Central National Bank, Canajoharie
Form 10-Q

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    FORM 10-Q

             Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                 For the Quarterly period ending March 31, 2000


                         Commission File Number 33-45522
                                                --------

                               CNB FINANCIAL CORP.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           New York                                               22-3203747
-------------------------------                              -------------------
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                    24 Church Street, Canajoharie N.Y. 13317
               ---------------------------------------------------
               (Address of principal executive offices - Zip code)


         Registrant's telephone number, include area code (518) 673-3243
                                                          --------------

Indicated by a 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 bank
was required to file such reports), and (2) has been subjected to such filing
requirements for the past 90 days.

                    Yes     X    No
                          -----       -----


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                            Number of shares outstanding
                     Class                        on April 30, 2000
                     -----                        -----------------
         Common Stock, $1.25 par value                 7,505,704

================================================================================


<PAGE>

<TABLE>
<CAPTION>
                                                                                                     Page
<S>                                                                                               <C>
PART I.  FINANCIAL INFORMATION


         Item 1.   Consolidated Interim Financial Statements and Notes (unaudited)

                   1. Consolidated Balance Sheets                                                     3.

                   2. Consolidated Statements of Income                                               4.

                   3. Consolidated Statements of Cash Flows                                           5.

                   4. Notes to Consolidated Interim Financial Statements                             6.-7.

         Item 2.   Management's Discussion and Analysis of
                    Financial Condition and Results of Operations                                  7. - 20.

         Item 3.   Quantitative and Qualitative Disclosures About Market Risk                     20. - 22.




PART II.  OTHER INFORMATION


         Item 1.   Legal Proceedings                                                                 23.

         Item 2.   Changes in Securities and Use of Proceeds                                         23.

         Item 3.   Defaults Upon Senior Securities                                                   23.

         Item 4.   Submission of Matters to a Vote of Security Holders                               23.

         Item 5.   Other Information                                                                 23.

         Item 6.   Exhibits and Reports on Form 8-K                                                  23.



SIGNATURES                                                                                           24.
</TABLE>



<PAGE>

                    Part 1. Financial Information

               Item 1. Consolidated Financial Statements

<TABLE>
                      CNB Financial Corp. and Subsidiaries
                           Consolidated Balance Sheets
                 (In thousands, except share and per share data)

<CAPTION>
                                                                                        March 31,        December 31,
                                                                                          2000               1999
                                                                                      --------------     --------------
<S>                                                                                        <C>                <C>
Assets

Cash and due from banks                                                                    $ 15,806           $ 25,051
Federal funds sold                                                                                -              6,150
                                                                                      --------------     --------------
  Cash and cash equivalents                                                                  15,806             31,201
                                                                                      --------------     --------------

Securities available for sale, at fair value                                                405,263            387,765
Net loans & leases receivable                                                               468,039            449,064
Accrued interest receivable                                                                   6,873              6,281
Premises and equipment, net                                                                  13,110             12,999
Other real estate owned and repossessed assets                                                1,103              1,258
Goodwill                                                                                     19,135             19,428
Other assets                                                                                  6,501              6,176
                                                                                      --------------     --------------
               Total assets                                                               $ 935,830          $ 914,172
                                                                                      ==============     ==============

Liabilities, Guaranteed Preferred Beneficial Interests in Company's
Junior Subordinated Debentures and Stockholders' Equity

Noninterest-bearing deposits                                                               $ 65,217           $ 58,064
Interest-bearing deposits                                                                   750,946            738,180
                                                                                      --------------     --------------
  Total deposits                                                                            816,163            796,244
                                                                                      --------------     --------------

Short-term borrowings:
               Securities sold under agreements to repurchase                                10,632             29,054
               Borrowings from FHLB                                                          19,850                  -
               Borrowings from the U.S. Treasury                                                536                530
                                                                                      --------------     --------------
  Total short-term borrowings                                                                31,018             29,584
                                                                                      --------------     --------------

Long-term borrowings                                                                          6,010              6,103
Other liabilities                                                                             9,804              9,618
                                                                                      --------------     --------------
               Total liabilities                                                            862,995            841,549
                                                                                      --------------     --------------

Guaranteed preferred beneficial interests in Company's
  junior subordinated debentures ("Capital Securities")                                      18,000             18,000

Stockholders' equity:

Common stock, $1.25 par value, 20,000,000 shares authorized
       (7,805,128 shares issued at March 31, 2000 and
       December 31, 1999)                                                                     9,756              9,756
Additional paid-in capital                                                                    6,202              6,202
Retained earnings                                                                            49,771             48,265
Accumulated other comprehensive loss                                                         (5,959)            (5,075)
Treasury stock, at cost (287,621 shares at March 31, 2000 and 268,263
                            at December 31, 1999)                                            (4,935)            (4,525)
                                                                                      --------------     --------------
               Total stockholders' equity                                                    54,835             54,623
                                                                                      --------------     --------------
               Total liabilities, guaranteed preferred beneficial
               interests in Company's junior subordinated
               debentures and stockholders' equity                                        $ 935,830          $ 914,172
                                                                                      ==============     ==============
</TABLE>

See accompanying notes to unaudited consolidated interim financial statements.

                                        3
<PAGE>

<TABLE>
                      CNB Financial Corp. and Subsidiaries
                        Consolidated Statements of Income
                      (In thousands, except per share data)

<CAPTION>
                                                                                   Three months ended
                                                                              March 31,          March 31,
                                                                                 2000               1999
                                                                             -------------      -------------
<S>                                                                               <C>                <C>
Interest and dividend income:
               Loans & leases, including fees                                     $ 9,650            $ 8,389
               Securities:
                            Taxable                                                 6,483              3,672
                            Nontaxable                                                751                933
               Federal funds sold and other                                            87                 33
                                                                             -------------      -------------
                                                                                   16,971             13,027
                                                                             -------------      -------------

Interest expense:
               Deposits                                                             7,971              6,065
               Short-term borrowings                                                  380                165
               Long-term borrowings                                                    93                 85
                                                                             -------------      -------------
                                                                                    8,444              6,315
                                                                             -------------      -------------

               Net interest income                                                  8,527              6,712

Provision for loan and lease losses                                                   420                270

                                                                             -------------      -------------
               Net interest income after provision for loan losses                  8,107              6,442
                                                                             -------------      -------------

Non-interest income:
               Service charges on deposit accounts                                    580                499
               Net gain on securities transactions                                    319                 71
               Other                                                                  502                520
                                                                             -------------      -------------
                                                                                    1,401              1,090
                                                                             -------------      -------------
Non-interest expense:
               Salaries and employee benefits                                       2,677              2,404
               Occupancy and equipment                                                712                572
               Data processing                                                        636                571
               Professional fees                                                      212                245
               Advertising and marketing                                              163                 61
               Postage and courier                                                    155                128
               Office supplies and stationary                                         158                172
               Other real estate owned and repossessed assets                         233                151
               Goodwill amortization                                                  332                  -
               Capital securities                                                     415                  -
               Other                                                                  848                715
                                                                             -------------      -------------
                                                                                    6,541              5,019
                                                                             -------------      -------------

Income before income tax expense                                                    2,967              2,513

Income tax expense                                                                    783                662
                                                                             -------------      -------------
               Net income                                                         $ 2,184            $ 1,851
                                                                             =============      =============

Earnings per share:
               Basic                                                               $ 0.29             $ 0.24
               Diluted                                                             $ 0.29             $ 0.24
</TABLE>

See accompanying notes to unaudited consolidated interim financial statements.

