##### 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 March 31, 2009
 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)
 304 258 1520
 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 March 31, 2009
(Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the Three Months ended March 31, 2009
and 2008 (Unaudited)
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Three
Months Ended March 31, 2009 (Unaudited) and the Year Ended December 31,
2008
    
    
    5Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2009 and 2008 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations for the Three Months ended March 31, 2009
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    26PART II:
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    27Item 1a.
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    27Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    27SIGNATURES
    
    
    28EX-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
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)ASSETSCash and due from banks
    
    $
    6,385,300
    
    
    $
    4,770,724Certificates of deposit
    
    
    1,237,112
    
    
    
    Securities available for sale
(at approximate market value)
    
    
    57,316,408
    
    
    
    62,604,735Federal Home Loan Bank stock, at cost
    
    
    2,321,300
    
    
    
    2,321,300Loans and lease receivable, net
    
    
    197,834,817
    
    
    
    200,752,202Accrued interest receivable
    
    
    1,229,648
    
    
    
    1,272,742Foreclosed real estate (held for sale), net
    
    
    698,898
    
    
    
    253,300Premises and equipment, net
    
    
    5,768,794
    
    
    
    5,842,368Deferred income taxes
    
    
    1,670,972
    
    
    
    1,889,746Cash surrender value of life insurance
    
    
    1,679,830
    
    
    
    1,617,055Intangible assets
    
    
    246,266
    
    
    
    274,145Other assets
    
    
    1,093,088
    
    
    
    658,665TOTAL ASSETS
    
    $
    277,482,433
    
    
    $
    282,256,982LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits:Demand
    
    $
    40,966,440
    
    
    $
    39,469,377Interest-bearing demand
    
    
    34,294,152
    
    
    
    35,554,781Savings
    
    
    24,973,610
    
    
    
    23,476,255Time, $100,000 and over
    
    
    60,986,455
    
    
    
    55,269,424Other time
    
    
    75,220,271
    
    
    
    74,125,229$
    236,440,928
    
    
    $
    227,895,066Accrued interest payable
    
    
    1,114,098
    
    
    
    1,126,219FHLB borrowings
    
    
    11,650,000
    
    
    
    25,445,000Accrued expenses and other liabilities
    
    
    4,336,421
    
    
    
    4,572,907TOTAL LIABILITIES
    
    $
    253,541,447
    
    
    $
    259,039,192SHAREHOLDERS EQUITYCommon stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares issued at March 31, 2009 and
December 31, 2008 and 447,398 outstanding at
March 31, 2009 and 449,151 outstanding at December 31, 2008
    
    $
    458,048
    
    
    $
    458,048Capital surplus
    
    
    4,163,592
    
    
    
    4,163,592Retained earnings
    
    
    21,647,385
    
    
    
    21,015,652Accumulated other comprehensive income (loss)
    
    
    (1,674,536
    )
    
    
    (1,848,990
    )$
    24,594,489
    
    
    $
    23,788,302Less treasury stock, at cost, 10,650 shares in 2009 and 8,897
shares in 2008
    
    
    (653,503
    )
    
    
    (570,512
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    23,940,986
    
    
    $
    23,217,790TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    277,482,433
    
    
    $
    282,256,982
  3




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 Three months endedMarch 31,2009
    
    
    2008INTEREST INCOMEInterest and fees on loans
    
    $
    3,268,686
    
    
    $
    3,616,728Interest and dividends on securities
U.S. Government agencies and
corporations
    
    
    80,798
    
    
    
    221,488Corporate bonds
    
    
    99,220
    
    
    
    55,078Mortgage backed securities
    
    
    367,733
    
    
    
    318,844State and political subdivisions
    
    
    157,653
    
    
    
    110,479Interest on certificates of deposit
    
    
    2,566
    
    
    
    Dividend income from FHLB stock
    
    
    
    
    
    
    27,797Interest on FHLB deposits
    
    
    23
    
    
    
    851$
    3,976,679
    
    
    $
    4,351,265INTEREST EXPENSEInterest on interest bearing demand,
savings and time deposits
    
