##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-30665
 CNB Financial Services, Inc.
  West Virginia
    
    550773918(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)101 S. Washington Street, Berkeley Springs, WV
    
    25411(Address of principal executive offices)
    
    (Zip Code)
   þ o
  o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
  þ o




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##### 



CNB FINANCIAL SERVICES, INC.
 TABLE OF CONTENTS
 PAGEPART 1: FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of June 30, 2010 (Unaudited)
and December 31, 2009
    
    
    3Consolidated Statements of Income for the Three and Six Months ended June 30, 2010
and 2009 (Unaudited)
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Six
Months Ended June 30, 2010 and 2009 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2010 and 2009 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Six Months ended June 30, 2010
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1a. Risk Factors
    
    
    30Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    30Item 6. Exhibits and Reports on Form 8-K
    
    
    30SIGNATURES
    
    
    31EX-31.1EX-31.2EX-32.1EX-32.2
    2




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (Audited)ASSETSCash and due from banks
    
    $
    4,177,941
    
    
    $
    5,068,118Certificates of deposit investments
    
    
    
    
    
    
    1,989,017Securities available for sale
(at approximate market value)
    
    
    74,135,935
    
    
    
    72,272,665Federal Home Loan Bank stock, at cost
    
    
    2,321,300
    
    
    
    2,321,300Loans and lease receivable, net
    
    
    189,826,915
    
    
    
    194,707,226Accrued interest receivable
    
    
    1,304,823
    
    
    
    1,334,704Foreclosed real estate (held for sale), net
    
    
    414,383
    
    
    
    386,500Premises and equipment, net
    
    
    5,441,616
    
    
    
    5,554,927Deferred income taxes
    
    
    1,731,527
    
    
    
    1,753,665Cash surrender value of life insurance
    
    
    1,690,400
    
    
    
    1,601,720Intangible assets
    
    
    106,870
    
    
    
    162,628Other assets
    
    
    1,669,606
    
    
    
    2,345,418TOTAL ASSETS
    
    $
    282,821,316
    
    
    $
    289,497,888LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits:Demand
    
    $
    41,295,035
    
    
    $
    43,381,922Interest-bearing demand
    
    
    35,361,458
    
    
    
    35,564,826Savings
    
    
    26,528,999
    
    
    
    24,925,247Time, $100,000 and over
    
    
    70,268,504
    
    
    
    72,982,196Other time
    
    
    74,710,485
    
    
    
    75,437,663$
    248,164,481
    
    
    $
    252,291,854Accrued interest payable
    
    
    1,080,622
    
    
    
    1,170,417FHLB borrowings
    
    
    2,925,000
    
    
    
    6,400,000Accrued expenses and other liabilities
    
    
    3,947,594
    
    
    
    4,005,322TOTAL LIABILITIES
    
    $
    256,117,697
    
    
    $
    263,867,593SHAREHOLDERS EQUITYCommon stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares issued at June 30, 2010 and
December 31, 2009 and 441,348 and 443,648 outstanding at
June 30, 2010 and December 31, 2009, respectively
    
    $
    458,048
    
    
    $
    458,048Capital surplus
    
    
    4,163,592
    
    
    
    4,163,592Retained earnings
    
    
    23,092,161
    
    
    
    22,476,562Accumulated other comprehensive income (loss)
    
    
    (72,284
    )
    
    
    (642,839
    )$
    27,641,517
    
    
    $
    26,455,363Less treasury stock, at cost, 16,700 shares at June 30, 2010
and 14,400 shares at December 31, 2009
    
    
    (937,898
    )
    
    
    (825,068
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    26,703,619
    
    
    $
    25,630,295TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    282,821,316
    
    
    $
    289,497,888
  3




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST INCOMEInterest and fees on loans
    
    $
    2,998,412
    
    
    $
    3,206,011
    
    
    $
    6,030,211
    
    
    $
    6,474,697Interest and dividends on securities
U.S. Government agencies and
corporations
    
    
    39,711
    
    
    
    60,392
    
    
    
    95,368
    
    
    
    141,190Corporate bonds
    
    
    59,400
    
    
    
    97,711
    
    
    
    121,336
    
    
    
    196,931Mortgage backed securities
    
    
    306,971
    
    
    
    343,628
    
    
    
    615,227
    
    
    
    711,361State and political subdivisions
    
    
    329,486
    
    
    
    179,366
    
    
    
    637,863
    
    
    
    337,019Interest on certificates of deposit
    
    
    597
    
    
    
    6,059
    
    
    
    2,052
    
    
    
    8,625Interest on FHLB deposits
    
    
    3
    
    
    
    6
    
    
    
    57
    
    
    
    29Interest on federal funds sold
    
    
    394
    
    
    
    538
    
    
    
    1,489
    
    
    
    538$
    3,734,974
    
    
    $
    3,893,711
    
    
    $
    7,503,603
    
    
    $
    7,870,390INTEREST EXPENSEInterest on interest bearing demand,
savings and time deposits
    
    $
    1,193,655
    
    
    $
    1,268,891
    
    
    $
    2,431,178
    
    
    $
    2,528,096Interest on FHLB borrowings
    
    
    2,935
    
    
    
    74,058
    
    
    
    26,518
    
    
    
    160,891$
    1,196,590
    
    
    $
    1,342,949
    
    
    $
    2,457,696
    
    
    $
    2,688,987NET INTEREST INCOME
    
    $
    2,538,384
    
    
    $
    2,550,762
    
    
    $
    5,045,907
    
    
    $
    5,181,403PROVISION FOR LOAN LOSSES
    
    
    455,000
    
    
    
    375,000
    
    
    
    910,000
    
    
    
