CNB Bancorp 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from            to            

Commission File Number: 000-50729

CNB Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Virginia	54-2059214
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11407 Windsor Blvd., Windsor, VA 23487

(Address of principal executive offices)

(757) 242-4422

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:As of November 10, 2010, 1,500,427 shares of the registrant’s common stock, $.01 par value, were issued and outstanding.

CNB BANCORP, INC.

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements of CNB Bancorp, Inc.		1
	Consolidated Balance Sheets at September 30, 2010 (unaudited) and December 31, 2009		1
	Consolidated Statements of Operations (unaudited) for the three month and nine month periods ended September 30, 2010 and 2009		2
	Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the nine months ended September 30, 2010 and 2009		3
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2010 and 2009		4
	Notes to Consolidated Financial Statements (unaudited)		5-10
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11-17
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk		17
Item 4 -	Controls and Procedures		17-18
PART II.	OTHER INFORMATION
Item 1 -	Legal Proceedings		18
Item 1A -	Risk Factors		18
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		18
Item 3 -	Defaults Upon Senior Securities		18
Item 4 -	Removed and Reserved		18
Item 5 -	Other Information		18
Item 6 -	Exhibits		18
Signatures			19

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PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS OF CNB BANCORP, INC.

CNB BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)	September 30, 2010 (unaudited)			December 31, 2009
Assets
Cash and due from banks	$	623		$	634
Federal funds sold		2,582			1,197
Securities available for sale, at fair value		8,120			7,414
Restricted securities, at cost		199			199
Loans, net of allowance for loan losses of $591 and $686 on September 30, 2010 and December 31, 2009		34,506			36,057
Premises and equipment, net		1,375			1,420
Foreclosed real estate and repossessed assets		304			16
Other assets		503			580
Total assets	$	48,212		$	47,517
Liabilities and Shareholders’ Equity
Liabilities
Non-interest bearing deposits	$	2,556		$	2,461
Interest bearing deposits		38,459			38,359
Total deposits		41,015			40,820
Accrued interest payable		88			96
Other liabilities		87			91
Total liabilities		41,190			41,007
Shareholders’ Equity
Common stock, $.01 par, 10,000,000 shares authorized, 1,500,427 shares issued and outstanding at September 30, 2010 and December 31, 2009		15			15
Additional paid-in capital		9,567			9,567
Retained earnings (deficit)		(2,837	)		(2,967	)
Accumulated other comprehensive income (loss)		277			(105	)
Total shareholders’ equity		7,022			6,510
Total liabilities and shareholders’ equity	$	48,212		$	47,517

See Notes to Consolidated Financial Statements.

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CNB BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months  Ended September 30,					For the Nine Months  Ended September 30,
(In thousands, except share and per share data)	2010		2009			2010		2009
Interest and Dividend Income
Loans, including fees	$	623	$	696		$	1,918	$	2,043
Investment securities, taxable		68		72			214		224
Federal funds sold		—		—			1		1
Total Interest and Dividend Income		691		768			2,133		2,268
Interest Expense
Deposits		221		264			693		865
Other borrowings		—		1			—		1
Total Interest Expense		221		265			693		866
Net Interest Income		470		503			1,440		1,402
Provision for Loan Losses		30		638			40		763
Net Interest Income after Provision for Loan Losses		440		(135	)		1,400		639
Non-Interest Income
Service charges on deposit accounts		3		3			8		9
Other fees and commissions		20		23			64		68
Net realized gains on disposition of securities		56		17			76		67
Income from investment in title company		1		5			6		10
Mortgage broker fees		—		2			—		6
Other income		11		8			32		25
Total Non-Interest Income		91		58			186		185
Non-Interest Expense
Personnel		266		262			786		788
Occupancy and equipment		30		30			93		92
Professional fees		50		39			150		129
Advertising		3		5			10		16
Computer services		28		23			80		68
Other		123		103			337		310
Total Non-Interest Expense		500		462			1,456		1,403
Net Income (Loss)	$	31	$	(539	)	$	130	$	(579	)
Earnings (loss) per share, basic and diluted	$	0.02	$	(0.36	)	$	0.09	$	(0.39	)
Weighted average shares outstanding, basic and diluted		1,500,427		1,500,427			1,500,427		1,500,427

See Notes to Consolidated Financial Statements.

