**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-KSB**





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


**for
      the fiscal year ended December 31, 2005**


**OR**


**[
      ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF
      1934**


**for
      the transition period from _______________to______________**





**Commission
      File Number: 000-51685**





**CNB
      FINANCIAL CORP.**


(Name
      of
      small business issuer in its charter)





**MASSACHUSETTS**
            **20-3801620**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                employer ID)**33
                Waldo Street, P.O. Box 830, Worcester, MA**
            **01613-0830**(Address
                of principle executive offices)
            (Zip
                Code)





Issuer’s
      Telephone Number: **(508)
      752-4800**





Securities
      registered under Section 12(b) of the Exchange Act:


Title
                of each class
            Name
                of each exchange on which registered**None**
            **N/A**





Securities
      registered under Section 12(g) of the Exchange Act:


**Common
      Stock**








Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. [
      ]





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.  YES
      [ ]
      NO [x]





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB or any
      amendment to this Form 10-KSB. [ ]





Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act.  YES
      [
      ]  NO [x]





The
      issuer’s revenues for its fiscal year ended December 31, 2005, were
      $13,041,000.





The
      aggregate market value of the issuer’s voting and non voting common equity held
      by non-affiliates (based upon the trading price of $14.75 per share for the
      issuer’s Common on December 28, 2005, and for the purpose of this computation
      only, on the assumption that all of the issuer’s directors and officers are
      affiliates) was approximately $22,784,000.





At
      March
      28, 2006, the registrant had 2,114,350 shares of Common Stock issued and
      outstanding.





Transitional
      Small Business Disclosure Format (check one):   YES
      [ ]
      NO [X]








**CNB
      Financial Corp.**





**Annual
      Report on Form 10-KSB**


**For
      the Fiscal Year Ended December 31, 2005**





**TABLE
      OF CONTENTS**








**PART
                I**
            **Page**Item
                1
            Description
                of Business
            1Item
                2
            Description
                of Property
            2Item
                3
            Legal
                Proceedings
            3Item
                4
            Submission
                of Matters to a Vote of Security Holders
            4**PART
                II**Item
                5
            Market
                of Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            4Item
                6
            Management’s
                Discussion and Analysis or Plan of Operation
            5Item
                7
            Financial
                Statements
            16Item
                8
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            16Item
                8A
            Controls
                and Procedures
            16Item
                8B
            Other
                Information
            17**PART
                III**Item
                9
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance Section
                16(a) of the Exchange Act
            17Item
                10
            Executive
                Compensation
            20Item
                11
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            21Item
                12
            Certain
                Relationships and Related Transactions
            24Item
                13
            Exhibits
            24Item
                14
            Principal
                Accountant Fees and Services
            25**PART
                F/S**Signatures
            S-1,
                S-2Certifications
            C-1
                thru C-4














**PART
      I**








**ITEM
      1-DESCRIPTION OF BUSINESS**





**General
      Description of Business**








**Organization**





CNB
      Financial Corp. (the “Company”) was formed on December 16, 2005 upon the
      reorganization of Commonwealth National Bank (the “Bank”) into a bank holding
      company structure. The reorganization of the Bank was approved by shareholders
      of the Bank on August 23, 2005 and subsequently approved by the Office of the
      Comptroller of the Currency (“OCC”). The Federal Reserve Bank of Boston (‘FRBB”)
      approved the application of the Company to acquire 100% of the capital stock
      of
      the Bank. The Bank was originally organized as a national bank under the
      National Bank Act and received its charter to operate as a national bank from
      the OCC effective November 19, 2001. The Bank received approval of its
      application for Federal Deposit Insurance from the Federal Deposit Insurance
      Corporation (“FDIC”) effective November 19, 2001 and commenced its banking
      business on the same day.





In
      order
      to facilitate the organization of the Bank and provide necessary capital,
      certain of the persons who are now directors of the Bank and/or the Company
      and
      others (the “Organizers”) established X Corporation, a Massachusetts
      corporation, (the “Corporation”) on November 24, 1999. Such persons subscribed
      to a total of 92,500 shares of the common stock, par value $10.00 per share,
      or
      $925,000 in the aggregate. The Corporation was formed to undertake
      organizational activities necessary for the formation of a national bank, and
      the proceeds of the sale of its capital stock funded those activities. The
      Bank’s initial capital was raised in a self-underwritten, initial public
      offering of shares of its common stock, par value $5.00 per share (“Common
      Stock”), through which it issued 1,389,461 shares of Common Stock at a price of
      $10.00 per share. The Bank’s second capital offering was a self-underwritten
      rights and community offering which closed December 12, 2003. The offering
      involved the sale of units at $9.25 per unit. Each unit included one share
      of
      common stock and a warrant to purchase one-fourth share of common stock on
      or
      before September 30, 2006 at a price of $11.00 per whole share. This offering
      resulted in the issuance of 721,581 shares of common stock plus warrants to
      purchase 180,395 shares at $11.00 per share. The warrants expire September
      30,
      2006. Upon reorganization of the bank into a holding company structure on
      December 16, 2005, the holding company issued debentures through a private
      placement in the amount of $7,732,000, $5.8 million of which qualifies as Tier
      1
      capital per regulatory definitions. Subsequently, $5.5 million of these funds
      were down-streamed to the Bank in the form of capital which qualifies for Tier
      1
      capital per applicable banking regulations.








**The
      Business of CNB Financial Corp. and Commonwealth National
      Bank**





**General:** The
      Company does not have operations aside form its ownership of all of the issued
      and outstanding stock of the Bank. The bank is the Company’s sole operating
      subsidiary. The Company, through the Bank, provides customary retail and
      commercial banking products and services, including checking and savings
      accounts, time deposits, IRAs, commercial, consumer, and real estate loans
      to
      customers located primarily in the Worcester, Massachusetts market
      area.





The
      Company relies mainly on local advertising and promotional activities and on
      personal contacts by its directors, officers, employees and shareholders to
      attract business and to acquaint potential customers with the Company’s
      personalized service. The Company emphasizes a high degree of personalized
      service in order to be able to serve each customer’s banking needs. The Company
      operates out of its main office at 33 Waldo Street, Worcester, Massachusetts
      and
      three branch offices: 1 West Boylston Street, Worcester, Massachusetts; 564
      Main
      Street, Shrewsbury, Massachusetts; and 701 Church Street in the Whitinsville
      section of Northbridge, Massachusetts. Two additional branches are expected
      to
      open in 2006.





**Loan
      Portfolio:** The Bank
      originates commercial, industrial, commercial real estate, home equity,
      residential and consumer loans. Commercial and industrial loans include
      operating lines of credit and term loans made to small and medium-sized
      businesses. Business assets such as accounts receivable and equipment typically
      secure such loans. Commercial real estate loans are primarily secured by either
      borrower-occupied business real estate or investment real estate. Home equity
      loans and lines of credit are secured by the borrower’s residence.
      One-to-four-family owner-occupied residences secure residential








1




mortgage
      loans. Consumer loans to individuals include installment loans secured by
      automobiles and other assets and overdraft protection lines of credit, which
      are
      generally unsecured.





Certain
      risks are involved in granting loans, which primarily relate to the borrower’s
      ability and willingness to repay the debt. Before the Bank extends a new loan
      to
      a customer, the risks are assessed through a review of the borrower’s financial
      information, past and current credit history, the collateral being used to
      secure the transaction and other factors.





**Investment
      Activities:** The Bank
      maintains a portion of its assets in investment securities, which consist
      primarily of U.S. Government and agency obligations, including mortgage-backed
      securities.





The
      officers of the Bank, in accordance with investment policies established by
      the
      Bank’s Board of Directors and with the assistance of an investment advisory
      firm, manage the Bank’s investment portfolio. The objectives of the Bank’s
      investment policy are to provide liquidity and diversification of assets and
      earnings.





**Deposits:** The Bank
      sources its deposits from retail and commercial customers located primarily
      in
      the Worcester marketplace as a result of its competitively priced deposit
      products and a local advertising campaign. The deposit portfolio is comprised
      of
      savings accounts, NOW accounts, demand deposit accounts, money market deposit
      accounts and certificates of deposit of personal, corporate and municipal
      account holders.





**Competition:** The Bank
      faces competition, both from within and outside of its primary market area,
      in
      all aspects of its business. Many of these other institutions have substantially
      greater financial resources than the Bank. Competitors for deposits include
      existing banks and credit unions, insurance companies, brokerage firms, mutual
      funds and other financial institutions. The Bank competes for commercial loans
      with a number of banks within its service area. The Bank competes for consumer
      loans, such as home equity loans, installment loans and automobile loans with
      existing banks, mortgage companies and credit unions doing business in its
      market area. Its competitors also consist of out-of-state banks, local offices
      of national financial companies and financial subsidiaries of automobile
      manufacturers.





**Personnel:** At
      December 31, 2005, the Bank employed 47 full-time employees and 9 part-time
      employees. The Bank provides a number of benefits such as health, disability,
      and life insurance for qualified employees. None of the Bank’s employees are
      subject to collective bargaining agreements. The Bank currently does not have
      employment agreements with any officers or employees. The Compensation Committee
      on behalf of the Board of Directors is currently negotiating change in control
      agreements with each of the five Executive Officers which would provide for
      severance pay in the event a change in control occurred.





**Supervision
      and Regulation:** The
      Company is subject to supervision, regulation and periodic examination by the
      United States Securities and Exchange Commission (“SEC”) and the FRBB. The Bank
      is subject to supervision, regulation and periodic examinations by the OCC
      and
      the FDIC. Earnings of the Company and the Bank are affected by state and federal
      laws and regulations, and by policies of various regulatory authorities. These
      policies include, for example, statutory maximum lending rates, requirement
      of
      maintenance of reserves against deposits, domestic monetary policies of the
      Board of Governors of the Federal Reserve System, United States fiscal policies,
      international currency regulations and monetary policies, and capital adequacy
      and liquidity restraints. The Company and the Bank are required to file
      quarterly and annual reports with the SEC, the OCC, the FRBB and the FDIC and
      such additional information as the SEC, OCC, FRBB or the FDIC may
      require.








**ITEM
      2-DESCRIPTION OF PROPERTY**





**Company
      and Bank Premises**





The
      Bank
      leases administrative and banking offices located at 33 Waldo Street, Worcester,
      Massachusetts. The Waldo Street facility lease is for an initial term of fifteen
      years, which term ends in the year 2016, and provides two five-year renewal
      options. Leasehold improvements were made at a cost of approximately $440,000.
      This amount includes the construction of a drive-through teller and ATM lane.
      Gross rentals during the initial term were $16.73 per square foot including
      parking for employees and customers, heating and air conditioning. Rentals
      increase at the rate of 7% every third year. The lease is currently in the
      second three year period of the initial term and the Bank’s effective costs are
      now $17.91 per square foot








2




plus
      escalations. The Bank directly pays costs for electricity serving the Bank’s
      premises and signs, as well as cleaning and snow removal costs. The lease
      includes escalation clauses wherein the Bank will share in 30% of the increases
      in the costs for electricity servicing tenant common areas, heating and real
      estate tax incurred by the landlord compared to the base year of 2000.





On
      March
      6, 2003 a lease for 2,820 square feet in the multi-tenant building, at 1 West
      Boylston Street, Worcester, Massachusetts was executed with a term commencement
      date of December 1, 2002. The lease includes an initial term of twenty years
      and
      provides two five-year renewal options. Leasehold improvements were made at
      a
      cost of approximately $133,000. Gross rentals during the initial term are $28.50
      per square foot ($80,370 per annum) including parking for employees and
      customers, heating and air conditioning. Lease payments increase to $32.78
      per
      square foot ($92,440 per annum) at the commencement of the fourth year of the
      lease term. Commencing with the seventh year of the lease, and at the beginning
      of each lease year thereafter, lease payments increase by a percentage equal
      to
      the most recent annual percentage increase in the Consumer Price Index (CPI).
      The lease includes escalation clauses wherein the Bank will share in increases
      in the common area maintenance costs.





On
      June
      6, 2002 the Bank executed a ground lease for 28,253 square feet of land at
      572
      Main Street, Shrewsbury, Massachusetts. The lease includes an initial term
      of
      twenty years and provides eleven five-year renewal options. Lease payments
      during the first five years are $36,000 per year. During subsequent years the
      rent payments increase in accordance with the annual increase in the CPI less
      an
      amount of $3,000. The Bank constructed a building upon the leased site at a
      cost
      of approximately $523,000. Completed during January of 2003, the building opened
      as a bank branch facility on January 27, 2003.





During
      2004 the Bank purchased a parcel of land at 701 Church Street, Northbridge,
      Massachusetts and constructed an office building at a cost of approximately
      $580,000. Upon completion of the building, the Bank sold the premises and
      entered into a leaseback agreement for an initial term of twenty years, which
      term ends in 2024 and provides for two five year extension options. On November
      15, 2004 the Bank opened a bank branch facility at the building. Gross rentals
      will increase by 3% annually during the initial twenty year term. The gross
      rent
      for the current twelve-month period (11/1/05 to 10/31/06) is equal to
      $66,950.





On
      September 21, 2004, the Bank executed an offer to purchase a parcel of land
      in
      North Oxford, Massachusetts. If purchased, the Bank intends to construct an
      office building for the purpose of opening a bank branch facility. A final
      decision regarding the potential purchase is dependent upon the resolution
      of
      various site issues.





On
      January 27, 2006, the Bank executed a lease for approximately 2,000 square
      feet
      in a multi-tenant building under construction, at 1393 Grafton Street,
      Worcester, Massachusetts with a term commencement date to be determined by
      the
      completion date of the building’s construction. The lease includes an initial
      term of ten years and provides three five-year renewal options. Gross rentals
      during the five years are $16.00 per square foot ($32,000 per annum) including
      parking for employees and customers, heating and air conditioning. Lease
      payments increase by 2% per year at the commencement of the sixth year of the
      lease term. The lease includes escalation clauses wherein the Bank will share
      in
      increases in the common area maintenance costs, insurance and real estate taxes.





In
      the
      opinion of management, the foregoing properties are adequately covered by
      insurance.





In
      general, the Company and the Bank are permitted to make investments, subject
      to
      applicable banking laws and regulations. The Company and the Bank do not
      regularly invest in real estate, although the Bank’s business involves the
      making and purchasing of real estate loans. The Bank’s investment policy permits
      it to invest in mortgage-backed securities. This investment authority is subject
      to limitations regarding quality, maturity and concentration.








**ITEM
      3-LEGAL PROCEEDINGS**





Neither
      the Company nor the Bank currently is party to any pending legal proceedings,
      other than routine matters incidental to the business of banking. The Company
      is
      not aware of any proceedings contemplated by any governmental entity.








3





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





No
      matter
      was submitted during the fourth quarter of the fiscal year covered by this
      Form
      10-KSB to a vote of the Company’s security holders.








**PART
      II**





**ITEM
      5-**  **MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES**





At
      present, there is a limited public trading market for the Company’s Common
      Stock, which is listed on the Over-The-Counter Bulletin Board (OTCBB) under
      the
      symbol CFNA. At the date hereof, there are approximately 725 holders of record
      of the Company’s Common Stock. The Company has not declared a dividend on its
      Common Stock.





The
      following table gives the high and low sales prices for the Company’s common
      stock on the OTC Bulletin Board for the last two fiscal years. High and low
      bid
      prices reported on the OTC Bulletin Board reflect inter-dealer quotations
      without retail markup, markdown or commissions, and may not necessarily
      represent actual transactions.


**Sales
                Price**High
            
            Low1stQuarter 2004
            
            $
            12.00
            
            $
            9.252ndQuarter 2004
            
            $
            13.50
            
            $
            11.503rdQuarter 2004
            
            $
            17.25
            
            $
            12.304thQuarter 2004
            
            $
            13.20
            
            $
            12.301stQuarter 2005
            
            $
            13.00
            
            $
            12.402ndQuarter 2005
            
            $
            12.85
            
            $
            10.803rd
                Quarter 2005
            
            $
            11.95
            
            $
            10.254th
                Quarter 2005
            
            $
            14.75
            
            $
            8.65





National
      banks are subject to significant regulatory restrictions on the payments of
      cash
      dividends. In light of these restrictions on the Bank and the need for the
      Company to retain and build capital, the Boards of Directors of the Company
      and
      the Bank plan to reinvest earnings for the period of time necessary to further
      support successful operations. As a result, the Company has not declared any
      dividends and does not plan to pay dividends in the near future so it may
      further support growth. The Company’s future dividend policy therefore will
      depend on earnings, capital requirements and financial condition and on other
      factors that the Company’s Board of Directors considers relevant.





The
      prior
      approval of the OCC is required if the total of all dividends declared by a
      national bank in any calendar year exceeds the bank’s net profits, as defined
      for that year combined with its retained new profits for the preceding two
      calendar years, less any required transfers to surplus or a fund for the
      retirement of any preferred stocks. The payment of dividends by the Company
      may
      also be affected by other factors, such as the requirement to maintain adequate
      capital above regulatory guidelines.


4





**EQUITY
      COMPENSATION PLAN INFORMATION**





The
      following schedule provides information with respect to compensation plans
      (including individual compensation arrangements) under which equity securities
      of the Company are authorized for issuance as of December 31, 2005.





Plan
                category
            Number
                of securities
              to
                be issued upon
              exercise
                of outstanding
              options,
                warrants and rights (a)
            Weighted-average
              exercise
                price of
              outstanding
                options,
              warrants
                and rights
              (b)
            Number
                of securities remaining
              available
                for future issuance
              under
                equity compensation
              plans
                (excluding securities
              reflected
                in column (a))
              (c)Equity
                compensation
              plans
                approved by
              security
                holders
            196,055
            $
                11.41
            202,345Equity
                compensation
              plans
                not approved by
              security
                holders
            -
            -
            -Total
            196,055
            $
                11.41
            202,345





The
      equity securities described in the chart, above, have been issued pursuant
      to
      the Bank’s 2001 Stock Option Plan (the “Plan”). On November 6, 2001, the
      shareholders’ voted to approve the Plan for employees and directors of the Bank.
      Upon the reorganization of the Bank into a bank holding company structure on
      December 16, 2005, the Company assumed the Plan. The Compensation Committee
      of
      the Bank’s Board of Directors administrates the Plan, which has 400,000 shares
      authorized for grant. Both incentive stock options and non-qualified stock
      options may be granted under the Plan. The authorization of grants, the
      determination of number of shares to be granted, the exercise date and the
      option price of each award is determined by the Compensation Committee of the
      Board of Directors on the date of grant. The options vest annually at a rate
      of
      25% over a four-year period and will expire on the tenth anniversary of the
      grant date. On April 18, 2002, the Board of Directors authorized the granting
      of
      65,650 shares at the fair market value of $10.00 per share to the employees
      of
      the Bank under the provisions of this Plan. On April 17, 2003, the Board of
      Directors authorized the granting of 35,815 shares at the then fair market
      value
      of $9.00 per share to the employees of the Bank under the provisions of this
      plan. On April 15, 2004, the Board of Directors authorized the granting of
      52,625 shares at the then fair market value of $13.50 per share to the employees
      of the Bank under the provisions of this plan. On April 21, 2005, the Board
      of
      Directors authorized the granting of 49,350 shares at the then fair market
      value
      of $12.75 per share to the employees of the Bank under the provisions of this
      plan. On May 19, 2005 shareholders approved amending the plan to increase the
      authorized number of shares to from 200,000 to the current 400,000. During
      the
      period after the issuance of the options and prior to December 31, 2005, a
      total
      of 1,600 options were exercised and certain employees forfeited a total of
      5,785
      option shares as the result of voluntary resignations. Therefore, the number
      of
      options outstanding at December 31, 2005 equaled 196,055. The weighted average
      exercise price to the remaining outstanding options is equal to $11.41 per
      share.








**ITEM
      6-MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





**General**





The
      Company’s national bank subsidiary received its banking charter effective
      November 19, 2001 and operates as a national bank, offering banking deposit
      and
      loan service to individuals, municipalities and small to medium sized businesses
      in the Worcester, Massachusetts marketplace.





The
      operating results of the Company and the Bank depend primarily upon net interest
      income, which is the difference between interest on interest-earning assets,
      primarily loans and investments securities, and interest expense on
      interest-bearing liabilities, primarily deposits. Net earnings are also affected
      by non-interest income as well as non-interest expense, such as compensation
      and
      benefits, building and occupancy expense, and other operating
      expenses.






5





This
      discussion and analysis covers material changes in financial condition and
      liquidity that have occurred since December 31, 2004 as well as the results
      of
      operations during the year ended December 31, 2005.





The
      Company’s financial statements and related notes, which are included in this
      filing, provide additional information relating to the following discussion
      of
      its financial condition. See Item 7 and Part F/S of this Form
      10-KSB.





