##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-30665
 CNB Financial Services, Inc.
  West Virginia
    
    550773918(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 101 S. Washington Street, Berkeley Springs, WV
    
    25411(Address of principal executive offices)
    
    (Zip Code)
     Common Stock, Par Value $1.00 per share
   o þ
  o þ
  þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a Smaller Reporting Company)
    
    Smaller Reporting Company þ
  o þ
     Documents
    
    10-K Parts1. CNB Financial Services, Inc. 2010 Proxy Statement
    
    Part III




---



##### Table of Contents



PAGEPART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    9Item 2. Properties
    
    
    11Item 3. Legal Proceedings
    
    
    11Item 4. (Removed and Reserved)
    
    
    11PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    12Item 6. Selected Financial Data
    
    
    14Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 8. Financial Statements and Supplementary Data
    
    
    37Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    73Item 9A(T). Controls and Procedures
    
    
    73Item 9B. Other Information
    
    
    73PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    74Item 11. Executive Compensation
    
    
    75Item 12. Security Ownership of Certain Beneficial Owners and Management
    
    
    75Item 13. Certain Relationships and Related Stockholder Matters
    
    
    75Item 14. Principal Accountants Fees and Services
    
    
    75PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    76SIGNATURES
    
    
    77
 2




---



##### Table of Contents




    
    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;
    
    General economic conditions may become unfavorable resulting in reduced credit quality or
demand for loans;
    
    Delinquency rates on loans;
    
    Additional assessments may be imposed by the FDIC;
    
    Additional expense to the provision for loan losses may be greater than anticipated;
    
    Loan activity may continue to be soft in the commercial real estate portfolio with very
little generation of new loans;
    
    Real estate activity for 2010 in the Eastern Panhandle of West Virginia may not improve;
    
    Changes in accounting principles, policies or guidelines; and
    
    Current economic environment.
  3




---



##### Table of Contents



Part I
 
 Item 1. DESCRIPTION OF BUSINESS
 ORGANIZATIONAL HISTORY AND SUBSIDIARIES
               4




---



##### Table of Contents



Bank Holding Company Regulation .
 5




---



##### Table of Contents



Bank Subsidiary Regulation
   6




---



##### Table of Contents



Capital Requirements
  Federal and State Laws
  Monetary Policy and Economic Conditions
   7




---



##### Table of Contents



Effect of Environmental Regulation
    International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (U.S. Patriot
Act)
    8




---



##### Table of Contents



Item 1A. RISK FACTORS
  The banking business is very competitive.
      In the future, CNBs lending limit could create a competitive disadvantage.
  CNB engages in commercial and consumer lending activities which are riskier than residential real
estate lending.
  9




---



##### Table of Contents



Type of Loan
    
    Percentage of PortfolioResidential Real Estate Loans
    
    
    66
    %Commercial Loans, principally real estate secured
    
    
    26
    %Consumer Loans
    
    
    8
    %
 CNB has limited control over its profitability because CNB cannot control the various factors that
can cause fluctuations in interest rates.
   CNBs success depends on CNBs management team.
  An economic slowdown in our market area could hurt CNBs business.
  
    
    Loan delinquencies may increase;
    
    Problem assets and foreclosures may increase;
    
    Demand for the products and services of CNB may decline; and
    
    Collateral (including real estate) for loans made by CNB may decline in value, in
turn reducing customers borrowing power and making existing loans less secure.
  The global financial crisis may have an adverse affect on our Bank, business and results of
operations.
   10




---



##### Table of Contents



CNB is highly regulated.
  CNB may incur increased charge-offs and additional loan loss provision due to negative credit in
the future.
  Marketability of Common Stock.
 
 
 Item 2. PROPERTIES
 CNB Financial Services, Inc.
  CNB Bank, Inc.
 .
 
 Item 3. LEGAL PROCEEDINGS
   
 Item 4. (REMOVED AND RESERVED)
 11




---



##### Table of Contents



Part II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    Total Number
    
    
    
    
    
    
    Total Number of Shares Purchased
    
    
    Maximum Number of Sharesof Shares
    
    
    Average Price
    
    
    as Part of Publicly Announced
    
    
    that may yet be purchased underPeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Plans or Programs
    
    
    the Plans or ProgramsBeginning balance
September 30, 2009
    
    
    
    
    
    
    
    
    
    
    12,600
    
    
    
    33,205October 1, 2009
October 31, 2009
    
    
    600
    
    
    $
    46.60
    
    
    
    600
    
    
    
    32,605November 1, 2009
November 30, 2009
    
    
    1,200
    
    
    $
    45.25
    
    
    
    1,200
    
    
    
    31,405December 1, 2009
December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    31,405Total
    
    
    1,800
    
    
    
    
    
    
    
    14,400
  12




---



##### Table of Contents



The prices listed below represent the high and low market prices for stock trades reported
during each quarter.
 Per ShareHigh
    
    
    Low
    
    
    Dividend2009First quarter
    
    $
    66.00
    
    
    $
    47.00Second quarter
    
    $
    60.00
    
    
    $
    44.50
    
    
    $
    0.53Third quarter
    
    $
    46.70
    
    
    $
    46.70Fourth quarter
    
    $
    46.60
    
    
    $
    45.25
    
    
    $
    1.022008First quarter
    
    $
    80.00
    
    
    $
    65.00Second quarter
    
    $
    67.00
    
    
    $
    65.50
    
    
    $
    0.53Third quarter
    
    $
    63.50
    
    
    $
    63.50Fourth quarter
    
    $
    63.85
    
    
    $
    49.40
    
    
    $
    1.37
  13




---



##### Table of Contents



Item 6. SELECTED FINANCIAL DATA
 TABLE 1. FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005In thousands except for per share dataAt Year-EndTotal assets
    
