##### 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 September 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
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
  o þ




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##### 



CNB FINANCIAL SERVICES, INC.
 TABLE OF CONTENTS
  
 PAGEPART 1: FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of September 30, 2010 (Unaudited)
and December 31, 2009
    
    
    3Consolidated Statements of Income for the Three and Nine Months ended September 30, 2010
and 2009 (Unaudited)
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Nine
Months Ended September 30, 2010 and 2009 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months
Ended September 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 Nine Months ended September 30, 2010
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    32PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1a. Risk Factors
    
    
    33Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits and Reports on Form 8-K
    
    
    33SIGNATURES
    
    
    34EX-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
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (Audited)ASSETSCash and due from banks
    
    $
    3,596,105
    
    
    $
    5,068,118Federal funds sold
    
    
    3,800,000
    
    
    
    Certificates of deposit investments
    
    
    
    
    
    
    1,989,017Securities available for sale
(at approximate market value)
    
    
    71,750,052
    
    
    
    72,272,665Federal Home Loan Bank stock, at cost
    
    
    2,321,300
    
    
    
    2,321,300Loans and lease receivable, net
    
    
    186,892,465
    
    
    
    194,707,226Accrued interest receivable
    
    
    1,331,841
    
    
    
    1,334,704Foreclosed real estate (held for sale), net
    
    
    942,983
    
    
    
    386,500Premises and equipment, net
    
    
    5,417,889
    
    
    
    5,554,927Deferred income taxes
    
    
    1,580,206
    
    
    
    1,753,665Cash surrender value of life insurance
    
    
    1,690,400
    
    
    
    1,601,720Intangible assets
    
    
    78,991
    
    
    
    162,628Other assets
    
    
    1,889,484
    
    
    
    2,345,418TOTAL ASSETS
    
    $
    281,291,716
    
    
    $
    289,497,888LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits:Demand
    
    $
    39,820,448
    
    
    $
    43,381,922Interest-bearing demand
    
    
    36,443,847
    
    
    
    35,564,826Savings
    
    
    26,000,838
    
    
    
    24,925,247Time, $100,000 and over
    
    
    73,027,938
    
    
    
    72,982,196Other time
    
    
    73,223,391
    
    
    
    75,437,663$
    248,516,462
    
    
    $
    252,291,854Accrued interest payable
    
    
    1,021,793
    
    
    
    1,170,417FHLB borrowings
    
    
    
    
    
    
    6,400,000Accrued expenses and other liabilities
    
    
    4,160,801
    
    
    
    4,005,322TOTAL LIABILITIES
    
    $
    253,699,056
    
    
    $
    263,867,593SHAREHOLDERS EQUITYCommon stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares issued at September 30, 2010 and
December 31, 2009 and 441,348 and 443,648 outstanding at
September 30, 2010 and December 31, 2009, respectively
    
    $
    458,048
    
    
    $
    458,048Capital surplus
    
    
    4,163,592
    
    
    
    4,163,592Retained earnings
    
    
    23,556,318
    
    
    
    22,476,562Accumulated other comprehensive income (loss)
    
    
    352,600
    
    
    
    (642,839
    )$
    28,530,558
    
    
    $
    26,455,363Less treasury stock, at cost, 16,700 shares at September 30, 2010
and 14,400 shares at December 31, 2009
    
    
    (937,898
    )
    
    
    (825,068
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    27,592,660
    
    
    $
    25,630,295TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    281,291,716
    
    
    $
    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
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST INCOMEInterest and fees on loans
    
    $
    2,997,963
    
    
    $
    3,227,137
    
    
    $
    9,028,174
    
    
    $
    9,701,834Interest and dividends on securitiesU.S. Government agencies and
corporations
    
    
    35,364
    
    
    
    48,362
    
    
    
    130,732
    
    
    
    189,552Corporate bonds
    
    
    68,251
    
    
    
    86,655
    
    
    
    189,587
    
    
    
    283,586Mortgage backed securities
    
    
    305,741
    
    
    
    327,452
    
    
    
    920,968
    
    
    
    1,038,813State and political subdivisions
    
    
    300,455
    
    
    
    202,095
    
    
    
    938,318
    
    
    
    539,114Interest on certificates of deposit
    
    
    
    
    
    
    5,517
    
    
    
    2,052
    
    
    
    14,142Interest on FHLB deposits
    
    
    3
    
    
    
    4
    
    
    
    60
    
    
    
    33Interest on federal funds sold
    
    
    653
    
    
    
    2,750
    
    
    
    2,142
    
    
    
    3,288$
    3,708,430
    
    
    $
    3,899,972
    
    
    $
    11,212,033
    
    
    $
    11,770,362INTEREST EXPENSEInterest on interest bearing demand,
savings and time deposits
    
    $
    1,167,236
    
    
    $
    1,280,828
    
    
    $
    3,598,414
    
    
    $
    3,808,924Interest on federal funds purchased
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    Interest on FHLB borrowings
    
    
    2,287
    
    
    
    73,161
    
    
    
    28,805
    
    
    