    765,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    $
    2,083,384
    
    
    $
    2,175,762
    
    
    $
    4,135,907
    
    
    $
    4,416,403NONINTEREST INCOMEService charges on deposit accounts
    
    $
    296,989
    
    
    $
    336,159
    
    
    $
    577,687
    
    
    $
    626,734Other service charges, commissions
and fees
    
    
    226,461
    
    
    
    204,630
    
    
    
    433,678
    
    
    
    387,108Other operating income
    
    
    27,808
    
    
    
    20,772
    
    
    
    51,808
    
    
    
    98,340Income from title company
    
    
    
    
    
    
    3,267
    
    
    
    
    
    
    
    5,061Net gain on sales of loans
    
    
    9,949
    
    
    
    19,542
    
    
    
    14,643
    
    
    
    20,324Net gain (loss) on sales and calls of securities
    
    
    5,213
    
    
    
    (1,672
    )
    
    
    53,423
    
    
    
    32,023Net gain on sale of other real estate owned
    
    
    3,072
    
    
    
    29,137
    
    
    
    14,561
    
    
    
    27,364Provision for losses on other real estate owned
    
    
    
    
    
    
    (60,800
    )
    
    
    (48,000
    )
    
    
    (75,800
    )Net (loss) on disposal of premises, equpment and software
    
    
    
    
    
    
    
    
    
    
    (166
    )
    
    
    Net gain (loss) on sale of repossessed assets
    
    
    2,725
    
    
    
    
    
    
    
    (4,425
    )
    
    
    $
    572,217
    
    
    $
    551,035
    
    
    $
    1,093,209
    
    
    $
    1,121,154NONINTEREST EXPENSESSalaries
    
    $
    725,968
    
    
    $
    648,579
    
    
    $
    1,467,705
    
    
    $
    1,338,380Employee benefits
    
    
    299,222
    
    
    
    282,312
    
    
    
    588,467
    
    
    
    577,636Occupancy of premises
    
    
    146,558
    
    
    
    125,570
    
    
    
    296,733
    
    
    
    235,940Furniture and equipment expense
    
    
    156,593
    
    
    
    159,078
    
    
    
    313,724
    
    
    
    319,145Other operating expenses
    
    
    842,223
    
    
    
    796,838
    
    
    
    1,571,138
    
    
    
    1,451,256$
    2,170,564
    
    
    $
    2,012,377
    
    
    $
    4,237,767
    
    
    $
    3,922,357INCOME BEFORE INCOME TAXES
    
    $
    485,037
    
    
    $
    714,420
    
    
    $
    991,349
    
    
    $
    1,615,200PROVISION FOR INCOME TAXES
    
    
    62,217
    
    
    
    201,294
    
    
    
    141,836
    
    
    
    470,341NET INCOME
    
    $
    422,820
    
    
    $
    513,126
    
    
    $
    849,513
    
    
    $
    1,144,859BASIC EARNINGS PER SHARE
    
    $
    0.96
    
    
    $
    1.15
    
    
    $
    1.92
    
    
    $
    2.56
  4




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
 AccumulatedOther
    
    
    TotalCommon
    
    
    Treasury
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBALANCE, JANUARY 1, 2009
    
    $
    458,048
    
    
    $
    (570,512
    )
    
    $
    4,163,592
    
    
    $
    21,015,652
    
    
    $
    (1,848,990
    )
    
    $
    23,217,790Comprehensive income:Net income for six months
ended June 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,144,859
    
    
    
    
    
    
    
    1,144,859Change in unrealized gains
(losses) on securities
available for sale (net of tax of $204,163)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333,108
    
    
    
    333,108Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,477,967Acquisition of treasury stock, at cost,
3,303 shares
    
    
    
    
    
    
    (153,616
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153,616
    )Cash dividends ($.53 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (236,300
    )
    
    
    
    
    
    
    (236,300
    )BALANCE, JUNE 30, 2009
    
    $
    458,048
    
    
    $
    (724,128
    )
    
    $
    4,163,592
    
    
    $
    21,924,211
    
    
    $
    (1,515,882
    )
    
    $
    24,305,841BALANCE, JANUARY 1, 2010
    
    $
    458,048
    
    
    $
    (825,068
    )
    
    $
    4,163,592
    
    
    $
    22,476,562
    
    
    $
    (642,839
    )
    
    $
    25,630,295Comprehensive income:Net income for six months
ended June 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    849,513
    
    
    
    
    
    
    
    849,513Change in unrealized gains
(losses) on securities
available for sale (net of tax of $349,695)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570,555
    
    
    
    570,555Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420,068Acquisition of treasury stock, at cost,
2,300 shares
    
    
    
    
    
    
    (112,830
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,830
    )Cash dividends ($.53 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (233,914
    )
    
    
    
    
    
    
    (233,914
    )BALANCE, JUNE 30, 2010
    
    $
    458,048
    
    
    $
    (937,898
    )
    
    $
    4,163,592
    
    
    $
    23,092,161
    
    
    $
    (72,284
    )
    
    $
    26,703,619
  5




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months endedJune 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    849,513
    
    
    $
    1,144,859Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization on premises, equipment and software
    
    
    236,811
    
    
    
    254,340Provision for loan losses
    
    
    910,000
    
    
    
    765,000Provision for losses on other real estate owned
    
    
    48,000
    
    
    
    Deferred income taxes
    
    
    (327,557
    )
    
    
    (140,387
    )Net (gain) on sale of securities
    
    
    (53,423
    )
    
    
    (32,023
    )Net (gain) loss on sale of real estate owned
    
    
    (14,183
    )
    
    
    48,436Decrease in deferred gain on sale of real estate owned
    
    
    378
    
    
    
    Loss on disposal of premises, equipment and software
    
    
    166
    
    
    
    Net (gain) on loans sold
    
    
    (14,643
    )
    
