<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                      ANNUAL REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                    Form 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002

                                       Or
          [ ] 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

<TABLE>
<S>                                                  <C>
                                    CNB Financial Services, Inc.
----------------------------------------------------------------------------------------------------
                        (Exact name of registrant as specified in its charter)

         United States of America                                      55-0773918
-----------------------------------------------      -----------------------------------------------
       (State or other jurisdiction of                     (I.R.S. Employer Identification No.)
       incorporation or organization)

101 S. Washington Street, Berkeley Springs, WV                           25411
-----------------------------------------------      -----------------------------------------------
   (Address of principal executive offices)                            (Zip Code)
</TABLE>

Registrant's telephone number, ( 304 ) 258 - 1520


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

                                      None

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

                     Common Stock, Par Value $1.00 per share
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter periods that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [  ]           No [X]

The aggregate value of the common stock of the Registrant that was held by
non-affiliates as of the most recently completed second fiscal quarter (June 30,
2002), was approximately $32.7 million. This amount was based on the last
closing sale price of a share of common stock of $85.00 as of the same date.

As of March 24, 2003, there were 458,048 shares of Common Stock, Par Value $1.00
per share, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None


<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I
                                                                                                 PAGE
                                                                                                 ----
<S>        <C>                                                                                   <C>
Item 1.    Business.................................................................................3
Item 2.    Properties...............................................................................6
Item 3.    Legal Proceedings........................................................................7
Item 4.    Submission of Matters to a Vote of Security Holders......................................7

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters....................8
Item 6.    Selected Financial Data..................................................................9
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...10
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..............................24
Item 8.    Financial Statements and Supplementary Data.............................................25
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures...52

PART III

Item 10.   Directors and Executive Officers of the Registrant......................................52
Item 11.   Executive Compensation..................................................................54
Item 12.   Security Ownership of Certain Beneficial Owners and Management..........................55
Item 13.   Certain Relationships and Related Transactions..........................................55
Item 14.   Controls and Procedures.................................................................56

PART IV

Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................58

SIGNATURES.........................................................................................59
</TABLE>

FORWARD LOOKING STATEMENTS

        In our Annual Report and Form 10-K, we include forward-looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products and similar
matters. You can identify these statements by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate," "plans,"
"intends," or similar words or expressions. You should read statements that
contain these words carefully because they discuss our future expectations or
state other "forward-looking" information. We believe that it is important to
communicate our future expectations to our shareholders. However, there may be
events in the future that we are not able to predict accurately or control. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, we must inform you that a variety of factors could cause CNB Financial
Services, Inc.'s actual results and experiences to differ materially from the
anticipated results or other expectations expressed in these forward-looking
statements. Our ability to predict the results of the effect of future plans and
strategies is inherently uncertain. The risks and uncertainties that may affect
the operations, performance, development and results of CNB Financial Services,
Inc.'s business include:

-   Changes in market interest rates;
-   Local and national economic trends and conditions;
-   Competition for products and services among community, regional and national
    financial institutions;
-   New services and product offerings by competitors;
-   Changes in customer preferences;
-   Changes in technology;
-   Legislative and regulatory changes;
-   Delinquency rates on loans;
-   Changes in accounting principles, policies or guidelines;

        You should consider these factors in evaluating any forward-looking
statements and not place undue reliance on such statements. We are not obligated
to publicly update any forward looking statements we may make in this Form 10-K
or our Annual Report to reflect the impact of subsequent events.



                                       2
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

ORGANIZATIONAL HISTORY AND SUBSIDIARIES

        CNB Financial Services, Inc. (the "Company") was organized under the
laws of West Virginia in March 2000 at the direction of the Board of Directors
of Citizens National Bank (the "Bank") for the purpose of becoming a financial
services holding company. The Company and its subsidiary are collectively
referred to herein as "CNB".

        A special meeting of the Bank's shareholders was held on August 4, 2000,
and the shareholders approved the Agreement and Plan of Merger between the Bank
and the Company, whereby the Bank became a wholly-owned subsidiary of the
Company and the shareholders of the Bank became shareholders of the Company. The
merger became effective on August 31, 2000. Each Bank shareholder received two
shares of the Company stock for each share of the Bank's common stock. On August
31, 2000, the Company consummated its merger with the Bank and subsidiary, in a
tax-free exchange of stock. Shareholders of the Bank received two shares of CNB
Financial Services, Inc. common stock for each of the 229,024 shares of the
Bank's common stock. The merger was accounted for as a pooling of interests.

        CNB became a 50% member of a limited liability corporation, Morgan
County Title Insurance Agency, LLC in February 2001, for the purpose of selling
title insurance.

        Citizens National Bank of Berkeley Springs, (the Bank or Citizens
National Bank), was organized on June 20, 1934 and has operated in Berkeley
Springs, Morgan County, West Virginia, as a national banking association
continuously since that time. The Bank formed CNB Insurance Services, Inc., a
wholly owned subsidiary, which is a property and casualty insurance agency
selling primarily personal lines of insurance.

EMPLOYEES

        As of December 31, 2002 and 2001, CNB employed 81 and 80 full-time
equivalent employees, respectively.

BUSINESS OF CNB FINANCIAL SERVICES, INC. AND CITIZENS NATIONAL BANK

        The Company's primary function is to direct, plan and coordinate the
business activities of the Bank and its subsidiary.

        Citizens National Bank is a full-service commercial bank conducting
general banking and trust activities through four full-service offices and five
automated teller machines located in Morgan and Berkeley Counties, West
Virginia. The Bank opened a full-service branch in Martinsburg, Berkeley County,
West Virginia on March 18, 2002. The Bank accepts time, demand and savings
deposits including NOW accounts, regular savings accounts, money market
accounts, fixed-rate certificates of deposit and club accounts. In addition, the
Bank provides safe deposit box rentals, wire transfer services and 24-hour ATM
services through a regional network known as STAR. STAR is a participant in the
nationwide Cirrus network.

        The Bank offers a full spectrum of lending services to its customers,
including commercial loans and lines of credit, residential real estate loans,
consumer installment loans and other personal loans. Commercial loans are
generally secured by various collateral, including commercial real estate,
accounts receivable and business machinery and equipment. Residential real
estate loans consist primarily of mortgages on the borrower's personal
residence, and are typically secured by a first lien on the subject property.
Consumer and personal loans are generally secured, often by first liens on
automobiles, consumer goods or depository accounts. A special effort is made to
keep loan products as flexible as possible within the guidelines of prudent
banking practices in terms of interest rate risk and credit risk. Bank lending
personnel adhere to established lending limits and authorities based on each
individual's lending expertise and experience.

        The Bank's trust department acts as trustee under trusts and wills, as
executor of wills and administrator of estates, as guardian for estates of
minors and incompetents and serves in various corporate trust capacities.



                                       3
<PAGE>

COMPETITION

        Citizens National Bank faces a high degree of competition for all its
services from local banks. Within its market area of Morgan and Berkeley
Counties in West Virginia and Washington County in Maryland, there exist
numerous competing commercial banks.

        Nonbank competition has also increased in recent years locally by the
establishment of finance companies and the expansion of insurance operations and
credit unions, as well as from mutual funds located throughout the country.

        West Virginia banks are allowed unlimited branch banking throughout the
State. The Interstate Banking and Branch Efficiency Act of 1994 also authorizes
interstate branching by acquisition and consolidation nationwide. These and
similar provisions impacting both the banking and thrift industries may serve to
intensify future competition within the Bank's market.

SUPERVISION AND REGULATION

        As a registered bank holding company, CNB is subject to the supervision
of the Federal Reserve Board and is required to file with the Federal Reserve
Board reports and other information regarding its business operations and the
business operations of its subsidiaries. CNB is also subject to examination by
the Federal Reserve Board and is required to obtain Federal Reserve Board
approval prior to acquiring, directly or indirectly, ownership or control of
voting shares of any bank, if, after such acquisition, it would own or control
more than 5% of the voting stock of such bank. In addition, pursuant to federal
law and regulations promulgated by the Federal Reserve Board, CNB may only
engage in, or own or control companies that engage in, activities deemed by the
Federal Reserve Board to be so closely related to banking as to be a proper
incident thereto. Prior to engaging in most new business activities, CNB must
obtain approval from the Federal Reserve Board.

        CNB's banking subsidiary has deposits insured by the Bank Insurance Fund
of the FDIC, and is subject to supervision, examination and regulation by the
Office of the Comptroller of the Currency.

        The Gramm-Leach-Bliley Act of 1999 was enacted into law on November 12,
1999. The Act removes the Glass-Steagall Act restrictions on affiliation between
banks and securities firms and it authorizes financial holding companies that
own a bank to engage in a full range of insurance activities. The result is that
qualifying bank holding companies may opt to become financial holding companies
and thus to hold subsidiaries that engage in banking, securities underwriting
and dealing, and insurance agency and underwriting. They may also engage in
financial activities listed in the Act, including merchant banking or venture
capital activities, the distribution of mutual funds and securities lending.

        Bank holding companies now have the option under the Act to continue to
operate as bank holding companies or, if they qualify, to act as financial
holding companies. CNB has qualified and elected to be a financial holding
company. It is important to note in this regard that both bank holding companies
and financial holding companies and their non-bank operating subsidiaries are
subject to the full panoply of affiliate transaction rules under Sections 23A
and B of the Federal Reserve Act. As a consequence, all transactions between
affiliated depository institutions and these entities will be restricted under
the provisions of those laws.

        Under the Act, certain activities are listed as being "financial in
nature" including "underwriting, dealing in, or making a market in securities,"
and "merchant banking". In addition, national banks and state banks (if the
state bank chartering authority permits) may engage in certain "financial in
nature" activities through financial services subsidiaries. Activities
prohibited to financial services subsidiaries include merchant banking but not
securities underwriting and dealing.

        To engage in these new activities, all depository institutions and
financial subsidiaries of a financial holding company must be well capitalized,
well managed and have no less than a satisfactory rating under the federal
Community Reinvestment Act. CNB and its subsidiaries meet these requirements.

Dividend Restrictions

        There are statutory limits on the amount of dividends the bank can pay
to CNB without regulatory approval. Under applicable federal regulations,
appropriate bank regulatory agency approval is required if the total of all
dividends declared by a bank in any calendar year exceeds the available retained
earnings and exceeds the aggregate of the bank's net profits (as defined by
regulatory agencies) for that year and its



                                       4
<PAGE>

retained net profits for the preceding two years, less any required transfers to
surplus or a fund for the retirement of any preferred stock.

FDIC Insurance

        The FDIC has the authority to raise the insurance premiums for
institutions in the Bank Insurance Fund to a level necessary to achieve a target
reserve level of 1.25% of insured deposits within not more than 15 years. In
addition, the FDIC has the authority to impose special assessments in certain
circumstances. The level of deposit premiums affects the profitability of the
bank and thus the potential flow of dividends to parent companies.

        Under the risk-based insurance assessment system that became effective
January 1, 1994, the FDIC places each insured depository institution in one of
nine risk categories based on its level of capital and other relevant
information (such as supervisory evaluations).

Federal Deposit Insurance Corporation Improvement Act of 1991

        In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes.

        Among other things, FDICIA requires federal bank regulatory authorities
to take "prompt corrective action", with respect to depository institutions that
do not meet minimum capital requirements. For these purposes, FDICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.

        Rules adopted by the Federal banking agencies under FDICIA provide that
an institution is deemed to be: "well capitalized" if the institution has a
total (Tier I plus Tier II) risk-based capital ratio of 10.0% or greater, a Tier
I risk-based ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater,
and the institution is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a specific
level for any capital measure; "adequately capitalized" if the institution has a
Total risk-based capital ratio of 8.0% or greater, a Tier I risk-based capital
ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater (or a leverage
ratio of 3.0% or greater if the institution is rated composite 1 in its most
recent report of examination, subject to appropriate Federal banking agency
guidelines), and the institution does not meet the definition of a
well-capitalized institution; "undercapitalized" if the institution has a Total
risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital
ratio that is less than 4.0% or a leverage ratio that is less than 4.0% (or a
leverage ratio that is less than 3.0% if the institution is rated composite 1 in
its most recent report of examination, subject to appropriate Federal banking
agency guidelines) and the institution does not meet the definition of a
significantly undercapitalized or critically undercapitalized institution;
"significantly undercapitalized" if the institution has a Total risk-based
capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is
less than 3.0%, or a leverage ratio that is less than 3.0% and the institution
does not meet the definition of a critically undercapitalized institution; and
"critically undercapitalized" if the institution has a ratio of tangible equity
to total assets that is equal to or less than 2%.

        At December 31, 2002, CNB qualified as a well-capitalized institution
based on the ratios and guidelines noted above. A bank's capital category,
however, is determined solely for the purpose of applying the prompt corrective
action rules and may not constitute an accurate representation of that bank's
overall financial condition or prospects.

        The appropriate Federal banking agency may, under certain circumstances,
reclassify a well-capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an adequately
capitalized or undercapitalized institution to comply with the supervisory
provisions as if the institutions were in the next lower category (but not treat
a significantly undercapitalized institution as critically undercapitalized)
based on supervisory information other than the capital levels of the
institution.

        The statute provides that an institution may be reclassified if the
appropriate Federal banking agency determines (after notice and opportunity for
hearing) that the institution is in an unsafe and unsound condition or deems the
institution to be engaging in an unsafe or unsound practice.

        FDICIA generally prohibits a depository institution from making any
capital distributions (including payment of a dividend) or paying any management
fee to its holding company if the depository institution



                                       5
<PAGE>

would thereafter be undercapitalized. Undercapitalized depository institutions
are subject to growth limitations and are required to submit a capital
restoration plan. The Federal banking agencies may not accept a capital
restoration plan without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring the depository
institution's capital. In addition, for a capital restoration plan to be
acceptable, the depository institution's parent holding company must guarantee
that the institution will comply with such capital restoration plan. The
aggregate liability of the parent holding company is limited to the lesser of
(i) an amount equal to 5% of the depository institution's total assets at the
time it became undercapitalized, and (ii) the amount which is necessary (or
would have been necessary) to bring the institution into compliance with all
capital standards applicable with respect to such institution as of the time it
fails to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.

        Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized institutions are subject to the appointment of receiver or
conservator.

        FDICIA also contains a variety of other provisions that may affect the
operation of CNB, including reporting requirements, regulatory standards for
real estate lending, "truth in savings" provisions, and the requirement that a
depository institution give 90 days' prior notice to customers and regulatory
authorities before closing any branch.

Capital Requirements

        The risk-based capital guidelines for bank holding companies and banks
adopted by the Federal banking agencies were phased in at the end of 1992. The
minimum ratio of qualifying total capital to risk-weighted assets (including
certain off-balance sheet items, such as standby letters of credit) under the
fully phased-in guidelines is 8%. At least half of the total capital is to be
comprised of common stock, retained earnings, noncumulative perpetual preferred
stocks, minority interests and, for bank holding companies, a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and certain other
intangibles ("Tier I capital"). The remainder ("Tier II capital") may consist of
other preferred stock, certain other instruments, and limited amounts of
subordinated debt and the reserve for credit losses.

        In addition, the Federal Reserve Board has established minimum leverage
ratio (Tier I capital to total average assets less goodwill and certain other
intangibles) guidelines for bank holding companies and banks. These guidelines
provide for a minimum leverage ratio of 3.0% for bank holding companies and
banks that meet certain specified criteria, including that they have the highest
regulatory rating. All other banking organizations are required to maintain a
leverage ratio of 3.0% plus an additional cushion of at least 100 to 200 basis
points. The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the Federal Reserve Board will continue to consider a "tangible Tier I
leverage ratio" in evaluating proposals for expansion or new activities. The
tangible Tier I leverage ratio is the ratio of Tier I capital, less intangibles
not deducted from Tier I capital, to total assets, less all intangibles.

        As of December 31, 2002, the bank had capital in excess of all
applicable requirements. Additional information relating to risk-based capital
calculations is set forth under the heading "Note 22 Regulatory Matters" of the
Annual Report to Shareholders and is incorporated herein by reference.

ITEM 2. PROPERTIES

CNB Financial Services, Inc.

        CNB's headquarters are located at the main office of Citizens National
Bank located at 101 South Washington Street, Berkeley Springs, West Virginia.

Citizens National Bank

        The principal executive office and main banking office is located at 101
South Washington Street, Berkeley Springs, West Virginia. In addition, the bank
has owned and operated a full service branch bank located at 2450 Valley Road,
Berkeley Springs, West Virginia since 1991. In October 1998, the bank opened a
full service branch located at 2646 Hedgesville Road, Martinsburg, West
Virginia. In March 2002, the



                                       6
<PAGE>

bank opened an additional full service branch located at 14994 Apple Harvest
Drive, Martinsburg, West Virginia. The main banking office and each location in
Berkeley County provides ATM services, in addition to traditional lobby and
drive-in services. During 1998, the bank purchased two cash machines and placed
them at Cacapon State Park Lodge and the Woods Resort. In November of 1998, the
bank acquired CNB Insurance Services, Inc. which is operated out of the main
office in Berkeley Springs. The main office and branches are owned free and
clear of any indebtedness. The net book value of the bank's premises and
equipment as of December 31, 2002 is $4.8 million.

ITEM 3. LEGAL PROCEEDINGS

        In the ordinary course of business, the company and its subsidiary are
involved in various legal proceedings.

        In the opinion of the management of CNB, there are no proceedings
pending to which CNB is a party or to which its property is subject, which, if
determined adversely to CNB, would be material in relation to CNB's financial
condition. There are no proceedings pending other than ordinary routine
litigation incident to the business of CNB. In addition, no material proceedings
are pending or are known to be threatened or contemplated against CNB by
government authorities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 2002.



                                       7
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The price of CNB's common stock ranged from $63.50 to $90.00 in 2002 and
from $66.75 to $135.00 in 2001. The prices listed below represent the high and
low market prices for stock trades reported during each quarter.

<TABLE>
<CAPTION>
                                            PER SHARE
                    HIGH          LOW        DIVIDEND
                 -----------   ----------   ----------
<S>                <C>          <C>           <C>
2002
First quarter      $  90.00     $  63.50
Second quarter     $  85.00     $  85.00       $ 0.36
Third quarter      $  70.50     $  73.50
Fourth quarter     $  70.00     $  70.00       $ 0.66

2001
First quarter      $ 135.00     $ 115.00
Second quarter     $ 100.00     $ 100.00       $ 0.36
Third quarter      $  66.75     $  66.75
Fourth quarter     $ 100.00     $  50.00       $ 0.66
</TABLE>

        CNB's stock is not traded on an established exchange and there are no
known market makers, therefore there is no established public trading market for
CNB's stock. The prices listed above are based upon information available to
management through discussions with shareholders, and to the best of
management's knowledge, accurately represent the amount at which its stock was
traded during the periods indicated. Prices reflect amounts paid by purchasers
of the stock and, therefore, may include commissions or fees. The amounts of
such commissions or fees, if any, are not known to management. No attempt was
made by management to ascertain the prices for every sale made during these
periods.

        The ability of CNB to pay dividends is subject to certain limitations
imposed by national banking laws. As of March 5, 2003, the number of record
holders was 606.