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CNB BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2010 and 2009 (unaudited)

(Dollars in thousands)	Shares  of Common Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Comprehensive Income (Loss)			Total
Balance - December 31, 2009		1,500,427	$	15	$	9,567	$	(2,967	)	$	(105	)				$	6,510
Comprehensive income:
Net income		—		—		—		130			—		$	130			130
Other comprehensive income:
Unrealized gain on securities available for sale		—		—		—		—			—			458			—
Reclassification adjustment		—		—		—		—			—			(76	)		—
Total other comprehensive income		—		—		—		—			382		$	382			382
Total comprehensive income		—		—		—		—			—		$	512			—
Balance - September 30, 2010		1,500,427	$	15	$	9,567	$	(2,837	)	$	277					$	7,022
Balance - December 31, 2008		1,500,427	$	15	$	9,567	$	(1,827	)	$	47					$	7,802
Comprehensive loss:
Net loss		—		—		—		(579	)		—		$	(579	)		(579	)
Other comprehensive loss:
Unrealized gain on securities available for sale		—		—		—		—			—			38			—
Reclassification adjustment		—		—		—		—			—			(67	)		—
Total other comprehensive loss		—		—		—		—			(29	)	$	(29	)		(29	)
Total comprehensive loss		—		—		—		—			—		$	(608	)		—
Balance - September 30, 2009		1,500,427	$	15	$	9,567	$	(2,406	)	$	18					$	7,194

See Notes to Consolidated Financial Statements.

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CNB BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Nine Months Ended  September 30,
(Dollars in thousands)	2010			2009
Cash Flows From Operating Activities
Reconciliation of net income (loss) to net cash provided by operating activities:
Net income (loss)	$	130		$	(579	)
Provision for loan losses		40			763
Depreciation and amortization		62			62
Net amortization of securities		57			36
Realized gain on securities		(76	)		(67	)
Changes in:
Interest receivable		18			(45	)
Other assets		42			(34	)
Interest payable		(8	)		(16	)
Other liabilities		(4	)		23
Net cash provided by operating activities		261			143
Cash Flows From Investing Activities
Purchase of available for sale securities		(6,751	)		(6,444	)
Proceeds from sales, calls and maturities of available for sale securities		6,446			5,324
Purchase of property and equipment		—			(33	)
Net (increase) decrease in loans		1,223			(1,498	)
Net cash provided by (used in) investing activities		918			(2,651	)
Cash Flows From Financing Activities
Net increase (decrease) in non-interest bearing deposits		95			(437	)
Net increase in interest bearing deposits		100			2,207
Net cash provided by financing activities		195			1,770
Net increase (decrease) in cash and cash equivalents	$	1,374		$	(738	)
Cash and Cash Equivalents
Beginning		1,831			2,209
Ending	$	3,205		$	1,471
Supplemental Disclosures of Cash Flow Information
Cash payments for interest	$	701		$	882
Unrealized gain (loss) on available for sale securities	$	382		$	(29	)
Transfer between loans and other real estate owned	$	288		$	—

See Notes to Consolidated Financial Statements.

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CNB BANCORP, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Business Activities and Significant Accounting Policies

Business

CNB Bancorp, Inc. (the Company or CNB) is a Virginia bank holding company with a wholly owned subsidiary, Citizens National Bank (the Bank). The Bank is a national bank chartered under the laws of the United States located in Windsor, Virginia. The Bank commenced operations on April 29, 2003.

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company and the Bank. In consolidation, all intercompany accounts and transactions have been eliminated. These statements conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of September 30, 2010 and December 31, 2009; the results of operations for the three and nine month periods ended September 30, 2010 and 2009; changes in shareholders’ equity for the nine months ended September 30, 2010 and 2009; and cash flows for the nine months ended September 30, 2010 and 2009. The results of operations for the nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year. The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in CNB Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009.

Estimates

The financial statements include estimates and assumptions that affect the Company’s financial position and results of operations and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Note 2. Securities

The amortized cost and fair value of securities available for sale as of September 30, 2010 and December 31, 2009, are as follows:

	September 30, 2010
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
U.S. Government and federal agencies	$	6,773	$	252	$	(3	)	$	7,022
State and municipals, taxable		1,070		32		(4	)		1,098
	$	7,843	$	284	$	(7	)	$	8,120
	December 31, 2009
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
U.S. Government and federal agencies	$	5,973	$	13	$	(85	)	$	5,901
Corporate bonds		1,012		—		(18	)		994
State and municipals, taxable		534		—		(15	)		519
	$	7,519	$	13	$	(118	)	$	7,414

Proceeds from available for sale securities that matured, were sold, or were called by their issuers in the first nine months of 2010 were $6.4 million. During the same period, the Company realized gains of $76,000 on the sale of securities.