    $
    1,259,205
    
    
    $
    1,522,302Interest on FHLB borrowings
    
    
    86,833
    
    
    
    270,589$
    1,346,038
    
    
    $
    1,792,891NET INTEREST INCOME
    
    $
    2,630,641
    
    
    $
    2,558,374PROVISION FOR LOAN LOSSES
    
    
    390,000
    
    
    
    105,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    $
    2,240,641
    
    
    $
    2,453,374NONINTEREST INCOMEService charges on deposit accounts
    
    $
    290,575
    
    
    $
    330,541Other service charges, commissions
and fees
    
    
    182,478
    
    
    
    200,278Other operating income
    
    
    77,568
    
    
    
    20,299Income from title company
    
    
    1,794
    
    
    
    3,728Net gain on sales of loans
    
    
    782
    
    
    
    26,587Net gain (loss) on sales and calls of securities
    
    
    33,695
    
    
    
    89,941Net gain (loss) on other real estate owned
    
    
    (16,773
    )
    
    
    (484
    )$
    570,119
    
    
    $
    670,890NONINTEREST EXPENSESSalaries
    
    $
    689,801
    
    
    $
    726,013Employee benefits
    
    
    295,324
    
    
    
    342,578Occupancy of premises
    
    
    110,370
    
    
    
    118,687Furniture and equipment expense
    
    
    160,067
    
    
    
    206,038Other operating expenses
    
    
    654,418
    
    
    
    565,512$
    1,909,980
    
    
    $
    1,958,828INCOME BEFORE INCOME TAXES
    
    $
    900,780
    
    
    $
    1,165,436PROVISION FOR INCOME TAXES
    
    
    269,047
    
    
    
    386,006NET INCOME
    
    $
    631,733
    
    
    $
    779,430BASIC EARNINGS PER SHARE
    
    $
    1.41
    
    
    $
    1.71
  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
    
    
    EquityBALANCE, JANUARY 1, 2008
    
    $
    458,048
    
    
    $
    (207,633
    )
    
    $
    4,163,592
    
    
    $
    19,155,244
    
    
    $
    (747,806
    )
    
    $
    22,821,445Comprehensive income:Net income for three
months
ended March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    779,430
    
    
    
    
    
    
    
    779,430Change in unrealized
gains
(losses) on securities
available for sale
(net of tax of
$108,842)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177,585
    
    
    
    177,585Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    957,015BALANCE, MARCH 31, 2008
    
    $
    458,048
    
    
    $
    (207,633
    )
    
    $
    4,163,592
    
    
    $
    19,934,674
    
    
    $
    (570,221
    )
    
    $
    23,778,460BALANCE, JANUARY 1, 2009
    
    $
    458,048
    
    
    $
    (570,512
    )
    
    $
    4,163,592
    
    
    $
    21,015,652
    
    
    $
    (1,848,990
    )
    
    $
    23,217,790Comprehensive income:Net income for three
months
ended March 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    631,733
    
    
    
    
    
    
    
    631,733Change in unrealized
gains
(losses) on securities
available for sale
(net of tax of
$106,923)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,454
    
    
    
    174,454Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806,187Acquisition of treasury
stock, at cost,
1,753 shares
    
    
    
    
    
    
    (82,991
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82,991
    )BALANCE, MARCH 31, 2009
    
    $
    458,048
    
    
    $
    (653,503
    )
    
    $
    4,163,592
    
    
    $
    21,647,385
    
    
    $
    (1,674,536
    )
    
    $
    23,940,986
  5




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##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months endedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    631,733
    
    
    $
    779,430Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization on premises, equipment and software
    
    
    127,750
    
    
    
    143,829Provision for loan losses
    
    
    390,000
    
    
    
    105,000Deferred income taxes
    
    
    111,851
    
    
    
    (82,380
    )Net (gain) on sales and calls of securities
    
    
    (33,695
    )
    
    
    (89,941
    )Loss on sale of real estate owned
    
    
    16,773
    
    
    
