature, with the average life of the portfolio consistently being less than two years. The Company serves a market which is highly tied to the tourist industry. Consequently, the Company experiences seasonal swings in liquidity. Deposit growth occurs during July, August, and September, and then may decline through the fall and winter months. The Company does not anticipate any significant change in its seasonal pattern. In addition to the above readily available sources of liquidity, the Company has an available borrowing capacity at the Federal Reserve Discount Window and Federal Home Loan Bank of Indianapolis. There were no advances outstanding on these borrowing capacities at December 31, 2009 or 2008.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Interest Rate Sensitivity

The following tables provide information about the Company’s financial instruments that are sensitive to changes in interest rates at December 31, 2009 and 2008. For loans receivable, securities, and liabilities with contractual maturities, the tables present principal cash flows and related weighted-average interest rates by contractual maturities. For core deposits (demand deposits, interest-bearing checking, savings, and money market deposits) that have no contractual maturity, the tables present principal balances and, as applicable, related weighted-average interest rates.

The primary source of market risk for the financial instruments presented is interest rate risk, that is, the risk that a change in market rates could adversely affect the market value of the instruments. Generally, the longer the maturity, the greater the interest rate risk exposure. While maturity information does not necessarily present all aspects of exposure, it may provide an indication of where risks are prevalent.

All financial institutions assume interest rate risk as an integral part of normal operations. Managing and measuring interest rate risk is a dynamic, multi-faceted process that ranges from assuring sufficient capital and liquidity in support of future balance sheet growth to reducing the exposure of the Company’s net interest margin from swings in interest rates. The Company manages interest rate risk through the Asset/Liability Committee. The Asset/Liability Committee is comprised of Bank officers from various disciplines. The Committee establishes policies and rates which lead to the prudent investment of resources, the effective management of risks associated with changing interest rates, the maintenance of adequate liquidity and the earning of an adequate return on shareholders’ equity.

The following market risk disclosure tables allow management to measure the imbalance between the amount of assets and liabilities repricing in the next five years and thereafter.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Market Risk Disclosure at December 31, 2009
(Dollars in thousands)


																						Fair Value
	2010			2011			2012			2013			2014			Thereafter			Total			12/31/2009
Rate-sensitive assets
Variable interest rate loans	$	11,852		$	446		$	726		$	—		$	—		$	—		$	13,024		$	13,042
Average interest rate		4.00	%		5.52	%		5.91	%		—	%		—	%		—	%		4.16	%
Fixed interest rate loans		22,371			16,936			10,614			15,893			12,478			59,891			138,183			138,370
Average interest rate		5.71	%		5.57	%		7.30	%		6.54	%		6.40	%		6.06	%		6.15	%
Variable interest rate securities		710			—			—			—			—			753			1,463			1,463
Average interest rate		4.07	%		—	%		—	%		—	%		—	%		2.28	%		3.15	%
Fixed interest rate securities		17,470			15,729			5,020			3,316			1,749			12,036			55,320			55,855
Average interest rate		1.92	%		2.32	%		2.17	%		4.69	%		4.05	%		3.60	%		3.97	%
Rate-sensitive liabilities
Noninterest-bearing deposits		40,016			—			—			—			—			—			40,016			40,016
Average interest rate		—	%		—	%		—	%		—	%		—	%		—	%		—	%
Fixed interest rate savings and interest-bearing deposits		103,896			—			—			—			—			—			103,896			104,167
Average interest rate		0.43	%		—	%		—	%		—	%		—	%		—	%		0.91	%
Variable interest rate time deposits		1,337			500			—			—			—			—			1,837			1,842
Average interest rate		0.22	%		0.22	%		—	%		—	%		—	%		—	%		0.22	%
Fixed interest rate time deposits		48,685			20,445			3,267			5,801			611			—			78,809			79,014
Average interest rate		2.68	%		1.97	%		4.19	%		4.66	%		2.86	%		—	%		2.70	%

Market Risk Disclosure at December 31, 2008
(Dollars in thousands)