**Forward-looking
      Statements Safe-Harbor Statement**





This
      report may contain forward-looking statements that are subject to numerous
      assumptions, risks and uncertainties. Statements pertaining to future periods
      are subject to numerous uncertainties because of the possibility of changes
      in
      underlying factors and assumptions. Actual results could differ materially
      from
      those contained in or implied by such forward-looking statements for a variety
      of factors including: sharp and rapid changes in interest rates; significant
      changes in the economic scenario from the current anticipated scenario which
      could materially change anticipated credit quality trends and the ability to
      generate loans; significant delay or inability to execute strategic initiatives
      designed to grow revenues and/or control expenses; and changes in accounting,
      tax or regulatory practices or requirements. Because of the risks and
      uncertainties inherent in forward-looking statements, readers are cautioned
      not
      to place undue reliance on them, whether included in this report or made
      elsewhere from time to time by the Company or on its behalf. The Company assumes
      no obligation to update any forward-looking statements.





**Liquidity
      and Interest Rate Sensitivity**





The
      Company’s net interest income, its primary source of earnings, will fluctuate
      with interest rate movements. To lessen the impact of changes in the interest
      rates, the Company endeavors to structure the balance sheet so there will be
      regular opportunities to change the interest rates on (or “reprice”) many of the
      interest-bearing assets in order to match the variability of interest rates
      paid
      on the Company’s interest bearing liabilities. Imbalance among interest bearing
      assets and liabilities at any point in time constitutes interest rate
      risk.





Interest
      rate risk includes interest rate sensitivity. Sensitivity refers to the
      responsiveness of interest-bearing assets and liabilities to changes in market
      interest rates. The rate sensitive position (or GAP) is the difference in the
      volume of rate sensitive assets and liabilities for a given maturity or
      repricing period. The general objective of GAP management is to actively manage
      rate sensitive assets and liabilities in order to reduce the impact of interest
      rate fluctuations on the net interest margin of the Company. The Company
      attempts to maintain an industry acceptable balance between rate sensitive
      assets and liabilities.





The
      Company regularly evaluates asset mix of the balance sheet in terms of several
      variables: yield, credit quality, maturity, and appropriate funding sources
      and
      liquidity. To manage the balance sheet’s liability mix effectively, the Company
      focuses primarily on expanding the deposit base by providing a high level of
      customer service.





As
      growth
      in assets continues, the Company will continuously structure its rate
      sensitivity position in an effort to protect against rapidly rising or falling
      interest rates. The Asset/Liability Committee, which meets on a quarterly basis,
      develops and implements the Company’s strategy for managing the potential impact
      of changing interest rates.





Liquidity
      represents the ability to provide sources of funds for loan commitments and
      investment activities, as well as to maintain sufficient funds to cover deposit
      withdrawals, payment of debt and operating obligations. The Company’s ability to
      maintain and increase deposits will serve as its primary source of liquidity.
      In
      addition, the Company’s liquidity may be supplemented through the use of
      borrowings or by converting portions of the investment security portfolio to
      cash.





The
      Company knows of no trends, demands, commitments, events or uncertainties that
      should result in, or are reasonably likely to result in, its liquidity
      increasing or decreasing in any material way in the foreseeable future, other
      than through its normal banking operations.





**Capital
      Adequacy**





The
      Company has been successful in achieving the primary targets contained within
      its business plan, as evidenced by the substantial growth in the loan and
      deposit portfolios and thus, substantial growth in total assets. The business
      plan for 2006 reflects continued levels of significant growth in quality loans,
      deposits






6






and
      total
      assets, and continued profitability on a quarter-to-quarter basis. The Company
      anticipates in its 2006 Business Plan that current levels of Stockholders’
Equity, coupled with a continuation of profitable operations, will be sufficient
      to support such growth in total assets by meeting the FDIC, OCC and FRB
      requirements for capital adequacy.








**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





The
      following analysis of the Company’s financial condition and operating results
      should be read in conjunction with the accompanying consolidated Financial
      Statements and the notes thereto and selected statistical information appearing
      in Part F/S of this Form 10-KSB.








**RESULTS
      OF OPERATIONS**





**Summary**





The
      Company recorded a consolidated net income of $2,565,000 for the full year
      2005
      and a consolidated net income of $286,000 for the full year 2004. The
      significant year over year improvement in profitability resulted from the
      substantial growth in average earning assets (29%), which in turn caused a
      35%
      (or $2.0 million) growth in net interest income. During the third quarter of
      2005, the company also reduced the valuation reserve for the tax loss carry
      forward and recorded a $1.5 million tax benefit.





**Net
      Interest Income**





The
      Company’s overall operating performance is largely dependent upon its net
      interest income, which is the difference between the income the Company earns
      on
      interest earning assets such as loans and investments and the interest the
      Company pays for its deposits and borrowed funds. As the Company’s primary
      source of earnings, net interest income will fluctuate with interest rate
      movements. To lessen the impact of changes in interest rates, the Company
      endeavors to structure the balance sheet so that there will be regular
      opportunities to change the interest rates on (or “reprice”) many of the
      interest-bearing assets in order to match the variability of interest paid
      on
      the Company’s deposits and other interest bearing liabilities. Imbalance among
      interest bearing assets and liabilities at any point in time constitutes
      interest rate risk. During 2005 the Company generated $12,580,000 in interest
      income, which was offset by interest expense of $4,877,000, resulting in net
      interest income of $7,703,000. The resultant net yield on interest earning
      assets increased by .16% during 2005 and equaled 3.60% for the year. During
      the
      prior year the Company generated $8,578,000 in interest income, which was offset
      by interest expense of $2,869,000, resulting in net interest income of
      $5,709,000. The resulting net yield on interest earning assets equaled 3.44%
      for
      the full year 2004.


7





The
      following table presents condensed annual average balance sheet categories
      and
      the average yields and costs for each category during the years ended December
      31, 2005 and 2004. The interest income, net interest income, asset yields,
      interest rate spread and net interest margin are portrayed on a taxable
      equivalent basis.





**Distribution
                of Assets, Liabilities and Stockholders’ Equity:**
              **Interest
                Rates and Interest
                Differential**




Year
                EndedDecember
                31, 2005
              
              Year
                  EndedDecember
                  31, 2004Average
                  Balance
              
              Interest
                Income
                  and
                Expense
                (Taxable
                  Equivalent)
              
              Average
                Rate
              
              Average
                Balance
              
              Interest
                Income
                  and
                Expense
                (Taxable
                  Equivalent)
              
              Average
                  Rate(Fully
                  Taxable Equivalent)INTEREST
                  EARNING ASSETSTotal
                  Loans(1)
              
              $
              163,577,000
              
              $
              10,638,000
              
              
              6.50
              %
              $
              127,952,000
              
              $
              7,406,000
              
              
              5.79
              %Investments,
                  Fed Funds and Int. Bearing Balances
              
              
              50,566,000
              
              
              1,944,000
              
              
              3.84
              %
              
              37,995,000
              
              
              1,172,000
              
              
              3.08
              %Total
                  Interest Earning Assets
              
              
              214,143,000
              
              
              12,582,000
              
              
              5.88
              %
              
              165,947,000
              
              
              8,578,000
              
              
              5.17
              %Allowance
                  for Loan Losses
              
              
              (2,296,000
              )
              
              
              
              
              
              
              
              (1,631,000
              )Cash
                  and Due From Banks
              
              
              4,858,000
              
              
              
              
              
              
              
              
              4,096,000Premises
                  and Equipment
              
              
              1,914,000
              
              
              
              
              
              
              
              
              2,103,000Other
                  Assets
              
              
              1,756,000
              
              
              
              
              
              
              
              
              660,000Total
                  Assets
              
              $
              220,375,000
              
              
              
              
              
              
              
              $
              171,175,000INTEREST
                  BEARING LIABILITIESSavings,
                  NOW and Money Market Deposits
              
              
              56,321,000
              
              
              965,000
              
              
              1.71
              %
              
              52,577,000
              
              
              680,000
              
              
              1.29
              %Time Deposits
              
              
              93,961,000
              
              
              2,888,000
              
              
              3.07
              %
              
              65,791,000
              
              
              1,679,000
              
              
              2.55
              %Borrowed
                  Funds
              
              
              30,180,000
              
              
              1,003,000
              
              
              3.33
              %
              
              18,614,000
              
              
              510,000
              
              
              2.74
              %Trust
                  Preferred
              
              
              329,000
              
              
              21,000
              
              
              6.26
              %
              
              -
              
              
              -
              
              
              -Total Interest Bearing Liabilities
              
              
              180,791,000
              
              
              4,877,000
              
              
              2.70
              %
              
              136,982,000
              
              
              2,869,000
              
              
              2.10
              %Demand
                  Deposits
              
              
              22,968,000
              
              
              
              
              
              
              
              
              18,785,000Total Deposits and Borrowed Funds
              
              
              203,759,000
              
              
              4,877,000
              
              
              2.39
              %
              
              155,767,000
              
              
              2,869,000
              
              
              1.84
              %Other
                  Liabilities
              
              
              557,000
              
              
              
              
              
              
              
              
              548,000Stockholders'
                  Equity
              
              
              16,059,000
              
              
              
              
              
              
              
              
              14,860,000Total
                  Liabilities and Stockholders' Equity
              
              $
              220,375,000
              
              
              
              
              
              
              
              $
              171,175,000Net
                  Interest Income
              
              
              
              
              $
              7,705,000
              
              
              
              
              
              
              
              $
              5,709,000Interest
                  Rate Spread
              
              
              
              
              
              
              
              
              3.48
              %
              
              
              
              
              
              
              
              3.33
              %Net
                  Yield on Interest Earning Assets
                (Net Interest Margin)
              
              
              
              
              
              
              
              
              3.60
              %
              
              
              
              
              
              
              
              3.44
              %






(1)
                No (1) Non-accrual loans are included in average amounts
                outstanding.





8


The
      following table depicts the composition of average earning assets and interest
      bearing liabilities. The earning asset ratio reflects the percentage of total
      assets that are interest earning. The free funds ratio depicts the percentage
      of
      interest earning assets that are supported by non-interest bearing liabilities.





**Composition
                of Average Earning Assets******
              **and
                Interest Bearing Liabilities**
            **2005**
            **2004**As
                a percentage of average earning assetsLoans
            76.4%
            77.1%Other earning assets
            23.6%
            22.9%Average earning assets
            100.0%
            100.0%Savings and NOW
            26.3%
            31.7%Certificates
                of deposit
            43.9%
            39.6%Borrowed funds
            14.3%
            11.2%Average interest bearing liabilities
            84.5%
            82.5%Earning
                asset ratio
            97.2%
            96.9%Free-funds
                ratio
            15.6%
            17.5%








**Provision
      for Loan Losses**





The
      Company provided for a $590,000 addition to the allowance for loan losses
      through charges to operations during the full year 2005, compared to a provision
      of $612,000 during 2004. The 2005 provision caused the allowance for loan losses
      to equal $2,615,000 or 1.45% of total loans at December 31, 2005. Management,
      based upon known circumstances and conditions, determines the level of allowance
      for loan losses. In addition to assessing risk on individual loans, the Company
      considers industry trends, regional and national economic conditions, and past
      estimates of losses as compared to actual losses. One loan in the amount of
      $2,000 has been charged off since the inception of the Company. At December
      31,
      2005, loans in the amount of $1,287,000 were in non-accrual status. No loans
      accruing interest were past due 30 days or more. It is the Company’s policy to
      discontinue the accrual of interest on loans once they become 90 days past
      due
      or earlier when it becomes doubtful that the full principal and interest will
      be
      collected. Once a loan is placed on non-accrual status, any interest that is
      collected will be recorded on a cash basis.





**Non-Interest
      Income**





Total
      non-interest income amounted to $461,000 for the full year 2005 compared to
      $364,000 for 2004. The source of this income is primarily fees and service
      charges on deposit accounts and loan document preparation fees. The increase
      was
      caused by a significant increase in the number of the Company’s deposit account
      holders and loan customers.





**Non-Interest
      Expense**





Total
      non-interest expense amounted to $6,500,000 for 2005 compared to $5,205,000
      during 2004. Compensation and employee benefits amounted to $3,381,000 equaling
      52% of total non-interest expense during 2005 compared to the 2004 cost of
      $2,707,000 (which equaled the same ratio to non-interest expense as in 2005).
      Occupancy and equipment expense amounted to $1,033,000, marketing and public
      relations totaled $403,000, information processing equaled $313,000,
      professional services, primarily legal, appraisal and accounting fees, amounted
      to $640,000 and general and other administrative expense totaled $730,000.





Comparing
      2005’s expense levels to those of 2004 reflects a 25% increase in total
      non-interest expense caused by the planned growth of the Company which included
      growth in asset and deposit size, growth in the number of deposit and loan
      accounts, a full year’s expense in connection with the branch opened in November
      of 2004, the resulting information processing costs related to the increased
      size of the Company, as well as, increased audit and compliance costs. The
      increase in non-interest expense is comprised of several components.
      Compensation and employee benefit costs increased by $674,000 or 25% over the








9






year
      earlier period as the Company incurred a full year of the cost of employees
      for
      the additional branch opened in late 2004, accrued for incentive compensation
      and added certain administrative staff positions. Occupancy and equipment costs
      increases of $236,000 or 30% over the year earlier period is again the result
      of
      a full year’s expenses relating to the newest branch and increases in lease
      costs, real estate taxes, utilities and service contracts. Marketing and public
      relations expense declined by $20,000 or 5% compared to the prior year period
      as
      the 2004 cost of the marketing campaign for a newly opened branch was not
      repeated. Data processing costs increased by $29,000 or 10% compared to the
      prior year period as a result of increased numbers of loan and deposit accounts
      maintained on the data processing systems and increased software maintenance
      expenses. Professional services (primarily legal, audit, consulting and
      appraisal expenses) increased by $192,000 or 43% compared to the prior year
      period as expenses relating to audit services, consulting, legal services and
      shareholder relations increased over the prior year’s level. The majority of the
      increase may be attributed to the costs associated with the formation of a
      parent holding company during 2005. Other factors influencing this category
      include the increased cost of beginning the process to comply with
      Sarbanes-Oxley Section 404. Other general and administrative costs increased
      by
      $184,000 or 34% versus the year-earlier period due to increased costs of
      postage, delivery, fidelity insurance, OCC assessments, FDIC deposit insurance
      and office supplies. All of the above named categories were impacted by the
      Company’s growth in numbers of deposit and loan accounts and growth in the size
      of the Company’s balance sheet.





**Income
      Taxes**





During
      2005, the Company recognized the benefit of the deferred tax assets including
      the net operating loss carry-forwards for GAAP purposes. An income tax benefit
      of $1.5 million was recorded as a result of reversing the previously established
      valuation allowance for deferred taxes. This action was taken after completing
      an analysis of the Bank’s current operating income and future earnings
      potential. The analysis revealed that the potential and expectations for
      continued profitability will more likely than not generate sufficient operating
      income to realize the deferred tax asset created during the early years of
      the
      Bank’s existence. Projections for continued levels of profitability will be
      reviewed quarterly and any necessary adjustments to the deferred tax assets
      will
      be recognized in the provision or benefit for income taxes. At December 31,
      2005, the Company had approximately $2.3 million in net operating loss carry
      forwards available to offset future taxable earnings, if any, under current
      Federal tax laws. Net operating loss carry forwards are available for a period
      of up to 20 years to offset taxable income in those years. As the Company
      continues to generate taxable income in the future this utilization of
      carry-forwards will continue to reduce income taxes paid until the $2.3 million
      is exhausted.








**FINANCIAL
      CONDITION**




**Assets**





Total
      assets at December 31, 2005, amounted to $249.4 million compared to $199.8
      at
      December 31, 2004, a $49.6 million increase. Approximately 96% of the total
      assets at year-end 2005 were held in earning assets, with total loans equaling
      $180.8 million, investment securities $51.1 million, and interest bearing cash
      equivalents totaling $9.7 million. At December 31, 2004, earning assets equaled
      approximately 97% of total assets, with total loans equaling $149.7 million,
      investment securities totaling $39.7 million and interest bearing cash
      equivalents totaling $6.5 million.





The
      loan
      portfolio included approximately $91.5 million in commercial real estate, $15.3
      million in residential real estate, $59.0 million in commercial and industrial
      loans and $15.0 million in consumer loans as of December 31, 2005. On December
      31, 2004, the loan portfolio was comprised of $78.6 million in commercial real
      estate, $17.4 million in residential real estate, $41.5 million in commercial
      and industrial loans and $12.2 million in consumer loans. The 21% increase
      in
      loan balances from year to year is the result of the application of the
      Company’s strategy of loan growth from within the Company’s market area, which
      primarily covers a substantial portion of Worcester County. Continued growth
      of
      the loan portfolio is dependent upon management’s assessment of risks and
      opportunities in its future lending activities in addition to a variety of
      competitive and economic factors.





The
      Company views the investment portfolio both as a means of generating earnings
      and as a source of liquidity. The portfolio at year-end was comprised primarily
      of government and agency securities and mortgage backed securities. At December
      31, 2005, approximately $3.0 million of the portfolio was scheduled to mature
      within one year and $34.8 million after one year. Approximately $8.2 million
      of
      the portfolio securities are subject to calls prior to final
      maturity.








10





Cash
      and
      cash equivalents amounted to $15.0 million at December 31, 2005 compared to
      $9.3
      million at December 31, 2004.





The
      aggregate of premises and equipment, accrued interest receivable, prepaid
      expenses and other assets increased slightly during 2005. The deferred tax
      asset
      increased by $1.9 million since December 31, 2004, as a result of the
      elimination of the valuation reserve for the deferred tax asset.





**Liabilities**





At
      December 31, 2005, total deposits amounted to $189.5 million compared to $157.0
      million at December 31, 2004, a $32.5 million or 21% increase. The deposit
      portfolio increases occurred in all categories: certificates of deposits
      increased $17.9 million and equaled $102.8 million at December 31, 2005;
      personal and commercial savings, money market and NOW accounts grew by $9.8
      million to equal $62.2 million, demand deposits accounts increased by $4.7
      million and equaled $24.4 million. Of the total certificates of deposit,
      approximately $43.6 million are scheduled to mature in 2006. The increases
      in
      core deposits resulted from the opening of new customer accounts by individuals,
      businesses, and local government units. To attract new core depositors the
      Company conducts deposit promotion campaigns comprised of newspaper and radio
      advertisements, competitive pricing and in-branch promotions. These programs,
      in
      conjunction with the opening of a new branch in late 2004, continued to generate
      significant increases in customer relationships. Management believes that the
      new relationships that result from these marketing efforts provide valuable
      opportunities to cross-sell other deposit and loan products and services, as
      well as build a solid base of core deposits.





On
      December 16, 2005 the Company issued subordinated debt in the form of trust
      preferred securities through a private placement offering in the amount of
      $7,500,000. The issue has a maturity date of March 15, 2036 and bears a floating
      rate of interest that reprices quarterly (the fifteenth of March, June,
      September and December of each year) at the 3-month LIBOR rate plus 1.85%.
      The
      current interest rate is 6.26% and the next repricing date is June 15, 2006.
      A
      special redemption provision allows the issue to be callable at 103.525 % of
      par
      for the first year and thereafter on a sliding scale down to 100% of par upon
      the fifth year and thereafter.





**Capital
      Resources**





The
      Federal Reserve Board (“FRB”), the Federal Deposit Insurance Corporation
      (“FDIC”), and other regulatory agencies have established capital guidelines for
      banks and bank holding companies. Risk-based capital guidelines issued by the
      federal regulatory agencies require banks to meet a minimum Tier 1
      risk-based capital ratio of 4.0% and a total risk-based capital ratio of 8.0%.
      At December 31, 2005, the Company and the Bank exceeded the minimum
      requirements for Tier 1 risk-based and total risk-based capital. A minimum
      requirement of 4.0% Tier 1 leverage capital is also mandated. On December
      31, 2005, the Tier 1 leverage capital ratio for the Company and the Bank
      was 9.46% and 9.35%, respectively.





**At
                December 31,****Capital
                Ratios for the Company and the Bank**
            
            **2005**
            
            
            **2004********The
                Company**Tier 1
                leverage capital ratio
            
            
            9.46
            %Tier 1
                risk-based capital ratio
            
            
            11.73
            %Total
                risk-based capital ratio
            
            
            12.98
            %******The
                Bank**Tier 1
                leverage capital ratio
            
            
            9.35
            %
            
            
            7.79
            %Tier 1
                risk-based capital ratio
            
            
            11.59
            %
            
            
            9.63
            %Total
                risk-based capital ratio
            
            
            12.84
            %
            
            
            10.88
            %





**Critical
      Accounting Policies**





The
      Company has established various accounting policies that 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








11




management
      that 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 management’s judgments and
      estimates which, in turn, could have a material impact on the carrying values
      of
      assets and liabilities and the results of operations of the
      Company.





The
      Company believes accounting policies covering the allowance for loan losses
      and
      income taxes require the most significant judgments and estimates used in
      preparation of its consolidated financial statements. Refer to the Credit
      Quality and Allowance for Loan Losses section entitled Allowance for Loan Losses
      and Note 2 of the consolidated financial statements-Summary of Significant
      Accounting Policies-for a detailed description of the Company’s estimation
      process and methodology related to the allowance for loan losses and income
      taxes.