    484Net (gain) on loans sold
    
    
    (782
    )
    
    
    (26,587
    )Loans originated for sale
    
    
    (223,000
    )
    
    
    (2,225,150
    )Proceeds from loans sold
    
    
    223,782
    
    
    
    2,251,737Decrease in accrued interest receivable
    
    
    43,094
    
    
    
    143,997(Increase) decrease in other assets
    
    
    (392,354
    )
    
    
    159,813(Decrease) in accrued interest payable
    
    
    (12,121
    )
    
    
    (91,483
    )(Increase) in cash surrender value on life insurance in excess
of premiums paid
    
    
    (56,854
    )
    
    
    Increase (decrease) in accrued expenses and other liabilities
    
    
    (236,486
    )
    
    
    1,027,816Amortization of deferred loan (fees) cost
    
    
    34,439
    
    
    
    11,722Amortization (accretion) of premium and discount on investments
    
    
    1,400
    
    
    
    (5,273
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    625,530
    
    
    $
    2,103,014CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease in loans, not originated for sale
    
    $
    2,043,027
    
    
    $
    1,493,541Proceeds from sales of securities
    
    
    1,319,395
    
    
    
    2,803,399Proceeds from maturities, repayments and calls of securities
    
    
    6,001,883
    
    
    
    22,537,318Purchases of securities
    
    
    (1,735,224
    )
    
    
    (14,524,605
    )Purchases of certificates of deposits
    
    
    (1,237,620
    )
    
    
    Purchases of Federal Home Loan Bank stock
    
    
    
    
    
    
    (528,000
    )Redemptions of Federal Home Loan Bank stock
    
    
    
    
    
    
    806,300Purchases of premises, equipment and software
    
    
    (51,913
    )
    
    
    (41,092
    )Proceeds from sale of real estate owned
    
    
    
    
    
    
    150,361Costs to acquire foreclosed real estate
    
    
    (12,452
    )
    
    
    (4,800
    )Premiums paid on life insurance
    
    
    (5,921
    )
    
    
    (5,921
    )NET CASH PROVIDED BY INVESTING ACTIVITIES
    
    $
    6,321,175
    
    
    $
    12,686,501CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in demand and savings deposits
    
    $
    1,733,789
    
    
    $
    (826,508
    )Net increase in time deposits
    
    
    6,812,073
    
    
    
    878,587Net (decrease) in FHLB borrowings
    
    
    (13,795,000
    )
    
    
    (16,800,000
    )Purchase of treasury stock
    
    
    (82,991
    )
    
    
    NET CASH (USED IN) FINANCING ACTIVITIES
    
    $
    (5,332,129
    )
    
    $
    (16,747,921
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    $
    1,614,576
    
    
    $
    (1,958,406
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    4,770,724
    
    
    
    7,791,093CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    6,385,300
    
    
    $
    5,832,687SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period:Interest
    
    $
    1,333,917
    
    
    $
    1,884,374Income taxes
    
    $
    86
    
    
    $
    150Net transfer to foreclosed real estate, held for sale
from loans receivable
    
    $
    449,919
    
    
    $
    235,005Unrealized gain (loss) on investment securities
available for sale (net of tax)
    
    $
    174,454
    
    
    $
    177,585
  6




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
      3/31/2009
    
    3/31/2008Quarter ending
    
    
    447,557
    
    
    
    454,949
 7




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##### Table of Contents



CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    WeightedMarch 31, 2009
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies
and corporationsWithin one year
    
    $
    500,000
    
    
    $
    1,000
    
    
    $
    
    
    
    $
    501,000
    
    
    
    4.00
    %After 1 but within 5 years
    
    
    1,046,467
    
    
    
    15,093
    
    
    
    
    
    
    
    1,061,560
    
    
    
    3.67After 5 but within 10 years
    
    
    4,394,746
    
    
    
    90,371
    
    
    
    
    
    
    
    4,485,117
    
    
    
    4.69$
    5,941,213
    
    
    $
    106,464
    
    
    $
    
    
    