																						Fair Value
	2009			2010			2011			2012			2013			Thereafter			Total			12/31/2008
Rate-sensitive assets
Variable interest rate loans	$	20,092		$	445		$	500		$	—		$	—		$	—		$	21,037		$	21,427
Average interest rate		4.21	%		8.00	%		6.32	%		—	%		—	%		—	%		4.34	%
Fixed interest rate loans		22,573			13,154			16,659			12,054			19,237			57,134			140,811			143,421
Average interest rate		6.17	%		6.98	%		7.51	%		7.43	%		6.52	%		6.69	%		6.77	%
Variable interest rate securities		655			—			—			—			—			868			1,523			1,523
Average interest rate		2.30	%		—	%		—	%		—	%		—	%		2.80	%		2.58	%
Fixed interest rate securities		15,345			9,605			9,073			1,170			3,613			8,999			47,805			48,041
Average interest rate		3.27	%		4.01	%		4.28	%		4.66	%		4.08	%		3.84	%		3.97	%
Rate-sensitive liabilities
Noninterest-bearing deposits		37,163			—			—			—			—			—			37,163			37,163
Average interest rate		—	%		—	%		—	%		—	%		—	%		—	%		—	%
Fixed interest rate savings and interest-bearing deposits		101,484			—			—			—			—			—			101,484			101,945
Average interest rate		0.91	%		—	%		—	%		—	%		—	%		—	%		0.91	%
Variable interest rate time deposits		4,587			797			—			—			—			—			5,384			5,408
Average interest rate		0.23	%		0.23	%		—	%		—	%		—	%		—	%		0.23	%
Fixed interest rate time deposits		40,748			34,550			3,619			1,992			5,603			—			86,512			86,905
Average interest rate		3.77	%		2.85	%		4.75	%		4.62	%		4.72	%		—	%		3.53	%

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

Capital Resources

The capital ratios of the Bank exceed the regulatory guidelines for well capitalized institutions.

The stock of the Company is generally traded locally, although beginning in 2007 it became readily available on the over-the-counter market. Additional information concerning capital ratios and shareholder return is included in the Financial Highlights on page 1. The Company maintains a five-year plan and utilizes a formal strategic planning process. Management and the Board continue to monitor long-term goals, which include increasing market share and maintaining long-term earnings sufficient to pay dividends.

Results of Operations

Net Income

Consolidated net income/(loss) was $2.1 million for 2009 and ($5.2 million) for 2008. Basic and diluted earnings/(loss) per share for 2009 were $1.74 compared to ($4.31) for 2008.

Consolidated net income was $3.1 million for 2007. Basic earnings per share for 2007 were $2.51 while diluted earnings per share for 2007 were $2.50.

Net Interest Income

Interest income is the total amount earned on interest bearing deposits at financial institutions, funds invested in federal funds sold, securities and loans. Interest expense is the amount of interest paid on interest-bearing checking, money market, savings and time deposits accounts. Net interest income is the difference between interest income and interest expense. The net margin is the net interest income as a percentage of average interest-earning assets. Interest spread is the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. In 2009, net interest income decreased by $818,000, due to multiple factors including the change in the rates on our interest-earning assets, the change in asset mix due to the increase in the securities portfolio and decreases in total loans. Also contributing to the decreased net interest income were asset quality factors including an increased level of nonaccrual loans over 2008.

In 2008, net interest income decreased by $836,000, due to similar factors as noted above for 2009. These factors include the change in the rate on our interest-earning assets, the change in asset mix due to the decrease in the securities portfolio in 2008 and increases in other interest earning assets. Asset quality factors were also an issue in 2008 due to an increased level of nonaccrual loans. Offsetting these decreases in interest income in 2008 was decreases in rates paid on the Company’s deposit accounts due to the decreasing rate environment.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

The following table shows the daily average consolidated balance sheets, revenue on average interest-earning assets on a tax-equivalent basis, expense on average interest-bearing liabilities and the annualized effective yield or rate. Interest on loans includes loan fees. For the periods ending:

Yield Analysis of Consolidated Average Assets and Liabilities
(Dollars in thousands)


				Year Ended								Year Ended								Year Ended
	December 31, 2009								December 31, 2008								December 31, 2007
	Average					Yield/			Average					Yield/			Average					Yield/
	Balance			Int		Rate			Balance			Int		Rate			Balance			Int		Rate
Interest-earning assets:
Other interest- earning assets	$	18,342		$	235		1.28	%	$	21,892		$	423		1.93	%	$	12,129		$	660		5.44	%
Total securities (1) (2)		55,889			2,133		3.82			50,480			2,545		5.04			55,078			2,774		5.04
Loans (2)		161,256			10,130		6.28			170,293			11,706		6.87			172,136			13,070		7.59