    234,052$
    1,169,544
    
    
    $
    1,353,989
    
    
    $
    3,627,240
    
    
    $
    4,042,976NET INTEREST INCOME
    
    $
    2,538,886
    
    
    $
    2,545,983
    
    
    $
    7,584,793
    
    
    $
    7,727,386PROVISION FOR LOAN LOSSES
    
    
    460,000
    
    
    
    400,000
    
    
    
    1,370,000
    
    
    
    1,165,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    $
    2,078,886
    
    
    $
    2,145,983
    
    
    $
    6,214,793
    
    
    $
    6,562,386NONINTEREST INCOMEService charges on deposit accounts
    
    $
    290,139
    
    
    $
    344,025
    
    
    $
    867,826
    
    
    $
    970,759Other service charges, commissions
and fees
    
    
    205,176
    
    
    
    206,890
    
    
    
    638,854
    
    
    
    593,998Other operating income
    
    
    22,029
    
    
    
    17,575
    
    
    
    73,837
    
    
    
    115,915Income from title company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,061Net gain on sales of loans
    
    
    3,812
    
    
    
    12,628
    
    
    
    18,455
    
    
    
    32,952Net gain on sales and calls of securities
    
    
    120,495
    
    
    
    568
    
    
    
    173,918
    
    
    
    32,591Net gain (loss) on sale of other real estate owned
    
    
    (4,461
    )
    
    
    (38,308
    )
    
    
    10,100
    
    
    
    (86,744
    )Provision for losses on other real estate owned
    
    
    (3,900
    )
    
    
    (35,000
    )
    
    
    (51,900
    )
    
    
    (110,800
    )Net (loss) on disposal of premises, equipment and software
    
    
    
    
    
    
    
    
    
    
    (166
    )
    
    
    Net gain (loss) on sale of repossessed assets
    
    
    975
    
    
    
    
    
    
    
    (3,450
    )
    
    
    $
    634,265
    
    
    $
    508,378
    
    
    $
    1,727,474
    
    
    $
    1,553,732NONINTEREST EXPENSESSalaries
    
    $
    738,208
    
    
    $
    690,747
    
    
    $
    2,205,913
    
    
    $
    2,029,127Employee benefits
    
    
    288,389
    
    
    
    264,747
    
    
    
    876,856
    
    
    
    842,383Occupancy of premises
    
    
    187,733
    
    
    
    126,526
    
    
    
    484,466
    
    
    
    362,466Furniture and equipment expense
    
    
    130,118
    
    
    
    163,529
    
    
    
    443,842
    
    
    
    482,674Other operating expenses
    
    
    871,179
    
    
    
    600,606
    
    
    
    2,442,317
    
    
    
    1,976,062$
    2,215,627
    
    
    $
    1,846,155
    
    
    $
    6,453,394
    
    
    $
    5,692,712INCOME BEFORE INCOME TAXES
    
    $
    497,524
    
    
    $
    808,206
    
    
    $
    1,488,873
    
    
    $
    2,423,406PROVISION FOR INCOME TAXES
    
    
    33,367
    
    
    
    193,886
    
    
    
    175,203
    
    
    
    664,227NET INCOME
    
    $
    464,157
    
    
    $
    614,320
    
    
    $
    1,313,670
    
    
    $
    1,759,179BASIC EARNINGS PER SHARE
    
    $
    1.05
    
    
    $
    1.38
    
    
    $
    2.97
    
    
    $
    3.94
  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 nine months
ended September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,759,179
    
    
    
    
    
    
    
    1,759,179Change in unrealized gains
(losses) on securities
available for sale (net of tax of $714,213)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,165,296
    
    
    
    1,165,296Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,924,475Acquisition of treasury stock, at cost,
3,703 shares
    
    
    
    
    
    
    (172,296
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172,296
    )Cash dividends ($.53 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (236,300
    )
    
    
    
    
    
    
    (236,300
    )BALANCE, SEPTEMBER 30, 2009
    
    $
    458,048
    
    
    $
    (742,808
    )
    
    $
    4,163,592
    
    
    $
    22,538,531
    
    
    $
    (683,694
    )
    
    $
    25,733,669BALANCE, JANUARY 1, 2010
    
    $
    458,048
    
    
    $
    (825,068
    )
    
    $
    4,163,592
    
    
    $
    22,476,562
    
    
    $
    (642,839
    )
    
    $
    25,630,295Comprehensive income:Net income for nine months
ended September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,313,670
    
    
    
    
    
    
    
    1,313,670Change in unrealized gains
(losses) on securities
available for sale (net of tax of $610,107)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    995,439
    
    
    
    995,439Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,309,109Acquisition of treasury stock, at cost,
2,300 shares
    
    
    
    
    
    
    (112,830
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,830
    )Cash dividends ($.53 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (233,914
    )
    
    
    
    
    
    
    (233,914
    )BALANCE, SEPTEMBER 30, 2010
    
    $
    458,048
    
    
    $
    (937,898
    )
    
    $
    4,163,592
    
    
    $
    23,556,318
    
    
    $
    352,600
    
    
    $
    27,592,660
  5




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedSeptember 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,313,670
    
    
    $
    1,759,179Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization on premises, equipment and software
    
    
    339,645
    
    
    
    380,255Provision for loan losses
    
    
    1,370,000
    
    
    