The primary purpose of the Company’s investment securities portfolio is to generate income and meet liquidity needs of the Company through readily saleable financial instruments. The portfolio is made up of fixed rate bonds, whose prices move inversely

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with changes in interest rates. At the end of each accounting period, the investment portfolio evidences certain unrealized gains and losses. The Company monitors the portfolio, which is subject to liquidity needs, market rate changes and credit risk changes, to determine whether adjustments are needed. The Company’s primary concern when selling securities at a loss is the credit quality of the issuer of the instrument being sold. A primary cause of temporary impairments would be a decline in the prices of bonds, generally as rates rise. At September 30, 2010, the portfolio had two accounts with unrealized losses. Unrealized losses are relative to the market rates and the timing of purchases and do not, in management’s opinion, materially negatively affect the Company’s operations, but remain subject to internal monitoring and controls. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis.

Note 3. Loans

The consolidated loan portfolio at September 30, 2010 and December 31, 2009 is composed of the following:

(Dollars in thousands)	September 30, 2010		Percentage			December 31, 2009		Percentage
Loans secured by real estate:
Construction and land development	$	3,650		10.40	%	$	4,431		12.06	%
Secured by 1-4 family residential		12,476		35.55	%		12,022		32.72	%
Nonfarm, nonresidential		13,060		37.21	%		12,696		34.55	%
Agricultural		120		0.34	%		297		0.81	%
Commercial and industrial loans		2,637		7.51	%		3,154		8.58	%
Loans to individuals		3,154		8.99	%		4,143		11.28	%
Total loans	$	35,097		100.00	%	$	36,743		100.00	%
Less: Allowance for loan losses		591					686
Loans, net	$	34,506				$	36,057

Note 4. Allowance for Loan Losses

Changes in the allowance for loan losses are as follows:

(Dollars in thousands)
Balance, December 31, 2009	$	686
Provision charged to operating expense		40
Loans recovered		—
Loans charged off		(135	)
Balance, September 30, 2010	$	591

(Dollars in thousands)	September 30, 2010		December 31, 2009
Impaired loans without a valuation allowance	$	354	$	920
Impaired loans with a valuation allowance		271		1,072
Total impaired loans	$	625	$	1,992
Valuation allowance related to impaired loans		71		271
Total non-accrual loans excluded from impaired loans		17		8
Total loans past due ninety days and still accruing		—		—
(Dollars in thousands)	September 30, 2010		December 31, 2009
Average balance of impaired loans	$	642	$	2,725
Interest income recognized on impaired loans		6		62
Cash-basis interest included in interest income		—		32

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Note 5. Premises and Equipment

Premises and equipment consists of the following:

(Dollars in thousands)	September 30, 2010		December 31, 2009
Land	$	301	$	301
Building		1,255		1,255
Furniture, fixtures and equipment		225		225
		1,781		1,781
Less accumulated depreciation		406		361
	$	1,375	$	1,420

Note 6. Earnings Per Share

For the three and nine months ended September 30, 2010 and 2009, the weighted average number of shares outstanding for calculating basic and diluted earnings per share was 1,500,427. Stock options outstanding of 82,527 and 84,027 shares, respectively, and warrants outstanding of 81,375 shares were excluded from each calculation of diluted earnings per share as the impact was anti-dilutive.

Note 7. Stock Option Plan

The Company sponsors a stock option plan, which allows employees and directors to increase their personal financial interest in the Company. This plan provides the ability to grant equity-based incentives in the form of either incentive or nonqualified options. The plan authorizes the issuance of up to 126,255 shares of common stock, subject to adjustment for certain recapitalizations. At September 30, 2010, there were 82,527 options issued and outstanding, all of which were exercisable. No options were granted or exercised and 1,500 options were forfeited during the first nine months of 2010. Options outstanding and exercisable had no intrinsic value at September 30, 2010. The following table summarizes options outstanding at September 30, 2010. Refer to Note 8 of the Company’s 2009 Form 10-K for a full description of the plan.