                                       8
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

TABLE 1. FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                       2002          2001         2000          1999         1998
                                   ------------  ------------ ------------  ------------ ------------
                                                 In thousands except for per share data
<S>                                 <C>           <C>          <C>           <C>          <C>
AT YEAR-END
    Total assets                    $ 191,602     $ 171,541    $ 149,982     $ 138,648    $ 129,600
    Securities available for sale      43,430        49,668       35,374        31,187       33,594
    Loans and lease, net of
       unearned income                129,815       111,874      105,220        98,272       86,377
    Deposits                          173,063       154,381      133,996       124,510      115,320
    Shareholders' equity               16,270        14,926       13,864        12,249       12,518


SIGNIFICANT RATIOS
    Return on average assets            0.71%         0.77%        0.91%         0.90%        1.07%
    Return on average
       shareholders' equity              8.38          8.49        10.16          9.66        10.60
    Average shareholders' equity
       to average assets                 8.49          9.12         9.00          9.35        10.13
    Net interest margin                  3.35          3.73         4.03          4.01         4.21


SUMMARY OF OPERATIONS
    Interest income                 $  11,489     $  11,868    $  11,035     $   9,945    $   9,243
    Interest expense                    5,342         5,937        5,365         4,597        4,171
    Net interest income                 6,147         5,931        5,670         5,348        5,072
    Provision for loan losses             261           226          170           118          196
    Net interest income after
       provision for loan losses        5,886         5,705        5,500         5,230        4,876
    Non-interest income                 1,403         1,025          843           565          415
    Non-interest expense                5,300         4,794        4,279         3,954        3,372
    Income before income taxes          1,989         1,936        2,064         1,841        1,919
    Income tax expense                    681           700          758           621          618
    Net income                          1,308         1,236        1,306         1,220        1,301


PER SHARE DATA (1)(2)
    Net income                      $    2.86     $    2.70    $    2.85     $    2.66    $    2.84
    Cash dividends                       1.02          1.02         1.02          1.00         1.00
    Net book value                      35.52         32.59        30.27         26.74        27.33
</TABLE>

(1) Adjusted to reflect 100% stock dividend on March 1, 1998

(2) Restated to reflect the formation of CNB Financial Services, Inc. and the
    acquisition of Citizens National Bank and subsidiary on August 31, 2000 and
    accounted for as a pooling of interests.


                                       9
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        The following discussion and analysis presents the significant changes
in financial condition and results of operations of CNB, for the years ended
December 31, 2002 and 2001. This discussion and analysis should be read in
conjunction with the audited, consolidated financial statements and the
accompanying notes thereto. This discussion may include forward looking
statements based upon management's expectations; actual results may differ.
Amounts and percentages used in this discussion have been rounded. All average
balances are based on monthly averages.

EARNINGS SUMMARY

        CNB had net income totaling $1.3 million or $2.86 per share, $1.2
million or $2.70 per share and $1.3 million or $2.85 per share for fiscal years
2002, 2001 and 2000, respectively. Annualized return on average assets and
average equity were .7% and 8.4%, respectively for 2002 compared to .8% and 8.5%
for 2001 and .9% and 10.2% for 2000.

NET INTEREST INCOME

        Net interest income represents the primary component of the Bank's
earnings. It is the difference between interest and fee income related to
earning assets and interest expense incurred to carry interest-bearing
liabilities. Net interest income is impacted by changes in the volume and mix of
interest-earning assets and interest-bearing liabilities, as well as by changing
interest rates. In order to manage these changes, their impact on net interest
income and the risk associated with them, the Bank utilizes an ongoing
asset/liability management program. This program includes analysis of the
difference between rate sensitive assets and rate sensitive liabilities,
earnings sensitivity to rate changes, and source and use of funds. A discussion
of net interest income and the factors impacting it is presented below.

        Net interest income in 2002 increased by $217,000 or 3.7% over 2001.
Interest income in 2002 decreased by $379,000 or 3.2% compared to 2001, while
interest expense decreased by $596,000 or 10.0% during 2002 as compared to 2001.
Interest income decreased during 2002 compared to 2001 as a result of a decrease
in the average rates earned on loans, securities and federal funds sold offset
by an increase in the average balances of the earning assets. Interest expense
decreased during 2002 compared to 2001 as a result of a decrease in the average
rates paid on NOW, money market, savings and time deposits offset by an increase
in the average balances of the interest bearing liabilities.

        Net interest income in 2001 increased by $260,000 or 4.6% over 2000.
Interest income in 2001 increased by $833,000 or 7.6% compared to 2000, while
interest expense increased by $573,000 or 10.7% during 2001 as compared to 2000.
Interest income increased during 2001 compared to 2000 as a result of an
increase in the average balance of loans, securities and federal funds sold
offset by a decrease in the average rates earned thereon. Interest expense
increased during 2001 compared to 2000 as a result of an increase in the average
balance of time deposits and the rates paid thereon and the average balance of
NOW accounts offset by lower rates paid on deposit products other than time
deposits.

        During both 2002 and 2001, the Bank used funds generated from deposit
account growth to fund loan commitments and to increase the average balance of
investment securities, especially high quality U.S. government agency
securities.

        The net interest margin is impacted by the change in the spread between
yields on earning assets and rates paid on interest bearing liabilities. Net
interest margin declined slightly from 2001 to 2002. See Table 2 -- Distribution
of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest
Differential.



                                       10
<PAGE>

     TABLE 2. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
                    INTEREST RATES AND INTEREST DIFFERENTIAL

<TABLE>
<CAPTION>
                                     DECEMBER 31, 2002                DECEMBER 31, 2001               DECEMBER 31, 2000
                              ------------------------------   ------------------------------  ------------------------------
                                 YTD        YTD     YIELD/        YTD       YTD      YIELD/       YTD       YTD      YIELD/
                               AVERAGE                          AVERAGE                         AVERAGE
                               BALANCE   INTEREST    RATE       BALANCE   INTEREST    RATE      BALANCE   INTEREST    RATE
                              ---------- --------- ---------   ---------- --------- ---------  ---------- --------- ---------
                                                                        In thousands
<S>                           <C>        <C>           <C>     <C>        <C>           <C>    <C>        <C>           <C>
Interest earning assets:
   Federal funds sold         $   4,720  $     82      1.57 %  $   4,298  $    160      3.79 % $   1,026  $     95      6.12 %
   Securities:
      Taxable                    47,955     2,307      4.81       38,385     2,312      6.02      31,098     2,016      6.48
      Tax-exempt (1)                695        28      6.10          302        14      7.02         825        45      8.26
   Loans (net of unearned
      interest) (2) (4) (5)     118,530     8,708      7.35      108,526     9,096      8.38     102,096     8,646      8.47
                              ---------- --------- ---------   ---------- --------- ---------  ---------- --------- ---------
Total interest
      earning assets (1)      $ 171,900  $ 11,125      6.47 %  $ 151,511  $ 11,582      7.64 % $ 135,045  $ 10,802      8.00 %
                              ---------- --------- ---------   ---------- --------- ---------  ---------- --------- ---------

Nonearning assets:
   Cash and due
        from banks            $   6,592                        $   3,609                       $   3,457
   Bank premises and
        equipment, net            4,624                            3,700                           3,221
   Other assets                   2,240                            2,202                           2,226
   Allowance for
         loan losses             (1,403)                          (1,277)                         (1,169)
                              ----------                       ----------                      ----------
Total assets                  $ 183,953                        $ 159,745                       $ 142,780
                              ==========                       ==========                      ==========

Interest bearing
   liabilities:
   Savings deposits           $  19,629  $    117      0.60 %  $  16,614  $    272      1.64 % $  16,080  $    323      2.01 %
   Time deposits                 94,889     4,854      5.12       84,987     5,094      5.99      73,522     4,360      5.93
   NOW accounts                  23,242       318      1.37       19,321       476      2.46      17,984       564      3.14
   Money market
        accounts                  5,295        52      0.98        4,802        93      1.94       5,001       113      2.26
   Borrowings                         -         -                     44         2      4.55          69         5      7.25
                              ---------- --------- ---------   ---------- --------- ---------  ---------- --------- ---------
Total interest
       bearing liabilities    $ 143,055  $  5,341      3.73 %  $ 125,768  $  5,937      4.72 % $ 112,656  $  5,365      4.76 %
                              ---------- --------- ---------   ---------- --------- ---------  ---------- --------- ---------

Noninterest bearing
       liabilities:
   Demand deposits            $  23,278                        $  17,469                       $  16,004
   Other liabilities              2,009                            1,944                           1,269
   Shareholders' equity          15,611                           14,564                          12,851
                              ----------                       ----------                      ----------
Total liabilities and
   shareholders' equity       $ 183,953                        $ 159,745                       $ 142,780
                              ==========                       ==========                      ==========

                                         ---------                        ---------                       ---------
Net interest income (1)                  $  5,784                         $  5,645                        $  5,437
                                         =========                        =========                       =========

Net interest spread (3)                                2.74 %                           2.92 %                          3.24 %
                                                   =========                        =========                       =========

Net interest income to
  average interest earning
  assets (1)                                           3.36 %                           3.73 %                          4.03 %
                                                   =========                        =========                       =========
</TABLE>

(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) Interest income on loans excludes fees of $365,000 in 2002, $285,000 in
    2001and $233,000 in 2000.

(5) Interest income on loans includes fees of $158,085 in 2002, $200,039 in
    2001and $141,729 in 2000 from the Business Manager Program, student loans
    and lease receivables.

                                       11
<PAGE>

        Table 3 sets forth a summary of the changes in interest earned and
interest expense detailing the amounts attributable to (i) changes in volume
(change in average volume times the prior year's average rate), (ii) changes in
rate (change in the average rate times the prior year's average volume). The
changes in rate/volume (change in the average volume times the change in the
average rate), had been allocated to the changes in volume and changes in rate
in proportion to the relationship of the absolute dollar amounts of the change
in each. During 2002, net interest income increased $648,000 due to changes in
volume and decreased $509,000 due to changes in interest rates. Also, net
interest income was affected by a $80,000 increase in loan fees. In 2001, net
interest income increased $380,000 due to changes in volume and increased
$172,000 due to changes in interest rates. Also, net interest income was
affected by a $52,000 decrease in loan fees.

TABLE 3.  VOLUME AND RATE ANALYSIS OF CHANGES IN INTEREST INCOME

<TABLE>
<CAPTION>
                            ------------------------------------  ------------------------------------
(Taxable equivalent basis)            2002 OVER 2001                        2001 OVER 2000
                            ------------------------------------  ------------------------------------
                                 CHANGE DUE TO          TOTAL          CHANGE DUE TO          TOTAL
                            -----------------------               -----------------------
                              VOLUME       RATE        CHANGE      VOLUME        RATE        CHANGE
                            -----------  ----------   ----------  ----------   ----------  -----------
                                                           In thousands
<S>                            <C>        <C>            <C>        <C>           <C>           <C>
Interest earned on:
  Federal funds sold           $    15    $    (94)      $  (79)    $   150       $  (85)       $  65
  Taxable securities               512        (516)          (4)        446         (150)         296
  Tax-exempt securities             16          (2)          14         (25)          (6)         (31)
  Loans                            794      (1,182)        (388)        540          (90)         450
                            -----------  ----------   ----------  ----------   ----------  -----------
Total interest earned          $ 1,337    $ (1,794)      $ (457)    $ 1,111       $ (331)       $ 780
                            -----------  ----------   ----------  ----------   ----------  -----------

Interest expense on:
  Savings deposits             $    43    $   (198)      $ (155)       $ 10       $  (61)       $ (51)
  Time deposits                    555        (795)        (240)        686           48          734
  NOW accounts                      83        (241)        (158)         40         (128)         (88)
  Money market accounts              9         (50)         (41)         (4)         (16)         (20)
  Other borrowing                   (1)         (1)          (2)         (1)          (2)          (3)
                            -----------  ----------   ----------  ----------   ----------  -----------
Total interest expense         $   689    $ (1,285)      $ (596)    $   731       $ (159)       $ 572
                            -----------  ----------   ----------  ----------   ----------  -----------

Net interest income            $   648    $   (509)      $  139     $   380       $ (172)       $ 208
                            ===========  ==========   ==========  ==========   ==========  ===========
</TABLE>

        Another method of analyzing the change in net interest income is to
examine the changes between interest rate spread and the net interest margin on
earning assets. The interest rate spread as shown in Table 4 is the difference
between the average rate earned on earning assets and the average rate on
interest bearing liabilities. The net interest margin takes into account the
benefit derived from assets funded by interest free sources such as non-interest
bearing demand deposits and capital.


                                       12
<PAGE>

    TABLE 4. INTEREST RATE SPREAD AND NET INTEREST MARGIN ON EARNING ASSETS

<TABLE>
<CAPTION>
(Taxable equivalent basis)             2002                       2001                       2000
                              ----------------------     ----------------------     ---------------------
                               AVERAGE                    AVERAGE                    AVERAGE
                               BALANCE      RATE          BALANCE      RATE          BALANCE     RATE
                              ----------  ----------     ----------  ----------     ---------- ----------
                                                              In thousands
<S>                            <C>             <C>        <C>             <C>        <C>            <C>
Earning assets                 $171,900        6.47 %     $151,511        7.64 %     $135,045       8.00 %
                              ==========                 ==========                 ==========

Interest bearing liabilities   $143,055        3.73 %     $125,768        4.72 %     $112,656       4.76 %
                                          ------------               ------------              ------------

Interest rate spread                           2.74 %                     2.92 %                    3.24 %
Interest free sources used
   to fund earning assets(1)     28,845        0.62 %       25,743        0.81 %       22,389       0.79 %
                              ----------  ------------   ----------  ------------   ---------- ------------

Total sources of funds         $171,900                   $151,511                   $135,045
                              ==========                 ==========                 ==========

Net interest margin                            3.36 %                     3.73 %                    4.03 %
                                          ============               ============              ============
</TABLE>

(1) Non-interest bearing liabilities and shareholders' equity less non-interest
earning assets.

        The following discussion analyzes changes in the Bank's spreads and
margins in terms of basis points. A basis point is a unit of measure for
interest rates equal to .01%. One hundred basis points equals 1%.

        Interest rate spread decreased 18 basis points in 2002 while the net
interest margin declined 37 basis points. Both the interest rate spread and
margin were negatively impacted by a 117 basis point decrease in earning asset
yields offset by a 99 basis point decrease in interest bearing liability costs.
Although the prime rate only decreased 50 basis points in 2002, loan yields
decreased 103 basis points because a significant portion of the loan portfolio
repriced at lower rates through refinancing or variable rate loans. The decrease
in liability costs is primarily the result of the lower cost of funds on
savings, NOW, money market and time deposit accounts during the year.

        Interest rate spread decreased 32 basis points in 2001 while the net
interest margin decreased 30 basis points. Both the interest rate spread and
margin were negatively impacted by a 36 basis point decrease in earning asset
yields and offset by a 4 basis point decrease in interest bearing liability
costs. Although the prime rate decreased 475 basis points in 2001, loan yields
only decreased 9 basis points due to a significant portion of the loan portfolio
are variable rate loans that only reprice on a one, three or five year basis.
The decrease in liability costs is primarily the result of lower cost of funds
on savings, NOW, money market and time deposit accounts during the year.

PROVISION FOR LOAN LOSSES

        The amount charged to provision for loan losses is based on Management's
evaluation of the loan portfolio. Management determines the adequacy of the
allowance for loan losses based on past loan loss experience, current economic
conditions, composition of the loan portfolio. The allowance for loan losses is
the best estimate by Management of the probable losses which have been incurred
as of the balance sheet date. See Nonperforming Loans and Allowance for Loan
Losses for a comprehensive analysis.

NONINTEREST INCOME

        Noninterest income increased $377,000 or 36.8% during 2002 over the
prior comparable period. The increase in 2002 was attributable to fees generated
from the Bounce Protection program, which is a new service the Bank began to
offer to checking deposit account holders in April 2001, overdraft fees, debit
cards, gain on sale of securities and trust fees. Income from CNB's insurance
operations decreased. Bounce Protection is a form of overdraft protection which
enables the customer to have insufficient funds checks paid



                                       13
<PAGE>

instead of returned. The customer is charged a fee for each check paid. Bounce
Protection, overdraft fees and debit card fees increased due to the Bank's
increased number of checking accounts and volume of activity on these accounts.

        There was also an increase in other fees, which included trust fees.
Fees generated from trust assets under management increased even though the
level of assets being managed decreased from $24.1 million at December 31, 2001
to $22.7 million at December 31, 2002. The trust fees increased due to a large
estate being settled in 2002. Another factor contributing to the increase in
noninterest income was in March 2002, one of the Bank's Board of Directors
passed away and the Bank was the beneficiary of a life insurance policy on the
director. The Bank received $43,379 in a death benefit, $21,645 of which was
recorded in assets as cash surrender value. The difference of $21,734 is
reflected in other operating income.

        Noninterest income increased $183,000 or 21.7% during 2001 over the
prior comparable period. The increase in 2001 was attributable to insurance
operations, a new service the Bank began to offer to checking deposit account
holders in April 2001, debit cards and trust fees. Income from CNB's insurance
operations increased, including the investment in the title company.

        Fees generated from the Bounce Protection program and debit card income
offset by the decrease in gain on stock received from the demutualization of an
insurance company in the first quarter of 2000 accounted for the increase in
noninterest income. There were also an increase in other fees, which included
trust fees. Fees generated from trust assets under management increased as the
level of assets being managed reached $24.1 million at December 31, 2001, a
12.1% increase from $21.5 million at December 31, 2000.

NONINTEREST EXPENSES

        Noninterest expenses increased $507,000 or 10.6% during 2002 over the
prior comparable period. The increase was primarily due to an increase in
occupancy expense, furniture and equipment expense, salaries and employee
benefits and other operating expenses. Higher health insurance costs, normal
recurring merit increases and additional staffing at the south Martinsburg
branch facility accounted for the additional costs of salaries and benefits in
2002. Additional depreciation related to the Bank's new technology systems and
south Martinsburg branch facility caused occupancy expense and furniture and
equipment expense to increase.

        Components of other operating expense, which significantly increased
during 2002, included telephone, advertising, conventions and meetings, and NSF
check and other losses. These increases were offset by decreases to stationary,
supplies and printing, Bounce Protection expenses, Business Manager expenses,
other outside service fees and miscellaneous other operating expenses. Expenses
related to the first full year of operation of the new branch facility in south
Martinsburg, Berkeley County West Virginia attributed to the increase in other
operating expenses. Expenses related to the Bounce Protection Program decreased
due to a contract revision reducing the percentage of income shared with the
vendor. Advertising expense increased due to the bank contracting a third party
vendor for additional advertising services. A decrease in the volume of the
Business Manager program caused the expenses related to this program to
decrease.

        Noninterest expenses increased $515,000 or 12.0% during 2001 over the
prior comparable period. The increase was primarily due to an increase in
occupancy expense, salaries and employee benefits and other operating expenses.
Higher health insurance costs, normal recurring merit increases and additional
hiring for the south Martinsburg branch facility accounted for the additional
costs of salaries and benefits in 2001.

        Components of other operating expense, which significantly increased
during 2001, included stationary, supplies and printing, data processing fees,
postage, professional fees and business manager program expenses. Expenses
related to the opening and operation of the temporary banking facility in south
Martinsburg, Berkeley County West Virginia beginning in August 2001 attributed
to the increase in occupancy expense and stationery, supplies and printing
expense. Also, contributing to the slight increase in occupancy expense was the
main Bank renovations, offset by the 2000 write-off of the fixed asset
abandonment related to the Bank not pursing main office expansion plans.
Maintenance expense related to technology systems caused data processing expense
to increase. Professional fees increased due to holding company regulatory
financial reporting expenses. An increase in the volume of the Business Manager
program caused the expenses related to this program to increase.



                                       14
<PAGE>

INCOME TAXES

        Provision for income tax totaled $681,000 in 2002, $700,000 in 2001 and
$758,000 in 2000. The effective tax rate was 34.2% in 2002 compared to 36.1% and
36.7% in 2001 and 2000, respectively. The Bank's income tax expense differs from
the amount computed at statutory rates primarily due to the tax-exempt earnings
from certain investment securities. See Note 18 of the Notes to Consolidated
Financial Statements for a comprehensive analysis of income tax expense.