    $
    289,498
    
    
    $
    282,257
    
    
    $
    290,415
    
    
    $
    276,069
    
    
    $
    258,953Securities available for sale
    
    
    72,273
    
    
    
    62,605
    
    
    
    66,017
    
    
    
    50,873
    
    
    
    55,194Loans and lease, net of unearned income
    
    
    194,707
    
    
    
    200,752
    
    
    
    202,669
    
    
    
    204,319
    
    
    
    180,207Deposits
    
    
    252,292
    
    
    
    227,895
    
    
    
    226,645
    
    
    
    233,083
    
    
    
    219,288Shareholders equity
    
    
    25,630
    
    
    
    23,218
    
    
    
    22,821
    
    
    
    20,322
    
    
    
    19,008Significant RatiosReturn on average assets
    
    
    0.75
    %
    
    
    0.96
    %
    
    
    0.90
    %
    
    
    0.92
    %
    
    
    1.00
    %Return on average shareholders equity
    
    
    8.88
    
    
    
    11.66
    
    
    
    11.88
    
    
    
    12.46
    
    
    
    12.91Average shareholders equity to average assets
    
    
    8.49
    
    
    
    8.21
    
    
    
    7.55
    
    
    
    7.35
    
    
    
    7.76Net interest margin
    
    
    3.71
    
    
    
    3.92
    
    
    
    3.53
    
    
    
    3.77
    
    
    
    4.12Summary of OperationsInterest income
    
    $
    15,642
    
    
    $
    16,995
    
    
    $
    17,201
    
    
    $
    15,989
    
    
    $
    13,420Interest expense
    
    
    5,412
    
    
    
    6,307
    
    
    
    7,725
    
    
    
    6,269
    
    
    
    3,850Net interest income
    
    
    10,230
    
    
    
    10,688
    
    
    
    9,476
    
    
    
    9,720
    
    
    
    9,570Provision for loan losses
    
    
    1,853
    
    
    
    940
    
    
    
    169
    
    
    
    275
    
    
    
    352Net interest income after provision for loan losses
    
    
    8,377
    
    
    
    9,748
    
    
    
    9,307
    
    
    
    9,445
    
    
    
    9,218Non-interest income
    
    
    2,172
    
    
    
    2,241
    
    
    
    2,400
    
    
    
    1,968
    
    
    
    2,007Non-interest expense
    
    
    7,834
    
    
    
    7,967
    
    
    
    8,012
    
    
    
    7,760
    
    
    
    7,541Income before income taxes
and discontinued operations
    
    
    2,715
    
    
    
    4,022
    
    
    
    3,695
    
    
    
    3,653
    
    
    
    3,684Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    Income tax expense
    
    
    565
    
    
    
    1,307
    
    
    
    1,191
    
    
    
    1,308
    
    
    
    1,238Net income
    
    
    2,150
    
    
    
    2,715
    
    
    
    2,504
    
    
    
    2,469
    
    
    
    2,446Per Share DataNet income
    
    $
    4.82
    
    
    $
    6.01
    
    
    $
    5.48
    
    
    $
    5.39
    
    
    $
    5.34Cash dividends
    
    
    1.55
    
    
    
    1.90
    
    
    
    1.69
    
    
    
    1.54
    
    
    
    1.44Net book value
    
    
    57.77
    
    
    
    51.69
    
    
    
    50.16
    
    
    
    44.37
    
    
    
    41.50
 14




---



##### Table of Contents



TABLE 2. SELECTED QUARTERLY FINANCIAL DATA
 2009First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterIn thousandsInterest income
    
    $
    3,977
    
    
    $
    3,894
    
    
    $
    3,900
    
    
    $
    3,871Interest expense
    
    
    1,346
    
    
    
    1,343
    
    
    
    1,354
    
    
    
    1,369Net interest income
    
    
    2,631
    
    
    
    2,551
    
    
    
    2,546
    
    
    
    2,502Provision for loan losses
    
    
    390
    
    
    
    375
    
    
    
    400
    
    
    
    688Noninterest income
    
    
    570
    
    
    
    551
    
    
    
    543
    
    
    
    508Noninterest expense
    
    
    1,910
    
    
    
    2,013
    
    
    
    1,881
    
    
    
    2,030Income before income taxes
    
    
    901
    
    
    
    714
    
    
    
    808
    
    
    
    292Provision for income taxes
    
    
    269
    
    
    
    201
    
    
    
    194
    
    
    
    (99
    )Net income
    
    $
    632
    
    
    $
    513
    
    
    $
    614
    
    
    $
    391Basic earnings per share
    
    $
    1.41
    
    
    $
    1.15
    
    
    $
    1.38
    
    
    $
    0.88
 2008First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterIn thousandsInterest income
    
    $
    4,351
    
    
    $
    4,178
    
    
    $
    4,218
    
    
    $
    4,248Interest expense
    
    
    1,793
    
    
    
    1,572
    
    
    
    1,531
    
    
    
    1,411Net interest income
    
    
    2,558
    
    
    
    2,606
    
    
    
    2,687
    
    
    
    2,837Provision for loan losses
    
    
    105
    
    
    
    120
    
    
    
    160
    
    
    
    556Noninterest income
    
    
    581
    
    
    
    589
    
    
    
    589
    
    
    
    482Noninterest expense
    
    
    1,869
    
    
    
    1,926
    
    
    
    1,991
    
    
    
    2,180Income before income taxes
    
    
    1,165
    
    
    
    1,149
    
    
    
    1,125
    
    
    
    583Provision for income taxes
    
    
    386
    
    
    