Total interest-earning assets		235,487			12,498		5.31	%		242,665			14,674		6.05	%		239,343			16,504		6.90	%
Cash and due from banks		8,607								6,094								6,635
Premises and equipment, net		6,011								6,176								6,495
Allowance for loan losses		(2,466	)							(1,720	)							(1,610	)
Other assets		9,840								8,785								8,020

Total	$	257,479							$	262,000							$	258,883


Interest-bearing liabilities:
Interest-bearing demand deposits	$	29,924		$	103		0.34	%	$	28,854		$	389		1.35	%	$	23,575		$	529		2.24	%
Savings deposits		76,012			435		0.57			71,981			1,012		1.41			75,677			1,383		1.83
Time deposits		88,437			2,952		3.34			93,234			3,455		3.71			89,984			3,917		4.35
Fed Funds Purchased		—			—		0.00			—			—		0.00			—			—		0.00
Other interest-bearing liabilities		148			10		6.76			207			15		7.25			259			29		11.20

Total interest-bearing liabilities		194,521			3,500		1.80	%		194,276			4,871		2.51	%		189,495			5,858		3.09	%

Noninterest-bearing deposits		38,939								39,264								39,790
Other liabilities		5,116								4,417								4,305
Shareholders’ equity		18,903								24,043								25,293

Total	$	257,479							$	262,000							$	258,883

Net interest income				$	8,998							$	9,803							$	10,646

Net interest spread (FTE)							3.51	%							3.54	%							3.81	%

Net yield on interest- earning assets (FTE)							3.82	%							4.04	%							4.45	%

Ratio of interest-earning assets to interest- bearning liabilities							1.21	x							1.25	x							1.26	x


(1)		Yield computed using the average amortized cost for securities available for sale.

(2)		Tax exempt income was converted to a fully taxable equivalent basis at a 34% tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expenses.

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

The table below shows the effect of volume and rate changes on net interest income on a pre-tax basis.


	2009 Compared to 2008									2008 Compared to 2007
	Volume			Rate			Net			Volume			Rate			Net
							(In thousands)
Other interest-earning assets	$	55		$	(243	)	$	(188	)	$	352		$	(589	)	$	(237	)
Total Securities		178			(590	)		(412	)		(169	)		(60	)		(229	)
Loans, net		(601	)		(975	)		(1,576	)		(139	)		(1,225	)		(1,364	)

Total interest-earning assets		(368	)		(1,808	)		(2,176	)		44			(1,874	)		(1,830	)

Interest-bearing demand deposits		14			(300	)		(286	)		101			(241	)		(140	)
Savings deposits		54			(631	)		(577	)		(65	)		(305	)		(370	)
Time deposits		(172	)		(331	)		(503	)		137			(599	)		(462	)
Other interest-bearing liabilities		(5	)		—			(5	)		(5	)		(10	)		(15	)

Total interest-bearing liabilities		(109	)		(1,262	)		(1,371	)		168			(1,155	)		(987	)


Net change in net interest income (a)	$	(259	)	$	(546	)	$	(805	)	$	(124	)	$	(719	)	$	(843	)


(a)		The net change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Noninterest Income

Noninterest income includes fees and service charges on deposit accounts, loan servicing fees, gains on sales of loans and other income. Non interest income increased during 2009 by $1.6 million. This increase can be attributed for the most part to the gains on the sales of auction rate investment securities as previously in Note 2 of the financial statements. The increase in net realized gains from the sales of loans added to the increased noninterest income for 2009. This increase was offset by a year over year decrease in the gains on sales of other real estate owned. The Company recorded $304,000 of gains on the sale of other real estate owned in 2008 while gains in 2009 were only $3,000.

Noninterest income increased from 2007 to 2008 by $328,000 primarily due to the $304,000 gain on sale of other real estate owned in 2008 as mentioned above.

Noninterest Expense

Noninterest expense decreased $6.7 million during 2009 compared to 2008. Non interest expenses in 2008 included a write down on investment securities due to an other-than-temporary impairment. Results for 2009 included a securities write down of $37,000. This single difference between the two years is the primary reason for the change in total noninterest expense. Other contributing factors included an increase in FDIC Premiums from $149,000 in

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

2008 to $623,000 in 2009 and increases in other real estate owned losses and carrying costs in the amount of $134,000 compared to the prior year. These increases were offset by decreases in salaries and employee benefits including decreased expense for hospitalization. Salaries and benefits decreased $357,000 from 2008 to 2009 and the number of employee’s decreased from 84 at December 31, 2008 to 78 at December 31, 2009. The Company changed its hospitalization coverage in 2007. Although the company still funds 100% of the employee hospitalization premium, the Company changed to a high deductible plan in 2007. For the first two years of the new plan, one half of the deductible was funded by the Company to assist employees as they transitioned to the new type of coverage. The decreased hospital expense of $72,000 from 2008 to 2009 is due in most part to the fact that the Company did not fund any part of the hospitalization deductible in 2009 and due to the decreased number of employees as stated above.