FINANCIAL CONDITION

        Table 5 examines Citizens National Bank's financial condition in terms
of its sources and uses of funds. Average funding sources and uses increased
$20.4 million or 13.5% in 2002 compared with an increase of $16.5 million or
12.2% in 2001.

TABLE 5. SOURCES AND USES OF FUNDS

<TABLE>
<CAPTION>
                                        2002                                      2001                       2000
                        -------------------------------------     ------------------------------------    -----------
                         AVERAGE       INCREASE (DECREASE)         AVERAGE      INCREASE (DECREASE)         AVERAGE
                                     ------------------------                  -----------------------
                         BALANCE       AMOUNT          %           BALANCE      AMOUNT          %           BALANCE
                        ----------   -----------   ----------     ----------   ----------   ----------    -----------
                                                                In thousands
<S>                      <C>           <C>               <C>       <C>          <C>             <C>         <C>
Funding uses:
   Federal funds
      sold               $  4,720      $    422          9.8 %     $  4,298     $  3,272        318.9 %     $  1,026
   Securities available
      for sale             48,650         9,963         25.8         38,687        6,764         21.2         31,923
   Loans                  118,530        10,004          9.2        108,526        6,430          6.3        102,096
                        ----------   -----------                  ----------   ----------                 -----------

   Total uses            $171,900      $ 20,389         13.5 %     $151,511     $ 16,466         12.2 %     $135,045
                        ==========   ===========   ==========     ==========   ==========   ==========    ===========

Funding sources:
    Interest-bearing
      demand deposits    $ 28,537      $  4,414         18.3 %     $ 24,123     $  1,138          5.0 %     $ 22,985
   Savings deposits        19,629         3,015         18.1         16,614          534          3.3         16,080
   Time deposits           94,889         9,902         11.7         84,987       11,465         15.6         73,522
   Short-term
      borrowings                -           (44)      (100.0)            44          (25)       (36.2)            69
   Noninterest bearing
      funds, net(1)        28,845         3,102         12.0         25,743        3,354         15.0         22,389
                        ----------   -----------                  ----------   ----------                 -----------

   Total sources         $171,900      $ 20,389         13.5 %     $151,511     $ 16,466         12.2 %     $135,045
                        ==========   ===========   ==========     ==========   ==========   ==========    ===========
</TABLE>

(1) Noninterest bearing liabilities and shareholders' equity less noninterest
    earning assets.


        Total assets increased $20.1 million or 11.7% to $191.6 million from
December 31, 2001 to December 31, 2002, due primarily to a $17.8 million
increase in loans, a $4.1 million increase in federal funds sold, a $3.6 million
increase in cash and cash equivalents and a $517,000 increase in premises and
equipment, net, which were partially offset by a $5.5 million decrease in
securities available for sale.

        Total liabilities increased $18.7 million or 11.9% to $175.3 million
from December 31, 2001 to December 31, 2002 substantially due to the increase in
deposits. Shareholders' equity increased $1.4 million to $16.3 million at
December 31, 2002 primarily due to net income of $1.3 million and a $503,000
increase in accumulated other comprehensive income, offset by cash dividends of
$467,000.

        The increase in accumulated other comprehensive income was due to the
unrealized market value appreciation of the available for sale investment
security portfolio. The only component of accumulated other comprehensive income
at December 31, 2002 was unrealized gains and losses on available for sale


                                       15
<PAGE>

securities net of deferred income taxes. The unrealized gains and losses are
primarily a function of available market interest rates relative to the yield
being generated on the available for sale portfolio. No earnings impact results,
however, unless the securities are actually sold.

LOAN PORTFOLIO

        At December 31, 2002, total loans increased $17.8 million or 16.1% to
$128.3 million from $110.5 million at December 31, 2001. The loan mix changed
slightly compared with December 31, 2001. The Bank's real estate loans grew as a
direct result of the increased debt consolidation and refinancing of existing
loans at lower rates. The Bank's new programs targeting purchases and home
construction loans generated additional growth. The Bank's commercial real
estate and business loans grew as a direct result of the Bank's continued
efforts to develop new commercial lending relationships especially in the
Berkeley County, West Virginia market. The Bank's management believes additional
growth in all lending areas is possible into year 2003. Management's intent is
to control the loan volume in a manner which would produce a loan to deposit
ratio between 75% and 80% and maintain credit quality. The loan to deposit ratio
was 74.2% at December 31, 2002 and 71.6% at December 31, 2001. The ratio of net
charge-offs to average loans outstanding was .08% in 2002 and .10% in 2001.

        Growth recorded in the commercial loan area resulted in increases of
38.8% to $9.7 million outstanding at December 31, 2002 and 15.6% to $7.0 million
outstanding at December 31, 2001. The Bank's market area was expanded to
Berkeley County, West Virginia in 1999 which provides a much larger area for
commercial lending. Additional growth in both commercial business and commercial
real estate is possible in 2003.

        Real estate mortgage loans comprised mainly of one to four family
residences continued to be the Bank's dominant loan category. Mortgage lending
comprises approximately 64% or $83.2 million of the total loan portfolio at
December 31, 2002 compared to 61% or $67.9 million at December 31, 2001.

        Demand for the Bank's primary mortgage products, variable rate loans
carrying annual interest rate adjustments based on one, three and five year
Treasury rates, continues to increase and have become more attractive to the
Bank's customers because these loans usually have lower rates, lower closing
costs and quicker settlement. The Bank continues to see demand for fixed rate
mortgage products, and for all loan products, as the Bank penetrates the
Berkeley County, West Virginia real estate market. As of December 31, 2002,
60.1% of the Bank's mortgage loans were adjustable rate loans and 39.9% were
fixed rate loans. Currently, the Bank has approximately $3.8 million in fixed
rate loans in the portfolio which were originated under terms that would allow
them to be sold on the secondary market, although there is no present intent to
sell these loans.

        The consumer loan portfolio showed a decrease. The primary factor
causing the decrease was new automobile loans were considerably affected by the
dealer incentive programs offered by the competition. In the third quarter of
2002, the Bank adopted a managed risk pricing structure for its consumer loans
which significantly reduced loan rates for borrowers with excellent credit.
Indirect loan contracts from automobile dealers did show a marked increase when
the new pricing structure took effect, however, the new managed risk pricing
structure rates have not been advertised to the Bank's market area. Due to this
new pricing structure, the Bank opted not to have a formal loan sale.

        Additional information on the composition of the loan portfolio may be
found in Note 5 of the Notes to the Consolidated Financial Statements.

        Bank policy requires those loans which are past due 90 days or more be
placed on nonaccrual status unless they are both well secured and in the process
of collection. As of December 31, 2002 and 2001, nonaccrual loans approximated
..01% and .02% of total loans (net), respectively.



                                       16
<PAGE>

TABLE 6. LOANS AND LEASE RECEIVABLE

<TABLE>
<CAPTION>
                                              DECEMBER 31,
                                 ---------------------------------------
                                   2002          2001           2000
                                 ----------    ----------    -----------
                                              In thousands
<S>                               <C>           <C>            <C>
Real estate                       $ 83,239      $ 67,860       $ 65,278
Commercial real estate              13,935        12,459          9,944
Consumer                            22,575        24,198         23,708
Commercial                           9,685         6,978          6,037
Overdrafts                              73            87             20
                                 ----------    ----------    -----------
                                  $129,507      $111,582       $104,987

Lease:                                 135           139            143
                                 ----------    ----------    -----------
                                   129,642       111,721        105,130

Net deferred loan fees,
    premiums and discounts             172           153             90
Allowance for loan losses           (1,484)       (1,337)        (1,216)
                                 ----------    ----------    -----------
                                  $128,330      $110,537       $104,004
                                 ==========    ==========    ===========
</TABLE>

TABLE 7. LOAN MATURITIES AND INTEREST SENSITIVITY (1)

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 2002
                                          ---------------------------------------------------
                                           ONE YEAR    ONE THROUGH      OVER
                                           OR LESS     FIVE YEARS    FIVE YEARS     TOTAL
                                          -----------  ------------  -----------  -----------
                                                             In thousands
<S>                                         <C>            <C>         <C>          <C>
Commercial, financial and agricultural      $ 10,057       $ 1,074     $ 12,489     $ 23,620
Real estate - construction                     1,841             -            -     $  1,841
                                          -----------  ------------  -----------  -----------

Total                                       $ 11,898       $ 1,074     $ 12,489     $ 25,461
                                          ===========  ============  ===========  ===========

Loans with predetermined interest rate      $ 11,898       $   869     $  1,502     $ 14,269
Loans with variable interest rate                  -           205       10,987     $ 11,192
                                          -----------  ------------  -----------  -----------

Total                                       $ 11,898       $ 1,074     $ 12,489     $ 25,461
                                          ===========  ============  ===========  ===========
</TABLE>


(1) Excludes residential mortgages and consumer loans.


NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES

        Nonperforming loans consist of loans in nonaccrual status, loans which
are past due 90 days or more and still accruing interest and restructured loans.
The Bank has no loans which are considered to be impaired as of December 31,
2002 and 2001. As of December 31, 2002, management is aware of three borrowers
who have exhibited weaknesses. Their loans have aggregate uninsured balances of
$862,190 and are primarily secured by real estate. A specific allowance of
$100,000 related to these loans has been established as part of the allowance
for loan losses. Management believes that any additional potential loss would be
minimal.



                                       17
<PAGE>

TABLE 8. NON-PERFORMING ASSETS

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                         ------------------------------------
                                           2002         2001         2000
                                         ----------   ----------   ----------
                                                     In thousands
<S>                                        <C>          <C>          <C>
 Nonaccrual loans                            $  13        $  25        $  22

 Loans past due 90 days or more
    still accruing interest                    553          450          360
                                         ----------   ----------   ----------
 Total nonperforming loans                   $ 566        $ 475        $ 382

 Other real estate owned                     $   2        $  15        $   -
                                         ----------   ----------   ----------

 Total nonperforming assets                  $ 568        $ 490        $ 382
                                         ==========   ==========   ==========

 Ratios:
 Nonperforming loans/Total loans             0.44%        0.43%        0.37%
 Nonperforming assets/Total assets           0.30%        0.29%        0.25%
 Allowance for loan losses/Total loans       1.16%        1.21%        1.17%
</TABLE>

        The allowance for loan losses is the best estimate by management of the
probable losses which have been incurred as of the respective balance sheet
date. Management makes a determination quarterly by analyzing overall loan
quality, changes in the mix and size of the loan portfolio, previous loss
experience, general economic conditions, information about specific borrowers
and other factors. The Bank's methodology for determining the allowance for loan
losses establishes both an allocated and an unallocated component. The allocated
portion of the allowance represents the results of analyses of individual loans
that are being monitored for potential credit problems and pools of loans within
the portfolio. The allocated portion of the allowance for loans is based
principally on current loan risk ratings, historical loan loss rates adjusted to
reflect current conditions, as well as analyses of other factors that may have
affected the collectibility of loans in the portfolio. The Bank analyzes all
commercial loans that are being monitored as potential credit problems to
determine whether such loans are impaired, with impairment measured by reference
to the borrowers' collateral values and cash flows. The unallocated portion of
the allowance for loan losses represents the results of analyses that measure
probable losses inherent in the portfolio that are not adequately captured in
the allocated allowance analyses. These analyses include consideration of
unidentified losses inherent in the portfolio resulting from changing
underwriting criteria, changes in the types and mix of loans originated,
industry concentrations and evaluations, allowance levels relative to selected
overall credit criteria and other economic indicators used to estimate probable
incurred losses. At December 31, 2002 and 2001, the allowance for loan losses
totaled $1.5 million and $1.3 million, respectively. The allowance for loan
losses as a percentage of loans was 1.2% and 1.2% as of December 31, 2002 and
2001. The provision for loan losses exceeded net charge-offs by $147,000 and
$121,000 in 2002 and 2001. An analysis of the allowance for loan losses for the
years ended December 31, 2002 and 2001 may be found in Note 5 of the Notes to
the Consolidated Financial Statements.

        The provision for loan losses is a charge to earnings which is made to
maintain the allowance for loan losses at a sufficient level. In 2002, 2001 and
2000, the provision totaled $261,000, $226,000 and $170,000, respectively. While
loan quality remains good and past due and nonaccrual loans are minimal,
management increased the provision for loan losses in 2002 based on the
declining general economic conditions as evidenced by the slowdown in the
economy as cited in various financial publications. Having increased the
provision for loan losses, management believes the allowance for loan losses to
be adequate and is not aware of any information relating to the loan portfolio
which it expects will materially impact future operating results, liquidity or
capital resources. In addition, federal regulators may require additional
reserves as a result of their examination of the Bank. The allowance for loan
losses reflects what management currently believes is an adequate level of
allowance, although there can be no assurance that future losses will not exceed
the estimated amounts, thereby adversely affecting future results of operations.


                                       18
<PAGE>

TABLE 9. ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                 2002          2001          2000
                                              -----------    ----------    ----------
                                                            In thousands
<S>                                             <C>           <C>           <C>
Balance, beginning of year                       $ 1,337       $ 1,216       $ 1,148
                                              -----------    ----------    ----------
Provision charged to expense                     $   261       $   226       $   170
                                              -----------    ----------    ----------
Loans charged off:
    Commercial, financial and agricultural           $ 1           $ 3       $     6
    Consumer                                         145           133           115
    Mortgage                                           5             -             -
                                              -----------    ----------    ----------
    Total loans charged off                      $  (151)      $  (136)      $  (121)
                                              -----------    ----------    ----------

Recoveries:
    Commercial, financial and agricultural       $     2       $     2       $     1
    Consumer                                          35            29            18
                                              -----------    ----------    ----------
    Total recoveries                             $    37       $    31       $    19
                                              -----------    ----------    ----------
    Net charge-offs                              $  (114)      $  (105)      $  (102)
                                              -----------    ----------    ----------

Balance, end of year                             $ 1,484       $ 1,337       $ 1,216
                                              ===========    ==========    ==========
</TABLE>

TABLE 10. ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                          ------------------------------------------------------------------------------------------------
                                      2002                             2001                              2000
                          ----------------------------     ------------------------------   ------------------------------
                                           PERCENT OF                       PERCENT OF                       PERCENT OF
                                         LOANS IN EACH                    LOANS IN EACH                     LOANS IN EACH
                                          CATEGORY TO                      CATEGORY TO                       CATEGORY TO
                             AMOUNT       TOTAL LOANS         AMOUNT       TOTAL LOANS         AMOUNT        TOTAL LOANS
                          -------------  -------------     -------------  ---------------   -------------  ---------------
                                                                   In thousands
<S>                            <C>             <C>              <C>            <C>             <C>             <C>
Commercial, financial          $   330              8 %         $   363              6 %         $   206              6 %
    and agriculture
Real estate - mortgage             391             75               294             72               257             72
Installment and other              364             17               370             22               351             22
Unallocated                        399            N/A               310            N/A               402            N/A
                          -------------  ---------------   -------------  ---------------   -------------  ---------------
       Total                   $ 1,484            100 %         $ 1,337            100 %         $ 1,216            100 %
                          =============  ===============   =============  ===============   =============  ===============
</TABLE>

SECURITIES PORTFOLIO AND FEDERAL FUNDS SOLD

        The Bank's securities portfolio consists of only available for sale
securities. Classifying the securities portfolio as available for sale provides
management with increased ability to manage the balance sheet structure and
address asset/liability management issues when needed. The fair value of the
investment portfolio has decreased $5.5 million to $43.4 million at December 31,
2002 from 2001.

        The composition of the portfolio continues to reflect the Bank's
conservative philosophy which places greater importance on safety and liquidity
than on yield. At December 31, 2002, approximately 64.8% of the portfolio is
comprised of US Treasury and Agency securities, 32.5% in Mortgage Backed
securities and 2.7% in State and Political Subdivision securities. The term to
maturity is limited to seven years for Treasury and Agency bonds and 10 years
for Municipal bonds. Typically, investments in Agency bonds contain a call
feature. These bonds generally have a somewhat higher yield. The average term to
maturity of the portfolio as of December 31, 2002 was 4.0 years.

        The Bank generally participates in the overnight federal funds sold
market. Depending upon specific investing or funding strategies and/or normal
fluctuations in loan and deposit balances, the Bank may need, on occasion, to
purchase funds on an overnight basis. In 2002 and 2001, the average balance in
federal funds sold was $4.7 million and $4.3 million, respectively.


                                       19
<PAGE>

DEPOSITS AND OTHER FUNDING SOURCES

        Total deposits were $173.1 million at December 31, 2002, an increase of
$18.7 million or 12.1% over deposits at December 31, 2001. Average deposits,
however, showed a $23.1 million, or 16.2% growth, to $166.3 million in 2002.
Deposits at the Hedgesville branch totaled $21.2 million at December 31, 2002,
an increase of $600,000 over December 31, 2001. Deposits at the Martinsburg
branch totaled $5.6 million at December 31, 2002, an increase of $4.3 million
over December 31, 2001. The Bank has experienced a change in the deposit account
mix during 2002. A shift from time deposits to jumbo certificates of deposit is
a direct result of customers making deposits to the 36-month Ultimate
Certificate of Deposit throughout the year. The increase in jumbo certificates
of deposit and other certificates of deposit are primarily due to the continued
growth in the 36-month Ultimate Certificate of Deposit. The Bank's 36-month
Ultimate Certificate of Deposit allows the customer to withdraw all or a portion
of the CD on the first or second year anniversary date without penalty. Deposits
may also be made to this CD at any time.

        Noninterest-bearing deposits also grew by $7.5 million or 39.1%, during
2002, from $19.2 million at December 31, 2001, to $26.7 million at December 31,
2002. At December 31, 2002, noninterest-bearing deposits represented 15.4% of
total deposits, compared to 12.4% for 2001. Average noninterest-bearing deposits
increased 33.1% from $17.5 million in 2001 to $23.3 million in 2002. The Bank's
noninterest-bearing deposit account with no minimum balance and check truncation
continues to grow since its introduction in 1999.

        Interest-bearing deposits increased by $11.2 million or 8.3% to $146.4
million at December 31, 2002. Interest-bearing checking increased by $5.2
million in 2002. Included in this category are NOW accounts and Money Market
accounts. Savings accounts increased $3.6 million in 2002 from the previous year
to $21.5 million, while the average savings deposits increased only $3.0 million
or 18.2% to $19.6 million at December 31, 2002. The Bank's largest source of
interest-bearing funds is certificates of deposit. These accounts totaled $94.8
million at December 31, 2002, an increase of $2.3 million or 2.5%. The increase
is primarily due to the continue growth in the 36-month Ultimate Certificate of
Deposit which was first offered as a promotional certificate of deposit with the
grand opening of the Hedgesville branch location in 1998.

        The Bank's institutional advertising campaign which began in 2000 has
generated an influx of new noninterest-bearing and interest-bearing deposit
accounts especially at the Hedgesville and south Martinsburg branches.

        Table 11 is a summary of the maturity distribution of certificates of
deposit in amounts of $100,000 or more as of December 31, 2002:


TABLE 11. MATURITY OF TIME DEPOSITS OF $100,000 OR MORE

<TABLE>
<CAPTION>
                                                AMOUNT          PERCENT
                                             ------------   ---------------
                                                     In thousands
<S>                                           <C>               <C>
Three months or less                            $  8,885          23.74 %
Three through six months                           7,236          19.33
Six through twelve months                          9,653          25.79
Over twelve months                                11,660          31.15
                                             ------------   ---------------

     Total                                      $ 37,434            100 %
                                             ============   ===============
</TABLE>

CAPITAL RESOURCES

        The Bank remains well capitalized. Total shareholders' equity at
December 31, 2002 of $16.3 million represents 8.5% of total assets. This
compares to $14.9 million or 8.7%, at December 31, 2001. Included in capital at
December 31, 2002 are $681,000 of unrealized gains on available for sale
securities, net of deferred income taxes. At December 31, 2001, the Bank had
unrealized gains on available for sale securities, net of deferred income taxes
of $178,000. Such unrealized gains and losses are recorded net of related
deferred taxes and are primarily a function of available market interest rates
relative to the yield being



                                       20
<PAGE>

generated on the available for sale portfolio. No earnings impact will result,
however, unless the securities are actually sold.

