CNBZ CNB Corporation (PK)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

Commission file number 033-00737

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

 MICHIGAN 38-2662386
(State or other jurisdiction of (I.R.S. Employer
 incorporation or organization) Identification No.)

303 NORTH MAIN STREET, CHEBOYGAN, MI 49721
(Address of principal executive offices, including Zip code)

Registrant's telephone number (231) 627-7111

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $2.50 PER SHARE
(Title of Class)

Indicate by check mark if the registrant is a well known seasoned issuer, as
defined in Rule 405 of the Securities Act

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.

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.

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

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. (Check one):

 Large Non- Smaller
accelerated Accelerated accelerated reporting
 filer [ ] filer [ ] filer [ ] company [X]
 (Do not check if a
 smaller reporting
 company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2007 was $ 49,579,880.

As of March 20, 2008 there were outstanding 1,214,419 shares of the registrant's common stock, $2.50 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant's annual report to security holders for fiscal year ended December 31, 2007 are incorporated by reference in Part I and Part II of this report, and specified portions of the registrant's proxy statement for its annual meeting of shareholders to be held May 20, 2008 are incorporated by reference in Part III of this report.

PART I

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 phrases, "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 to the date made, and advise 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.

ITEM 1-BUSINESS

CNB Corporation (the Company) was incorporated in June, 1985 as a business corporation under the Michigan Business Corporation Act, pursuant to the authorization and direction of the Board of Directors of the Citizens National Bank of Cheboygan (the Bank).

The Company is a bank holding company registered with the Board of Governors of the Federal Reserve System (the Federal Reserve Board) under the Bank Holding Company Act with the Bank as its wholly-owned subsidiary. The Bank was acquired by the Company effective December 31, 1985. The Company has corporate power to engage in such activities as permitted to business corporations under the Michigan Business Corporation Act, subject to the limitations of the Bank Holding Company Act and regulations of the Federal Reserve Board. In general, the Bank Holding Company Act and regulations restrict the Company with respect to its own activities and activities of any subsidiaries to the business of banking or such other activities which are closely related to the business of banking.

During 2001, the Company, through its subsidiary, the Bank, formed the CNB Mortgage Corporation. Residential mortgages were transferred to the new subsidiary in October, 2001. The change had no impact on our customers who continue to have their loans serviced locally by our Bank.

The Bank offers a full range of banking services to individuals, partnerships, corporations, and other entities. Banking services include checking, NOW accounts, savings, time deposit accounts, money market deposit accounts, safe deposit facilities and money transfers.

The Bank's lending function provides a full range of loan products. These include real estate mortgages, secured and unsecured commercial and consumer loans, lines of credit, home equity loans and construction financing. The Bank also participates in specialty loan programs through the Michigan State Housing Development Authority, Federal Home Loan Mortgage Corporation, Mortgage Guaranty Insurance Corporation, Farm Service Agency and Small Business Administration. Through correspondent relationships, the Bank also makes available credit cards and student loans.

The Bank's loan portfolio consists of over 48% residential real estate mortgages on both primary and secondary homes. The residential borrower base is very diverse and loan to value ratios are generally 80% or less. The Bank does not practice subprime lending and does not have any loans that it would consider to be subprime mortgage loans. Commercial loans accounts for approximately 47% of total loans. Commercial real estate lending, a part of commercial loans, has grown to represent 40% of total loans. These loans are generally for owner occupied properties with loan to value ratios of 80% or less. Personal guarantees are required on most commercial loans. Unsecured lending is very limited.

The Bank makes first and second mortgage loans to its customers for the purchase of residential and commercial properties. Historically, the Bank has sold its long term fixed rate residential mortgage loans qualifying for the secondary market to the Federal Home Loan Mortgage Corporation (FHLMC). The mortgage loan portfolio serviced by the Bank for the FHLMC totaled approximately $75 million at December 31, 2007.

Banking services are delivered through seven full-service banking offices and two drive-in branches plus eleven automated teller machines in Cheboygan, Emmet and Presque Isle Counties, Michigan. The business base of the counties is primarily tourism with light manufacturing. The Bank maintains correspondent bank relationships with several larger banks, which involve check clearing operations, transfer of funds, loan participations, and the purchase and sale of federal funds and other similar services.

