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



FORM 10-K

(Mark One)

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

	For the fiscal year ended December 31, 2011



OR

[ ]	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: 000-24523

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

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

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

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

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

None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 par value
(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. [ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No

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. [X] Yes [ ] 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). [X] Yes [ ] No.

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

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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller Reporting Company [ ]

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

As of June 30, 2011 the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Stock held by nonaffiliates (based upon the price at which stock was last sold prior to such date) was approximately $77,917,594. As of March 1, 2012, there were 1,661,876 shares of Common Stock of CNB Corporation outstanding.

Documents incorporated by reference
Portions of the Company’s Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held May 8, 2012 are incorporated by reference in Part III of this Form 10-K.

CNB CORPORATION AND SUBSIDIARY 2011 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

PART I
		Page
ITEM 1	Business	1-22
ITEM 1A	Risk Factors	23-26
ITEM 1B	Unresolved Staff Comments	27
ITEM 2	Properties	27
ITEM 3	Legal Proceedings	27
ITEM 4	(Removed and Reserved)	27


PART II

ITEM 5	Market for the Registrant's Common Equity, Related Stock Holder Matters and Issuer Purchases of Equity Securities	28
ITEM 6	Selected Financial Data	29
ITEM 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	30-36
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	36
ITEM 8	Financial Statements and Supplementary Data	37-78
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	79
ITEM 9A	Controls and Procedures	79
ITEM 9B	Other Information	79

PART III
ITEM 10	Directors, Executive Officers, and Corporate Governance	80
ITEM 11	Executive Compensation	80
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	80
ITEM 14	Principal Accountant Fees and Services	80
PART IV

ITEM 15	Exhibits and Financial Statement Schedules	81


Signatures		82

CAUTIONARY NOTICE WITH RESPECT TO
FORWARD LOOKING STATEMENTS

This report contains "forward-looking statements" within the meaning of the securities laws. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forwarding-looking statements.

All statements that are not historical facts are statements that could be "forward-looking statements." You can identify these forward-looking statements through the use of words such as "may," "will," "should," "could," "would," "expect," "anticipate," "assume," "indicate," "contemplate," "seek," "plan," "predict," "target," "potential," "believe," "intend," "estimate," "project," "continue," or other similar words. Forward-looking statements include, but are not limited to, statements regarding the Company's future business prospects, revenues, working capital, liquidity, capital needs, interest costs, income, business operations and proposed services.

These forward-looking statements are based on current expectations, estimates and projections about the banking industry and the economy, management's beliefs, and assumptions made by management. Such information includes, without limitation, discussions as to estimates, expectations, beliefs, plans, strategies, and objectives concerning future financial and operating performance. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. The risks and uncertainties include, but are not limited to:

●	future economic and business conditions;
●	lack of sustained growth in the economies of the Company's market areas;
●	government monetary and fiscal policies;
●	the effects of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities;
●	the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, and insurance services, as well as competitors that offer banking products and services by mail, telephone, computer and/or the Internet;
●	credit risks;
●	higher than anticipated levels of defaults on loans;
●	ability to sell repossessed collateral;
●	perceptions by depositors about the safety of their deposits;
●	ability to weather the current economic downturn;
●	loss of consumer or investor confidence;
●	the failure of assumptions underlying the establishment of the allowance for loan losses and other estimates, including the value of collateral securing loans;
●	the risks of opening new offices, including, without limitation, the related costs and time of building customer relationships and integrating operations as part of these endeavors and the failure to achieve expected gains, revenue growth and/or expense savings from such endeavors;
●	increases in deposit insurance premiums;
●	changes in laws and regulations, including tax, banking and securities laws and regulations;
●	changes in accounting policies, rules and practices;
●	the effect of agreements with regulatory authorities, which restrict various activities and impose additional administrative requirements without commensurate benefits;
●	changes in requirements of regulatory authorities;
●	changes in technology or products may be more difficult or costly, or less effective, than anticipated;
●	the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic conditions and economic confidence; and
●	other factors and information described in this report and in any of the other reports that we file with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The Company has no obligation, and does not undertake, to update, revise or correct any of the forward-looking statements after the date of this report. The Company has expressed its expectations, beliefs and projections in good faith and believes they have a reasonable basis. However, there is no assurance that these expectations, beliefs or projections will result or be achieved or accomplished.

PART I

ITEM 1. BUSINESS

DESCRIPTION OF CNB CORPORATION

CNB Corporation (the "Company") is a South Carolina business corporation organized in 1985 for the purpose of becoming a bank holding company for The Conway National Bank (the "Bank") under the Bank Holding Company Act. The Company's only business is ownership of the Bank. The activities of the Company are subject to the supervision of the Federal Reserve, and the Company may engage directly or through subsidiary corporations in those activities closely related to banking which are specifically permitted under the Bank Holding Company Act. See "Supervision and Regulation." Although the Company, after obtaining the requisite approval of the Federal Reserve and any other appropriate regulatory agency, may seek to enter businesses closely related to banking or to acquire existing businesses already engaged in such activities, the Company has not engaged in, and has no present intent to engage in, such other permissible activities.

DESCRIPTION OF THE SUBSIDIARY

The Bank is an independent community bank engaged in the general commercial banking business in Horry County and the "Waccamaw Neck" portion of Georgetown County, South Carolina. The Bank was organized in 1903. The Bank's Main Office consists of an Operations and Administration Center along with an adjacent branch office known as the Conway Banking Office. The Bank also operates thirteen other branch offices throughout Horry County and the "Waccamaw Neck" area of Georgetown County. The Bank employs approximately 250 full-time-equivalent employees at its Main Office and fourteen branch offices.

The Bank performs the full range of normal commercial banking functions. Some of the major services provided include checking accounts, NOW accounts, money market deposit accounts, IRA accounts, Health Savings Accounts, savings and time deposits of various types and loans to individuals for personal use, home mortgages, home improvement, automobiles, real estate, agricultural purposes and business needs. Commercial lending operations include various types of credit for business, industry, and agriculture. In addition, the Bank offers safe deposit boxes, wire transfer services, 24-hour automated teller machines on the STAR Network, internet banking, bank by phone, direct deposits, a MasterCard/Visa program, cash management services, commercial lockbox services, and remote deposit capture. The Bank offers discount brokerage services through a correspondent relationship. Additionally, the Bank provides long-term mortgage loans through its secondary mortgage department which acts in an agency only capacity for various investors. The Bank does not provide trust services; does not sell annuities; does not sell mutual funds; and does not sell insurance.

The majority of the Bank's customers are individuals and small to medium-sized businesses headquartered within the Bank's service area. The Bank has no material concentration of deposits from any single customer or group of customers. At December 31, 201,1 the Bank had two concentrations of credit to single industries (See Note 1 to the Consolidated Financial Statements, contained elsewhere in this report). There are no material seasonal factors that would have any adverse effect on the Bank nor does the Bank rely on foreign sources of funds or income.

Further information about the Bank's business is set forth below under "Supplementary Financial Data, Guide 3 Statistical Disclosure by Bank Holding Companies" and in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

COMPETITION

The Bank actively competes with other institutions in Horry County and the "Waccamaw Neck" region of Georgetown County in providing customers with deposit, credit and other financial services. The principal competitors of the Bank include local offices of nine regional banks, nine state-wide banks, six locally owned banks in Horry and Georgetown Counties and various other financial and thrift institutions. At June 30, 2011, the Bank ranked second in Horry County and ninth in Georgetown County in deposits among its competitors. The Bank also competes with credit unions, money market funds, brokerage houses, insurance companies, mortgage companies, leasing companies, consumer finance companies and other financial institutions. Significant competitive factors include interest rates on loans and deposits, prices and fees for services, office location, customer service, community reputation, and continuity of personnel.

SUPERVISION AND REGULATION

General

The Company and the Bank are subject to an extensive array of state and federal banking laws and regulations which impose specific requirements and restrictions on, and provide for general regulatory oversight with respect to, virtually all aspects of the Company's and the Bank's operations. The federal banking regulators (the Federal Reserve, the FDIC and the OCC) periodically examine the Company and the Bank to assess compliance with applicable requirements and the level of risk existing with respect to the Company’s and the Bank’s capital, asset quality, management, earnings, liquidity and sensitivity to market risk. When the results of examinations are less than satisfactory, the regulators are authorized to require the Company and the Bank to take appropriate corrective actions through the mechanisms of agreements with the Company or the Bank or enforcement orders. The federal regulators also have the power to enforce compliance with laws, regulations, regulatory policies and agreements as well as regulatory orders by the imposition of civil money penalties. The Company and the Bank are also affected by government monetary policy and by regulatory measures affecting the banking industry in general. The actions of the Federal Reserve System affect the money supply and, in general, the Bank's lending abilities in increasing or decreasing the cost and availability of funds to the Bank. Additionally, the Federal Reserve System regulates the availability of bank credit in order to combat recession and curb inflationary pressures in the economy by open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in the reserve requirements against bank deposits.

The Company is also subject to limited regulation and supervision by the South Carolina State Board of Financial Institutions (the "State Board"). A South Carolina bank holding company may be required to provide the State Board with information with respect to the financial condition, operations, management and inter-company relationships of the holding company and its subsidiaries. The State Board also may require such other information as is necessary to keep itself informed about whether the provisions of South Carolina law and the regulations and orders issued thereunder by the State Board have been complied with, and the State Board may examine any bank holding company and its subsidiaries. Furthermore, pursuant to applicable law and regulations, the Company must receive approval of, or give notice to (as applicable) the State Board prior to engaging in the acquisition of banking or non-banking institutions or assets.

Obligations of Holding Company to its Subsidiary Banks

A number of obligations and restrictions are imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policies that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event the depository institution is in danger of becoming insolvent or is insolvent. For example, under the policy of the Federal Reserve and Federal Deposit Insurance Act, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such a requirement. In addition, the "cross-guarantee" provisions of the Federal Deposit Insurance Act, as amended ("FDIA"), require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC may decline to enforce the cross-guarantee provisions if it determines that a waiver is in its best interest. The FDIC’s claim for damages is superior to claims of stockholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or stockholder. This provision gives depositors a preference over general and subordinated creditors and stockholders in the event a receiver is appointed to distribute the assets of the bank.

Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the bank’s shareholders, pro rata, and to the extent necessary, if any such assessment is not paid by any shareholder after three months notice, to sell the stock of such shareholder to make good the deficiency.

Capital Adequacy Guidelines for Bank Holding Companies and Banks

The various federal bank regulators, including the Federal Reserve and the FDIC, have adopted risk-based and leverage capital adequacy guidelines assessing bank holding company and bank capital adequacy. These standards define what qualifies as capital and establish minimum capital standards in relation to assets and off-balance-sheet exposures, as adjusted for credit risks. The OCC also has the power to impose individual minimum capital requirements on individual national banks. The capital guidelines, requirements, and the Company’s capital position are summarized in Note 16 to the Consolidated Financial Statements, contained elsewhere in this report.

Capital Adequacy Guidelines for Bank Holding Companies and Banks, continued

Failure to meet capital guidelines could subject the Bank to a variety of enforcement remedies, ranging from, for example, a prohibition on the taking of brokered deposits to the termination of deposit insurance by the FDIC or the appointment of a receiver for the Bank.

The risk-based capital standards of both the Federal Reserve and the FDIC explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as an institution’s ability to manage these risks, as important factors to be taken into account by the agencies in assessing an institution’s overall capital adequacy. The capital guidelines also provide that an institution’s exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the agencies as a factor in evaluating a bank’s capital adequacy. The Federal Reserve also has issued additional capital guidelines for bank holding companies that engage in certain trading activities.

Payment of Dividends

The Company is a legal entity separate and distinct from the Bank. Most of the revenues of the Company result from dividends paid to the Company by the Bank. There are statutory and regulatory requirements applicable to the payment of dividends by subsidiary banks as well as by the Company to its shareholders.

Each national banking association is required by federal law to obtain the prior approval of the OCC for the payment of dividends if the total of all dividends declared by the board of directors of such bank in any year will exceed the total of (i) such bank’s net profits (as defined and interpreted by regulation) for that year plus (ii) the retained net profits (as defined and interpreted by regulation) for the preceding two years, less any required transfers to surplus. In addition, national banks can only pay dividends to the extent that retained net profits (including the portion transferred to capital in excess of par value of stock) exceed bad debts (as defined by regulation).