**CREDIT
      QUALITY AND ALLOWANCE FOR LOAN LOSSES**





**Policies
      Related to the Accrual of Interest Income**





The
      Company and the Bank normally recognize income on earning assets on the accrual
      basis, which calls for the recognition of income when earned, rather than when
      it is collected. The Bank’s policy is to classify a loan 90 days or more past
      due with respect to principal or interest as a non-accruing loan, unless the
      ultimate collectibility of principal and interest is assured. Income accruals
      are suspended on all non-accruing loans, and all the previously accrued and
      uncollected interest is typically charged against current income. A loan remains
      in non-accruing status until the factors which suggest doubtful collectibility
      no longer exist, the loan is liquidated, or when the loan is determined to
      be
      uncollected and is charged off against the allowance for loan losses. In those
      cases where a non-accruing loan is secured by real estate, the Bank can, and
      usually will, initiate foreclosure proceedings. The result of such action will
      either be to cause repayment of the loan with the proceeds of a foreclosure
      sale
      or to give the Bank possession of the collateral in order to manage a future
      resale of the real estate. Foreclosed property is recorded at its estimated
      fair
      value, less any estimated costs to sell. Any cost in excess of the estimated
      fair value on the transfer date is charged to the allowance for loan losses,
      while further declines in market values are recorded as expenses in other
      non-interest expense in the statement of operations.





**Loan
      Portfolio Monitoring**





The
      Bank’s Board of Directors grants each loan officer the authority to originate
      loans on behalf of the Bank, subject to certain limitations. The Board of
      Directors also establishes restrictions regarding the types of loans that may
      be
      granted and the distribution of loan types within the Bank's portfolio, and
      sets
      loan authority limits for each lender. These authorized lending limits are
      reviewed at least annually and are based upon the lender’s knowledge and
      experience. Loan requests that exceed that lender’s authority require the
      approval of either the President or the Officer’s Loan Committee. All extensions
      of credit over a dollar threshold to any one borrower, or related party
      interest, are reviewed and approved by the Executive Committee of the Bank’s
      Board of Directors.





Using
      a
      variety of management reports, the Bank’s loan portfolio is regularly monitored
      by credit administration, senior management and the Board of Directors. The
      loan
      portfolio as a whole, as well as individual loans, is reviewed for payment
      performance, creditworthiness and strength of documentation. The Bank uses
      an
      external loan review firm to assist in monitoring the commercial loan portfolio.
      Credit risk ratings are assigned to commercial loans and are regularly reviewed.





All
      loan
      officers are required to service their loan portfolios and account
      relationships. Remedial actions would be taken, as necessary, to assure full
      and
      timely payments of loan balances.





**Allowance
      for Loan Losses**





The
      Allowance for Loan Losses (“ALL”) is based on management’s estimate of the
      amount required to reflect the risks in the loan portfolio, based on
      circumstances and conditions known at each reporting date. The Bank reviews
      the
      adequacy of the ALL at least quarterly. The methodology is a comprehensive
      analytical process of assessing the credit risk inherent in the loan portfolio.
      This assessment incorporates a broad range of factors including previous loss
      experience, if any, asset quality trends, current economic conditions and their
      effect on borrowers, the performance of individual loans in relation to contract
      terms








12




and
      the
      estimated fair value of collateral. Losses are charged against the ALL when
      management believes that the collectibility of principal is doubtful. To the
      extent management determines the level of anticipated losses in the portfolio
      has significantly increased or diminished, the ALL is adjusted through current
      earnings. As part of the Bank’s analysis of specific credit risk, extensive
      reviews are done on problematic credits when identified on the watch and
      non-performing assets lists. At December 31, 2005 no loans accruing interest
      were past due more than 30 days. Two loans in the aggregate amount of $1,287,000
      were in non-accrual status, $120,000 of which is guaranteed for repayment by
      the
      Small Business Administration.





The
      ALL
      consists of three components:





*Allocated
      Allowances* -
      represents management’s assessment of potential losses associated with problem
      loan relationships over a certain size identified on the watch list and
      nonperforming asset list. Loans are evaluated for impairment by looking at
      the
      fair value of the collateral, if the loan is collateral dependent, or measuring
      the net present value of the expected future cash flows using the loan’s
      original effective interest rate. When the difference between the fair value
      of
      the collateral, if the loan is collateral dependent, and the net present value
      of a loan is lower than the recorded investment of the loan, the difference
      is
      reflected with a resulting specific reserve.





*General
      Allowances* -
      represents a reflection of risk associated with adversely graded/watch list
      commercial loans for which an allocated reserve has not been provided. It is
      based on the premise that, while loss exposure associated with any one
      particular credit may be greater than the percentages assigned, the losses
      that
      will be incurred by the pool of loans in an adverse grade will be consistent
      with these percentages.





*Unallocated
      Allowances* -
      represents the expected but as yet unidentified specific losses associated
      with
      various loan types within the loan portfolio; the methodology employed to
      calculate this portion of the ALL assumes that loans within loan type possess
      common characteristics and therefore may be treated similarly for purposes
      of
      determining loss factors. This portion also provides for expected losses due
      to
      changes in various conditions such as general economic conditions, trends in
      delinquency and asset quality, loan volumes and concentrations of
      credit.








**RISK
      MANAGEMENT**





Management
      and the Boards of Directors of the Company and the Bank are committed to sound
      risk management practices throughout the organization. A third party internal
      audit firm performs periodic audits of the Company’s policies and procedures.
      Risks associated with the Company’s business activities and products are
      identified and measured as to probability of occurrence and impact on the
      Company (low, moderate, or high), and the control of other activities in place
      to manage those risks are identified and assessed. The firm reports its findings
      to the Audit Committee of the Company’s Board of Directors. Department-level and
      senior managers of the Company and the Bank are responsible to implement changes
      recommended by the internal audit firm and approved by the Audit Committee.
      This
      documented program provides management and the Board of Directors with a
      comprehensive framework for monitoring the Company’s risk profile from a macro
      perspective, while also serving as a tool for assessing internal controls over
      financial reporting.





**Interest
      Rate Risk**





Interest
      rate risk is the exposure to movement in interest rates, which could affect
      the
      Company’s net interest income. It is the responsibility of the Bank’s
      Asset/Liability Committee (“ALCO”) to manage the interest rate risk, which
      arises naturally from imbalances in repricing, maturity and/or cash flow
      characteristics of both the Company’s and the Bank’s assets and liabilities.
      Asset/liability management is governed by policies reviewed and approved
      annually by the Board of Directors. The ALCO chaired by the Chief Financial
      Officer and composed of members of the board of directors and senior management,
      meets at least quarterly to review and develop asset/liability management
      strategies and tactics. The ALCO is responsible for ensuring that the Board
      of
      Directors receives timely, accurate information regarding the Company’s interest
      rate risk position. Techniques used by the ALCO take into consideration the
      cash
      flow and repricing attributes of balance sheet and off-balance sheet items
      and
      their relation to possible changes in interest rates. The ALCO manages its
      interest rate exposure primarily by using on-balance sheet strategies, generally
      accomplished through the management of the duration, rate sensitivity and
      average lives of the Company’s various investments, and by extending or
      shortening maturities of borrowed funds, as






13






well
      as
      carefully managing and monitoring the pricing of deposits. The ALCO may also
      use
      off-balance sheet strategies, such as interest rate swaps, caps and floors,
      to
      help minimize the Company’s exposure to changes in interest rates. Through the
      use of a computerized modeling system maintained by outside consultants, the
      potential effect on the Company’s net interest income of possible changes in
      interest rates, in rising and declining scenarios is determined and evaluated
      by
      ALCO. This evaluation is performed each quarter based upon the Company’s
      financial data as of February, May, August and November. ALCO has established
      a
      maximum limit for the change in net interest income over a twelve-month period.
      This limit requires that Net Interest Income (NII) for the projected
      twelve-month period will not be reduced by more than 5% for every 100 basis
      point (given a gradual ramp) change in interest rates. In addition, the limits
      require that the projected Return on Assets (ROA) for the next twelve months
      will not be reduced by more than 10 basis points for every 100 basis point
      (given a gradual ramp) change in interest rates. Exceptions to the tolerance
      limits will be considered “significant” when measurements for both NII and ROA
      are beyond the tolerance limits. The Company’s most recent model simulation
      reflects a 2.1% reduction in NII and zero change in ROA if market rates decline
      by 200 basis points and a 1.3% improvement in NII and a two basis point
      reduction in ROA if market rates increase by 300 basis points. The following
      table depicts the potential effect on the Company’s net interest income of
      various possible changes in interest rates, in both rising and declining
      scenarios, over a two-year period.





Changes
                in Net Interest Income and Return on
                Assets




(over
                a two-year period)
            as
                of November 30, 2005Change
                in Interest Rates During Year One
            Net
                Interest Income
            Percent
                Change
            Change
                in Return on Assets300
                basis point rise
            9,049
            1.30%
            -0.02%100
                basis point rise
            9,142
            2.34%
            0.05%Flat-rate
                scenario
            8,933200
                basis point decline
            8,742
            -2.14%
            0.00%Change
                in Interest Rates During Year Two
            Net
                Interest Income
            Percent
                Change
            Change
                in Return on Assets300
                basis point rise
            9,858
            -3.78%
            -0.11%100
                basis point rise
            10,489
            2.38%
            0.04%Flat-rate
                scenario
            10,245200
                basis point decline
            10,288
            0.42%
            0.04%





As
      market
      conditions vary from those assumed in the interest rate sensitivity analysis,
      actual results will likely differ due to: the varying impact of changes in
      the
      balances and mix of loans and deposits differing from those assumed; the impact
      of possible off balance sheet hedging strategies; and other internal/external
      variables. Furthermore, the sensitivity analysis may not reflect all actions
      that ALCO might take in responding to or anticipating changes in interest
      rates.





The
      model
      that is used to perform the simulation (the results of which are depicted above)
      assumes a gradual parallel shift of the yield curve over twenty four months
      and
      reprices every interest bearing asset and liability on the Company’s balance
      sheet. The model uses contractual repricing dates for variable products;
      contractual maturities for fixed rate products, and product-specific assumptions
      for deposits such as NOW Accounts and Money Market Accounts that are subject
      to
      repricing based on current market conditions. Investment securities with call
      provisions will be examined on an individual basis in each rate environment
      to
      estimate the likelihood of a call.





The
      Company could enter into interest rate swap, cap or floor contracts, from time
      to time, to mitigate the effects on net interest income in the event interest
      rates on variable deposits rise or rates on variable rate loans decline. No
      interest rate swap, cap or floor contracts were entered into during the years
      ending December 31, 2005 or 2004.








14








**Market
      Risk**





Market
      risk is the risk of loss in a financial instrument arising from adverse changes
      in market rates/prices such as interest rates, foreign currency exchange rates,
      commodity prices, and equity prices. The Company’s primary market risk exposure
      is interest rate risk. The ongoing monitoring of this risk is an important
      component of the Company’s asset/liability management process, which is governed
      by policies established by its Board of Directors that are reviewed and approved
      annually. The Board of Directors delegates responsibility for carrying out
      the
      asset/liability management policies to the ALCO. In this capacity the ALCO
      develops guidelines and strategies impacting the Company’s asset/liability
      management related activities based upon estimated market risk sensitivity,
      policy limits and overall market interest rate level/trends.








**Credit
      Risk**





The
      Bank’s lending staff manages credit risk with review by credit administration
      and senior management and oversight by the Board of Directors. The Board of
      Directors grants each loan officer the authority to originate loans on behalf
      of
      the Company and establishes policies regarding loan portfolio diversification
      and loan officer lending limits. The Company’s loan portfolio is monitored
      through the use of a variety of management reports and with the assistance
      of an
      external loan review firm, for performance, creditworthiness and quality
      documentation. The portfolio is also examined by the OCC. Risk ratings are
      assigned to commercial loans at inception and are routinely reviewed. When
      necessary, loan officers take remedial actions to assure full and timely
      repayment of loan balances. The Company’s policy is to discontinue the accrual
      of interest on loans when scheduled payments become contractually past due
      90
      days or more or when the ultimate collectibility of principal or interest
      becomes doubtful. Consumer installment loans will be charged off when they
      reach
      120 days past due.








**LIQUIDITY
      AND CAPITAL RESOURCES MANAGEMENT**





Liquidity,
      as it pertains to banking, can be defined as the ability to generate cash in
      the
      most economical way to satisfy loan demand and/or deposit withdrawal demand,
      and
      to meet other business opportunities that require cash. Sources of liquidity
      for
      banks include short-term liquid assets, cash generated from loan repayments
      and
      amortization, borrowing, deposit generation and earnings. Additionally, the
      Company’s investment portfolio is actively managed by the ALCO and is a strong
      source of cash flow for the Company. The portfolio is fairly liquid, with a
      weighted average maturity of 3.1 years, and is available to be used as a source
      of funds, if needed. Eighty-nine percent of the portfolio is held as
      available-for-sale. Including the effect of potential calls on specific
      investments, the weighted average life of the portfolio is 2.6
      years.





Approximately
      $13.9 million in capital was generated during the Bank’s initial stock offering.
      At December 31, 2001, capital had reduced to $12.3 million due to the effects
      of
      organizational costs and operating losses. The net loss recorded during 2002
      further reduced the capital to $9.5 million as of December 31, 2002. During
      2003, the Bank recorded losses during the first three calendar quarters and
      recorded a small net profit during the calendar quarter ending December
      31 st .
      For the
      full year 2003 a net loss of $1,156,000 was recorded. Also during 2003, the
      Bank
      conducted a subscription rights and community offering to raise additional
      capital to support further growth as was planned in the original business plan.
      This offering resulted in the issuance of 721,581 additional shares of common
      stock and provided net proceeds of $6.5 million. The offering also resulted
      in
      the issuance of warrants to purchase 180,395 shares of common stock at a price
      of $11.00 per share at any time on or before September 30, 2006. Net Income
      during 2004 and 2005 amounted to $286,000 and $2,565,000 respectively. The
      resulting stockholders’ equity at December 31, 2005 equaled $17.2 million. This
      level of capital does not include the $7.5 million of trust preferred securities
      issued by the Company in 2005, of which approximately $5.8 million may be
      treated as capital for bank regulatory purposes. Under application provisions
      of
      federal banking law, the Company must meet specific quantitative capital
      requirements. See Item I, “Description of Business” and “Notes to Consolidated
      Financial Statements, Note 12.”








**CONTRACTUAL
      OBLIGATIONS**





The
      Bank
      issues financial instruments with off-balance sheet risk in the normal course
      of
      business to meet the financing needs of its customers. At December 31, 2005
      these financial instruments included commitments to originate loans, unused
      lines of credit and secured lines of credit totaling $55.6 million; $8.5






15






million
      of which involves original maturities in excess of one year. In addition, the
      Company had issued letters of credit totaling $3.5 million at December 31,
      2005.
      For further information see “Notes to Financial Statements, Note 10 (a)
      Financial Instruments with Off-Balance Sheet Risk.”





The
      Bank
      has entered into a five year contract with Fiserv Solutions, Inc. for data
      processing and item processing services. The contract term ends on October
      1,
      2010. The minimum amount due under the terms of the contract is $100,000 per
      year. See “Notes to Financial Statements, Note 10 (f) Data Processing Service
      Agreements”.





The
      Bank
      has entered into certain lease arrangements for its headquarters and branch
      facilities. These lease obligations include commitments for payments amounting
      to $6.2 million in the aggregate during the lives of the leases. See “Notes to
      Financial Statements, Note 10 (b) Lease Commitments”.








**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 123R (revised 2004). SFAS No. 123R replaces
      SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes
      Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for
      Stock Issued to Employees”. SFAS No. 123R will require that the
      compensation cost relating to share-based payment transactions be recognized
      in
      the Company’s financial statements, eliminating pro forma disclosure as an
      alternative. That cost will be measured based on the grant-date fair value
      of
      the equity or liability instruments issued. SFAS No. 123R is effective
      for small business filers as of the first interim or annual period that begins
      after December 31, 2005. The Company expects to adopt SFAS No. 123R utilizing
      the modified prospective method of adoption. The impact of the Company adopting
      such accounting can be seen in Note 2, Stock-Based Compensation of the
      Notes to Consolidated Financial Statements included in Item 7 hereof. The
      Company does not believe the adoption of SFAS No.123R will have a material
      impact to the Company and estimates the 2006 compensation expense, net of taxes,
      related to share-based payment transactions to be recognized will be
      approximately $80,000.





The
      Financial Accounting Standards Board’s (FASB) Emerging Issues Task Force
      (“EITF”) issued a consensus on EITF Issue 03-1. EITF 03-1 contains new
      guidance on other-than-temporary impairments of investment securities. The
      guidance dictates when impairment is deemed to exist, provides guidance on
      determining if impairment is other than temporary, and directs how to calculate
      impairment loss. Issue 03-1 also details expanded annual disclosure rules.
      In September 2004, the FASB delayed the effective date for the measurement
      and
      recognition guidance contained in paragraphs 10-20 of EITF 03-1. The
      adoption of EITF 03-1 or FASB Staff Position (“FSP”) No. 115-1 “The Meaning
      of Other-than-temporary impairment and Its Application to Certain Investments”
did not have a material impact on the Company’s financial position or results of
      operations.








**ITEM
      7 - FINANCIAL STATEMENTS**





The
      information required by this item 7 is contained in Part F/S, pages F-1 to
      F-26
      of this Form 10-KSB.








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





There
      has
      been no change of the Company’s principal accountants during the Company’s two
      most recent fiscal years.








**ITEM
      8A - CONTROLS AND PROCEDURES**





(a)
            The
                Company’s Chief Executive Officer and Chief Financial Officer have
                concluded that the Company’s disclosure controls and procedures are
                effective. This conclusion is based on the above-referenced officers’
                evaluation of such controls and procedures at December 31,
                2005.


(b)
            There
                have not been any changes in the Company’s internal controls over
                financial reporting that occurred during the Company’s last fiscal quarter
                that has materially affected, or is reasonably likely to materially
                affect, the company’s internal control over financial
                reporting.








16





**ITEM
      8B - OTHER INFORMATION**





None.








**PART
      III**





**ITEM
      9** **-
      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH
      SECTION 16(** **a** **)
      OF THE EXCHANGE ACT**





The
      Bylaws of the Company provide that the Board of Directors shall manage the
      Company. The Bylaws further provide that the Board shall consist of not less
      than five (5) or more than twenty-five (25) directors as determined from time
      to
      time by the Board or shareholders. At this time the Board is comprised of
      fifteen (15) directors **** divided
      into three classes, with each class serving a term of three years. Each of
      the
      directors, with the exception of Mr. Marois, has served since the first annual
      Shareholder’s Meeting of the Bank in November 2001. Mr. Marois has served as a
      director since September 17, 2002. Officers serve at the discretion of the
      Board
      of Directors.





**Background
      of Directors and Executive Officers**





Certain
      information about the business experience of the Directors and Non-Director
      Executive Officers of the Company and the Bank, including their service as
      directors of other corporations, is listed below.





**Directors**





**Robert
      D. Ansin** **(36)**  - Mr.
      Ansin has served as President and Chief Executive Officer of Massachusetts
      Innovation Center, LLC, (“MIC”), a real estate development firm, since 1997.
      Prior to founding MIC, he was President and Chief Executive Officer of Nisna
      Investments, Inc., specializing in residential and industrial real estate
      development and investment. Mr. Ansin is on the Board of Governors of the
      Lawrence Boys & Girls Club, Inc. He received a B.A. degree from the
      University of Massachusetts, Amherst in 1993.





**Gerald
      D. Cohen** **(52)** - For
      over the past five years, Mr. Cohen has been involved in real estate development
      and management as Treasurer of CGI Management, Inc., President of S.F.
      Properties, Inc. and Manager of SF Properties, LLC. He is a licensed real estate
      broker in Massachusetts. Mr. Cohen received a B.A. degree from Brown University
      in 1975 and an MBA degree from Northwestern University in 1979.





**Cary
      J. Corkin** **(54)** - Mr.
      Corkin is Vice President of Government Products at The Entwistle Company, where
      he has worked since 1974. The Entwistle Company designs and builds equipment
      for
      all branches of the armed forces and manufactures commercial products for a
      wide
      range of users. Mr. Corkin is a member of the National Contract Management
      Association and the American Welding Society. He received a B.S. degree in
      1974
      from the University of Denver. Mr. Corkin’s cousin is married to Director George
      L. Kaplan.





**Lawrence
      J. Glick** **(47)** - Since
      1985, Mr. Glick has served as Vice President of Bancroft Motors, Inc., Edward
      Buick-GMC, Inc. and Bancroft Leasing Corporation, where he is responsible for
      sales and service of new and pre-owned vehicles. Since 1992, Mr. Glick has
      served as President of H. Glick & Sons, Inc., a Worcester-based company
      doing business as Bancroft Tire Center. Mr. Glick resigned from H. Glick &
Sons, Inc. in March 2005. In December 2005, H. Glick & Sons, Inc. filed a
      bankruptcy petition under Chapter 7 of the United States Bankruptcy Code. Mr.
      Glick is a 1980 graduate of Tufts University and received his MBA from Columbia
      University in 1982. Mr. Glick is a Director of the Worcester Business
      Development Corporation and the Massachusetts State Automobile Dealers
      Association. Mr. Glick is the nephew of Director J. Robert Seder.