    $
    6,047,677
    
    
    
    4.45
    %Corporate BondsAfter 1 but within 5 years
    
    $
    1,737,666
    
    
    $
    
    
    
    $
    183,718
    
    
    $
    1,553,948
    
    
    
    5.40
    %After 5 but within 10 years
    
    
    5,479,664
    
    
    
    
    
    
    
    653,842
    
    
    
    4,825,822
    
    
    
    5.47$
    7,217,330
    
    
    $
    
    
    
    $
    837,560
    
    
    
    6,379,770
    
    
    
    5.45
    %States and political subdivisionsWithin one year
    
    $
    907,239
    
    
    $
    3,562
    
    
    $
    
    
    
    $
    910,801
    
    
    
    2.89
    %After 1 but within 5 years
    
    
    5,146,857
    
    
    
    132,120
    
    
    
    
    
    
    
    5,278,977
    
    
    
    3.34After 5 but within 10 years
    
    
    12,159,380
    
    
    
    147,570
    
    
    
    91,512
    
    
    
    12,215,438
    
    
    
    3.71$
    18,213,476
    
    
    $
    283,252
    
    
    $
    91,512
    
    
    $
    18,405,216
    
    
    
    3.57
    %Mortgage backed securities:Government issued or guaranteed
    
    $
    15,695,669
    
    
    $
    601,350
    
    
    $
    1,665
    
    
    $
    16,295,354
    
    
    
    5.33
    %Collateralized mortgage obligations:Government issued or guaranteed
    
    $
    8,637,682
    
    
    $
    261,311
    
    
    $
    15,503
    
    
    $
    8,883,490
    
    
    
    5.14
    %Privately issued
    
    
    1,641,719
    
    
    
    
    
    
    
    336,818
    
    
    
    1,304,901
    
    
    
    6.91$
    10,279,401
    
    
    $
    261,311
    
    
    $
    352,321
    
    
    $
    10,188,391
    
    
    
    5.42
    %Total securities available for sale
    
    $
    57,347,089
    
    
    $
    1,252,377
    
    
    $
    1,283,058
    
    
    $
    57,316,408
    
    
    
    4.71
    %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, 2008
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies
and corporationsWithin one year
    
    $
    3,714,859
    
    
    $
    4,957
    
    
    $
    
    
    
    $
    3,719,816
    
    
    
    3.90
    %After 1 but within 5 years
    
    
    1,592,342
    
    
    
    368
    
    
    
    
    
    
    
    1,592,710
    
    
    
    3.15After 5 but within 10 years
    
    
    5,394,502
    
    
    
    96,724
    
    
    
    
    
    
    
    5,491,226
    
    
    
    4.56$
    10,701,703
    
    
    $
    102,049
    
    
    $
    
    
    
    $
    10,803,752
    
    
    
    4.12
    %Corporate BondsAfter 1 but within 5 years
    
    $
    1,735,480
    
    
    $
    
    
    
    $
    173,968
    
    
    $
    1,561,512
    
    
    
    5.64
    %After 5 but within 10 years
    
    
    5,478,377
    
    
    
    
    
    
    
    448,115
    
    
    
    5,030,262
    
    
    
    5.47$
    7,213,857
    
    
    $
    
    
    
    $
    622,083
    
    
    
    6,591,774
    
    
    
    5.51
    %States and political subdivisionsWithin one year
    
    $
    874,070
    
    
    $
    5,303
    
    
    $
    
    
    
    $
    879,373
    
    
    
    2.80
    %After 1 but within 5 years
    
    
    4,635,138
    
    
    
    46,652
    
    
    
    5,120
    
    
    
    4,676,670
    
    
    
    3.33After 5 but within 10 years
    
    
    11,581,159
    
    
    
    35,359
    
    
    
    207,323
    
    
    
    11,409,195
    
    
    
    3.72$
    17,090,367
    
    
    $
    87,314
    
    
    $
    212,443
    
    
    $
    16,965,238
    
    
    