                                        4
<PAGE>

<TABLE>
                      CNB Financial Corp. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                 (In thousands)

<CAPTION>
                                                                                                      Three months ended
                                                                                                March 31,          March 31,
                                                                                                  2000               1999
                                                                                              -------------      -------------
<S>                                                                                                <C>                 <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
               Net income                                                                          $ 2,184             $1,851
               Adjustments to reconcile net income to net cash
                provided by operating activities:
                            Depreciation and amortization                                              678                351
                            Provision for loan and lease losses                                        420                270
                            Net gain on securities transactions                                       (319)               (71)
                            Net loss on sales and writedowns of other real estate
                                owned and repossessed assets                                            63                 39
                            Purchases of trading securities                                              -            (15,153)
                            Proceeds from sales of trading securities                                    -             15,164
                            (Increase) decrease in accrued interest receivable                        (592)                29
                            Net change in other assets and other liabilities                           225              1,572
                                                                                              -------------      -------------
                                         Net cash provided by operating activities                   2,659              4,052
                                                                                              -------------      -------------

Cash flows from investing activities:
               Purchases of securities:
                            Available for sale                                                     (45,613)           (37,497)
                            Held to maturity                                                             -             (5,110)
               Proceeds from sales of securities:
                            Available for sale                                                      19,415             26,619
               Proceeds from maturities and calls of securities:
                            Available for sale                                                       7,733             11,647
                            Held to maturity                                                             -              4,504
               Net loans and leases made to customers                                              (19,972)            (5,500)
               Proceeds from sales of other real estate owned and
                   repossessed assets                                                                  669                235
               Purchases of premises and equipment                                                    (458)               (77)
                                                                                              -------------      -------------
                                         Net cash (used) in investing activities                   (38,226)            (5,179)
                                                                                              -------------      -------------

Cash flows from financing activities:
               Net increase (decrease) in deposits                                                  19,919             (1,520)
               Net increase in short term borrowings                                                 1,434              5,673
               Payments on long-term borrowings                                                        (93)               (89)
               Dividends paid                                                                         (678)              (607)
               Proceeds from issuance of shares for options and Dividend Reinvestment Plan               -                239
               Purchases of treasury stock                                                            (410)              (424)
                                                                                              -------------      -------------
                                         Net cash provided by financing activities                  20,172              3,272
                                                                                              -------------      -------------

Net (decrease) increase in cash and cash equivalents                                               (15,395)             2,145
Cash and cash equivalents at beginning of period                                                    31,201             16,128
                                                                                              -------------      -------------
Cash and cash equivalents at end of period                                                        $ 15,806            $18,273
                                                                                              =============      =============
</TABLE>

See accompanying notes to unaudited consolidated interim financial statements.

                                        5
<PAGE>

                               CNB Financial Corp.
          Notes to Unaudited Consolidated Interim Financial Statements
           (All dollar amounts in thousands other than per share data,
                          except when otherwise noted)



1.   The accompanying unaudited consolidated interim financial statements have
     been prepared in accordance with generally accepted accounting principles
     for interim financial information and with instructions to Form 10-Q.
     Accordingly, they do not include all of the information and footnotes
     required by generally accepted accounting principles for complete financial
     statements. In the opinion of management, all adjustments (consisting
     solely of normal recurring accruals) considered necessary for a fair
     presentation have been included. The accompanying unaudited consolidated
     interim financial statements should be read in conjunction with the
     Company's Annual Report on Form 10-K as of and for the year ended December
     31, 1999. Operating results for the three-month period ended March 31, 2000
     are not necessarily indicative of the results that may be expected for the
     full year.

2.   Earnings Per Share - Basic EPS excludes dilution and is computed by
     dividing income available to common stockholders by the weighted average
     number of common shares outstanding for the period. Diluted EPS reflects
     the potential dilution that could occur if securities or other contracts to
     issue common stock were exercised or converted into common stock or
     resulted in the issuance of common stock that then shared in the earnings
     of the entity (such as the Company's stock options).

     The following table provides the calculation of basic and diluted EPS for
     the three months ended March 31:
<TABLE>
<CAPTION>
                                            Three Months Ended 3/31/00       Three Months Ended 3/31/99
                                                    Weighted    Per                   Weighted   Per
                                              Net    Average   Share            Net    Average  Share
     (in thousands, except per share data)  Income   Shares    Amount         Income   Shares   Amount
     --------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>      <C>            <C>      <C>      <C>
     Basic EPS:
         Net income available to
            common stockholders             $2,184    7,533    $0.29          $1,851   7,567    $0.24
     Effect of dilutive securities:
         Stock options                                   26                               40
                                            -----------------------------------------------------------
     Diluted EPS                            $2,184    7,559    $0.29          $1,851   7,607    $0.24
                                            ===========================================================
</TABLE>

3.   Comprehensive Income - Comprehensive income represents the sum of net
     income and items of "other comprehensive income," which are reported
     directly in stockholders' equity, net of tax, such as the change in the net
     unrealized gain or loss on securities available for sale. Accumulated other
     comprehensive income or loss, which is included in stockholders' equity,
     net of tax, represents the net unrealized gain or loss on securities
     available for sale.

     Total comprehensive income for the three months ended March 31, 2000 and
     1999 was $1.3 million and $2.7 million, respectively.

                                       6
<PAGE>


4.   Recent Accounting Pronouncements:

     FASB Statement 133

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities." This Statement establishes accounting
     and reporting standards for derivative instruments, including certain
     derivative instruments embedded in other contracts, and for hedging
     activities. It requires that an entity recognize all derivatives as either
     assets or liabilities in the balance sheet and measure those instruments at
     fair value. The accounting for changes in the fair value of a derivative
     depends on the intended use of the derivative and the resulting
     designation. As amended, the Statement is effective for fiscal years
     beginning after June 15, 2000. Management is reviewing the Statement to
     determine what impact this Statement will have on the Company's accounting
     and disclosures.