We opened our new branch facility just south of Alanson in Littlefield Township in January 2007. This is our first expansion location since the Indian River branch opened in 1981. The new Alanson branch includes a full lobby service, easily accessible drive-thru lanes and a drive up ATM.

Under various agency relationships, the Bank provides trust and discount brokerage services and mutual fund, annuity and life insurance products to its customers.

In its primary market, which includes Cheboygan County and parts of Emmet, Mackinac and Presque Isle Counties, the Bank is one of three principal banking institutions. One is a member of a multi-bank holding company with substantially more assets than the Company, while the other is an independent community bank. There are also two credit unions, one savings and loan association and a brokerage firm.

As of December 31, 2007, the Bank employed 80 full-time and 8 part-time employees. This compares to 75 full-time and 12 part-time employees as of December 31, 2006. Neither the Company nor CNB Mortgage Corporation has any full-time employees. Their operation and business are carried out by officers and employees of the Bank who are not compensated by the Company.

Disclosure relating to the Distribution of Assets, Liabilities and Stockholders'Equity; Interest rates and Interest differential is presented on pages 43-44 of Registrant's 2007 Annual Report which is incorporated herein by reference.

SECURITIES

The year end fair values and related gross unrealized gains and losses for securities available for sale, were as follows:

AVAILABLE FOR SALE

 Gross Gross
 Fair Unrealized Unrealized
Available for Sale Value Gains Losses
------------------ ------- ---------- ----------
 (In thousands)
2007
 U.S. Government and agency $12,304 $111 $ (1)
 Mortgage-backed 10,238 39 (31)
 State and municipal 3,951 31 (2)
 Money market preferred stock 14,000 -- --
 ------- ---- -----
 $40,493 $181 $ (34)
 ======= ==== =====
2006
 U.S. Government and agency $21,307 $ 8 $(125)
 Mortgage-backed 10,491 4 (107)
 State and municipal 8,549 59 (13)
 Money market preferred stock 10,984 -- (16)
 ------- ---- -----
 $51,331 $ 71 $(261)
 ------- ---- -----

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

HELD TO MATURITY

 Gross Gross
 Carrying Unrecognized Unrecognized Fair
Held to Maturity Amount Gains Losses Value
---------------- -------- ------------ ------------ ------
 (In thousands)
2007
 State and municipal $8,789 $118 $(25) $8,882
 ====== ==== ==== ======
2006
 State and municipal $4,543 $ 54 $(15) $4,582
 ====== ==== ==== ======

Scheduled maturities of the fair value of securities available for sale and the carrying amount of held to maturity securities at December 31, 2007, were as follows:

 Due in Due from Due from Due
 One year One to Five to After ten
 Or less Five years Ten years Years Total
 -------- ---------- --------- --------- -------
 (In thousands)
U.S. Government and
 agency $ 5,545 $ 6,759 $ -- $ -- $12,304
Mortgage-backed 864 9,374 -- -- 10,238
State and municipial 4,104 3,825 3,301 1,510 12,740
Money market prefd stock 14,000 -- -- -- 14,000
 ------- ------- ------ ------ -------
 $24,513 $19,958 $3,301 $1,510 $49,282
 ======= ======= ====== ====== =======
Yield 5.39% 5.18% 6.64% 6.80% 5.43%
 ======= ======= ====== ====== =======

The Company held securities exceeding 10% of shareholders' equity for the following states (including its political subdivisions) at December 31, 2007:

 Book Fair
 Value Value
 ------ ------
 (In thousands)
Michigan $9,392 $9,437

LOANS

The following is a summary of loans at December 31:

 2007 2006 2005 2004 2003
 -------- -------- -------- -------- --------
 (In thousands)
Residential real estate $ 83,264 $ 82,842 $ 83,234 $ 83,364 $ 89,042
Consumer 8,709 9,444 9,922 8,699 9,660
Commercial real estate 68,445 61,740 53,133 43,336 35,258
Commercial 14,234 13,208 10,037 9,220 9,540
 -------- -------- -------- -------- --------
 174,652 167,234 156,326 144,619 143,500
Deferred loan origination fees, net (28) (6) (8) (11) (15)
Allowance for loan losses (1,670) (1,498) (1,456) (1,350) (1,575)
 -------- -------- -------- -------- --------
 $172,954 $165,730 $154,862 $143,258 $141,910
 ======== ======== ======== ======== ========

Maturity and Rate Sensitivity of Selected Loans

The following table presents the remaining maturity of total loans outstanding excluding residential real estate and consumer loans at December 31, 2007, according to scheduled repayments of principal. The amounts due after one year are classified according to the sensitivity of changes in interest rates.