		Options Outstanding and Exercisable
Exercise Price		Number		Weighted  Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	6.67		62,625		5.25	$	6.67
	8.33		1,125		3.75		8.33
	8.67		18,777		5.25		8.67

Note 8. Warrants

In connection with the initial offering of the Company, 153,750 warrants were issued to the original directors to purchase common shares. During the first nine months of 2010, there were no warrants granted, exercised, or forfeited. All of the remaining warrants are held by the organizing directors of the Company and became fully vested during 2005. Warrants outstanding and exercisable had no intrinsic value at September 30, 2010 and are summarized in the following table. Refer to Note 8 of the Company’s 2009 Form 10-K for more information on the warrants.

		Warrants Outstanding and Exercisable
Exercise Price		Number		Weighted  Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	6.67		81,375		2.25	$	6.67

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Note 9. Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure. In accordance with theFair Value Measurements and Disclosurestopic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimate may not be realized in an immediate settlement of an instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in 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 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in market that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets of liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of far value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:

Securities available for sale.Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). Restricted securities are recorded at cost based on the redemption provisions of the correspondent banks and therefore are not included in the following table.

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2010 and December 31, 2009.

	Fair Value Measurements at September 30, 2010 Using
Description(Dollars in thousands)	Balance as of September 30, 2010		Quoted Prices in Active  Markets for Identical Assets		Significant  Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities	$	8,120	$	—	$	8,120	$	—

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	Fair Value Measurements at December 31, 2009 Using
	Balance as of		Quoted Prices in Active  Markets for Identical Assets		Significant  Other Observable Inputs		Significant Unobservable Inputs
Description(Dollars in thousands)	December 31, 2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities	$	7,414	$	—	$	7,414	$	—

Certain assets are measured at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:

Impaired Loans. Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Bank’s loan collateral is real estate. The value of real estate collateral is determined by utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Operations.

The following table summarizes the Company’s financial assets that were measured at fair value on a nonrecurring basis during the period.

	Carrying Value at September 30, 2010
	Balance as of		Quoted Prices in Active  Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description(Dollars in thousands)	September 30, 2010		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans	$	200	$	—	$	200	$	—
	Carrying Value at December 31, 2009
	Balance as of		Quoted Prices in Active  Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description(Dollars in thousands)	December 31, 2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans	$	801	$	—	$	801	$	—

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

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

Securities.For securities, excluding restricted securities, fair values are based on quoted market prices or dealer quotes. The carrying value of restricted securities approximates fair value based on the redemption provision of each issuer.

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

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

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

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

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

	September 30, 2010				December 31, 2009
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and short-term investments	$	3,205	$	3,205	$	1,831	$	1,831
Securities, available for sale		8,120		8,120		7,414		7,414
Loans, net		34,506		34,490		36,057		36,080
Accrued interest receivable		246		246		252		252
Financial liabilities:
Non-interest bearing deposits		2,556		2,556		2,461		2,461
Interest bearing deposits		38,459		38,780		38,359		38,705
Accrued interest payable		88		88		96		96

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

Note 10. Other Expenses

The Company had the following other expenses as of the dates indicated.

	For the three months  ended September 30,				For the nine months  ended September 30,
(Dollars in thousands)	2010		2009		2010		2009
ATM expense	$	13	$	9	$	38	$	34
Insurance		5		4		16		14
FDIC assessments		14		14		44		46
Regulatory assessments		8		7		22		21
Supplies and stationery		4		3		8		14
Taxes		11		15		36		42
Other		68		51		173		139
Total Other	$	123	$	103	$	337	$	310

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Information

CNB Bancorp, Inc. (the Company or CNB) was organized on November 12, 2001 to serve as a holding company for Citizens National Bank (the Bank). Other than its investment in the Bank, the Company has no other material asset, nor does it conduct any other business activity. The Company is headquartered in Windsor, Virginia. The Bank is a community bank serving the County of Isle of Wight, the Cities of Franklin and Suffolk, and portions of Southampton, Surry and Sussex Counties with one full service branch, all within the state of Virginia.

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

Economic conditions, competition and federal monetary and fiscal policies also affect financial institutions. The year 2010 has and will continue to be a challenging year in margin management as we work to balance asset repricing that occurs sooner than deposit repricing in a low interest rate environment. In a normal slow rate decline as seen in many business cycles in the past, this process would be relatively straight forward, but in the world wide economic downturn that surfaced in 2007 and has remained prevalent, we remain more challenged. While community banks like us for the most part have not been involved in subprime lending, we are exposed to a broad market reaction to the financial services industry which has lowered stock prices and negatively affected certain of the larger institutions that took part in sub-prime loans or utilized hedge funds relying on these loans. The economic environment that has been created has influenced and may continue to influence the ability of some of our customers to repay their loans. A downward movement of interest rates may also influence our investment portfolio. A drop in interest rates may cause bonds to be called faster than normal, prompting close management attention to maintain the yield on the portfolio. Until rates stabilize, we will operate in an environment that will likely negatively influence our earnings in the short term.