    
    (20,324
    )Loans originated for sale
    
    
    (1,330,300
    )
    
    
    (4,029,800
    )Proceeds from loans sold
    
    
    1,344,943
    
    
    
    4,050,124Decrease in accrued interest receivable
    
    
    29,881
    
    
    
    47,848(Increase) decrease in other assets
    
    
    692,161
    
    
    
    (2,079,124
    )Increase (decrease) in accrued interest payable
    
    
    (89,795
    )
    
    
    15,384(Increase) in cash surrender value on life insurance in excess
of premiums paid
    
    
    (33,472
    )
    
    
    (87,999
    )Proceeds from life insurance death benefits
    
    
    
    
    
    
    194,184(Decrease) in accrued expenses and other liabilities
    
    
    (58,106
    )
    
    
    (117,891
    )Amortization of deferred loan (fees) cost
    
    
    47,300
    
    
    
    95,235Amortization (accretion) of premium and discount on securities
    
    
    72,940
    
    
    
    212Amortization (accretion) of premium and discount on certificates of deposit
    
    
    
    
    
    
    (364
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    2,310,614
    
    
    $
    107,710CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease in loans, not originated for sale
    
    $
    3,258,011
    
    
    $
    729,498Proceeds from sales of securities
    
    
    4,813,393
    
    
    
    1,319,395Proceeds from maturities, repayments and calls of securities
    
    
    9,147,517
    
    
    
    10,455,130Proceeds from maturities of certificates of deposit
    
    
    1,989,000
    
    
    
    250,000Purchases of securities
    
    
    (14,919,961
    )
    
    
    (7,355,276
    )Purchases of certificates of deposit
    
    
    
    
    
    
    (4,659,620
    )Purchases of premises, equipment and software
    
    
    (87,726
    )
    
    
    (100,131
    )Proceeds from sale of real estate owned
    
    
    610,892
    
    
    
    402,906Costs to acquire foreclosed real estate
    
    
    (7,592
    )
    
    
    (18,137
    )Net (increase) in federal funds sold
    
    
    
    
    
    
    (1,050,000
    )Premiums paid on life insurance
    
    
    (55,208
    )
    
    
    (55,208
    )NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    $
    4,748,326
    
    
    $
    (81,443
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in demand and savings deposits
    
    $
    (686,503
    )
    
    $
    3,776,074Net increase (decrease) in time deposits
    
    
    (3,440,870
    )
    
    
    14,081,363Net (decrease) in FHLB borrowings
    
    
    (3,475,000
    )
    
    
    (15,445,000
    )Purchase of treasury stock
    
    
    (112,830
    )
    
    
    (153,616
    )Cash dividends paid
    
    
    (233,914
    )
    
    
    (236,300
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    $
    (7,949,117
    )
    
    $
    2,022,521NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    $
    (890,177
    )
    
    $
    2,048,788CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    5,068,118
    
    
    
    4,770,724CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    4,177,941
    
    
    $
    6,819,512SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period:Interest
    
    $
    2,547,491
    
    
    $
    2,673,603Income taxes
    
    $
    260,582
    
    
    $
    389,400Net transfer to foreclosed real estate, held for sale
from loans receivable
    
    $
    665,000
    
    
    $
    578,332Unrealized gain (loss) on investment securities
available for sale (net of tax)
    
    $
    570,555
    
    
    $
    333,108
  6




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
      6/30/2010
    
    
    6/30/2009Quarter ending
    
    
    441,581
    
    
    
    446,696Year to date ending
    
    
    442,600
    
    
    
    447,124
 7




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    June 30, 2010
    
    
    WeightedAverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies
and corporationsWithin one year
    
    $
    730,000
    
    
    $
    2,049
    
    
    $
    
    
    
    $
    732,049
    
    
    
    4.00
    %After 5 but within 10 years
    
    
    5,496,067
    
    
    
    30,941
    
    
    
    
    
    
    
    5,527,008
    
    
    
    2.59$
    6,226,067
    
    
    $
    32,990
    
    
    $
    
    
    
    $
    6,259,057
    
    
    
    2.76
    %Corporate BondsWithin one year
    
    $
    491,939
    
    
    $
    4,770
    
    
    $
    
    
    
    $
    496,709
    
    
    
    3.23
    %After 1 but within 5 years
    
    
    1,474,743
    
    
    
    117,224
    
    
    
    
    
    
    
    1,591,967
    
    
    
    5.87After 5 but within 10 years
    
    
    2,506,502
    
    
    
    134,888
    
    
    
    3,465
    
    
    
    2,637,925
    
    
    
    5.48$
    4,473,184
    
    
    $
    256,882
    
    
    $
    3,465
    
    
    $
    4,726,601
    
    
    
    5.36
    %States and political subdivisionsWithin one year
    
    $
    2,262,475
    
    
    $
    8,885
    
    
    $
    
    
    
    $
    2,271,360
    
    
    
    2.26
    %After 1 but within 5 years
    
    
    9,865,300
    
    
    
    337,173
    
    
    
    3,772
    
    
    
    10,198,701
    
    
    
    3.02After 5 but within 10 years
    
    
    22,546,116
    
    
    
    429,351
    
    
    
    88,304
    
    
    
    22,887,163
    
    
    
    4.18$
    34,673,891
    
    
    $
    775,409
    
    
    $
    92,076
    
    
    $
    35,357,224
    
    
    
    3.72
    %Mortgage backed securities:Government issued or
guaranteed
    
    $
    12,110,850
    
    
    $
    914,826
    
    
    $
    
    
    
    $
    13,025,676
    
    
    
    5.16
    %Collateralized mortgage obligations:Government issued or
guaranteed
    
    $
    13,371,885
    
    
    $
    392,206
    
    
    $
    159
    
    
    $
    13,763,932
    
    
    