 Total
 --------------
 (In thousands)
In one year or less $38,861
After one year but within five years:
 Interest rates are floating or adjustable --
 Interest rates are fixed or predetermined 39,711
After five years:
 Interest rates are floating or adjustable --
 Interest rates are fixed or predetermined 4,107
 -------
 $82,679
 =======

Summary of loan loss experience is as follows:

Additional information relative to the allowance for loan losses is presented in the following table. This table summarizes loan balances at the end of each period and daily average balances, changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off by loan category, and additions to the allowance for loan losses through provisions charged to expense.

 2007 2006 2005 2004 2003
 ------ ------ ------ ------ ------
 (Dollars in thousands)
Balance at beginning of period $1,498 $1,456 $1,350 $1,575 $1,669
Less charge-offs:
 Residential real estate 57 2 -- 33 8
 Consumer 59 63 28 43 98
 Commercial real estate -- -- -- -- --
 Commercial 10 39 -- 166 --
 ------ ------ ------ ------ ------
Total charge-offs: 126 104 28 242 106
Recoveries:
 Residential real estate 5 6 7 1 1
 Consumer 16 19 7 8 11
 Commercial real estate -- -- -- -- --
 Commercial 2 1 -- 8 --
 ------ ------ ------ ------ ------
Total recoveries 23 26 14 17 12
 ------ ------ ------ ------ ------
Net charge-offs 103 78 14 225 94
 ------ ------ ------ ------ ------
Provision charged to expense 275 120 120 -- --
 ------ ------ ------ ------ ------
Allowance for loan losses,
 end of period $1,670 $1,498 $1,456 $1,350 $1,575
 ====== ====== ====== ====== ======

 2007 2006 2005 2004 2003
 -------- -------- -------- -------- --------
 (Dollars in thousands)
Total loans outstanding at end
 of period $174,652 $167,234 $156,326 $144,619 $143,500
Average loans outstanding for
 the year $172,144 $163,146 $149,681 $143,800 $146,330
Ratio of net charge-offs to daily
 average loans outstanding 0.06% 0.05% 0.01% 0.16% 0.06%
Ratio of net charge-offs to total
 loans outstanding 0.06% 0.05% 0.01% 0.16% 0.07%

The allocation of the allowance for loan losses for the years ended December 31 is:

 Residential Commercial
 Real Estate Consumer Real Estate Commercial Unallocated Total
 ----------- -------- ----------- ---------- ----------- ------
 (Dollars in thousands)
2007 Allowance amount $ 446 $ 97 $ 814 $268 $ 45 $1,670
 % of Total loans 47.7% 5.0% 39.2% 8.1% 100.0%
2006 Allowance amount $ 437 $ 98 $ 655 $228 $ 80 $1,498
 % of Total loans 49.5% 5.7% 36.9% 7.9% 100.0%
2005 Allowance amount $ 299 $ 35 $ 829 $163 $ 130 $1,456
 % of Total loans 53.2% 6.3% 34.0% 6.5% 100.0%
2004 Allowance amount $ 223 $ 39 $ 118 $ 74 $ 896 $1,350
 % of Total loans 57.6% 6.0% 30.0% 6.4% 100.0%
2003 Allowance amount $ 258 $ 48 $ 88 $ 49 $1,132 $1,575
 % of Total loans 62.1% 6.7% 24.6% 6.6% 100.0%

The amount of the unallocated allowance decreased significantly from $896,000 in 2004 to $130,000 in 2005. This was primarily due to a revision of the allowance for loan losses methodology during 2005. During 2005 management enhanced their assessment of inherent risks in the loan portfolio which resulted in increased allowance allocations in the commercial real estate and commercial loan categories during 2005. Management feels the new methodology better allocates the allowance into the appropriate loan categories.