The payment of dividends by the Company and the Bank may also be affected or limited by other factors, such as the requirements to maintain adequate capital above regulatory guidelines. In addition, if, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the Bank, could include the payment of dividends), such authority may require, after notice and hearing, that such bank cease and desist from such practice. The OCC has indicated that paying dividends that deplete a national bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve, the OCC and the FDIC have issued policy statements, which provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. The ability of the Bank to pay dividends is currently limited by a Formal Agreement with the OCC, and the ability of the Company to pay dividends is currently subject to prior approval of the Federal Reserve pursuant to a Memorandum of Understanding between the Company and the Federal Reserve. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Actions.

Certain Transactions by the Company with its Affiliates

Federal law regulates transactions among the Company and its affiliates, including the amount of the Bank’s loans to or investments in nonbank affiliates and the amount of advances to third parties collateralized by securities of an affiliate. Further, a bank holding company and its affiliates are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments

The FDIC merged the Bank Insurance Fund and the Savings Association Insurance Fund to form the Deposit Insurance Fund ("DIF") on March 31, 2006 in accordance with the Federal Deposit Insurance Reform Act of 2005. The FDIC maintains the DIF by assessing depository institutions an insurance premium. Since 2006, the FDIC implemented numerous revisions to its assessment methodology including an "emergency assessment" of 5 cents per $100 of assessable assets held on June 30, 2009, not to exceed to 10 cents per $100 of an institution’s deposit insurance base for the second quarter of 2009, which was payable in September 2009. Also, in November of 2009 the FDIC adopted a final rule amending the assessment regulation to require insured depository institutions to prepay their quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012 on December 30, 2009, along with each institution’s risk-based assessment for the third quarter of 2009. In February 2011, the FDIC again implemented a rule that amends the deposit insurance assessment regulations. The rule implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), discussed below, which changes the assessment base from one based on domestic deposits to one based on assets. The assessment base changes from adjusted domestic deposits to average consolidated total assets minus average tangible equity, and assessment rates have been lowered. Under this methodology, assessments will range between 0.5 and 35.0 cents per $100 in assessable assets. The change in assessments was effective as of April 1, 2011.

Regulation of the Bank

The Bank is also subject to regulation by the OCC and the Consumer Financial Protection Bureau, and to examination by the OCC. In addition, the Bank is subject to various other state and federal laws and regulations, including state usury laws, laws relating to fiduciaries, consumer credit laws and laws relating to branch banking. The Bank’s loan operations are subject to certain federal consumer credit laws and regulations promulgated thereunder, including, but not limited to: the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the Home Mortgage Disclosure Act, requiring financial institutions to provide certain information concerning their mortgage lending; the Equal Credit Opportunity Act and the Fair Housing Act, prohibiting discrimination on the basis of certain prohibited factors in extending credit; and the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies. The deposit operations of the Bank are subject to the Truth in Savings Act, requiring certain disclosures about rates paid on savings accounts; the Expedited Funds Availability Act, which deals with disclosure of the availability of funds deposited in accounts and the collection and return of checks by banks; the Right to Financial Privacy Act, which imposes a duty to maintain certain confidentiality of consumer financial records; the Electronic Funds Transfer Act and regulations promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and Check 21, governing the creation and clearing of digital images of checks, substitute checks, check truncation, clearing error crediting, and all disclosures related thereto. The Bank is also subject to the requirements of the Community Reinvestment Act (the "CRA") which imposes on financial institutions an affirmative and ongoing obligation to meet the credit needs of their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. Each financial institution’s actual performance in meeting community credit needs is evaluated as part of the examination process, and also is considered in evaluating mergers, acquisitions and applications to open a branch or facility. The Bank is also subject to provisions of the Gramm-Leach-Bliley Act of 1999 (see the section below of the same title); the Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; the Bank Secrecy Act, dealing with, among other things, the reporting of certain currency transactions; the USA Patriot Act, dealing with, among other things, requiring the establishment of anti-money laundering programs, including standards for verifying customer information at account opening; and activities of the Office of Foreign Assets Control (OFAC) as set forth by Executive Order or Acts of Congress primarily to prevent U.S. entities from engaging in transaction with enemies of the U.S.

Other Safety and Soundness Regulations

Prompt Corrective Action. The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" or "critically undercapitalized."

A bank that is "undercapitalized" becomes subject to provisions of the Federal Deposit Insurance Act: restricting payment of capital distributions and management fees; requiring the OCC to monitor the condition of the bank; requiring submission by the bank of a capital restoration plan; restricting the growth of the bank’s assets; and requiring prior approval of certain expansion proposals. A bank that is "significantly undercapitalized" is additionally subject to restrictions on compensation paid to senior management of the bank, and a bank that is "critically undercapitalized" is further subject to restrictions on the activities of the bank and restrictions on payments of subordinated debt of the bank, and will ordinarily be placed in receivership. The purpose of these provisions is to require banks with less than adequate capital to act quickly to restore their capital and to have the OCC move promptly to take over banks that are unwilling or unable to take such steps.

Brokered Deposits. Under current FDIC regulations, "well-capitalized" banks may accept brokered deposits without restriction, "adequately capitalized" banks may accept brokered deposits with a waiver from the FDIC (subject to certain restrictions on payments of rates), while "undercapitalized" banks may not accept brokered deposits. The regulations provide that the definitions of "well capitalized," "adequately capitalized" and "undercapitalized" are the same as the definitions adopted by the agencies to implement the prompt corrective action provisions described in the previous paragraph.

Interstate Banking

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal"), the Company and any other adequately capitalized bank holding company located in South Carolina can acquire a bank located in any other state, and a bank holding company located outside South Carolina can acquire any South Carolina-based bank, in either case subject to certain deposit percentage and other restrictions. The Dodd-Frank Act amended a number of provisions of the Riegle-Neal Act to increase the authority of banks to branch across state lines. The authority of a bank to establish and operate branches within a state continues to be subject to applicable state branching laws, but interstate branching is permitted to the same extent it would be permitted under state law if the branching bank’s home office were located in the state in which the branch will be located.

The Riegle-Neal Act, together with legislation adopted in South Carolina, resulted in a number of South Carolina banks being acquired by large out-of-state bank holding companies. Size gives the larger banks certain advantages in competing for business from larger

Interstate Banking, continued

customers. These advantages include higher lending limits and the ability to offer services in other areas of South Carolina and the region. As a result, the Bank does not generally attempt to compete for the banking relationships of large corporations, but concentrates its efforts on small to medium-sized businesses and on individuals. The Company believes the Bank has competed effectively in this market segment by offering quality, personal service.

Gramm-Leach-Bliley Act of 1999

The Gramm-Leach-Bliley Act expanded the activities in which a bank holding company and a bank can engage through affiliations created under a holding company structure or through a financial subsidiary if certain conditions are met. Significantly, the permitted financial activities for financial holding companies include authority to engage in merchant banking and insurance activities, including insurance portfolio investing. The Act also established a minimum federal standard of privacy to protect the confidentiality of a consumer’s personal financial information and gives the consumer the power to choose how personal financial information may be used by financial institutions. The regulations adopted pursuant to the Act govern the consumer’s right to opt-out of further disclosure of nonpublic personal financial information and require the Bank to provide initial and annual privacy notices. The Act and regulations also required the Bank to develop and maintain a comprehensive plan for the safeguarding of customer information which encompasses all aspects of the Bank’s technological environment, business practices, and Bank facilities.

Although the Act and the regulations created new opportunities for the Company to offer expanded services to customers in the future, the Company has not determined what the nature of the expanded services might be or whether and when the Company might find it feasible to offer them. The Act has increased competition from larger financial institutions that are currently more capable than the Company of taking advantage of the opportunity to provide a broader range of services. However, the Company continues to believe that its commitment to providing high quality, personalized service to customers will permit it to remain competitive in its market area.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act became effective in 2002, and mandated extensive reforms and requirements for public companies. The SEC has adopted extensive regulations pursuant to the requirements of the Sarbanes-Oxley Act. The Sarbanes-Oxley Act and the SEC’s implementing regulations have increased the Company’s cost of doing business, particularly its fees for internal and external audit services and legal services, and the law and regulations are expected to continue to do so. However, the Company has not been affected by Sarbanes-Oxley and the SEC regulations in ways that are materially different or more onerous than those of other public companies of similar size and in similar business.

Government Response to the Financial Crisis commencing in 2008

During the fourth quarter of 2008 and continuing through 2011 the FDIC, the Federal Reserve, the Department of the Treasury and Congress took a number of actions designed to alleviate or correct mounting systemic problems in the financial services industry. A number of these initiatives were directly applicable to community banks.

Congress enacted the Emergency Economic Stabilization Act of 2008 which, among other things, temporarily increased the maximum amount of FDIC deposit insurance from $100,000 to $250,000, which was recently made permanent by the Dodd-Frank Act discussed below, and created a Troubled Assets Relief Program (“TARP”) administered by Treasury. In October, 2008, Treasury announced a Capital Purchase Program (“CPP”) under TARP to increase the capital of healthy banks. Under the CPP, Treasury would purchase preferred stock with warrants from qualified banks and bank holding companies in an amount up to 3% of the seller’s risk-weighed assets as of September 30, 2008. Institutions wishing to participate in the CPP were required to file an application with their principal federal regulators. The Company elected not to participate in the CPP because of (i) the cost of the preferred stock, (ii) the open-ended administrative burdens associated with the preferred stock including having to agree to allow Treasury to unilaterally amend the stock purchase agreement to comply with subsequent changes in applicable federal statutes, and (iii) the fact that the Company and the Bank were already well capitalized under regulatory guidelines and expected to continue to be so.

FDIC also implemented in October, 2008 a Temporary Liquidity Guarantee Program (TLGP) pursuant to which it undertook to provide deposit insurance in an unlimited amount for non-interest bearing transaction accounts and a debt guarantee component to fully guarantee senior, unsecured debt issued by banks or bank holding companies. Coverage of both components was automatic until December 5, 2008 at which time covered institutions could opt out of one or both of the components. Institutions not opting out would be charged fees for their participation in the components. The Company and Bank opted out of the debt guarantee component. Under provisions of the Dodd-Frank Act, discussed below, the transaction account guarantee component of the TLGP was extended to December 31, 2012. However, NOW accounts are no longer covered by the plan.

An unfortunate consequence of the difficulties that have beset the banking industry in the last three years has been a large increase in bank failures which has led to substantial claims being made against the FDIC’s Deposit Insurance Fund. In order to increase the

Government Response to the Financial Crisis commencing in 2008, continued

amount in the Deposit Insurance Fund to reflect the increased risk of additional bank failures and insurance claims, FDIC raised its assessments on banks for 2009 and also made a one-time special assessment of 5 cents per $100 of assessable deposits at June 30, 2009. The FDIC also made an additional "emergency assessment" of 5 cents per $100 of assessable assets held on June 30, 2009, not to exceed to 10 cents per $100 of an institution’s deposit insurance base for the second quarter of 2009, which was payable in September 2009. In November of 2009 the FDIC adopted a final rule amending the assessment regulation to require insured depository institutions to prepay their quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012 on December 30, 2009, along with each institutions risk-based assessment for the third quarter of 2009. In February 2011, the FDIC again implemented a rule that amends the deposit insurance assessment regulations. The rule implements a provision of the Dodd-Frank Act, discussed below, which changes the assessment base from one based on domestic deposits to one based on assets. The assessment base changes from adjusted domestic deposits to average consolidated total assets minus average tangible equity, and assessment rates have been lowered. Under this methodology, assessments will range between 0.5 and 35.0 cents per $100 in assessable assets. The change in assessments was effective as of April 1, 2011.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Act was passed into law on July 21, 2010. The Act is a sweeping and comprehensive new regulatory framework which significantly impacts the financial services industry. The Act includes changes to the financial regulatory systems, enhanced bank capital requirements, creates the Financial Stability Oversight Council, provides for mortgage reform provisions regarding a customer’s ability to repay, changes the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, makes permanent the $250,000 limit for federal deposit insurance, provides for unlimited federal deposit insurance for noninterest-bearing transaction accounts until December 31, 2012, implements corporate governance requirements for public companies with regard to executive compensation including providing shareholders the right to vote on executive compensation, repeals the federal prohibitions on the payment of interest on demand deposits, and amends the Electronic Fund Transfer Act to give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions, among other measures. The Dodd-Frank Act also establishes the Bureau of Consumer Financial Protection as an independent entity within the Federal Reserve, which has been given the authority to promulgate consumer protection regulations applicable to all entities offering consumer financial services or products, including banks. Additionally, the Dodd-Frank Act includes a series of provisions covering mortgage loan origination standards affecting originator compensation, minimum repayment standards, and pre-payments.