    379
    
    
    
    372
    
    
    
    170Net income
    
    $
    779
    
    
    $
    770
    
    
    $
    753
    
    
    $
    413Basic earnings per share
    
    $
    1.71
    
    
    $
    1.70
    
    
    $
    1.67
    
    
    $
    0.93
 15




---



##### Table of Contents



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     EARNINGS SUMMARY
   NET INTEREST INCOME
   16




---



##### Table of Contents



17




---



##### Table of Contents



TABLE 3. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
 `
    
    DECEMBER 31, 2009
    
    
    DECEMBER 31, 2008
    
    
    DECEMBER 31, 2007YTD
    
    
    YTD
    
    
    YIELD/
    
    
    YTD
    
    
    YTD
    
    
    YIELD/
    
    
    YTD
    
    
    YTD
    
    
    YIELD/AVERAGE
    
    
    
    
    
    
    
    
    
    
    AVERAGE
    
    
    
    
    
    
    
    
    
    
    AVERAGEBALANCE
    
    
    INTEREST
    
    
    RATE
    
    
    BALANCE
    
    
    INTEREST
    
    
    RATE
    
    
    BALANCE
    
    
    INTEREST
    
    
    RATEIn thousandsInterest earning assets:Federal funds sold
    
    $
    2,428
    
    
    $
    7
    
    
    
    0.16
    %
    
    $
    
    
    
    $
    
    
    
    
    
    %
    
    $
    701
    
    
    $
    37
    
    
    
    4.97
    %Certificates of deposit
    
    
    2,578
    
    
    
    18
    
    
    
    0.70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Securities:Taxable
    
    
    43,666
    
    
    
    2,084
    
    
    
    4.77
    
    
    
    49,888
    
    
    
    2,514
    
    
    
    5.04
    
    
    
    45,820
    
    
    
    2,192
    
    
    
    4.78Tax-exempt (1)
    
    
    20,788
    
    
    
    687
    
    
    
    5.01
    
    
    
    14,776
    
    
    
    510
    
    
    
    5.23
    
    
    
    11,100
    
    
    
    386
    
    
    
    5.27Loans (net of unearned
interest) (2) (4) (5)
    
    
    200,177
    
    
    
    12,618
    
    
    
    6.30
    
    
    
    202,803
    
    
    
    13,757
    
    
    
    6.78
    
    
    
    204,045
    
    
    
    14,356
    
    
    
    7.04Total interest
earning assets (1)
    
    $
    269,637
    
    
    $
    15,414
    
    
    
    5.72
    %
    
    $
    267,467
    
    
    $
    16,781
    
    
    
    6.27
    %
    
    $
    261,666
    
    
    $
    16,971
    
    
    
    6.49
    %Nonearning assets:Cash and due
from banks
    
    $
    6,470
    
    
    
    
    
    
    
    
    
    
    $
    6,590
    
    
    
    
    
    
    
    
    
    
    $
    7,573Bank premises and
equipment, net
    
    
    5,712
    
    
    
    
    
    
    
    
    
    
    
    5,970
    
    
    
    
    
    
    
    
    
    
    
    6,249Other assets
    
    
    6,694
    
    
    
    
    
    
    
    
    
    
    
    5,704
    
    
    
    
    
    
    
    
    
    
    
    5,688Allowance for
loan losses
    
    
    (3,181
    )
    
    
    
    
    
    
    
    
    
    
    (2,292
    )
    
    
    
    
    
    
    
    
    
    
    (2,171
    )Total assets
    
    $
    285,332
    
    
    
    
    
    
    
    
    
    
    $
    283,439
    
    
    
    
    
    
    
    
    
    
    $
    279,005Interest bearing
liabilities:Savings deposits
    
    $
    24,750
    
    
    $
    29
    
    
    
    0.12
    %
    
    $
    23,540
    
    
    $
    69
    
    
    
    0.29
    %
    
    $
    25,335
    
    
    $
    119
    
    
    
    0.47
    %Time deposits
    
    
    140,905
    
    
    
    4,945
    
    
    
    3.51
    
    
    
    125,689
    
    
    
    5,148
    
    
    
    4.10
    
    
    
    122,639
    
    
    
    5,632
    
    
    
    4.59NOW accounts
    
    
    22,399
    
    
    
    108
    
    
    
    0.48
    
    
    
    22,348
    
    
    
    202
    
    
    
    0.90
    
    
    
    31,534
    
    
    
    772
    
    
    
    2.45Money market
accounts
    
    
    12,726
    
    
    
    24
    
    
    
    0.19
    
    
    
    12,801
    
    
    
    120
    
    
    
    0.94
    
    
    
    13,252
    
    
    
    287
    
    
    
    2.17Borrowings
    
    
    12,669
    
    
    
    306
    
    
    
    2.42
    
    
    
    30,538
    
    
    
    768
    
    
    
    2.51
    
    
    
    18,173
    
    
    
    915
    
    
    
    5.03Total interest
bearing liabilities
    
    $
    213,449
    
    
    $
    5,412
    
    
    
    2.54
    %
    
    $
    214,916
    
    
    $
    6,307
    
    
    
    2.93
    %
    
    $
    210,933
    
    
    $
    7,725
    
    
    
    3.66
    %Noninterest bearing
liabilities:Demand deposits
    
    $
    42,102
    
    
    
    
    
    
    
    
    
    
    $
    41,209
    
    
    
    
    
    
    
    
    
    
    $
    42,575Other liabilities
    
    
    5,568
    
    
    
    
    
    
    
    
    
    
    
    4,039
    
    
    
    
    
    
    
    
    
    
    
    4,424Shareholders equity
    
    
    24,213
    
    
    