    1,165,000Provision for losses on other real estate owned
    
    
    51,900
    
    
    
    Deferred income taxes
    
    
    (436,649
    )
    
    
    (327,645
    )Net (gain) on sale of securities
    
    
    (173,918
    )
    
    
    (32,591
    )Net (gain) loss on sale of real estate owned
    
    
    (9,153
    )
    
    
    86,744Decrease in deferred gain on sale of real estate owned
    
    
    947
    
    
    
    Loss on disposal of premises, equipment and software
    
    
    166
    
    
    
    Net (gain) on loans sold
    
    
    (18,455
    )
    
    
    (32,952
    )Loans originated for sale
    
    
    (1,756,300
    )
    
    
    (7,141,400
    )Proceeds from loans sold
    
    
    1,774,755
    
    
    
    7,174,177(Increase) decrease in accrued interest receivable
    
    
    2,863
    
    
    
    (42,359
    )(Increase) decrease in other assets
    
    
    485,772
    
    
    
    (40,007
    )Increase (decrease) in accrued interest payable
    
    
    (148,624
    )
    
    
    1,433(Increase) in cash surrender value on life insurance in excess
of premiums paid
    
    
    (33,472
    )
    
    
    (87,999
    )Proceeds from life insurance death benefits
    
    
    
    
    
    
    194,184Increase (decrease) in accrued expenses and other liabilities
    
    
    154,532
    
    
    
    (250,434
    )Amortization of deferred loan (fees) cost
    
    
    79,155
    
    
    
    136,126Amortization (accretion) of premium and discount on securities
    
    
    101,458
    
    
    
    11,005Amortization (accretion) of premium and discount on certificates of deposit
    
    
    
    
    
    
    (380
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    3,098,292
    
    
    $
    2,952,336CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease in loans, not originated for sale
    
    $
    5,032,606
    
    
    $
    3,818,107Proceeds from sales of securities
    
    
    8,227,219
    
    
    
    2,327,895Proceeds from maturities, repayments and calls of securities
    
    
    16,430,106
    
    
    
    13,060,660Proceeds from maturities of certificates of deposit
    
    
    1,989,000
    
    
    
    1,238,000Purchases of securities
    
    
    (22,453,670
    )
    
    
    (16,660,699
    )Purchases of certificates of deposit
    
    
    
    
    
    
    (4,908,620
    )Purchases of premises, equipment and software
    
    
    (151,992
    )
    
    
    (151,165
    )Proceeds from sale of real estate owned
    
    
    745,862
    
    
    
    588,695Costs to acquire foreclosed real estate
    
    
    (12,092
    )
    
    
    (20,423
    )Net (increase) in federal funds sold
    
    
    (3,800,000
    )
    
    
    (9,950,000
    )Premiums paid on life insurance
    
    
    (55,208
    )
    
    
    (55,208
    )NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    $
    5,951,831
    
    
    $
    (10,712,758
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in demand and savings deposits
    
    $
    (1,606,862
    )
    
    $
    5,804,867Net increase (decrease) in time deposits
    
    
    (2,168,530
    )
    
    
    16,830,638Net (decrease) in FHLB borrowings
    
    
    (6,400,000
    )
    
    
    (15,445,000
    )Purchase of treasury stock
    
    
    (112,830
    )
    
    
    (172,296
    )Cash dividends paid
    
    
    (233,914
    )
    
    
    (236,300
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    $
    (10,522,136
    )
    
    $
    6,781,909NET (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    $
    (1,472,013
    )
    
    $
    (978,513
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    5,068,118
    
    
    
    4,770,724CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    3,596,105
    
    
    $
    3,792,211SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period:Interest
    
    $
    3,775,864
    
    
    $
    4,041,543Income taxes
    
    $
    555,982
    
    
    $
    840,900Net transfer to foreclosed real estate, held for sale
from loans receivable
    
    $
    1,333,000
    
    
    $
    686,045Unrealized gain on investment securities
available for sale (net of tax)
    
    $
    995,439
    
    
    $
    1,165,296
  6




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
      9/30/2010
    
    9/30/2009Quarter ending
    
    
    441,348
    
    
    
    445,774Year to date ending
    
    
    442,178
    
    
    
    446,669
 7




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    WeightedSeptember 30, 2010
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies
and corporationsWithin one year
    
    $
    999,400
    
    
    $
    2,257
    
    
    
    
    
    
    
    1,001,657
    
    
    
    3.81
    %After 1 but wihin 5 years
    
    
    1,000,000
    
    
    
    4,977
    
    
    
    
    
    
    
    1,004,977
    
    
    
    2.00After 5 but within 10 years
    
    
    1,998,290
    
    
    
    20,795
    
    
    
    1
    
    
    
    2,019,084
    
    
    
    2.29$
    3,997,690
    
    
    $
    28,029
    
    
    $
    1
    
    
    $
    4,025,718
    
    
    
    2.60
    %Corporate BondsWithin one year
    
    $
    495,110
    
    
    $
    4,158
    
    
    $
    
    
    
    $
    499,268
    
    
    
    3.18
    %After 1 but within 5 years
    
    
    2,775,820
    
    
    