     Item 2: Management's Discussion and Analysis of Financial Condition and
                              Results of Operations
           (All dollar amounts in thousands other than per share data,
                          except when otherwise noted)

General
-------

CNB Financial Corp. (the Company) is a one-bank holding company, registered
under the Bank Holding Company Act of 1956, as amended. It was organized under
the laws of the State of New York and became a bank holding company on January
5, 1993 through the consummation of a reorganization plan with Central National
Bank, Canajoharie, (Bank) which became the wholly owned subsidiary of the
Company. The Company maintains its headquarters in Canajoharie, New York. The
principal business of the Company is to provide, through the Bank, comprehensive
banking services through its network of twenty nine branches and two financial
services centers located in Central New York in the counties of Montgomery,
Fulton, Chenango, Herkimer, Oneida, Otsego, Schoharie, Saratoga and Schenectady.
In 1996, Central Asset Management, Inc. (CAM) was formed as a second subsidiary
of the Company. The main business activity of CAM is to offer investment
management services for a fee to a focused customer base of high net worth
individuals and businesses.

The Company's principal business is attracting deposits from customers within
its market area and investing those funds primarily in mortgage loans, consumer
loans and leases, commercial and agricultural loans, and government and
corporate debt securities. The financial condition and operating results of the
Company are dependent on its net interest income which is the difference between
the interest and dividend income earned on its assets, primarily loans and
investments, and the interest expense paid on its liabilities, primarily
deposits and borrowings. Net income is also affected by other operating income,
such as fees on deposit related services, loan servicing income, and fiduciary
activities; other operating expenses, such as salaries and benefits, occupancy
expenses, and data processing expense; provision for loan and lease losses; and
federal and state income taxes.

                                       7
<PAGE>

The Company's results of operations are significantly affected by general
economic and competitive conditions (particularly changes in market interest
rates), government polices, changes in accounting standards and actions of
regulatory agencies. Future changes in applicable laws, regulations or
government policies may have a material impact on the Company. The demand for
and supply of real estate, competition among lenders, the level of interest
rates and the availability of funds substantially influence lending activities.
The ability to gather deposits and the cost of funds are influenced by
prevailing market interest rates, fees and terms on deposit products, as well as
the availability of alternative investments, including mutual funds and stocks.

Forward Looking Statements
--------------------------

When used in this filing or future filings by the Company with the Securities
and Exchange Commission, in the Company's press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project",
"believe", or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. In addition, certain disclosures and information customarily provided
by financial institutions, such as an analysis of the adequacy of the allowance
for loan and lease losses or an analysis of the interest rate sensitivity of the
Company's assets and liabilities, are inherently based upon predictions of
future events and circumstances. Furthermore, from time to time, the Company may
publish other forward-looking statements relating to such matters as anticipated
financial performance, business prospects, and similar matters.

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 forward-looking statements. Some of the risks and uncertainties
that may affect the operations, performance, development and results of the
Company's business, the interest rate sensitivity of its assets and liabilities,
and the adequacy of its allowance for loan and lease losses, include but are not
limited to the following:

a.   Deterioration in local, regional, national or global economic conditions
     which could result, among other things, in an increase in loan
     delinquencies, a decrease in property values, or a change in the housing
     turnover rate;

b.   Changes in market interest rates or changes in the speed at which market
     interest rates change;

c.   Changes in laws and regulations affecting the financial service industry;

d.   Changes in competition and continued pricing pressures on loan and deposit
     products;

e.   Changes in consumer preferences and customer borrowing, repayment,
     investment and deposit practices;

                                       8
<PAGE>

f.   The introduction, withdrawal, success and timing of business initiatives
     and strategies, several of which are in early stages and therefore
     susceptible to greater uncertainty than more mature businesses; and

g.   Ability of the Bank to implement successfully its strategy to increase the
     level of loans on its balance sheet at acceptable levels of risk.

The Company wishes to caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including those described above, could affect the
Company's financial performance and could cause the Company's actual results or
circumstances for future periods to differ materially from those anticipated or
projected. The Company does not undertake, and specifically disclaims any
obligations, to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

Results of Operations
---------------------

Net income for the quarter ended March 31, 2000 amounted to $2.184 million, an
18.0% increase over the $1.851 million reported for the quarter ended March 31,
1999. Basic and diluted earnings per share amounted to $.29 for the quarter
ended March 31, 2000 compared to basic and diluted earnings per share of $.24
for the quarter ended March 31, 1999, an increase of 20.8%. The percentage
increase in earnings per share exceeded the percentage increase in net income as
a result of the Company's repurchase program (including 24,312 shares of common
stock repurchased during the quarter ended March 31, 2000). Return on average
assets and return on average equity for the quarter ended March 31, 2000 were
0.95% and 15.86% compared to 1.03% and 13.04% for the same period in 1999.

Net interest income increased $1.815 million (27.0%) from $6.712 million for the
quarter ended March 31, 1999 to $8.527 million for the quarter ended March 31,
2000. The increase was principally due to a $188.460 million increase in average
earning assets which was funded primarily from the funds received from the
acquisition of five bank branches and related deposits amounting to $155.700
million from Astoria Federal Savings and Loan Association in August of 1999. The
Company's net interest margin on a tax equivalent basis for the quarter ended
March 31, 2000 was 4.01%, down eight basis points from 4.09% for the quarter
ended March 31, 1999.

The Company's provision for loan and lease losses was $420,000 for the quarter
ended March 31, 2000 as compared to $270,000 for the quarter ended March 31,
1999, an increase of 55.6%. The increase in the provision can be attributed to
the growth in the loan and lease portfolio as well as an increase in net loan
charge-offs. The allowance for loan and lease losses was $8.615 million, or
1.81% of period end loans and leases at March 31, 2000, as compared to $8.390
million, or 2.18% of period end loans and leases at March 31, 1999. The
allowance for loan and lease losses as a percentage of non-performing loans was
177.6% at March 31, 2000 as compared to 169.2% at March 31, 1999.

                                       9
<PAGE>

Non-interest income amounted to $1.401 million for the quarter ended March 31,
2000 compared to $1.090 million for the quarter ended March 31, 1999, an
increase of $311,000 or 28.5%. The primary reason for the increase in
non-interest income can be attributed to net gains on the sale of securities
available for sale. Net gain on securities transactions amounted to $319,000 for
the quarter ended March 31, 2000 compared to $71,000 for the quarter ended March
31, 1999, an increase of $248,000. The increase in net gains on securities
transactions can be attributed to the sale of approximately $6.548 million in
tax-exempt securities, which resulted in $241,000 in securities gains. The sale
of tax-exempt securities is consistent with the Company's plan to reduce its
holdings in these types of securities due mainly to tax planning strategies.
Service charges on deposit accounts increased $81,000 from $499,000 for the
quarter ended March 31, 1999 to $580,000 for the quarter ended March 31, 2000.
The increase in service charges on deposit accounts was due mainly to branch
expansion, as the Company had 29 branches in operations during the quarter ended
March 31, 2000 compared to 20 branches during the quarter ended March 31, 1999.