    
    
    
    
    
    
    
    
    23,275
    
    
    
    
    
    
    
    
    
    
    
    21,073Total liabilities and
shareholders equity
    
    $
    285,332
    
    
    
    
    
    
    
    
    
    
    $
    283,439
    
    
    
    
    
    
    
    
    
    
    $
    279,005Net interest income (1)
    
    
    
    
    
    $
    10,002
    
    
    
    
    
    
    
    
    
    
    $
    10,474
    
    
    
    
    
    
    
    
    
    
    $
    9,246Net interest spread (3)
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.34
    %
    
    
    
    
    
    
    
    
    
    
    2.83
    %Net interest income to
average interest earning
assets (1)
    
    
    
    
    
    
    
    
    
    
    3.71
    %
    
    
    
    
    
    
    
    
    
    
    3.92
    %
    
    
    
    
    
    
    
    
    
    
    3.53
    %
 
 (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 $227,805 in 2009, $214,622 in 2008 and $229,997 in 2007.(5)
    
    Interest income on loans includes fees of $85,075 in 2009, $77,546 in 2008 and $86,770 in 2007 from the Business Manager Program,
student loans and lease receivables. 18




---



##### Table of Contents



TABLE 4. VOLUME AND RATE ANALYSIS OF CHANGES IN INTEREST INCOME
 (Taxable equivalent basis)
    
    2009 over 2008
    
    
    2008 over 2007Change due to
    
    
    Total
    
    
    Change due to
    
    
    TotalVolume
    
    
    Rate
    
    
    Change
    
    
    Volume
    
    
    Rate
    
    
    ChangeIn thousandsInterest earned on:Federal funds sold
    
    $
    7
    
    
    $
    
    
    
    $
    7
    
    
    $
    (23
    )
    
    $
    (14
    )
    
    $
    (37
    )Certificates of deposit
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    Taxable securities
    
    
    (300
    )
    
    
    (130
    )
    
    
    (430
    )
    
    
    201
    
    
    
    121
    
    
    
    322Tax-exempt securities
    
    
    198
    
    
    
    (21
    )
    
    
    177
    
    
    
    128
    
    
    
    (4
    )
    
    
    124Loans
    
    
    (176
    )
    
    
    (963
    )
    
    
    (1,139
    )
    
    
    (80
    )
    
    
    (519
    )
    
    
    (599
    )Total interest earned
    
    $
    (253
    )
    
    $
    (1,114
    )
    
    $
    (1,367
    )
    
    $
    226
    
    
    $
    (416
    )
    
    $
    (190
    )Interest expense on:Savings deposits
    
    $
    3
    
    
    $
    (43
    )
    
    $
    (40
    )
    
    $
    (8
    )
    
    $
    (42
    )
    
    $
    (50
    )Time deposits
    
    
    1,101
    
    
    
    (1,304
    )
    
    
    (203
    )
    
    
    141
    
    
    
    (625
    )
    
    
    (484
    )NOW accounts
    
    
    
    
    
    
    (94
    )
    
    
    (94
    )
    
    
    (179
    )
    
    
    (391
    )
    
    
    (570
    )Money market accounts
    
    
    (1
    )
    
    
    (95
    )
    
    
    (96
    )
    
    
    (8
    )
    
    
    (159
    )
    
    
    (167
    )Other borrowing
    
    
    (434
    )
    
    
    (28
    )
    
    
    (462
    )
    
    
    (561
    )
    
    
    414
    
    
    
    (147
    )Total interest expense
    
    $
    669
    
    
    $
    (1,564
    )
    
    $
    (895
    )
    
    $
    (615
    )
    
    $
    (803
    )
    
    $
    (1,418
    )Net interest income
    
    $
    (922
    )
    
    $
    450
    
    
    $
    (472
    )
    
    $
    841
    
    
    $
    387
    
    
    $
    1,228
  19




---



##### Table of Contents



TABLE 5. INTEREST RATE SPREAD AND NET INTEREST MARGIN ON EARNING ASSETS
 (Taxable equivalent basis)
    
    2009
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateIn thousandsEarning assets
    
    $
    269,637
    
    
    
    5.72
    %
    
    $
    267,467
    
    
    
    6.27
    %
    
    $
    261,666
    
    
    
    6.49
    %Interest bearing liabilities
    
    $
    213,449
    
    
    
    2.54
    %
    
    $
    214,916
    
    
    
    2.93
    %
    
    $
    210,933
    
    
    
    3.66
    %Interest rate spread
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    3.34
    %
    
    
    
    
    
    
    2.83
    %Interest free sources used
to fund earning assets(1)
    
    
    56,188
    
    
    
    0.53
    %
    
    
    52,551
    
    
    
    0.58
    %
    
    
    50,733
    
    
    
    0.70
    %Total sources of funds
    
    $
    269,637
    
    
    
    
    
    
    $
    267,467
    
    
    
    
    
    
    $
    261,666Net interest margin
    
    
    
    
    
    
    3.71
    %
    
    
    
    
    
    
    3.92
    %
    
    
    
    
    
    
    3.53
    %
 
 (1)
    
    Non-interest bearing liabilities and shareholders equity less non-interest earning
assets.    PROVISION FOR LOAN LOSSES
  20




---



##### Table of Contents



NONINTEREST INCOME
            21




---



##### Table of Contents



NONINTEREST EXPENSES
      th th
 th
 22




---



##### Table of Contents



th
  23




---



##### Table of Contents



INCOME TAXES
  FINANCIAL CONDITION
  TABLE 6. SOURCES AND USES OF FUNDS
 2009
    
    
    2008
    
    
    2007Average
    
    
    Increase (Decrease)
    