The Dodd-Frank Act requires regulatory agencies to implement new regulations that will establish the parameters of the new regulatory framework and provide a clearer understanding of the legislation’s effect on banks. The Company continues to evaluate proposed and final regulations related to the Dodd-Frank Act as they are implemented in order to determine the impact each will have on current and future operations. The majority of the resulting regulation affecting the Company have been implemented, and the Company has experienced a moderate loss of income associated with debit transactions and moderate increased compliance costs associated with other provisions of the Dodd-Frank Act.

The Small Business Jobs Act of 2010

The Small Business Jobs Act of 2010 was signed into law on September 27, 2010. The Act created the Small Business Lending Fund (SBLF), which is a $30 billion fund designed to encourage lending to small businesses by providing Tier 1 capital to qualified community banks. The Company did not participate in the SBLF because of (i) the cost and tiered cost structure of the plan and (ii) the fact that the Company and the Bank were already well capitalized under regulatory guidelines and expected to continue to be so.

Legislative Proposals

Legislation which could significantly affect the business of banking is introduced in Congress and the General Assembly of South Carolina from time to time. For example, broader problems in the financial sector of the economy which became apparent in 2008 led to numerous calls for legislative restructuring of the regulation of the sector. This urgency has culminated in the Dodd-Frank Act, discussed above. While various requirements of the Dodd-Frank Act are known and, in some instances, implemented, the amount and impact of potential regulation promulgated by the Financial Stability Oversight Council is unknown. The Company cannot predict the future course of additional potential legislative and regulatory proposals or their impact on the Company should they be adopted.

Available Information

The Company electronically files with the Securities and Exchange Commission ("SEC") its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "1934 Act"), and proxy materials pursuant to Section 14 of the 1934 Act. The SEC maintains a site on the Internet, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company also makes its filings available, free of charge, through The Conway National Bank’s Web site, www.conwaynationalbank.com, as soon as reasonably practical after the electronic filing of such material with the SEC. The Company’s 2011 Annual Report to shareholders and proxy materials will be available free of charge, from The Conway National Bank’s website, www.conwaynationalbank.com, upon mailing of these materials to shareholders and the filing of the proxy materials with the SEC.

SUPPLEMENTARY FINANCIAL DATA
GUIDE 3 STATISTICAL DISCLOSURE BY BANK
HOLDING COMPANIES

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

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

The tables on the following three pages present selected financial data and an analysis of average balance sheets, average yield and the interest earned on earning assets, and the average rate paid and the interest expense on interest-bearing liabilities for the years ended December 31, 2011, 2010, and 2009.


CNB Corporation and Subsidiary Average Balances, Yields, and Rates (Dollars in Thousands)
	Twelve Months Ended 12/31/11
		Interest	Avg. Annual
	Avg.	Income/	Yield or
	Balance	Expense	Rate

Assets:
Earning assets:
Loans, net of unearned income (1)	$510,742	$ 31,087	6.09%
Securities:
Taxable	268,324	3,327	1.24
Tax-exempt	34,925	1,756	5.03
Federal funds sold and securities purchased under
agreement to resell	13,249	31	.23
Other earning assets	48,471	118	.24
Total earning assets	$875,711	$ 36,319	4.15
Other assets	56,309
Total assets	$932,020

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Interest-bearing deposits	$619,978	$ 5,246	.85
Securities sold under agreement to repurchase	98,070	280	.29
Other short-term borrowings	908	-	-
Total interest-bearing liabilities	$718,956	$ 5,526	.77
Noninterest-bearing deposits	119,637
Other liabilities	4,903
Stockholders' equity	88,524
Total liabilities and stockholders' equity	$932,020
Net interest income and yield as a percent of total
earning assets	$875,711	$ 30,793	3.52%


Ratios:
Return on average total assets			.13%
Return on average stockholders' equity			1.38
Cash dividends declared as a percent of net income			-
Average stockholders' equity as a percent of:
Average total assets			9.50
Average total deposits			11.97
Average loans			17.33
Average earning assets as a percent of
average total assets			93.96%

(1)	The Company had no out-of-period adjustments or foreign activities. Loan fees of $515 are included in interest income. Loans on a nonaccrual basis for the recognition of interest income totaling $22,913 as of December 31, 2011 are included in loans for purposes of this analysis.

(2)	Tax-exempt income is presented on a tax-equivalent basis using a 34% tax rate. The amount shown includes a tax-equivalent adjustment of $597.


CNB Corporation and Subsidiary Average Balances, Yields, and Rates (Dollars in Thousands)


	Twelve Months Ended 12/31/10
		Interest		Avg. Annual
	Avg.	Income/		Yield or
	Balance	Expense		Rate

Assets:
Earning assets:
Loans, net of unearned income (1)	$559,823	$ 34,382		6.14%
Securities:
Taxable	251,824	4,252		1.69
Tax-exempt	31,650	1,773	(2)	5.60
Federal funds sold and securities purchased under
agreement to resell	13,970	33		.24
Other earning assets	47,269	120		.25
Total earning assets	$904,536	$ 40,560		4.48
Other assets	37,045
Total assets	$941,581

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Interest-bearing deposits	$623,167	$ 8,647		1.39
Securities sold under agreement to repurchase	108,486	791		.73
Other short-term borrowings	9,674	182		1.88
Total interest-bearing liabilities	$741,327	$ 9,620		1.30
Noninterest-bearing deposits	106,854
Other liabilities	5,618
Stockholders' equity	87,782
Total liabilities and stockholders' equity	$941,581
Net interest income and yield as a percent of total
earning assets	$904,536	$ 30,940		3.42%


Ratios:
Return on average total assets				.11%
Return on average stockholders' equity				1.18
Cash dividends declared as a percent of net income				-
Average stockholders' equity as a percent of:
Average total assets				9.32
Average total deposits				12.02
Average loans				15.68
Average earning assets as a percent of
average total assets				96.07%

(1)	The Company had no out-of-period adjustments or foreign activities. Loan fees of $518 are included in interest income. Loans on a nonaccrual basis for the recognition of interest income totaling $25,704 as of December 31, 2010 are included in loans for purposes of this analysis.

(2)	Tax-exempt income is presented on a tax-equivalent basis using a 34% tax rate. The amount shown includes a tax-equivalent adjustment of $603.

CNB Corporation and Subsidiary Average Balances, Yields, and Rates (Dollars in Thousands)


	Twelve Months Ended 12/31/09
			Interest		Avg. Annual
	Avg.		Income/		Yield or
	Balance		Expense		Rate
Assets:
Earning assets:
Loans, net of unearned income (1)	$593,370	$ 37,170			6.26%
Securities:
Taxable	188,454	5,452			2.89
Tax-exempt	31,956	1,847		(2)	5.78
Federal funds sold and securities purchased under
agreement to resell	13,162	32			.24
Other Earning Assets	32,353	74			.23
Total earning assets	$859,295	$ 44,575			5.19
Other assets	45,571
Total assets	$904,866

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Interest-bearing deposits	$579,927	$ 10,668			1.84
Securities sold under agreement to repurchase	101,461	1,121			1.10
Other short-term borrowings	23,242	340			1.46
Total interest-bearing liabilities	$704,630	$ 12,129			1.72
Noninterest-bearing deposits	105,182
Other liabilities	9,283
Stockholders' equity	85,771
Total liabilities and stockholders' equity	$904,866
Net interest income and yield as a percent of total
earning assets	$859,295	$ 32,446			3.78%


Ratios:
Return on average total assets					.56%
Return on average stockholders' equity					5.91
Cash dividends declared as a percent of net income					41.37
Average stockholders' equity as a percent of:
Average total assets					9.48
Average total deposits					12.52
Average loans					14.45
Average earning assets as a percent of
average total assets					94.96%

(1)	The Company had no out-of-period adjustments or foreign activities. Loan fees of $514 are included in interest income. Loans on a nonaccrual basis for the recognition of interest income totaling $12,678 as of December 31, 2009 are included in loans for purposes of this analysis.

(2)	Tax-exempt income is presented on a tax-equivalent basis using a 34% tax rate. The amount shown includes a tax-equivalent adjustment of $628.

The table "Rate/Volume Variance Analysis" provides a summary of changes in net interest income resulting from changes in rate and changes in volume. The changes due to rate are the difference between the current and prior year’s rates multiplied by the prior year’s volume. The changes due to volume are the difference between the current and prior year’s volume multiplied by rates earned or paid in the current year. Rate/Volume Variance has been allocated to change due to volume.

CNB Corporation and Subsidiary Rate/Volume Variance Analysis For the Twelve Months Ended December 31, 2011 and 2010 (Dollars in Thousands)

	Average	Average			Interest	Interest		Change	Change
	Volume	Volume	Yield/Rate	Yield/Rate	Earned/Paid	Earned/Paid		Due to	Due to
	2011	2010	2011	2010	2011	2010	Variance	Rate	Volume
Earning Assets:
Loans, Net of unearned Income (1)	$510,742	$559,823	6.09%	6.14%	$31,087	$34,382	$ (3,295)	$ (308)	$(2,987)
Investment securities:
Taxable	268,324	251,824	1.24%	1.69%	3,327	4,252	(925)	(1,130)	205
Tax-exempt (2)	34,925	31,650	5.03%	5.60%	1,756	1,773	(17)	(182)	165
Federal funds sold and Securities
purchased under agreement to resell	13,249	13,970	.23%	.24%	31	33	(2)	-	(2)
Other Earning Assets	48,471	47,269	.24%	.25%	118	120	(2)	(5)	3

Total Earning Assets	$875,711	$904,536	4.15%	4.48%	$36,319	$40,560	$ (4,241 )	$ (1,625)	$(2,616)

Interest-bearing Liabilities:

Interest-bearing deposits	$619,978	$623,167	.85%	1.39%	$ 5,246	$ 8,647	$ (3,401)	$ (3,374)	$ (27)
Securities sold under agreement to repurchase	98,070	108,486	.29%	.73%	280	791	(511)	(481)	(30)
Other short-term borrowings	908	9,674	-%	1.88%	-	182	(182)	(182)	-

Total Interest-bearing Liabilities	718,956	741,327	.77%	1.30%	5,526	9,620	(4,094)	(4,037)	(57)
Interest-free Funds Supporting
Earning Assets	156,755	163,209

Total Funds Supporting Earning Assets	$875,711	$904,536	.63%	1.06%	$ 5,526	$ 9,620	$ (4,094)	$ (4,037)	$ (57)

Interest Rate Spread			3.38%	3.18%
Impact of Noninterest-bearing Funds
on Net Yield on Earning Assets			.14%	.24%
Net Yield on Earning Assets			3.52%	3.42%	$30,793	$ 30,940

(1) Includes non-accruing loans which do not have a material effect on the Net Yield on Earning Assets.
(2) Tax-equivalent adjustment based on a 34% tax rate.