    222,793
    
    
    
    
    
    
    
    2,998,613
    
    
    
    5.03After 5 but within 10 years
    
    
    2,015,126
    
    
    
    160,610
    
    
    
    
    
    
    
    2,175,736
    
    
    
    5.49$
    5,286,056
    
    
    $
    387,561
    
    
    $
    
    
    
    $
    5,673,617
    
    
    
    5.03
    %States and political subdivisionsWithin one year
    
    $
    1,510,350
    
    
    $
    8,499
    
    
    $
    
    
    
    $
    1,518,849
    
    
    
    2.61
    %After 1 but within 5 years
    
    
    6,589,670
    
    
    
    276,723
    
    
    
    1,038
    
    
    
    6,865,355
    
    
    
    3.04After 5 but within 10 years
    
    
    22,371,714
    
    
    
    1,094,925
    
    
    
    
    
    
    
    23,466,639
    
    
    
    4.19$
    30,471,734
    
    
    $
    1,380,147
    
    
    $
    1,038
    
    
    $
    31,850,843
    
    
    
    3.86
    %Mortgage backed securities:Government issued or guaranteed
    
    $
    11,867,046
    
    
    $
    787,680
    
    
    $
    15,215
    
    
    $
    12,639,511
    
    
    
    5.05
    %Collateralized mortgage obligations:Government issued or guaranteed
    
    $
    16,247,150
    
    
    $
    395,204
    
    
    $
    15,666
    
    
    $
    16,626,688
    
    
    
    3.44
    %Privately issued
    
    
    1,065,628
    
    
    
    
    
    
    
    131,953
    
    
    
    933,675
    
    
    
    8.41$
    17,312,778
    
    
    $
    395,204
    
    
    $
    147,619
    
    
    $
    17,560,363
    
    
    
    3.74
    %Total securities available for sale
    
    $
    68,935,304
    
    
    $
    2,978,621
    
    
    $
    163,873
    
    
    $
    71,750,052
    
    
    
    4.05
    %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)
    September 30, 2010Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government agencies
and corporations
    
    $
    499,375
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    499,375
    
    
    $
    1State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    103,530
    
    
    
    1,038
    
    
    
    103,530
    
    
    
    1,038Mortgage backed securities:Government issued or guarenteed
    
    
    507,658
    
    
    
    15,215
    
    
    
    
    
    
    
    
    
    
    
    507,658
    
    
    
    15,215Collateralized mortgage obligations:Government issued or guaranteed
    
    
    1,912,687
    
    
    
    15,666
    
    
    
    
    
    
    
    
    
    
    
    1,912,687
    
    
    
    15,666Privately issued
    
    
    
    
    
    
    
    
    
    
    933,675
    
    
    
    131,953
    
    
    
    933,675
    
    
    
    131,953Total temporarily impaired
securities
    
    $
    2,919,720
    
    
    $
    30,882
    
    
    $
    1,037,205
    
    
    $
    132,991
    
    
    $
    3,956,925
    
    
    $
    163,873
 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 impairedsecurities
    
    $
    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)
     September 30,
    
    
    December 31,2010
    
    
    2009Loans:Real estate
    
    $
    124,585,916
    
    
    $
    129,509,117Commercial real estate
    
    
    43,523,511
    
    
    
    43,972,033Consumer
    
    
    15,158,985
    
    
    
    16,683,611Commercial
    
    
    7,091,463
    
    
    
    7,276,430Overdrafts
    
    
    65,494
    
    
    
    203,337$
    190,425,369
    
    
    $
    197,644,528Leases
    
    
    525,987
    
    
    
    585,393$
    190,951,356
    
    
    $
    198,229,921Net deferred loan fees, costs,
premiums and discounts
    
    
    409,055
    
    
    
    380,025Allowance for loan losses
    
    
    (4,467,946
    )
    
    
    (3,902,720
    )$
    186,892,465
    
    
    $
    194,707,226
  September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Balance, Beginning
    
    $
    3,902,720
    
    
    $
    2,751,386
    
    
    $
    2,751,386Provision charged to operations
    
    
    1,370,000
    
    
    
    1,165,000
    
    
    
    1,852,726Recoveries
    
    
    168,387
    
    
    
    54,341
    
    
    
    116,135Loans charged off
    
    
    (973,161
    )
    
    
    (602,125
    )
    
    
    (817,527
    )Balance, Ending
    
    $
    4,467,946
    
    
    $
    3,368,602
    
    
    $
    3,902,720
 11




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Impaired loans without a valuation allowance
    
    $
    
    
    
    $
    
    
    
    $
    Impaired loans with a valuation allowance (1)
    
    
    5,556,693
    
    
    
    1,236,885
    
    
    
    935,785Total impaired loans
    
    $
    5,556,693
    
    
    $
    1,236,885
    
    
    $
    935,785Valuation allowance related to impaired loans
    
    $
    756,730
    
    
    $
    275,430
    
    
    $
    235,073
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure
by $0 for September 30, 2010, $38,435 at September 30, 2009 and $31,379 for December 31, 2009 September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Average investment in impaired loans
    