    3.88
    %Privately issued
    
    
    1,150,607
    
    
    
    
    
    
    
    147,162
    
    
    
    1,003,445
    
    
    
    7.60$
    14,522,492
    
    
    $
    392,206
    
    
    $
    147,321
    
    
    $
    14,767,377
    
    
    
    4.17
    %Total securities available for sale
    
    $
    72,006,484
    
    
    $
    2,372,313
    
    
    $
    242,862
    
    
    $
    74,135,935
    
    
    
    4.07
    %Restricted:Federal Home Loan Bank stock
    
    $
    2,321,300
    
    
    $
    
    
    
    $
    
    
    
    $
    2,321,300
    
    
    
    
    %
 8




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  WeightedDecember 31, 2009
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies
and corporationsWithin one year
    
    $
    864,592
    
    
    $
    18,441
    
    
    $
    
    
    
    $
    883,033
    
    
    
    3.68
    %After 1 but within 5 years
    
    
    2,006,039
    
    
    
    1,077
    
    
    
    17,468
    
    
    
    1,989,648
    
    
    
    1.60After 5 but within 10 years
    
    
    5,742,908
    
    
    
    29,965
    
    
    
    22,737
    
    
    
    5,750,136
    
    
    
    3.27$
    8,613,539
    
    
    $
    49,483
    
    
    $
    40,205
    
    
    $
    8,622,817
    
    
    
    2.92
    %Corporate BondsWithin one year
    
    $
    252,711
    
    
    $
    
    
    
    $
    7,614
    
    
    $
    245,097
    
    
    
    6.76
    %After 1 but within 5 years
    
    
    1,490,853
    
    
    
    47,318
    
    
    
    7,029
    
    
    
    1,531,142
    
    
    
    4.84After 5 but within 10 years
    
    
    2,997,344
    
    
    
    57,064
    
    
    
    19,138
    
    
    
    3,035,270
    
    
    
    5.60$
    4,740,908
    
    
    $
    104,382
    
    
    $
    33,781
    
    
    $
    4,811,509
    
    
    
    5.42
    %States and political subdivisionsWithin one year
    
    $
    2,898,507
    
    
    $
    19,824
    
    
    $
    
    
    
    $
    2,918,331
    
    
    
    1.92
    %After 1 but within 5 years
    
    
    9,567,178
    
    
    
    314,547
    
    
    
    357
    
    
    
    9,881,368
    
    
    
    2.98After 5 but within 10 years
    
    
    19,656,673
    
    
    
    216,197
    
    
    
    139,565
    
    
    
    19,733,305
    
    
    
    4.20$
    32,122,358
    
    
    $
    550,568
    
    
    $
    139,922
    
    
    $
    32,533,004
    
    
    
    3.63
    %Mortgage backed securities:Government issued or
guaranteed
    
    $
    12,775,369
    
    
    $
    640,601
    
    
    $
    
    
    
    $
    13,415,970
    
    
    
    5.35
    %Collateralized mortgage obligations:Government issued or
guaranteed
    
    $
    11,489,702
    
    
    $
    346,900
    
    
    $
    21,947
    
    
    $
    11,814,655
    
    
    
    4.12
    %Privately issued
    
    
    1,321,605
    
    
    
    
    
    
    
    246,895
    
    
    
    1,074,710
    
    
    
    7.17$
    12,811,307
    
    
    $
    346,900
    
    
    $
    268,842
    
    
    $
    12,889,365
    
    
    
    4.43
    %Total securities available for sale
    
    $
    71,063,481
    
    
    $
    1,691,934
    
    
    $
    482,750
    
    
    $
    72,272,665
    
    
    
    4.12
    %Restricted:Federal Home Loan Bank stock
    
    $
    2,321,300
    
    
    $
    
    
    
    $
    
    
    
    $
    2,321,300
    
    
    
    
    %Certificates of deposit
    
    $
    1,989,000
    
    
    $
    209
    
    
    $
    192
    
    
    $
    1,989,017
    
    
    
    0.33
    %
   9




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    June 30, 2010Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    497,891
    
    
    $
    3,465
    
    
    $
    
    
    
    $
    
    
    
    $
    497,891
    
    
    $
    3,465State and political subdivisions
    
    
    5,837,971
    
    
    
    84,022
    
    
    
    738,521
    
    
    
    8,054
    
    
    
    6,576,492
    
    
    
    92,076Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    
    
    
    
    
    
    
    
    334,987
    
    
    
    159
    
    
    
    334,987
    
    
    
    159Privately issued
    
    
    
    
    
    
    
    
    
    
    1,003,445
    
    
    
    147,162
    
    
    
    1,003,445
    
    
    
    147,162Total temporarily impaired
securities
    
    $
    6,335,862
    
    
    $
    87,487
    
    
    $
    2,076,953
    
    
    $
    155,375
    
    
    $
    8,412,815
    
    
    $
    242,862
 December 31, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    990,185
    
    
    $
    19,138
    
    
    $
    723,796
    
    
    $
    14,643
    
    
    $
    1,713,981
    
    
    $
    33,781U.S. Government agencies
and corporations
    
    
    3,207,366
    
    
    
    40,205
    
    
    
    
    
    
    
    
    
    
    
    3,207,366
    
    
    
    40,205State and political subdivisions
    
    
    8,689,560
    
    
    
    124,471
    
    
    
    929,785
    
    
    
    15,451
    
    
    
    9,619,345
    
    
    
    139,922Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    1,995,305
    
    
    
    19,204
    
    
    
    370,595
    
    
    
    2,742
    
    
    
    2,365,900
    
    
    
    21,946Privately issued
    
    
    
    
    
    
    
    
    
    
    1,074,651
    
    
    
    246,896
    
    
    
    1,074,651
    
    
    