CNB Corporation and Subsidiary Rate/Volume Variance Analysis For the Twelve Months Ended December 31, 2010 and 2009 (Dollars in Thousands)

	Average	Average			Interest	Interest		Change	Change
	Volume	Volume	Yield/Rate	Yield/Rate	Earned/Paid	Earned/Paid		Due to	Due to
	2010	2009	2010	2009	2010	2009	Variance	Rate	Volume
Earning Assets:
Loans, Net of unearned Income (1)	$559,823	$593,370	6.14%	6.26%	$34,382	$37,170	$ (2,788)	$ (728)	$(2,060)
Investment securities:
Taxable	251,824	188,454	1.69%	2.89%	4,252	5,452	(1,200)	(2,270)	1,070
Tax-exempt (2)	31,650	31,956	5.60%	5.78%	1,773	1,847	(74)	(57)	(17)
Federal funds sold and Securities
purchased under agreement to resell	13,970	13,162	.24%	.24%	33	32	1	(1)	2
Other Earning Assets	47,269	32,353	.25%	.23%	120	74	46	8	38

Total Earning Assets	$904,536	$859,295	4.48%	5.19%	$40,560	$44,575	$ (4,015 )	$ (3,048)	$ (967)

Interest-bearing Liabilities:

Interest-bearing deposits	$623,167	$579,927	1.39%	1.84%	$ 8,647	$10,668	$ (2,021)	$ (2,621)	$ 600
Securities sold under agreement to repurchase	108,486	101,461	.73%	1.10%	791	1,121	(330)	(381)	51
Other short-term borrowings	9,674	23,242	1.88%	1.46%	182	340	(158)	97	(255)

Total Interest-bearing Liabilities	741,327	704,630	1.30%	1.72%	9,620	12,129	(2,509)	(2,905)	396
Interest-free Funds Supporting
Earning Assets	163,209	154,665

Total Funds Supporting Earning Assets	$904,536	$859,295	1.06%	1.41%	$ 9,620	$12,129	$ (2,509)	$ (2,905)	$ 396

Interest Rate Spread			3.18%	3.47%
Impact of Noninterest-bearing Funds
on Net Yield on Earning Assets			.24%	.31%
Net Yield on Earning Assets			3.42%	3.78%	$30,940	$ 32,446

(1) Includes non-accruing loans which do not have a material effect on the Net Yield on Earning Assets.
(2) Tax-equivalent adjustment based on a 34% tax rate.

INVESTMENT SECURITIES

The goal of the investment policy of the Bank is to provide for management of the investment securities portfolio in a manner designed to maximize portfolio yield over the long term consistent with liquidity needs, pledging requirements, asset/liability strategies, and safety/soundness concerns. Specific investment objectives include the desire to: provide adequate liquidity for loan demand, deposit fluctuations, and other changes in balance sheet mix; manage interest rate risk; maximize the institution's overall return; provide availability of collateral for pledging; and manage asset-quality diversification of the bank's assets. At December 31, 2011 and 2010, investment securities represented 36.3% and 32.5% of total assets, respectively. Loans declined in 2009 due to weakened loan demand as a result of the recessionary economy during the first three quarters of the year and continued pressure on local real estate markets. The declining trend in loan volume continued throughout 2010 and 2011. At December 31, 2011, 2010, and 2009, the Loans/Total Assets ratios were 53.0%, 58.6%, and 63.0%, respectively. Investment securities have correspondingly risen as a percentage of total assets.

Investment securities with a par value of $175,457,000, $204,917,000, and $207,233,000 at December 31, 2011, 2010, 2009, respectively, were pledged to secure public deposits and for other purposes as required by law.

The following summaries reflect the book value, unrealized gains and losses, approximate market value, weighted-average tax-equivalent yields, and maturities on investment securities at December 31, 2011, 2010, 2009.

	December 31, 2011 (Dollars in Thousands)
	Book	Unrealized Holding		Fair
	Value	Gains	Losses	Value	Yield(1)
AVAILABLE FOR SALE
Government sponsored enterprises
Within one year	$ 52,367	$ 153	$ -	$ 52,520	.62%
One to five years	185,112	842	93	185,861	.97%
Six to ten years	29,877	160	30	30,007	1.40%
	267,356	1,155	123	268,388	.95%
Mortgage backed securities
One to five years	84	8	-	92	5.86%
Six to ten years	3,149	128	-	3,277	3.51%
Over ten years	18,787	232	30	18,989	2.46%
	22,020	368	30	22,358	2.63%
State, county and municipal
Within one year	265	-	-	265	5.47%
One to five years	1,784	64	-	1,848	4.13%
Six to ten years	19,472	1,410	3	20,879	5.01%
Over ten years	5,538	283	-	5,821	4.78%
	27,059	1,757	3	28,813	4.91%
Other investments
CRA Qualified Investment Fund	1,079	43	-	1,122	-%
Other	36	-	-	36	-%
	1,115	43	-	1,158	-%

Total available for sale	$ 317,550	$ 3,323	$ 156	$ 320,717	1.40%

HELD TO MATURITY
State, county and municipal
Within one year	$ 804	$ 11	$ -	$ 815	4.41%
One to five years	812	38	-	850	5.62%
Six to ten years	6,519	473	-	6,992	5.36%
Over ten years	2,874	213	-	3,087	4.86%
	11,009	735	-	11,744	5.18%

Total held to maturity	$ 11,009	$ 735	$ -	$ 11,744	5.18%

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

As of the year ended December 31, 2011, the Bank did not hold any securities of an issuer that
exceeded 10% of stockholders' equity.

INVESTMENT SECURITIES, continued

	December 31, 2010 (Dollars in Thousands)
	Book	Unrealized Holding		Fair
	Value	Gains	Losses	Value	Yield(1)
AVAILABLE FOR SALE
Government sponsored enterprises
One to five years	$ 186,938	$ 349	$ 652	$ 186,635	1.13%
Six to ten years	58,047	137	322	57,862	1.87%
	244,985	486	974	244,497	1.30%
Mortgage backed securities
Six to ten years	2,112	90	-	2,202	4.01%
Over ten years	8,090	102	86	8,106	3.31%
	10,202	192	86	10,308	3.46%
State, county and municipal
Within one year	950	4	-	954	6.26%
One to five years	1,395	40	-	1,435	6.28%
Six to ten years	12,531	332	82	12,781	5.41%
Over ten years	4,442	5	142	4,305	4.93%
	19,318	381	224	19,475	5.41%
Other investments
CRA Qualified Investment Fund	1,065	-	-	1,065	-%
Other	36	-	-	36	-%
	1,101	-	-	1,101	-%

Total available for sale	$ 275,606	$ 1,059	$ 1,284	$ 275,381	1.67%

HELD TO MATURITY
Government sponsored enterprises
One to five years	10,000	25	4	10,021	1.33%
	10,000	25	4	10,021	1.33%
State, county and municipal
One to five years	$ 1,103	$ 46	$ -	$ 1,149	4.74%
Six to ten years	5,847	149	14	5,982	5.60%
Over ten years	3,728	-	96	3,632	4.85%
	10,678	195	110	10,763	5.25%

Total held to maturity	$ 20,678	$ 220	$ 114	$ 20,784	3.34%

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

As of the year ended December 31, 2010, the Bank did not hold any securities of an issuer that
exceeded 10% of stockholders' equity.

INVESTMENT SECURITIES, continued

	December 31, 2009 (Dollars in Thousands)
	Book	Unrealized Holding		Fair
	Value	Gains	Losses	Value	Yield(1)
AVAILABLE FOR SALE
Government sponsored enterprises
One to five years	$135,494	$ 945	$ 11	$136,428	2.18%
Six to ten years	42,907	116	144	42,879	2.61%
	178,401	1,061	155	179,307	2.28%
Mortgage backed securities
Six to ten years	2,240	63	1	2,302	3.87%
Over ten years	6,975	165	-	7,140	3.94%
	9,215	228	1	9,442	3.92%
State, county and municipal
Within one year	1,381	13	-	1,394	7.04%
One to five years	2,543	93	-	2,636	6.64%
Six to ten years	16,563	442	68	16,937	5.61%
Over ten years	4,010	62	-	4,072	5.39%
	24,497	610	68	25,039	5.77%
Other investments
CRA Qualified Investment Fund	780	-	-	780	-%
MasterCard International Stock	11	-	-	11	-%
Other	36	-	-	36	-%
	827	-	-	827	-%

Total available for sale	$212,940	$ 1,899	$ 224	$214,615	2.76%

HELD TO MATURITY
Government sponsored enterprises
One to five years	6,003	-	17	5,986	1.29%
	6,003	-	17	5,986	1.29%
State, county and municipal
Within one year	$ 645	$ 5	$ -	$ 650	6.98%
One to five years	826	26	-	852	4.41%
Six to ten years	6,232	161	28	6,365	5.80%
Over ten years	1,243	69	-	1,312	6.44%
	8,946	261	28	9,179	5.85%

Total held to maturity	$ 14,949	$ 261	$ 45	$ 15,165	4.01%

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

As of the year ended December 31, 2009, the Bank did not hold any securities of an issuer that
exceeded 10% of stockholders' equity.

LOAN PORTFOLIO

LENDING ACTIVITIES

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

Real Estate Loans

Loans secured by first or second mortgages on residential and commercial real estate are one of the primary components of the Bank's loan portfolio. These loans will generally consist of commercial real estate loans, construction and development loans and residential real estate loans (including home equity and second mortgage loans). Interest rates are generally fixed but adjustable rates are also utilized for some commercial purpose loans. The Bank seeks to manage credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings. In addition, the Bank typically requires personal guarantees of the principal owners of the borrower. The Bank may also originate mortgage loans funded and owned by investors in the secondary market, earning a fee, but avoiding the interest rate risk of holding long-term, fixed-rate loans. The principal economic risk associated with all loans, including real estate loans, is the creditworthiness of the Bank's borrowers. The ability of a borrower to repay a real estate loan will depend upon a number of economic factors, including employment levels and fluctuations in the value of real estate. In the case of a real estate construction loan, there is generally no income from the underlying property during the construction period, borrowings may exceed the current value of the improvements to the property, and the developer's personal obligations under the loan may be limited. Each of these factors increases the risk of nonpayment by the borrower. In the case of a real estate purchase loan and other first mortgage real estate loans structured with a balloon payment, the borrower may be unable to repay the loan at the end of the loan term and may thus be forced to refinance the loan at a higher interest rate, or, in certain cases, the borrower may default as a result of an inability to refinance the loan. In either case, the risk of nonpayment by the borrower is increased. The Bank will also face additional credit risks to the extent that it engages in making adjustable rate mortgage loans ("ARMs"). In the case of an ARM, as interest rates increase, the borrower's required payments increase periodically, thus increasing the potential for default (See "Adjustable Rate Mortgage Loans" below). The marketability of all real estate loans, including ARMs, is also generally affected by the prevailing level of interest rates. Bank management monitors loans with loan-to-value ratios in excess of regulatory guidelines and secured by real estate in accordance with guidance as set forth by regulatory authorities. Aggregate levels of both commercial and residential real estate loans with loan-to-value ratios above regulatory guidelines at the time the loans were made are reported to the Bank’s Board of Directors on a quarterly basis in total dollars and as a percent of capital. Additionally, loans in excess of $500,000 with a loan-to-value ratio exception are simultaneously reported on an individual basis. The total of loans with loan-to-value ratio exceptions are maintained within regulatory limitations. The total amount of loans with loan-to-value ratios in excess of regulatory guidelines at the time the loans were made totaled $36,244,000 and $46,075,000 or 7.5% and 8.6% of total loans at fiscal year-ends December 31, 2011 and 2010, respectively.

Commercial Loans

The Bank makes loans for commercial purposes in various lines of business. The commercial loans will include both secured and unsecured loans for working capital (including inventory and receivables), loans for business expansion (including acquisition of real estate and improvements), and loans for purchases of equipment. When taken, security usually consists of liens on inventories, receivables, equipment, and furniture and fixtures. Unsecured business loans are generally short-term with emphasis on repayment strengths and low debt-to-worth ratios. Commercial lending involves significant risk because repayment usually depends on the cash flows generated by a borrower’s business, and debt service capacity can deteriorate because of downturns in national and local economic conditions. Management generally seeks to control risks by conducting more in-depth and ongoing financial analysis of a borrower’s cash flows and other financial information.

Consumer Loans

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

LOAN PORTFOLIO

LENDING ACTIVITIES (Continued)

Adjustable Rate Mortgage Loans

The Bank offers adjustable rate mortgages (ARMs)(as defined by regulatory authorities) for consumer purpose real estate loans only in the form of revolving equity lines of credit. ARMs are more typically offered as an alternative structuring on commercial purpose real estate loans and other commercial purpose loans. Variable rate loans, the majority of which are real estate secured, totaled $74,121,000 and $78,879,000 or 15.3% and 14.8% of total loans at fiscal year-ends December 31, 2011 and 2010, respectively. (The Bank does not offer any loan products which provide for planned graduated payments or loans which allow negative amortization.)