**Stephen
      J. Granger** **(53)** -Mr.
      Granger is Vice Chairman of Granger Management Corporation, a holding company
      for construction/development firms located in Massachusetts. He is also Vice
      President and Treasurer of the Cortland Corporation, which owns an assisted
      living facility in northern Worcester County. Mr. Granger is a Trustee of
      Assumption College and Notre Dame Academy and is also the Chairman of the






17






Board
      of
      St. Francis Home in Worcester, Massachusetts. He received a B.S. degree from
      Boston University in 1974.





**George
      L. Kaplan** **(57)** - Mr.
      Kaplan is Vice President of Commercial Sales & Engineering at The Entwistle
      Company where he has worked since 1973. He is also the President and Director
      of
      Alem, Inc. Mr. Kaplan received a B.A. degree from the University of Denver
      in
      1970. Mr. Kaplan is married to Director Cary Corkin’s cousin.





**John
      P. Lauring** **(51** )
      - Mr.
      Lauring is Chief Executive Officer of Lauring Construction Co., Inc., which
      he
      joined in 1985. Since October 2005 Mr. Lauring is also CEO and Director of
      Tasco
      Holdings International Inc. He is a member of the Massachusetts Bar and a
      director of Associated General Contractors of Massachusetts. Mr. Lauring
      received a B.S. degree from Tufts University in 1976 and earned a J.D. degree
      in
      1984 from Western New England College of Law.





**Harris
      L. MacNeill** **(49)** - Mr.
      MacNeill is the President and Chief Executive Officer of MacNeill Engineering
      Worldwide, a manufacturer of sports shoe hardware with operations in the United
      States, Europe, and the Pacific Rim, where he has worked since 1979. He received
      his B.S. degree from Northeastern University in 1979.





**Ralph
      D. Marois** **(40)** - Mr.
      Marois is Vice President of Marois Brothers, Inc., a land excavation contracting
      firm, where he has worked since 1995. He is Director and Treasurer of the Auburn
      Chamber of Commerce. He received a B.S. degree from Assumption College in
      1987.





**Henry
      T. Michie** **(52)** - Mr.
      Michie is the Treasurer of Mercantile Image Press, Inc., which was formed from
      the 1998 merger of Instant Image Press, which Mr. Michie helped found in 1980,
      and Mercantile Press. He received a B.S. degree from Babson College in 1976.
      He
      is a Trustee of Bancroft School and President of the Trustees of Rural
      Cemetery.





**Richard
      J. Noonan** **,
      C.P.A. (78)** - Since
      1991, Mr. Noonan has served as Treasurer and a Director of Parker Metal
      Corporation and its wholly-owned subsidiary Parker International Products,
      a
      Worcester based manufacturer and distributor. Previously, Mr. Noonan completed
      a
      long career as a certified public accountant. He retired in 1990 from a
      management position as partner in a major national accounting firm. Mr. Noonan
      also serves as a director for various private, for profit companies.





**Claire
      A. O’Connor** **(46)** - Since
      1989, Ms. O’Connor has been co-owner of O’Connor’s Restaurant & Bar and
      serves as Treasurer and Clerk of the Harp & Eagle Restaurant Company, Inc.
      and 1160 West Boylston Street Realty Trust. Ms. O’Connor graduated from Shannon
      College of Hotel Management in Ireland in 1982. She is a member of the
      Massachusetts Restaurant Association.





**Bryan
      T. Rich** **(49)** - Mr.
      Rich has served as President of TREC, LLC, a real estate investment company,
      since 1998. He is the Co-Chairman and Executive Director of NationsRent
      Companies Inc. (“NationsRent”), a construction and industrial equipment rental
      company, a position he has held since 2003, Chairman of Phantom Equipment Rental
      Co., and Managing Member of Phoenix Rental Partners. Mr. Rich was the President
      and Chief Executive Officer of Logan Equipment Corp. for over 15 years prior
      to
      its merging with NationsRent in December 1998. He received a B.S. degree from
      Boston College in 1978.





**J.
      Robert Seder** **(66)** - Mr.
      Seder is a Senior Partner with the law firm of Seder & Chandler, LLP in
      Worcester where he has practiced law since 1967. A graduate of Brown University
      and the New York University School of Law, he was admitted to the Massachusetts
      Bar in 1964. Mr. Seder is a member of the Bars of the State of New York and
      the
      State of Florida and is a fellow of the American College of Bankruptcy. He
      is
      President and a Director of each of: the Jewish Health Care Center, Inc., JHC
      Assisted Living Corp., and Jewish Home Hospice, Inc., as well as a Director
      of
      the Worcester Regional Research Bureau. Mr. Seder is the uncle of Director
      Lawrence J. Glick.





**Charles
      R. Valade** **(54)** - Mr.
      Valade has served as President and Chief Executive Officer of the Company since
      its formation in December 2005 and as President and Chief Executive Officer
      of
      its wholly-owned subsidiary, Commonwealth National Bank, since its founding
      in
      2001. Mr. Valade was hired as the Senior Loan Officer at First Massachusetts
      Bank, N.A. in 1996. He left First Massachusetts Bank in December 2000 to assist
      its organizers in forming Commonwealth National Bank. Previously, Mr. Valade
      was
      a Vice President and Team Leader at Bank of Boston from 1994 to 1996 and held
      various positions in the lending area for Mechanics Bank from 1974 until their
      acquisition by Bank of Boston in 1994. He is Director & Treasurer of Dismas
      House and a Director of The Worcester Club, Worcester Business Development








18






Corporation,
      Worcester Housing Development Corporation, and Worcester Regional Research
      Bureau. He is also a Community Trustee of the United Way of Central
      Massachusetts and a Trustee and member of the Investment Committee for the
      Greater Worcester Community Foundation. Mr. Valade received a B.S. degree from
      Nichols College in 1974.




**Non-Director
      Executive Officers**





**Martha
      A. Dean** **(44)**  - Ms.
      Dean
      joined Commonwealth National Bank in September 2001 to assist its organizers
      and
      currently serves as a Senior Vice President and the Chief Operations Officer.
      Ms. Dean is not an officer of the Company. She previously worked for Flagship
      Bank & Trust Company from 1988 to September 2001 where she was Vice
      President, Operations Manager. From 1982 to 1988, Ms. Dean was a loan-servicing
      supervisor at Guaranty Bank. Ms. Dean is a graduate of Worcester State
      College.





**William
      M. Mahoney** **(55)**  - Mr.
      Mahoney has served as Chief Financial Officer and Treasurer of the Company
      since
      its formation in December 2005. He joined Commonwealth National Bank in December
      2000 to assist its organizers where he is a Senior Vice President and the Chief
      Financial Officer. Previously he held a financial management position at
      BankBoston Financial Corp., which he joined in 1994. He was the Chief Financial
      Officer of Mechanics Bank in Worcester from 1981 until their acquisition by
      Bank
      of Boston in 1994. He is a graduate of Providence College and the Stonier
      Graduate School of Banking and received an MBA from the University of
      Connecticut.





**Christine
      Trifari** **(50)**  -
      Ms.
      Trifari has served as the Corporate Secretary of the Company since its formation
      in December 2005. She joined
      Commonwealth National Bank in December 2000 to assist its organizers where
      she
      is a Senior Vice President and the Chief Credit Officer. Previously she joined
      First Massachusetts Company in 1996 as its Senior Credit Officer. Ms. Trifari
      was the Director of Loan Review for Banknorth Group, Inc. from 1990 until her
      transfer to its affiliate, First Massachusetts Bank, in April 1996. She began
      her career at BayBank Boston in 1982. Ms. Trifari received a B.A. degree from
      Providence College and an MBA degree from Babson College. She is a member of
      the
      Board of Directors of ARTSWorcester and the Family Health Center of
      Worcester.





**Andrea
      J. White** **(40)**  -
      Since joining
      Commonwealth National Bank in June 2001 to assist its organizers, Ms. White
      has
      served as a Senior Vice President and the Chief Retail Officer. Ms. White is
      not
      an officer of the Company. She joined Flagship Bank & Trust Company in 1993
      as Branch Administrator. From 1987 to 1993 she held management positions at
      Bank
      of New England and Fleet Bank. Ms. White is a graduate of North Adams State
      College and received an MBA from Nichols College.








**Audit
      Committee Financial Expert**





The
      Company’s Board of Directors has determined that the Company has at least one
      audit committee financial expert serving on its Audit Committee. That person
      is
      Director Richard J. Noonan, C.P.A. Mr. Noonan is “independent,” as that term is
      defined in Rule 4200(a)(15) of the NASD’s listing standards.








**Code
      of Ethics**





The
      Board
      of Directors has adopted a Code of Ethics, which includes specific requirements
      for the Chief Executive Officer, the Chief Financial Officer and all other
      employees with financial reporting responsibilities. A copy of the Code of
      Ethics can be found on the Company's website at www.commonwealthworcester.com .





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act, as amended, requires the Company’s directors,
      executive officers and persons who beneficially own more that 10% of the
      Company’s Common Stock (“Reporting Persons”) to file reports of ownership and
      changes in ownership of the Company’s stock with the OCC and to furnish the
      Company with copies of all Section 16 (a) forms they file.





Based
      on
      our review of copies of reports we have received, the Company is aware of
      non-compliance by one director and five executive officers, during the year
      ending December 31, 2005, with Section 16(a) filing requirements applicable
      to
      them. Director Marois filed one late report. Executive officer’s Dean, Mahoney,








19






Trifari,
      Valade and White each filed a Form 5 in February 2006 to correct the oversight
      of not completing a Section 16(a) filing at the time employee options were
      granted during the calendar years 2002 through 2005.








**ITEM
      10 - EXECUTIVE COMPENSATION**





**Summary
      Compensation Table**





The
      table
      below provides information concerning the annual and long-term compensation
      of
      the Company’s chief executive officer and the most highly compensated executive
      officers, other than its chief executive officer, whose annual compensation
      exceeded $100,000 for the period from January 1, 2005 through December 31,
      2005.





**Annual
                Compensation**
            **Long
                Term Compensation****Awards**
            **Payouts****Name
                and Principal Position**
            **Year**
            **Salary
                (1)**
              **($)**
            **Bonus**
              **($)**
            **Other
                Annual Compensation (2)**
              **($)**
            **Restricted
                Stock Awards**
              **($)**
            **Securities
                Underlying Options/ SARs (3)**
            **LTIP
                Payouts**
            **All
                Other Compensation**
              **($)**Charles
                R. Valade;
            2005
            169,000
            -
            10,400
            -
            9,095
            -
            610President/CEO
            2004
            150,000
            -
            6,900
            -
            10,000
            -
            5202003
            120,000
            -
            5,400
            -
            5,000
            -
            500William
                M. Mahoney;
            2005
            115,300
            -
            5,670
            -
            3,200
            -
            480Senior
                Vice
            2004
            107,500
            -
            4,970
            -
            3,200
            -
            460President/CFO
            2003
            103,500
            -
            4,660
            -
            2,400
            -
            430





(1)
            Includes
                elective deferrals pursuant to Section 401(k) of the Internal Revenue
                Code. Also includes compensation paid by Commonwealth National
                Bank


(2)
            Includes
                the value of premiums paid by Commonwealth National Bank for employee
                life
                insurance in excess of $50,000 of coverage, as well as contributions
                by
                Commonwealth National Bank to the officers’ 401(k) Plan balances. Subject
                to certain age and service requirements, all employees of Commonwealth
                National Bank are eligible to participate in this
                plan.


(3)
            Reflects
                options granted under the Commonwealth National Bank 2001 Stock Option
                Plan.








**Option
      Grants in 2005**





The
      following table provides information on options granted to the Named Executives
      during the year ended December 31, 2005 (including options granted by
      Commonwealth National Bank, prior to the December 2005 holding company
      reorganization):





******OPTION/SAR
                GRANTS IN LAST FISCAL YEAR****(Individual
                Grants)**Name
            Number
                of Securities Underlying Options Granted
            Percent
                of Total Options Granted to Employees in 2005
            Exercise
                or Base Price ($/Share)
            Expiration
                DateCharles
                R. Valade
            9,095
            18,43%
            $12.75
            April
                21, 2015William
                M. Mahoney
            3,200
            6.48%
            $12.75
            April
                21, 2015





Options
      may not be exercised in full or in part prior to the expiration of one year
      from
      the date of the grant. Twenty five percent of the options become exercisable
      on
      each of the first through fourth annual anniversary dates of the
      grants.





**Compensation
      of Directors**





Beginning
      in the year 2005, the directors approved the payment of fees to non-employee
      directors based upon each individual director’s attendance at meetings of the
      Board of Directors and of committees of the Board of Directors at a rate of
      $200
      per meeting attended. Future changes in the Company’s director fee








20






policy
      will depend on its earnings, capital requirements and financial condition and
      on
      other factors that the Board of Directors considers relevant.








**Employee
      Contracts**





The
      Company does not have any written employment contracts with any executive
      officers, all of whom are employees at will. The Compensation Committee on
      behalf of the Board of Directors is currently negotiating change in control
      agreements with each of the five Executive Officers which would provide for
      severance pay in the event a change in control occurred.





**Stock
      Option Plan**





On
      November 6, 2001, the Bank’s shareholders voted to approve the Bank’s 2001 Stock
      Option Plan (the “Plan”) for employees and directors of the Bank. Upon the
      reorganization of the Bank into a holding company structure on December 16,
      2005, the Company assumed the Plan. The Plan (which has an originally authorized
      200,000 shares for grant plus an additional 200,000 shares authorized in 2005,
      for a total of 400,000 shares), is administered by the Compensation Committee
      of
      the Board of Directors. Both incentive stock options and non-qualified stock
      options may be granted under the Plan. The authorization of grants, the
      determination of number of shares to be granted, the exercise date and the
      option price of each award will be determined by the Compensation Committee
      on
      the date of grant. The options vest annually at a rate of 25% over a four-year
      period, and will expire on the tenth anniversary of the grant date. Options
      have
      been granted by the Committee each year since 2002. On April 21, 2005 the
      Committee awarded stock options for a total of 49,350 shares to the officers
      and
      employees of the Bank.








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





The
      following table sets forth certain information with respect to beneficial
      ownership of the common stock of the Company as of March 1, 2006 by persons
      or
      organizations, other than directors and executive officers, believed by us
      to
      own of record or beneficially more than five percent of the Company’s common
      stock.




**Name
                of Beneficial**
              **Owner**
            
            **Address**
            
            **Amount
                and Nature of Beneficial Ownership**
            
            **Percent
                of Class**
              (1)Ronald
                M. Ansin
            
            132
                Littleton Rd.
              Harvard,
                MA 01451
            
            135,000(2)
            
            5.5%Herbert
                I. Corkin
            
            445
                Grand Bay Drive, Apt 1106
              Key
                Biscayne, FL 33149
            
            148,055(3)
            
            6.0%







·
            (1)
                Includes the aggregate number of shares outstanding, shares reserved
                for
                issuance under currently exercisable warrants and shares which may
                be
                acquired within 60 days through the exercise of stock
                options.




·
            (2)
                Includes currently exercisable warrants to purchase 15,000 shares.




**·**
            (3)
                Includes currently exercisable warrants to purchase 6,250 shares
                held by
                Mr. Corkin, 25,000 shares and currently exercisable warrants to purchase
                6,250 shares held by a charitable foundation for which he is a co-trustee
                and 80,555 shares and currently exercisable warrants to purchase
                5,000
                shares held by a private corporation of which Mr. Corkin owns more
                than
                10%.




The
      table
      on the next page sets forth certain information with respect to beneficial
      ownership of the common stock of the Company as of March 1, 2006 by (1) each
      director and proposed director and the named executive officers of the Company,
      and (2) all directors and proposed directors and all named executive officers
      as
      a group. Unless otherwise indicated, each person listed below exercises sole
      voting and investment powers with respect to all shares shown as beneficially
      owned by them.








21




**Name
                of Beneficial Owner**
            
            **Address**
            
            **Amount
                and Nature of Beneficial Ownership**
            
            **Percent
                of Class**
              **(1)**Robert
                D. Ansin
              Director
            
            MassInnovation,
                LLC
              c/o
                The Wood Worsted Mill
              250
                Merrimack Street
              Lawrence,
                MA 01843
            
            74,653(2)
            
            3.0%Gerald
                D. Cohen
              Director
            
            c/o
                SF Properties, Inc.
              637
                Washington St., Suite 200
              Brookline,
                MA 02446-4579
            
            18,617(3)
            
            *****Cary
                J. Corkin
              Director
                (Chairman)
            
            c/o
                The Entwistle Company
              Bigelow
                Street
              Hudson,
                MA 01749
            
            7,500(4)
            
            *****Lawrence
                J. Glick
              Director
            
            c/o
                Bancroft Motors, Inc.
              569
                Oxford St. South
              Auburn,
                MA 01501
            
            16,000(5)
            
            *****Stephen
                J. Granger
              Director
            
            c/o
                Cortland Corporation
              415
                Boston Turnpike
              Shrewsbury,
                MA 01545
            
            48,280(6)
            
            2.0%George
                L. Kaplan
              Director
            
            c/o
                The Entwistle Company
              Bigelow
                Street
              Hudson,
                MA 01749
            
            104,000(7)
            
            4.2%John
                P. Lauring
              Director
            
            c/o
                Lauring Construction Company, Inc.
              23
                Brigham Road
              Worcester,
                MA 01609
            
            30,000(8)
            
            1.2%Harris
                L. MacNeill
              Director
            
            c/o
                MacNeill Engineering Worldwide
              289
                Elm Street, PO Box 735
              Marlboro,
                MA 01752
            
            29,463(9)
            
            1.2%Ralph
                D. Marois
              Director
            
            c/o
                Marois Brothers, Inc.
              115
                Blackstone River Road
              Worcester,
                MA 01607
            
            22,375(10)
            
            *Henry
                T. Michie
              Director
            
            c/o
                Mercantile/Image Press, Inc.
              Hartwell
                Industrial Park
              70
                Hartwell Street
              West
                Boylston, MA 01583
            
            31,000(11)
            
            1.3%Richard
                J. Noonan
              Director
            
            c/o
                Parker International Products
              243
                Stafford Street, PO Box 15052
              Worcester,
                MA 01605
            
            17,500(12)
            
            *Claire
                A. O’Connor
              Director
            
            26
                Townsend Drive
              West
                Boylston, MA 01583
            
            16,756(13)
            
            *Bryan
                T. Rich
              Director
            
            Ocean
                Two, 19111 Collins Avenue
              Unit
                1108
              Sunny
                Isles, FL 33160
            
            60,565(14)
            
            2.5%J.
                Robert Seder
              Director
            
            c/o
                Seder & Chandler
              339
                Main Street
              Worcester,
                MA 01608
            
            11,351(15)
            
            *Charles
                R. Valade
              Director,
                President and CEO
            
            c/o
                CNB Financial Corp.
              33
                Waldo Street
              Worcester,
                MA 01608
            
            35,374(16)
            
            1.4%William
                M. Mahoney
              Chief
                Financial Officer
            
            c/o
                CNB Financial Corp.
              33
                Waldo Street
              Worcester,
                MA 01608
            
            12,550(17**)**
            
            *All
                directors and executive officers as a group
            
            568,597
            
            23.1%


*
      Less
      than 1%










22





·
            (1)
                Includes the aggregate number of shares outstanding, shares reserved
                for
                issuance under currently exercisable warrants and shares which may
                be
                acquired within 60 days through the exercise of stock
                options.




·
            (2)
                Includes currently exercisable warrants to purchase 10,810 shares.




·
            (3)
                Includes currently exercisable warrants to purchase 5,213 shares
                and 4,852
                shares and currently exercisable warrants to purchase 213 shares
                owned by
                Mr. Cohen’s spouse. Also includes 1,650 shares and currently exercisable
                warrants to purchase 212 shares owned by the pension plan of a corporation
                of which Mr. Cohen owns more than 10% and 1,500 shares and currently
                exercisable warrants to purchase 125 shares owned by a trust of which
                his
                spouse serves as a trustee.****Mr. Cohen disclaims beneficial ownership in the shares beneficially
                owned
                by the trust.




·
            (4)
                Includes currently exercisable warrants to purchase 500 shares.




·
            (5)
                Includes currently exercisable warrants to purchase 5,000 shares
                held by
                Mr. Glick and 1,000 shares and currently exercisable warrants to
                purchase
                250 shares held by Mr. Glick’s IRA. Also includes the following: 3,000
                shares held by Mr. Glick’s spouse, 1,000 shares and currently exercisable
                warrants to purchase 250 shares held by his spouse’s IRA and 500 shares
                owned by a private corporation of which Mr. Glick owns more than
                10%. Mr.
                Glick disclaims beneficial ownership of the shares beneficially owned
                by
                the corporation.




·
            (6)
                Includes exercisable warrants to purchase 6,000 shares, 8,549 shares
                and
                currently exercisable warrants to purchase 262 shares owned by Mr.
                Granger’s IRA, 4,875 shares and exercisable warrants to purchase 1,218
                shares owned by his spouse as custodian and 3,500 shares and currently
                exercisable warrants to purchase 875 shares owned by Mr. Granger’s
                spouse’s IRA. Also includes 10,000 shares held by his spouse and
                mother-in-law as tenants in common. Mr. Granger disclaims beneficial
                ownership of the shares beneficially owned by his spouse and
                mother-in-law.