    
    Average
    
    
    Increase (Decrease)
    
    
    AverageBalance
    
    
    Amount
    
    
    %
    
    
    Balance
    
    
    Amount
    
    
    %
    
    
    BalanceIn thousandsFunding uses:Federal funds
sold
    
    $
    2,428
    
    
    $
    2,428
    
    
    
    100.0
    %
    
    $
    
    
    
    $
    (701
    )
    
    
    (100.0
    )%
    
    $
    701Certificates of
deposit
    
    
    2,578
    
    
    
    2,578
    
    
    
    100.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Securities available
for sale
    
    
    64,454
    
    
    
    (210
    )
    
    
    (0.3
    )
    
    
    64,664
    
    
    
    7,744
    
    
    
    13.6
    
    
    
    56,920Loans
    
    
    200,177
    
    
    
    (2,626
    )
    
    
    (1.3
    )
    
    
    202,803
    
    
    
    (1,242
    )
    
    
    (0.6
    )
    
    
    204,045Total uses
    
    $
    269,637
    
    
    $
    2,170
    
    
    
    0.8
    %
    
    $
    267,467
    
    
    $
    5,801
    
    
    
    2.2
    %
    
    $
    261,666Funding sources:Interest-bearing demand deposits
    
    $
    35,125
    
    
    $
    (24
    )
    
    
    (0.1
    )%
    
    $
    35,149
    
    
    $
    (9,637
    )
    
    
    (21.5
    )%
    
    $
    44,786Savings deposits
    
    
    24,750
    
    
    
    1,210
    
    
    
    5.1
    
    
    
    23,540
    
    
    
    (1,795
    )
    
    
    (7.1
    )
    
    
    25,335Time deposits
    
    
    140,905
    
    
    
    15,216
    
    
    
    12.1
    
    
    
    125,689
    
    
    
    3,050
    
    
    
    2.5
    
    
    
    122,639Short-term borrowings
    
    
    12,669
    
    
    
    (17,869
    )
    
    
    (58.5
    )
    
    
    30,538
    
    
    
    12,365
    
    
    
    68.0
    
    
    
    18,173Noninterest bearing funds, net(1)
    
    
    56,188
    
    
    
    3,637
    
    
    
    6.9
    
    
    
    52,551
    
    
    
    1,818
    
    
    
    3.6
    
    
    
    50,733Total sources
    
    $
    269,637
    
    
    $
    2,170
    
    
    
    0.8
    %
    
    $
    267,467
    
    
    $
    5,801
    
    
    
    2.2
    %
    
    $
    261,666
 
 (1)
    
    Noninterest bearing liabilities and shareholders equity less noninterest earning
assets.    24




---



##### Table of Contents



LOAN PORTFOLIO
   TABLE 7. LOANS AND LEASES OUTSTANDING
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005In thousandsReal estate
    
    $
    129,509
    
    
    $
    137,770
    
    
    $
    143,012
    
    
    $
    143,767
    
    
    $
    125,723Commercial real estate
    
    
    43,972
    
    
    
    40,614
    
    
    
    37,588
    
    
    
    36,967
    
    
    
    29,492Consumer
    
    
    16,684
    
    
    
    16,666
    
    
    
    15,544
    
    
    
    15,934
    
    
    
    16,802Commercial
    
    
    7,277
    
    
    
    7,931
    
    
    
    8,179
    
    
    
    9,172
    
    
    
    9,314Overdrafts
    
    
    203
    
    
    
    92
    
    
    
    104
    
    
    
    163
    
    
    
    356$
    197,645
    
    
    $
    203,073
    
    
    $
    204,427
    
    
    $
    206,003
    
    
    $
    181,687Leases
    
    
    585
    
    
    
    105
    
    
    
    113
    
    
    
    124
    
    
    
    145$
    198,230
    
    
    $
    203,178
    
    
    $
    204,540
    
    
    $
    206,127
    
    
    $
    181,832Net deferred loan fees, premiums and
discounts
    
    
    380
    
    
    
    325
    
    
    
    273
    
    
    
    324
    
    
    
    397Allowance for loan
losses
    
    
    (3,903
    )
    
    
    (2,751
    )
    
    
    (2,144
    )
    
    
    (2,132
    )
    
    
    (2,022
    )$
    194,707
    
    
    $
    200,752
    
    
    $
    202,669
    
    
    $
    204,319
    
    
    $
    180,207
 25




---



##### Table of Contents



26




---



##### Table of Contents



TABLE 8. CONTRACTUAL MATURITY AND SENSITIVITY
 December 31, 2009One year
    
    
    One through
    
    
    Overor less
    
    
    Five years
    
    
    Five years
    
    
    TotalIn thousandsCommercial, financial and agricultural:Floating rate
    
    $
    28,383
    
    
    $
    14,910
    
    
    $
    
    
    
    $
    43,293Fixed rate
    
    
    1,989
    
    
    
    4,040
    
    
    
    1,927
    
    
    
    7,956Total
    
    $
    30,372
    
    
    $
    18,950
    
    
    $
    1,927
    
    
    $
    51,249Real estate  mortgage:Floating rate
    
    $
    11,046
    
    
    $
    60,946
    
    
    $
    402
    
    
    $
    72,394Fixed rate
    
    
    923
    
    
    
    4,728
    
    
    
    49,845
    
    
    
    55,496Total
    
    $
    11,969
    
    
    $
    65,674
    
    
    $
    50,247
    
    
    $
    127,890Real estate  construction:Floating rate
    
    $
    1,547
    
    
    $
    
    
    
    $
    
    
    
    $
    1,547Fixed rate
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    72Total
    
    $
    1,619
    
    
    $
    
    
    