    $
    3,396,789
    
    
    $
    1,231,977
    
    
    $
    1,081,427Interest income recognized on impaired loans
    
    $
    172,451
    
    
    $
    49,571
    
    
    $
    56,662Interest income recognized on a cash basis on
impaired loans
    
    $
    172,451
    
    
    $
    49,571
    
    
    $
    56,662
  September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Foreclosed real estate (other real estate owned)
    
    $
    942,983
    
    
    $
    284,329
    
    
    $
    386,500Impaired loans, not on nonaccrual
    
    
    5,556,693
    
    
    
    654,404
    
    
    
    826,658Nonaccrual loans, impaired (1)
    
    
    
    
    
    
    582,481
    
    
    
    109,127Nonaccrual loans, not impaired
    
    
    1,180,830
    
    
    
    258,019
    
    
    
    1,456,367Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    7,680,506
    
    
    $
    1,779,233
    
    
    $
    2,778,652
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure
by $0 at September 30, 2010, $38,435 at September 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
    
    $
    17,106,070
    
    
    $
    30,675,3563 months thru 6 months
    
    
    23,125,076
    
    
    
    37,280,8316 months thru 12 months
    
    
    4,875,723
    
    
    
    13,932,645Over 12 months
    
    
    27,921,069
    
    
    
    64,362,497$
    73,027,938
    
    
    $
    146,251,329
  September 30,
    
    December 31,2010
    
    2009
    
    2009Federal Home Loan Bank advances
    
    $
    
    
    
    $
    10,000,000
    
    
    $
    6,400,000
     Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    65,133
    
    
    $
    59,100
    
    
    $
    195,398
    
    
    $
    177,299Interest cost
    
    
    86,446
    
    
    
    79,062
    
    
    
    259,337
    
    
    
    237,185Expected return on plan assets
    
    
    (86,656
    )
    
    
    (81,877
    )
    
    
    (259,967
    )
    
    
    (245,631
    )Amortization of prior service costs
    
    
    3,086
    
    
    
    3,086
    
    
    
    9,258
    
    
    
    9,258Recognized net actuarial loss
    
    
    21,530
    
    
    
    18,321
    
    
    
    64,592
    
    
    
    54,964Net periodic plan cost
    
    $
    89,539
    
    
    $
    77,692
    
    
    $
    268,618
    
    
    $
    233,075
  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
 September 30, 2010(In Thousands)In Active Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    Total
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:U.S. government agencies and corporations
    
    $
    4,026
    
    
    $
    
    
    
    $
    4,026
    
    
    $
    Corporate bonds
    
    
    5,673
    
    
    
    
    
    
    
    5,673
    
    
    
    State and municipal securities
    
    
    31,851
    
    
    
    
    
    
    
    31,851
    
    
    
    Residential mortgage-backed securities
    
    
    12,640
    
    
    
    
    
    
    
    12,640
    
    
    
    Collateralized mortgage obligations
    
    
    17,560
    
    
    
    
    
    
    
    17,560
    
    
    
    December 31, 2009(In Thousands)In Active Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    Total
    
    
    Assets (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
 September 30, 2010(In Thousands)Quoted Prices InActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Recognized GainsDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired loans, net of government agency
guarantees and reserve for losses
    
    $
    4,800
    
    
    $
    
    
    
    $
    4,800
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    943
    
    
    $
    
    
    
    $
    943
    
    
    $
    
    
    
    $
    (42
    )December 31, 2009(In Thousands)Quoted Prices InActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Recognized GainsDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired loans, net of government agency
guarantees 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)
    September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash, due from banks and
federal funds sold
    
    $
    7,396,105
    
    
    $
    7,396,105
    
    
    $
    5,068,118
    
    
    $
    5,068,118Securities available for
sale
    
    
    71,750,052
    
    
    
    71,750,052
    
    
    
    72,272,665
    
    
    
    72,272,665Loans
    
    
    186,892,465
    
    
    
    183,298,249
    
    
    
    194,707,226
    
    
    
    191,450,941Accrued interest receivable
    
    
    1,331,841
    
    
    
    1,331,841
    
    
    
    1,334,704
    
    
    
    1,334,704Financial Liabilities:Demand deposits
    
    $
    102,265,133
    
    
    $
    102,265,133
    
    
    $
    103,871,995
    
    
    $
    103,871,995Time deposits
    
    
    146,251,329
    
    
    
    149,763,574
    
    
    
    148,419,859
    
    
    
    157,634,463Accrued interest payable
    
    
    1,021,793
    
    
    
    1,021,793
    
    
    
    1,170,417
    
    
    
    1,170,417FHLB borrowings
    
    
    
    
    
    
    
    
    
    
    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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CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Accounting Standards Update (ASU) 2009-15  Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance or Other Financing.
 Accounting Standards Update (ASU) 2010-4  Accounting for Various Topics  Technical
Corrections to SEC Paragraphs.
 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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CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   SEC Release No. 33-9142  Internal Control Over Financial Reporting in Exchange Act Periodic
Reports of Non-Accelerated Filers.
 SEC Release No. 33-9144  Commission Guidance on Presentation of Liquidity and Capital
Resources Disclosures in Managements Discussion and Analysis.
   19