Noninterest expense increased $7.8 million during 2008 compared to 2007. This increase was due primarily to the write down of investment securities due to an other-than-temporary impairment as previously discussed. Salaries and benefits expense decreased $119,000 during 2008 compared to 2007 due to the departure of a highly compensated officer whose position was not filled. The deferred compensation expense increase $33,000 from 2007 to 2008 due primarily to additional expense due to the accelerated amount payable as a result of the impending retirement of a director. The increase of $81,000 in hospitalization expense from 2007 to 2008 was due to increased premiums. Supplies expense decreased $50,000 and marketing expense decreased $45,000 during 2008 compared to 2007 due to cost cutting measures. ORE Losses and carrying costs increased $632,000 in 2008 compared to 2007 results. This increase is the result of increased levels of other real estate owned property and the associated expenses related to those properties. Write-downs and losses on ORE sales totaled $316,000 in 2008 compared to $9,000 in 2007. Other real estate owned also has associated costs of ownership. These carrying costs totaled $289,000 in 2008 compared to $64,000 in 2007.

Federal Income Taxes

The Company had an income tax benefit of $236,000 for the year ended December 31, 2009 compared to a tax benefit of $518,000 for 2008 and an expense of $1.1 million for 2007.

Income/(loss) before tax for 2009 and 2008 included gains and losses, respectively, which were not tax effected for income reporting purposes, thus dramatically effecting the effective tax rate for those years. The difference between the effective tax rate and the federal corporate tax rate of 34% is also due to tax-exempt interest earned on investments and loans and other tax-related items. The tax rates are shown in the table below:


	2009			2008			2007
Income/(loss) before tax (In thousands)	$	1,879		$	(5,743	)	$	4,170
Income tax expense/(benefit) (In thousands)		(236	)		(518	)		1,082
Effective tax rate		(12.6	)%		(9.0	)%		25.9	%

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

We assess the need for a valuation allowance against our deferred tax assets periodically. The realization of deferred tax assets is largely dependent upon future taxable income, future reversals of existing taxable temporary differences and ability to carry-back losses to available tax years. In assessing the need for a valuation allowance, all positive and negative evidence was considered, including anticipated operating results, taxable income in carry-back years, scheduled reversals of deferred tax liabilities and tax planning strategies. In 2009, the conclusion that a valuation allowance was not required was based on a number of factors including the 2010 budget.

Critical Accounting Policies

Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could effect these judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses, determining the fair value of securities and other financial instruments, the valuation of mortgage servicing rights and deferred tax and tax provision estimates.

The Company believes that the allowance for loan losses and related provision expense are particularly susceptible to material change in the near term. Due to overall loan growth, a provision expense of $275,000 was recorded during 2007. Due to the continued loan growth and a downturn in the overall Michigan economy, a provision expense of $1.8 million was recorded during 2008. Due to additional asset quality concerns and continued downturn in the Michigan and National economy, a provision expense of $1.7 million was recorded in 2009. In future periods the allowance for loan losses may be impacted due to changes in the local economy, commercial loans asset quality and individual borrower situations. The Company believes its significant concentration in residential mortgage loans and the importance of the tourism industry to the local economy are particularly important factors that could have a significant impact on the allowance for loan losses and provision for loan losses. As of December 31, 2009, the Company held $67.1 million of commercial and commercial real estate loans, and the ability of our borrowers to repay such loans may be significantly impacted by the current economy or individual borrower conditions. Management continues to take steps to help preserve the asset quality of the loan portfolio; however, the allowance for loan losses and related provision expense could increase in future periods depending on changes in the factors discussed above.

Securities available for sale are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income, net of tax. As a result of changes in the fair market value of the Company’s available for sale securities portfolio, total comprehensive income increased by $196,000, $118,000 and $222,000 for 2009, 2008 and 2007. Additionally, all investment securities are required to be written down to fair value when a

CNB CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2009, 2008 and 2007

decline in fair value is not temporary; therefore, future changes in the fair value of securities could have a significant impact on the Company’s operating results.