Non-interest expenses were $6.541 million for the quarter ended March 31, 2000,
an increase of $1.522 million from the $5.019 million for the same period in
1999. Capital securities expense and goodwill amortization amounted to $415,000
and $332,000, respectively, for the quarter ended March 31, 2000 compared to $0
for the same period in 1999. These expenses are a result of the capital
securities offering and the Astoria branch acquisition that occurred in August
of 1999. Salaries and employee benefits increased $273,000 from $2.404 million
for the quarter ended March 31, 1999 to $2.677 million for the quarter ended
March 31, 2000. The increase in salaries and benefits can be attributed to an
increase in full-time equivalent employees, which resulted from branch
expansion. Occupancy and equipment and advertising and marketing increased
$140,000 and $102,000, respectively, for the quarter ended March 31, 2000 when
compared to the same period in 1999. The increases are due mainly to the branch
expansion, as the Company had 29 branches in operations during the quarter ended
March 31, 2000 compared to 20 branches during the quarter ended March 31, 1999.
Additionally, these branches are located in new markets, which required
expenditures for advertising and marketing campaigns.

Other expenses increased $133,000 from $715,000 for the quarter ended March 31,
1999 to $848,000 for the quarter ended March 31, 1999. The increase in other
expenses resulted mainly from an increase in losses incurred on the sale of
vehicles sold at the end of the lease term of $47,000, insurance on leased
vehicles of $20,000 and tele-communications expense of $24,000. The increase in
expenses related to lease vehicle receivables is a result of the growth in the
lease vehicle receivables portfolio, which has increased from $47.957 million at
March 31, 1999 to $83.692 million at March 31, 2000. This increase in the lease
vehicle receivables portfolio has resulted in an increase in the number of
vehicles that are sold when the lease term expires and insurance costs. The
Company anticipates the level of expense related to lease vehicle receivables to
increase as the portfolio continues to grow. The increase in tele-communications
is a result of the branch expansion.

                                       10
<PAGE>

Income tax expense was $783,000 for the quarter ended March 31, 2000 up $121,000
from the $662,000 recognized in the same period in 1999. The effective tax rate
for the first quarter of 2000 and 1999 was 26.4% and 26.3%, respectively.

Net Interest Income
(The accompanying schedule entitled "Average Balances/Net Interest Margin -
Fully Taxable Equivalent Basis (FTE)" is the basis of and should be read in
conjunction with this discussion).

FTE net interest income for the quarter ended March 31, 2000 amounted to $8.777
million, up 25.0% over the same 1999 period due primarily to growth in earning
assets. The net interest margin and interest rate spread were 4.01% and 3.52%,
respectively, for the quarter ended March 31, 2000 compared to 4.09% and 3.48%
for the same period in 1999. The yield on earning assets for the quarter ended
March 31, 2000 was 7.86% compared to 7.76% for the same period in 1999. The rate
paid on interest-bearing liabilities was 4.34% for the quarter ended March 31,
2000 compared to 4.28% for the same period in 1999.

The yield on loans and leases receivable for the quarter ended March 31, 2000
was 8.28%, a 47 basis point decrease when compared to the same period in 1999.
Despite the decrease in yield on loans and leases receivable, FTE interest
income on loans and leases receivable was $9.670 million for the quarter ended
March 31, 2000 an increase of $1.271 million (15.1%) when compared to the $8.399
million for the same period in 1999. The increase in FTE interest income on
loans and leases receivable can be attributed to the growth in loans and leases
receivable, which increased from an average balance of $383.913 million for the
quarter ended March 31, 1999 to $466.888 million for the quarter ended March 31,
2000, an increase of $82.975 million (21.6%). The increase in the average
balance of loans and leases was primarily in commercial and agricultural loans
(including real estate), which increased from an average balance of $127.953
million for the quarter ended March 31, 1999 to $158.992 million for the quarter
ended March 31, 2000, leased vehicles receivable (net of unearned interest),
which increased from an average balance of $40.320 million for the quarter ended
March 31, 1999 to $70.207 million for the quarter ended March 31, 2000, and
residential real estate, which increased from an average balance of $58.999
million for the quarter ended March 31, 1999 to $85.601 million for the quarter
ended March 31, 2000.

The decrease in the yield on loans and leases receivable of 47 basis points can
be attributed to several factors. Higher yielding residential real estate,
commercial real estate and commercial loans have been paid off or have been
re-financed and have been replaced with new loans, which yield lower rates.
Additionally, consistent with the Company's strategy to de-emphasize lending in
manufactured housing loans, the loan and lease portfolio has experienced a
decline in yield as these products typically have much higher rates compared to
lease receivables, a product which has experienced significant growth. To
mitigate the decrease in yield, the Company will continue to focus on growth
related to lease receivables, residential real estate, and commercial real
estate/commercial loans.

                                       11
<PAGE>

The yield on taxable securities increased 118 basis points from 6.28% for the
quarter ended March 31, 1999 to 7.46% for the quarter ended March 31, 2000. FTE
interest income on taxable securities increased $2.811 million from $3.672
million for the quarter ended March 31, 1999 to $6.483 million for the quarter
ended March 31, 2000. The increase in FTE interest income on taxable securities
can be attributed to the increase in yield of 118 basis points and an increase
in the average balance of taxable securities of $114.021 million, from $233.774
million for the quarter ended March 31, 1999 to $347.795 million for the quarter
ended March 31, 2000. The increase in the average balance of taxable securities
is due mainly to the acquisition of the Astoria branches and the assumption of
related deposit liabilities, which resulted in a net cash payment of $133.900
million in August of 1999. The lower yield on taxable securities is due to
accelerated pay-downs on mortgage-backed securities and collaterlized mortgage
obligations (CMOs) that resulted from a substantial decrease in long-term
mortgage rates which led to a higher than normal re-finance period that occurred
at the end of the fiscal year 1998 and into the beginning of fiscal year 1999.
As these mortgage-backed securities and CMOs paid down, the amortization of
associated premiums was accelerated. Subsequent to the first quarter of 1999,
yields on taxable securities have risen, and the Company has invested funds
received from the Astoria acquisition, in higher yielding securities when
compared to yields for the first quarter of 1999.