        The stock of CNB Financial Services, Inc., and prior to the formation of
CNB, the Bank, are not listed on an exchange and are not heavily traded. The
trades that have occurred are those that, to management's knowledge, have been
individually arranged. Based on information that management is aware of, the
majority of shares sold during 2002 were at a price that ranged from $64 to $90
per share. During 2001, information available to management indicates that stock
trades ranged from $67 to $135 per share. Book value per share increased from
$32.59 at December 31, 2001 to $35.52 at December 31, 2002.

        Dividends which have been declared by the Board of Directors
semiannually, remained the same in 2002 and 2001 at $1.02 per share. All stock
prices and per share amounts have been restated to reflect the formation of CNB
Financial Services, Inc. and the acquisition of Citizens National Bank and
subsidiary on August 31, 2000 and accounted for as a pooling of interests.

        The Federal Reserve's risk-based capital guidelines provide for the
relative weighting of both on-balance-sheet and off-balance-sheet items based on
their degree of risk. The Bank continues to exceed all regulatory capital
requirements, and is unaware of any trends or uncertainties, nor do any plans
exist, which may materially impair or alter its capital position.

RETURN ON EQUITY AND ASSETS

        Table 12 shows consolidated operating and capital ratios for the periods
indicated.

TABLE 12. OPERATING AND CAPITAL RATIOS

<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                         ------------------------
                                                          2002              2001
                                                          ----              ----
<S>                                                      <C>               <C>
Return on average assets                                   .71%              .77%
Return on average equity                                  8.38              8.49
Dividend payout ratio                                    35.72             37.79
Average equity to average assets ratio                    8.49              9.12
</TABLE>

LIQUIDITY AND INTEREST RATE SENSITIVITY

        The objective of the Bank's liquidity management program is to ensure
the continuous availability of funds to meet the withdrawal demands of
depositors and the credit needs of borrowers. The basis of the Bank's liquidity
comes from the stability of its core deposits. Liquidity is also available
through the available for sale securities portfolio and short-term funds such as
federal funds sold. At December 31, 2002, these sources totaled $47.6 million,
or 24.8% of total assets. In addition, liquidity may be generated through loan
repayments and over $7.0 million of available borrowing arrangements with
correspondent banks. At December 31, 2002, management considered the Bank's
ability to satisfy its anticipated liquidity needs over the next twelve months.
Management believes that the Bank is well positioned and has ample liquidity to
satisfy these needs. The Bank generated $2.2 million of cash from operations in
2002, which compares to $1.5 million in 2001 and $1.8 million in 2000.
Additional cash of $18.2 million, $19.9 million and $9.0 million was generated
through net financing activities in 2002, 2001 and 2000, respectively. These
proceeds along with proceeds from the sales and maturities of investment
securities were used to fund loans and purchase securities during each year. Net
cash used in investing activities totaled $16.8 million in 2002 compared to
$20.9 million in 2001 and $11.1 million in 2000. Details on both the sources and
uses of cash are presented in the Consolidated Statements of Cash Flows
contained in the financial statements.

        The objective of the Bank's interest rate sensitivity management
program, also known as asset/liability management, is to maximize net interest
income while minimizing the risk of adverse effects from changing interest
rates. This is done by controlling the mix and maturities of interest-sensitive
assets and liabilities. The Bank has established an asset/liability committee
for this purpose. Daily management of the Bank's sensitivity of earnings to
changes in interest rates within the Bank's policy guidelines are monitored by
using a combination of off-balance sheet and on-balance sheet financial
instruments. The Bank's Chief Executive Officer, Senior Lending Officer, Chief
Financial Officer and the Chief Operations Officer monitor day to day deposit
flows, lending requirements and the competitive environment. Rate changes occur
within policy guidelines if necessary to minimize adverse effects. Also, the
Bank's policy is intended to ensure that the Bank measures a range of rate
scenarios and patterns of rate movements that are reasonably possible.


                                       21
<PAGE>

        In analyzing interest rate sensitivity for policy measurement, the Bank
compares its forecasted earnings in both a "high rate" and "low rate" scenario
to a base-line scenario. The Bank's base-line scenario is that short-term
interest rates over the next 12 months remain at the current rate. The "high
rate" and "low rate" scenarios assume a 200 basis point increase or decrease in
the prime rate from beginning point of the base-line scenario over the most
current 12-month period. The Bank's policy limit for the maximum negative impact
on earnings resulting from "high rate" or "low rate" scenarios is 10 percent.
The policy measurement period is 12 months in length, beginning with the first
month of the forecast.

        The Bank's base-line scenario holds the prime rate constant at 4.25
percent through December 2003. Based on the January 2003 outlook, the model
indicates that earnings during the policy measurement period would be affected
by less than 10 percent, in both an increasing or decreasing interest rate
scenario.

        One common interest rate risk measure is the gap, or the difference
between rate sensitive assets and rate sensitive liabilities. A positive gap
occurs when rate-sensitive assets exceed rate-sensitive liabilities. This tends
to be beneficial in rising interest rate environments. A negative gap refers to
the opposite situation and tends to be beneficial in declining interest rate
environments. However, the gap does not consider future changes in the volume of
rate sensitive assets or liabilities or the possibility that interest rates of
various products may not change by the same amount or at the same time. In
addition, certain assumptions must be made in constructing the gap. For example,
the Bank considers administered rate deposits, such as savings accounts, to be
immediately rate sensitive although their actual rate sensitivity could differ
from this assumption. The Bank monitors its gap on a quarterly basis.

TABLE 13. INTEREST SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
                                                                        DECEMBER 31, 2002
                                         --------------------------------------------------------------------------------
                                                                   INTEREST SENSITIVITY PERIOD
                                         --------------------------------------------------------------------------------

                                            2003       2004        2005        2006       2007     THEREAFTER    TOTAL
                                         ----------  ---------  ----------  ----------  ---------  ----------  ----------
                                                                            In thousands
Rate sensitive assets
<S>                                       <C>        <C>         <C>         <C>        <C>         <C>        <C>
Loans, net of unearned interest           $ 36,205   $ 12,434    $ 13,530    $ 15,340   $ 16,181    $ 34,640   $ 128,330
    Average interest rate                     4.68 %     4.94 %      5.23 %      5.51 %     5.77 %      6.50 %      5.59 %
Securities                                   5,327          -       2,100       4,226      5,359      26,418      43,430
    Average interest rate                     4.75 %        - %      4.15 %      4.63 %     4.69 %      4.88 %      4.89 %
                                         ----------  ---------  ----------  ----------  ---------  ----------  ----------
    Total interest sensitive assets       $ 41,532   $ 12,434 %  $ 15,630 %  $ 19,566 % $ 21,540 %  $ 61,058 % $ 171,760
                                         ==========  =========  ==========  ==========  =========  ==========  ==========

Interest sensitive liabilities
Non-interest-bearing deposits             $  2,666   $  2,666    $  2,666    $  2,666   $  2,666    $ 13,333      26,663
    Average interest rate                        - %        - %         - %         - %        - %         - %         - %
Savings and interest-bearing checking        5,158      5,158       5,158       5,158      5,158      25,788      51,578
    Average interest rate                     0.50 %     0.50 %      0.50 %      0.50 %     0.50 %      0.50 %      0.50 %
Time deposits                               54,700     19,296      13,988       1,971      4,866           -      94,821
    Average interest rate                     1.35 %     1.68 %      2.00 %      2.00 %     2.98 %         - %      1.84 %
                                         ----------  ---------  ----------  ----------  ---------  ----------  ----------
    Total interest sensitive liabilities  $ 62,524   $ 27,120    $ 21,812 %  $  9,795 % $ 12,690 %  $ 39,121   $ 173,062
                                         ==========  =========  ==========  ==========  =========  ==========  ==========

GAP                                       $(20,992)  $ (14,686)  $ (6,182)   $  9,771   $  8,850    $ 21,937
Cumulative GAP                            $(20,992)  $ (35,678)  $(41,860)   $(32,089)  $ (23,239)  $ (1,302)

GAP to sensitive assets ratio               (12.22)%    (8.55)%     (3.60)%      5.69 %     5.15 %     12.77 %
Cumulative GAP to sensitive
    assets ratio                            (12.22)%   (20.77)%    (24.37)%    (18.68)%   (13.53)%     (0.76)%
GAP to total assets ratio                   (10.96)%    (7.66)%     (3.23)%      5.10 %     4.62 %     11.45 %
Cumulative GAP to total assets ratio        (10.96)%   (18.62)%    (21.85)%    (16.75)%   (12.13)%     (0.68)%
</TABLE>


                                       22
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

        In April 2002, FASB Statement 145 was issued. This Statement rescinds
FASB Statement 4, Reporting Gains and Losses from Extinguishment of Debt, and
it's subsequent amendment in FASB Statement 64, Extinguishment of Debt Made to
Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement
44, Accounting for Intangible Assets of Motor Carriers. Finally, this statement
amends FASB statement number 13, Accounting for Leases. The amendment to FASB 13
modifies the required accounting treatment for leases that have similar economic
effects of the sale-leaseback transactions to follow the same requirements as a
true sale-leaseback transaction.

        FASB Statement 146, Accounting for Cost Associated with Exit of Disposal
Activities, was issued in June of 2002. Statement 146 nullifies Emerging Issues
Task Force Issue number 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructure)." Under EITF Issue 94-3, companies were
required to recognize the liability of costs associated with disposal activities
at a plan date. This statement now requires that the costs associated with a
disposal activity be measured at fair value and recognized only when the
liability is incurred. FASB Statement 146 is effective for exit or disposal
activities that occur after December 31, 2002.

        In October 2002, FASB Statement 147, Acquisitions of Certain Financial
Institutions was issued. This Statement was an amendment of FASB Statements 72
and 144 and Interpretation 9. The provisions of this Statement relate to the
application of the purchase method of accounting which applies to all
acquisitions of financial institutions, except for transactions between mutual
enterprises. Following the issuance of FASB Statements 141, Business
Combinations, and 142, Goodwill and Other Intangible Assets, in 2001, the
Financial Account Standards Board concluded that certain guidance provided in
Statement 72 and Interpretation 9 was no longer necessary. Statement 147 is
effective for acquisitions on or after October 1, 2002.

        In November 2002, FASB Interpretation 45 was issued. The interpretation
was titled Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. This Statement rescinds
FASB Interpretation 34 and provides an interpretation of FASB Statements 5, 57,
and 107. This Interpretation elaborates on the disclosures to be made by
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. These new disclosure requirements
are effective for financial statement periods ending after December 15, 2002.

        In December 2002, FASB Statement 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, was issued. This statement was an
amendment for FASB Statement 123, and provided alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
financial results.

        Adoption of Statements 145, 146, 147 and 148 and Interpretation 45 are
not expected to have a material impact on CNB Financial Services, Inc.'s
financial condition or results of operations.

IMPACT OF INFLATION

        The results of operations and financial position of the Bank have been
presented based on historical cost, unadjusted for the effects of inflation,
except for the recording of unrealized gains and losses on securities available
for sale. Inflation could significantly impact the value of the Bank's interest
rate-sensitive assets and liabilities and the cost of noninterest expenses, such
as salaries, benefits and other operating expenses. Management of the money
supply by the Federal Reserve to control the rate of inflation may have an
impact on the earnings of the Bank. Further, changes in interest rates to
control inflation may have a corresponding impact on the ability of certain
borrowers to repay loans granted by the Bank.

        As a financial intermediary, the Bank holds a high percentage of
interest rate-sensitive assets and liabilities. Consequently, the estimated fair
value of a significant portion of the Bank's assets and liabilities change more
frequently than those of non-banking entities. The Bank's policies attempt to
structure its mix of financial instruments and manage its interest rate
sensitivity in order to minimize the potential adverse effects of market forces
on its net interest income, earnings and capital.


                                       23
<PAGE>

        A comparison of the carrying value of the Bank's financial instruments
to their estimated fair value as of December 31, 2002 and December 31, 2001 is
disclosed in Note 24 of the Notes to the Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Interest Rate Sensitivity" in Item 7
hereof.




                                       24
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following audited consolidated financial statements are set forth in
this Annual Report of Form 10-K on the following pages:

<TABLE>
<S>                                                                                               <C>
         CNB Financial Services, Inc. and Subsidiary
           Independent Auditors' Report........................................................... 26
           Consolidated Balance Sheets............................................................ 27
           Consolidated Statements of Income...................................................... 28
           Consolidated Statements of Stockholders' Equity........................................ 29
           Consolidated Statements of Cash Flows.................................................. 30
           Notes to Consolidated Financial Statements............................................. 31
</TABLE>



                                       25
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT




Shareholders and Board of Directors
CNB Financial Services, Inc.
Berkeley Springs, West Virginia


                We have audited the accompanying consolidated statements of
financial condition of CNB Financial Services, Inc. and subsidiary as of
December 31, 2002 and 2001, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 2002. These financial statements are the
responsibility of CNB Financial Services, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audits.

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

                In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of CNB
Financial Services, Inc. and subsidiary as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.



                                    /s/ SMITH ELLIOTT KEARNS & COMPANY, LLC





Hagerstown, Maryland
February 12, 2003




                                       26
<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
ASSETS                                                                2002                     2001
                                                                 ---------------          ----------------
<S>                                                               <C>                       <C>
  Cash and due from banks                                         $   7,832,735             $   4,229,810
  Federal funds sold                                                  4,127,299                         -
  Securities available for sale
     (at approximate market value)                                   43,429,902                48,913,329
  Federal Home Loan Bank stock, at cost                                 429,000                   625,500
  Federal Reserve Bank stock, at cost                                   129,650                   129,650
  Loans and lease receivable, net                                   128,330,303               110,536,744
  Accrued interest receivable                                           921,907                 1,052,620
  Foreclosed real estate (held for sale), net                             1,800                    14,898
  Premises and equipment, net                                         4,800,135                 4,283,625
  Deferred income taxes                                                       -                   225,894
  Cash surrender value of life insurance                                964,179                   883,533
  Intangible assets                                                      96,483                   105,168
  Other assets                                                          538,687                   540,672
                                                                 ---------------          ----------------

         TOTAL ASSETS                                             $ 191,602,080             $ 171,541,443
                                                                 ===============          ================


              LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
  Deposits:
        Demand                                                    $  26,663,469             $  19,174,111
        Interest-bearing demand                                      30,087,763                24,878,709
        Savings                                                      21,489,855                17,851,684
        Time, $100,000 and over                                      37,433,561                27,450,519
        Other time                                                   57,387,901                65,025,516
                                                                 ---------------          ----------------
                                                                  $ 173,062,549             $ 154,380,539
  Accrued interest payable                                            1,010,086                 1,148,437
  Deferred income taxes                                                 158,269                         -
  Accrued expenses and other liabilities                              1,101,158                 1,086,230
                                                                 ---------------          ----------------

         TOTAL LIABILITIES                                        $ 175,332,062             $ 156,615,206
                                                                 ---------------          ----------------

SHAREHOLDERS' EQUITY
  Common stock, $1 par value; 5,000,000  shares
       authorized; 458,048 shares outstanding                     $     458,048             $     458,048
  Capital surplus                                                     3,863,592                 3,863,592
  Retained earnings                                                  11,267,374                10,426,618
  Accumulated other comprehensive income                                681,004                   177,979
                                                                 ---------------          ----------------

         TOTAL SHAREHOLDERS' EQUITY                               $  16,270,018             $  14,926,237
                                                                 ---------------          ----------------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $ 191,602,080             $ 171,541,443
                                                                 ===============          ================
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       27
<PAGE>

                        CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                       2002              2001              2000
                                                   -------------     -------------     -------------
<S>                                                <C>               <C>               <C>
INTEREST INCOME
   Interest and fees on loans                      $  9,072,329      $  9,381,949      $  8,887,114
   Interest and dividends on securities:
      United States Treasury securities                       -               274            25,232
      U.S. Government agencies and
         corporations                                 1,856,035         2,238,886         1,960,198
      Mortgage backed securities                        406,958                 -                 -
      State and political subdivisions                   43,058            29,450            60,002
      Other                                              28,802            57,686             7,779
   Interest on federal funds sold                        82,035           159,744            94,914
                                                   -------------     -------------     -------------
                                                   $ 11,489,217      $ 11,867,989      $ 11,035,239
                                                   -------------     -------------     -------------
INTEREST EXPENSE
   Interest on interest bearing demand,
     savings and time deposits                     $  5,341,720      $  5,935,078      $  5,359,871
   Interest on federal  funds purchased                       -             2,291             5,051
                                                   -------------     -------------     -------------
                                                   $  5,341,720      $  5,937,369      $  5,364,922
                                                   -------------     -------------     -------------

           NET INTEREST INCOME                     $  6,147,497      $  5,930,620      $  5,670,317

PROVISION FOR LOAN LOSSES                               261,000           226,000           170,000
                                                   -------------     -------------     -------------

           NET INTEREST INCOME AFTER
               PROVISION FOR LOAN LOSSES           $  5,886,497      $  5,704,620      $  5,500,317
                                                   -------------     -------------     -------------

NONINTEREST INCOME
   Service charges on deposit accounts             $    747,343      $    545,882      $    282,866
   Other service charges, commissions
      and fees                                          338,481           259,887           211,982
   Insurance income                                     106,304           124,514            94,691
   Other operating income                                72,726            49,498            59,148
   Gain on demutualization of insurance company               -                 -           195,889
   Net gain (loss) on sale of securities                 78,028               833           (13,991)
   Income from title company                             56,400            44,877                 -
   Gain (loss) on sale of other real estate owned         3,492                 -            12,177
                                                   -------------     -------------     -------------
                                                   $  1,402,774      $  1,025,491      $    842,762
                                                   -------------     -------------     -------------
NONINTEREST EXPENSES
   Salaries                                        $  2,253,312      $  2,013,709      $  1,760,226
   Employee benefits                                    752,564           621,036           562,625
   Occupancy of premises                                295,221           264,184           249,738
   Furniture and equipment expense                      337,050           254,232           248,053
   Other operating expenses                           1,662,288         1,640,764         1,458,762
                                                   -------------     -------------     -------------
                                                   $  5,300,435      $  4,793,925      $  4,279,404
                                                   -------------     -------------     -------------

            INCOME BEFORE INCOME TAXES             $  1,988,836      $  1,936,186      $  2,063,675

PROVISION FOR INCOME TAXES                              680,871           699,781           757,835
                                                   -------------     -------------     -------------

            NET INCOME                             $  1,307,965      $  1,236,405      $  1,305,840
                                                   =============     =============     =============

BASIC EARNINGS PER SHARE                           $       2.86      $       2.70      $       2.85
                                                   =============     =============     =============
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       28
<PAGE>


                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                                  ACCUMULATED
                                                                                                    OTHER          TOTAL
                                                     COMMON         CAPITAL        RETAINED      COMPREHENSIVE  SHAREHOLDERS'
                                                     STOCK (1)     SURPLUS (1)    EARNINGS (1)      INCOME         EQUITY
                                                   ------------   -------------   ------------   ------------   -------------
<S>                                                  <C>           <C>            <C>             <C>            <C>
BALANCE, DECEMBER 31, 1999                           $ 458,048     $ 3,863,592    $ 8,818,791     $ (891,710)    $12,248,721
                                                                                                                -------------
Comprehensive income:
  Net income for 2000                                        -               -      1,305,840              -       1,305,840
  Change in unrealized gains
    (losses) on securities
    available for sale (net of tax of $475,898)              -               -              -        776,466         776,466
                                                                                                                -------------
Total Comprehensive Income                                   -               -              -              -       2,082,306
                                                                                                                -------------
Issuance of common stock                                12,000               -              -              -               -
Cancellation of stock                                  (12,000)              -              -              -               -
Cash dividends ($1.02 per share)                             -               -       (467,209)             -        (467,209)
                                                   ------------   -------------   ------------   ------------   -------------

BALANCE, DECEMBER 31, 2000                           $ 458,048     $ 3,863,592    $ 9,657,422     $ (115,244)    $13,863,818
                                                                                                                -------------
Comprehensive income:
  Net income for 2001                                        -               -      1,236,405              -       1,236,405
  Change in unrealized gains
    (losses) on securities
    available for sale (net of tax of $179,718)              -               -              -        293,223         293,223
                                                                                                                -------------
Total Comprehensive Income                                   -               -              -              -       1,529,628
                                                                                                                -------------
Cash dividends ($1.02 per share)                             -               -       (467,209)             -        (467,209)
                                                   ------------   -------------   ------------   ------------   -------------

BALANCE, DECEMBER 31, 2001                           $ 458,048     $ 3,863,592    $10,426,618     $  177,979     $14,926,237
                                                                                                                -------------
Comprehensive income:
  Net income for 2002                                        -               -      1,307,965              -       1,307,965
  Change in unrealized gains
    (losses) on securities
    available for sale (net of tax of $308,306)              -               -              -        503,025         503,025
                                                                                                                -------------
Total Comprehensive Income                                   -               -              -              -       1,810,990
                                                                                                                -------------
Cash dividends ($1.02 per share)                             -               -       (467,209)             -        (467,209)
                                                   ------------   -------------   ------------   ------------   -------------

BALANCE, DECEMBER 31, 2002                           $ 458,048     $ 3,863,592    $11,267,374     $  681,004     $16,270,018
                                                   ============   =============   ============   ============   =============
</TABLE>

(1) Restated to reflect the formation of CNB Financial Services, Inc. and the
    acquisition of Citizens National Bank and subsidiary on August 31, 2000 and
    accounted for as a pooling of interests.

The Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       29
<PAGE>


                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                             2002             2001             2000
                                                                         -------------    -------------    -------------
<S>                                                                      <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                              $  1,307,965     $  1,236,405     $  1,305,840
 Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                                            340,677          251,463          238,162
     Provision for loan losses                                                261,000          226,000          170,000
     Deferred income taxes                                                     75,857          (30,103)          (1,686)
     Net (gain) loss on sale of securities                                    (78,028)            (833)          13,991
     (Gain) loss on sale of real estate owned                                  (3,492)               -          (12,177)
     (Gain) on demutualization of insurance company                                 -                -         (195,889)
     Loss on disposal and abandonment of fixed assets                           8,111                -           55,254
     (Increase) decrease in loans held for sale                                     -                -           65,300
     (Increase) decrease in accrued interest receivable                       130,713          (48,363)        (132,586)
     (Increase) decrease in other assets                                      193,704         (235,995)          95,169
     Increase (decrease) in accrued interest payable                         (138,351)         110,315          221,503
     (Increase) in cash surrender value on life insurance in excess
          of premiums paid                                                    (31,568)         (42,882)         (70,180)
     Increase in accrued expenses and other liabilities                        14,928            1,653           12,126
     Amortization of deferred loan (fees) cost                                 72,833           55,000           42,633
     Amortization (accretion) of premium and discount on investments           36,889          (28,920)          (1,709)
                                                                         -------------    -------------    -------------
         NET CASH PROVIDED BY OPERATING ACTIVITIES                       $  2,191,238     $  1,493,740     $  1,805,751
                                                                         -------------    -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) in loans                                                $(18,159,192)    $ (6,824,573)    $ (8,118,916)
  Proceeds from loan sales                                                          -                -        1,027,345
  Proceeds from sales of securities                                         7,075,471          901,406        2,659,593
  Proceeds from maturities of securities                                   44,889,207       52,450,000        1,570,000
  Purchases of securities                                                 (45,628,781)     (67,124,098)      (6,374,538)
  Purchases of Federal Home Loan Bank stock                                   (21,400)         (18,800)        (606,700)
  Redemptions of Federal Home Loan Bank stock                                 217,900                -                -
  Purchases of premises and equipment and computer software                (1,048,332)      (1,456,617)         (83,935)
  Proceeds from sale of other real estate owned, net                           48,390                -           79,115
  Net (increase) in real estate owned, net                                          -           (4,138)               -
  Investment in title company                                                       -           (5,000)               -
  Return of capital from title company                                              -            2,715                -
  Net (increase) decrease in federal funds sold                            (4,127,299)       1,207,684       (1,207,684)
  Premiums paid on life insurance                                             (49,078)         (49,843)         (49,893)
  Purchase of intangibles                                                           -                -          (14,270)
                                                                         -------------    -------------    -------------
         NET CASH (USED IN) INVESTING ACTIVITIES                         $(16,803,114)    $(20,921,264)    $(11,119,883)
                                                                         -------------    -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase in demand and savings deposits                             $ 16,336,583     $  6,156,422     $    705,412
 Net increase in time deposits                                              2,345,427       14,228,267        8,780,490
 Cash dividends paid                                                         (467,209)        (467,209)        (467,209)
                                                                         -------------    -------------    -------------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                       $ 18,214,801     $ 19,917,480     $  9,018,693
                                                                         -------------    -------------    -------------
         NET INCREASE (DECREASE) IN CASH AND CASH
             EQUIVALENTS                                                 $  3,602,925     $    489,956     $   (295,439)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                              4,229,810        3,739,854        4,035,293
                                                                         -------------    -------------    -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $  7,832,735     $  4,229,810     $  3,739,854
                                                                         =============    =============    =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     Cash paid during the year:
               Interest                                                  $  5,480,071     $  5,827,054     $  5,143,419
               Income taxes                                              $    682,000     $    768,500     $    716,000
      Net transfer to foreclosed real estate, held for sale
          from loans receivable                                          $     31,800     $     10,760     $          -
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The following is a description of the more significant accounting policies
      of CNB Financial Services, Inc. and its subsidiary.

      NATURE OF OPERATIONS:
      CNB Financial Services, Inc. ("CNB" or the "Company") is a financial
      services holding company incorporated under the laws of West Virginia in
      March 2000. It became a bank holding company when it acquired all of the
      common stock of Citizens National Bank of Berkeley Springs on August 31,
      2000.

      Citizens National Bank of Berkeley Springs (the "Bank"), a wholly owned
      subsidiary of CNB, provides a variety of banking services to individuals
      and businesses through its two locations in Morgan County, West Virginia
      and its two locations in Berkeley County, West Virginia. Its primary
      deposit products are demand deposits and certificates of deposit, and its
      primary lending products are commercial business, real estate mortgage and
      installment loans.

      In February 2001, CNB became a 50% member in a limited liability
      corporation, Morgan County Title Insurance Agency, LLC which sells title
      insurance.

      CNB Insurance Services, Inc., a wholly owned subsidiary of Citizens
      National Bank, is a property and casualty insurance agency selling
      primarily personal lines of insurance in Morgan and Berkeley Counties.

      The accounting policies of the Company and its subsidiary conform to
      accounting principles generally accepted in the United States of America
      and to general practices within the banking industry.

      PRINCIPLES OF CONSOLIDATION:
      The consolidated financial statements of CNB Financial Services, Inc.,
      include the accounts of the Company and its wholly owned subsidiary,
      Citizens National Bank and CNB Insurance Services, Inc., a wholly owned
      subsidiary of the Bank. The financial statements of Morgan County Title
      Insurance Agency, LLC are not included in these consolidated financial
      statements. All significant intercompany transactions and balances have
      been eliminated.

      USE OF ESTIMATES:
      The preparation of the consolidated financial statements in conformity
      with accounting principles generally accepted in the United States of
      America requires management to make estimates and assumptions that affect
      the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements
      and the reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates.

      SECURITIES AND MORTGAGE-BACKED SECURITIES:
      Investments in equity securities that have readily determinable fair
      values and for all investments in debt securities are classified and
      accounted for as follows:

               a. Debt securities that management has the positive intent and
      ability to hold to maturity are classified as held-to-maturity securities
      and reported at amortized cost.

               b. Debt and equity securities that are bought and held
      principally for the purpose of selling them in the near term are
      classified as trading securities and reported at fair value, with
      unrealized gains and losses included in earnings.

               c. Debt and equity securities not classified as either
      held-to-maturity securities or trading securities are classified as
      available-for-sale securities and reported at fair value, with unrealized
      gains and losses excluded from earnings and reported in a separate
      component of shareholders' equity as accumulated other comprehensive
      income.

      CNB classifies all investments as available for sale, except for stock in
      the Federal Reserve Bank and Federal Home Loan Bank, which are restricted
      investments.


                                       31
<PAGE>

      Interest and dividends on securities, including amortization of premiums
      and accretion of discounts, are included in interest income. Realized
      gains and losses from the sales of securities are determined using the
      specific identification method.

      IMPAIRED LOANS:
      Impaired loans are defined as those loans for which it is probable that
      contractual amounts due will not be received. Statement of Financial
      Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
      Impairment of a Loan," as amended by SFAS No. 118, requires that the
      measurement of impaired loans is based on the present value of expected
      future cash flows discounted at the historical effective interest rate,
      except that all collateral-dependent loans are measured for impairment
      based on the fair value of the collateral. Larger groups of small-balance
      loans such as residential mortgage and installment loans that are
      considered to be part of homogeneous loan pools are aggregated for the
      purpose of measuring impairment, and therefore, are not subject to these
      statements. Management has established a dollar-value threshold for
      commercial loans. The larger commercial loans are evaluated in accordance
      with the statements. No loans are considered to be impaired at December
      31, 2002 and 2001.

      ALLOWANCE FOR LOAN LOSSES:
      The allowance for loan losses is maintained at a level which, in
      management's judgment, is adequate to absorb credit losses inherent in the
      loan portfolio. The amount of the allowance is based on management's
      evaluation of the collectibility of the loan portfolio, including the
      nature of the portfolio, credit concentrations, trends in historical loss
      experience, specific impaired loans and economic conditions.

      Allowances for impaired loans are generally determined based on collateral
      values or the present value of estimated cash flows. The allowance is
      increased by a provision for loan losses, which is charged to expense and
      reduced by charge-offs, net of recoveries. Changes in the allowance
      relating to impaired loans are charged or credited to the provision for
      loan losses. Because of uncertainties inherent in the estimation process,
      management's estimate of credit losses inherent in the loan portfolio and
      the related allowance may change in the near term.

      LOANS HELD FOR SALE:
      Mortgage loans held for sale are recorded at the lower of cost or market
      value. Gains and losses realized from the sale of loans and adjustments to
      market value are included in non-interest income. Mortgage loans are
      sometimes sold to the Federal Home Loan Mortgage Corporation (Freddie Mac)
      and other commercial banks.

      INTANGIBLE ASSETS:
      Intangible assets represent the acquisition of customer lists, contracts
      and records in the amount of $130,270 in November 1998 and January 2000 by
      CNB Insurance Services, Inc. The intangible assets are being amortized
      over fifteen years on a straight line basis. On January 1, 2002, CNB
      adopted SFAS No. 142, Goodwill and Other Intangible Assets. The
      implementation of SFAS No. 142 did not have a significant impact on the
      financial statements.

      LOAN SERVICING:
      The cost of mortgage servicing rights is amortized in proportion to, and
      over the period of, estimated net servicing revenues. Impairment of
      mortgage servicing rights is assessed based on the fair value of those
      rights. Fair values are estimated using discounted cash flows based on a
      current market interest rate. For purposes of measuring impairment, the
      rights are stratified based on the predominant risk characteristics of the
      underlying loans: product type, investor type, interest rate, term and
      geographic location. An analysis of the risk characteristics of CNB's loan
      servicing portfolio allows for all loans to be defined by one risk
      category.

      INTEREST INCOME ON LOANS:
      Interest on loans is accrued and credited to income based on the principal
      amount outstanding. The accrual of interest on loans is discontinued when,
      in the opinion of management, there is an indication that the borrower may
      be unable to meet payments as they become due.

      NONPERFORMING/NONACCRUAL ASSETS:
      Nonperforming/nonaccrual assets consist of loans on which interest is no
      longer accrued, loans which have been restructured in order to allow the
      borrower the ability to maintain control of the collateral, real estate
      acquired by foreclosure and real estate upon which deeds in lieu of
      foreclosure have been



                                       32
<PAGE>

      accepted. Interest previously accrued but not collected on nonaccrual
      loans is reversed against current income when a loan is placed on a
      nonaccrual basis.

      LOANS AND LEASE RECEIVABLE:
      Loans and lease receivable that management has the intent and ability to
      hold for the foreseeable future or until maturity or payoff are reported
      at their outstanding unpaid principal balances reduced by any charge-offs
      or specific valuation accounts and net of any deferred fees or costs on
      originated loans, or unamortized premiums or discounts on purchased loans.

      LOAN ORIGINATION FEES AND COSTS:
      Loan origination fees, net of certain direct costs of originating loans
      are being deferred and recognized over the contractual life of the loan as
      an adjustment of the yield on the related loan.

      PREMISES AND EQUIPMENT:
      Premises and equipment are carried at cost less accumulated depreciation.
      Depreciation is calculated on both straight-line and accelerated methods
      over the estimated useful lives of 15 to 50 years for buildings and 3 to
      20 years for equipment. Computer software is being amortized over 3 to 5
      years. Maintenance and repairs are charged to operating expenses as
      incurred.

      INCOME TAXES:
      Deferred tax assets or liabilities are computed based on the difference
      between the financial statement and income tax bases of assets and
      liabilities using the enacted marginal tax rate. Deferred income tax
      expenses or credits are based on the changes in the asset or liability
      from period to period.

      PENSION PLAN:
      Pension plan costs are funded by annual contributions as required by
      applicable regulations.

      CASH AND CASH EQUIVALENTS:
      For purposes of the Consolidated Statements of Cash Flows, cash and cash
      equivalents include all highly liquid debt instruments purchased with a
      maturity of three months or less except for federal funds sold. Those
      amounts are included in the balance sheet captions "Cash and Due From
      Banks."

      EARNINGS AND DIVIDENDS PER SHARE:
      Basic earnings and dividends per share are computed on the basis of the
      weighted average number of 458,048 shares of common stock outstanding
      during each year.

      OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
      In the ordinary course of business, CNB has entered into off-balance-sheet
      financial instruments consisting of commitments to extend credit,
      commercial lines of credit and letters of credit. Such financial
      instruments are recorded in the financial statements when they become due
      or payable.

      POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS:
      Postretirement insurance benefits are provided to selected officers and
      employees. During the years that the employee renders the necessary
      service, the Bank accrues the cost of providing postretirement health and
      life insurance benefits to the employee.

      FORECLOSED REAL ESTATE:
      Real estate properties acquired through, or in lieu of, loan foreclosure
      are to be sold and are initially recorded at fair value at the date of
      foreclosure, establishing a new cost basis. After foreclosure, valuations
      are periodically performed by management and the real estate is carried at
      the lower of carrying amount or fair value less estimated cost to sell.
      Revenue and expenses from operations and changes in the valuation
      allowance are included in loss on foreclosed real estate. The historical
      average holding period for such properties is twelve to eighteen months.

      TRUST ASSETS:
      Assets held by CNB in a fiduciary or agency capacity are not included in
      the consolidated financial statements since such assets are not assets of
      CNB. In accordance with banking industry practice, income from fiduciary
      activities is generally recognized on a cash basis which is not
      significantly different from amounts that would have been recognized
      accrual basis.



                                       33
<PAGE>

      ADVERTISING COSTS:
      The Company expenses advertising costs in the period in which they are
      incurred. Advertising cost amounted to $118,017, $110,979 and $112,642 for
      the years ended December 31, 2002, 2001 and 2000, respectively.

      COMPREHENSIVE INCOME:
      Comprehensive income is defined as the change in equity from transactions
      and other events from nonowner sources. It includes all changes in equity
      except those resulting from investments by shareholders and distributions
      to shareholders. Comprehensive income includes net income and certain
      elements of "other comprehensive income" such as foreign currency
      translations; accounting for futures contracts; employers accounting for
      pensions; and accounting for certain investments in debt and equity
      securities.

      CNB has elected to report its comprehensive income in the Consolidated
      Statements of Changes in Shareholders' Equity. The only element of "other
      comprehensive income" that CNB has is the unrealized gains or losses on
      available for sale securities.

      The components of the change in net unrealized gains (losses) on
      securities were as follows:

<TABLE>
<CAPTION>
                                                      2002           2001            2000
                                                  -------------   ------------   -------------
<S>                                                 <C>            <C>           <C>
Unrealized holding gains (losses) arising during
   the year                                          $ 889,359      $ 473,774     $ 1,238,373
Reclassification adjustment for (gains) losses
   realized in net income                              (78,028)          (833)         13,991
                                                  -------------   ------------   -------------
Net unrealized holding gains
   (losses) before taxes                             $ 811,331      $ 472,941     $ 1,252,364
Tax effect                                            (308,306)      (179,718)       (475,898)
                                                  -------------   ------------   -------------

Net change                                           $ 503,025      $ 293,223     $   776,466
                                                  =============   ============   =============
</TABLE>

NOTE 2. FORMATION OF HOLDING COMPANY

         In March 2000, the Bank's Board of Directors approved the formation of
         CNB, a financial services holding company. A special meeting of the
         Bank's shareholders was held on August 4, 2000 and the shareholders
         approved the Agreement and Plan of Merger between the Bank and CNB,
         whereby the Bank became a wholly-owned subsidiary of CNB and the
         shareholders of the Bank became shareholders of CNB. The merger became
         effective on August 31, 2000. Each Bank shareholder received two shares
         of CNB stock for each share of the Bank's common stock. The Bank
         received approval for the reorganization from the Comptroller of the
         Currency and the Federal Reserve Bank of Richmond. Also, the Securities
         and Exchange Commission (SEC) declared the registration statement on
         Form S-4 related to the Agreement and Plan of Merger between the Bank
         and CNB effective on July 12, 2000. The Bank incurred and expensed all
         costs of start-up activities including activities related to organizing
         the new entity and filings with the SEC and Bank regulators. On August
         31, 2000, CNB consummated its merger with the Bank and subsidiary, in a
         tax-free exchange of stock. Shareholders of the Bank received two
         shares of CNB Financial Services, Inc. common stock for each of the
         229,024 shares of the Bank's common stock. The merger was accounted for
         as a pooling of interests.

NOTE 3. INVESTMENT IN LIMITED LIABILITY CORPORATION

         In February 2001, CNB paid $5,000 to become a 50% member in a limited
         liability corporation, Morgan County Title Insurance Agency, LLC for
         the purpose of selling title insurance. CNB accounts for their
         investment in Morgan County Title Insurance Agency, LLC as part of
         "Other Assets" using the equity method of accounting.