Financial Condition

At September 30, 2010, CNB Bancorp, Inc. had total assets of $48.2 million compared to $47.5 million at December 31, 2009, an increase of $695,000. The increase in total assets is primarily due to a $1.4 million increase in federal funds sold and a $706,000 increase in securities available for sale offset by a $1.6 million decrease in net loans. At September 30, 2010, assets consisted principally of cash and cash equivalents of $3.2 million, $8.3 million in securities available for sale, $34.5 million in loans, net of allowance for loan losses, and $1.4 million in premises and equipment, net of accumulated depreciation.

Total liabilities at September 30, 2010 were $41.2 million, compared to $41.0 million at December 31, 2009. Total liabilities at September 30, 2010 consisted primarily of $2.6 million in non-interest bearing deposits and $38.5 million in interest bearing deposits. Non-interest bearing and interest bearing deposits increased $95,000 and $100,000, respectively in the first nine months of 2010.

As of September 30, 2010, CNB had off-balance sheet financial instruments from unfulfilled loan commitments of $2.5 million. At September 30, 2010, the Company had five loans in the amount of $642,000 on non-accrual status. The Company had three loans totaling $625,000 classified as impaired, all of which were on non-accrual. The Company had no loans past due 90 days and still accruing interest at September 30, 2010.

Asset Quality

The Company’s allowance for loan losses is an estimate of the amount needed to provide for possible losses in its loan portfolio. In determining the adequacy of the allowance, management considers the Company’s historical loss experience, the size and composition of the loan portfolio, specific impaired loans, the overall level of nonperforming loans, the value and adequacy of collateral and guarantors, experience and depth of lending staff, and the effects of credit concentrations and economic conditions. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge offs, net of recoveries. Because the risk of loan loss includes general economic trends as well as conditions affecting individual borrowers, the allowance for loan losses can only be an estimate. (See the Allowance for Loan Losses discussion under Critical Accounting Policies later in this section.)

Total nonperforming assets at September 30, 2010 consisted of nonaccrual loans of $642,000, other real estate owned and repossessed assets of $304,000 and no loans past due 90 days and still accruing interest. The Company had three loans totaling

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$625,000 classified as impaired, all of which were on non-accrual. Two of these loans totaling $438,000 were also classified for regulatory purposes as doubtful. The Company had nonperforming assets of seven loans on non-accrual totaling $920,000 and repossessed assets of $16,000 at December 31, 2009. Five loans totaling $919,000 classified as non-accrual were also classified as impaired. Four loans, two of which were also non-accrual and impaired, totaling $525,000 were also classified for regulatory purposes as doubtful. The slow economy has adversely affected collateral values and our customers’ ability to pay, subjecting the Company to similar risks many financial institutions are facing as a result of the weakening economy. These risks include increased charge-offs, levels of past due loans, and nonperforming assets.

The following table sets forth selected asset quality data and ratios (dollars in thousands) for the period ended:

	September 30, 2010			December 31, 2009
Nonaccrual loans	$	642		$	920
Loans past due 90 days and accruing interest		—			—
Total nonperforming loans		642			920
Foreclosed real estate and repossessed assets		304			16
Total nonperforming assets	$	946		$	936
Balances
Allowance for loan losses	$	591		$	686
Gross loans		35,097			36,743
Ratios
Allowance for loan losses to loans		1.68	%		1.87	%
Allowance for loan losses to nonperforming loans		92.06	%		74.57	%

Total loan charge-offs, less recoveries, for the nine months ended September 30, 2010 and 2009 amounted to $135,000 and $21,000, respectively. Credit quality management continues to be a top priority, however the Company recognizes an increased potential for charge-offs in this environment. With the high level of real estate secured debt and active monitoring of the loan portfolio and reserves, management is attempting to mitigate the effects of the economic downturn.