    3.57
    %Mortgage backed securities:Government issued or guaranteed
    
    $
    17,278,086
    
    
    $
    511,216
    
    
    $
    5,937
    
    
    $
    17,783,365
    
    
    
    5.35
    %Collateralized mortgage obligations:Government issued or guaranteed
    
    $
    8,942,326
    
    
    $
    141,517
    
    
    $
    41,825
    
    
    $
    9,042,018
    
    
    
    5.06
    %Privately issued
    
    
    1,691,093
    
    
    
    
    
    
    
    272,505
    
    
    
    1,418,588
    
    
    
    7.01$
    10,633,419
    
    
    $
    141,517
    
    
    $
    314,330
    
    
    $
    10,460,606
    
    
    
    5.37
    %Total securities available for sale
    
    $
    62,917,432
    
    
    $
    842,096
    
    
    $
    1,154,793
    
    
    $
    62,604,735
    
    
    
    4.68
    %Restricted:Federal Home Loan Bank stock
    
    $
    2,321,300
    
    
    $
    
    
    
    $
    
    
    
    $
    2,321,300
    
    
    
    2.35
    %
   9




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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    March 31, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    1,663,519
    
    
    $
    123,374
    
    
    $
    4,716,251
    
    
    $
    714,186
    
    
    $
    6,379,770
    
    
    $
    837,560State and political subdivisions
    
    
    3,601,075
    
    
    
    86,633
    
    
    
    340,017
    
    
    
    4,879
    
    
    
    3,941,092
    
    
    
    91,512Mortgage backed securities:Government issued or
guaranteed
    
    
    575,064
    
    
    
    1,621
    
    
    
    475,303
    
    
    
    44
    
    
    
    1,050,367
    
    
    
    1,665Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    
    
    
    
    
    
    
    
    397,988
    
    
    
    15,503
    
    
    
    397,988
    
    
    
    15,503Privately issued
    
    
    450,685
    
    
    
    3,032
    
    
    
    854,216
    
    
    
    333,787
    
    
    
    1,304,901
    
    
    
    336,818Total temporarily impaired
securities
    
    $
    6,290,343
    
    
    $
    214,660
    
    
    $
    6,783,775
    
    
    $
    1,068,399
    
    
    $
    13,074,118
    
    
    $
    1,283,058
 December 31, 2008Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    6,591,774
    
    
    $
    622,083
    
    
    $
    
    
    
    $
    
    
    
    $
    6,591,774
    
    
    $
    622,083State and political subdivisions
    
    
    7,296,127
    
    
    
    210,761
    
    
    
    217,773
    
    
    
    1,682
    
    
    
    7,513,900
    
    
    
    212,443Mortgage backed securities:Government issued or
guaranteed
    
    
    296,216
    
    
    
    271
    
    
    
    492,011
    
    
    
    5,666
    
    
    
    788,227
    
    
    
    5,937Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    1,130,704
    
    
    
    9,320
    
    
    
    393,802
    
    
    
    32,505
    
    
    
    1,524,506
    
    
    
    41,825Privately issued
    
    
    1,418,529
    
    
    
    272,505
    
    
    
    
    
    
    
    
    
    
    
    1,418,529
    
    
    
    272,505Total temporarily impaired
securities
    
    $
    16,733,350
    
    
    $
    1,114,940
    
    
    $
    1,103,586
    
    
    $
    39,853
    
    
    $
    17,836,936
    
    
    $
    1,154,793
 10




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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   March 31,
    
    
    December 31,2009
    
    
    2008Loans:Real estate
    
    $
    134,791,486
    
    
    $
    137,770,172Commercial real estate
    
    
    40,546,271
    
    
    
    40,613,894Consumer
    
    
    17,170,687
    
    
    
    16,665,647Commercial
    
    
    7,622,376
    
    
    
    7,931,399Overdrafts
    
    
    68,474
    
    
    
    91,515$
    200,199,294
    
    
    $
    203,072,627Leases
    
    
    100,368
    
    
    