    $
    
    
    
    $
    1,619Consumer:Floating rate
    
    $
    206
    
    
    $
    115
    
    
    $
    
    
    
    $
    321Fixed rate
    
    
    1,050
    
    
    
    9,992
    
    
    
    5,524
    
    
    
    16,566Total
    
    $
    1,256
    
    
    $
    10,107
    
    
    $
    5,524
    
    
    $
    16,887Lease financing:Floating rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Fixed rate
    
    
    
    
    
    
    488
    
    
    
    97
    
    
    
    585Total
    
    $
    
    
    
    $
    488
    
    
    $
    97
    
    
    $
    585
  27




---



##### Table of Contents



NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
   TABLE 9. NONPERFORMING ASSETS
 December 312009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005In thousandsForeclosed real estate (other real estate owned)
    
    $
    387
    
    
    $
    253
    
    
    $
    151
    
    
    $
    
    
    
    $
    Impaired loans, not on nonaccrual
    
    
    827
    
    
    
    131
    
    
    
    848
    
    
    
    
    
    
    
    Nonaccrual loans, impaired (1)
    
    
    109
    
    
    
    1,096
    
    
    
    562
    
    
    
    
    
    
    
    Nonaccrual loans, not impaired
    
    
    1,456
    
    
    
    403
    
    
    
    552
    
    
    
    402
    
    
    
    790Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Total non-performing assets
    
    $
    2,779
    
    
    $
    1,883
    
    
    $
    2,113
    
    
    $
    407
    
    
    $
    790
 
 (1)
    
    Some of these loans have government agency guarantees reducing the
banks exposure by $31,379 for December 31, 2009 and $57,611 for December 31, 2008.  28




---



##### Table of Contents



TABLE 10. ALLOWANCE FOR LOAN LOSSES
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005In thousandsLoans outstanding at end of year
    
    $
    198,230
    
    
    $
    203,178
    
    
    $
    204,540
    
    
    $
    206,127
    
    
    $
    181,832Daily average balance of loans and leases
    
    $
    200,177
    
    
    $
    202,803
    
    
    $
    204,045
    
    
    $
    194,712
    
    
    $
    170,158Balance of allowance for loan losses
at beginning of year
    
    $
    2,751
    
    
    $
    2,144
    
    
    $
    2,132
    
    
    $
    2,022
    
    
    $
    1,807Loans charged off:Commercial, financial and agricultural
    
    $
    4
    
    
    $
    48
    
    
    $
    
    
    
    $
    20
    
    
    $
    Real estate  mortgage
    
    
    508
    
    
    
    178
    
    
    
    20
    
    
    
    
    
    
    
    Consumer
    
    
    305
    
    
    
    296
    
    
    
    320
    
    
    
    298
    
    
    
    306Total loans charged off
    
    $
    817
    
    
    $
    522
    
    
    $
    340
    
    
    $
    318
    
    
    $
    306Recoveries:Commercial, financial and agricultural
    
    $
    1
    
    
    $
    21
    
    
    $
    5
    
    
    $
    
    
    
    $
    2Consumer
    
    
    89
    
    
    
    166
    
    
    
    178
    
    
    
    152
    
    
    
    167Real estate  mortgage
    
    
    26
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total recoveries
    
    $
    116
    
    
    $
    189
    
    
    $
    183
    
    
    $
    152
    
    
    $
    169Net charge-offs
    
    $
    701
    
    
    $
    333
    
    
    $
    157
    
    
    $
    166
    
    
    $
    137Provision charged to expense
    
    $
    1,853
    
    
    $
    940
    
    
    $
    169
    
    
    $
    276
    
    
    $
    352Balance, end of year
    
    $
    3,903
    
    
    $
    2,751
    
    
    $
    2,144
    
    
    $
    2,132
    
    
    $
    2,022Selected Asset Quality Ratios:Net charge-offs to average loans
    
    
    0.35
    %
    
    
    0.16
    %
    
    
    0.08
    %
    
    
    0.09
    %
    
    
    0.08
    %Allowance for loan losses to loans
outstanding at end of year
    
    
    1.97
    %
    
    
    1.35
    %
    
    
    1.05
    %
    
    
    1.03
    %
    
    
    1.11
    %Non-performing assets (1) to total assets
    
    
    0.96
    %
    
    
    0.67
    %
    
    
    0.73
    %
    
    
    0.15
    %
    
    
    0.31
    %Non-accrual loans to total loans
    
    
    0.79
    %
    
    
    0.75
    %
    
    
    0.54
    %
    
    
    0.20
    %
    
    
    0.43
    %
 
 (1)
    
    Includes accruing loans past due 90 days or more, impaired loans and other real
estate owned 29




---



##### Table of Contents



Table 11 summarizes the allocation of the allowance for loan losses by loan type:
 TABLE 11. HISTORICAL ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans inEach
    
    
    
    
    
    
    Each
    
    
    
    
    
    
    Each
    
    
    
    
    
    
    Each
    
    
    
    
    
    
    EachAmount
    
    
    Category
    
    
    Amount
    
    
    Category
    
    
    Amount
    
    
    Category
    
    
    Amount
    
    
    Category
    
    
    Amount
    
    
    CategoryIn thousandsCommercial, financial
and agriculture
    
    $
    1,428
    
    
    
    26
    %
    
    $
    1,178
    
    
    
    22
    %
    
    $
    886
    
    
    
    22
    %
    
    $
    1,231
    
    
    
    22
    %
    
    $
    1,056
    
    
    
    21
    %Real estate-
construction and
mortgages
    
    
    1,613
    
    
    
    66
    
    
    
    543
    
    
    
    69
    
    
    