    246,896Certificates of deposit
    
    
    499,808
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    499,808
    
    
    
    192Total temporarily impaired
securities
    
    $
    15,382,224
    
    
    $
    203,210
    
    
    $
    3,098,827
    
    
    $
    279,732
    
    
    $
    18,481,051
    
    
    $
    482,942
  10




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     June 30,
    
    
    December 31,2010
    
    
    2009Loans:Real estate
    
    $
    126,114,799
    
    
    $
    129,509,117Commercial real estate
    
    
    43,750,794
    
    
    
    43,972,033Consumer
    
    
    15,654,034
    
    
    
    16,683,611Commercial
    
    
    7,696,620
    
    
    
    7,276,430Overdrafts
    
    
    126,249
    
    
    
    203,337$
    193,342,496
    
    
    $
    197,644,528Leases
    
    
    517,973
    
    
    
    585,393$
    193,860,469
    
    
    $
    198,229,921Net deferred loan fees, costs,
premiums and discounts
    
    
    398,866
    
    
    
    380,025Allowance for loan losses
    
    
    (4,432,420
    )
    
    
    (3,902,720
    )$
    189,826,915
    
    
    $
    194,707,226
  June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Balance, Beginning
    
    $
    3,902,720
    
    
    $
    2,751,386
    
    
    $
    2,751,386Provision charged to
operations
    
    
    910,000
    
    
    
    765,000
    
    
    
    1,852,726Recoveries
    
    
    132,761
    
    
    
    129,179
    
    
    
    116,135Loans charged off
    
    
    (513,061
    )
    
    
    (528,357
    )
    
    
    (817,527
    )Balance, Ending
    
    $
    4,432,420
    
    
    $
    3,117,208
    
    
    $
    3,902,720
 11




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Impaired loans without a valuation allowance
    
    $
    
    
    
    $
    
    
    
    $
    Impaired loans with a valuation allowance (1)
    
    
    821,943
    
    
    
    1,375,400
    
    
    
    935,785Total impaired loans
    
    $
    821,943
    
    
    $
    1,375,400
    
    
    $
    935,785Valuation allowance related to impaired loans
    
    $
    182,138
    
    
    $
    440,285
    
    
    $
    235,073
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure
by $18,884 for June 30, 2010, $44,842 at June 30, 2009 and $31,379 for December 31, 2009 June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Average investment in impaired loans
    
    $
    1,098,672
    
    
    $
    1,301,234
    
    
    $
    1,081,427Interest income recognized on impaired loans
    
    $
    23,041
    
    
    $
    29,458
    
    
    $
    56,662Interest income recognized on a cash basis on
impaired loans
    
    $
    23,041
    
    
    $
    29,458
    
    
    $
    56,662
  June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Foreclosed real estate (other real estate owned)
    
    $
    414,383
    
    
    $
    398,427
    
    
    $
    386,500Impaired loans, not on nonaccrual
    
    
    704,011
    
    
    
    778,483
    
    
    
    826,658Nonaccrual loans, impaired (1)
    
    
    117,932
    
    
    
    596,917
    
    
    
    109,127Nonaccrual loans, not impaired
    
    
    2,060,756
    
    
    
    682,727
    
    
    
    1,456,367Loans past due 90 days or more still accruing
interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    3,297,082
    
    
    $
    2,456,554
    
    
    $
    2,778,652
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by
$18,884 at June 30, 2010, $44,842 at June 30, 2009 and $31,379 at December 31, 2009. 12




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Time Deposits
    
    
    All Time$100,000 and Over
    
    
    DepositsWithin 3 months
    
    $
    4,371,905
    
    
    $
    10,352,5583 months thru 6 months
    
    
    16,173,770
    
    
    
    29,031,0656 months thru 12 months
    
    
    25,424,719
    
    
    
    45,116,580Over 12 months
    
    
    24,298,110
    
    
    
    60,478,786$
    70,268,504
    
    
    $
    144,978,989
  June 30,
    
    December 31,2010
    
    2009
    
    2009Federal Home Loan Bank
advances
    
    $
    2,925,000
    
    
    $
    10,000,000
    
    
    $
    6,400,000
     Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    65,133
    
    
    $
    59,099
    
    
    $
    130,266
    
    
    $
    118,199Interest cost
    
    
    86,446
    
    
    
    79,061
    
    
    
    172,891
    
    
    
    158,123Expected return on plan assets
    
    
    (86,656
    )
    
    
    (81,877
    )
    
    
    (173,311
    )
    
    
    (163,754
    )Amortization of prior service costs
    
    
    3,086
    
    
    
    3,086
    
    
    
    6,172
    
    
    
    6,172Recognized net actuarial loss
    
    
    21,530
    
    
    
    18,322
    
    
    
    43,061
    
    
    
    36,643Net periodic plan cost
    
    $
    89,539
    
    
    $
    77,691
    
    
    $
    179,079
    
    
    $
    155,383
  13




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##### Table of Contents



CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
           Securities available for sale and certificates of deposit investments
  14




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##### Table of Contents



CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Valuation of our Financial Instruments by Fair Value Hierarchy Levels  Recurring Basis
 June 30, 2010(In Thousands)SignificantIn Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:U.S. government agencies and corporations
    
    $
    6,259
    
    
    $
    
    
    
    $
    6,259
    
    
    $
    Corporate bonds
    
    
    4,727
    
    
    
    
    
    
    
    4,727
    
    
    
    State and municipal securities
    
    
    35,357
    
    
    
    
    
    
    
    35,357
    
    
    
    Residential mortgage-backed securities
    
    
    13,026
    
    
    
    
    
    
    
    13,026
    
    
    
    Collateralized mortgage obligations
    
    
    14,767
    
    
    
    
    
    
    
    14,767
    
    
    