·
            (7)****Includes
                exercisable warrants to purchase 100 shares and 92,000 shares and
                exercisable warrants to purchase 10,500 shares owned by a private
                corporation of which Mr. Kaplan owns more than 10%. Mr. Kaplan disclaims
                beneficial ownership of the shares owned by the corporation.





·
            (8)
                Includes 10,000 shares held with his spouse as tenants in common
                and
                10,000 shares and currently exercisable warrants to purchase 10,000
                shares
                owned by a private corporation of which Mr. Lauring owns more than
                10%.




·
            (9)
                Includes currently exercisable warrants to purchase 8,852 shares
                and 5,200
                shares owned by Mr. MacNeill’s spouse. Mr. MacNeill disclaims beneficial
                ownership in the shares beneficially owned by his
                spouse.




·
            (10)
                Includes currently exercisable warrants to purchase 3,875 shares
                and 3,000
                shares held by Mr. Marois as custodian for two minor children. Mr.
                Marois
                disclaims beneficial ownership in the shares he holds as
                custodian.




·
            (11)
                Includes currently exercisable warrants to purchase 10,000 shares,
                2,500
                shares owned by Mr. Michie’s spouse and 2,500 shares held by his spouse as
                custodian for their daughter. Mr. Michie disclaims beneficial ownership
                in
                the shares beneficially owned by his spouse and in those held by
                his
                spouse as custodian for their
                daughter.




·
            (12)
                Includes currently exercisable warrants to purchase 2,500 shares.




·
            (13)
                Includes 15,405 shares and currently exercisable warrants to purchase
                1,351 shares held with Ms. O’Connor’s spouse as tenants in
                common.




·
            (14)
                Includes currently exercisable warrants to purchase 10,000 shares,
                6,900
                shares held in Mr. Rich’s IRA, 37,312 shares and currently exercisable
                warrants to purchase 2,703 shares held with his spouse as tenants
                in
                common and 3,650 shares held in his spouse’s IRA.




·
            (15)
                Includes currently exercisable warrants to purchase 5,270 shares.




·
            (16)
                Includes 21,024 shares which may be acquired within 60 days through
                the
                exercise of stock options, 7,500 shares and currently exercisable
                warrants
                to purchase 1,500 shares held in Mr. Valade’s IRA, 4,600 shares and
                currently exercisable warrants to purchase 650 shares held with Mr.
                Valade’s spouse as tenants in common and 100 shares held by his spouse as
                custodian for their child. Mr. Valade disclaims beneficial ownership
                in
                the shares beneficially held by his spouse as custodian for their
                minor
                child.




·
            (17)
                Includes 9,700 shares which may be acquired within 60 days through
                the
                exercise of stock options, 1,700 shares and currently exercisable
                warrants
                to purchase 150 shares held with Mr. Mahoney’s spouse as tenants in
                common, an aggregate of 500 shares held with two of his children
                as
                tenants in common and an aggregate of 500 shares held by his spouse
                and
                two of his children as tenants in common.







23








**ITEM
      12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





At
      December 31, 2005, certain of the Company’s directors, executive officers,
      principal shareholders and their related interests had outstanding loans from
      the Bank totaling $9,734,000. All such transactions were entered into in the
      ordinary course of business, on substantially the same terms, including interest
      rates and collateral, as those prevailing at the time for comparable
      transactions with unrelated persons and do not involve more than the normal
      risk
      of collectability or present other unfavorable features. At December 31, 2004,
      loans from the Bank to related parties amounted to $5,193,000.





The
      Bank
      entered into a related-party lease agreement with J. Robert Seder, a Director
      of
      the Company for its main branch and administrative facility at 33 Waldo Street,
      Worcester, Massachusetts. The 15-year lease was entered into on December 1,
      2001
      for the amount of $152,000 per year for the initial three years of the lease
      term, increasing by 7% on each third year anniversary. The lease agreement
      has
      two separate five-year renewal options. This agreement represents an arms length
      transaction.





During
      2004 the Bank entered into a related party contract with Lauring Construction
      Co. Inc., a company partially owned by Mr. John Lauring, a director of the
      Company. Lauring Construction Co. Inc. was hired, after a competitive bidding
      process, for a contract amount of $579,000 to construct the Bank’s branch in
      Northbridge, Massachusetts.





**ITEM
      13—EXHIBITS**





Exhibit
                No.
            Description
            Reference
                to:3.1
            Articles
                of Organization
            Exhibit
                3.1 to CNB Financial Corp.’s Form 8-K dated December 19,
                20053.2
            Bylaws
            Exhibit
                3.2 to CNB Financial Corp.’s Form 8-K dated December 19,
                20054.1
            Warrant
                Form
            Exhibit
                4.1 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency4.2
            Common
                Stock Certificate
            Exhibit
                4.2 hereto4.3
            Form
                of Subscription Rights Certificate
            Exhibit
                4.1 to Commonwealth National Bank’s Registration Statement on Form SB-2/A
                dated July 28, 2003 as filed with the Office of the Comptroller of
                the
                Currency4.4
            Form
                of Warrant to Purchase Common Stock
            Exhibit
                4.2 to Commonwealth National Bank’s Registration Statement on Form SB-2/A
                dated July 28, 2003 as filed with the Office of the Comptroller of
                the
                Currency10.1
            Lease
                for 33 Waldo Street, Worcester
              Massachusetts
            Exhibit
                10.1 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency10.2
            Stock
                Option Plan
            Exhibit
                10.2 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency10.3
            Lease
                for 572 Main Street, Shrewsbury Massachusetts
            Exhibit
                10.3 to Commonwealth National Bank’s Quarterly Report on Form 10-QSB dated
                August 13, 2002 as filed with the Office of the Comptroller of the
                Currency10.4
            Lease
                for One West Boylston Street, Worcester Massachusetts
            Exhibit
                10.4 to Commonwealth National Bank’s Quarterly Report on Form 10-QSB dated
                August 13, 2002 as filed with the Office of the Comptroller of the
                Currency10.5
            Lease
                for 701 Church Street, Northbridge Massachusetts
            Exhibit
                10.5 to commonwealth National Bank’s Quarterly report on form 10-QSB dated
                November 9, 2004 as filed with the Office of the Comptroller of the
                Currency10.6
            Lease
                for 1393 Grafton Street, Worcester Massachusetts
            Exhibit
                10.6 hereto21
            Subsidiaries
                of Small Business Issuer
            Exhibit
                21 hereto31.1
            Sarbanes-Oxley
                Section 302 Certification of Charles R. Valade
            Exhibit
                31.1 hereto






24






Exhibit
                No.
            Description
            Reference
                to:31.2
            Sarbanes-Oxley
                Section 302 Certification of William M. Mahoney
            Exhibit
                31.2 hereto32.1
            Sarbanes-Oxley
                Section 906 Certification of Charles R. Valade
            Exhibit
                32.1 hereto32.2
            Sarbanes-Oxley
                Section 906 Certification of William M. Mahoney
            Exhibit
                32.2 hereto








**ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      following table reflects the aggregate fees billed for the last two fiscal
      years
      for professional services by the Company’s independent registered public
      accounting firm, KPMG LLP, for the audit of the annual financial statements
      of
      the Company and its subsidiary Commonwealth National Bank. The table also
      reflects the aggregate fees billed in each of the last two fiscal years for
      professional services rendered by KPMG LLP for tax compliance, tax advice and
      tax planning. In particular, the tax fees billed were for preparation of the
      Bank’s tax filings for the prior year.





**2005**
            
            **2004**Audit
                Fees
            
            $
            88,000
            
            $
            85,000Audit
                Related Fees
            
            
            -
            
            
            -Tax
                Compliance Fees
            
            
            18,700
            
            
            15,800All
                Other *
            
            
            25,000
            
            
            -Total
            
            $
            131,700
            
            $
            100,800


*“All
                Other” includes fees related to an ownership change analysis in accordance
                with the provisions of Section 382 of the Internal Revenue
                Code.




The
      Audit
      Committee has not developed pre-approval policies because all engagements of
      independent accountants for audit or non-audit services must be approved by
      the
      Audit Committee .


25




**PART
      F/S**





**ITEM
      7**





**CNB
      FINANCIAL CORP.**





Consolidated
      Financial Statements


as
      of
      December 31, 2005 and 2004


and
      Report of Independent Registered Public Accounting Firm





F-1











**Index
      to Consolidated Financial Statements**




Report
                  of Independent Registered Public Accounting Firm
              F-3Consolidated
                  Balance Sheets at December 31, 2005 and 2004
              F-4Consolidated
                  Statements of Operations for the YearsEnded
                  December 31, 2005 and 2004
              F-5Consolidated
                  Statements of Stockholders’ Equity for theYears
                  Ended December 31, 2005 and 2004
              F-6Consolidated
                  Statements of Cash Flows for the YearsEnded
                  December 31, 2005 and 2004
              F-7Notes
                  to Consolidated Financial Statements
              F-8
  F-2











**Report
      of Independent Registered Public Accounting Firm**








The
      Board
      of Directors and Shareholders


CNB
      Financial Corp.:





We
      have
      audited the accompanying consolidated balance sheets of CNB Financial Corp.
      (the
      Company) and its subsidiary as of December 31, 2005 and 2004, and the
      related consolidated statements of operations, stockholders’ equity and cash
      flows for the years then ended. These consolidated financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits  in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. An audit includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements. An audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of CNB Financial Corp. and
      subsidiary as of December 31, 2005 and 2004, and the results of their operations
      and their cash flows for the years  then
      ended in conformity with U.S. generally accepted accounting
      principles.








/s/
      KPMG
      LLP








Boston,
      Massachusetts


March
      23,
      2006








F-3





**CNB
      FINANCIAL CORP.**





Consolidated
      Balance Sheets


As
      Of
      December 31, 2005 and 2004


**2005**
            
            **2004****ASSETS**Cash
                and Cash Equivalents
            
            $
            14,971,000
            
            $
            9,316,000Investment
                Securities Available-for-Sale, (AmortizedCost
                of $40,294,000 as of December 31, 2005 and$33,968,000
                as of December 31, 2004) (Note 3)
            
            
            39,593,000
            
            
            33,849,000Investment
                Securities Held To Maturity, (Fair Value of$9,005,000
                as of December 31, 2005 and $4,048,000as
                of December 31, 2004) (Note 3)
            
            
            9,110,000
            
            
            4,002,000Federal
                Reserve Bank Stock (Note 3)
            
            
            508,000
            
            
            446,000Federal
                Home Loan Bank Stock (Note 3)
            
            
            1,870,000
            
            
            1,431,000Loans
                (Note 4)
            
            
            180,848,000
            
            
            149,693,000Less-Allowance
                for Loan Losses (Note 4)
            
            
            (2,615,000
            )
            
            (2,025,000
            )Loans, Net
            
            
            178,233,000
            
            
            147,668,000Premises
                and Equipment, Net (Note 5)
            
            
            1,774,000
            
            
            1,994,000Accrued
                Interest Receivable
            
            
            971,000
            
            
            709,000Deferred
                Tax Asset
            
            
            2,056,000
            
            
            175,000Prepaid
                Expenses and Other Assets
            
            
            325,000
            
            
            224,000$
            249,411,000
            
            $
            199,814,000**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Liabilities:Deposits
                (Note
                6)
            
            $
            189,452,000
            
            $
            157,025,000Federal
                Home Loan Bank Advances (Note 7)
            
            
            33,500,000
            
            
            27,000,000Subordinated
                Debentures (Note 7)
            
            
            7,732,000
            
            
            -Accrued
                Expenses and Other Liabilities
            
            
            1,501,000
            
            
            805,000Total
                Liabilities
            
            
            232,185,000
            
            
            184,830,000Commitments
                and Contingencies (Note 10)Stockholders’
                Equity:Common stock
              Par
                Value: $1.00 and $5.00 per share as of December 31, 2005 and 2004,
                respectivelyShares
                Authorized: 10,000,000 and 4,000,000 as of December 31, 2005 and
                2004,
                respectivelyIssued
                and Outstanding: 2,113,000 and 2,111,000 as of December 31, 2005
                and 2004,
                respectively
            
            
            2,113,000
            
            
            10,556,000Additional
                Paid-in Capital
            
            
            18,314,000
            
            
            9,851,000Accumulated
                Deficit
            
            
            (2,787,000
            )
            
            (5,352,000
            )Accumulated
                Other Comprehensive Loss
            
            
            (414,000
            )
            
            (71,000
            )Total
                Stockholders' Equity
            
            
            17,226,000
            
            
            14,984,000$
            249,411,000
            
            $
            199,814,000


*See
        accompanying notes to consolidated financial
        statements.*


F-4
 **CNB
              FINANCIAL CORP.**
 
 Consolidated
              Statements of Operations
 For
              the
              Years December 31, 2005 and 2004





**2005**
            
            **2004**Interest
                and Divided Income:Interest and Fees on Loans
            
            $
            10,636,000
            
            $
            7,406,000Interest and Dividends on Investments
            
            
            1,944,000
            
            
            1,172,000Total
                Interest and Dividend Income
            
            
            12,580,000
            
            
            8,578,000Interest
                Expense:Interest Expense on Deposits
            
            
            3,853,000
            
            
            2,359,000Interest Expense on Borrowings
            
            
            1,024,000
            
            
            510,000Total
                Interest Expense
            
            
            4,877,000
            
            
            2,869,000Net
                Interest Income
            
            
            7,703,000
            
            
            5,709,000Provision
                for Loan Losses (Note 4)
            
            
            590,000
            
            
            612,000Net
                Interest Income, After Provisionfor Loan Losses
            
            
            7,113,000
            
            
            5,097,000Other
                Income:Fees on Deposit Accounts
            
            
            249,000
            
            
            169,000Loan Related Fees
            
            
            173,000
            
            
            154,000Other
            
            
            39,000
            
            
            41,000Total
                Other Income
            
            
            461,000
            
            
            364,000Operating
                Expenses:Employee Compensation and Benefits
            
            
            3,381,000
            
            
            2,707,000Occupancy and Equipment
            
            
            1,033,000
            
            
            797,000Professional Fees
            
            
            640,000
            
            
            448,000Marketing
                and Public Relations
            
            
            403,000
            
            
            423,000Data Processing Expenses
            
            
            313,000
            
            
            284,000Other General and Administrative Expenses
            
            
            730,000
            
            
            546,000Total
                Operating Expenses
            
            
            6,500,000
            
            
            5,205,000Income
                Before Income Taxes
            
            
            1,074,000
            
            
            256,000Income
                Taxes Benefit (Note 8)
            
            
            (1,491,000
            )
            
            (30,000
            )Net
                Income
            
            $
            2,565,000
            
            $
            286,000Net
                Income per Basic Share
            
            $
            1.21
            
            $
            0.14Net
                Income per Diluted Share
            
            $
            1.19
            
            $
            0.13Weighted
                Average Shares - Basic
            
            
            2,112,000
            
            
            2,111,000Weighted
                Average Shares - Diluted
            
            
            2,152,000
            
            
            2,176,000





*See
      accompanying notes to consolidated financial statements.*





F-5


**CNB
      FINANCIAL CORP.**





Consolidated
      Statements of Stockholders’ Equity


For
      the
      Years Ended December 31, 2005 and 2004







**Common
                Stock****Number
                of Shares**
            
            **Par
                Value**
            
            **Additional
                Paid-in Capital**
            
            **Accumulated
                Deficit**
            
            **Accumulated
                Other Comprehensive Loss**
            
            **Total**Balance,
                December 31, 2003
            
            
            2,111,000
            
            $
            10,555,000
            
            $
            9,849,000
            
            $
            (5,638,000
            )
            $
            19,000
            
            $
            14,785,000Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            286,000
            
            
            -
            
            
            286,000Other
                Comprehensive LossUnrealized
                Gains (Losses) on Securities Available-for-Sale,
              net of Deferred Taxes of $49,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (90,000
            )
            
            (90,000
            )Total
                Comprehensive Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            196,000Exercise
                of Warrants
            
            
            -
            
            
            1,000
            
            
            2,000
            
            
            
            
            
            
            
            
            3,000Balance,
                December 31, 2004
            
            
            2,111,000
            
            
            10,556,000
            
            
            9,851,000
            
            
            (5,352,000
            )
            
            (71,000
            )
            
            14,984,000Net
                Income
            
            
            
            
            
            
            
            
            
            
            
            2,565,000
            
            
            -
            
            
            2,565,000Other
                Comprehensive LossUnrealized
                Gains (Losses) on Securities Available-for-Sale,
              net
                of Deferred Taxes of
                $238,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (343,000
            )
            
            (343,000
            )Total
                Comprehensive Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,222,000Exercise
                of Employee Stock Options
            
            
            2,000
            
            
            8,000
            
            
            8,000
            
            
            
            
            
            
            
            
            16,000Exercise
                of Warrants
            
            
            -
            
            
            2,000
            
            
            2,000
            
            
            
            
            
            
            
            
            4,000Exchange
                of Shares upon formation of holding company (Note 1)
            
            
            
            
            
            (8,453,000
            )
            
            8,453,000
            
            
            
            
            
            
            
            
            -Balance,
                December 31, 2005
            
            
            2,113,000
            
            $
            2,113,000
            
            $
            18,314,000
            
            $
            (2,787,000
            )
            $
            (414,000
            )
            $
            17,226,000
















*See
      accompanying notes to consolidated financial statements.*





F-6


**CNB
      FINANCIAL CORP.**





Consolidated
      Statements of Cash Flows


for
      the
      Years Ended December 31, 2005 and 2004


Cash
                Flows from Operating Activities:
            
            **2005**
            
            **2004**Net
                Income
            
            $
            2,565,000
            
            $
            286,000Adjustments
                to reconcile Net Income to Net Cash Used in Operating
                Activities-Provision
                for Loan Losses
            
            
            590,000
            
            
            612,000Increase
                in net Deferred Loan Costs
            
            
            (19,000
            )
            
            -Depreciation,
                Amortization of Premiums and Accretion of Discounts on
                Securities
            
            
            336,000
            
            
            143,000Increase
                in Deferred Taxes
            
            
            (1,644,000
            )
            
            (113,000
            )Loss
                on Sale of Securities
            
            
            -
            
            
            9,000Changes
                in Assets and Liabilities-Increase
                in Accrued Interest Receivable
            
            
            (262,000
            )
            
            (158,000
            )Increase
                in Other Assets
            
            
            (101,000
            )
            
            (66,000
            )Increase
                in Accrued Expenses and Other Liabilities
            
            
            696,000
            
            
            376,000Net
                Cash Used in Operating Activities
            
            
            2,161,000
            
            
            1,089,000Cash
                Flows from Investing Activities:Purchases
                of Investment Securities Held-to-Maturity
            
            
            (8,445,000
            )
            
            (999,000
            )Purchases
                of Investment Securities Available-for-Sale
            
            
            (10,002,000
            )
            
            (26,342,000
            )Principal
                Payments on Mortgage Backed Securities (CMOs)
            
            
            3,998,000
            
            
            513,000Proceeds
                from Maturity (Call) of Investment Securities
                Held-to-Maturity
            
            
            3,000,000
            
            
            5,200,000Proceeds
                from Maturity (Call) of Investment Securities
                Available-for-Sale
            
            
            -
            
            
            7,000,000Purchase
                of Federal Reserve Stock and FHLBB Stock
            
            
            (502,000
            )
            
            (701,000
            )Sale
                of Securities Available-for-Sale
            
            
            -
            
            
            1,983,000Loan
                Originations, net of Principal Repayments
            
            
            (31,136,000
            )
            
            (43,057,000
            )Purchases
                of Premises and Equipment
            
            
            (98,000
            )
            
            (288,000
            )Net
                Cash Used in Investing Activities
            
            
            (43,185,000
            )
            
            (56,691,000
            )Cash
                Flows from Financing Activities:Advances
                from FHLBB
            
            
            17,000,000
            
            
            16,000,000Repayment
                of FHLBB Advances
            
            
            (10,500,000
            )
            
            (5,000,000
            )Net
                Increase in Deposits
            
            
            32,427,000
            
            
            48,775,000Issuance
                of Subordinated Debentures
            
            
            7,732,000
            
            
            -Common
                Stock Issuance
            
            
            20,000
            
            
            3,000Net
                Cash Provided by Financing Activities
            
            
            46,679,000
            
            
            59,778,000Net
                Increase in Cash and Cash Equivalents
            
            
            5,655,000
            
            
            4,176,000Cash
                and Cash Equivalents, Beginning of the Period
            
            
            9,316,000
            
            
            5,140,000Cash
                and Cash Equivalents, End of the Period
            
            $
            14,971,000
            
            $
            9,316,000Supplemental
                Disclosure of Cash Flow InformationInterest
                Paid
            
            $
            4,482,000
            
            $
            2,750,000Taxes
                Paid
            
            $
            141,000
            
            $
            101,000




*See
      accompanying notes to consolidated financial statements.*





F-7


**CNB
      FINANCIAL CORP.**





Notes
      to
      Consolidated Financial Statements


December
      31, 2005








**(1)****ORGANIZATION**





CNB
      Financial Corp. (the Company) is a bank holding company. It’s wholly owned
      subsidiary Commonwealth National Bank (the Bank) is a nationally chartered
      bank
      operating primarily in Worcester County, Massachusetts. The bank operates out
      of
      its main office at 33 Waldo Street, Worcester, Massachusetts, a branch office
      at
      One West Boylston Street, Worcester, Massachusetts, a branch office at 564
      Main
      Street, Shrewsbury, Massachusetts, and a branch office at 701 Church Street
      in
      Northbridge, Massachusetts. The Bank has received OCC approval to open a branch
      banking facility at 1393 Grafton Street, Worcester, Massachusetts and a branch
      banking facility at 25A West Boylston Street, West Boylston, Massachusetts.
      The
      bank intends to request regulatory approvals for additional branch locations
      within the Worcester County market area. The Bank is subject to competition
      from
      other financial institutions, including commercial banks, savings banks, credit
      unions and mortgage banking companies. The Company is subject to the regulations
      of, and periodic examinations by, the Federal Reserve Board and the Securities
      and Exchange Commission. The Bank is also subject to the regulations of, and
      periodic examinations by, the Office of the Comptroller of the Currency (OCC)
      and the Federal Deposit Insurance Corporation (FDIC). The Bank Insurance Fund
      of
      the FDIC insures the Bank’s deposits for amounts up to $100,000 and the amount
      insured for retirement accounts will increase to $250,000 effective April 1,
      2006 due to recent federal insurance changes.