    105,219$
    200,299,662
    
    
    $
    203,177,846Net deferred loan fees, costs,
premiums and discounts
    
    
    347,738
    
    
    
    325,742Allowance for loan losses
    
    
    (2,812,583
    )
    
    
    (2,751,386
    )$
    197,834,817
    
    
    $
    200,752,202
  March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Balance, Beginning
    
    $
    2,751,386
    
    
    $
    2,144,461
    
    
    $
    2,144,461Provision charged to
operations
    
    
    390,000
    
    
    
    105,000
    
    
    
    940,500Recoveries
    
    
    110,923
    
    
    
    38,366
    
    
    
    188,860Loans charged off
    
    
    (439,726
    )
    
    
    (90,391
    )
    
    
    (522,435
    )Balance, Ending
    
    $
    2,812,583
    
    
    $
    2,197,436
    
    
    $
    2,751,386
 11




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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Impaired loans without a valuation allowance
    
    $
    
    
    
    $
    
    
    
    $
    Impaired loans with a valuation allowance (1)
    
    
    1,196,521
    
    
    
    1,336,353
    
    
    
    1,227,068Total impaired loans
    
    $
    1,196,521
    
    
    $
    1,336,353
    
    
    $
    1,227,068Valuation allowance related to impaired loans
    
    $
    348,983
    
    
    $
    283,676
    
    
    $
    383,350
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by $51,153 at
March 31, 2009, $75,913 at March 31, 2008 and $57,611 at December 31, 2008 March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Average investment in impaired loans
    
    $
    1,211,795
    
    
    $
    668,177
    
    
    $
    1,318,584Interest income recognized on impaired loans
    
    $
    14,143
    
    
    $
    9,253
    
    
    $
    52,430Interest income recognized on a cash basis on
impaired loans
    
    $
    14,143
    
    
    $
    9,253
    
    
    $
    52,430
  March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Foreclosed real estate (other real estate owned)
    
    $
    698,898
    
    
    $
    239,805
    
    
    $
    253,300Impaired loans, not on nonaccrual
    
    
    913,679
    
    
    
    707,460
    
    
    
    130,905Nonaccrual loans, impaired (1)
    
    
    282,842
    
    
    
    628,893
    
    
    
    1,096,163Nonaccrual loans, not impaired
    
    
    460,117
    
    
    
    541,491
    
    
    
    402,520Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    2,355,536
    
    
    $
    2,117,649
    
    
    $
    1,882,888
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by
$51,153 at March 31, 2009, $75,913 at March 31, 2008 and $57,611 at December 31, 2008. 12




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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Time Deposits
    
    
    All Time$100,000 and Over
    
    
    DepositsWithin 3 months
    
    $
    7,129,446
    
    
    $
    15,382,6653 months thru 6 months
    
    
    4,624,657
    
    
    
    8,817,8506 months thru 12 months
    
    
    8,161,444
    
    
    
    15,193,987Over 12 months
    
    
    41,070,908
    
    
    
    96,812,224$
    60,986,455
    
    
    $
    136,206,726
  March 31,
    
    December 31,2009
    
    2008
    
    2008Federal Home Loan Bank advances
    
    $
    11,650,000
    
    
    $
    20,700,000
    
    
    $
    25,445,000
     March 31,2009
    
    
    2008Service cost
    
    $
    59,100
    
    
    $
    66,222Interest cost
    
    
    79,062
    
    
    
    73,550Expected return on plan assets
    
    
    (81,877
    )
    
    
    (83,598
    )Amortization of prior service costs
    
    
    3,086
    
    
    
    3,085Recognized net actuarial loss
    
    
    18,321
    
    
    
    15,476Net periodic plan cost
    
    $
    77,692
    
    
    $
    74,735
  13




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CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
         
    
    Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
    
    Level 2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument.
    