    
 December 31, 2009(In Thousands)SignificantIn Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:U.S. government agencies and corporations
    
    $
    8,623
    
    
    $
    
    
    
    $
    8,623
    
    
    $
    Corporate bonds
    
    
    4,812
    
    
    
    
    
    
    
    4,812
    
    
    
    State and municipal securities
    
    
    32,533
    
    
    
    
    
    
    
    32,533
    
    
    
    Residential mortgage-backed securities
    
    
    13,416
    
    
    
    
    
    
    
    13,416
    
    
    
    Collateralized mortgage obligtions
    
    
    12,889
    
    
    
    
    
    
    
    12,889
    
    
    
    Certificates of deposit investments
    
    
    1,989
    
    
    
    
    
    
    
    1,989
    
    
    
    
   Loans held for sale
  15




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##### Table of Contents



CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Impaired loans
   Other Real Estate Owned
   Valuation of our Financial Instruments by Fair Value Hierarchy Levels  Non-recurring Basis
 June 30, 2010(In Thousands)Quoted Prices
    
    SignificantIn Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    Unobservable
    
    RecognizedIdentical Assets
    
    Inputs
    
    Inputs
    
    GainsDescription
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    (Losses)Assets:Impaired loans, net of government
agency guarantees and reserve for losses
    
    $
    621
    
    
    $
    
    
    
    $
    621
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    414
    
    
    $
    
    
    
    $
    414
    
    
    $
    
    
    
    $
    (33
    )
 December 31, 2009(In Thousands)Quoted Prices
    
    SignificantIn Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    Unobservable
    
    RecognizedIdentical Assets
    
    Inputs
    
    Inputs
    
    GainsDescription
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    (Losses)Assets:Impaired loans, net of government agencyguarantees and reserve for losses
    
    $
    669
    
    
    $
    
    
    
    $
    669
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    387
    
    
    $
    
    
    
    $
    387
    
    
    $
    
    
    
    $
    (149
    )
 16




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##### Table of Contents



CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    June 30, 2010
    
    December 31, 2009Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial Assets:Cash, due from banks and
federal funds sold
    
    $
    4,177,941
    
    
    $
    4,177,941
    
    
    $
    5,068,118
    
    
    $
    5,068,118Securities available for
sale
    
    
    74,135,935
    
    
    
    74,135,935
    
    
    
    72,272,665
    
    
    
    72,272,665Loans
    
    
    189,826,915
    
    
    
    185,989,079
    
    
    
    194,707,226
    
    
    
    191,450,941Accrued interest receivable
    
    
    1,304,823
    
    
    
    1,304,823
    
    
    
    1,334,704
    
    
    
    1,334,704Financial Liabilities:Demand deposits
    
    $
    103,185,492
    
    
    $
    103,185,492
    
    
    $
    103,871,995
    
    
    $
    103,871,995Time deposits
    
    
    144,978,989
    
    
    
    148,809,009
    
    
    
    148,419,859
    
    
    
    157,634,463Accrued interest payable
    
    
    1,080,622
    
    
    
    1,080,622
    
    
    
    1,170,417
    
    
    
    1,170,417FHLB borrowings
    
    
    2,925,000
    
    
    
    2,925,000
    
    
    
    6,400,000
    
    
    
    6,400,000Off-Balance SheetFinancial Instruments:Letters of credit
    
    $
    
    
    
    $
    250
    
    
    $
    
    
    
    $
    
  ASC Topic 860  Transfers and Servicing (Statement No. 166, Accounting for Transfers of
Financial Assets  an amendment of FASB Statement No. 140) (ASC 860).
 ASC Topic 810  Consolidation (Statement No. 167, Amendments to FASB Interpretation No.
46R) (ASC 810)
 17




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##### Table of Contents



CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Accounting Standards Update (ASU) 2010-6  Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements.
 Accounting Standards Update (ASU) 2010-9 Subsequent Events (Topic 855): Amendments to
Certain Recognition and Disclosure Requirements.
 Accounting Standards Update (ASU) 2010-18  Effect of a Loan Modification When the Loan is Part of
a Pool that is Accounted for as a Single Asset (Topic 310).
 Accounting Standards Update (ASU) 2010-20  Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses (Topic 310).
   18




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
          19




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,
 ,
         20




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21




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TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
 JUNE 30, 2010
    
    

    JUNE 30, 2009QTR
    
    
    
    
    
    
    
    
    
    
    QTRAVERAGE
    
    
    QTR
    
    
    YIELD/
    
    
    AVERAGE
    
    
    QTR
    
    
    YIELD/BALANCE
    
    
    INTEREST
    
    
    RATE(4)
    
    
    BALANCE
    
    
    INTEREST
    
    
    RATE(4)(IN THOUSANDS OF DOLLARS)Interest earning assets:Federal funds sold
    
    $
    317
    
    
    $
    
    
    
    
    0.19
    %
    
    $
    1,165
    
    
    $
    1
    
    
    
    0.18
    %Certificates of deposit
    
    
    773
    
    
    
    1
    
    
    
    0.52
    
    
    
    2,704
    
    
    
    6
    
    
    
    0.89Securities:Taxable
    
    
    45,834
    
    
    
    486
    
    
    
    4.24
    
    
    
    41,790
    
    
    
    519
    
    
    
    4.97Tax-exempt (1)
    
    
    30,152
    
    
    
    249
    
    
    
    5.00
    
    
    
    18,789
    
    
    
    162
    
    
    
    5.23Loans (net of unearned interest) (2)(5)(6)
    
    
    194,789
    
    
    
    2,952
    
    
    
    6.06
    
    
    
    201,321
    
    
    
    3,143
    
    
    
    6.24Total interest earning assets (1)
    
    $
    271,865
    
    
    $
    3,688
    
    
    