Loan Approval and Review

The Bank's loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds an individual officer's lending authority, the loan request will be considered and approved by an officer with a higher lending limit or by the Credit Committee as established by the Board of Directors. The Loan Committee of the Board of Directors recommends to the Board of Directors the lending limits for the Bank's loan officers. The Bank has an in-house lending limit to a single borrower, group of borrowers, or related entities, of the lesser of $10,000,000 or 15% of capital. An unsecured limit (aggregate) for the Bank is set at 50% of total capital.

CATEGORIES OF LOANS

The following is a summary of loans, in thousands of dollars, at December 31, 2011, 2010, 2009, 2008, 2007 by major category:

	2011	2010	2009	2008	2007
Real Estate Loans – mortgage	$334,234	$362,998	$375,741	$366,948	$350,138
- construction	52,271	63,080	81,311	92,010	83,398
Commercial and industrial loans	50,855	61,127	74,565	89,348	88,106
Loans to individuals for household family and other consumer expenditures	42,351	43,350	44,865	46,278	47,731
Agriculture	3,615	3,282	2,930	3,119	3,264
All other loans, including
Overdrafts and deferred loan costs	696	349	384	578	1,114
Gross Loans	484,022	534,186	579,796	598,281	573,751
Less allowance for loan losses	(12,373)	(11,627)	(9,142)	(7,091)	(6,507)
Net loans	$471,649	$522,559	$570,654	$591,190	$567,244

For the year ended December 31, 2011, the Company's loan portfolio contained approximately $409,901 in fixed rate loans and approximately $74,121 in variable rate loans. The following schedule summarizes the Company’s commercial, financial and agricultural, real estate – construction, and all other loans by maturity and sensitivity to changes in interest rates for December 31, 2011.

MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES
(Thousands of Dollars)

For the Year Ended December 31, 2011

	Loans Maturing in One Year or Less	Loans Maturing after One through Five Years	Loans Maturing after Five Years	Total
Total loans by category
Commercial, financial and agriculture	$ 25,259	$ 27,580	$ 1,630	$ 54,469
Real-estate construction	25,018	26,919	335	52,272
All other loans	100,908	218,263	58,110	377,281
Total	151,185	272,762	60,075	484,022

Fixed rate loans by category
Commercial, financial and agriculture	$ 17,276	$ 22,447	$ 339	$ 40,062
Real-estate construction	15,938	20,811	335	37,084
All other loans	86,754	197,378	48,623	332,755
Total	119,968	240,636	49,297	409,901

Variable rate loans by category
Commercial, financial and agriculture	$ 7,983	$ 5,133	$ 1,291	$ 14,407
Real-estate construction	9,080	6,108	-	15,188
All other loans	14,154	20,885	9,487	44,526
Total	31,217	32,126	10,778	74,121

NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
(Thousands of Dollars)

The following schedule summarizes the amount of nonaccrual, past due, and restructured loans for the periods ended December 31, 2011, 2010, 2009, 2008, and 2007:

	2011	2010	2009	2008	2007

Nonaccrual loans	$ 22,913	$ 25,704	$ 12,678	$ 2,990	$ 861
Accruing loans which are contractually past due 90 days or more as to principal or interest payments	$ 2,141	$ 1,042	$ 961	$ 607	$ 147
Troubled debt restructurings	$ 3,638	$ 20	$ 22	$ 24	$ 25

Accruing loans which are contractually past due 90 days or more are graded substandard within the Bank's internal loan grading system and come under heightened scrutiny. Typically, a loan will not remain in the 90 days past due category, but will either show improvement or be moved to nonaccrual loans. Consumer purpose loans are moved to nonaccrual or charged off, as appropriate, at 120 days or more past due. Loans are placed in a nonaccrual status when, in the opinion of management, the collection of additional interest is questionable. Thereafter, no interest is taken into income unless received in cash or until such time as the borrower demonstrates the ability to pay principal and interest. Loans which demonstrate sustained performance for a period of time, usually six months, can be returned to accrual status provided the loan is contractually current and the borrower can demonstrate the financial capacity to perform on the loan in future periods. At December 31, 2011, the Company had $22,913 of nonaccrual loans consisting of 119 loans averaging $193. Nonaccrual loans are written down to the fair value of the underlying collateral at the time of transfer to nonaccrual, or as soon as reasonably possible, based on a current appraisal. At December 31, 2011, the Company had $2,141 of accruing loans which were contractually past due 90 days or more consisting of 67 consumer purpose loans averaging $32. At December 31, 2011, the Company had $3,638 of restructured troubled debt consisting of 7 loans.

Information relating to interest income on nonaccrual and renegotiated loans outstanding, in thousands of dollars, for the years ended December 31, 2011, 2010, 2009, 2008, and 2007 is as follows:

	2011	2010	2009	2008	2007

Interest included in income during the year	$ 386	$ 408	$ 318	$ 103	$ 33
Interest which would have been included at the original contract rates (includes amount included in income)	$ 1,919	$ 1,847	$ 953	$ 288	$ 94

POTENTIAL PROBLEM LOANS
(Thousands of Dollars)

In addition to those loans disclosed under "Nonaccrual, Past Due, and Restructured Loans," there are certain loans in the portfolio which are not yet 90 days past due but about which management has concerns regarding the ability of the borrower to comply with present loan repayment terms. Such loans and nonaccrual loans are classified as impaired. Problem loan identification includes a review of individual loans, the borrower’s and guarantor’s financial capacity and position, loss potential, and present economic conditions. A specific allocation is provided for impaired loans not yet placed in nonaccrual status and not yet written down to fair value in management’s determination of the allowance for loan losses.

As of December 31, 2011, all loans which management had identified as potential problem loans totaled $3,123.

FOREIGN OUTSTANDINGS

As of the year ended December 31, 2011, the Company had no foreign loans outstanding.

LOAN CONCENTRATIONS

As of the year ended December 31, 2011, the Company did not have any concentration of loans to multiple borrowers engaged in similar activities that would cause them to be similarly affected by economic or other conditions exceeding 10% of total loans which are not otherwise disclosed as a category of loans in the tables above. However, because the Company is engaged in the business of community banking, most of its loans are geographically concentrated to borrowers in Horry and Georgetown counties of South Carolina.

SUMMARY OF LOAN LOSS EXPERIENCE

ALLOWANCE FOR LOAN LOSSES

The following table summarizes loan balances as of the end of each period indicated, averages for each period, changes in the allowance for loan losses arising from charge-offs and recoveries by loan category, and additions to the allowance which have been charged to expense.

The allowance for loan losses is increased by the provision for loan losses, which is a direct charge to expense. Losses on specific loans are charged against the allowance in the period in which management determines that such loans become uncollectible. Recoveries of previously charged-off loans are credited to the allowance.

	Years Ended December 31, (Thousands of Dollars)
	2011	2010	2009	2008	2007
Loans:
Average loans outstanding for the period	$510,742	$559,823	$593,370	$587,931	$563,864

Allowance for loan losses:

Balance at the beginning of period	$ 11,627	$ 9,142	$ 7,091	$ 6,507	$ 6,476

Charge-offs:
Commercial, financial, and agricultural	$ 1,872	$ 3,273	$ 2,251	$ 896	$ 732
Real Estate - construction and mortgage	7,798	7,444	4,383	750	127
Loans to individuals	917	899	1,141	836	587

Total charge-offs	$ 10,587	$ 11,616	$ 7,775	$ 2,482	$ 1,446

Recoveries:
Commercial, financial, and agricultural	$ 298	$ 259	$ 593	$ 278	$ 96
Real Estate - construction and mortgage	929	73	16	44	25
Loans to individuals	218	372	469	211	211

Total recoveries	$ 1,445	$ 704	$ 1,078	$ 533	$ 332

Net charge-offs	$ 9,142	$ 10,912	$ 6,697	$ 1,949	$ 1,114
Additions charged to operations	$ 9,888	$ 13,397	$ 8,748	$ 2,533	$ 1,145
Balance at end of period	$ 12,373	$ 11,627	$ 9,142	$ 7,091	$ 6,507

Net Charge-offs as a Percentage of Average Loans Outstanding	1.79%	1.95%	1.13%	.33%	.20%

The allowance for loan losses is maintained at an amount based on considerations of classified and internally-identified problem loans, the current trend in delinquencies, the volume of past-due loans, historical loss experience, current economic conditions, over-margined real estate loans, if any, the effects of changes in risk selection or underwriting practices, the experience, ability and depth of lending management and staff, industry conditions, the effect of changes in concentrations of credit, and loan administration risks. In addition, the Asset/Liability Management Committee and the Credit Committee review the adequacy of the allowance quarterly and make recommendations regarding the appropriate degree of consideration to be given the various factors utilized in determining the allowance and to make recommendations as to the appropriate amount of the allowance.

The Bank’s real estate loan portfolio and consequently the allowance for loan losses has been significantly impacted by deterioration of local real estate markets in terms of both real estate market activity and real estate values during the most recent recession, 2007 through 2009, and although local real estate markets have begun to recover, management expects that full recovery of this economic sector will not be evident before 2013 or later. Management has sought to maintain the allowance for loan losses at a level commensurate with the level of risk identified in the loan portfolio and has continuously monitored the methodologies employed in determining the allowance for loan losses. Management believes it has reduced all real estate exposures to levels below acceptable thresholds established by regulatory authorities. As a result of these actions and growth in past due, nonaccrual, and impaired loans (outlined in the “Nonaccrual, Past Due, and Restructured Loans” and “Potential Problem Loans” above), provisions for loan losses and the allowance for loan losses have exceeded historical norms since the onset of the recession in 2007.

The Board of Directors maintains an independent Loan Review function which has established controls and procedures to monitor loan portfolio risk on an on-going basis. Credit reviews on all major relationships are conducted on a continuing basis as is the monitoring of past-due trends and classified assets. The function utilizes various methodologies in its assessment of the adequacy of the Allowance for

Loan Losses. Three primary measurements are reported to the Board of Directors on a quarterly basis, the Graded Loan Method based on a bank-wide risk grading model, the Migration Analysis Method which tracks risk patterns on charged-off loans for the previous 10 years, and the Percentage of Net Loans Method. The graded loans and migration methodologies are calculated based on gross charge offs. Additionally, the function annually reviews the economic assessment conducted by Loan Administration, addresses portfolio risk by industry concentration, reviews loan policy changes and marketing strategies for any effect on portfolio risk, and conducts tests addressing portfolio performance by type of portfolio, collateral type, and loan officer performance.

Management utilizes the best information available to establish the allowance for loan losses. However, future adjustments to the allowance or to the reserve adequacy methodology may be necessary if economic conditions differ substantially, the required methodology is altered by regulatory authorities governing the Company or the Bank, or alternative accounting methodologies are promulgated by the Public Company Accounting Oversight Board. During 2011, one primary change to the methodology of determining the allowance for loan losses was implemented. This change effectively modified the factor utilized to adjust incorporated existing migration loss calculations for pooled loans calculated for gross charge-offs to net charge-offs. Specifically, the factor was modified to the average recovery rate for the previous five years excepting the rates for the highest and lowest years. Prior to this change, the lowest recovery rate experienced during the last five years was utilized. This change better reflects recovery rates experienced in 2011 and those expected to be experienced.

The following table presents an estimated allocation of the allowance for loan losses at December 31, 2011, 2010, 2009, 2008, and 2007. This table is presented based on the regulatory reporting classifications of the loans. This allocation of the allowance for loan losses is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans.