**Company
      Formation**





CNB
      Financial Corp. (the Company) was formed on December 16, 2005 upon the
      reorganization of Commonwealth National Bank (the Bank) into a bank holding
      company structure. The reorganization of the Bank was approved by shareholders
      of the Bank on August 23, 2005 and subsequently approved by the Office of the
      Comptroller of the Currency (OCC). The Federal Reserve Bank of Boston (FRBB)
      approved the application of the Company to acquire 100% of the capital stock
      of
      the Bank. The Bank was originally organized as a national bank under the
      National Bank Act and received its charter to operate as a national bank from
      the OCC effective November 19, 2001. The bank received approval of its
      application for Federal Deposit Insurance from the Federal Deposit Insurance
      Corporation (“FDIC”)





The
      holders of common stock of the Bank immediately prior to the reorganization
      received one share of common stock of the Company in exchange for each share
      of
      common stock of Bank held by them. Outstanding certificates representing shares
      of common stock of Bank now represent shares of the common stock of the Company
      and such certificates may, but need not, be exchanged by the holders for new
      certificates for the appropriate number of shares of the Company. The par value
      of the common stock changed from $5 for the Bank’s common to $1 for the
      Company’s common. The holders of Bank options and warrants immediately prior to
      the reorganization are entitled to receive one option or warrant to acquire
      shares of the common stock of CNB Financial Corp. for each Bank Option or
      Warrant then held by them on the same terms and conditions.







**(2)**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Consolidated
      Financial Statements**





The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly owned subsidiary, Commonwealth National Bank. All
      material inter-company transactions have been eliminated in consolidation. The
      Company (only), as a separately incorporated bank holding company, has no
      significant operations other than serving as the sole stockholder of the Bank.
      Its commitments and debt service requirement, at December 31, 2005, consist
      of
      subordinated debentures, including accrued interest amounting to $7.8 million
      issued to the unconsolidated subsidiary, Commonwealth National Bank Statutory
      Trust I. Commonwealth National Bank Statutory Trust I is an unconsolidated
      special purpose subsidiary of the Company that was formed to facilitate the
      issuance of trust preferred securities to the public. The Company has one
      reportable operating segment.




**Use
      of Estimates**




The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities as of the
      date
      of the consolidated financial statements and the reported amounts of income
      and
      expenses during








F-8
 
  **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005






the
      reporting period. Actual results could differ from those estimates. The most
      significant estimates include those used in determining the allowance for loan
      losses and assessing the recoverability of deferred tax assets.





**Cash
      and Cash Equivalents**




For
      purpose of the statement of cash flows, cash and cash equivalents consist of
      cash on hand and amounts due from banks, federal funds sold and securities
      purchased under the agreement to resell, all of which mature within ninety
      days.
      At December 31, 2005, cash and cash equivalents consisted of cash on hand,
      amounts due from banks and overnight federal funds sold.








**Investment
      Securities**




The
      Company classifies certain of its investment securities as held-to-maturity,
      which are carried at amortized cost if the Company has the positive intent
      and
      ability to hold such securities to maturity. Investments in debt securities
      that
      are not classified as held-to-maturity and equity securities that have readily
      determinable fair values are classified as available-for-sale or trading
      securities. Trading securities are investments purchased and held principally
      for the purpose of selling in the near term; available-for-sale securities
      are
      investments not classified as held-to-maturity or trading. Available-for-sale
      securities are carried at fair value, which is measured at each reporting date.
      The resulting unrealized gain or loss is reflected in accumulated other
      comprehensive income (loss) net of the associated tax effect. Trading securities
      are also carried at fair value, with the gains and losses recognized through
      the
      statement of operations.








Any
      security that Management believes has experienced a decline in value, which
      is
      deemed other than temporary, is reduced to its estimated fair value by a charge
      to operations. Realized gains and losses on security transactions are computed
      using the specific identification method. Dividend and interest income,
      including amortization of premiums and discounts, is included in interest
      income. Discounts and premiums related to debt securities are amortized using
      the effective interest rate method. The Company did not have any derivative
      financial instruments as of December 31, 2005 and 2004.








**Loans**





The
      Company grants commercial mortgage, commercial and consumer loans to customers.
      A substantial portion of the loan portfolio is represented by commercial loans
      and commercial mortgages throughout Worcester County, Massachusetts. The ability
      of the Company’s debtors to honor their contracts is dependant upon the real
      estate values and general economic conditions in this area.





Loans
      are
      stated at the amount of unpaid principal, adjusted for charge-offs, the
      allowance for loan losses and net loan origination fees. Loan origination fees
      and certain direct loan origination costs are deferred and amortized as an
      adjustment to the related loan yield over the contractual life of the loan.
      When
      loans are sold or fully repaid, the unamortized fees and costs are recognized
      in
      operations.





Interest
      is not accrued on loans 90 days or greater past due or on other loans when
      management believes collection is doubtful. Loans considered impaired, as
      defined below, are non-accruing. When a loan is placed on non-accrual status,
      all interest previously accrued, but not collected, is reversed against current
      interest income. The interest on these loans is accounted for on the cash basis
      or cost-recovery method, until qualifying for return to accrual status. Loans
      are returned to the accrual status when all the principal and interest amounts
      contractually due are brought current and future payments are reasonably
      assured.








**Allowance
      for Loan Losses**





The
      allowance for loan losses is established as losses are estimated to have
      occurred, through a provision for loan losses charged to earnings. Losses are
      charged against the allowance when management believes the collectibility of
      principal is doubtful. Subsequent recoveries, if any, are credited to the
      allowance.





The
      allowance for loan losses is based on management’s estimate of the amount
      required to reflect the risks in the loan portfolio, based on circumstances
      and
      conditions known or anticipated at each reporting date. There are inherent
      uncertainties with respect to the final outcome of loans and nonperforming
      loans. Because of these inherent uncertainties, actual losses may differ from
      the amounts reflected in these consolidated financial statements. Factors
      considered in evaluating the adequacy of the allowance include previous loss
      experience, current economic conditions and its effect on borrowers,








F-9
 
 
 **CNB
            FINANCIAL CORP.**
 
 Notes
            to
            Consolidated Financial Statements
 December
            31, 2005
  the performance of individual loans in relation to contract term, industry
        peer
        standards and estimated fair values of underlying collateral.





Key
      elements of the above estimates, including assumptions used in independent
      appraisals, are dependent upon the economic conditions prevailing at the time
      of
      the estimates. Accordingly, uncertainty exists as to the final outcome of
      certain of the valuation judgments as a result of economic conditions in the
      Company’s lending areas. The inherent uncertainties in the assumptions relative
      to projected sales prices or rental rates may result in the ultimate realization
      of amounts on certain loans that are significantly different from the amounts
      reflected in these consolidated financial statements.





A
      loan is
      considered impaired when, based on current information and events, it is
      probable that the Company will be unable to collect all amounts due in
      accordance with the contractual terms of the loan agreement. All loans are
      individually evaluated for impairment, except for smaller balance homogeneous
      residential and consumer loans, which are evaluated in aggregate, according
      to
      the Company’s normal loan review process, including overall credit evaluation,
      non-accrual status and payment experience. Loans identified as impaired are
      further evaluated to determine the estimated extent of impairment.





Impaired
      loans are measured based on the present value of expected future cash flows
      discounted at the loan’s effective interest rate or the fair value of the
      collateral, if the loan is collateral-dependent. For collateral-dependent loans,
      the extent of impairment is the shortfall, if any, between the collateral value,
      less costs to dispose of such collateral, and the carrying value of the loan.
      Loans on non-accrual status and restructured troubled debts are considered
      to be
      impaired.








**Credit
      Related Financial Instruments**





In
      the
      ordinary course of business, the Company enters into commitments to extend
      credit. Such financial instruments are generally recorded as assets when they
      are funded.








**Premises
      and Equipment**




Buildings,
      leasehold improvements, furniture, fixtures, software, computers and equipment
      are stated at cost, less accumulated depreciation and amortization. Depreciation
      is computed using the straight-line method over estimated useful lives of the
      asset. Amortization of leasehold improvements is computed on the straight-line
      method over the shorter of the estimated useful lives of the assets or the
      related lease term. Expenditures for maintenance, repairs and renewals of minor
      items are charged to expense as incurred.








**Impairment
      of Long-Lived Assets**




The
      Company reviews long-lived assets for impairment whenever events or changes
      in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Long-lived assets to be disposed of are reported at the lower
      of
      the carrying amount or fair value less cost to sell. The Company evaluates
      the
      recoverability of its carrying amounts of long-lived assets based on estimated
      cash flows to be generated by each of such assets. To the extent impairment
      is
      identified, the Company reduces the carrying value of such assets.








**Income
      Taxes**




The
      Company records income taxes under the asset and liability method. Under this
      method, deferred tax assets and liabilities are established for the temporary
      difference between the accounting bases and the tax bases of the Company’s
      assets and liabilities. Deferred taxes are measured using enacted tax rates
      that
      are expected to be in effect when the amounts related to such temporary
      differences are realized or settled. A valuation allowance is established
      against deferred tax assets when, based upon the available evidence, management
      believes it is more likely than not that some or all of the deferred tax assets
      will not be realized.








**Stock-Based
      Compensation**




For
      the
      years prior to and including 2005, the Company accounted for stock options
      using
      the intrinsic value based method of accounting, whereby compensation cost is
      the
      excess, if any, of the quoted market price of the stock at the grant date (or
      other measurement date) over the amount an employee must pay to acquire the
      stock. Stock options issued under the Company’s stock option plan had no
      intrinsic value at the grant date, and no compensation cost was recognized
      for
      them. The Company






F-10
 
 **CNB
        FINANCIAL CORP.**
  Notes
        to
        Consolidated Financial Statements
 December
        31, 2005








provided
      pro forma disclosures of net income and earnings per share and other
      disclosures, as if the fair value based method of accounting had been applied.
      Refer to footnote 9 for further information.





The
      following table illustrates the effect on net income (loss) and earnings per
      share if the Company had applied the fair value method to stock-based employee
      compensation.





**2005**
            
            **2004**Net
                Income (Loss), as reported
            
            $
            2,565,000
            
            $
            286,000Deduct:
                Total stock-based employeecompensation expense determinedunder
                fair value based method forall awards
            
            
            (72,000
            )
            
            (84,000
            )Pro
                forma net income (loss)
            
            
            2,493,000
            
            
            202,000Earnings
                per share:Basic-as
                reported
            
            $
            1.21
            
            $
            0.14Basic-pro
                forma
            
            $
            1.18
            
            $
            0.10Diluted-as
                reported
            
            $
            1.19
            
            $
            0.13Diluted-pro
                forma
            
            $
            1.16
            
            $
            0.09Weighted
                Average Actual Shares Outstanding
            
            
            2,112,000
            
            
            2,111,000Weighted
                Average Diluted Shares Outstanding
            
            
            2,152,000
            
            
            2,176,000





In
      determining the pro-forma accounts, the fair value of each option grant was
      estimated as the date of the grant using the National Economics Research
      Associates, Inc. employee stock option pricing model with the following
      assumptions: expected life: 6 years; dividend yield; 2.5% and expected
      volatility: 35%. A risk-free interest rate: 3.50% was used in the calculation
      concerning the options granted in 2005, a risk-free interest rate: 2.07% was
      used in the calculation concerning the options granted in 2004, a risk-free
      interest rate: 1.24% was used in the calculation concerning the options granted
      in 2003 and a risk-free interest rate of 3.70% was used in the calculation
      concerning the options granted in 2002.





**Earnings
      Per Share** ****





The
      calculation of basic earnings per share is based on the weighted average number
      of shares of common stock outstanding during the period. Diluted earnings per
      share reflect additional common shares that would have been dilutive if
      potential common shares had been issued, as well as any adjustment to income
      that would result from the assumed issuance. Potential common shares that may
      be
      issued by the Company related to outstanding stock options and warrants, and
      are
      determined using the treasury stock method.




**2005**
              
              **2004**Net
                  Income
              
              $
              2,565,000
              
              $
              286,000**Weighted
                  Average Shares**Basic
                  Shares
              
              
              2,112,000
              
              
              2.111,000Effect
                  of Dilution
              
              
              40,000
              
              
              65,000Diluted
                  Shares
              
              
              2,152,000
              
              
              2,176,000**Net
                  Income Per Share**Basic
                  EPS
              
              $
              1.21
              
              $
              .14Effect
                  of Dilution
              
              
              .02
              
              
              .01Diluted
                  Shares
              
              $
              1.19
              
              $
              .13





**Comprehensive
      Income (Loss)**





Accounting
      principles generally require that recognized revenue, expenses, gains and losses
      be included in net income. Although certain changes in assets and liabilities,
      such as unrealized gains and losses on available-for-sale securities, are
      reported as a separate component of the equity section of






F-11
 
  **CNB
          FINANCIAL CORP.**
  Notes
          to
          Consolidated Financial Statements
 December
          31, 2005
   the
        consolidated balance sheet,
        such items, along with net income, are components of comprehensive
        income.





**(3)**
            **INVESTMENT
                SECURITIES**





The
      amortized cost and fair value of investment securities available-for-sale and
      held-to-maturity by contractual maturity, with gross unrealized gains and
      losses, at December 31, 2005 and 2004 are shown below. Expected maturities
      may
      differ from contractual maturities because issuers of these securities may
      have
      the right to call or prepay obligations with or without call or prepayment
      penalties.


******200****5**Amortized
                cost
            
            Unrealized
            
            Fair
                Value**Available-for-sale:**
            
            
            
            Gains
            
            LossesUS Government agencies
              Due
                within one year
            
            $
            1,999,000
            
            $
            -
            
            $
            (30,000
            )
            $
            1,969,000Due
                after one year through five years
            
            
            19,160,000
            
            
            -
            
            
            (363,000
            )
            
            18,797,000Due
                after five years
            
            
            19,135,000
            
            
            26,000
            
            
            (334,000
            )
            
            18,827,000$
            40,294,000
            
            $
            26,000
            
            $
            (727,000
            )
            $
            39,593,000**Held-to-maturity:**US Government agenciesDue
                within one year
            
            $
            1,001,000
            
            $
            2,000
            
            
            -
            
            $
            1,003,000Due
                after one year through five years
            
            
            3,981,000
            
            
            -
            
            
            (40,000
            )
            
            3,941,000Due
                after five years
            
            
            4,103,000
            
            
            -
            
            
            (67,000
            )
            
            4,036,000Other
                Bonds
              
              Due
                after one year through five years
            
            
            25,000
            
            
            -
            
            
            -
            
            
            25,000$
            9,110,000
            
            $
            2,000
            
            
            (107,000
            )
            $
            9,005,000**Total
                Investment Securities**
            
            $
            49,404,000
            
            $
            28,000
            
            $
            (834,000
            )
            $
            45,598,000





******2004**Amortized
                cost
            
            Unrealized
            
            Fair
                Value**Available-for-sale:**
            
            
            
            Gains
            
            LossesUS Government agenciesDue
                after one year through five years
            
            $
            17,152,000
            
            $
            30,000
            
            $
            (130,000
            )
            $
            17,052,000Due
                after five years
            
            
            16,816,000
            
            
            34,000
            
            
            (53,000
            )
            
            16,797,000$
            33,968,000
            
            $
            64,000
            
            $
            (183,000
            )
            $
            33,849,000**Held-to-maturity:**US Government agenciesDue
                within one year
            
            $
            2,998,000
            
            $
            22,000
            
            
            -
            
            $
            3,020,000Due
                after one year through five years
            
            
            1,004,000
            
            
            24,000
            
            
            -
            
            
            1,028,000$
            4,002,000
            
            $
            46,000
            
            
            -
            
            $
            4,048,000**Total
                Investment Securities**
            
            $
            37,970,000
            
            $
            110,000
            
            $
            (183,000
            )
            $
            37,897,000







At
      December 31, 2005 and 2004, the Bank had callable investment securities of
      $14,161,000 and $8,161,000, respectively, in the available-for-sale category
      and
      $3,981,000 and $0, respectively, in the held-to-maturity category.





At
      December 31, 2005 and 2004, investment securities carried at amortized cost
      of
      $26,006,000 and $17,623,000, respectively, (fair value of $25,496,000 and
      $17,545,000, respectively), were pledged to secure public deposits and for
      other
      purposes required or permitted by law.





The
      Bank
      is a member of the Federal Home Loan Bank of Boston (FHLBB) and is required
      to
      invest in $100 par value stock of the FHLBB. The Bank must invest in FHLBB
      stock
      in an amount equal to .35% of certain assets of the Bank (a minimum of $500)
      plus 4.5% of the Bank’s outstanding FHLBB








F-12


**CNB
        FINANCIAL CORP.**
  Notes
        to
        Consolidated Financial Statements
 December
        31, 2005




advances
      and other activity with the FHLBB. As and when such stock is redeemed, the
      Bank
      will receive an amount equal to the par value of the stock. At December 31,
      2005, $33.5 million of advances from the FHLBB were outstanding (See Note 7)
      and
      the Bank held $1,870,000 in FHLBB stock.





The
      Bank
      is a member of the Federal Reserve Bank of Boston (FRBB) and is required to
      invest in $100 par value stock of the FRBB in an amount equal to six percent
      of
      the Bank’s capital and surplus (one-half of the amount of the Banks’
subscription is paid to the FRBB and the remaining half is subject to call
      by
      the FRBB). As and when such stock is redeemed, the Bank will receive an amount
      equal to the amount paid in. At December 31, 2005 the Bank held $508,000 in
      FRBB
      stock.







**Other
      Than Temporarily Impaired Securities**









The
      following chart reflects the gross unrealized loss and fair value of the
      Company’s securities with unrealized losses that are not deemed to be
      other-than-temporarily impaired at December 31, 2005 and 2004.









**2005**Less
                than 12 Months
            
            12
                Months or Longer
            
            TotalDescription
                of Securities
            
            Fair
                Value
            
            Unrealized
                Loss
            
            Fair
                Value
            
            Unrealized
                Loss
            
            Fair
                Value
            
            Unrealized
                Loss(in
                thousands)US
                Government Agencies
            
            $
            12,981
            
            $
            (145
            )
            $
            12,158
            
            $
            (288
            )
            $
            25,139
            
            $
            (433
            )Mortgage
                Backed Securities
            
            
            15,697
            
            
            (327
            )
            
            3,050
            
            
            (74
            )
            
            18,747
            
            
            (401
            )Total
                Temporarily Impaired Securities
            
            $
            28,678
            
            $
            (472
            )
            $
            15,208
            
            $
            (362
            )
            $
            43,886
            
            $
            (834
            )**2004**Less
                than 12 Months
            12
                Months or Longer
            TotalDescription
                of Securities
            
            
            Fair
                Value
            
            
            Unrealized
                Loss
            
            
            Fair
                Value
            
            
            Unrealized
                Loss
            
            
            Fair
                Value
            
            
            Unrealized
                Loss(in
                thousands)US
                Government Agencies
            
            $
            14,152
            
            $
            (130
            )
            $
            -
            
            $
            -
            
            $
            14,152
            
            $
            (130
            )Mortgage
                Backed Securities
            
            
            3,768
            
            
            (53
            )
            
            -
            
            
            -
            
            
            3,768
            
            
            (53
            )Total
                Temporarily Impaired Securities
            
            $
            17,920
            
            $
            (183
            )
            $
            -
            
            $
            -
            
            $
            17,920
            
            $
            (183
            )







At
      December 31, 2005, the Bank had investment securities with an aggregate book
      value of $15,208,000 that have been in a continuous loss position for twelve
      months or more. The aggregate unrealized loss for these securities equaled
      $362,000 at December 31, 2005. There were no investment securities in a
      continuous loss position for twelve months or more at December 31, 2004. The
      unrealized loss on investments is caused by changes in the interest rate
      environment. The Company has the ability and intent to hold these investment
      securities until a price recovery, which could be until maturity, and therefore
      considers them to be other-than-temporarily impaired at December 31,
      2005.