                                       34
<PAGE>

        The following represents the limited liability corporation's financial
information:

                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                        STATEMENTS OF FINANCIAL CONDITION
                                   (Unaudited)
                           DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                              2002                   2001
                                                         ----------------       ---------------
<S>                                                          <C>                   <C>
ASSETS

   Cash                                                          $ 5,191               $ 4,571
                                                         ----------------       ---------------

          TOTAL ASSETS                                           $ 5,191               $ 4,571
                                                         ================       ===============


MEMBERS' EQUITY                                                  $ 5,191               $ 4,571
                                                         ----------------       ---------------

         TOTAL MEMBERS' EQUITY                                   $ 5,191               $ 4,571
                                                         ================       ===============
</TABLE>


                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                              STATEMENTS OF INCOME
                                   (Unaudited)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                      2002                 2001
                                                                  --------------       -------------
<S>                                                                  <C>                 <C>
INCOME
   Insurance commissions                                              $ 241,902           $ 115,135
                                                                  --------------       -------------
       TOTAL INCOME                                                   $ 241,902           $ 115,135
                                                                  --------------       -------------

EXPENSES
   Management fees                                                    $ 125,789            $ 22,000
   Other expenses                                                         2,693               3,382
                                                                  --------------       -------------
       TOTAL EXPENSES                                                 $ 128,482            $ 25,382
                                                                  --------------       -------------

       NET INCOME                                                     $ 113,420            $ 89,753
                                                                  ==============       =============
</TABLE>


                                       35
<PAGE>

                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                      2002               2001
                                                                  -------------       ------------
<S>                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                          $  113,420          $  89,753
                                                                  -------------       ------------
         NET CASH PROVIDED BY OPERATING ACTIVITIES                  $  113,420          $  89,753
                                                                  -------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Members capital contribution                                    $        -          $  10,000
    Profit and capital distributed                                    (112,800)           (95,182)
                                                                  -------------       ------------
         NET CASH (USED IN) FINANCING ACTIVITIES                    $ (112,800)         $ (85,182)
                                                                  -------------       ------------
         NET INCREASE IN CASH AND CASH
             EQUIVALENTS                                            $      620          $   4,571
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                           4,571                  -
                                                                  -------------       ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                            $    5,191          $   4,571
                                                                  =============       ============
</TABLE>

NOTE 4. SECURITIES AVAILABLE FOR SALE

        The amortized cost and estimated market value of debt securities at
        December 31, 2002 and 2001 by contractual maturity are shown below.
        Expected maturities will differ from contractual maturities because
        borrowers may have the right to call or prepay obligations with or
        without call or prepayment penalties.

        Securities are summarized as follows:

<TABLE>
<CAPTION>
                                                                    2002                               WEIGHTED
                                         -----------------------------------------------------------    AVERAGE
                                                           GROSS           GROSS        ESTIMATED         TAX
                                          AMORTIZED      UNREALIZED     UNREALIZED         FAIR        EQUIVALENT
                                            COST           GAINS          LOSSES          VALUE          YIELD
                                         ------------   -------------   ------------   --------------------------
<S>                                      <C>             <C>             <C>            <C>                 <C>
Available for sale:
   U.S. Government agencies
     and corporations
     Within one year                     $ 5,300,481     $    26,917     $        -     $ 5,327,398         4.75 %
     After 1 but within 5 years            9,880,564         496,919              -      10,377,483         4.76
     After 5 but within 10 years          12,135,426         187,756              -      12,323,182         4.99
                                         ------------   -------------   ------------   -------------
                                         $27,316,471     $   711,592     $        -     $28,028,063         4.86 %
                                         ------------   -------------   ------------   -------------

   States and political subdivisions
     Within one year                     $   350,000     $     9,747     $        -     $   359,747         8.27 %
     After 1 but within 5 years                    -               -              -               -            -
     After 5 but within 10 years             775,000          21,967              -         796,967         6.22
                                         ------------   -------------   ------------   -------------
                                         $ 1,125,000     $    31,714     $        -     $ 1,156,714         6.86 %
                                         ------------   -------------   ------------   -------------

   Mortgage backed securities            $13,890,037     $   355,088     $        -     $14,245,125         5.20 %
                                         ------------   -------------   ------------   -------------

Total securities available for sale      $42,331,508     $ 1,098,394     $        -     $43,429,902         5.02 %
                                         ============   =============   ============   =============

Restricted:
   Federal Reserve Bank stock            $   129,650     $         -     $        -     $   129,650         6.00 %
   Federal Home Loan Bank stock              429,000               -              -         429,000         3.25
                                         ------------   -------------   ------------   -------------
Total restricted investments             $   558,650     $         -     $        -     $   558,650         3.89 %
                                         ============   =============   ============   =============
</TABLE>


                                       36

<PAGE>

<TABLE>
<CAPTION>
                                                                     2001                              WEIGHTED
                                         -----------------------------------------------------------    AVERAGE
                                                           GROSS           GROSS        ESTIMATED         TAX
                                          AMORTIZED      UNREALIZED     UNREALIZED         FAIR        EQUIVALENT
                                            COST           GAINS          LOSSES          VALUE          YIELD
                                         ------------   -------------   ------------   --------------------------
<S>                                      <C>             <C>             <C>            <C>                 <C>
Available for sale:
   U.S. Government agencies
     and corporations
     Within one year                     $ 1,250,000       $   1,328      $       -     $ 1,251,328         6.63 %
     After 1 but within 5 years           29,007,880         116,337        151,186      28,973,031         4.67
     After 5 but within 10 years          17,818,385         327,707          3,568      18,142,524         6.28
                                         ------------   -------------   ------------   -------------
                                         $48,076,265       $ 445,372      $ 154,754     $48,366,883         5.27 %
                                         ------------   -------------   ------------   -------------

   States and political subdivisions
     After 1 but within 5 years          $   350,000       $   1,020      $       -     $   351,020         6.75 %
     After 5 but within 10 years             200,000               -          4,574         195,426         8.02
                                         ------------   -------------   ------------   -------------
                                         $   550,000       $   1,020      $   4,574     $   546,446         7.21 %
                                         ------------   -------------   ------------   -------------

Total securities available for sale      $48,626,265       $ 446,392      $ 159,328     $48,913,329         5.29 %
                                         ============   =============   ============   =============

Restricted:
   Federal Reserve Bank stock            $   129,650       $       -      $       -     $   129,650         6.00 %
   Federal Home Loan Bank stock              625,500               -              -         625,500         5.75
                                         ------------   -------------   ------------   -------------
Total restricted investments             $   755,150       $       -      $       -     $   755,150         5.79 %
                                         ============   =============   ============   =============
</TABLE>

        The carrying value of securities pledged to secure public deposits and
        for other purposes as required or permitted by law totaled $12,864,841
        at December 31, 2002 and $12,099,922 at December 31, 2001.

        Proceeds from sales of securities available for sale (excluding
        maturities) for the years ended December 31, 2002, 2001 and 2000 were
        $7,075,471, $901,406 and $2,659,593, respectively. Gross gains and
        (losses) of $78,028 and $(0) in 2002, $7,071 and $(6,238) in 2001, and
        $7,115 and $(21,106) in 2000 were realized on the respective sales.

NOTE 5. LOANS AND LEASE RECEIVABLE

        Major classifications of loans at December 31, 2002 and 2001 were as
        follows:

<Table>
<Caption>
                                               2002               2001
                                          -------------      -------------
<S>                                      <C>               <C>
Loans:
   Real estate                           $   83,239,409    $    67,859,963
   Commercial real estate                    13,934,900         12,458,880
   Consumer                                  22,575,379         24,197,964
   Commercial                                 9,684,720          6,977,624
   Overdrafts                                    72,763             86,694
                                          -------------      -------------
                                          $ 129,507,171      $ 111,581,125

Lease:                                          135,341            139,608
                                          -------------      -------------
                                          $ 129,642,512      $ 111,720,733
Net deferred loan fees, costs,
premiums and discounts                          172,239            152,971
Allowance for loan losses                   (1,484,448)        (1,336,960)
                                          -------------      -------------
                                          $ 128,330,303      $ 110,536,744
                                          =============      =============
</Table>


                                       37
<PAGE>

        At December 31, 2002, approximately $38,467,000 or 39.6% of the real
        estate loans had fixed rates of interest and $58,708,000 or 60.4% had
        adjustable rates of interest.

        The net investment in the direct financing lease was $135,341 at
        December 31, 2002.

        An analysis of the allowance for loan losses were as follows:

<Table>
<Caption>
                                     2002              2001             2000
                                  -----------      -----------      -----------
<S>                               <C>              <C>              <C>
Balance, beginning                $ 1,336,960      $ 1,216,333      $ 1,147,846
    Provision charged to
      operations                      261,000          226,000          170,000
    Recoveries                         37,230           29,729           19,494
    Loans charged off                (150,742)        (135,102)        (121,007)
                                  -----------      -----------      -----------
Balance, ending                   $ 1,484,448      $ 1,336,960      $ 1,216,333
                                  ===========      ===========      ===========
</Table>

                Loans are placed on nonaccrual status when, in the judgement of
        management, the probability of collection of interest is deemed to be
        insufficient to warrant further accrual. A summary of nonperforming
        loans is as follows:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                           ---------------------
                                                             2002         2001
                                                           --------     --------
<S>                                                        <C>          <C>
Nonaccrual loans                                           $ 12,711     $ 25,173
Loans past due 90 days or more still accruing interest      553,170      449,675
                                                           --------     --------
     Total                                                 $565,881     $474,848
                                                           ========     ========
</Table>

        The contractual amount of interest that would have been recorded on
        nonaccrual loans during 2002 and 2001 was $6,599 and $9,976,
        respectively. The amount of interest income that was recorded on
        nonaccrual loans during 2002 and 2001 was $5,248 and $6,719,
        respectively.

        The Bank is not committed to lend additional funds to debtors whose
        loans are nonperforming or on nonaccrual status.

        The Bank has no loans which are considered to be impaired at December
        31, 2002 and 2001.

NOTE 6. LOAN SERVICING

        Mortgage loans serviced for others are not included in the accompanying
        financial statements. The unpaid principal balances of mortgage loans
        serviced for others were $5,207,621 and $6,089,473 at December 31, 2002
        and 2001, respectively.

        Custodial balances maintained in connection with the foregoing loan
        servicing, and included in demand deposits, were $100,206 and $10,988 at
        December 31, 2002 and 2001, respectively.

        The Bank did not capitalize any mortgage servicing rights in 2002, 2001
        or 2000. An analysis of the predominant risk characteristics indicates
        that there is not more than a normal amount of prepayment risk and thus
        no write down is necessary. Amortization of mortgage servicing rights
        was $2,248, $1,792 and $2,264 in 2002, 2001 and 2000, respectively.
        Mortgage servicing rights at December 31, 2002 and 2001 were $29,921 and
        $32,169, respectively.



                                       38
<PAGE>

NOTE 7. PREMISES AND EQUIPMENT

        Major classifications of premises and equipment at December 31 were as
        follows:

<Table>
<Caption>
                                                       2002              2001
                                                    ----------        ----------
<S>                                                 <C>               <C>
Land and land improvements                          $1,435,174        $1,435,174
Banking house - Main                                 1,355,096         1,334,788
Banking house - Valley Road branch                     532,624           521,431
Banking house - Hedgesville branch                     766,743           765,137
Banking house - Martinsburg branch                     697,006                 -
Bank owned automobiles                                  20,555                 -
Furniture, fixtures and equipment                    2,106,114         2,124,581
                                                    ----------        ----------
                                                    $6,913,312        $6,181,111
     Less accumulated depreciation                   2,123,691         2,344,408
                                                    ----------        ----------
                                                    $4,789,621        $3,836,703
Construction in progress                                10,514           446,922
                                                    ----------        ----------
                                                    $4,800,135        $4,283,625
                                                    ==========        ==========
</Table>

        Depreciation expense amounted to $293,787, $220,698 and $200,995 in
        2002, 2001 and 2000, respectively.

        Computer software included in the statement of financial condition
        caption "Other Assets" amounted to $400,742 and $128,534 at December 31,
        2002 and 2001, respectively. Amortization expense on computer software
        amounted to $38,205, $22,080 and $28,482 in 2002, 2001 and 2000,
        respectively.

        In December 2001, the Bank entered into a contract to upgrade its
        technology systems. The technology is expected to create operational
        efficiencies and enhance customer service and product delivery.

        The Bank's remaining commitments totaled $273,000 at December 31, 2002
        to upgrade the Bank's technology systems.

NOTE 8. INTANGIBLE ASSETS

        Amortized intangible assets representing customer lists, contracts and
        records acquired by CNB Insurance Services, Inc. have a carrying amount
        of $130,270 and accumulated amortization of $33,787 and $25,107 at
        December 31, 2002 and 2001, respectively. These intangibles are
        amortized over fifteen years on a straight line basis.

        Amortization expense on intangible assets amounted to $8,685 in 2002,
        2001 and 2000, respectively.

        The estimated amortization expense for 2003 through 2007 is $8,685 per
        year.


                                       39
<PAGE>
NOTE 9. TIME DEPOSITS

        At December 31, 2002, the scheduled maturities of time deposits are as
        follows:

<Table>
<Caption>
                                           TIME DEPOSITS               ALL TIME
                                         $100,000 AND OVER             DEPOSITS
                                         -----------------           -----------
                          <S>            <C>                         <C>
                          2003              $25,773,805              $54,699,723
                          2004                6,653,324               19,296,123
                          2005                3,751,748               13,988,210
                          2006                  267,459                1,970,736
                          2007                  987,225                4,866,670
                                            -----------              -----------
                                            $37,433,561              $94,821,462
                                            ===========              ===========
</Table>

NOTE 10. MEMBERSHIP IN FEDERAL HOME LOAN BANK

        Effective October 4, 2000, Citizens National Bank became a member of the
        Federal Home Loan Bank (FHLB) of Pittsburgh. By virtue of its
        membership, the Bank has the ability to obtain borrowings from the FHLB.
        Access to borrowing is dependent upon submission of advance applications
        and adequate collateral. The Bank has no outstanding advances from the
        FHLB at December 31, 2002 and 2001, respectively.

NOTE 11. UNUSED LINES OF CREDIT

        The Bank entered into an open-ended unsecured line of credit with Bank
        of America for $5,000,000 for federal fund purchases. Funds issued under
        this agreement are at the Bank of America federal funds rate effective
        at the time of borrowing. The line matures September 30, 2003. The Bank
        had not drawn on these funds at December 31, 2002 and 2001.

        The Bank also entered into an open-ended unsecured line of credit with
        Wachovia Bank of N.C. for $1,000,000 for federal fund purchases and
        $200,000 for a standby letter of credit. Funds issued under this
        agreement are at the Wachovia Bank of N.C. federal funds rate effective
        at the time of borrowing. This line matures July 31, 2003. The Bank had
        not drawn any of these funds at December 31, 2002 and 2001.

NOTE 12. OPERATING LEASES

        The Bank entered into two lease agreements in 2001, which were
        terminated in March 2002. A lease for a parcel of land to locate a
        temporary banking unit required a monthly payment of $1,500. The
        additional lease was for the temporary banking unit which required a
        monthly payment of $3,575. Both leases were classified as operating
        leases.

        Lease expense under operating leases for the periods ending December 31,
        2002, 2001 and 2000 amounted to $15,019, $30,738 and $1,205,
        respectively.

NOTE 13. PENSION PLAN

        The Bank is a member of The West Virginia Bankers Association Retirement
        Plan, a multi-employer, defined benefit pension plan. All employees
        participate in the plan after completing one year of service and
        attaining the age of 21. The benefits are based on years of service and
        the highest average earnings during any five consecutive calendar years.
        Plan assets are invested primarily in corporate bonds, common stocks and
        U.S. Government and Agency Securities.



                                       40
<PAGE>

        The following table sets forth information about the Bank's plan as of
        October 31:


<TABLE>
<CAPTION>

                                                      2002               2001              2000
                                                   -----------       -----------       -----------

<S>                                              <C>               <C>               <C>
Change in benefit obligation:
   Benefit obligation at
     beginning of year                             $ 2,711,735       $ 2,356,019       $ 2,265,218
Service cost                                           116,959           107,250           115,427
Interest cost                                          189,547           185,125           179,194
Actuarial (gain) loss                                  (37,581)           17,282           (93,277)
Change due to amendment                                      -                 -             3,069
Change in discount rate                                 63,471           166,447                 -
Benefits paid                                         (126,291)         (120,388)         (113,612)
                                                   -----------       -----------       -----------

Benefit obligation at end of
     year                                          $ 2,917,840       $ 2,711,735       $ 2,356,019
                                                   -----------       -----------       -----------

Change in plan assets:
   Fair value of plan assets at
     beginning of year                             $ 2,116,828       $ 2,294,234       $ 2,112,741
Actual return on plan assets                          (274,542)         (156,520)          116,729
Employer contribution                                  188,051            99,502           178,376
Benefits paid                                         (126,291)         (120,388)         (113,612)

Fair value of plan assets
     at end of year                                $ 1,904,046       $ 2,116,828       $ 2,294,234
                                                   -----------       -----------       -----------

Funded status                                      $(1,013,794)      $  (594,907)      $   (61,785)
Unrecognized net actuarial (gain) loss                 821,797           321,327          (188,435)
Unrecognized prior service cost                         23,804            44,855            68,514
Unrecognized net transition (asset)                     (7,371)          (16,941)          (26,511)
                                                   -----------       -----------       -----------

     Prepaid (accrued) benefit cost                $  (175,564)      $  (245,666)      $  (208,217)
                                                   ===========       ===========       ===========


Weighted average assumptions as of October 31:
     Discount rate                                         7.0%              7.3%              8.0%
     Expected return on plan
      assets                                               8.5%              8.5%              8.5%
     Rate of compensation increase                         4.0%              4.3%              5.0%

Components of net periodic cost:
     Service cost                                  $   116,959       $   107,250       $   115,427
     Interest cost                                     189,547           185,125           179,194
     Expected return on plan assets                   (200,038)         (189,974)         (176,764)
     Special termination benefit cost                        -            23,069                 -
     Net amortization                                   11,481            11,481            11,446
                                                   -----------       -----------       -----------

        Net periodic plan cost                     $   117,949       $   136,951       $   129,303
                                                   ===========       ===========       ===========
</TABLE>



                                       41
<PAGE>

NOTE 14. 401(k) PROFIT SHARING PLAN

        All employees are eligible to participate in the Bank's 401(k) Profit
        Sharing Plan after completing one year of service. Employees may defer
        up to 15% of their salary in 2002, 2001 and 2000. The Bank may, at the
        discretion of the Board of Directors, match all or part of the employee
        deferrals. For 2002, 2001 and 2000, the Bank matched 50% of employee
        deferrals up to 5% of salary. The percentage of match varies based on
        the Bank's profit level.

        The Bank's contribution charged to income during 2002, 2001 and 2000 was
        $25,600, $24,000 and $25,200, respectively.

NOTE 15. DEFERRED COMPENSATION PLAN

        The Bank has a plan pursuant to which a director may elect to waive
        receipt of all or a portion of his fees for Board of Directors' meetings
        or committee meetings in exchange for a retirement benefit to be
        received during a ten-year period after attaining a certain age. The
        Bank has acquired life insurance on the lives of participating directors
        to fund its obligation under the plan. The cash surrender value of these
        life insurance policies has been recorded as an asset. The present value
        of payments to be paid to directors or their beneficiaries for services
        rendered to date has been recorded as a liability. The net expense for
        these benefits was $(2,967), $11,032 and $(18,941) for 2002, 2001 and
        2000, respectively.

NOTE 16. SHAREHOLDERS' EQUITY

        On August 31, 2000, CNB consummated its merger with the Bank, and
        shareholders received two shares of CNB stock with a $1 par value for
        each share of Bank stock with a $10 par value. Common stock, capital
        surplus and retained earnings have been restated to reflect the change
        in par value and the shares issued due to the formation of CNB.

        CNB initially issued 12,000 shares of common stock, which were redeemed
        and canceled on August 31, 2000, concurrent with the closing of the
        merger with the Bank.

        All references in the accompanying consolidated financial statements and
        notes to per share amounts have been restated to reflect the above stock
        split and shares issued in the acquisition of the Bank by CNB. Basic
        earnings and dividends per share have been computed based on 458,048
        weighted average number of shares outstanding in 2002, 2001 and 2000.