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)

	2011		2010		2009		2008		2007
	Amount	% Loans in each category	Amount	% Loans in each category	Amount	% Loans in each category	Amount	% Loans in each category	Amount	% Loans in each category
Balance applicable to:
Commercial Industrial, Agriculture	$ 2,205	11.2%	$ 2,776	12.0%	$3,309	13.4%	$2,411	15.5%	$2,212	17.3%

Real Estate - Construction and Mortgage	8,676	79.9%	7,380	79.8%	4,590	78.8%	3,616	76.7%	3,319	74.0%

Loans to Individuals	1,492	8.9%	1,361	8.2%	1,228	7.8%	1,064	7.8%	936	8.7%

Unallocated	-	-	110	-	15	-	-	-	40	-

Total	$12,373	100%	$11,627	100%	$9,142	100%	$7,091	100%	$6,507	100%

DEPOSITS

AVERAGE DEPOSITS BY CLASSIFICATION

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

	Years Ended December 31,
		2011	2010	2009

Noninterest bearing demand deposits		$119,637	$106,854	$105,182
Interest bearing demand deposits		98,876	93,260	89,172
Money market deposits		85,650	84,919	75,979
Savings deposits		63,539	56,605	51,743
Health savings deposits		1,210	1,028	896
Time deposits		318,618	335,296	314,367
Individual retirement accounts		52,085	52,059	47,770
Total deposits		$739,615	$730,021	$685,109

AVERAGE RATES PAID ON DEPOSITS

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

	Years Ended December 31,
	2011	2010	2009

Interest bearing demand deposits	.08%	.12%	.14%
Money Market Deposits	.25%	.75%	1.03%
Savings deposits	.27%	.66%	.81%
Health savings deposits	.55%	1.32%	1.85%
Time deposits	1.25%	1.88%	2.48%
Individual retirement account deposits	1.51%	2.33%	3.23%

MATURITIES OF TIME DEPOSITS

The following table sets forth the maturity of time deposits in thousands of dollars, at December 31, 2011:

	Time Deposits of $100,000 or more	Time Deposits of Less Than $100,000	Total Time Deposits
Maturity within 3 months or less	$ 79,759	$ 41,490	$121,249
Over 3 through 6 months	33,200	35,425	68,625
Over 6 through 12 months	50,872	51,962	102,834
Over 12 months	37,531	24,683	62,214
Total	$201,362	$153,560	$354,922

RETURN ON EQUITY AND ASSETS

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

	Years Ended December 31,
	2011	2010	2009

Return on average total assets(1)	.13%	.11%	.56%
Return on average stockholders' equity(2)	1.38%	1.18%	5.91%
Cash dividend payout ratio(3)	-%	-%	41.25%
Average equity to average assets ratio (4)	9.50%	9.32%	9.48%

(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends per share divided by net income per share
(4) Average equity divided by average total assets.

SHORT-TERM BORROWINGS

Securities sold under repurchase agreements are short-term borrowings which generally mature within 180 days from the dates of issuance. No other category of short-term borrowings had an average balance outstanding during the reported period which represented 30 percent or more of stockholders' equity at the end of the period.

The following is a summary of securities sold under repurchase agreements outstanding at December 31 of each reported period, in thousands of dollars:

	At December 31,
	2011	2010	2009
Securities sold under agreement to repurchase	$87,784	$99,153	$104,654

The following information relates to outstanding securities sold under repurchase agreements during 2011, 2010, and 2009, in thousands of dollars:

	Maximum Amount Outstanding at Any Month End			Weighted Average Interest Rate at December 31,
	2011	2010	2009	2011	2010	2009

Securities sold under agreement to repurchase	$111,274	$113,463	$114,267	.22%	.46%	.94%

	Years ended December 31,
	2011	2010	2009
Securities sold under agreement to repurchase - average daily amount outstanding during the year	$98,009	$108,392	$101,286

Weighted average interest rate paid	.28%	.73%	1.11%

ITEM 1A. RISK FACTORS

An investment in our common stock involves a significant degree of risk. Any of the following risks could adversely affect our business, our results of operations and our financial condition, as well as the price of our common stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Our growth strategy may not be successful.

We have plans to maintain our recent asset and deposit growth through the opening of additional branch locations and the hiring of additional bankers. We may not be successful in identifying or obtaining suitable new branch locations or receiving regulatory approval for them, or employing and retaining suitable bankers, on terms that we can afford and that are attractive to us. Even if we successfully open additional branch locations and hire additional bankers, we may not achieve the asset and deposit growth that we seek because of competition or poor economic conditions, or for other reasons.

Our growth strategy may reduce our earnings in the near term.

We expect each new office we open to take several years to become profitable and we cannot guarantee that any new office will ever become profitable. We expect that by having a number of new offices at any given time, our ability to operate at higher levels of profitability will be reduced until our new offices can operate at levels of profitability that equal or exceed our older offices.

Our growth strategy may require future increases in capital that we may not be able to accomplish.

We are required by banking regulators to maintain various ratios of capital to assets. As our assets continue to grow we expect our capital ratios to decline unless we can also continue to increase our earnings or raise sufficient new capital to keep pace with asset growth. Our ability to raise additional capital, if needed, will depend, among other things, on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. If we are unable to limit a capital ratio decline by increasing our capital, we will have to restrict our asset growth to the amount our earnings will support.

We may be unable to manage our sustained growth successfully.

We have grown substantially in the last several years. Although we may not continue to grow as fast as we have in the past, we intend to expand our asset base. Our future profitability will depend in part on our ability to manage growth successfully. Our ability to manage growth successfully will depend on our ability to maintain cost controls and asset quality while attracting additional loans and deposits, as well as on factors beyond our control, such as economic conditions and interest rate trends. If we grow quickly and are not able to control costs and maintain asset quality, growth could materially adversely affect our financial performance.

We depend on the services of a number of key personnel, and a loss of any of those personnel could disrupt our operations and result in reduced revenues.

We are a relationship-driven organization. Our growth and development in recent years have depended in large part on the efforts of several members of our senior management team. These senior officers have primary contact with our customers and are extremely important in maintaining personalized relationships with our customer base, which are key aspects of our business strategy, and in increasing our market presence. The unexpected loss of services of one or more of these key employees could have a material adverse effect on our operations and possibly result in reduced revenues if we were unable to find suitable replacements promptly.

If our loan customers do not pay us as they have contracted to, we may experience losses.

Our principal revenue producing business is making loans. If our customers do not repay the loans, we will suffer losses. Even though we maintain an allowance for loan losses, the amount of the allowance may not be adequate to cover the losses we experience. We attempt to mitigate this risk by a thorough review of the creditworthiness of loan customers. Nevertheless, there is risk that our credit evaluations will prove to be inaccurate due to changed circumstances, unanticipated economic conditions, or otherwise.

Our assets include substantial amounts of real estate acquired through foreclosure or in settlement of loans, which we may not be able to sell without incurring additional losses.

We have acquired, and expect to continue to acquire, substantial amounts of real estate through foreclosure or settlement of loans in default. When we acquire such real estate, it is written down to its estimated fair market value less the estimated costs of selling. If we cannot sell the property for that amount we will incur additional loss which, for one or more properties, could materially reduce our earnings.

ITEM 1A. RISK FACTORS - Continued

Risks Related to Our Business - Continued

Our business is concentrated in Horry County and the "Waccamaw Neck" region of Georgetown County, and a downturn in the economy of the Horry County and the Waccamaw Neck area, a continuing decline in real estate values in the Horry County and the Waccamaw Neck areas, or other events in our market area may adversely affect our business.

Substantially all of our business is located in the Horry County and the "Waccamaw Neck" region of Georgetown County areas in coastal South Carolina. As a result, our financial condition and results of operations are affected by changes in the Horry County and the Waccamaw Neck economies. Over the past three years, we have experienced the adverse effects of the economic recession in the form of increased nonpayment and delinquent payment of loans, and decreases in the value of collateral securing loans and of real estate acquired through foreclosures. If the economic recession and general decline in real estate values in our market areas, or other adverse economic conditions continue, we would expect continuing decreases in demand for our services, increases in nonpayment of loans and decreases in the value of collateral securing loans. The existence of adverse economic conditions, declines in real estate values or the occurrence of other adverse economic conditions in Horry County, the Waccamaw Neck and South Carolina could have a material adverse effect on our business, future prospects, financial condition or results of operations.

We operate in an area susceptible to hurricane and other weather related damage which could disrupt our business and reduce our profitability.

Nearly all of our business and our customers are located in coastal South Carolina, an area that often experiences damage from hurricanes and other weather phenomena. We attempt to mitigate such risk with insurance and by requiring insurance on property taken as collateral. However, catastrophic weather damage to a large portion of our market area could cause substantial disruptions to our business and our customers’ businesses which would reduce our profitability for some period.

We face strong competition from larger, more established competitors which may adversely affect our ability to operate profitably.

We encounter strong competition from financial institutions operating in the greater Horry/Georgetown County and Grand Strand areas of South Carolina. In the conduct of our business, we also compete with credit unions, insurance companies, money market mutual funds and other financial institutions, some of which are not subject to the same degree of regulation as we are. Many of these competitors have substantially greater resources and lending abilities than we have and offer services, such as investment banking, insurance, trust and international banking services that we do not provide. We believe that we have been able to, and will continue to be able to, compete effectively with these institutions because of our experienced bankers and personalized service, as well as through loan participations and other strategies and techniques. However, we cannot promise that we are correct in our belief. If we are wrong, our ability to operate profitably may be negatively affected.

Technological changes affect our business, and we may have fewer resources than many of our competitors to invest in technological improvements.

The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services. In addition to enabling financial institutions to serve customers better, the effective use of technology may increase efficiency and may enable financial institutions to reduce costs. Our future success may depend, in part, upon our ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations. We may need to make significant additional capital investments in technology in the future, and we may not be able to effectively implement new technology-driven products and services. Many of our competitors have substantially greater resources to invest in technological improvements.

Our profitability and liquidity may be affected by changes in interest rates and economic conditions.

Our profitability depends upon our net interest income, which is the difference between interest earned on our interest earning assets, such as loans and investment securities, and interest expense on interest bearing liabilities, such as deposits and borrowings. Our net interest income will be adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increases faster than the interest earned on loans and investments, or, conversely, if the interest earned on loans and investments decreases faster than the interest we pay on deposits and borrowings. Interest rates, and consequently our results of operations, are affected by general economic conditions (domestic and foreign) and fiscal and monetary policies. Monetary and fiscal policies may materially affect the level and direction of interest rates. Increases in interest rates generally decrease the market values of interest earning investments and loans held and therefore may adversely affect our liquidity and earnings. Increased interest rates also generally affect the volume of mortgage loan originations, and the ability of borrowers to perform under existing loans of all types. Decreases in interest rates generally have the opposite effect on market values of interest-bearing assets, the volume of mortgage loan originations, and the ability of borrowers to perform under existing loans of all types.

ITEM 1A. RISK FACTORS – Continued

Risks Related to Our Common Stock

Our common stock has a limited trading market, which may make the prompt execution of sale transactions difficult.

Although our common stock may be traded from time to time on an individual basis, no active trading market has developed and none is expected to develop in the foreseeable future. Our common stock is not traded on any exchange. Accordingly, shareholders who wish to sell shares may experience a delay or have to sell them at lower prices than they seek in order to sell them promptly, if at all.

There is no guarantee we will pay cash dividends in the future.

Declaration and payment of dividends are within the discretion of our board of directors. Our bank is currently our only source of funds with which to pay cash dividends. Our bank’s declaration and payment of future dividends to us are within the discretion of the bank’s board of directors, and are dependent upon its earnings, financial condition, its need to retain earnings for use in the business and any other pertinent factors. The bank’s payment of dividends is also subject to various regulatory requirements and the ability of the bank’s regulators to forbid or limit its payment of dividends. Although we have historically paid cash dividends, we have not done so for the past two years in order to conserve capital in the face of reduced earnings. We cannot estimate when, or if , we will resume paying cash dividends.

Provisions in our articles of incorporation and South Carolina law may discourage or prevent takeover attempts, and these provisions may have the effect of reducing the market price for our stock.

Our articles of incorporation include several provisions that may have the effect of discouraging or preventing hostile takeover attempts. The provisions include staggered terms for our board of directors and requirements of supermajority votes to approve certain business transactions. In addition, South Carolina law contains several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors, and may make it more difficult or expensive for a third party to acquire a majority of our outstanding common stock. To the extent that these provisions are effective in discouraging or preventing takeover attempts, they may tend to reduce the market price for our stock.