The rate paid on interest-bearing liabilities increased 6 basis points from
4.28% for the quarter ended March 31, 1999 to 4.34% for the quarter ended March
31, 2000. The rate paid on interest-bearing deposits increased 3 basis points
from 4.25% for the quarter ended March 31, 1999 to 4.28% for the quarter ended
March 31, 2000. Interest expense on interest-bearing liabilities increased
$1.906 million from $6.065 million for the quarter ended March 31, 1999 to
$7.971 million for the quarter ended March 31, 2000. The increase in interest
expense is a result of the Astoria branch acquisition in August 1999, which
resulted in the assumption of approximately $155.700 million in deposits. The
rate paid on money market accounts increased 75 basis points, from 3.52% for the
quarter ended March 31, 1999 to 4.27% for the quarter ended March 31, 2000. The
increase in the rate paid on money market accounts is due mainly to a municipal
money market product which amounted to 65% and 72% of the total average balance
of money market accounts for the quarters ended March 31, 2000 and March 31,
1999, respectively. The municipal money market product re-prices weekly and is
indexed to an overnight borrowing rate. The average overnight borrowing rate was
4.73% for the quarter ended March 31, 1999 compared to 5.68% for the quarter
ended March 31, 2000.

The rate paid on time deposits decreased 13 basis points, from 5.37% for the
quarter ended March 31, 1999 to 5.24% for the quarter ended March 31, 2000. The
decrease in the rate paid on time deposits is due mainly to the assumption of
deposit liabilities associated with the Astoria branch acquisition. Time
deposits assumed from Astoria amounted to approximately $103.500 million with a
weighted-average rate of 5.31%. The assumption of these deposits offset time
deposits that had a rate of 5.92%, which matured during the second and third
quarters of 1999. The average balance of municipal time deposits greater than
$100,000 amounted to $139.179 million for the quarter ended March 31, 2000 (31%
of total average time deposits). If short-term rates continue to rise, the
Company anticipates that the rate paid on time deposits will increase, as
municipal

                                       12
<PAGE>

time deposits greater than $100,000 have terms generally less than six months
and re-price more quickly than other time deposit products.

Average Balances/Net Interest Margin - Fully Taxable Equivalent (FTE) Basis
---------------------------------------------------------------------------
The following table sets forth average balance and interest rate information.
The average balances used for these tables and other statistical disclosures
were calculated using daily averages. Tax exempt income has been adjusted to a
tax equivalent basis by tax effecting such income at the Federal tax rate.
Non-accruing loans have been included in loans with interest earned recognized
on a cash basis only. Securities include securities available for sale,
investment securities held to maturity, and trading securities, if any, all at
amortized cost.

<TABLE>
<CAPTION>
Three months ended March 31,                       2000                                       1999
(Dollars in thousands)              Average                    Yield/           Average                    Yield/
                                    Balance       Interest     Rate             Balance       Interest     Rate
                                  --------------------------------------------------------------------------------
<S>                                <C>             <C>         <C>             <C>             <C>         <C>
Earning assets:
Loans                              $466,888        $9,670      8.28%           $383,913        $8,399      8.75%
Taxable Securities                  347,795         6,483      7.46%            233,774         3,672      6.28%
Tax-exempt Securities                55,266           981      7.10%             67,211         1,233      7.34%
Federal Funds Sold                    6,000            87      5.80%              2,591            33      5.09%
                                   --------        ------      ----            --------        ------      ----
Total Earning assets                875,949        17,221      7.86%            687,489        13,337      7.76%
                                   ========        ------      ----            ========        ------      ----

Interest-bearing liabilities:
Deposits
NOW                                  93,318           417      1.79%             74,442           346      1.86%
Savings                             134,310           949      2.83%            103,043           719      2.79%
Money Market                         68,283           729      4.27%             60,504           532      3.52%
Time Deposits                       448,223         5,876      5.24%            332,638         4,468      5.37%
                                   --------        ------      ----            --------        ------      ----
Total Interest Bearing Deposits     744,134         7,971      4.28%            570,627         6,065      4.25%
                                   --------        ------      ----            --------        ------      ----

Short-term Borrowings                28,760           380      5.29%             13,510           165      4.89%
Long-term Borrowings                  6,045            93      6.15%              6,495            85      5.23%
                                   --------        ------      ----            --------        ------      ----

Total Interest-bearing
liabilities                        $778,939         8,444      4.34%           $590,632         6,315      4.28%
                                   ========        ------      ----            ========        ------      ----


Interest Rate Spread                               $8,777      3.52%                           $7,022      3.48%
                                                   ======                                      ======


Net Interest Margin                                            4.01%                                       4.09%
</TABLE>


                                       13
<PAGE>

Financial Condition and Liquidity

The Company's total assets at March 31, 2000 were $935.830 million, an increase
of $21.658 million (9.48% annual rate of increase). The increase includes
increases in securities available for sale of $17.498 million and loans and
leases of $18.975 million offset in part by a decrease in cash and cash
equivalents of $15.395 million.

Securities

The Company's investment policy focuses investment decisions on maintaining a
balance of high quality, diversified investments. In making its investment
decisions, the Company also considers liquidity, collateral to be used for
pledging purposes, tax position, and maximum overall returns. Under the
Company's investment policy, securities eligible for the Company to purchase
include: U.S. Government securities, U.S. Agency securities, mortgaged-backed
securities, collateralized mortgage obligations (CMO), municipal securities,
corporate debt obligations, bankers acceptances, certificates of deposit,
commercial paper, and asset-backed securities.

The following table represents the composition of the Company's securities
portfolio in dollar amounts and percentages at the dates indicated:

<TABLE>
<CAPTION>
                                                                           At March 31, 2000
                                                                        Carrying        Percent of
                                                                          Value            Total
                                                                       ---------------------------
<S>                                                                     <C>                 <C>
         CMO & asset-backed securities                                  $152,742            37.7%
         Mortgaged backed securities                                      39,108             9.6%
         Corporate and taxable municipal debt
         securities                                                       78,448            19.4%
         U.S. government agency securities                                68,902            17.0%
         State and municipal obligations                                  50,282            12.4%
         U.S. treasury securities                                          7,831             1.9%
                                                                       -------------------------
                  Total debt securities                                  397,313            98.0%
         Non-marketable equity securities                                  4,040             1.0%
         Mutual funds and preferred stock                                  3,910             1.0%
                                                                       ---------        --------
                                                                        $405,263           100.0%
                                                                       =========        ========