    Level 3 inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
  Securities available for sale
  14




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CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Fair Value Measurements at March 31, 2009 Using Quoted Prices(In Thousands)SignificantIn Active
    
    Other
    
    SignificantBalance at
    
    Markets for
    
    Observable
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Inputs
    
    InputsDescription
    
    2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available-for-sale securities
    
    $
    57,316
    
    
    $
    
    
    
    $
    57,316
    
    
    $
    
   Loans held for sale
  Impaired loans
   Other Real Estate Owned
  15




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CNB FINANCIAL SERVICES, INC  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Carrying Value at March 31, 2009(In Thousands)Quoted Prices
    
    SignificantIn Active
    
    Other
    
    SignificantBalance at
    
    Markets for
    
    Observable
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Inputs
    
    InputsDescription
    
    2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans, net of reserve for losses
    
    $
    796
    
    
    $
    
    
    
    $
    796
    
    
    $
    Other real estate owned
    
    $
    699
    
    
    $
    
    
    
    $
    699
    
    
    $
    
  16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
          17




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,
           18




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TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
 MARCH 31, 2009
    
    
    MARCH 31, 2008QTR
    
    
    
    
    
    
    
    
    
    
    QTRAVERAGE
    
    
    QTR
    
    
    YIELD/
    
    
    AVERAGE
    
    
    QTR
    
    
    YIELD/BALANCE
    
    INTEREST
    
    RATE(4)
    
    BALANCE
    
    INTEREST
    
    RATE(4)(IN THOUSANDS OF DOLLARS)Interest earning assets:Securities:Taxable
    
    $
    45,731
    
    
    $
    553
    
    
    
    4.84
    %
    
    $
    51,080
    
    
    $
    626
    
    
    
    4.90
    %Tax-exempt (1)
    
    
    17,360
    
    
    
    155
    
    
    
    5.41
    
    
    
    12,594
    
    
    
    108
    
    
    
    5.20Loans (net of unearned interest) (2)(5)(6)
    
    
    202,981
    
    
    
    3,218
    
    
    
    6.34
    
    
    
    204,360
    
    
    
    3,570
    
    
    
    6.99Total interest earning assets (1)
    
    $
    266,072
    
    
    $
    3,926
    
    
    
    5.90
    %
    
    $
    268,034
    
    
    $
    4,304
    
    
    
    6.42
    %Nonearning assets:Cash and due from banks
    
    $
    5,957
    
    
    
    
    
    
    
    
    
    
    $
    6,786Bank premises and equipment, net
    
    
    5,810
    
    
    
    
    
    
    
    
    
    
    
    6,087Other assets
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    5,086Allowance for loan losses
    
    
    (2,916
    )
    
    
    
    
    
    
    
    
    
    
    (2,191
    )Total assets
    
    $
    281,152
    
    
    
    
    
    
    
    
    
    
    $
    283,802Interest bearing liabilities:Savings deposits
    
    $
    24,121
    
    
    $
    10
    
    
    
    0.17
    %
    
    $
    23,167
    
    
    $
    17
    
    
    
    0.29
    %Time deposits
    
    
    133,451
    
    
    
    1,215
    
    
    
    3.64
    
    
    
    126,027
    
    
    
    1,393
    
    
    
    4.42NOW accounts
    
    
    21,047
    
    
    
    25
    
    
    
    0.48
    
    
    
    22,243
    
    
    
    66
    
    
    
    1.19Money market accounts
    
    
    13,220
    
    
    
    9
    
    
    
    0.27
    
    
    
    11,927
    
    
    
    46
    
    
    
    1.54Borrowings
    
    
    19,683
    
    
    
    87
    
    
    
    1.77
    
    
    
    31,558
    
    
    
    271
    
    
    
    3.43Total interest bearing liabilities
    
    $
    211,522
    
    
    $
    1,346
    
    
    
    2.55
    %
    
    $
    214,922
    
    
    $
    1,793
    
    
    
    3.34
    %Noninterest bearing liabilities:Demand deposits
    
    $
    40,843
    
    
    
    
    
    
    
    
    
    
    $
    42,048Other liabilities
    
    
    5,576
    
    
    
    
    
    
    
    
    
    
    
    3,927Shareholders equity
    
    
    23,211
    
    
    