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
         
    
    Centralize responsibility for consumer financial protection by creating a new agency,
the Consumer Financial Protection Bureau, which will have rulemaking authority for a wide
range of consumer protection laws that would apply to all banks and have broad powers to
supervise and enforce consumer protection laws;
    
    Changes standards for Federal preemption of state laws related to federally chartered
institutions and their subsidiaries;
    
    After a three-year phase-in period which begins January 1, 2013, removes trust preferred
securities as a permitted component of a holding companys tier 1 capital;
    
    Requires the Office of the Comptroller of the Currency to seek to make its capital
requirements for national banks countercyclical so that capital requirements increase in
times of economic expansion and decrease in times of economic contraction;
    
    Requires financial holding companies to be well-capitalized and well-managed as of July
21, 2011. Bank holding companies and banks must also be both well-capitalized and
well-managed in order to acquire banks located outside their domiciled state;
    
    Provides for an increase in the FDIC assessment for depository institutions with assets
of $10 billion or more, increases in the minimum reserve ratio for the deposit insurance
fund from 1.15% to 1.35% and changes in the basis for determining FDIC premiums from
deposits to assets;
    
    Requires large, publicly traded bank holding companies with assets of $10 billion or
more to establish a risk committee responsible for the oversight of enterprise risk
management;
    
    Provides for new disclosure and other requirements relating to executive compensation
and corporate governance. These disclosures and requirements apply to all public
companies, not just financial institutions;
 20




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##### Table of Contents




    
    Permanently increases the $250 thousand limit for federal deposit insurance and
increases the cash limit of Securities Investor Protection Corporation protection from $100
thousand to $250 thousand and provides unlimited federal deposit insurance until January 1,
2013 for non-interest bearing demand transaction accounts at all insured depository
institutions;
    
    Repeals the federal prohibitions on the payment of interest on demand deposits;
    
    Amends the Electronic Fund Transfer Act (EFTA) to, among other things, give the Federal
Reserve the authority to establish rules regarding interchange fees charged for electronic
debit transactions by payment card issuers having assets over $10 billion and to enforce a
new statutory requirement that such fees be reasonable and proportional to the actual cost
of a transaction to the issuer; and
    
    Increases the authority of the Federal Reserve to examine the Bank and its non-bank
subsidiaries.
     21




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,
 ,
         22




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23




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TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
 SEPTEMBER 30, 2010
    
    
    SEPTEMBER 30, 2009QTR AVERAGE
    
    
    
    
    
    
    
    
    
    
    QTR AVERAGEBALANCE
    
    
    QTR INTEREST
    
    
    YIELD/ RATE(4)
    
    
    BALANCE
    
    
    QTR INTEREST
    
    
    YIELD/ RATE(4)(IN THOUSANDS OF DOLLARS)Interest earning assets:Federal funds sold
    
    $
    930
    
    
    $
    
    
    
    
    0.19
    %
    
    $
    5,645
    
    
    $
    3
    
    
    
    0.16
    %Certificates of deposit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,599
    
    
    
    6
    
    
    
    0.67Securities:Taxable
    
    
    48,958
    
    
    
    493
    
    
    
    4.03
    
    
    
    40,921
    
    
    
    496
    
    
    
    4.85Tax-exempt (1)
    
    
    25,699
    
    
    
    217
    
    
    
    5.12
    
    
    
    21,032
    
    
    
    168
    
    
    
    4.84Loans (net of unearned interest) (2)(5)(6)
    
    
    192,539
    
    
    
    2,952
    
    
    
    6.13
    
    
    
    199,166
    
    
    
    3,168
    
    
    
    6.36Total interest earning assets (1)
    
    $
    268,126
    
    
    $
    3,662
    
    
    
    5.46
    %
    
    $
    270,363
    
    
    $
    3,841
    
    
    
    5.68
    %Nonearning assets:Cash and due from banks
    
    $
    4,304
    
    
    
    
    
    
    
    
    
    
    $
    6,085Bank premises and equipment, net
    
    
    5,431
    
    
    
    
    
    
    
    
    
    
    
    5,681Other assets
    
    
    7,061
    
    
    
    
    
    
    
    
    
    
    
    6,496Allowance for loan losses
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    (3,235
    )Total assets
    
    $
    280,381
    
    
    
    
    
    
    
    
    
    
    $
    285,390Interest bearing liabilities:Savings deposits
    
    $
    26,595
    
    
    $
    7
    
    
    
    0.11
    %
    
    $
    25,110
    
    
    $
    6
    
    
    
    0.10
    %Time deposits
    
    
    145,383
    
    
    
    1,134
    
    
    
    3.12
    
    
    
    143,461
    
    
    
    1,245
    
    
    
    3.47NOW accounts
    
    
    23,061
    
    
    
    22
    
    
    
    0.38
    
    
    
    21,893
    
    
    
    25
    
    
    
    0.46Money market accounts
    
    
    11,444
    
    
    
    4
    
    
    
    0.14
    
    
    
    12,833
    
    
    
    5
    
    
    
    0.16Borrowings
    
    
    1,287
    
    
    
    2
    
    
    
    0.62
    
    
    
    10,023
    
    
    
    73
    
    
    