                                                                           At December 31, 1999
                                                                        Carrying        Percent of
                                                                          Value            Total
                                                                       ---------------------------
         CMO & asset-backed securities                                  $145,940            37.6%
         Mortgaged backed securities                                      36,861             9.5%
         Corporate and taxable municipal debt
         securities                                                       75,270            19.4%
         U.S. government agency securities                                58,065            15.0%
         State and municipal obligations                                  57,746            14.9%
         U.S. treasury securities                                          5,938             1.5%
                                                                       -------------------------
                  Total debt securities                                  379,820            97.9%
         Non-marketable equity securities                                  4,040             1.1%
         Mutual funds and preferred stock                                  3,905             1.0%
                                                                       ---------        --------
                                                                        $387,765           100.0%
                                                                       =========        ========
</TABLE>

                                       14
<PAGE>

CMOs and asset-backed securities increased $6.802 million from December 31,
1999, and represent 37.7% of the securities available for sale ("SAFS")
portfolio at March 31, 2000. The weighted-average life and weighted-average rate
of CMOs and asset-backed securities was 7.0 years and 7.46%, respectively, at
March 31, 2000. Mortgage-backed securities ("MBS") increased $2.247 million from
December 31, 1999, and represent 9.6% of the SAFS portfolio at March 31, 2000.
The weighted-average life and weighted-average rate of the MBS was 8.1 years and
7.15%, respectively, at March 31, 2000. If interest rates continue to rise, the
Company anticipates that the weighted-average lives of CMOs and MBS will
increase and the fair value of the securities will decrease. Alternatively, if
rates decrease, the weighted-average lives of CMOs and MBS will decrease and the
fair value of the securities will increase.

Corporate and taxable municipal debt securities increased $3.178 million from
December 31, 1999, and represent 19.4% of the SAFS at March 31, 2000. The
weighted-average life and weighted-average rate of the corporate and taxable
municipal debt portfolio was 8.9 years and 8.50%, respectively, at March 31,
2000. Included in corporate debt securities is a corporate obligation that
management believes is other-than-temporarily impaired. During 1999, the Company
wrote-down the corporate obligation a total of $1.4 million to net (loss) gain
on securities transactions. The remaining carrying value of the corporate
obligation is $1.5 million, which management will continue to monitor for
additional other-than-temporary impairment. Although management currently
anticipates collecting the current carrying value of this security, should
conditions worsen relative to this security, additional other-than-temporary
write-downs may be necessary.

U.S. government agency securities increased $10.837 million from December 31,
1999, and represents 17.0% of the SAFS at March 31, 2000. The weighted-average
life and weighted-average rate of U.S. agency securities was 11.3 years and
8.04%, respectively, at March 31, 2000. A substantial number of U.S. government
agency securities have call features, and in a decreasing interest rate
environment, these securities may likely be called. Consistent with the
Company's tax planning strategy, the state and municipal obligation portfolio
decreased $7.464 million from December 31, 1999 and represents 12.4% of the SAFS
portfolio at March 31, 2000. The weighted-average life of the total SAFS
portfolio at March 31, 2000 was 8.6 years.

                                       15
<PAGE>

Loans and leases
Net loans and leases receivable increased $18.975 million from $449.064 million
at December 31, 1999 to $468.039 million at March 31, 2000. The following
schedule details the Company's loan and lease portfolio:

<TABLE>
<CAPTION>
                                              March 31,                     December 31,
                                                2000                             1999
                                              ---------                     ------------
<S>                                           <C>                             <C>
Loans secured by real estate:
Residential                                    $89,315                         $83,949
Commercial & Agricultural                      101,352                          96,309
Construction                                     1,922                           2,286
Home equity                                     25,534                          25,183
                                              --------                        --------
                                               218,123                         207,727
                                              --------                        --------
Other loans and leases:
Commercial & Agricultural                       58,335                          59,995
Manufactured housing                            52,873                          55,774
Lease receivables                               83,692                          76,002
Tax exempt                                       7,139                           6,116
Consumer                                        63,292                          57,944
                                              --------                        --------
                                               265,331                         255,831
                                              --------                        --------

Net deferred loan fees/costs
and unearned discount                           (6,800)                         (5,965)

Allowance for loan and lease losses             (8,615)                         (8,529)
                                              --------                        --------

Net loans and leases receivable               $468,039                        $449,064
                                              ========                        ========
</TABLE>

The most significant area of growth in the Company's loan and lease portfolio
continues to be in lease receivables. Lease receivables increased $7.690
million, from $76.002 million at December 31, 1999 to $83.692 million at March
31, 2000. The Company has expanded its leasing market area, which has led to the
increase. Lease receivables are secured by automobiles and sport utility
vehicles and generally have terms ranging from three to five years. Loans
secured by residential real estate increased $5.336 million, from $83.949
million at December 31, 1999 to $89.315 million at March 31, 2000. The Company
anticipates that its residential real estate activity will continue to increase.
In light of this anticipated increase in residential real estate activity, the
Company has begun selling its fixed rate residential real estate loans on the
secondary market, and intends to retain servicing rights on the majority of the
loans it sells. Commercial and agricultural real estate increased $5.043
million, from $96.309 million at December 31, 1999 to $101.352 million at March
31, 2000. Of the total at March 31, 2000, $84.499 million was comprised of
commercial real estate and $16.853 million was comprised of agricultural real
estate. The increase of $5.043 million during the first quarter of 2000 was
primarily related to commercial real estate.

Consumer loans increased $5.348 million, from $57.944 million at December 31,
1999 to $63.292 million at March 31, 2000. The increase in consumer loans was
primarily related to indirect automobile loans which is the result of an
increase in the number of dealers the Company contracts. Manufactured housing
decreased $2.901 million during the first quarter of 2000 and represents 10.9%
of the total loan and lease portfolio at March 31,

                                       16
<PAGE>

2000. The Company will continue to focus its efforts in growth related to the
lease receivable, residential real estate, and commercial real estate/commercial
loan portfolios. The Company's manufactured housing portfolio will continue to
decline as the Company is de-emphasizing its efforts in originating this loan
type, due to competitive pressures and higher credit risk associated with this
product.

Deposits
Total deposits increased $19.919 million, from $796.244 million at December 31,
1999 to $816.163 million at March 31, 2000. The following schedule details the
Company's deposit liabilities:

                                             March 31,           December 31,
                                               2000                 1999
                                             ---------             -------

Non-interest bearing deposits                 $65,217              $58,064
NOW accounts                                   93,806               96,234
Savings accounts                              136,100              136,150
Money market accounts                          64,739               64,351
Time deposits of $100,000 or more             204,073              184,594
Other time deposits                           252,228              256,851
                                              -------              -------

Total deposits                               $816,163             $796,244
                                             ========             ========

The Company's primary source of funds is deposits. The Company offers deposit
accounts having a range of interest rates and terms. The Company offers
transaction accounts, savings accounts, money market accounts, N.O.W. accounts,
and certificate of deposit accounts with various terms. The Company only
solicits deposits from its primary market area and depositors include
individuals, local governments and businesses.