F-13
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005


**4)**  **LOANS**





Major
      classifications of loans at December 31 follow:





**2005**
            
            **2004**Commercial
                and Industrial
            
            $
            59,043,000
            
            $
            41,533,000Commercial
                Real Estate
            
            
            91,497,000
            
            
            78,571,000Residential
                Real Estate
            
            
            15,278,000
            
            
            17,392,000Consumer
            
            
            15,030,000
            
            
            12,197,000Total
                loans
            
            
            180,848,000
            
            
            149,693,000Less-Allowance for Loan Losses
            
            
            (2,615,000
            )
            
            (2,025,000
            )Total
                Loans, net
            
            $
            178,233,000
            
            $
            147,668,000






The
      Bank’s lending activities are conducted principally in Worcester County,
      Massachusetts. The Bank originates commercial real estate loans, commercial
      loans, commercial construction loans, commercial lines of credit, consumer
      loans
      and residential real estate loans. At December 31, 2005 no loans accruing
      interest were past due 90 days or more and $1,287,000 of loans were on
      non-accrual status. Net deferred costs totaled $368,000 and $367,000 at December
      31, 2005 and 2004, respectively.





As
      of
      December 31, 2005 and 2004, the Company’s recorded investment in impaired
      loans and the related valuation allowance was as follows:





**2005**
            
            **2004****Recorded
                Investment**
            
            **Valuation
                Allowance**
            
            **Recorded
                Investment**
            
            **Valuation
                Allowance**Impaired
                LoansValuation
                Allowance Required
            
            $
            1,287,000
            
            $
            91,000
            
            
            -
            
            
            -No
                Valuation Allowance Required
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,287,000
            
            $
            91,000
            
            
            -
            
            
            -





The
      valuation allowance is included in the allowance for loan losses on the
      consolidated balance sheet. The average recorded investment in impaired loans
      for the years ended December 31, 2005 and 2004 was $261,000 and $16,000
      respectively. Interest payments received on impaired loans are recorded as
      interest income unless collection of the remaining recorded investment is
      doubtful, at which time payments received are recorded as reductions of
      principal.





In
      the
      ordinary course of business, the Bank may make loans to directors and officers,
      including their families and companies with which they are affiliated. Such
      loans are made under normal credit terms, including interest rates and
      collateral prevailing at the time for comparable transactions with other persons
      and do not represent more than normal credit risk. An analysis of the aggregate
      loan activity to these related parties as of December 31, 2005 is as
      follows:





Balance,
                Beginning of Year
            
            $
            5,193,000New
                Loans Granted During the Year
            
            
            5,683,000Less-Repayments
            
            
            (1,142,000
            )Balance,
                End of Year
            
            $
            9,734,000





A
      summary
      of changes in the allowance for loan losses for the annual periods ended
      December 31 follows:





**2005**
            
            **2004**Balance,
                Beginning of Year
            
            $
            2,025,000
            
            $
            1,413,000Provision
                for
                Loan Losses
            
            
            590,000
            
            
            612,000Less:
                Loans Charged-off
            
            
            -
            
            
            -Balance,
                End of Year
            
            $
            2,615,000
            
            $
            2,025,000





One
      loan,
      in the amount of $2,000, has been charged off since the inception of the
      Bank.






F-14


**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005





**(5)**
            **PREMISES
                AND EQUIPMENT**





A
      summary
      of the Bank’s premises and equipment at December 31 follows:





**2005**
            
            **2004**
            **Estimated
                Useful Lives**Buildings
            
            $
            639,000
            
            $
            639,000
            
            
            40
                yearsLeasehold
                Improvements
            
            
            591,000
            
            
            591,000
            
            
            Lesser
                of useful life or remaining term of the leaseSoftware
                and Equipment
            
            
            941,000
            
            
            915,000
            
            
            5
                yearsComputers
            
            
            235,000
            
            
            220,000
            
            
            3
                yearsFurniture
                and Fixtures
            
            
            192,000
            
            
            182,000
            
            
            10
                yearsProjects
                in Process
            
            
            79,000
            
            
            32,000
            
            
            N/ATotal
            
            
            2,677,000
            
            
            2,579,000Less-Accumulated
                Depreciation and Amortization
            
            
            (903,000
            )
            
            (585,000
            )Net Premises and Equipment
            
            $
            1,774,000
            
            $
            1,994,000





Depreciation
      expense for the year ended December 31, 2005 and 2004 was $337,000 and $285,000
      respectively and is classified as occupancy and equipment expense in the
      accompanying Consolidated Statement of Operations.








**(6)**  **DEPOSITS**





A
      summary
      of deposits at December 31 follows:




**2005**
            
            **2004**Demand
                Deposits
            
            $
            24,410,000
            
            $
            19,665,000Savings
                and NOW Accounts
            
            
            62,244,000
            
            
            52,422,000Certificates
                of Deposit
            
            
            102,798,000
            
            
            84,938,000Total
                Deposits
            
            $
            189,452,000
            
            $
            157,025,000




Certificates
      of deposit of $100,000 and over totaled $37,608,000 and $22,027,000 at December
      31, 2005 and 2004, respectively. Certificates of deposit of under $100,000
      totaled $65,190,000 and $62,911,000 at December 31, 2005 and 2004,
      respectively.





The
      following is a summary of original maturities of certificates of deposits at
      December 31, 2005:




2006
            
            $
            88,530,0002007
            
            
            11,670,0002008
            
            
            222,0002009
            
            
            2,148,0002010
                and beyond
            
            
            228,000Total
            
            $
            102,798,000







F-15
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005


**(7)**   **FEDERAL
      HOME LOAN BANK OF BOSTON (FHLBB) ADVANCES AND
      SUBORDINATED** **DEBENTURES**





Advances
      from the FHLBB at December 31, 2005 and 2004, have the following
      maturities:


($
                  thousands)
              
              **2005**
              
              **2004**Year
                  ending December 31:
              
              Amount
              
              Weighted
                  Average Rate
              
              Amount
              
              Weighted
                  Average Rate2005
              
              
              
              
              
              
              
              $
              6,500
              
              
              2.20
              %2006
              
              $
              13,750
              
              
              3.42
              %
              
              7,250
              
              
              2.692007
              
              
              8,500
              
              
              3.66
              
              
              6,000
              
              
              3.412008
              
              
              4,500
              
              
              3.89
              
              
              2,500
              
              
              3.662009
              
              
              3,250
              
              
              3.70
              
              
              3,250
              
              
              3.702010
                  and beyond
              
              
              3,500
              
              
              3.74
              
              
              1,500
              
              
              3.54Total
              
              $
              33,500
              
              
              3.61
              %
              $
              27,000
              
              
              2.99
              %




Subordinated
      debt at December 31, 2005 consists of subordinated debentures payable to the
      company’s unconsolidated special purpose entity, Commonwealth National Bank
      Statutory Trust I (“Trust’) that issued trust preferred securities to the public
      on December 16, 2005. The
      issue
      has a maturity date of March 15, 2036 and bears a floating rate of interest
      that
      reprices quarterly (the fifteenth of March, June, September and December of
      each
      year) at the 3-month LIBOR rate plus 1.85%. The current interest rate is 6.26%
      and the next repricing date is June 15, 2006. A special redemption provision
      allows the issue to be callable at 103.525 % of par for the first year and
      thereafter on a sliding scale down to 100% of par upon the fifth year and
      thereafter.








**(8)**   **INCOME
      TAXES**





The
      components of federal and state income tax expense for the years ended December
      31, 2005 and 2004 are as follows:


**2005**
            
            **2004**Current
                Expense:Federal
                Expense
            
            $
            -
            
            $
            6,000State
                Expense
            
            
            153,000
            
            
            77,000Total
                Current Expense
            
            
            153,000
            
            
            83,000Deferred
                Expense:Federal
                Expense
            
            
            367,000
            
            
            77,000State
                Benefit
            
            
            (211,000
            )
            
            (77,000
            )Change
                in Valuation Allowance
            
            
            (1,800,000
            )
            
            (113,000
            )Total
                Deferred Benefit
            
            
            (1,644,000
            )
            
            (113,000
            )Income
                Tax Benefit
            
            $
            (1,491,000
            )
            $
            (30,000
            )





A
      reconciliation of federal income tax expense to the amount computed by applying
      the statutory federal income tax rate to loss before federal income tax for
      the
      years ended December 31, 2005 and 2004 follows:




**2005**
            
            **2004**Pre-Tax
                Income
            
            $
            1,074,000
            
            $
            256,000Expected
                Federal Tax at 34%
            
            
            365,000
            
            
            87,000State
                Tax, net of Federal
            
            
            (39,000
            )
            
            -Change
                in Valuation Allowance
            
            
            (1,800,000
            )
            
            (113,000
            )Other
            
            
            (17,000
            )
            
            (4,000
            )Total
                Income Tax Benefit
            
            $
            (1,491,000
            )
            $
            (30,000
            )





The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004
      follow:













F-16


**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005
  **2005**
                  
                  **2004********Deferred
                      Income Tax Assets******Allowance
                      for Loan Loss
                  
                  $
                  1,070,000
                  
                  $
                  698,000Start-Up
                      Costs
                  
                  
                  65,000
                  
                  
                  139,000Net
                      Operating Loss
                  
                  
                  783,000
                  
                  
                  1,186,000Unrealized
                      Loss on Investment Securities
                  
                  
                  287,000
                  
                  
                  49,000Other
                  
                  
                  88,000
                  
                  
                  87,000Gross
                      Deferred Tax Asset
                  
                  $
                  2,293,000
                  
                  $
                  2,159,000Valuation
                      Allowance
                  
                  
                  -
                  
                  
                  (1,800,000
                  )Net
                      Deferred Tax Asset
                  
                  $
                  2,293,000
                  
                  $
                  359,000**Deferred
                      Income Tax Liabilities**Depreciation
                  
                  $
                  237,000
                  
                  $
                  185,000Gross
                      Deferred Liabilities
                  
                  $
                  237,000
                  
                  $
                  185,000**Net
                      Deferred Taxes**
                  
                  $
                  2,056,000
                  
                  $
                  174,000





Initial
      operating losses, coupled with recent periods of profitable operations, have
      resulted in available tax loss carry-forwards of approximately $2.3 million.
      These carry-forwards expire through 2023 and are subject to review and possible
      adjustment by the Internal Revenue Service. The United States Tax Reform Act
      of
      1986 contains provisions that may limit the net operating loss carry-forwards
      available to be used in any given year under certain circumstances, including
      significant changes in ownership interests. Projections for continued levels
      of
      profitability will be reviewed quarterly and any necessary adjustments to the
      deferred tax assets will be recognized in the provision or benefit for income
      taxes. Factors beyond management’s control, such as the general state of the
      economy and real estate values, can affect future levels of taxable income.
      A
      deferred tax asset valuation allowance is required to reduce the potential
      tax
      benefit when it is more likely than not that all or some portion of the
      potential benefit will not be realized due to the lack of sufficient taxable
      income in the carry-forward period.





During
      2005, the Company recognized the benefit of the deferred tax assets including
      the net operating loss carry-forwards for GAAP purposes. An income tax benefit
      of $1.5 million was recorded as a result of reversing the previously established
      valuation allowance for deferred taxes. This action was taken after completing
      an analysis of the Bank’s current operating income and future earnings
      potential. The analysis revealed that the potential and expectations for
      continued profitability will more likely than not generate sufficient operating
      income to realize the deferred tax asset created during the early years of
      the
      Bank’s existence.








**(9)**  **STOCK-BASED
      PLANS**





**Stock
      Option Plan**





On
      November 6, 2001, the shareholders’ voted to approve the Bank’s 2001 Stock
      Option Plan (the Plan) for employees and directors of the Bank. The Compensation
      Committee of the Board of Directors administers the Plan, which has authorized
      200,000 shares for grant. Both incentive stock options and non-qualified stock
      options may be granted under the Plan. The authorization of grants, the
      determination of number of shares to be granted, the exercise date and the
      option price of each award will be determined by the Compensation Committee
      of
      the Board of Directors on the date of grant. The options vest annually at a
      rate
      of 25% over a four-year period and will expire on the tenth anniversary of
      the
      grant date. On April 21, 2005, the Board of Directors authorized the granting
      of
      the 49,350 shares at the then fair market value of $12.75 per share to the
      employees of the Bank under the provisions of this Plan. On May 19, 2005,
      shareholders approved amending the plan to increase the authorized number of
      shares to 400,000.





Upon
      the
      reorganization of the Bank into a holding company structure the Plan was assumed
      and restated by the Company on the same terms and conditions as the Bank’s Plan.
      All shares of common stock of the Bank under the Plan which remained available
      on the date of reorganization for issuance of options were converted into the
      same number of shares of common stock of the Company and are available for
      future option grants made by the Company. Any options thereafter granted
      pursuant to the Plan shall be options granted by the Company and shall relate
      to
      the common stock of the Company.








F-17




**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005




A
      summary
      of the status of the Company’s stock option plan as of December 31, 2005 and
      changes during the years ended on December 31, 2005 and 2004
      follows:





**2005**
            
            **2004****Fixed
                Options**
            
            **Shares**
            
            **Weighted
                Average Exercise Price**
            
            **Shares**
            
            **Weighted
                Average Exercise Price**Outstanding
                at Beginning of Year
            
            
            151,100
            
            $
            9.78
            
            
            99,475
            
            $
            9.64Granted
            
            
            49,350
            
            $
            12.75
            
            
            52,625
            
            $
            13.50Forfeited
            
            
            (2,795
            )
            $
            13.14
            
            
            (1,000
            )
            $
            10.85Exercised
            
            
            (1,600
            )
            $
            9.63Outstanding
                at End of Year
            
            
            196,055
            
            $
            11.41
            
            
            151,100
            
            $
            10.98Issued
                in 2002 (Expire April 30, 2012)
            
            
            62,650
            
            $
            10.00
            
            
            63,650
            
            $
            10.00Issued
                in 2003 (Expire April 17, 2013)
            
            
            34,525
            
            $
            9.00
            
            
            35,125
            
            $
            9.00Issued
                in 2004 (Expire April 15, 2014)
            
            
            50,875
            
            $
            13.50
            
            
            52,325
            
            $
            13.50Issued
                in 2005 (Expire April 21, 2015)
            
            
            48,005
            
            $
            12.75Total
                Shares and Average Exercise Price
            
            
            196,055
            
            $
            11.41
            
            
            151,100
            
            $
            10.98Weighted
                Average Remaining Life
            
            
            7.7
                years
            
            
            
            
            
            8.2
                yearsOptions
                Exercisable at Year End
            
            
            76,967
            
            $
            10.35
            
            
            40,606
            
            $
            9.78Fair
                Value of Options Granted During the Year
            
            $
            3.21
            
            
            
            
            $
            3.36








**Warrants**





On
      November 19, 2001, the Organizers were issued 92,500 warrants to purchase one
      share of common stock of the Bank for each share of the Corporation that was
      originally purchased. These warrants become exercisable in one-third annual
      increments beginning one year from the date of issuance. The warrants have
      a
      ten-year life and are exercisable for $10.00 per share subject to adjustments
      for stock splits, recapitalization or other similar events. As of December
      31,
      2005, none of the organizers’ warrants had been exercised.





The
      Bank’s 2003 capital stock offering included the issuance of 721,581 warrants to
      purchase an aggregate of 180,395 common shares. Four warrants are required
      to
      purchase one common share. Fractional shares will not be issued in connection
      with the exercise of warrants. The exercise price of the warrants is $11.00
      per
      whole share subject to adjustments for stock splits, recapitalization or other
      similar events. The warrants expire on September 30, 2006. As of December 31,
      2005, 2,602 of the warrants issued during 2003 had been exercised resulting
      in
      the issuance of 649 common shares.





Upon
      the
      reorganization of the Bank into a holding company structure all outstanding
      warrants were assumed and restated by the Company on the same terms and
      conditions as were the Bank’s. All shares of common stock of Bank which remained
      available through the exercise of warrants on the date of reorganization were
      converted into the same number of warrants for shares of common stock of the
      Company.







F-18
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005





**(10)**  **COMMITMENTS
      AND CONTINGENCIES**








**(a)**
            **Financial
                Instruments With Off-Balance-Sheet
                Risk**





The
      Bank
      is party to financial instruments with off-balance-sheet risk in the normal
      course of business to meet the financing needs of its customers. These financial
      instruments, held for purposes other than trading, include commitments to
      originate loans, unused lines of credit and commercial and standby letters
      of
      credit. The instruments involve, to varying degrees, elements of credit and
      interest rate risk in excess of the amount recognized in the accompanying
      balance sheet. The contract or notional amounts of these instruments reflect
      the
      extent of involvement the Bank has in particular classes of financial
      instruments.





The
      Company’s exposure to credit loss in the event of nonperformance by the other
      party to the financial instrument for loan commitments and commercial and
      standby letters of credit is represented by the contractual amount of those
      instruments. The Company uses the same credit policies in making commitments
      and
      conditional obligations as it does for on-balance-sheet
      instruments.





Financial
      instruments with off-balance-sheet risk at December 31, 2005 and 2004
      follow:





**2005**
            
            **2004**Commitments
                to Originate Loans
            
            $
            27,914,000
            
            $
            20,332,000Unused
                Lines of Credit
            
            
            7,107,000
            
            
            6,813,000Secured
                Commercial Lines of Credit
            
            
            20,619,000
            
            
            17,485,000Letters
                of Credit
            
            
            3,457,000
            
            
            3,004,000





Commitments
      to originate loans are agreements to lend to customers provided there are no
      violations of any conditions established in the contracts. Commitments generally
      have fixed expiration dates or other termination clauses and may require payment
      of a fee. Since many of the commitments are expected to expire without being
      drawn upon, the total commitment amounts do not necessarily represent future
      cash requirements. The Company evaluates each customer’s creditworthiness on a
      case-by-case basis. The amount of collateral obtained, if deemed necessary
      by
      the Company upon extension of credit, is based upon management’s credit
      evaluation of the borrower.





Lines
      of
      Credit represent approved extensions of credit which may be drawn upon at the
      option of the borrower. Amounts that are not outstanding and may be drawn upon
      at the option of the borrower are reported as unused lines of credit.





Commercial
      and standby letters of credit are conditional commitments issued by the Company
      to guarantee the performance by a customer to a third party. The credit risk
      involved in issuing letters of credit is essentially the same as that involved
      in extending loan facilities to customers.








**(b)**
            **Lease
                Commitments**





On
      January 27, 2006, the Company entered into an operating lease agreement for
      a
      branch office to be constructed at 1393 Grafton Street, Worcester,
      Massachusetts. The lease, which will commence sixty (60) days after the landlord
      has completed the agreed construction (expected to be approximately May 1,
      2006)
      includes an initial term of ten years from that date and provides three
      five-year renewal options.





On
      October 1, 2004, the Company entered into an operating lease agreement for
      a
      branch office at 701 Church Street, Northbridge, Massachusetts, which expires
      on
      September 30, 2024. The lease has two separate five-year renewal options.





On
      March
      6, 2003, the Company entered into an operating lease for 2,820 square feet
      in
      the multi-tenant building at 1 West Boylston Street, Worcester, Massachusetts.
      The lease commencement date is December 1, 2002. The lease includes an initial
      term of twenty years and provides two five-year renewal options. Commencing
      with
      the seventh year of the lease, and at the beginning of each lease year
      thereafter, lease payments increase by a percentage equal to the most recent
      annual percentage increase in the Consumer Price Index (CPI). The lease includes
      escalation clauses where in the Company will share in increases in the common
      area maintenance costs.








F-19


**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005


On
      June
      6, 2002, the Company exercised an option and entered into an operating lease
      agreement with a third party for land located at 564 Main Street, Shrewsbury,
      Massachusetts for the purpose of building a branch. The lease term is
      approximately twenty years. The lease has eleven separate five-year renewal
      options.





In
      December 2001, the Company entered into an operating lease agreement with one
      of
      its directors for the main office, branch office and drive-up facility in the
      building at 33 Waldo Street, Worcester, Massachusetts, which expires on December
      1, 2016. The lease has two separate five-year renewal options. The terms of
      this
      lease are substantially the same as if it had been entered into with a third
      party.





The
      following is a schedule of future minimum lease payments for non-cancelable
      lease obligations as of December 31, 2005:





Year
                Ending December 31,2006
            
            $
            398,0002007
            
            
            401,0002008
            
            
            414,0002009
            
            
            416,0002010
            
            
            419,000Thereafter
            
            
            4,194,000Total
                Future Minimum Lease Payments
            
            $
            6,242,000








**(c)**
            **Employment
                Agreements**





The
      Company does not have any written employment contracts with any executive
      officers, all of whom are employees at will. The Compensation Committee on
      behalf of the Board of Directors is currently negotiating change in control
      agreements with each of the five Executive Officers which would provide for
      severance pay in the event a change in control occurred.