The review of the loan portfolio revealed no undue concentrations of credit, however, the portfolio continues to be concentrated in residential real estate mortgages and highly dependent upon the tourist industry for the source of repayment. Because the reliance on tourism is both primary, (i.e. loans to motels, hotels, and restaurants, etc.) and secondary (i.e. loans to employees of tourist related businesses), it is difficult to assess a specific dollar amount of inherent loss potential. Likewise, the residential real estate market has been stable or increasing, so inherent loss potential in this concentration is also difficult to reasonably assess. Therefore, the tourism industry and residential real estate mortgage concentrations are considered in establishing the allowance for loan loss.

The following is a summary of nonaccrual, past due and restructured loans as of December 31:

 2007 2006 2005 2004 2003
 ------ ---- ---- ---- -----
 (In thousands)
Nonaccrual loans $ 831 $ -- $ -- $ -- $ --
Loans past due 90 days or more 387 177 255 674 408
Troubled debt restructurings -- -- -- -- --
 ------ ---- ---- ---- ----
 $1,218 $177 $255 $674 $408
 ====== ==== ==== ==== ====

DEPOSITS

The following table presents the remaining maturity of time deposits individually exceeding $100,000 at December 31, 2007. Dollars are reported in thousands.

3 Months or less $ 5,926
Over 3 Months to 6 Months 3,451
Over 7 Months through 12 Months 5,457
Over 12 Months 10,669
 -------
 $25,503
 =======

Various ratios required by this section and other ratios commonly used in analyzing bank holding company financial statements are included in page 1 of Registrant's 2007 Annual Report, which is incorporated herein by reference.

SUPERVISION AND REGULATION

As a bank holding company within the meaning of the Bank Holding Company Act, the Company is required to file quarterly and annual reports of its operations and such additional information as the Federal Reserve Board may require and is subject, along with its subsidiary, to examination by the Federal Reserve Board. The Federal Reserve Board is the primary regulator of the Company.

The Bank Holding Company Act requires every bank holding company to obtain prior approval of the Federal Reserve Board before it may merge with or consolidate into another bank holding company, acquire substantially all the assets of any bank, or acquire ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank holding company or bank. The Bank Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. However, holding companies may engage in, and may own shares of companies engaged in, certain businesses found by the Federal Reserve Board to be so closely related to banking or the management or control of banks as to be a proper incident thereto.

Under current regulations of the Federal Reserve Board, a holding company and its nonbank subsidiaries are permitted, among other activities, to engage, subject to certain specified limitations, in such banking related business as consumer finance, equipment leasing, computer service bureau and software operations, data processing, discount securities brokerage, mortgage banking and brokerage, sale and leaseback, and other forms of real estate banking. The Bank Holding Company Act does not place territorial restrictions on the activities of nonbank subsidiaries of bank holding companies.

In addition, Federal legislation prohibits acquisition of "control" of a bank or bank holding company without prior notice to certain federal bank regulators. "Control" in certain cases may include the acquisition of as little as 10% of the outstanding shares of capital stock.

The Company's cash revenues are derived primarily from dividends paid by the Bank. Without prior approval, a national bank may not declare a dividend if the total amount of all dividends declared by the bank in any calendar year exceeds the total bank's retained net income for the current year and retained net income for the preceding two years. Under federal law, the Bank cannot pay a dividend if, after paying the dividend, the Bank will be "undercapitalized."

The Bank is a national banking association and as such is subject to the regulations of, and supervision and regular examination by, the Office of the Comptroller of the Currency ("OCC"). Deposit accounts of the bank are insured by the Federal Deposit Insurance Corporation ("FDIC"). Requirements and restrictions under the laws of the State of Michigan and Title 12 of the United States Code include the requirements that banks maintain reserves against deposits, restrictions on the nature and amount of loans which may be made by a bank, and the interest that may be charged thereon, restrictions on the payment of interest on certain deposits, and restrictions relating to investments and other activities of a bank. The Federal Reserve Board has established guidelines for risk based capital by bank holding companies. These guidelines establish a risk adjusted ratio relating capital to risk-weighted assets and off-balance sheet exposures. These capital guidelines primarily define the components of capital, categorize assets into different risk classes, and include certain off-balance sheet items in the calculation of capital requirements.

An analysis of the Bank's regulatory capital requirements at December 31, 2007 is presented on page 29 of the Registrant's 2007 Annual Report in Note 14 Regulatory Capital to the Company's consolidated financial statements, which is incorporated herein by reference.