FORWARD-LOOKING STATEMENTS

When used in this filing and in future filings involving the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phases, “anticipate,” “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “project,” or similar expressions are intended to identify, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions in the Company’s market area and competition, all or some of which could cause actual results to differ materially from historical earnings and those presently anticipated or projected.

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors, including regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investing activities, and competitive and regulatory factors, could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected.

The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

CNB CORPORATION
OFFICERS, COMMUNITY ADVISORS AND STAFF

OFFICERS AND COMMUNITY ADVISORS OF
CNB CORPORATION AND CITIZENS NATIONAL BANK

CNB CORPORATION OFFICERS

VINCENT J. HILLESHEIM

CHAIRMAN

SUSAN A. ENO

PRESIDENT & CHIEF EXECUTIVE OFFICER

DOUGLAS W. DAMM

SENIOR VICE PRESIDENT

SHANNA L. HANLEY

TREASURER

REBECCA L. TOMASKI

SECRETARY

CITIZENS NATIONAL BANK OFFICERS AND COMMUNITY ADVISORS

VINCENT J. HILLESHEIM

CHAIRMAN

SUSAN A. ENO

PRESIDENT & CHIEF EXECUTIVE OFFICER

DOUGLAS W. DAMM

SENIOR VICE PRESIDENT & SENIOR LOAN OFFICER

STEPHEN J. CRUSOE

VICE PRESIDENT, MORTGAGE LOANS

VICTORIA J. HAND

VICE PRESIDENT & CASHIER

SHANNA L. HANLEY

VICE PRESIDENT & SENIOR CONTROLLER

MARIAN L. HARRISON

VICE PRESIDENT, COMMERCIAL LOANS

SUSAN L. CASWELL

ASSISTANT VICE PRESIDENT

CYRIL S. DRIER

ASSISTANT VICE PRESIDENT

SALLY J. LACROSS

ASSISTANT VICE PRESIDENT

NANCY K. LINDSAY

ASSISTANT VICE PRESIDENT, MARKETING

RANDY J. MALTBY

TECHNOLOGY OFFICER

SUSAN J. CLEARY

LOAN OFFICER

MICHELLE J. OSTWALD

LOAN OFFICER

NICOLE M. DRAKE

BANKING OFFICER- COMMERCIAL LOANS

DARREN M. SELDEN

BANKING OFFICER- COLLECTIONS

FLORENCE CASWELL

ASSISTANT LOAN OPERATIONS OFFICER

NANCY A. STEMPKY

MANAGER OF INTERNAL AUDIT

GINA L. EUSTICE

CREDIT MANAGER

ONAWAY

LAURA L. SHACK

BANKING OFFICER & BRANCH MANAGER

INDIAN RIVER

MATTHEW J. KAVANAUGH

ASSISTANT VICE PRESIDENT & BRANCH MANAGER

PAUL FISHER

COMMUNITY ADVISOR

LISA RENAUD-LAPRAIRIE

COMMUNITY ADVISOR

MACKINAW CITY

SUSAN M. BRANDT

BANKING OFFICER & BRANCH MANAGER

DEAN SCHEERENS

COMMUNITY ADVISOR

JAMES E. TAMLYN

COMMUNITY ADVISOR

PELLSTON

LORA L. CLOUSER

BANKING OFFICER & BRANCH MANAGER

KELLEY ATKINS

COMMUNITY ADVISOR

RICHARD CONRAD

COMMUNITY ADVISOR

ALANSON

LORA L. CLOUSER

BANKING OFFICER & BRANCH MANAGER

CNB CORPORATION
OFFICERS, COMMUNITY ADVISORS AND STAFF

STAFF OF CITIZENS NATIONAL BANK

MAIN OFFICE

Taryn Bednarz

Cheryl Blaskowski

Kurt Blaskowski

Maghan J. Brooks

Patricia K. Comps

Arlene Daniel

Trisha M. Dobias

Katherine H. Eldridge

Mary E. Greenwood

Debra Grice

Tonya Hiller

Deanna Hudson

Kathy Johnson

Sherri Kosan

Susan Leonardi

Betty J. Lewis

Loretta Merchant

Adam Newman

Penny L. Reynolds

Ronald D. Rose

Carla Roznowski

Carolyn A. Scheele

Lee Sheets

David Shotwell

Sally A. Spray

Helen K. Stumpf

M. Teresa Sullivan

Kathy S. Swackhamer

Lori Thornton

David Tomaski

Rebecca Tomaski

Joel VanSlembrouck

Wendelin K. Whippo

Sherry M. Wichlacz

DOWNTOWN
DRIVE-IN
CHEBOYGAN

Carla Jankoviak

SOUTH BRANCH
CHEBOYGAN

Karen Barrette

Susan D. Bliss

Sharon Coppernoll

Diane S. Mushlock

MACKINAW CITY

Deborah L. Closs