NOTE 17. GAIN ON DEMUTUALIZATION OF INSURANCE COMPANY

        The Bank owns several life insurance policies which were issued by a
        mutual insurance company. In January 2000, the insurance company
        demutualized and converted to a stock company. The Bank received stock
        from the insurance company as part of the demutualization. There was no
        direct effect on the Bank's interest as a policyholder. The receipt of
        the stock was accounted for at fair value with a gain recognized in
        income from continuing operations. The stock was sold during 2000 at an
        additional gain of $4,401, included in gain (loss) on sale of
        securities.


                                       42
<PAGE>

NOTE 18. INCOME TAXES

        Income taxes reflected in the statements of income are as follows:

<Table>
<Caption>
                                             YEARS ENDED DECEMBER 31,
                                     --------------------------------------
                                        2002          2001           2000
                                     ---------     ---------      ---------
<S>                                  <C>           <C>            <C>
Federal:
    Current                          $ 554,466     $ 656,915      $ 677,117
    Deferred                            69,195       (50,201)         1,932
State:
    Current                             50,548        72,969         82,404
    Deferred                             6,662        20,098         (3,618)
                                     ---------     ---------      ---------

      Provision for income taxes     $ 680,871     $ 699,781      $ 757,835
                                     =========     =========      =========
</Table>


        Deferred income taxes reflect the impact of "temporary differences"
        between the amount of assets and liabilities for financial reporting
        purposes and such amounts as measured by tax laws and regulations.

        The following is a reconciliation of the statutory federal income tax
        rate applied to pre-tax accounting income, with the income tax
        provisions in the statements of income.

<TABLE>
<CAPTION>

                                                   YEARS ENDED DECEMBER 31,
                                          ---------------------------------------
                                             2002          2001           2000
                                          ---------      ---------      ---------
<S>                                     <C>            <C>            <C>
Income tax expense at the
    statutory rate (34%)                  $ 676,204      $ 658,303      $ 701,650
Increases (decreases) resulting
    from:
     Nontaxable interest income,
       net of non-deductible interest
       expense                              (35,750)       (19,739)       (26,139)
     State income taxes, net of
       federal income tax benefit            57,210         93,027         78,786
     Other                                  (16,793)       (31,810)         3,538
                                          ---------      ---------      ---------

       Provision for income taxes         $ 680,871      $ 699,781      $ 757,835
                                          =========      =========      =========
</TABLE>


        Federal and state income taxes receivable included in the balance sheet
        as other assets were $155,625 and $80,538 at December 31, 2002 and 2001,
        respectively.



                                       43
<PAGE>

        The components of deferred taxes included in the balance sheet as of
        December 31 are as follows:

<Table>
<Caption>
                                               2002            2001
                                             ---------      ---------
<S>                                         <C>            <C>
Deferred tax assets:
       Provision for loan losses             $ 472,495      $ 416,943
       Deferred compensation plan              216,063        206,813
       Postretirement benefits                  55,805         46,950
       Defined benefit plan                     65,249         79,992
       Organizational costs                      2,274          3,637
                                             ---------      ---------
                                             $ 811,886      $ 754,335
                                             ---------      ---------
Deferred tax liabilities:
       Deferred compensation plan            $(192,835)     $(176,707)
       Mortgage servicing rights               (10,772)       (11,581)
       Net unrealized gain on securities
         available for sale                   (417,390)      (109,084)
       Depreciation                           (349,158)      (231,069)
                                             ---------      ---------
                                             $(970,155)     $(528,441)
                                             ---------      ---------

Net deferred tax asset (liability)           $(158,269)     $ 225,894
                                             =========      =========
</Table>

        Generally accepted accounting principles require a valuation allowance
        against deferred tax assets if, based on the weight of available
        evidence, it is more likely than not that some or all of the deferred
        tax assets will not be realized. The Bank believes that the deferred tax
        assets will be realized and therefore no valuation allowance was
        established.

NOTE 19. OTHER OPERATING EXPENSES

<TABLE>
<CAPTION>

                                                   YEARS ENDED DECEMBER 31,
                                          ----------------------------------------
                                             2002           2001           2000
                                          ----------     ----------     ----------

<S>                                     <C>            <C>            <C>
Stationery, supplies and printing         $  144,511     $  159,195     $  122,410
Data processing                              202,755        194,639        163,125
Director's fees                              144,262        138,600        133,875
Postage                                      101,399         92,899         75,516
Telephone                                     87,972         62,567         58,709
Professional fees                            212,758        210,345        161,632
ATM fees                                     107,839        100,369        101,149
Advertising and public relations             146,314        136,463        141,843
Other                                        514,478        545,687        500,503
                                          ----------     ----------     ----------

       Total other operating expenses     $1,662,288     $1,640,764     $1,458,762
                                          ==========     ==========     ==========
</TABLE>


NOTE 20. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

        CNB is a party to financial instruments with off-balance-sheet risk in
        the normal course of business to meet the financing needs of its
        customers. These financial instruments include commitments to extend
        credit, and standby letters of credit. Those instruments involve, to
        varying degrees, elements of credit and interest rate risk which are not
        reflected in the statements of financial condition. The contractual
        amounts of those instruments reflect the extent of involvement CNB has
        in particular classes of financial instruments.

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


                                       44
<PAGE>

        Commitments to extend credit are agreements to lend funds as long as
        there is no violation of any condition established in the contract.
        Commitments generally have fixed expiration dates or other termination
        clauses. Commercial line of credit arrangements usually require payment
        of a fee.

        CNB evaluates each customer's creditworthiness and related collateral on
        a case-by-case basis. The amount of collateral obtained if deemed
        necessary by CNB upon extension of credit is based on management's
        credit evaluation of the customer. Collateral held varies but may
        include accounts receivable, inventory, real estate, equipment and
        income-producing commercial properties.

        Standby letters of credit written are conditional commitments issued by
        CNB to guarantee the performance of a customer to a third party. Those
        guarantees are issued to support public and private borrowing
        arrangements, bond financing and similar transactions. The credit risk
        involved in issuing a letter of credit is essentially the same as that
        involved in extending loan facilities to customers.

        A summary of off-balance sheet instruments as of December 31 is as
        follows:

<Table>
<Caption>
                                                2002            2001
                                             -----------     -----------
<S>                                          <C>             <C>
Commitments
   to originate:
     Fixed rate loans                        $ 1,456,003     $   601,585
     Adjustable rate loans                     1,058,600       1,158,644
                                             -----------     -----------
                                             $ 2,514,603     $ 1,760,229
Letters of credit                                485,109         519,364
Undisbursed portion of construction
   loans                                       4,089,134       3,012,301
Available credit granted on commercial
   loans                                       3,626,501       4,599,816
Available credit on personal lines
   of credit                                     375,066         453,613
Undisbursed portion of home equity loans       2,253,585       1,715,316
                                             -----------     -----------
                                             $13,343,998     $12,060,639
                                             ===========     ===========
</Table>

NOTE 21. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

        CNB's primary business is mortgage loans, which consists of originating
        residential, construction, multi-family and commercial real estate loans
        and consumer and commercial loans. CNB's primary lending area is Morgan
        and Berkeley Counties, West Virginia. Loans are occasionally made in
        surrounding counties in West Virginia, Maryland, Virginia and
        Pennsylvania.

        CNB evaluates each customer's creditworthiness on a case-by-case basis.
        The amount of collateral obtained if deemed necessary by CNB upon the
        extension of credit is based on management's credit evaluation of the
        customer. Collateral held varies but generally includes vehicles,
        equipment and real estate.

NOTE 22. REGULATORY MATTERS

        The Bank is subject to various regulatory capital requirements
        administered by the federal banking agencies. Failure to meet minimum
        capital requirements can initiate certain mandatory and possibly
        additional discretionary actions by regulators that, if undertaken,
        could have a direct material effect on the Bank's financial statements.
        Under capital adequacy guidelines and the regulatory framework for
        prompt corrective action, the Bank must meet specific capital guidelines
        that involve quantitative measures of the Bank's assets, liabilities and
        certain off-balance-sheet items as calculated under regulatory
        accounting practices. The Bank's capital amounts and classification are
        also subject to qualitative judgments by the regulators about
        components, risk weightings and other factors.


                                       45
<PAGE>

        Quantitative measures established by regulation to ensure capital
        adequacy require the Bank to maintain minimum amounts and ratios of
        total and Tier I capital to risk-weighted assets (as defined), and of
        Tier I capital (as defined) to average assets (as defined). Management
        believes, as of December 31, 2002, that the Bank meets all capital
        adequacy requirements to which it is subject.

        As of December 31, 2002 and 2001, the most recent notification from the
        Office of the Comptroller of the Currency categorized the Bank as
        well-capitalized under the regulatory framework for prompt corrective
        action. To be categorized as well-capitalized the Bank must maintain
        minimum total risk-based, Tier I risk-based, and Tier I leverage ratios.
        There are no conditions or events since that notification that
        management believes have changed the institution's category.

        The Bank's actual capital amounts and ratios are presented in the table.
        There were no deductions from capital for interest-rate risk in 2002 and
        2001.

<TABLE>
<CAPTION>

                                                                                    RATIO
                                                ---------------------------------------------------------------------
                                        ACTUAL                                                         TO BE WELL
                                        AMOUNT                                                     CAPITALIZED UNDER
                                          IN                                     FOR CAPITAL       PROMPT CORRECTIVE
                                       THOUSANDS                ACTUAL        ADEQUACY PURPOSES    ACTION PROVISIONS
                                      -------------------------------------------------------------------------------
<S>                                  <C>                      <C>                 <C>                <C>
As of December 31, 2002:
   Total Capital
    (to Risk Weighted
    Assets)                            $16,996                  15.10%              8.0%               10.0%
   Tier I Capital
    (to Risk Weighted
    Assets)                            $15,588                  13.85%              4.0%                6.0%
   Tier I Capital
    (to Average Assets)                $15,588                   8.14%              4.0%                5.0%


As of December 31, 2001:
   Total Capital
    (to Risk Weighted
    Assets)                            $15,981                  16.19%              8.0%               10.0%
   Tier I Capital
    (to Risk Weighted
    Assets)                            $14,746                  14.94%              4.0%                6.0%
   Tier I Capital
    (to Average Assets)                $14,746                   8.73%              4.0%                5.0%
</TABLE>

NOTE 23. REGULATORY RESTRICTIONS

        Included in Cash and Due From Banks are average daily reserve balances
        the Bank is required to maintain with the Federal Reserve Bank. The
        amount of these required reserves, calculated based on percentages of
        certain deposit balances was $1,751,000 at December 31, 2002.

        Certain restrictions exist regarding the ability of the Bank subsidiary
        to transfer funds to CNB in the form of cash dividends, which in turn
        impact the ability of CNB to declare dividends to its shareholders. The
        approval of the Comptroller of the Currency is required if the total
        dividends declared by a national bank in any calendar year exceed the
        bank's net profits (as defined) for that year combined with its retained
        net profits for the preceding two calendar years.

        Certain regulations prohibit affiliates from transferring funds to CNB
        in the form of loans or advances exceeding 10% of its capital stock and
        surplus, as defined in the Act. In addition, all loans or advances to
        nonbank affiliates must be secured by specific collateral. Based on this
        limitation, there was approximately $1,558,000 available for loans or
        advances to CNB as of December 31, 2002, at which time there were no
        material loans or advances outstanding.


                                       46
<PAGE>

NOTE 24. FAIR VALUE OF FINANCIAL INSTRUMENTS

        The fair value of financial instruments is the amount at which the asset
        or obligation could be exchanged in a current transaction between
        willing parties, other than in a forced or liquidation sale. Fair value
        estimates are made at a specific point in time based on relevant market
        information and information about the financial instrument. These
        estimates do not reflect any premium or discount that could result from
        offering for sale at one time the entire holdings of a particular
        financial instrument. Because no market value exists for a significant
        portion of the financial instruments, fair value estimates are based on
        judgments regarding future expected loss experience, current economic
        conditions, risk characteristics of various financial instruments, and
        other factors. These estimates are subjective in nature, involve
        uncertainties and matters of judgment and, therefore, cannot be
        determined with precision. Changes in assumptions could significantly
        affect the estimates.

        Fair value estimates are based on financial instruments both on and off
        the balance sheet without attempting to estimate the value of
        anticipated future business, and the value of assets and liabilities
        that are not considered financial instruments. Additionally, tax
        consequences related to the realization of the unrealized gains and
        losses can have a potential effect on fair value estimates and have not
        been considered in many of the estimates.

        The following methods and assumptions were used to estimate the fair
        value of significant financial instruments:

        Financial Assets:
           The carrying amounts of cash, due from Banks and federal funds sold
           are considered to approximate fair value. The fair value of
           investment securities, including available for sale, are generally
           based on quoted market prices. The fair value of loans is estimated
           using a combination of techniques, including discounting estimated
           future cash flows and quoted market prices of similar instruments
           where available.

        Financial Liabilities:
           The carrying amounts of deposit liabilities payable on demand are
           considered to approximate fair value. For fixed maturity (time)
           deposits, fair value is estimated by discounting estimated future
           cash flows using currently offered rates for deposits of similar
           remaining maturities.

        Off-Balance-Sheet-Financial Instruments:
           The fair value of commitments to extend credit and standby letters of
           credit is estimated using the fees currently charged to enter into
           similar agreements.

        The estimated fair value of financial instruments at December 31, is
        summarized as follows:


                                       47
<PAGE>

<TABLE>
<CAPTION>

                                                       2002                                        2001
                                          -------------------------------------       ----------------------------------
                                           CARRYING                                    CARRYING
                                            AMOUNT               FAIR VALUE             AMOUNT              FAIR VALUE
                                          -----------           -----------           -----------           -----------
<S>                                    <C>                   <C>                   <C>                   <C>
Financial Assets:
    Cash, due from banks and
      federal funds sold                 $  7,832,735          $  7,832,735          $  4,229,810          $  4,229,810
    Securities available for
      sale                                 43,429,902            43,429,902            48,913,329            48,913,329
    Loans                                 128,330,303           128,425,985           110,536,744           110,959,202
    Accrued interest receivable               921,907               921,907             1,052,620             1,052,620
    Mortgage servicing rights                  29,921                29,921                32,169                32,169
Financial Liabilities:
    Demand deposits                      $ 78,241,087          $ 78,241,087          $ 61,904,504          $ 61,904,504
    Time deposits                          94,821,462            97,507,166            92,476,035            95,724,104
    Accrued interest payable                1,010,086             1,010,086             1,148,437             1,148,437
Off Balance - Sheet
    Financial Instruments:
    Letters of credit                    $          -          $      1,260          $          -          $      1,472
</TABLE>


NOTE 25. RELATED PARTY TRANSACTIONS

        In the ordinary course of business, the Bank has granted loans to
        officers, directors, and their affiliates amounting to $1,433,386 and
        $1,308,100 at December 31, 2002 and 2001, respectively. During 2002,
        $1,166,544 of new loans were made, or became reportable, and repayments
        and other decreases totaled $1,041,258. Deposits from related parties
        held by the Bank at December 31, 2002 and 2001 amounted to $4,347,387
        and $2,248,568, respectively.



                                       48
<PAGE>

NOTE 26. PARENT COMPANY ONLY FINANCIAL INFORMATION

           The following represents parent company only financial information:


                      STATEMENTS OF FINANCIAL (PARENT ONLY)
                           DECEMBER 31, 2002, AND 2001


<TABLE>
<CAPTION>


ASSETS                                                   2002              2001
                                                      -----------      -----------
<S>                                                  <C>              <C>

   Cash                                               $    58,991      $     2,591
   Investment in Citizens National Bank                16,256,896       14,924,237
   Deferred income taxes                                    2,274            3,637
   Other assets                                             4,385            5,785
                                                      -----------      -----------

      TOTAL ASSETS                                    $16,322,546      $14,936,250
                                                      ===========      ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
   Accrued expenses and other liabilities             $    52,528      $    10,013
                                                      -----------      -----------

      TOTAL LIABILITIES                               $    52,528      $    10,013
                                                      -----------      -----------

SHAREHOLDERS' EQUITY
   Common stock, $1 par value; 5,000,000
      shares authorized; 458,048 shares
      outstanding                                     $   458,048      $   458,048
   Capital surplus                                      3,863,592        3,863,592
   Retained earnings                                   11,267,374       10,426,618
   Accumulated other comprehensive income                 681,004          177,979
                                                      -----------      -----------

      TOTAL SHAREHOLDERS' EQUITY                      $16,270,018      $14,926,237
                                                      -----------      -----------

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $16,322,546      $14,936,250
                                                      ===========      ===========
</TABLE>





                                       49
<PAGE>

                       STATEMENTS OF INCOME (PARENT ONLY)
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                      2002               2001                2000
                                                                  -----------         -----------         -----------

<S>                                                             <C>                 <C>                 <C>
Dividend income                                                   $   467,209         $   477,209         $   302,311
Income from title company                                              56,400              44,876                   -
Noninterest expense                                                   (36,340)            (42,225)            (11,888)
                                                                  -----------         -----------         -----------

INCOME BEFORE INCOME TAXES AND EQUITY IN
   UNDISTRIBUTED EARNINGS OF CITIZENS NATIONAL BANK               $   487,269         $   479,860         $   290,423
Income tax (expense) credit                                            (8,938)             (2,757)              3,994
                                                                  -----------         -----------         -----------

INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
   CITIZENS NATIONAL BANK                                         $   478,331         $   477,103         $   294,417
Equity in undistributed earnings of Citizens National Bank            829,634             759,302           1,011,423
                                                                  -----------         -----------         -----------

NET INCOME                                                        $ 1,307,965         $ 1,236,405         $ 1,305,840
                                                                  ===========         ===========         ===========
</TABLE>


                     STATEMENTS OF CASH FLOWS (PARENT ONLY)
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                             2002               2001                2000
                                                                         -----------         -----------         -----------


<S>                                                                    <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                               $ 1,307,965         $ 1,236,405         $ 1,305,840
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Deferred income taxes                                                      1,363                 357              (3,994)
    (Increase) decrease in other assets                                        1,400              (3,500)               -
    Increase (decrease) in accrued expenses and other liabilities             42,515              (1,875)             11,888
    Equity in undistributed earnings of Citizens National Bank              (829,634)           (759,302)         (1,011,423)
                                                                         -----------         -----------         -----------
     NET CASH PROVIDED BY OPERATING ACTIVITIES                           $   523,609         $   472,085         $   302,311
                                                                         -----------         -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in title company                                          $      -            $    (5,000)        $      -
    Return of capital from title company                                        -                  2,715                -
                                                                         -----------         -----------         -----------
     NET CASH (USED IN) INVESTING ACTIVITIES                             $      -            $    (2,285)        $      -
                                                                         -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Cash dividends paid                                                     (467,209)           (467,209)        $  (302,311) (1)
                                                                         -----------         -----------         -----------
     NET CASH (USED IN) FINANCING ACTIVITIES                             $  (467,209)        $  (467,209)        $  (302,311)
                                                                         -----------         -----------         -----------
     NET INCREASE IN CASH AND CASH
       EQUIVALENTS                                                       $    56,400         $     2,591         $      -
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                           $     2,591         $       -           $      -
                                                                         -----------         -----------         -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $    58,991         $     2,591         $      -
                                                                         ===========         ===========         ===========
</TABLE>

(1) Represents dividends paid by CNB Financial Services, Inc. subsequent to its
    acquisition of the Bank.