ITEM 1A-RISK FACTORS

In addition to the other information in this Annual Report on Form 10-K, shareholders or prospective investors should carefully consider the following risk factors:

WE FACE INTENSE COMPETITION IN ALL PHASES OF OUR BUSINESS FROM OTHER BANKS AND FINANCIAL INSTITUTIONS.

We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment. We compete for deposits, loans and other financial services with numerous Michigan-based and out-of-state banks, thrifts, credit unions and other financial institutions as well as other entities which provide financial services. Some of these competitors are not subject to the same regulatory restrictions, have advantages of scale due to their size, or have cost advantages due to their tax status.

INTEREST RATES AND OTHER CONDITIONS IMPACT OUR RESULTS OF OPERATIONS.

Our profitability is in part a function of the spread between the interest rates earned on loans and investments and the interest rates paid on deposits. Like most banking institutions, our net interest spread and margin will be affected by general economic conditions and other factors, including fiscal and monetary policies of the federal government, that influences market interest rates and our ability to respond to changes in such rates. At any given time, our assets and liabilities (deposits) will be such that they are affected differently by a given change in interest rates. Although we believe our current level of interest rate sensitivity is reasonable and effectively managed, significant fluctuations in interest rates, changes in the U.S. Treasury yield curve and other similar factors may have an adverse effect our business, financial condition and results of operations.

OUR LOCAL ECONOMY MAY AFFECT OUR FUTURE GROWTH POSSIBILITIES.

Our current market area is principally located in Northern Michigan. Our future growth opportunities depend on the growth and stability of our regional economy and our ability to expand our market area and market share. A downturn in our local economy may limit funds available for deposit and may negatively affect our borrowers' ability to repay their loans on a timely basis, both of which could have an impact on our profitability.

WE RELY HEAVILY ON OUR MANAGEMENT AND OTHER KEY PERSONNEL, AND THE LOSS OF ANY OF THEM MAY ADVERSELY EFFECT OUR OPERATIONS.

We are and will continue to be dependent upon the services of our management team, including our President and Chief Executive Officer, our Senior Vice President, and our other senior managers and commercial lenders. Losing one or more key members of the management team could adversely affect our operations.

WE MUST EFFECTIVELY MANAGE OUR CREDIT RISK.

These are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risk of nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions. We attempt to minimize our credit risk through prudent loan application approval procedures. We have a formal lending policy that is approved by the Board of Directors of the Bank. However prudent these procedures may be they do not eliminate credit risk.

OUR CREDIT LOSSES COULD INCREASE AND OUR ALLOWANCE FOR LOAN LOSSES MAY NOT BE ADEQUATE TO COVER ACTUAL LOAN LOSSES.

The risk of nonpayment of loans is inherent in all lending activities and nonpayment, if it occurs, may have a material adverse affect on our earnings and overall financial condition as well as the value of our common stock. We make various assumptions and judgments about the collectibility of our loan portfolio and provide an allowance for potential losses based on a number of factors. If our assumptions were wrong, our allowance for loan losses may not be sufficient to cover our losses, thereby having an adverse affect on our operating results, and may cause us to increase the allowance in the future. The actual amount of future provisions for loan losses cannot now be determined and may exceed the amounts of past provisions. Additionally, federal banking regulators, as an integral part of their supervisory function, periodically review our allowance for credit losses. These regulatory agencies may require us to increase our provision for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. Any increase in the allowance for credit losses could have a negative effect on our net income, financial condition and results of operations.

THE COMPANY CONTINUES TO BE SUBJECT TO INCREASED REGULATORY REQUIREMENTS IMPOSED BY THE SARBANES-OXLEY ACT OF 2002, INCLUDING A REQUIREMENT THAT MANAGEMENT ATTEST TO THE COMPANY'S INTERNAL CONTROLS OVER FINANCIAL REPORTING, WHICH ATTESTATION WILL BE REVIEWED BY THE COMPANY'S EXTERNAL AUDITORS. THESE REQUIREMENTS REPRESENT INCREASED COSTS TO THE COMPANY OVER PAST PERIODS.

The Company is required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002 as well as new rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board. In particular, unless extended, the Company will be required to include external auditor reports on the effectiveness of internal controls over financial reporting as part of its annual report on Form 10-K for the year ended December 31, 2008, pursuant to Section 404 of the Sarbanes-Oxley Act. Management is already required to report on the effectiveness of internal controls for the year ended December 31, 2007. The Company expects to continue to spend significant amounts of time and money on compliance with these rules.