The flow of deposits is influenced significantly by general economic conditions,
changes in prevailing interest rates, and competition. The variety of deposit
accounts offered by the Company has allowed it to be competitive in obtaining
funds and to respond with flexibility to changes in consumer demand. The Company
manages the pricing of its deposits in keeping with its asset/liability
management, liquidity and profitability objectives. Based on experience, the
Company believes that its transaction accounts, savings accounts and money
market accounts are relatively stable sources of deposits. However, the ability
of the Company to attract and maintain certificates of deposits, as well as the
rates paid on those deposits, has been and will continue to be significantly
affected by market conditions.

Borrowings

Although deposits are the Company's primary source of funds, the Company
utilizes security repurchase agreements and other borrowings as a funding
source. The Company regularly has security repurchase agreements with several
Bank customers in the ordinary course of business. For liquidity management,
lines of credit have also been established with correspondent banks to meet
short-term funding needs. At March 31, 2000, the Company had overnight
borrowings with the FHLB amounting to $19.850 million. The Company has $1.5
million in long-term borrowings with the Federal Home Loan Bank of New York at
March 31, 2000. This FHLB borrowing bears interest at 5.45%, amortizes

                                       17
<PAGE>

monthly and matures in 2003. In 1995 and 1996, the Company issued Industrial
Revenue Bonds to fund the construction of its administrative and operations
complex. As of March 31, 2000, the remaining balance on the bonds was $4.5
million and bears interest at a variable interest rate, which adjusts weekly,
based on a commercial paper rate index. The bonds have annual principal payments
due through 2025.


Non-performing Assets
Non-performing assets are summarized in the following table:

<TABLE>
<CAPTION>
                                                              March 31,                   December 31,
                                                                2000                          1999
                                                                ----                         -----
<S>                                                             <C>                            <C>
Non-accrual loans                                               $4,522                         $5,212
Accruing loans past due 90 days                                    324                            722
                                                                ------                         ------
Total non-performing loans                                       4,846                          5,934
Other real estate owned and
repossessed assets                                               1,103                          1,258
                                                                ------                         ------
Total non-performing assets (loan related)                       5,949                          7,192

Impaired corporate debt security                                 1,535                          1,535
                                                                ------                         ------
Total non-performing assets                                     $7,484                         $8,727
                                                                ======                         ======

Non-performing loans as a % of total loans                        1.00%                          1.30%
Non-performing assets as a
of total assets (loan related)                                    0.64%                          0.79%
Allowance for loan and lease losses to
non-performing loans                                            177.78%                        143.73%
</TABLE>

Non-accrual loans at March 31, 2000 were comprised of $1.832 million of
commercial/commercial real estate, $1.803 million of agricultural loans,
$695,000 of residential real estate, and $192,000 of manufactured housing loans.
Loans past due 90 days or more and still accruing were comprised mainly of
manufactured housing loans and residential real estate at March 31, 2000.

The remaining carrying value of the impaired corporate debt security, which is
not accruing interest and is considered to be non-performing is $1.535 million.
This bond, which is not actively traded, is monitored closely by management and
at this time, management does not believe any additional write-down is required.
However, if adverse conditions continue or worsen, an additional write-down may
be necessary.

Gross charge-offs for the quarter ended March 31, 2000 amounted to $405,000.
Charge-offs were mainly comprised of consumer/manufactured housing loans
amounting to $217,000. Recoveries for the quarter ended March 31, 2000 amounted
to $71,000. Provisions for loan and lease losses amounted to $420,000 for the
quarter ended March 31, 2000. The allowance for loan losses increased $86,000,
from $8.529 million at December 31, 1999 to $8.615 million at March 31, 2000.
The allowance for loan and lease losses represents management's estimate of an
amount adequate to provide for probable losses inherent in the loan and lease
portfolio. In its continuing evaluation of the allowance and its adequacy,
management considers the Company's loan and lease loss experience, the amount of
past-due and non-performing loans, current economic

                                       18
<PAGE>

conditions, underlying collateral values securing loans and other factors which
affect the allowance for loan and lease losses.

Liquidity and Capital Resources
Liquidity is the ability of the Company to convert assets into cash or cash
equivalents without significant loss and to raise additional funds by increasing
liabilities. Liquidity management involves maintaining the ability to meet the
day-to-day cash flow requirements of our customers, whether they be depositors
wishing to withdraw funds or borrowers requiring funds to meet their credit
needs.

Asset and liability management functions not only to assure adequate liquidity
in order to meet the needs of our customers, but also to maintain an appropriate
balance between interest-sensitive assets and interest-sensitive liabilities in
order to generate an appropriate return to stockholders. In the banking
environment, both assets and liabilities are considered sources of liquidity
funding and both are monitored on a daily basis. The asset portion of the
balance sheet provides liquidity primarily through loans, mortgage backed
security and collateralized mortgage obligation principal repayments, maturities
and calls of securities and sales from the available for sale and trading
portfolios.

Management closely monitors the timing of cash inflows and outflows although
changes in interest rates, economic conditions and competitive forces strongly
impact the predictability of these cash flows. The Company attempts to provide
stable and flexible sources of funding through its branch network as well as
with limited use of borrowings. Management believes that the level of the
Company's liquid assets combined with daily monitoring of cash inflows and
outflows provide adequate liquidity to fund outstanding loan commitments, meet
daily withdrawal requirements of depositors, and meet all other daily
obligations of the Company.

The Company and its subsidiary are currently subject to two sets of regulatory
capital measures, a leverage ratio test and risk-based capital guidelines. The
risk-based guidelines assign weightings to all assets and certain off-balance
sheet items and establish an 8% minimum ratio of qualified total capital to
risk-weighted assets. At least half of total capital must consist of "Tier 1"
capital, which comprises common equity, retained earnings and a limited amount
of minority interest in consolidated subsidiaries (subordinated debt), less
goodwill. Up to half of total capital may consist of so-called "Tier 2" capital,
comprising a limited amount of subordinated debt, other preferred stock, certain
other instruments and a limited amount of the allowance for loan and lease
losses. The leverage ratio test establishes minimum limits on the ratio of Tier
1 capital to total tangible assets, without risk weighting. For top-rated
companies, the minimum leverage ratio is 4%, but lower-rated or rapidly
expanding companies may be required to meet substantially higher minimum
leverage ratios. The FDIC Improvement Act of 1991 ("FDICIA") mandated actions to
be taken by banking regulators for financial institutions that are
undercapitalized as measured by these ratios. FDICIA established five levels of
capitalization for financial institutions ranging from "critically
undercapitalized" to "well-capitalized." As of March 31, 2000, the Tier 1
leverage and risk-based capital ratios for the Company and its subsidiary were
as follows:

                                       19
<PAGE>

Summary of Capital Ratios


                                              Tier 1                    Total
                                            Risk-Based                Risk-Based
                                              Capital     Leverage     Capital
                                               Ratio       Ratio        Ratio
                                            ------------------------------------
CNB Financial Corp.                            9.26         6.58         10.51
Central National Bank.                         8.80         6.33         10.05
Regulatory Minimum                             4.00         4.00          8.00
FDICIA's "Well-Capitalized" Standard           6.00         5.00         10.00


All capital ratios for the Company and its subsidiary bank at March 31, 2000
were above minimum capital standards for financial institutions. Additionally,
all Company and subsidiary banks' capital ratios at that date were above
FDICIA's "well-capitalized" standard.