    5.43
    %
    
    $
    265,769
    
    
    $
    3,831
    
    
    
    5.77
    %Nonearning assets:Cash and due from banks
    
    $
    4,054
    
    
    
    
    
    
    
    
    
    
    $
    5,806Bank premises and equipment, net
    
    
    5,451
    
    
    
    
    
    
    
    
    
    
    
    5,757Other assets
    
    
    6,898
    
    
    
    
    
    
    
    
    
    
    
    7,115Allowance for loan losses
    
    
    (4,287
    )
    
    
    
    
    
    
    
    
    
    
    (2,979
    )Total assets
    
    $
    283,981
    
    
    
    
    
    
    
    
    
    
    $
    281,468Interest bearing liabilities:Savings deposits
    
    $
    26,507
    
    
    $
    7
    
    
    
    0.11
    %
    
    $
    24,759
    
    
    $
    6
    
    
    
    0.10
    %Time deposits
    
    
    147,198
    
    
    
    1,157
    
    
    
    3.14
    
    
    
    138,999
    
    
    
    1,233
    
    
    
    3.55NOW accounts
    
    
    24,338
    
    
    
    26
    
    
    
    0.43
    
    
    
    21,936
    
    
    
    25
    
    
    
    0.46Money market accounts
    
    
    10,640
    
    
    
    4
    
    
    
    0.15
    
    
    
    12,634
    
    
    
    5
    
    
    
    0.16Borrowings
    
    
    1,643
    
    
    
    3
    
    
    
    0.73
    
    
    
    11,293
    
    
    
    74
    
    
    
    2.62Total interest bearing liabilities
    
    $
    210,326
    
    
    $
    1,197
    
    
    
    2.28
    %
    
    $
    209,621
    
    
    $
    1,343
    
    
    
    2.56
    %Noninterest bearing liabilities:Demand deposits
    
    $
    42,608
    
    
    
    
    
    
    
    
    
    
    $
    42,660Other liabilities
    
    
    4,867
    
    
    
    
    
    
    
    
    
    
    
    5,358Shareholders equity
    
    
    26,180
    
    
    
    
    
    
    
    
    
    
    
    23,829Total liabilities and
shareholders equity
    
    $
    283,981
    
    
    
    
    
    
    
    
    
    
    $
    281,468Net interest income (1)
    
    
    
    
    
    $
    2,491
    
    
    
    
    
    
    
    
    
    
    $
    2,488Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Net interest income to average
interest earning assets (1)
    
    
    
    
    
    
    
    
    
    
    3.67
    %
    
    
    
    
    
    
    
    
    
    
    3.74
    %
 
 (1)
    
    Yields are expressed on a tax equivalent basis using a 34% tax rate.(2)
    
    For the purpose of these computations, nonaccruing loans are included in the amounts of average
loans outstanding.(3)
    
    Net interest spread is the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing liabilities.(4)
    
    Yields/Rates are expressed on an annualized basis.(5)
    
    Interest income on loans excludes fees of $46,854 in 2010 and $62,662 in 2009.(6)
    
    Interest income on loans includes fees of $16,810 in 2010 and $23,321 in 2009 from student
loans and lease receivables. 22




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TABLE 2. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY; INTEREST RATES AND
INTEREST DIFFERENTIAL
 JUNE 30, 2010
    
    

    JUNE 30, 2009YTD
    
    
    
    
    
    
    
    
    
    
    YTDAVERAGE
    
    
    YTD
    
    
    YIELD/
    
    
    AVERAGE
    
    
    YTD
    
    
    YIELD/BALANCE
    
    
    INTEREST
    
    
    RATE(4)
    
    
    BALANCE
    
    
    INTEREST
    
    
    RATE(4)(IN THOUSANDS OF DOLLARS)Interest earning assets:Federal funds sold
    
    $
    642
    
    
    $
    2
    
    
    
    0.16
    %
    
    $
    586
    
    
    $
    1
    
    
    
    0.18
    %Certificates of deposit
    
    
    1,321
    
    
    
    2
    
    
    
    0.30
    
    
    
    1,747
    
    
    
    9
    
    
    
    1.03Securities:Taxable
    
    
    45,969
    
    
    
    986
    
    
    
    4.29
    
    
    
    43,362
    
    
    
    1,069
    
    
    
    4.93Tax-exempt (1)
    
    
    29,444
    
    
    
    484
    
    
    
    4.98
    
    
    
    18,079
    
    
    
    317
    
    
    
    5.31Loans (net of unearned interest) (2)(5)(6)
    
    
    195,701
    
    
    
    5,948
    
    
    
    6.08
    
    
    
    202,147
    
    
    
    6,361
    
    
    
    6.29Total interest earning assets (1)
    
    $
    273,077
    
    
    $
    7,422
    
    
    
    5.44
    %
    
    $
    265,921
    
    
    $
    7,757
    
    
    
    5.83
    %Nonearning assets:Cash and due from banks
    
    $
    4,253
    
    
    
    
    
    
    
    
    
    
    $
    5,881Bank premises and equipment, net
    
    
    5,487
    
    
    
    
    
    
    
    
    
    
    
    5,783Other assets
    
    
    7,257
    
    
    
    
    
    
    
    
    
    
    
    6,672Allowance for loan losses
    
    
    (4,164
    )
    
    
    
    
    
    
    
    
    
    
    (2,948
    )Total assets
    
    $
    285,910
    
    
    
    
    
    
    
    
    
    
    $
    281,309Interest bearing liabilities:Savings deposits
    
    $
    25,998
    
    
    $
    13
    
    
    
    0.10
    %
    
    $
    24,442
    
    
    $
    16
    
    
    
    0.13
    %Time deposits
    
    
    148,089
    
    
    
    2,359
    
    
    
    3.19
    
    
    