WE CONTINUALLY ENCOUNTER TECHNOLOGICAL CHANGE, AND WE MAY HAVE FEWER RESOURCES THAN OUR COMPETITORS TO CONTINUE TO INVEST IN TECHNOLOGICAL IMPROVEMENTS.

The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In additional to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements.

WE OPERATE IN A HIGHLY REGULATED ENVIRONMENT, AND CHANGES IN LAWS AND REGULATIONS TO WHICH WE ARE SUBJECT MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

We operate in a highly regulated environment and are subject to supervision and regulation by a number of governmental regulatory agencies, including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, Securities and Exchange Commission, and the Comptroller of the Currency. Regulations adopted by these agencies govern a comprehensive range of matters relating to our permissible activities for us to engage in, maintenance of adequate capital levels, matters of internal control over financial reporting and other aspects of our operations. The regulators possess broad authority to prevent or remedy unsafe or unsound practices or violations of law or regulation. The laws and regulations applicable to the Company could change at any time and we cannot predict the effects of these changes on our business and profitability. Increased regulation could increase our cost of compliance and adversely affect profitability. For example, new legislation or regulation may limit the manner in which we may conduct our business, including our ability to offer new products, attract deposits, make loans and achieve satisfactory spreads.

THERE IS A LIMITED TRADING MARKET FOR OUR COMMON SHARES, AND THUS YOUR ABILITY TO SELL OR PURCHASE OUR COMMON SHARES MAY BE LIMITED.

Your ability to sell our common shares or purchase additional common shares largely depends upon the existence or an active market for our common shares. Although our common shares are quoted on the OTC Bulletin Board, they are not listed on any securities exchange and the volume of trading has been historically limited. As a result, you may not be able to sell or purchase our common shares at the volume, time and price that you desire. In addition, a fair valuation of the purchases or sales price of our common shares also depends upon an active trading market, and thus the price you receive for a thinly traded stock, such as our common shares, may not reflect its true value.

WE MAY NOT BE ABLE TO PAY DIVIDENDS IN THE FUTURE IN ACCORDANCE WITH PAST PRACTICE.

We pay a quarterly dividend to shareholders. However, we are dependent primarily upon the Bank for our earnings and funds to pay dividends on our common stock. The payment of dividends also is subject to legal and regulatory restrictions. Any payment of dividends in the future will depend, in large part, on the Bank's earnings, capital requirements, financial condition and other factors considered by our Board of Directors.

ITEM 1B-UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2-PROPERTIES

The Company and the Bank have their primary office at 303 North Main Street, Cheboygan, Michigan. In addition, the Bank owns and operates the following facilities: Cheboygan South, 10854 North Straits Highway; Onaway Office, 20581 W. State Street, Onaway; Mackinaw City Office, 580 S. Nicolet Street, Mackinaw City; Pellston Office, 200 Stimpson, Pellston; Indian River Office, 3990 Straits Highway, Indian River; Downtown drive-in, 414 Division Street, Cheboygan;

and East Side drive-in, 816 East State Street, Cheboygan. During 2006 the Bank constructed a new facility in Littlefield Township just south of Alanson, Emmet County. The new facility was opened in January 2007 and is located at 8011 S. US 31, Alanson. All properties are owned by the Bank free of any mortgages or encumbrances but for the Littlefield Township property upon which there is a purchase money mortgage which was entered into to accommodate the seller.

ITEM 3-LEGAL PROCEEDINGS

Neither the Company nor the Bank is a party to any pending legal proceedings other than the routine litigation that is incidental to the business of banking.

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no matters submitted to a vote of security holders during the fourth quarter of 2007.

PART II

ITEM 5-MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock is listed on the Over-the-counter Bulletin Board under the symbol "CNBZ". All trades are handled on a direct basis between buyer and seller. The Bank acts as the Company's transfer agent. The principal market for the Company's stock consists of existing shareholders, family members of existing shareholders and individuals in the service area.

The information detailing the range of high and low selling prices of known transactions for the Company's common stock and cash dividends declared for each full quarterly period within the two most recent fiscal years can be found under the caption "Financial Highlights" on page 1 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

The information which indicates the amount of common stock that is subject to outstanding options or warrants to purchase, or securities convertible into, common equity of the registrant can be found in Note 8 on page 23 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

There are approximately 1,017 shareholders of record of common stock of the Company as of January 31, 2008.