    2.91Total interest bearing liabilities
    
    $
    207,770
    
    
    $
    1,169
    
    
    
    2.25
    %
    
    $
    213,320
    
    
    $
    1,354
    
    
    
    2.54
    %Noninterest bearing liabilities:Demand deposits
    
    $
    40,962
    
    
    
    
    
    
    
    
    
    
    $
    41,993Other liabilities
    
    
    5,062
    
    
    
    
    
    
    
    
    
    
    
    5,752Shareholders equity
    
    
    26,587
    
    
    
    
    
    
    
    
    
    
    
    24,325Total liabilities and
shareholders equity
    
    $
    280,381
    
    
    
    
    
    
    
    
    
    
    $
    285,390Net interest income (1)
    
    
    
    
    
    $
    2,493
    
    
    
    
    
    
    
    
    
    
    $
    2,487Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.21
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Net interest income to average
interest earning assets (1)
    
    
    
    
    
    
    
    
    
    
    3.72
    %
    
    
    
    
    
    
    
    
    
    
    3.68
    %
 
 (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 $45,876 in 2010 and $59,168 in 2009.(6)
    
    Interest income on loans includes fees of $17,307 in 2010 and $19,666 in 2009 from student
loans and lease receivables. 24




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

SEPTEMBER 30, 2009YTD AVERAGE
    
    
    
    
    
    
    
    
    
    
    YTD AVERAGEBALANCE
    
    
    YTD INTEREST
    
    
    YIELD/ RATE(4)
    
    
    BALANCE
    
    
    YTD INTEREST
    
    
    YIELD/ RATE(4)(IN THOUSANDS OF DOLLARS)Interest earning assets:Federal funds sold
    
    $
    739
    
    
    $
    1
    
    
    
    0.17
    %
    
    $
    2,291
    
    
    $
    3
    
    
    
    0.17
    %Certificates of deposit
    
    
    876
    
    
    
    2
    
    
    
    0.30
    
    
    
    2,371
    
    
    
    14
    
    
    
    0.79Securities:Taxable
    
    
    46,975
    
    
    
    1,479
    
    
    
    4.20
    
    
    
    42,539
    
    
    
    1,566
    
    
    
    4.91Tax-exempt (1)
    
    
    28,182
    
    
    
    702
    
    
    
    5.03
    
    
    
    19,074
    
    
    
    485
    
    
    
    5.14Loans (net of unearned interest) (2)(5)(6)
    
    
    194,636
    
    
    
    8,900
    
    
    
    6.10
    
    
    
    201,142
    
    
    
    9,529
    
    
    
    6.32Total interest earning assets (1)
    
    $
    271,408
    
    
    $
    11,084
    
    
    
    5.45
    %
    
    $
    267,417
    
    
    $
    11,597
    
    
    
    5.78
    %Nonearning assets:Cash and due from banks
    
    $
    4,270
    
    
    
    
    
    
    
    
    
    
    $
    5,950Bank premises and equipment, net
    
    
    5,468
    
    
    
    
    
    
    
    
    
    
    
    5,749Other assets
    
    
    7,192
    
    
    
    
    
    
    
    
    
    
    
    6,613Allowance for loan losses
    
    
    (4,291
    )
    
    
    
    
    
    
    
    
    
    
    (3,044
    )Total assets
    
    $
    284,047
    
    
    
    
    
    
    
    
    
    
    $
    282,685Interest bearing liabilities:Savings deposits
    
    $
    26,200
    
    
    $
    19
    
    
    
    0.10
    %
    
    $
    24,667
    
    
    $
    23
    
    
    
    0.12
    %Time deposits
    
    
    147,177
    
    
    
    3,493
    
    
    
    3.16
    
    
    
    138,672
    
    
    
    3,693
    
    
    
    3.55NOW accounts
    
    
    23,367
    
    
    
    73
    
    
    
    0.42
    
    
    
    21,629
    
    
    
    74
    
    
    
    0.46Money market accounts
    
    
    11,092
    
    
    
    13
    
    
    
    0.16
    
    
    
    12,894
    
    
    
    19
    
    
    
    0.20Borrowings
    
    
    2,947
    
    
    
    29
    
    
    
    1.31
    
    
    
    13,631
    
    
    
    234
    
    
    
    2.29Total interest bearing liabilities
    
    $
    210,783
    
    
    $
    3,627
    
    
    
    2.29
    %
    
    $
    211,493
    
    
    $
    4,043
    
    
    
    2.55
    %Noninterest bearing liabilities:Demand deposits
    
    $
    42,220
    
    
    
    
    
    
    
    
    
    
    $
    41,837Other liabilities
    
    
    4,965
    
    
    
    
    
    
    
    
    
    
    
    5,563Shareholders equity
    
    
    26,079
    
    
    
    
    
    
    
    
    
    
    
    23,792Total liabilities and
shareholders equity
    
    $
    284,047
    
    
    
    
    
    
    
    
    
    
    $
    282,685Net interest income (1)
    
    
    
    
    
    $
    7,457
    
    
    
    
    
    
    
    
    
    
    $
    7,554Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.23
    %Net interest income to average
interest earning assets (1)
    
    
    
    
    
    
    
    
    