    136,239
    
    
    
    2,448
    
    
    
    3.59NOW accounts
    
    
    23,523
    
    
    
    51
    
    
    
    0.43
    
    
    
    21,494
    
    
    
    50
    
    
    
    0.47Money market accounts
    
    
    10,914
    
    
    
    8
    
    
    
    0.15
    
    
    
    12,926
    
    
    
    14
    
    
    
    0.22Borrowings
    
    
    3,790
    
    
    
    27
    
    
    
    1.42
    
    
    
    15,465
    
    
    
    161
    
    
    
    2.08Total interest bearing liabilities
    
    $
    212,314
    
    
    $
    2,458
    
    
    
    2.32
    %
    
    $
    210,566
    
    
    $
    2,689
    
    
    
    2.55
    %Noninterest bearing liabilities:Demand deposits
    
    $
    42,860
    
    
    
    
    
    
    
    
    
    
    $
    41,756Other liabilities
    
    
    4,915
    
    
    
    
    
    
    
    
    
    
    
    5,465Shareholders equity
    
    
    25,821
    
    
    
    
    
    
    
    
    
    
    
    23,522Total liabilities and
shareholders equity
    
    $
    285,910
    
    
    
    
    
    
    
    
    
    
    $
    281,309Net interest income (1)
    
    
    
    
    
    $
    4,964
    
    
    
    
    
    
    
    
    
    
    $
    5,068Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.12
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %Net interest income to average
interest earning assets (1)
    
    
    
    
    
    
    
    
    
    
    3.64
    %
    
    
    
    
    
    
    
    
    
    
    3.81
    %
 
 (1)
    
    Yields are expressed on a tax equivalent basis using a 34% tax rate.(2)
    
    For the purpose of these computations, nonaccruing loans are included in the amounts of average
loans outstanding.(3)
    
    Net interest spread is the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing liabilities.(4)
    
    Yields/Rates are expressed on an annualized basis.(5)
    
    Interest income on loans excludes fees of $82,309 in 2010 and $113,503 in 2009.(6)
    
    Interest income on loans includes fees of $33,409 in 2010 and $48,037 in 2009 from student
loans and lease receivables. 23




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June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Impaired loans, not on nonaccrual
    
    
    704,011
    
    
    
    778,483
    
    
    
    826,658Nonaccrual loans, impaired (1)
    
    
    117,932
    
    
    
    596,917
    
    
    
    109,127Nonaccrual loans, not impaired
    
    
    2,060,756
    
    
    
    682,727
    
    
    
    1,456,367Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    $
    2,882,699
    
    
    $
    2,058,127
    
    
    $
    2,392,152Foreclosed real estate (other real estate owned)
    
    $
    414,383
    
    
    $
    398,427
    
    
    $
    386,500Total nonperforming assets
    
    $
    3,297,082
    
    
    $
    2,456,554
    
    
    $
    2,778,652Nonperforming loans/Total loans
    
    
    1.52
    %
    
    
    1.04
    %
    
    
    1.23
    %Nonperforming assets/Total assets
    
    
    1.17
    %
    
    
    0.86
    %
    
    
    0.96
    %Allowance for loan losses/Total loans
    
    
    2.33
    %
    
    
    1.57
    %
    
    
    2.00
    %
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks
exposure by $18,884 at June 30, 2010, $44,842 at June 30, 2009 and $31,379 at December 31,
2009.    26




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June 30,
    
    
    December 31,2010
    
    
    2009Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in EachCategory to
    
    
    
    
    
    
    Category toAmount
    
    
    Total Loans
    
    
    Amount
    
    
    Total LoansCommercial, financial
and agriculture
    
    $
    1,766
    
    
    
    27
    %
    
    $
    1,428
    
    
    
    26
    %Real estate  residential
mortgage
    
    
    1,773
    
    
    
    65
    
    
    
    1,613
    
    
    
    66Installment and other
    
    
    549
    
    
    
    8
    
    
    
    483
    
    
    
    8Impaired loans
    
    
    182
    
    
    
    
    
    
    
    235
    
    
    
    Unallocated
    
    
    162
    
    
    
    N/A
    
    
    
    144
    
    
    
    N/ATotal
    
    $
    4,432
    
    
    
    100
    %
    
    $
    3,903
    
    
    
    100
    %
        Components
    
    Actual
    
    Requiredof Capital
    
    Ratio
    
    RatioTier 1 Capital
    
    $
    26,318
    
    
    
    9.3
    %
    
    
    4.0
    %Total Risk Based Capital
    
    $
    28,484
    
    
    
    16.7
    %
    
    
    8.0
    %
 27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        28




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ITEM 4. CONTROLS AND PROCEDURES
   29




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Total Number
    
    
    
    
    
    
    Total Number of Shares Purchased
    
    
    Maximum Number of Sharesof Shares
    
    
    Average Price
    
    
    as Part of Publicly Announced
    
    
    that may yet be purchased underPeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Plans or Programs
    
    
    the Plans or ProgramsBeginning balanceMarch 31, 2010
    
    
    
    
    
    
    
    
    
    
    15,244
    
    
    
    30,561April 1, 2010April 30, 2010
    
    
    1,366
    
    
    $
    50.23
    
    
    
    1,366
    
    
    
    29,195May 1, 2010May 31, 2010
    
    
    90
    
    
    $
    50.50
    
    
    
    90
    
    
    
    29,105June 1, 2010June 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    29,105Total
    
    
    1,456
    
    
    
    
    
    
    
    16,700
  
   31.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 30




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CNB Financial Services, Inc.

(Registrant)Date August 5, 2010
    
    /s/ Thomas F. Rokisky, President/CEODate August 5, 2010
    
    /s/ Rebecca S. Stotler, Senior Vice President/CFO
 31