Our common stock is not insured, so shareholders could lose their total investments.

Our common stock is not a deposit or savings account, and is not insured by the Federal Deposit Insurance Corporation or any other government agency. Should our business fail, shareholders could lose their total investments.

There can be no assurance that recent government actions will help stabilize the U.S. financial system.

In response to the financial crises affecting the banking system and financial markets and going concern threats to investment banks and other financial institutions, various branches and agencies of the U.S. government have put in place laws, regulations, and programs to address capital and liquidity issues in the banking system. There can be no assurance, however, as to the actual long-term impact that such laws, regulations, and programs will have on the financial markets, including the extreme levels of volatility, liquidity and confidence issues, and limited credit availability experienced over the past several years. The failure of such laws, regulations, and programs to continue to stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit, or the trading price of our common stock.

Recent levels of market volatility are unprecedented.

The volatility and disruption of financial and credit markets in the past few years has reached unprecedented levels for recent times. In some cases, the markets produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. If recent levels of market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition, and results of operations.

The soundness of other financial institutions could adversely affect us.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers, dealers, commercial banks, investment banks, and government sponsored enterprises. Many of these transactions expose us to credit risk in the event of default of our counterparty. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or other

ITEM 1A. RISK FACTORS – Continued

Risks Related to Our Industry - Continued

The soundness of other financial institutions could adversely affect us – Continued.

obligation due us. There is no assurance that any such losses would not materially and adversely affect our results of operations or earnings. Our primary source of funding for our operations is deposits from customers in our local market. Should other banks in or near our market areas fail, it could cause our deposit customers to lose confidence in banks and cause them to withdraw or substantially restrict their deposits with us. If such activity reached a high enough level, it could substantially disrupt our business. There is no assurance that such disruptions, were they to occur, would not materially and adversely affect our results of operations or earnings.

Recent market developments may adversely affect our industry, business, and results of operations.

Dramatic declines in the housing market during the prior three years, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other derivative securities, as well as other financial assets, including loans, have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced, and in some cases, ceased to provide funding to borrowers, including other financial institutions. The resulting lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets, and reduced business activity could materially and adversely, directly or indirectly, affect our business, financial condition and results of operations.

We are subject to governmental regulation which could change and increase our cost of doing business or have an adverse affect on our business.

We operate in a highly regulated industry and are subject to examination, supervision and comprehensive regulation by various federal and state agencies. Most of this regulation is designed to protect our depositors and other customers, not our shareholders. Our compliance with the requirements of these agencies is costly and may limit our growth and restrict certain of our activities, including, payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, and locations of offices. We are also subject to capitalization guidelines established by federal authorities and our failure to meet those guidelines could result, in an extreme case, in our bank’s being placed in receivership.

Various laws, including the Federal Deposit Insurance Act, the Emergency Economic Stabilization Act of 2008 (“EESA”), and the Dodd-Frank Act, and related regulations are structured to spread the governmental costs of problems in the financial industry broadly over the financial industry in order to prevent the taxpayers from having to pay such costs. As a result, assessments by the FDIC to pay for deposit insurance have increased, and will likely continue to increase, substantially, and the total our bank will be required to pay could increase enough to materially affect our income and our ability to operate profitably. Additionally, EESA contains a provision for the financial industry to be required to absorb, in an as yet undetermined fashion, any losses suffered by the government on account of its acquiring troubled assets under the Troubled Assets Relief Program of EESA. The Dodd-Frank Act also makes numerous changes in the way financial institutions are regulated, and creates a new agency to regulate consumer protection as well as expanding and modifying consumer protection laws.

We are also subject to the extensive and expensive requirements imposed on public companies by the Sarbanes-Oxley Act of 2002 and on financial services businesses by the Dodd-Frank Act, and related regulations.

The laws and regulations applicable to the banking industry could change at any time, and numerous regulations required by the Dodd-Frank Act are yet to be adopted. Therefore, we cannot predict the impact of these changes on our business or profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, such regulation may not put us at a competitive disadvantage with respect to other similarly situated banks and holding companies, but our cost of compliance could adversely affect our ability to operate profitably.

We are susceptible to changes in monetary policy and other economic factors which may adversely affect our ability to operate profitably.

Changes in governmental, economic and monetary policies may affect the ability of our bank to attract deposits and make loans. The rates of interest payable on deposits and chargeable on loans are affected by governmental regulation and fiscal policy as well as by national, state and local economic conditions. All of these matters are outside of our control and affect our ability to operate profitably.

26

ITEM 1B. UNRESOLVED STAFF COMMENTS

The Company has no unresolved comments from the SEC staff regarding its 1934 Act filings in the 180 days prior to fiscal year-end December 31, 2011.

ITEM 2. PROPERTIES

The Company's subsidiary, The Conway National Bank, has twelve permanent banking offices in Horry County and two permanent banking offices in Georgetown County, for a total of fourteen banking offices. In addition, the Bank has an Operations and Administration Building, located at 1400 Third Avenue in Conway, which houses the Bank's administrative offices and data processing facilities. This three-story structure contains approximately 33,616 square feet. Adjacent to the Operations and Administration Building is a 24,000 square foot branch banking office, known as the Conway Banking Office, which provides retail banking functions at the Bank’s principal site. In addition, the Bank has a 1,450 square foot building for express banking services adjacent to the Conway Banking Office. The Bank has a two-story office on Main Street in Conway containing 8,424 square feet, banking offices located at Red Hill in Conway (3,760 square feet), West Conway in Conway (3,286 square feet), North Conway in Conway (3,600 square feet), Surfside in Surfside Beach (6,339 square feet), Northside, north of Myrtle Beach (2,432 square feet), Socastee in the southern portion of Myrtle Beach (3,498 square feet), Aynor in the Town of Aynor (2,809 square feet), Myrtle Beach in the City of Myrtle Beach (12,000 square feet), Murrells Inlet in Murrells Inlet, Georgetown County (3,600 square feet), North Myrtle Beach in the City of North Myrtle Beach (3,600 square feet), Pawleys Island in Pawleys Island, Georgetown County (3,900 square feet), and Little River northwest of North Myrtle Beach (3,900 square feet). In addition to the existing facilities, the Company has purchased one future office site. The site consists of 1.63 acres at Loop Road and River Oaks Drive, Carolina Forest, Myrtle Beach. The Company anticipates building a banking office on the site within the next two to six years, depending on market conditions. The physical addresses of each location are as follows: The Operations and Administration Building at 1400 Third Avenue, Conway; Conway Banking Office at 1411 Fourth Avenue, Conway; Main Street at 309 Main Street, Conway; West Conway at Highway 501 & Cultra Road, Conway; North Conway at 2601 Main Street, Conway; Surfside at Highway 17 & 5^th Avenue North, Surfside Beach; Northside at 9726 Highway 17 North, Myrtle Beach; Red Hill at Highways 544 & 501, Conway; Socastee at 3591 North Gate Road, Myrtle Beach; Aynor at 2605 Highway 501, Aynor; Myrtle Beach at 1353 21^st Avenue North, Myrtle Beach; Murrells Inlet at 4345 Highway 17 Bypass, Murrells Inlet; North Myrtle Beach at 110 Highway 17 North, North Myrtle Beach; Pawleys Island at 10608 Ocean Highway, Pawleys Island; and Little River at 2380 Highway 9 East, Longs, S.C. The Bank owns all of its facilities.

ITEM 3. LEGAL PROCEEDINGS

There were no material legal proceedings against the Company or its subsidiary, The Conway National Bank, as of December 31, 2011.

ITEM 4. (MINE SAFETY DISCLOSURES)

Not applicable.

PART II

As of March 1, 2012, there were approximately 1,020 holders of record of Company common stock. There is no established market for shares of Company common stock and only limited trading in such shares has occurred since the formation of the Company on June 10, 1985. During 2011 and 2010, management was aware of a few transactions, including a few transactions in which the Company was the purchaser, a few transactions in which the Company was the seller, and for which the Company’s common stock traded in the ranges set forth below. However, management has not ascertained that these transactions resulted from arm’s length transactions between the parties involved, and because of the limited number of shares involved, these prices may not be indicative of the value of the common stock.

	2011		2010
First Quarter Second Quarter Third Quarter Fourth Quarter	High $63.00 $61.00 $57.50 $57.50	Low $61.00 $61.00 $57.50 $57.50	High $80.50 $80.50 $80.00 $81.00	Low $80.50 $75.00 $79.50 $61.00

Holders of shares of Company stock are entitled to such dividends as may be declared from time to time by the Board of Directors of the Company. The Company did not pay any annual cash dividends for 2011 or 2010, and there can be no assurance as to the payment of dividends by the Company in the future. Payment of dividends is within the discretion of the Board of Directors, subject to regulatory approval, and is dependent upon the earnings and financial condition of the Company and the Bank, and other related factors. The Company’s primary source of funds with which to pay dividends are dividends paid to the Company by the Bank, which are also subject to regulatory approval. There are also other legal restrictions on the Bank’s ability to pay dividends. See "Supervision and Regulation–Payment of Dividends" under Item 1, Part I of this Form 10-K for a description of these legal restrictions.

The Company does not have any equity compensation plans. Accordingly, no information is required to be disclosed pursuant to Item 201(d) of Regulation S-K.

The Company made one sale of securities during 2011. On August 10, 2011 the Company sold 468 shares of common stock to The Conway National Bank Profit Sharing and Savings Plan for a price of $26,910, or $57.50 per share. This sale was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 because no public offering was involved.

Purchases of stock during the fourth quarter of 2011 are outlined in the below table. Information about all other purchases during 2011 has been previously reported on Forms 10-Q, filed May 10, 2011, August 9, 2011, and November 9, 2011, and is incorporated herein by reference.

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 - October 31, 2011	1	$ 57.50	-	-
November 1 - November 30, 2011	-	$ -	-	-
December 1 - December 31, 2011	-	$ -	-	-
Total	1	$ 57.50	-	-

(1) During the fourth quarter of 2011, the Company purchased 1 share of stock from The Conway National Bank Profit Sharing and Savings Plan, at the request of the participants, which is held by the Company as an authorized and unissued share. This share was purchased on a case-by-case basis and not pursuant to any formal program.

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

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

	Years Ended December 31,
	2011	2010	2009	2008	2007
Selected Income Statement Data:
Total Interest Income	$ 35,722	$ 39,957	$ 43,947	$ 50,119	$ 53,755
Total Interest Expense	5,526	9,620	12,129	18,221	22,858
Net Interest Income	30,196	30,337	31,818	31,898	30,897
Provision for Loan Losses	9,888	13,397	8,748	2,533	1,145
Net Interest Income
after Provision for Loan Losses	20,308	16,940	23,070	29,365	29,752
Total Noninterest Income	6,258	7,549	8,179	7,182	7,002
Total Noninterest Expenses	25,223	23,405	24,069	23,102	22,019
Income Before Income Taxes	1,343	1,084	7,180	13,445	14,735
Income Taxes	124	44	2,113	4,488	5,015
Net Income	$ 1,219	$ 1,040	$ 5,067	$ 8,957	$ 9,720

*Per Share:**
Net Income Per Weighted Average
Shares Outstanding	$ .73	$ .62	$ 3.03	$ 5.36	$ 5.65
Cash Dividend Paid Per Share	$ -	$ -	$ 1.25	$ 2.63	$ 2.63
Weighted Average Shares Outstanding	1,663,867	1,671,568	1,672,527	1,672,566	1,722,130

*Per share data for years 2008-2007 adjusted for the effect of a two-for-one stock split issued during 2009.

Selected Balance Sheet Data:
Assets	$ 913,820	$ 911,271	$ 920,641	$ 874,625	$ 865,638
Net Loans	471,649	522,559	570,654	591,190	567,244
Investment Securities	333,591	298,788	232,605	206,996	216,177
Federal Funds Sold	10,000	14,000	14,000	21,000	26,000
Deposits:
Noninterest-Bearing	$ 119,649	$ 108,031	$ 96,834	$ 100,560	$ 112,450
Interest-Bearing	612,976	610,109	608,436	578,659	579,839
Total Deposits	$ 732,625	$ 718,140	$ 705,270	$ 679,219	$ 692,289
Stockholders' Equity	$ 89,406	$ 86,333	$ 87,429	$ 83,527	$ 82,112

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

"Management's Discussion and Analysis" is provided to afford a clearer understanding of the major elements of the Company's financial condition, results of operations, liquidity, and capital resources. The following discussion should be read in conjunction with the Company's financial statements and notes thereto and other detailed information appearing elsewhere in this report. References to dollar amounts in this section are in thousands, except per share data.