During 2007 and 2006, the Company declared regular dividends of $1.68 per share plus a special dividend of $0.60 per share. The information detailing the cash dividends declared within the two most recent fiscal years can be found under the caption "Financial Highlights" on page 1 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference. These have resulted in a dividend payout ratio averaging 86.1% for the past three years.

The Federal Reserve Board's policy of Cash Dividends by Bank Holding Companies restricts the payment of cash dividends based on the following criteria: (1) the Company's net income from operations over the past year must be sufficient to fully fund the dividend and (2) the prospective rate of earnings retention must be consistent with the Company's capital needs, asset quality and overall financial condition.

ITEM 6-SELECTED FINANCIAL DATA

The information required by this item is included on Page 1 under the caption "Financial Highlights" of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information required by this item is included on pages 35 through 47 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

ITEM 7A-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included on pages 40 through 41 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This information is included on pages 2 through 32 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2007, which is hereby incorporated by reference.

ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

In February 2007, the Company announced that the Board of Directors, upon recommendation of its Audit Committee, dismissed Crowe Chizek and Company LLC the Company's independent auditors, and engaged Plante & Moran, PLLC to serve as the Company's independent auditors for the fiscal year ending December 31, 2007. For more information, see the Company's current report on Form 8-K/A, filed with the SEC on March 1, 2007.

ITEM 9A (T) -CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report (the "Evaluation Date") an evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Treasurer who serves as our Chief Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Treasurer have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that material information relating to the Company known to others within the Company required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

The management of CNB Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. CNB Corporation's internal control system was designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of its financial statements.

Management of CNB Corporation assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control--Integrated Framework. Based on our

assessment we believe that, as of December 31, 2007, the Company's internal control over financial reporting is effective based on those criteria.

This annual 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 temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report

The Board of Directors, acting through its Audit Committee, is responsible for the oversight of the Company's accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. It meets quarterly with management and the internal auditor and periodically with the independent auditors to ensure that they are carrying out their responsibilities. The independent auditors and the internal auditor have full and unlimited access to the Audit Committee, with or without management, to discuss the adequacy of internal control over financial reporting, and any other matter which they believe should be brought to the attention of the Audit Committee.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2007 that materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting.

LIMITATIONS OF THE EFFECTIVENESS OF INTERNAL CONTROLS

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective, provide only reasonable assurance with respect to financial statement preparation and presentation.

ITEM 9B-OTHER INFORMATION

None.

PART III

ITEM 10-DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information required by this item is included under the captions "Information about Director Nominees," "Committees and Meetings of the Board of Directors," "Code of Ethics," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

Information about the executive officers of the Corporation is set forth below.

Name and Age Position
------------ --------
Vincent J. Hillesheim, 57 Chairman of the Corporation and Citizens National
 Bank of Cheboygan. Mr. Hillesheim was elected
 Chairman in 2006.

Susan A. Eno, 53 Chief Executive Officer and President of the
 Corporation and Citizens National Bank of Cheboygan.
 Ms. Eno has been an officer of the Corporation since
 1996 and an employee of the Bank since 1971. She has
 been in her current position since January 1, 2008
 and was in her previous position as Executive Vice
 President and Secretary of the Corporation and
 Executive Vice President and Cashier of Citizens
 National Bank of Cheboygan for more than 11 years.

Douglas W. Damm, 54 Senior Vice President of the Corporation and
 Citizens National Bank of Cheboygan. Mr. Damm has
 been an officer of the Corporation since 2003 and an
 employee of the Bank since 1987. He has been in his
 current position for more than 20 years and has 29
 years experience in the banking business.

Shanna L. Hanley, 30 Treasurer of the Corporation; Vice President and
 Senior Controller of Citizens National Bank of
 Cheboygan. Ms. Hanley joined the Bank during 2005.

ITEM 11-EXECUTIVE COMPENSATION

The information required by this item is included under the caption "Compensation Discussion and Analysis" of the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is included under the caption "Ownership of Common Stock" of the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

The information required by this item is included under the caption "Securities Authorized for Issuance Under Equity Compensation Plan Information" in the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is included under the caption "Certain Relationships and Related Transactions" in the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

ITEM 14-PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is included under the caption "Independent Auditors" in the Company's proxy statement for the annual meeting of shareholders scheduled for May 20, 2008, which is hereby incorporated by reference.