Total stockholders' equity amounted to $54.835 million at March 31, 2000, which
is a $212,000 increase over the $54.623 million at December 31, 1999. The
increase resulted primarily from earnings retention of $1.505 million, offset by
an increase in accumulated other comprehensive (loss) of $884,000 and treasury
stock purchases of $410,000. The Company paid dividends totaling $0.09 per share
for the quarter ended March 31, 2000.

       Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market Risk
Interest rate risk is the most significant market risk affecting the Company.
Other types of market risk, such as foreign currency exchange rate risk and
commodity risk, do not arise in the normal course of the Company's business
activities.

Interest rate risk is defined as an exposure to a movement in interest rates
that could have an adverse effect on the Company's net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or re-price on a different basis than
earning assets. When interest-bearing liabilities mature or re-price more
quickly than earning assets in a given period, a significant increase in market
rates of interest could adversely affect net interest income. Similarly, when
earning assets mature or re-price more quickly than interest-bearing
liabilities, falling interest rates could result in a decrease in net income.

An important element of both earnings performance and liquidity is management of
interest rate sensitivity. Interest rate sensitivity management involves
comparison between the maturity and re-pricing dates of earning assets and
interest-bearing liabilities, with the goal being to minimize the impact on net
interest income in periods of extreme fluctuations in interest rates. Quarterly,
the change in net interest income, as well as

                                       20
<PAGE>

several other strategic measurement ratios, are presented to the Company's
Asset/Liability Committee (ALCO) and Board of Directors and compared to
Company-established guidelines. The Company consistently maintains the ratios
within the acceptable ranges of the guidelines established. On a weekly basis,
the ALCO, which is comprised of Senior Management, meets to monitor the interest
rate sensitivity and liquidity position.

The ALCO utilizes the results of a detailed and dynamic simulation model to
quantify the estimated exposure of net interest income to sustained interest
rate changes. While ALCO routinely monitors simulated net interest income
sensitivity over a one-year period, it also utilizes additional tools to monitor
longer-term interest rate risk. The simulation model captures the impact of
changing interest rates on the interest income received and interest expense
paid on all earning assets and interest-bearing liabilities reflected on the
Company's balance sheet. This sensitivity analysis is compared to ALCO policy
limits which specify a maximum tolerance level for net interest income exposure
over a one year horizon, assuming no balance sheet growth, a 200 basis point
upward and downward shift in interest rates, and the use of convexity factors
which estimate the change in interest rate risk caused by changes in the
Company's structure in response to the rate change. As of March 31, 2000, under
this analysis, a 200 basis point increase in interest rates resulted in a $1.722
million decrease (5.0%) in annual net interest income and a 200 basis point
decrease in interest rates resulted in a $107,000 (0.3%) increase in annual net
interest income. These amounts were within the Company's ALCO policy limits.

Interest rate risk analyses performed by the Company indicates that the Company
is liability sensitive, or its interest-bearing liabilities re-price more
quickly than its earning assets. As a result, rising interest rates could result
in a decrease in net interest income. The Company has taken steps to manage its
interest rate risk by attempting to match the re-pricing periods of earning
assets to its interest-bearing liabilities. The Company's current emphasis in
growing loans with terms less than five years and selling long-term fixed rate
loans are methods the Company has utilized to manage interest rate risk.
Additionally, the Company will focus on growing its core deposit base which
should be less volatile when rates change when compared to time deposits greater
than $100,000 (which represented 27% of interest-bearing liabilities at March
31, 2000), which are more volatile when rates change due to their short-terms
which typically range from 30 days to six months. Under a declining rate
scenario, the analysis indicates that the Company's benefit from its miss-match
in interest-bearing liabilities re-pricing more quickly than earning assets is
mitigated due to the optionality of earning assets. Management makes certain
assumptions in relation to prepayment speeds for loans, CMOs and
mortgaged-backed securities, which would prepay much faster in a falling rate
scenario. These assumptions are based on historical analyses and industry
standards for prepayments. Management continuously evaluates various
alternatives to address interest rate risk.

The preceding sensitivity analysis does not represent a Company forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability cash flows,
and others. While assumptions are developed based upon

                                       21
<PAGE>

current economic and local market conditions, the Company cannot make assurances
as to the predictive nature of these assumptions including how customer
preferences or competitor influences might change. Also, as market conditions
vary from those assumed in the sensitivity analysis, actual results will differ
due to: prepayment/refinancing levels likely deviating from those assumed, the
varying impact of interest rate changes on caps and floors on adjustable rate
assets, the potential effect of changing debt service levels on customers with
adjustable rate loans, depositor early withdrawals and product preference
changes, and other internal/external variables. Furthermore, the sensitivity
analysis does not reflect actions that ALCO might take in responding to or
anticipating changes in interest rates.


                                       22
<PAGE>

                               CNB Financial Corp.
                           Part II - Other Information


Item 1 -   Legal Proceedings

           No material changes since filing of the Registrant's Form 10-K for
           the year end December 31, 1999

Item 2 -   Changes in Securities and Use of Proceeds

           None


Item 3 -   Defaults upon Senior Securities

           None

Item 4 -   Submission of Matters to a Vote of Security Holders

           None

Item 5 -   Other Information

           None

Item 6 -   Exhibits and reports on Form 8-K

           (A) Exhibits
           Exhibit 27 - Financial Data Schedule (electronic filing only)

           (B) Current Reports filed on Form 8-K
           On February 29, 2000, the Company filed a Form 8-K related to the
           issuance of a press release for the announcement of the first
           quarter dividend and the continuation of the stock repurchase
           program.

                                       23
<PAGE>

SIGNATURES

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

                                                        CNB FINANCIAL CORP.
                                                        Registrant


Date:  May 12, 2000                 By: /s/DONALD L. BRASS
       ------------                     ---------------------------
                                                        Donald L. Brass
                                                        President


Date:  May 12, 2000                         By: /s/ PETER J. CORSO
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                                                        Peter J. Corso
                                                        Executive Vice President