    479
    
    
    
    69
    
    
    
    508
    
    
    
    70
    
    
    
    528
    
    
    
    69Consumer, leasing
and other
    
    
    483
    
    
    
    8
    
    
    
    415
    
    
    
    8
    
    
    
    244
    
    
    
    8
    
    
    
    225
    
    
    
    8
    
    
    
    303
    
    
    
    10Impaired loans
    
    
    235
    
    
    
    0
    
    
    
    383
    
    
    
    1
    
    
    
    255
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    144
    
    
    
    N/A
    
    
    
    232
    
    
    
    N/A
    
    
    
    280
    
    
    
    N/A
    
    
    
    168
    
    
    
    N/A
    
    
    
    135
    
    
    
    N/ATotal
    
    $
    3,903
    
    
    
    100
    %
    
    $
    2,751
    
    
    
    100
    %
    
    $
    2,144
    
    
    
    100
    %
    
    $
    2,132
    
    
    
    100
    %
    
    $
    2,022
    
    
    
    100
    %
 .
 SECURITIES PORTFOLIO AND FEDERAL FUNDS SOLD
  .
 30




---



##### Table of Contents



TABLE 12. INVESTMENT SECURITIES
 December 312009
    
    
    2008
    
    
    2007Available for sale:U.S. Government agencies and
corporations
    
    $
    8,623
    
    
    $
    10,804
    
    
    $
    31,170Corporate bonds
    
    
    4,812
    
    
    
    6,592
    
    
    
    State and municipal securities
    
    
    32,533
    
    
    
    16,965
    
    
    
    11,477Mortgage-backed securities
    
    
    13,416
    
    
    
    17,783
    
    
    
    14,139Collateralized mortgage obligations
    
    
    12,889
    
    
    
    10,461
    
    
    
    9,231Restricted securities
    
    
    2,321
    
    
    
    2,321
    
    
    
    2,624Cerificates of deposit
    
    
    1,989
    
    
    
    
    
    
    
    Total
    
    $
    76,583
    
    
    $
    64,926
    
    
    $
    68,641
   DEPOSITS AND OTHER FUNDING SOURCES
     31




---



##### Table of Contents



32




---



##### Table of Contents



TABLE 13. MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
 Amount
    
    
    PercentIn thousandsThree months or less
    
    $
    7,420
    
    
    
    10.17
    %Three through six months
    
    
    9,500
    
    
    
    13.02Six through twelve months
    
    
    17,322
    
    
    
    23.73Over twelve months
    
    
    38,740
    
    
    
    53.08Total
    
    $
    72,982
    
    
    
    100
    %
 CONTRACTUAL OBLIGATIONS
  TABLE 14. CONTRACTUAL OBLIGATIONS
 Payments due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsPurchase obligations
    
    $
    3,808,777
    
    
    $
    474,447
    
    
    $
    967,164
    
    
    $
    985,434
    
    
    
    1,381,732Other long-term liabilities
reflected on the registrants
balance sheet under GAAPSupplemental retirement liability (1)
    
    
    199,642
    
    
    
    
    
    
    
    17,500
    
    
    
    60,000
    
    
    
    122,142Pension liability
    
    
    1,869,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869,989401k liability
    
    
    36,243
    
    
    
    36,243
    
    
    
    
    
    
    
    
    
    
    
    Deferred compensation
    
    
    1,197,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,197,321Post retirement liability (1)
    
    
    275,480
    
    
    
    58,493
    
    
    
    88,077
    
    
    
    57,217
    
    
    
    71,693Total contractual obligations
    
    $
    7,387,452
    
    
    $
    569,183
    
    
    $
    1,072,741
    
    
    $
    1,102,651
    
    
    $
    4,642,877
 
 (1)
    
    These amounts represent the net present value of cash flow
payments at December 31, 2009. CAPITAL RESOURCES
   33




---



##### Table of Contents



RETURN ON EQUITY AND ASSETS
  TABLE 15. OPERATING AND CAPITAL RATIOS
 Years Ended December 31,2009
    
    2008Return on average assets
    
    
    .75
    %
    
    
    .96
    %Return on average equity
    
    
    8.88
    
    
    
    11.66Dividend payout ratio
    
    
    32.04
    
    
    
    31.48Average equity to average assets ratio
    
    
    8.49
    
    
    
    8.21
 LIQUIDITY AND INTEREST RATE SENSITIVITY
    34




---



##### Table of Contents



TABLE 16. INTEREST SENSITIVITY ANALYSIS
 December 31, 2009Interest Sensitivity Period2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueIn thousandsRate sensitive assetsLoans, net of unearned interest
    
    $
    94,705
    
    
    $
    21,956
    
    
    $
    22,187
    
    
    $
    14,568
    
    
    $
    15,083
    
    
    $
    26,210
    
    
    
    194,707
    
    
    $
    191,451Average interest rate
    
    
    6.76
    %
    
    
    7.61
    %
    
    
    7.76
    %
    
    
    7.93
    %
    
    
    6.58
    %
    
    
    5.71
    %
    
    
    7.06
    %Securities
    
    
    18,215
    
    
    
    5,132
    
    
    
    5,289
    
    
    
    4,493
    
    
    
    4,491
    
    
    
    34,653
    
    
    
    72,273
    
    
    
    72,273Average interest rate
    
    
    0.55
    %
    
    
    1.28
    %
    
    
    1.93
    %
    
    
    2.35
    %
    
    
    2.75
    %
    
    
    4.25
    %
    
    
    2.19
    %Total interest sensitive assets
    
    $
    112,920
    
    
    $
    27,088
    
    
    $
    27,476
    
    
    $
    19,061
    
    
    $
    19,574
    
    
    $
    60,863
    
    
    $
    266,980Interest sensitive liabilitiesNon-interest-bearing deposits
    
    $
    4,338
    
    
    $
    4,338
    
    
    $
    4,338
    
    
    $
    4,338
    
    
    $
    4,338
    
    
    $
    21,692
    
    
    