Jennifer M. LaHaie

PELLSTON

Sheri L. Kindell

Tammy Crocker

ONAWAY

Pamela A. Kolasa

Sara L. LaLonde

Lynn D. Porter

Kathleen T. Robbins

Kathleen S. Wilson

INDIAN RIVER

Christopher Brazier

Cheri Diot

Kelly Saker

Julie Davis

Michelle Miller

ALANSON

Jill Hoffman

Amanda Nicholson

Cathy Ward

CNB CORPORATION
DIRECTORS AND DIRECTORS EMERITI

DIRECTORS OF CNB CORPORATION &
CITIZENS NATIONAL BANK

VINCENT J. HILLESHEIM
Chairman
President, Anchor In Marina

STEVEN J. BAKER, D.V.M.
Retired, Indian River Veterinary Clinic

JAMES C. CONBOY, JR.
Retired, former President & Chief Executive Officer, CNB Corporation
Retired, former President & Chief Executive Officer, Citizens National Bank

SUSAN A. ENO
President & Chief Executive Officer, CNB Corporation
President & Chief Executive Officer, Citizens National Bank

KATHLEEN M. DARROW
President, Darrow Bros. Excavating, Inc.
Retired, formerly Group Sales & Special Events

Coordinator for the Mackinac State Historic Parks

THOMAS J. ELLENBERGER
Vice President & Secretary
Albert Ellenberger Lumber Company

KATHLEEN A. LIEDER
Retired, Partner, Bodman LLP
Co-Owner, Log Mark Bookstore

R. JEFFERY SWADLING
Vice President, Ken’s Village Market

FRANCIS J. VANANTWERP, JR.
Vice President Durocher Marine Division
Kokosing Construction Company, Inc.

DIRECTORS EMERITI
LYLE MCKINLEY, THOMAS A. ELLENBERGER,
JOHN P. WARD, JOHN L. ORMSBEE

CNB CORPORATION COMMON STOCK

CNB Corporation common stock is listed on the Over the Counter Bulletin Board and is traded under the symbol “CNBZ”. The Company had 987 shareholders as of December 31, 2009.

SHAREHOLDER RELATIONS AND FORM 10-K AVAILABLE

Shareholders may obtain, without charge, a copy of Form 10-K or the 2009 Annual Report by writing

Shareholder Relations
CNB Corporation
303 N. Main St. P.O. Box 10,
Cheboygan, Michigan 49721.

The reports can also be downloaded from www.cnbismybank.com. Click on the shareholder relations link.

WEBSITE INFORMATION

The most current news releases and CNB Corporation financial reports and product information are available at our website, www.cnbismybank.com

ANNUAL MEETING

The Annual Meeting of Shareholders will be held on Tuesday, May 18, 2010 at the Knights of Columbus Hall, 9840 N. Straits Highway, Cheboygan, Michigan, 49721 at 7:00 p.m.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Plante & Moran, PLLC
Grand Rapids, Michigan

STOCK SALES & MARKET MAKERS

Stock sales will be handled by stockbrokers serving as market makers. You may work with a broker of your choice and other firms familiar with CNB Corporation are identified on the Over the Counter (OTC) Bulletin Board website at www.otcbb.com.

TRANSFER AGENT

The transfer agent for CNB Corporation continues to be Citizens National Bank. Inquiries regarding a change of name, address or ownership of stock, as well as information on shareholder records, lost or stolen certificates should be directed to shareholder relations.

The following table shows the high and low selling prices of known transactions in common stock of the Company for each quarter of 2009 and 2008.


	2009				Cash		2008				Cash
	Market Price				Dividends		Market Price				Dividends
Quarter	High		Low		Declared		High		Low		Declared
1^st	$	20.00	$	8.05	$	—	$	40.00	$	29.00	$	0.42
2^nd		12.50		8.05		—		36.00		32.00		0.30
3^rd		11.00		6.38		—		35.50		20.00		—
4^th		10.50		9.70		—		28.49		13.00		—

Attached files

CNB CORP /MI/ Reports

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