    
    
    
    
    
    
    
    
    22,905Total liabilities and
shareholders equity
    
    $
    281,152
    
    
    
    
    
    
    
    
    
    
    $
    283,802Net interest income (1)
    
    
    
    
    
    $
    2,580
    
    
    
    
    
    
    
    
    
    
    $
    2,511Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.35
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Net interest income to average
interest earning assets (1)
    
    
    
    
    
    
    
    
    
    
    3.88
    %
    
    
    
    
    
    
    
    
    
    
    3.75
    %
 
 (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 $50,841 in 2009 and $46,555 in 2008.(6)
    
    Interest income on loans includes fees of $24,717 in 2009 and $23,449 in 2008 from student
loans and lease receivables. 19




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21




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March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Impaired loans, not on nonaccrual
    
    
    913,679
    
    
    
    707,460
    
    
    
    130,905Nonaccrual loans, impaired (1)
    
    
    282,842
    
    
    
    628,893
    
    
    
    1,096,163Nonaccrual loans, not impaired
    
    
    460,117
    
    
    
    541,491
    
    
    
    402,520Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    $
    1,656,638
    
    
    $
    1,877,844
    
    
    $
    1,629,588Foreclosed real estate (other real estate owned)
    
    $
    698,898
    
    
    $
    239,805
    
    
    $
    253,300Total nonperforming assets
    
    $
    2,355,536
    
    
    $
    2,117,649
    
    
    $
    1,882,888Nonperforming loans/Total loans
    
    
    0.84
    %
    
    
    0.94
    %
    
    
    0.81
    %Nonperforming assets/Total assets
    
    
    0.85
    %
    
    
    0.77
    %
    
    
    0.67
    %Allowance for loan losses/Total loans
    
    
    1.42
    %
    
    
    1.09
    %
    
    
    1.37
    %
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by
$51,153 at March 31, 2009, $75,913 at March 31, 2008 and $57,611 at December 31, 2008.    22




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March 31,
    
    
    December 31,2009
    
    
    2008Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in EachCategory to
    
    
    
    
    
    
    Category toIn thousands
    
    Amount
    
    
    Total Loans
    
    
    Amount
    
    
    Total LoansCommercial, financial
and agriculture
    
    $
    1,177
    
    
    
    23
    %
    
    $
    1,178
    
    
    
    22
    %Real estate  residential
mortgage
    
    
    657
    
    
    
    67
    
    
    
    543
    
    
    
    69Installment and other
    
    
    405
    
    
    
    9
    
    
    
    415
    
    
    
    8Impaired loans
    
    
    349
    
    
    
    1
    
    
    
    383
    
    
    
    1Unallocated
    
    
    225
    
    
    
    N/A
    
    
    
    232
    
    
    
    N/ATotal
    
    $
    2,813
    
    
    
    100
    %
    
    $
    2,751
    
    
    
    100
    %
     Components
    
    Actual
    
    Requiredof Capital
    
    Ratio
    
    RatioTier 1 Capital
    
    $
    23,438
    
    
    
    8.3
    %
    
    
    4.0
    %Total Risk Based Capital
    
    $
    25,602
    
    
    
    14.9
    %
    
    
    8.0
    %
   23




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24




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        25




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ITEM 4. CONTROLS AND PROCEDURES
   26




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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 balance
December 31, 2008
    
    
    
    
    
    
    
    
    
    
    8,897
    
    
    
    36,907January 1, 2009
January 31, 2009
    
    
    1,753
    
    
    $
    47.34
    
    
    
    1,753
    
    
    
    35,154February 1, 2009
February 28, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    35,154March 1, 2009
March 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    35,154Total
    
    
    1,753
    
    
    
    
    
    
    
    10,650
  
  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
 27




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##### Table of Contents



CNB Financial Services, Inc.
(Registrant)Date May 14, 2009
    /s/ Thomas F. Rokisky, President/CEODate May 14, 2009
    /s/ Rebecca S. Stotler, Vice President/CFO 28