Economic Conditions

The national recession which began in 2007 and (according to the classical definition of recession with reference to gross domestic product figures) ended in September of 2009 has significantly impacted the Company’s market area, two coastal counties of South Carolina, Horry County and the Waccamaw Neck region of Georgetown County. Although many industries within our market have been affected during this difficult period, the primary impact of this recession was to depress real estate sales, and consequently real estate values. The decline in real estate values, ensuing defaults, and foreclosures has had a moderately negative impact on the Company, resulting in historically low profitability. With the national and local economies expected to remain subdued through 2012 and beyond, we anticipate that profitability will remain below historical levels, but will improve moderately over time and, at the same time, expect that the Bank will continue to grow, further strengthen, and generally prosper. Although the Bank’s credit concerns have remained moderate in comparison to the magnitude of non-performing assets in the industry and local markets, we will continue to address credit concerns during 2012. Loan losses declined for 2011 and are expected to further decline in 2012, but will still remain above historical levels during 2011.

The national and local economies continue to recover slowly. The Bureau of Economic Analysis, a division of the U.S. Department of Commerce, indicated that real gross domestic product (GDP) increased at an annual rate of 1.7% for 2011. The 2011 increase reflects positive contributions from personal consumption expenditures, exports, and nonresidential fixed investment that were partly offset by negative contributions from private sector inventory investment, state and local government spending, federal government spending, and increased imports. Locally, the real estate sector fell in the fourth quarter of 2011 with the total number of real estate transactions decreasing approximately 5% as compared to the fourth quarter of 2010. For all of 2011, the real estate market declined .1% compared to 2010. The banking industry has continued to experience significant difficulties, with 92 bank failures occurring nationally in 2011, compared to 157 for 2010, 140 for 2009, and 25 for 2008. Further failures are anticipated for 2012.

Regulatory Actions

On June 7, 2011, the Bank entered into a formal agreement with the OCC requiring the Bank to take specified actions with respect to the operation of the Bank. The substantive actions called for by the agreement should strengthen the Bank and make it more efficient in the long-term. The agreement was filed as an exhibit to a Current Report on Form 8-K filed June 10, 2011. The Company believes the Bank has appropriately responded to all of the terms of the formal agreement, including implementing plans, and programs within the timeframes required by the agreement.

On June 16, 2011, the Company entered into a memorandum of understanding with the Federal Reserve Bank of Richmond (“FRB”). The memorandum of understanding requires the Company to seek permission from the FRB before it takes certain actions that would reduce its ability to serve as a source of strength for the Bank by dissipating its assets, such as payment of dividends to shareholders, or that would make changes in senior management. The Company believes it is in compliance with the memorandum of understanding with the FRB as of December 31, 2011.

Critical Accounting Policies

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

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

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

Distribution of Assets and Liabilities

The Company maintains a conservative approach in determining the distribution of assets and liabilities. Loans decreased 9.4% from $534,186 at December 31, 2010 to $484,022 at December 31, 2011; and decreased 7.9% from December 31, 2009 to $534,186 at December 31, 2010. Loan demand from creditworthy borrowers in our market area decreased during 2011, 2010, and 2009. Loans decreased as a percentage of total assets from 58.6% at year-end 2010 to 53.0% at year-end 2011, and decreased from 63.0% at year-end 2009 to 58.6% at year-end 2010. Investment securities, federal funds sold, and other earning assets increased as a percentage of total assets from 35.6% at year-end 2010 to 40.9% at year-end 2011, and increased from 30.8% at year-end 2009 to 35.6% at year-end 2010. Investments and federal funds sold provide for an adequate supply of secondary liquidity. Year-end other assets as a percentage of total assets increased from 5.8% at year-end 2010 to 6.1% at year-end 2011, and decreased from 6.2% at year-end 2009 to 5.8% at year-end 2010. Management has sought to build the deposit base with stable, relatively noninterest-rate sensitive deposits by offering the small to medium account holders a wide array of deposit instruments at competitive rates. Noninterest-bearing demand deposits, as a percent of total assets increased from 11.8% at year-end 2010 to 13.1% at year-end 2011, and increased from 10.5% at year-end 2009 to 11.8% at year-end 2010. Interest-bearing liabilities as a percentage of total assets decreased from 78.1% at December 31, 2010 to 76.7% at December 31, 2011, and decreased from 79.2% at December 31, 2009 to 78.1% at December 31, 2010. Stockholders’ equity as a percentage of total assets increased to 9.8% at year-end 2011, and was 9.5% for both 2010 and 2009. The Bank remains well-capitalized (see Note 16 to the Consolidated Financial Statements, contained elsewhere in this report).

The table below sets forth the percentage relationship to total assets of significant components of the Company's balance sheet as of December 31, 2011, 2010, and 2009:

	At December 31,
Assets:	2011	2010	2009
Earning assets:
Loans	53.0%	58.6%	63.0%
Investment securities:
Taxable	32.1	29.5	21.6
Tax-exempt	4.4	3.3	3.7
Federal funds sold and securities purchased
under agreement to resell	1.1	1.5	1.5
Other earning assets	3.3	1.3	4.0
Total earning assets	93.9	94.2	93.8
Other assets	6.1	5.8	6.2
Total assets	100.0%	100.0%	100.0%

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits	67.1%	66.9%	66.1%
Securities sold under agreement to resell	9.6	10.9	11.4
FHLB Advances and other borrowings	-	.3	1.7
Total interest-bearing liabilities	76.7	78.1	79.2
Noninterest-bearing deposits	13.1	11.8	10.5
Other liabilities	.4	.6	.8
Stockholders' equity	9.8	9.5	9.5
Total Liabilities and stockholders' equity	100.0%	100.0%	100.0%

Results of Operations

The Company and the Bank recognized earnings in 2011, 2010, and 2009 of $1,219, $1,040, and $5,067, respectively, resulting in a return on average assets of .13%, .11%, and .56%, and a return on average stockholders' equity of 1.38%, 1.18%, and 5.91%. The earnings were primarily attributable to favorable net interest margins in each period (see "Net Income-Net Interest Income"). Other factors include management's ongoing effort to maintain other income at adequate levels (see "Net Income ‑ Noninterest Income") and to control other expenses (see "Net Income - Noninterest Expenses"). Earnings, coupled with a conservative dividend policy, have supplied the necessary capital funds to support bank operations. Total assets were $913,820 at December 31, 2011 as compared to $911,271 at December 31, 2010 and $920,641 at December 31, 2009. The following table sets forth the financial highlights for fiscal years 2011, 2010, and 2009.

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

	December 31, 2011	2010 to 2011 Percent Increase (Decrease)	December 31, 2010	2009 to 2010 Percent Increase (Decrease)	December 31, 2009

Net interest income
after provision for loan losses	$ 20,308	19.9 %	$ 16,940	(26.6)%	$ 23,070
Income before income taxes	1,343	23.9	1,084	(84.9)	7,180
Net Income	1,219	17.2	1,040	(79.5)	5,067

Per Share
(weighted average shares outstanding)	$ .73	17.7	$ .62	(79.5)	$ 3.03

Cash dividends declared	-	-	-	(100.0)	2,096

Per Share	$ -	-	$ -	(100.0)	$ 1.25

Total assets	$913,820	.3 %	$911,271	(1.0)%	$ 920,641
Total deposits	732,625	2.0	718,140	1.8	705,270
Total loans	484,022	(9.4)	534,186	(7.9)	579,796
Investment securities	333,591	11.6	298,788	28.5	232,605
Stockholders' equity	89,406	3.6	86,333	(1.3)	87,429
Book value per share	$ 53.80	3.7	$ 51.86	(.5)	$ 52.13

Ratios (1):
Return on average total assets	.13%	18.2	.11%	(80.4)	.56%
Return on average stockholders' equity	1.38%	16.9	1.18%	(80.0)	5.91%

(1)	For the fiscal years ended December 31, 2011, 2010, and 2009 average total assets amounted to $932,020, $941,581, and $904,866, respectively, with average stockholders’ equity totaling $88,524, $87,782, and $85,771, for the same periods.

NET INCOME

Net Interest Income

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

The Bank maintained net interest margins in 2011, 2010, and 2009 of 3.52%, 3.42%, and 3.78%, respectively, as compared to management's long-term target of 4.20%. Net interest margins have been compressed for the Bank and industry-wide, as a result of competitive lending practices, softening loan demand, and the historically low and prolonged market interest rate environment. Loan demand remained strong throughout 2005 and 2006, declined in 2007, was moderate in 2008, and declined in 2009, 2010, and 2011. Fully-tax-equivalent net interest income decreased slightly from $30,940 in 2010 to $30,793 in 2011, and decreased from $32,446 in 2009 to $30,940 in 2010. During the three-year period, total fully-tax-equivalent interest income decreased by 10.5% from 2010 to 2011, from $40,560 to $36,319, respectively, and decreased 9.0% from 2009 to 2010 from $44,575 to $40,560, respectively. Over the same period, total interest expense decreased 42.6% from 2010 to 2011, from $9,620 to $5,526, respectively, and decreased 20.7% from 2009 to 2010 from $12,129 to $9,620, respectively. Fully-tax-equivalent net interest income as a percentage of average total earning assets was 3.52% in 2011, 3.42% in 2010, and 3.78% in 2009.

Interest rates paid on deposits and borrowed funds and earned on loans and investments have generally followed the fluctuations in market interest rates in 2011, 2010, and 2009. However, fluctuations in market interest rates may not necessarily have a significant impact on net interest income, depending on the Bank's rate sensitivity position. A rate sensitive asset (RSA) is any loan or investment that can be repriced up or down in interest rate within a certain time interval. A rate sensitive liability (RSL) is an interest paying deposit or other liability that can be repriced either up or down in interest rate within a certain time interval. When a proper balance between RSA and RSL exists, market interest rate fluctuations should not have a significant impact on earnings. The larger the imbalance, the greater the interest rate risk assumed by the Bank and the greater the positive or negative impact of interest rate fluctuations on earnings. When RSAs exceed RSLs for a specific repricing period, a positive interest sensitivity gap results. The gap is negative when interest-sensitive liabilities exceed interest-sensitive assets. For a bank with a positive gap, rising interest rates would be expected to have a positive effect on net interest income and falling rates would be expected to have the opposite effect. However, gap analysis, such as set forth in the table below, does not take into account actions a bank or its customers may take during periods of changing rates, which could significantly change the effects of rate changes that would otherwise be expected. The Bank seeks to manage its assets and liabilities in a manner that will limit interest rate risk and thus stabilize long-term earning power. The following table sets forth the Bank's estimated gap rate sensitivity position, including anticipated calls of investment securities, at each of the time intervals indicated. The table illustrates the Bank's rate sensitivity position on specific dates and may not be indicative of the position at other points in time. Management believes that a 200, 300, or 400 basis point rise or fall in interest rates will have less than a 10 percent effect on before-tax net interest income over a one-year period, which is within bank guidelines.

Interest Rate Sensitivity Analysis
December 31, 2011
(Dollars in Thousands)

	1 Day	90 Days	180 Days	365 Days	Over 1 to 5 Years	Over 5 Years
Rate Sensitive Assets (RSA)
Federal Funds Sold	$ 10,000	$ -	$ -	$ -	$ -	$ -
Interest Bearing Due From	30,678	-	-	-	-	-
Federal Reserve

Risks Related to Our Business

Risks Related to Our Industry

26

Distribution of Assets and Liabilities

NET INCOME

Interest Rate Sensitivity Analysis December 31, 2011 (Dollars in Thousands)

Interest Rate Sensitivity Analysis
December 31, 2011
(Dollars in Thousands)

CNB CORP /SC/ 10-K