The allowance for loan losses of $591,000 representing 1.68% of gross loans, at September 30, 2010 decreased $95,000 compared to $686,000, or 1.87% of gross loans, at December 31, 2009. The recessionary economic environment would not normally support a decline in the allowance for loan losses; however, during the second and third quarters of 2010, the Company fully charged off two impaired loans which resulted in a decrease to the specific reserves of $115,000. The Company continues to assess adequate reserve levels in accordance with interagency guidance, focusing primarily on proper impairment analyses and monitoring of the qualitative, subjective factor weighting to ensure adequate reserves for the recessionary economic environment observed during 2009 and in anticipation of a potential recessionary economic environment through 2010.

Liquidity and Interest Rate Sensitivity

During the fourth quarter of 2006, CNB completed an offering of 650,000 shares of its common stock in a rights and public offering. This offering raised $4.0 million, net of offering expenses, which has been and will be used for general corporate purposes, including future potential growth and expansion. CNB management believes its current working capital amount will be sufficient to fund the activities of the Bank on an ongoing basis. There can be no assurance, however, that CNB will achieve any particular level of profitability.

Net interest income, CNB’s primary source of consolidated earnings, will fluctuate with changes to prevailing interest rates. To lessen the impact of these interest rate changes, CNB intends to structure the balance sheet so that repricing opportunities exist for both assets and liabilities in roughly equal amounts at approximately the same time intervals. Imbalances in these repricing opportunities at any point in time constitute interest rate sensitivity.

Interest rate sensitivity refers to the responsiveness of interest-bearing assets and liabilities to changes in market interest rates. The rate sensitive position, or gap, is the difference in the volume of rate sensitive assets and liabilities at a given time interval. The general objective of gap management is to manage rate sensitive assets and liabilities in order to reduce potential negative the impact of interest rate fluctuations on net interest income. CNB will generally attempt to maintain a balance between rate sensitive assets and liabilities as the exposure period is lengthened to minimize the overall interest rate risks.

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CNB will evaluate regularly its balance sheet’s asset mix in terms of several variables: yield, credit quality, appropriate funding sources and liquidity. To manage effectively its balance sheet’s liability mix, CNB plans to focus on expanding the Bank’s deposit base and converting non-cash assets to cash as necessary.

As the Bank’s operations grow, CNB will continuously structure its rate sensitivity position in an effort to hedge against rapidly rising or falling interest rates. The Bank’s Asset and Liability Management Committee meets on a quarterly basis to develop strategy for the upcoming period. The committee’s strategy will include anticipating future interest rate movements.

Liquidity represents the ability to provide steady sources of funds for loan commitments and investment activities, as well as to maintain sufficient funds to cover deposit withdrawals and payment of debt and operating obligations. CNB can obtain these funds by converting assets to cash, by attracting new deposits, or by seeking alternate sources of funding such as those provided by the Federal Home Loan Bank. The Bank’s ability to maintain and increase deposits will serve as its primary source of liquidity.

Capital Resources

At September 30, 2010 and December 31, 2009, consolidated shareholders’ equity was $7.0 million and $6.5 million, representing 14.6% and 13.7% of total assets, respectively. The Company’s common stock had a tangible book value of $4.68 and $4.34 per share at September 30, 2010 and December 31, 2009, respectively.

The Bank and the Company (on a consolidated basis) are subject to the capital requirements of the OCC and the Federal Reserve, respectively. The OCC and Federal Reserve have adopted risk-based capital guidelines for all national banks and bank holding companies, respectively. To be “adequately capitalized,” all national banks are expected to maintain a minimum ratio of total capital (after deductions) to risk-weighted assets of 8% (of which at least 4% must consist of Tier 1 Capital, which is essentially common shareholders’ equity less intangible assets).

The following table sets forth information with respect to the risk-based and leverage ratios for the Company and Bank at September 30, 2010 compared to minimum ratios required by regulation.

	Actual					Minimum Capital Requirement					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2010:
Total Capital (to Risk-Weighted Assets)
Consolidated	$	7,182		20.63	%	$	2,786		8.00	%		N/A		N/A
Bank	$	6,986		20.06	%	$	2,786		8.00	%	$	3,482		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	$	6,745		19.37	%	$	1,393		4.00	%		N/A		N/A
Bank	$	6,549		18.81	%	$	1,393		4.00	%	$	2,089		6.00	%
Tier 1 Capital (to Average Assets)
Consolidated	$	6,745		13.95	%	$	1,934		4.00	%		N/A		N/A
Bank	$	6,549		13.55	%	$	1,934		4.00	%	$	2,417		5.00	%

Results of Operations

CNB had net income (loss) of $130,000 and $(579,000) for the nine months ended September 30, 2010 and 2009, respectively. Factors such as controlled asset growth, asset/liability repricing and management, and non-interest income have combined to provide the necessary income to maintain profitability; however the combination of increased industry-wide FDIC premium assessments and the potential for significant additional provisions for loan losses may negatively affect earnings for 2010.