    
    3.66
    %
    
    
    
    
    
    
    
    
    
    
    3.77
    %
 
 (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 $128,185 in 2010 and $172,671 in 2009.(6)
    
    Interest income on loans includes fees of $50,716 in 2010 and $67,704 in 2009 from student
loans and lease receivables. 25




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th
      27




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September 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Impaired loans, not on nonaccrual
    
    
    5,556,693
    
    
    
    654,404
    
    
    
    826,658Nonaccrual loans, impaired (1)
    
    
    
    
    
    
    582,481
    
    
    
    109,127Nonaccrual loans, not impaired
    
    
    1,180,830
    
    
    
    258,019
    
    
    
    1,456,367Loans past due 90 days or more still accruing
interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    $
    6,737,523
    
    
    $
    1,494,904
    
    
    $
    2,392,152Foreclosed real estate (other real estate owned)
    
    $
    942,983
    
    
    $
    284,329
    
    
    $
    386,500Total nonperforming assets
    
    $
    7,680,506
    
    
    $
    1,779,233
    
    
    $
    2,778,652Nonperforming loans/Total loans
    
    
    3.61
    %
    
    
    0.77
    %
    
    
    1.23
    %Nonperforming assets/Total assets
    
    
    2.73
    %
    
    
    0.61
    %
    
    
    0.96
    %Allowance for loan losses/Total loans
    
    
    2.39
    %
    
    
    1.73
    %
    
    
    2.00
    %
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by
$0 at September 30, 2010, $38,435 at September 30, 2009 and $31,379 at December 31, 2009.   28




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September 30,
    
    
    December 31,2010
    
    
    2009Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in EachCategory to
    
    
    
    
    
    
    Category toIn thousands
    
    Amount
    
    
    Total Loans
    
    
    Amount
    
    
    Total LoansCommercial, financial
and agriculture
    
    $
    1,743
    
    
    
    24
    %
    
    $
    1,428
    
    
    
    26
    %Real estate  residential
mortgage
    
    
    1,295
    
    
    
    65
    
    
    
    1,613
    
    
    
    66Installment and other
    
    
    287
    
    
    
    8
    
    
    
    483
    
    
    
    8Impaired loans
    
    
    757
    
    
    
    3
    
    
    
    235
    
    
    
    Unallocated
    
    
    386
    
    
    
    N/A
    
    
    
    144
    
    
    
    N/ATotal
    
    $
    4,468
    
    
    
    100
    %
    
    $
    3,903
    
    
    
    100
    %
      29




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Components
    
    
    Actual
    
    
    Requiredof Capital
    
    
    Ratio
    
    
    RatioTier 1 Capital
    
    $
    26,831
    
    
    
    9.6
    %
    
    
    4.0
    %Total Risk Based Capital
    
    $
    28,967
    
    
    
    17.2
    %
    
    
    8.0
    %
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      30




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ITEM 4. CONTROLS AND PROCEDURES
   32




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Item 1.
    
    Legal Proceedings
 There are no material legal proceedings to which CNB or its subsidiary is a party, or to
which any of their property is subject. However, CNB is involved in various legal
proceedings occurring in the ordinary course of business.
 
 Item 1a.
    
    Risk FactorsThere have been no material changes to CNBs risk factors since these factors were
previously disclosed in CNBs annual report on Form 10-K for the period ended December 31,
2009.
 
 Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds
 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 balanceJune 30, 2010
    
    
    
    
    
    
    
    
    
    
    16,700
    
    
    
    29,105July 1, 2010July 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    29,105August 1, 2010August 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    29,105September 1, 2010September 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    29,105Total
    
    
    
    
    
    
    
    
    
    
    16,700
 On August 23, 2007, the Board of Directors approved a stock repurchase program to
repurchase issued shares of common stock of CNB Financial Services, Inc. Management is
authorized to repurchase up to 45,804 shares or 10% of the outstanding shares of CNB
Financial Services, Inc. common stock at the prevailing fair market value. The stock
repurchase program will terminate upon the repurchase of 45,804 shares.
 Item 4.
    
    Removed and Reserved.
 
 Item 5.
    
    Other InformationOn November 5, 2010, the Company began mailing its definitive Proxy Statement to
shareholders of record as of October 15, 2010, soliciting proxies for a Special Meeting of
Shareholders on December 9, 2010. The purpose of the Special Meeting is to vote upon a
proposal to engage in a corporate reorganization that will allow all those Company
shareholders who hold, in the aggregate, less than 150 shares of CNB Common Stock, to
exchange those shares for newly created Class A Common Stock shares. Those Company
shareholders who hold in the aggregate 150 or more of CNBs Common Stock shares will
continue to hold their existing Common Stock without change. This reorganization is known
as a going private transaction and will result, if approved, in the Company having less
than 300 shareholders owning the Companys existing Common Stock and less than 500
shareholders owning the newly created Class A Common Stock.
 
 Item 6.
    
    Exhibits31.1 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
 33




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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 CNB Financial Services, Inc.
(Registrant)Date November 12, 2010
    /s/ Thomas F. Rokisky, President/CEODate  November 12, 2010
    /s/ Rebecca S. Stotler, Senior Vice President/CFO 34