**(d)**
            **Legal
                Proceedings**





Various
      legal claims may arise from time to time in the ordinary course of business.
      At
      December 31, 2005, no such claims existed which, in the opinion of management,
      would have a material effect on the Company’s consolidated financial
      statements.








**(e)**
            **Officer
                Life Insurance**





The
      Bank
      owns term life insurance policies insuring members of senior management. The
      Bank is the beneficiary under these policies. Officer life insurance costs
      for
      the years ended December 31, 2005 and 2004 were $3,000 and $2,000
      respectively.








**(f)**
            **Data
                Processing Service
                Agreements**





The
      Bank
      has entered into a contract for data and items processing services with Fiserv
      Solutions, Inc. The contract agreement originally was schedule to expire on
      November 19, 2006; however, was amended on October 1, 2005 and extended for
      a
      period ending on October 1, 2010. The Bank has the right to terminate the
      agreement with 60 days notice to Fiserv Solutions, Inc. Annual minimum charges
      per the Fiserv agreement for the entire remaining term are $100,000. Total
      fees
      to be paid may be the same as or exceed the minimum fee depending on transaction
      volume during the remaining term of the contract.








**(11)**  **FAIR
      VALUE OF FINANCIAL INSTRUMENTS**





The
      Company is required to disclose the fair value of financial instruments, both
      assets and liabilities recognized and not recognized in the consolidated balance
      sheet, as well as the methods and significant assumptions used to estimate
      the
      fair value of its financial instruments. Fair value estimates are made at a
      specific point in time, based on relevant market information and information
      about specific financial instruments. These estimates do not reflect any premium
      or discount that could result from offering for sale at one time the Company’s
      entire holdings of a particular financial instrument. Because






F-20


**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005






no
      active
      observable market exists for a portion of the Company’s financial instruments,
      fair value estimates are based on judgments regarding future expected loss
      experience, current economic conditions, risk characteristics of various
      financial instruments and other factors. These estimates are subjective in
      nature and involve uncertainties and matters of significant judgment and
      therefore cannot be determined with precision. Changes in assumptions could
      significantly affect the estimates.







**Cash
      and Cash Equivalents, Accrued Interest Receivable and Accrued Interest Payable**





The
      carrying amounts for these financial items approximate fair value because they
      have original maturities of less than three months.





**Investment
      Securities**




The
      fair
      value of investment securities, other than FHLBB stock and FRBB stock, is based
      on quoted market prices. The fair value of FHLBB stock and the FRBB stock are
      equal to cost, since there is no market for these instruments and they are
      redeemable at par.








**Loans,
      Net**





Fair
      value estimates are based on loans with similar financial characteristics.
      Loans
      have been segregated by homogeneous groups for calculation purposes and
      presented as a single line item for disclosure purposes. Fair value estimates
      are estimated by discounting contractual cash flows adjusted for prepayment
      estimates and using rates approximately equal to current market rates on loans
      with similar characteristics and maturities. Incremental credit risk for
      classified and non-accrual loans has been considered.








**Deposits**





Fair
      value of deposits with no stated maturity, such as non-interest-bearing demand
      deposits, savings and NOW accounts is equal to the amount payable on demand,
      that is, the carrying amount. The fair value reported for time deposits are
      based upon the discounted value of contractual cash flows. The discounted rates
      are representative of approximate rates currently offered on time deposits
      with
      similar remaining maturities.








**FHLBB
      Advances**





The
      fair
      value of the FHLBB advances is based on the discounted value of cash flows
      applying interest rates currently being offered for similar
      instruments.








**Subordinated
      Debentures**





The
      fair
      value of subordinated debentures approximates book value due to the three-month
      repricing nature of these instruments.








**Commitments
      to Extend Credit and Commercial and Standby Letters of
      Credit**








The
      fair
      value of commitments to extend credit is estimated using the fees currently
      charged to enter into similar agreements, taking into account the remaining
      terms of the agreements and the present creditworthiness of the counterparties.
      The fair value of financial commercial and standby letters of credit is based
      on
      fees currently charged for similar agreements or on the estimated cost to
      terminate them or otherwise settle the obligation with the counterparties.
      The
      fair value of these fees at December 31, 2005 and 2004 was immaterial to the
      consolidated financial statements as a whole.


F-21
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005





The
      carrying amount and estimated fair values of the Company’s financial instruments
      are as follows at December 31, 2005 and 2004:








**2005**
            
            **2004**($
                in thousands)
            
            
            
            Carrying
                Amount
            
            Fair
                Value
            
            Carrying
                Amount
            
            Fair
                Value**Financial
                Assets**Cash
                and Cash Equivalents
            
            
            
            
            $
            14,971
            
            $
            14,971
            
            $
            9,316
            
            $
            9,316Securities
                Available-for-Sale
            
            
            
            
            
            39,593
            
            
            39,593
            
            
            33,849
            
            
            33,849Securities
                Held-to-Maturity
            
            
            
            
            
            9,110
            
            
            9,005
            
            
            4,002
            
            
            4,048Federal
                Reserve Bank Stock
            
            
            
            
            
            508
            
            
            508
            
            
            446
            
            
            446Federal
                Home Loan Bank Stock
            
            
            
            
            
            1,870
            
            
            1,870
            
            
            1,431
            
            
            1,431Loans,
                Net
            
            
            
            
            
            178,233
            
            
            177,289
            
            
            147,668
            
            
            147,042Accrued
                Interest Receivable
            
            
            
            
            
            971
            
            
            971
            
            
            709
            
            
            709**Financial
                Liabilities**DepositsDemand
                Deposits
            
            
            
            
            
            24,410
            
            
            24,410
            
            
            19,665
            
            
            19,665Savings
                and NOW Accounts
            
            
            
            
            
            62,244
            
            
            62,244
            
            
            52,422
            
            
            52,422Certificates
                of Deposit
            
            
            
            
            
            102,798
            
            
            102,169
            
            
            84,938
            
            
            84,543FHLBB
                Advances
            
            
            
            
            
            33,500
            
            
            32,778
            
            
            27,000
            
            
            26,773Subordinated
                Debentures
            
            
            
            
            
            7,732
            
            
            7,732
            
            
            -
            
            
            -Accrued
                Interest Payable
            
            
            
            
            
            609
            
            
            609
            
            
            214
            
            
            214








**(12)**  **MINIMUM
      REGULATORY CAPITAL REQUIREMENTS**





The
      Company and the Bank are subject to various regulatory capital requirements
      administered by the Federal banking agencies. Failure to meet minimum capital
      requirements can initiate certain mandatory, and possibly additional
      discretionary, actions by regulators that, if undertaken, could have a direct
      material effect on the Company’s consolidated financial statements and the
      Bank’s financial statements. Under capital adequacy guidelines and the
      regulatory framework for Prompt Corrective Action (PCA), the Company and the
      Bank must meet specific capital guidelines that involve quantitative measures
      of
      assets, liabilities, and certain off-balance-sheet items as calculated under
      regulatory accounting practices. The Bank’s capital amounts and classification
      are also subject to qualitative judgments by the regulators about components,
      risk weightings and other factors. Management
      believes, as of December 31, 2004 that the Company and the Bank met all
      capital adequacy requirements to which they are subject





Quantitative
      measures established by regulation to ensure capital adequacy require the Bank
      to maintain minimum amounts and ratios (set forth in the table on the next
      page)
      of Total and Tier I Capital (as defined in the regulations) to risk-weighted
      assets (as defined), and of Tier I capital (as defined) to average assets (as
      defined).  The
      minimum amounts and ratios necessary for the Bank to be categorized as “Well
      Capitalized” are also reflected in the table below. At December 31, 2005, the
      Bank is categorized as “Well Capitalized” as defined by federal regulations. There
      are
      no conditions or events since the last filing with the FDIC that management
      believes have changed the Bank’s category.





**The
                Company**
            
            **Actual**
            
            **For
                Capital Adequacy Purposes****December
                31, 2005**
            
            **Amount**
            
            **Ratio**
            
            **Amount**
            
            **Ratio**Total
                Capital (to Risk Weighted Assets)
            
            $
            24,331,000
            
            
            12.97
            %
            >$15,004,000
            >8.00%Tier
                1 Capital (to Risk Weighted Assets)
            
            
            21,987,000
            
            
            11.72
            
            7,502,000
            4.00Tier
                1 Leverage Capital (to Average Assets)
            
            
            21,987,000
            
            
            9.46
            
            9,297,000
            4.00








F-22


**CNB
        FINANCIAL CORP.**
 
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005





**The
                  Bank**
                
                **Actual**
                
                **For
                    Capital Adequacy**
                  **Purposes**
                
                **To
                    be “Well**
                  **Capitalized”
                    Under**
                  **Prompt
                    Corrective**
                  **Action
                    Provisions****December
                    31, 2005**
                
                **Amount**
                
                **Ratio**
                
                **Amount**
                
                **Ratio**
                
                **Amount**
                
                **Ratio**Total
                    Capital (to Risk Weighted Assets)
                
                $
                24,042,000
                
                
                12.84
                %
                $
                >14,983,000
                
                
                >8.00
                %
                $
                >18,729,000
                
                
                >10.00
                %Tier
                    1 Capital (to Risk Weighted Assets)
                
                
                21,698,000
                
                
                11.59
                
                
                7,492,000
                
                
                4.00
                
                
                11,238,000
                
                
                6.00Tier
                    1 Leverage Capital (to Average Assets)
                
                
                21,698,000
                
                
                9.35
                
                
                9,286,000
                
                
                4.00
                
                
                11,608,000
                
                
                5.00
  **The
                    Bank**
                
                **Actual**
                
                **For
                    Capital Adequacy Purposes**
                
                **To
                    be “Well Capitalized” Under Prompt Corrective Action
                    Provisions****December
                    31, 2004**
                
                **Amount**
                
                **Ratio**
                
                **Amount**
                
                **Ratio**
                
                **Amount**
                
                **Ratio**Total
                    Capital (to Risk Weighted Assets)
                
                $
                17,007,000
                
                
                10.88
                %
                $
                >12,501,000
                
                
                >8.00
                %
                $
                >15,627,000
                
                
                >10.00
                %Tier
                    1 Capital (to Risk Weighted Assets)
                
                
                15,055,000
                
                
                9.63
                
                
                6,251,000
                
                
                4.00
                
                
                9,376,000
                
                
                6.00Tier
                    1 Leverage Capital (to Average Assets)
                
                
                15,055,000
                
                
                7.79
                
                
                7,732,000
                
                
                4.00
                
                
                9,665,000
                
                
                5.00





F-23
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005





**(13)**  **CNB
      FINANCIAL CORP. ONLY FINANCIAL STATEMENTS**





**Balance
                Sheet**
            
            **2005**ASSETSTotal
                Cash and Due From Banks
            
            $
            1,969,000Total
                Investment in Subsidiary
            
            
            23,049,000$
            25,018,000LIABILITIES
                AND STOCKHOLDERS’ EQUITYLiabilities:Accounts
                Payable
            
            $
            35,000Accrued
                Interest Payable on Subordinated Debentures
            
            
            21,000Due
                to Subsidiary
            
            
            4,000Subordinated
                Debentures
            
            
            7,732,000Total
                Liabilities
            
            $
            7,792,000Stockholders’
                Equity:Total
                Stockholders' Equity
            
            
            17,226,000$
            25,018,000**Statement
                of Operations**Total
                Income
            
            $
            -Operating
                Expenses:Interest
                Expense
            
            
            21,000Legal
            
            
            54,000Other
                General and Administrative Expenses
            
            
            14,000Total
                Operating Expenses
            
            
            89,000


Loss
                Before Equity in Undistributed Income of Subsidiary
            
            
            (89,000
            )Equity
                in Undistributed Income of Subsidiary
            
            
            2,654,000Net
                Income
            
            $
            2,565,000








CNB
      Financial Corp. was formed December 16, 2005.


F-24
 **CNB
          FINANCIAL CORP.**
 
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005


Statement
      of Cash
      Flows





Cash
                Flows from Operating Activities:
            
            **2005**Net
                Income
            
            $
            2,565,000Adjustments
                to Reconcile Net Income to Net Cash Used in Operating
                Activities-Increase
                in Accrued Expenses and Other Liabilities
            
            
            60,000Equity
                in Undistributed Income of Subsidiary
            
            
            (2,654,000
            )Net
                Cash Used in Operating Activities
            
            
            (29,000
            )Cash
                Flows from Investing Activities:Capital
                Investment in Bank Preferred Stock
            
            
            (5,500,000
            )Investment
                in CNB Interim Bank
            
            
            (2,000
            )Net
                Cash Used in Investing Activities
            
            
            (5,502,000
            )Cash
                Flows from Financing Activities:Issuance
                of Subordinated Debentures
            
            
            7,500,000Net
                Cash Provided by Financing Activities
            
            
            7,500,000Net
                Increase in Cash and Cash Equivalents
            
            
            1,969,000Cash
                and Cash Equivalents, Beginning of the Period
            
            
            -Cash
                and Cash Equivalents, End of the Period
            
            $
            1,969,000






CNB
        Financial Corp. was formed December 16, 2005.
  The
        Statement of Stockholders’ Equity for the parent company is identical to the
        Consolidated Statement of Stockholders’ Equity which appears on page
        F-6


















F-25
 **CNB
            FINANCIAL CORP.**
 
 Notes
            to
            Consolidated Financial Statements
 December
            31, 2005


**(14)
                Summary of Unaudited Quarterly Information****2005**
            
            **2005**
            
            **2005**
            
            **2005**
            
            **2004**
            
            **2004**
            
            **2004**
            
            **2004****Fourth**
            
            **Third**
            
            **Second**
            
            **First**
            
            **Fourth**
            
            **Third**
            
            **Second**
            
            **First****Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**Interest
                and Fee Income
            
            $
            3,517,000
            
            $
            3,308,000
            
            $
            3,019,000
            
            $
            2,737,000
            
            $
            2,525,000
            
            $
            2,232,000
            
            $
            1,994,000
            
            $
            1,827,000Interest
                Expense
            
            
            1,392,000
            
            
            1,305,000
            
            
            1,209,000
            
            
            972,000
            
            
            880,000
            
            
            717,000
            
            
            667,000
            
            
            606,000Net
                interest income
            
            
            2,125,000
            
            
            2,003,000
            
            
            1,810,000
            
            
            1,765,000
            
            
            1,645,000
            
            
            1,515,000
            
            
            1,327,000
            
            
            1,221,000Provision
                for Loan Losses
            
            
            150,000
            
            
            150,000
            
            
            150,000
            
            
            140,000
            
            
            195,000
            
            
            230,000
            
            
            121,000
            
            
            66,000Non-interest
                Income
            
            
            117,000
            
            
            113,000
            
            
            140,000
            
            
            91,000
            
            
            100,000
            
            
            82,000
            
            
            93,000
            
            
            89,000Non-interest
                Expense
            
            
            1,691,000
            
            
            1,674,000
            
            
            1,585,000
            
            
            1,550,000
            
            
            1,464,000
            
            
            1,305,000
            
            
            1,243,000
            
            
            1,192,000Income
                before provision for income taxes
            
            
            401,000
            
            
            292,000
            
            
            215,000
            
            
            166,000
            
            
            86,000
            
            
            62,000
            
            
            56,000
            
            
            52,000Income
                Tax (Benefit) Expense
            
            
            75,000
            
            
            (1,566,000
            )
            
            -
            
            
            -
            
            
            (43,000
            )
            
            5,000
            
            
            7,000
            
            
            -Net
                Income
            
            $
            326,000
            
            $
            1,858,000
            
            $
            215,000
            
            $
            166,000
            
            $
            129,000
            
            $
            57,000
            
            $
            49,000
            
            $
            52,000Basic
                Income per Share
            
            $
            0.15
            
            $
            0.88
            
            $
            0.10
            
            $
            0.08
            
            $
            0.06
            
            $
            0.03
            
            $
            0.02
            
            $
            0.02Weighted
                Average Shares Outstanding
            
            
            2,113,000
            
            
            2,112,000
            
            
            2,111,000
            
            
            2,111,000
            
            
            2,111,000
            
            
            2,111,000
            
            
            2,111,000
            
            
            2,111,000







F-26
 **CNB
            FINANCIAL CORP.**
 
 Notes
            to
            Consolidated Financial Statements
 December
            31, 2005


**Signatures**








In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





CNB
                  FINANCIAL CORP.By:/s/
                  Charles R. ValadeDated:
                  March 28, 2006
              Charles
                  R. Valade, President










In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





**Signature**
            **Title**
            **Date**/s/
                Charles R. Valade
            
            March
                28, 2006Charles
                R. Valade
            President/s/
                William M. Mahoney
            
            March
                28, 2006William
                M. Mahoney
            Treasurer
                and CFO/s/
                Robert D. Ansin
            
            March
                28, 2006Robert
                D. Ansin
            Director/s/
                Gerald D. Cohen
            
            March
                28, 2006Gerald
                D. Cohen
            Director/s/
                Cary J. Corkin
            
            March
                28, 2006Cary
                J. Corkin
            Director/s/
                Lawrence J. Glick
            
            March
                28, 2006Lawrence
                J. Glick
            Director/s/
                Stephen J. Granger
            
            March
                28, 2006Stephen
                J. Granger
            Director/s/
                George L. Kaplan
            
            March
                28, 2006George
                L. Kaplan
            Director/s/
                John P. Lauring
            
            March
                28, 2006John
                P. Lauring
            Director


F-27





**Signature**
              **Title**
              **Date**/s/
                  Ralph D. Marois
              
              March
                  28, 2006Ralph
                  D. Marois
              Director/s/
                  Henry T. Michie
              _
              March
                  28, 2006Henry
                  T. Michie
              Director/s/
                  Harris L. MacNeill
              
              March
                  28, 2006Harris
                  L. MacNeill
              Director/s/
                  Richard J. Noonan
              
              March
                  28, 2006Richard
                  J. Noonan
              Director/s/
                  Claire A. O’Connor
              
              March
                  28, 2006Claire
                  A. O’Connor
              Director/s/
                  Bryan T. Rich
              
              March
                  28, 2006Bryan
                  T. Rich
              Director/s/
                  J. Robert Seder
              
              March
                  28, 2006J.
                  Robert Seder
              Director


F-28


**EXHIBIT
      INDEX**








Exhibit
                No.
            Description
            Reference
                to:3.1
            Articles
                of Organization
            Exhibit
                3.1 to CNB Financial Corp.’s Form 8-K dated December 19,
                20053.2
            Bylaws
            Exhibit
                3.2 to CNB Financial Corp.’s Form 8-K dated December 19,
                20054.1
            Warrant
                Form
            Exhibit
                4.1 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency4.2
            Common
                Stock Certificate
            Exhibit
                4.2 hereto4.3
            Form
                of Subscription Rights Certificate
            Exhibit
                4.1 to Commonwealth National Bank’s Registration Statement on Form SB-2/A
                dated July 28, 2003 as filed with the Office of the Comptroller of
                the
                Currency4.4
            Form
                of Warrant to Purchase Common Stock
            Exhibit
                4.2 to Commonwealth National Bank’s Registration Statement on Form SB-2/A
                dated July 28, 2003 as filed with the Office of the Comptroller of
                the
                Currency10.1
            Lease
                for 33 Waldo Street, Worcester
              Massachusetts
            Exhibit
                10.1 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency10.2
            Stock
                Option Plan
            Exhibit
                10.2 to Commonwealth National Bank’s Annual Report on Form 10-KSB dated
                March 27, 2002 as filed with the Office of the Comptroller of the
                Currency10.3
            Lease
                for 572 Main Street, Shrewsbury Massachusetts
            Exhibit
                10.3 to Commonwealth National Bank’s Quarterly Report on Form 10-QSB dated
                August 13, 2002 as filed with the Office of the Comptroller of the
                Currency10.4
            Lease
                for One West Boylston Street, Worcester Massachusetts
            Exhibit
                10.4 to Commonwealth National Bank’s Quarterly Report on Form 10-QSB dated
                August 13, 2002 as filed with the Office of the Comptroller of the
                Currency10.5
            Lease
                for 701 Church Street, Northbridge Massachusetts
            Exhibit
                10.5 to commonwealth National Bank’s Quarterly report on form 10-QSB dated
                November 9, 2004 as filed with the Office of the Comptroller of the
                Currency10.6
            Lease
                for 1393 Grafton Street, Worcester Massachusetts
            Exhibit
                10.6 hereto21
            Subsidiaries
                of Small Business Issuer
            Exhibit
                21 hereto31.1
            Sarbanes-Oxley
                Section 302 Certification of Charles R. Valade
            Exhibit
                31.1 hereto31.2
            Sarbanes-Oxley
                Section 302 Certification of William M. Mahoney
            Exhibit
                31.2 hereto32.1
            Sarbanes-Oxley
                Section 906 Certification of Charles R. Valade
            Exhibit
                32.1 hereto32.2
            Sarbanes-Oxley
                Section 906 Certification of William M. Mahoney
            Exhibit
                32.2 hereto