PART IV

ITEM 15-EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements. The following financial statements, notes to financial statements and independent

report of CNB Corporation and its subsidiary are referenced in Item 8 of this report and are hereby incorporated by reference:

Consolidated Balance Sheets-December 31, 2007 and 2006.

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2007, 2006 and 2005.

Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 2007, 2006 and 2005.

Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005.

Notes to Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm dated March 28, 2008.

(2) Financial Statement Schedules. Not applicable

(3) Exhibits.

(3a) Articles of Incorporation. Previously filed as exhibit to the registrant's Form 10-KSB filed April 26, 1996, and hereby incorporated by reference.

(3b) By-Laws as amended through March 25, 2004. Previously filed as Exhibit 3b to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed December 27, 2004, and hereby incorporated by reference.

(10) 1996 Stock Option Plan. Previously filed as Exhibit 10 to the Company's Form 10-Q for the quarter ended September 30, 1996 and hereby incorporated by reference.

(11) Statement regarding computation of per share earnings. This information is disclosed in Note 10 to the Company's Financial Statements for the year ended December 31, 2007, which are included in the annual report to shareholders for the year ended December 31, 2007 which is filed as Exhibit 13 to the Company's Form 10-K for the fiscal year ended December 31, 2007, and hereby incorporated by reference.

(13) Annual report to shareholders for the year ended December 31, 2007. (filed herewith).

(21) Subsidiaries of the Company. (filed herewith).

(23) Consent of Independent Registered Public Accounting Firm. (filed herewith).

(31.1) Certification of Chief Executive Officer.

(31.2) Certification of Chief Financial Officer.

(32.1) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) See Item 15(a) (3) above.

(c) Financial Statement Schedules. Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CNB CORPORATION
(Registrant)

Date: March 27, 2008


/s/ Susan A. Eno
----------------------------------------
Susan A. Eno
President and Chief Executive Officer

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 27, 2008.

/s/ Steven J. Baker /s/ Kathleen A. Lieder /s/ Douglas W. Damm
------------------------------ ------------------------------ ------------------------------
Steven J. Baker Kathleen A. Lieder Douglas W. Damm
Director Director Senior Vice President


/s/ James C. Conboy, Jr. /s/ John L. Ormsbee /s/ Shanna L. Hanley
------------------------------ ------------------------------ ------------------------------
James C. Conboy, Jr. John L. Ormsbee Shanna L. Hanley
Director Director Treasurer (Principal Financial
 Officer)


/s/ Kathleen M. Darrow /s/ R. Jeffery Swadling
------------------------------ ------------------------------
Kathleen M. Darrow R. Jeffery Swadling
Director Director


/s/ Thomas J. Ellenberger /s/ Francis J. VanAntwerp, Jr.
------------------------------ ------------------------------
Thomas J. Ellenberger Francis J. VanAntwerp, Jr.
Director Director


/s/ Vincent J. Hillesheim /s/ Susan A. Eno
------------------------------ ------------------------------
Vincent J. Hillesheim Susan A. Eno
Director Director (Bank Only)
Chairman President and Chief Executive
 Officer

EXHIBIT INDEX

(3a) Articles of Incorporation. Previously filed as an exhibit to the registrant's Form 10-KSB filed April 26, 1996 and hereby incorporated by reference.

(3b) By-Laws as amended through March 25, 2004. Previously filed as Exhibit 3b to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed December 27, 2004, and hereby incorporated by reference.

(10) 1996 Stock Option Plan. Previously filed as Exhibit 10 to the Company's Form 10-Q for the quarter ended September 30, 1996 and hereby incorporated by reference.

(11) Statement regarding computation per share earnings. This information is disclosed in Note 10 to the Company's Financial Statements for the year ended December 31, 2007 contained in is annual report to shareholders for the year ended December 31, 2007. (filed herewith)

(13) Annual report to shareholders for the year ended December 31, 2007. (filed herewith)

(21) Subsidiaries of the Company. (filed herewith)

(23) Consent of Independent Registered Public Accounting firm. (filed herewith)

(31.1) Certification of Chief Executive Officer. (filed herewith)

(31.2) Certification of Chief Financial Officer. (filed herewith)

(32.1) Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
(filed herewith)

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