                                       50
<PAGE>

NOTE 27. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                         2002
                                  ------------------------------------------------
                                   FIRST         SECOND        THIRD       FOURTH
                                  QUARTER       QUARTER       QUARTER      QUARTER
                                  -------       -------       -------      -------
                                                     In thousands
<S>                             <C>           <C>           <C>           <C>
Interest income                   $2,823        $2,889        $2,861        $2,916
Interest expense                   1,382         1,344         1,335         1,281
                                  ------        ------        ------        ------
Net interest income                1,441         1,545         1,526         1,635

Provision for loan losses             73            39            40           109
Noninterest income                   345           381           328           349
Noninterest expense                1,307         1,308         1,357         1,328
                                  ------        ------        ------        ------

Income before income taxes           406           579           457           547

Provision for income taxes           132           213           160           176
                                  ------        ------        ------        ------

Net income                        $  274        $  366        $  297        $  371
                                   =====         =====         =====         =====

Basic earnings per share          $ 0.60        $ 0.80        $ 0.65        $ 0.81
                                   =====         =====         =====         =====
</TABLE>


<TABLE>
<CAPTION>

                                                         2001
                                  ------------------------------------------------
                                   FIRST         SECOND        THIRD       FOURTH
                                  QUARTER       QUARTER       QUARTER      QUARTER
                                  -------       -------       -------      -------
                                                     In thousands
<S>                             <C>           <C>           <C>           <C>
Interest income                   $2,900        $3,012        $3,029        $2,927
Interest expense                   1,472         1,519         1,489         1,457
                                  ------        ------        ------        ------
Net interest income                1,428         1,493         1,540         1,470

Provision for loan losses             51            61            57            57
Noninterest income                   172           269           286           298
Noninterest expense                1,094         1,188         1,223         1,289
                                  ------        ------        ------        ------

Income before income taxes           455           513           546           422

Provision for income taxes           160           187           187           166
                                  ------        ------        ------        ------

Net income                        $  295        $  326        $  359        $  256
                                   =====         =====         =====         =====

Basic earnings per share          $ 0.64        $ 0.71        $ 0.78        $ 0.57
                                   =====         =====         =====         =====
</TABLE>



                                       51
<PAGE>

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

        There were no changes in or disagreements with accountants in accounting
        and financial disclosure.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The following table contains certain information, as of March 20, 2003,
        with respect to current directors, nominees for directors and certain
        officers of CNB.

<TABLE>
<CAPTION>
                                     DIRECTOR     PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
          NAME              AGE       SINCE             AND POSITION HELD WITH CNB
          ----              ---       -----             --------------------------
<S>                         <C>       <C>         <C>
J. Robert Ayers              73        1974       Retired - President, Citizens National Bank

John E. Barker               74        1972       Auto Sales - Service

Margaret S. Bartles          49        2002       Realtor

Jay E. Dick                  50        1983       Retired - Manager-Hunters' Hardware, Inc.

Herbert L. Eppinger          70        1979       Retired - Agriculture

Robert L. Hawvermale         73        1967       Retired - Professional Engineer

J. Philip Kesecker           73        1965       Real Estate Development

Jerry McGraw                 56        1988       Insurance

Martha H. Quarantillo        43        1999       Pharmacist

Thomas F. Rokisky            56        1993       President and Chief Executive Officer, CNB and
                                                  Citizens National Bank

Charles S. Trump IV          42        1986       Attorney at Law

Arlie R. Yost                55        1988       Licensed Residential Appraiser
</TABLE>

      All nominees are incumbent directors of CNB Financial Services, Inc.



                                       52
<PAGE>

        The names, ages and position of each executive officer of the company
are listed below along with the positions with Citizens National Bank held by
each of them during the last five years. Officers are appointed annually by the
Board of Directors at the meeting of directors immediately following the annual
meeting.


<TABLE>
<CAPTION>

                               AGE AS OF
                               MARCH 20,
NAME                             2003                  POSITION AND EXPERIENCE DURING THE PAST 5 YEARS
----                             ----                  -----------------------------------------------
<S>                           <C>          <C>
J. Philip Kesecker (1)             73        2000 to present - Chairman of the Board, CNB Financial Services, Inc.
                                             1987 to present - Chairman of the Board, Citizens National Bank

Thomas F. Rokisky                  56        2000 to present - President/CEO, CNB Financial Services, Inc.
                                             1996 to present - President/CEO, Citizens National Bank
                                             1990 to 1996 - Executive Vice President/COO, Citizens National Bank

Arnold K. Stotler                  43        2000 to present - Vice President, Secretary and Treasurer, CNB Financial Services, Inc.
                                             1996 to present - Sr. Vice President of Lending, Citizens National Bank

Rebecca S. Stotler                 42        2000 to present - Vice President/CFO, CNB Financial Services, Inc.
                                             1999 to present - Vice President/CFO, Citizens National Bank
                                             1996 to 1999 - Vice President of Finance/Cashier, Citizens National Bank

Patricia L. Poland                 62        2000 to January 31, 2003 - Vice President, CNB Financial Services, Inc.
                                             1996 to January 31, 2003 - Vice President of Lending, Citizens National Bank

Patricia C. Muldoon                42        2001 to present - Vice President/COO, Citizens National Bank
                                             1999 to 2001 - Consultant/Audit Staff, Smith Elliott Kearns & Company, LLC
                                             1997 to 1999 - VP/Mgr of Accounting Operations and Financial Reporting
                                               Farmers and Mechanics National Bank
</TABLE>


(1)     Mr. Kesecker is not an employee of CNB.



        Section 16 (a) of the Securities Exchange Act of 1934 requires CNB's
directors and executive officers, and persons who own more than 10% of the
registered class of CNB's equity securities, to make stock ownership and
transaction filings with the Securities and Exchange Commission and to provide
copies to CNB. Based solely on a review of the reports furnished to CNB and
written statements that no other reports were required, all Section 16(a) filing
requirements applicable to its officers and directors were met except for Arnold
K. Stotler, who filed one report late. CNB is required to report late filings.



                                       53
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

        The table below reflects information concerning the annual compensation
        for services in all capacities to the corporation for the fiscal years
        ended December 31, 2002, 2001 and 2000, of those persons who were, as of
        December 31, 2002, (a) the chief executive officer, and (b) the four
        other most highly compensated executive officers to the extent that such
        persons, total annual salary and bonus exceeded $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                   OTHER ANNUAL
           NAME AND PRINCIPAL POSITION                YEAR      SALARY    BONUS    COMPENSATION
           ---------------------------                ----      ------    -----    ------------
<S>                                                   <C>      <C>        <C>      <C>     <C>
           Thomas F. Rokisky, President/CEO           2002     $103,420   $ -0-    $16,424 (1)(2)
                                                      2001     $ 98,759   $ -0-    $13,722 (1)(2)
                                                      2000     $ 93,358   $ -0-    $12,436 (1)(2)
</TABLE>

        (1)     CNB's group life and health insurance program, which is paid for
        by CNB, is made available to all full-time employees. In accordance with
        IRS Code Section 79, the cost of group life insurance coverage for an
        individual in excess of $50,000 is added to the individual's earnings
        and is included in salary. Also included in this figure are board fees
        earned and the corporation's contributions to the individual's 401(k)
        retirement savings program to which the individual has a vested
        interest.

        (2)     CNB's contributions to the pension plan, a defined benefit plan,
        are not and cannot be calculated separately for specific participants.
        Contributions for the plan year of $168,151, $99,502 and $178,376 were
        made by CNB in 2002, 2001 and 2000, respectively.

                CNB does not maintain any form of stock option, stock
        appreciation rights, or other long-term compensation plans.

                Directors receive $125 for each board meeting of the bank they
        attend, $150 for each discount committee meeting and $75 for other
        committee meetings they attend. There is no compensation for attendance
        at CNB board meetings. In addition, each director receives a fee of
        $4,150 per year. The chairman of the board receives an additional $3,500
        per year and the vice chairman receives an additional $1,000 per year.
        Other than the deferred compensation/supplemental insurance plan
        described below, there are no other special arrangements with any
        directors. In 2002, the board of directors of CNB received $144,262, in
        the aggregate, for all board of directors' meetings attended and all
        fees paid.

                CNB maintains a deferred compensation/supplemental insurance
        plan for directors pursuant to which a director may elect to defer
        receipt of a portion of fees for board meetings for at least four years
        or until he reaches age 65, whichever is later. An amount equal to fees
        waived in addition to interest at an annual rate of 10% per year will be
        paid to each participating director or his designated beneficiary during
        a period of 10 years after the director reaches age 65. The payments
        after retirement will be paid from the general funds of CNB. CNB
        purchases and is the beneficiary of insurance on the lives of
        participants, the proceeds of which are used to help recover the net
        after-tax cost of the benefits and insurance premiums paid. Funds from
        the deferred fees of a participating director will be used to reimburse
        CNB for the costs of the premium for the insurance policies. The cost of
        the insurance premiums in 2002 was $49,078. At December 31, 2002, these
        policies had a net accumulated cash value of $964,179.


                                       54
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT

        The following table sets forth information as of February 21, 2003,
        relating to the beneficial ownership of the common stock by (a) each
        person or group known by CNB to own beneficially more than 5% of the
        outstanding common stock; (b) each of CNB's directors; and (c) all
        directors and executive officers of CNB as a group. Unless otherwise
        noted below, the persons named in the table have sole investment power
        with respect to each of the shares reported as beneficially owned by
        such person.

<TABLE>
<CAPTION>
                    NAME AND ADDRESS                        NUMBER OF SHARES   PERCENT OF CLASS (1)
                    ----------------                        ----------------   ----------------
<S>                                                                 <C>              <C>
J. Robert Ayers (2)                                                   1,915                     *
John E. Barker (3)                                                   17,364                  3.79
Margaret S. Bartles                                                     100                     *
Jay E. Dick (4)                                                      15,691                  3.43
Herbert L. Eppinger (5)                                               2,870                     *
Robert L. Hawvermale (6)                                              3,730                     *
J. Philip Kesecker (7)                                               14,282                  3.12
Jerald McGraw (8)                                                     1,514                     *
Martha H. Quarantillo                                                   400                     *
Thomas F. Rokisky (9)                                                 1,546                     *
Charles S. Trump IV (10)                                             11,380                  2.48
Arlie R. Yost (11)                                                    2,210                     *
All directors and executive officers as a group (15 persons)         73,202                 15.98
D. Louise Stotler and Deborah Dhayer                                 47,488                 10.37
   3077 Valley Road, Berkeley Springs, WV 25411
Mary Lou Trump                                                       53,470                 11.67
   298 Grove Heights Road, Berkeley Springs, WV 25411
</TABLE>

<TABLE>
<S>     <C>
*       Indicates holdings of less than 1%.
(1)     Includes shares of common stock held by the named individual as of February 22, 2002.
(2)     Includes 1,815 shares held jointly with spouse.
(3)     Includes 14,164 shares held jointly with spouse and 3,000 shares held jointly with children.
(4)     Includes 15,591 shares held jointly with spouse.
(5)     Includes 2,770 shares held jointly with spouse.
(6)     Includes 1,200 shares held by spouse and 100 shares held jointly with spouse.
(7)     Includes 3,098 shares held by spouse and 1,860 shares held jointly with spouse.
(8)     Includes 110 shares held by spouse and 964 shares held jointly with spouse.
(9)     Includes 1,425 shares held in an Individual Retirement Account.
(10)    Includes 842 shares held by spouse and 270 shares held as custodian for children.
(11)    Includes 1,770 shares held jointly with spouse.
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        CNB has had and intends to continue to have banking and financial
        transactions in the ordinary course of business with directors and
        executive officers of CNB and their associates. Total loans outstanding
        from CNB at December 31, 2002, to CNB's officers and directors as a
        group and members of their immediate families and companies in which
        they had an ownership interest of 10% or more was $1,101,859, or
        approximately 6.8% of total equity capital. These loans do not involve
        more than the normal risk of collectibility or present other unfavorable
        features.

        Trump and Trump, in which director Charles S. Trump, IV is a partner,
        performed legal services for CNB and the bank. Fees paid by CNB and the
        bank to that law firm were $39,670 during 2002.


                                       55
<PAGE>

        CNB, Charles S. Trump, IV and George I. McVey are members in a Limited
        Liability Corporation, Morgan County Title Insurance Agency, LLC, which
        was formed in February 2001. Morgan County Title Insurance Agency, LLC,
        paid Trump and Trump management fees of $125,789. Charles S. Trump, IV
        and George I. McVey are partners in Trump and Trump.


ITEM 14. CONTROLS AND PROCEDURES

                The Company's chief executive officer and chief financial
        officer, based on their evaluation within 90 days prior to the date of
        this report of the Company's disclosure controls and procedures (as
        defined in Rule 13(a)-14(c) of the Securities Exchange Act of 1934),
        have concluded that the Company's disclosure controls and procedures are
        adequate and effective for purposes of Rule 13(a)-14(c) and timely,
        alerting them to material information relating to the Company required
        to be included in the Company's filings with the Securities and Exchange
        Commission under the Securities Exchange Act of 1934.

                There were no significant changes in the Company's internal
        controls or in other factors that could significantly affect internal
        controls subsequent to the date of their evaluation with the exception
        of the Company converting to the use of new software for its core
        processing system on February 14, 2003. The conversion significantly
        affected the Company's accounting systems as well as the loan and
        deposit processing. The conversion resulted in changes to procedures and
        controls, both manual and through electronic data processing. Throughout
        the preparation for the conversion, the new procedures and controls were
        reviewed and planned for and are in the implementation stage. Although,
        the Company's procedures and controls have changed with the conversion,
        management's conclusion that the controls are adequate and effective has
        not changed.

                Appearing immediately following the signatures of this annual
        report on Form 10-K, certificates of the chief executive office and
        chief financial officer appear. This form of certification is required
        in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This
        section of the annual report on Form 10-K is the information concerning
        the controls evaluation referred to in the Section 302 certifications.
        This information should be read in conjunction with those certifications
        for a more complete understanding of the topics presented.

                Disclosure controls are procedures that a company designs with
        the objective of ensuring that information required to be disclosed in
        their reports filed under the Securities Exchange Act of 1934 (such as
        this Form 10-K), is recorded, processed, summarized and reported within
        the time period specified under the SEC's rules and forms. Disclosure
        controls are also designed with the objective of ensuring that such
        information is accumulated and communicated to management, including the
        CEO and CFO, as appropriate, to allow timely decisions regarding
        required disclosure. Internal controls are procedures that a company
        designs with the objective of providing reasonable assurance that
        transactions are properly authorized, assets are safeguarded against
        unauthorized or improper use and transactions are properly recorded and
        reported all to permit the preparation of a company's financial
        statements in conformity with generally accepted accounting principles.

                The Company's management, including the CEO and CFO, does not
        expect that our disclosure controls or internal controls will prevent
        all error and fraud. A control system, no matter how well conceived and
        operated, can provide only reasonable, not absolute, assurance that the
        objectives of the control system are met. Further, the design of a
        control system must reflect the fact that there are resource
        constraints, and the benefits of controls must be considered relative to
        their costs. Because of the inherent limitations in all control systems,
        no evaluation of controls can provide absolute assurance that all
        control issues and instances of fraud, if any, within the Company have
        been detected. These inherent limitations include the realities that
        judgements and decision-making can be faulty, and that breakdowns can
        occur because of simple error or mistake. Additionally, controls can be
        circumvented by the individual acts of some persons, by collusion of two
        or more people, or by management override of the control. The design of
        any system of control also is based in part upon certain assumptions
        about the likelihood of future events and there can be no assurance that
        any design will succeed in achieving its stated goals under all
        potential future conditions. Over time, controls may become inadequate
        because of changes in conditions, or the degree of compliance with the
        policies or procedures may deteriorate.

                Based upon the controls evaluation conducted by our CEO and CFO,
        they have concluded that, subject to the limitations noted above, the
        Company's disclosure controls are effective to ensure


                                       56
<PAGE>

        that material information relating to CNB Financial Services, Inc. and
        its subsidiaries is made known to management, including the CEO and CFO,
        particularly during the period when our periodic reports are being
        prepared, and that our internal controls are effective to provide
        reasonable assurance that our financial statements are fairly presented
        in conformity with generally accepted accounting principles.


                                       57
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     1. Financial Statements

           The consolidated financial statements listed on the index to Item 8
           of this Annual Report on Form 10-K are filed as a part of this Annual
           Report.

        2. Financial Statement Schedules

           All schedules applicable to the Registrant are shown in the
           respective financial statements or in the notes thereto included in
           this Annual Report.

        3. Exhibits

           2.2  Articles of Incorporation of CNB Financial Services, Inc. filed
                as exhibit 3.1 to the Registration Statement on Form S-4.

           2.3  Bylaws of CNB Financial Services, Inc. filed as exhibit 3.2 to
                the Registration Statement on Form S-4.

            21  Subsidiaries of CNB Financial Services, Inc. filed as an exhibit
                hereto and incorporated herein by reference.

           99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)     Reports on Form 8-K

        There were no reports on Form 8-K filed in the fourth quarter of 2002.



                                       58
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


             CNB Financial Services, Inc.
------------------------------------------------------
                    (Registrant)


Date  March 28, 2003           /s/ Thomas F. Rokisky
-----------------------        ------------------------------------------------
                               Thomas F. Rokisky, President/CEO



Date  March 28, 2003           /s/ Rebecca S. Stotler
-----------------------        ------------------------------------------------
                               Rebecca S. Stotler, Vice President/CFO
                               (Principal Financial and Accounting Officer)


                                       59
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities indicated on the 28th March 2003.


        Signatures                                             Title
-----------------------------                        ---------------------------

/s/ J. Philip Kesecker                                Chairman and Director
-----------------------------
J. PHILIP KESECKER


/s/ Thomas F. Rokisky                                 President/CEO and Director
-----------------------------
THOMAS F. ROKISKY


/s/ J. Robert Ayers                                   Director
-----------------------------
J. ROBERT AYERS


/s/ John E. Barker                                    Director
-----------------------------
JOHN E. BARKER


/s/ Margaret S. Bartles                               Director
-----------------------------
MARGARET S. BARTLES


/s/ Jay E. Dick                                       Director
-----------------------------
JAY E. DICK


/s/ Herbert L. Eppinger                               Director
-----------------------------
HERBERT L. EPPINGER


/s/ Robert L. Hawvermale                              Director
-----------------------------
ROBERT L. HAWVERMALE


/s/ Jerald McGraw                                     Director
-----------------------------
JERALD MCGRAW


/s/ Martha H. Quarantillo                             Director
-----------------------------
MARTHA H. QUARANTILLO


/s/ Charles S. Trump IV                               Director
-----------------------------
CHARLES S. TRUMP IV


/s/ Arlie R. Yost                                     Director
-----------------------------
ARLIE R. YOST



                                       60
<PAGE>

                                  CERTIFICATION

I, Thomas F. Rokisky, certify that:

     1.   I have reviewed this annual report on Form 10-K of CNB Financial
          Services, Inc.;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial conditions, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report.

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 12a-14 and 15d-14) for the registrant
          and have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent functions):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation,
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.

Date: March 28, 2003

                                            /s/ Thomas F. Rokisky
                                            ---------------------
                                            Thomas F. Rokisky
                                            Chief Executive Officer



                                       61
<PAGE>

                                  CERTIFICATION

I, Rebecca S. Stotler, certify that:

     7.   I have reviewed this annual report on Form 10-K of CNB Financial
          Services, Inc.;

     8.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     9.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial conditions, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report.

     10.  The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 12a-14 and 15d-14) for the registrant
          and have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     11.  The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent functions):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     12.  The registrant's other certifying officer and I have indicated in this
          annual report whether there were significant changes in internal
          controls or in other factors that could significantly affect internal
          controls subsequent to the date of our most recent evaluation,
          including any corrective actions with regard to significant
          deficiencies and material weaknesses.

Date: March 28, 2003

                                            /s/ Rebecca S. Stotler
                                            ----------------------
                                            Rebecca S. Stotler
                                            Chief Financial Officer



                                       62