Total interest income for the three and nine month periods ended September 30, 2010 was $691,000 and $2.1 million, respectively. Total interest expense for the same periods was $221,000 and $693,000, respectively. Total interest income and expense for the nine months ended September 30, 2009 were $2.3 million and $866,000, respectively. For the three months ended September 30, 2009, total interest income was $768,000 and total interest expense was $265,000. The decreased interest income and expense from 2009 to 2010 is indicative of stable growth and asset/liability repricing in a low market rate environment. The net interest margin, which is calculated by expressing net interest income as a percentage of average interest earning assets, is an indicator of effectiveness in generating income from earning assets. CNB’s net interest margin remained strong at 4.20% during the first nine months of 2010, down slightly from 4.27% for the same period in 2009.

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Total non-interest income for the quarter ended September 30, 2010 was $91,000, consisting primarily of other fees and commissions and net realized gains on disposition of securities. For the same period, total non-interest expense was $500,000. Personnel expense and professional fees accounted for 53.2% and 10.0% of non-interest expense, respectively. Non-interest income for the three months ended September 30, 2009 was $58,000, while non-interest expense was $462,000. For the nine month period ended September 30, 2010, non-interest income was $186,000 and non-interest expense was $1.5 million. For the same period in 2009, non-interest income and non-interest expense were $185,000 and $1.4 million, respectively. For the nine month period ended September 30, 2010 compared to the same period in 2009, non-interest income increased 0.5% and non-interest expense increased 3.8%. Significantly higher FDIC premiums, which have been assessed industry-wide, were and will continue to be the primary component of increased non-interest expense during 2009 and 2010.

Off-Balance Sheet Arrangements

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

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

Off-balance-sheet financial instruments whose contract amounts represented credit risk as of September 30, 2010 were unfulfilled loan commitments totaling $2.5 million.

No losses are anticipated as a result of the foregoing commitments; therefore the Company does not expect a material effect on our consolidated financial condition.

Critical Accounting Policies

The financial condition and results of operations presented in the consolidated financial statements, accompanying notes to the consolidated financial statements and management’s discussion and analysis are, to a large degree, dependent upon the accounting policies of the Company. The selection and application of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change and require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.

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

The Company evaluates various loans individually for impairments. Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management. The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment.

For loans without individual measures of impairment, the Company makes estimates of losses for groups of loans. Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and general collateral type. A loss rate reflecting the expected loss inherent in a group of loans is derived based upon estimates of default rates for a given loan grade, the predominant collateral type for the group and the terms of the loan. The resulting estimate of losses for groups of loans are adjusted for relevant environmental factors and other conditions of the portfolio of loans and leases, including: borrower and industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in underwriting standards and risk selection; level of experience, ability and depth of lending management; peer group comparison; results of examinations and evaluations of the overall portfolio by senior management, external loan review, and regulatory examiners; and national and local economic conditions.

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The Company recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used, and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the allowance is adequate. The establishment of allowance factors is a continuing exercise and may change from period to period, resulting in an increase or decrease in the amount of provision or allowance based upon the same volume or classification of loans. If different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses, an additional provision for loan losses would be made, which amount may be material to the Consolidated Financial Statements.

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

The Company has recorded a 100% deferred tax valuation allowance related to various temporary differences, principally consisting of the provision for loan losses and its net operating loss carryforwards. Since the Company has only been in operation since April 29, 2003 and did not show a profit during 2003, 2004, 2005 or 2009, it is management’s opinion that it is prudent at this time to only recognize the deferred tax asset to the extent that income tax benefits are realized.

Recent Accounting Pronouncements

In June 2009, the FASB issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, “Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140”, was adopted into Codification in December 2009 through the issuance of Accounting Standards Update (ASU) 2009-16. The new standard provides guidance to improve the relevance, representational faithfulness, and comparability of the information that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. ASU 2009-16 was effective for transfers on or after January 1, 2010. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued new guidance relating to variable interest entities. The new guidance, which was issued as SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” was adopted into Codification in December 2009. The objective of the guidance is to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. SFAS No. 167 was effective as of January 1, 2010. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing.” ASU 2009-15 amends Subtopic 470-20 to expand accounting and reporting guidance for own-share lending arrangements issued in contemplation of convertible debt issuance. ASU 2009-15 is effective for fiscal years beginning on or after December 15, 2009 and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-04,Accounting for Various Topics – Technical Corrections to SEC Paragraphs. ASU 2010-04 makes technical corrections to existing SEC guidance including the following topics: accounting for subsequent investments, termination of an interest rate swap, issuance of financial statements - subsequent events, use of residential method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate used for measuring defined benefit obligation. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

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In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.” ASU 2010-09 addresses both the interaction of the requirements of Topic 855 with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provisions related to subsequent events. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. ASU 2010-09 is effective immediately. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” The new disclosure guidance will significantly expand the existing requirements and will lead to greater transparency into a company’s exposure to credit losses from lending arrangements. The extensive new disclosures of information as of the end of a reporting period will become effective for both interim and annual reporting periods ending on or after December 15, 2010. Specific disclosures regarding activity that occurred before the issuance of the ASU, such as the allowance rollforward and modification disclosures, will be required for periods beginning on or after December 15, 2010. The Company is currently assessing the impact that ASU 2010-20 will have on its consolidated financial statements.

On September 15, 2010, the SEC issued Release No. 33-9142, “Internal Control Over Financial Reporting In Exchange Act Periodic Reports of Non-Accelerated Filers.” This release issued a final rule adopting amendments to its rules and forms to conform them to Section 404(c) of the Sarbanes-Oxley Act of 2002 (SOX), as added by Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. SOX Section 404(c) provides that Section 404(b) shall not apply with respect to any audit report prepared for an issuer that is neither an accelerated filer nor a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Release No. 33-9142 was effective September 21, 2010.

On September 17, 2010, the SEC issued Release No. 33-9144, “Commission Guidance on Presentation of Liquidity and Capital Resources Disclosures in Management’s Discussion and Analysis.” This interpretive release is intended to improve discussion of liquidity and capital resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations in order to facilitate understanding by investors of the liquidity and funding risks facing the registrant. This release was issued in conjunction with a proposed rule, “Short-Term Borrowings Disclosures,” that would require public companies to disclose additional information to investors about their short-term borrowing arrangements. Release No. 33-9144 was effective on September 28, 2010.

Caution Regarding Forward Looking Statements

Various statements contained in this quarterly report on Form 10-Q and the exhibits to this quarterly report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the “Act”). In addition, various statements in future filings by the Company with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of the Company which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to:

• projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items;

• statements of plans and objectives of the Company or its management or board of directors, including those relating to products or services;

• statements of future economic performance; and

• statements of assumptions underlying such statements.

Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those in such statements. Facts that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

• the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

• the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System;

• inflation, interest rate, market and monetary fluctuations;

• the timely development of new products and services and the overall value of these products and services to users;

• changes in consumer spending, borrowing and saving habits;

16

• technological changes;

• acquisitions;

• the ability to increase market share and control expenses;

• the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply;

• the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board;

• changes in the Company’s organization, compensation and benefit plans;

• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and

• the success of the Company at managing the risks involved in the foregoing.

Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect unanticipated events or circumstances after the date on which a statement is made.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are executed in accordance with appropriate management authorization and accounting records are reliable for the preparation of financial statements in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010. Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

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Based on this assessment, management believes that the Company maintained effective internal control over financial reporting as of September 30, 2010.

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarterly report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our third fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which CNB or its subsidiary is a party or of which any of their property is the subject.

ITEM 1A. RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

(c) Not applicable.

The information required for limitations upon payment of dividends is incorporated herein by reference to the Company’s annual report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2009.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. REMOVED AND RESERVED.

ITEM 5. OTHER INFORMATION

(a) Required 8-K Disclosures. None

(b) Changes in Procedures for Director Nominations by Security Holders. None

ITEM 6. EXHIBITS

Exhibit Number	Exhibit
31.1	CEO Certification pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended.
31.2	CFO Certification pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	CNB BANCORP, INC.
	(Registrant)
DATE: November 15, 2010	BY:	/s/ Jeffrey H. Noblin
		Jeffrey H. Noblin
		Chief Executive Officer
DATE: November 15, 2010	BY:	/s/ Elizabeth T. Beale
		Elizabeth T. Beale
		Chief Financial Officer

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