    43,382
    
    
    $
    43,382Average interest rate
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Savings and interest-bearing checking
    
    
    6,049
    
    
    
    6,049
    
    
    
    6,049
    
    
    
    6,049
    
    
    
    6,049
    
    
    
    30,245
    
    
    
    60,490
    
    
    
    60,490Average interest rate
    
    
    0.12
    %
    
    
    0.12
    %
    
    
    0.12
    %
    
    
    0.12
    %
    
    
    0.12
    %
    
    
    0.12
    %
    
    
    0.12
    %Time deposits
    
    
    63,331
    
    
    
    48,548
    
    
    
    25,122
    
    
    
    5,263
    
    
    
    6,156
    
    
    
    
    
    
    
    148,420
    
    
    
    157,634Average interest rate
    
    
    0.93
    %
    
    
    1.25
    %
    
    
    1.55
    %
    
    
    2.05
    %
    
    
    2.40
    %
    
    
    
    %
    
    
    1.48
    %Total interest sensitive liabilities
    
    $
    73,718
    
    
    $
    58,935
    
    
    $
    35,509
    
    
    $
    15,650
    
    
    $
    16,543
    
    
    $
    51,937
    
    
    $
    252,292GAP
    
    $
    39,202
    
    
    $
    (31,847
    )
    
    $
    (8,033
    )
    
    $
    3,411
    
    
    $
    3,031
    
    
    $
    8,926Cumulative GAP
    
    $
    39,202
    
    
    $
    7,355
    
    
    $
    (678
    )
    
    $
    2,733
    
    
    $
    5,764
    
    
    $
    14,690GAP to sensitive assets ratio
    
    
    14.68
    %
    
    
    (11.93)
    %
    
    
    (3.01)
    %
    
    
    1.28
    %
    
    
    1.14
    %
    
    
    3.34
    %Cumulative GAP to sensitive
assets ratio
    
    
    14.68
    %
    
    
    2.75
    %
    
    
    (0.26)
    %
    
    
    1.02
    %
    
    
    2.16
    %
    
    
    5.50
    %GAP to total assets ratio
    
    
    13.54
    %
    
    
    (11.00)
    %
    
    
    (2.77)
    %
    
    
    1.18
    %
    
    
    1.05
    %
    
    
    3.08
    %Cumulative GAP to total assets ratio
    
    
    13.54
    %
    
    
    2.54
    %
    
    
    (0.23)
    %
    
    
    0.95
    %
    
    
    2.00
    %
    
    
    5.08
    %
 IMPACT OF INFLATION
    
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  35




---



##### 



Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
  CNB Financial Services, Inc. and SubsidiaryManagements Report on Internal Control
    
    
    37Report of Independent Registered Public Accounting Firm
    
    
    38Consolidated Balance Sheets
    
    
    39Consolidated Statements of Income
    
    
    40Consolidated Statements of Stockholders Equity
    
    
    41Consolidated Statements of Cash Flows
    
    
    42Notes to Consolidated Financial Statements
    
    
    43EX-21EX-31.1EX-31.2EX-32.1EX-32.2
  36




---



##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL
 
  Internal Control  Integrated Framework
  /s/ Thomas F. Rokisky
    
    /s/ Rebecca S. StotlerThomas F. Rokisky
President and Chief Executive Officer
    
    Rebecca S. Stotler
Sr. Vice President and Chief Financial OfficerFebruary 25, 2010
 37




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ SMITH ELLIOTT KEARNS & COMPANY, LLC 
 38




---



##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2009 AND 2008
 2009
    
    
    2008ASSETSCash and due from banks
    
    $
    5,068,118
    
    
    $
    4,770,724Certificates of deposit
    
    
    1,989,017
    
    
    
    Securities available for sale
(at approximate market value)
    
    
    72,272,665
    
    
    
    62,604,735Federal Home Loan Bank stock, at cost
    
    
    2,321,300
    
    
    
    2,321,300Loans and leases receivable, net
    
    
    194,707,226
    
    
    
    200,752,202Accrued interest receivable
    
    
    1,334,704
    
    
    
    1,272,742Foreclosed real estate (held for sale), net
    
    
    386,500
    
    
    
    253,300Premises and equipment, net
    
    
    5,554,927
    
    
    
    5,842,368Deferred income taxes
    
    
    1,753,665
    
    
    
    1,889,746Cash surrender value of life insurance
    
    
    1,601,720
    
    
    
    1,617,055Intangible assets
    
    
    162,628
    
    
    
    274,145Other assets
    
    
    2,345,418
    
    
    
    658,665TOTAL ASSETS
    
    $
    289,497,888
    
    
    $
    282,256,982LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits:Demand
    
    $
    43,381,922
    
    
    $
    39,469,377Interest-bearing demand
    
    
    35,564,826
    
    
    
    35,554,781Savings
    
    
    24,925,247
    
    
    
    23,476,255Time, $100,000 and over
    
    
    72,982,196
    
    
    
    55,269,424Other time
    
    
    75,437,663
    
    
    
    74,125,229$
    252,291,854
    
    
    $
    227,895,066Accrued interest payable
    
    
    1,170,417
    
    
    
    1,126,219FHLB borrowings
    
    
    6,400,000
    
    
    
    25,445,000Accrued expenses and other liabilities
    
    
    4,005,322
    
    
    
    4,572,907TOTAL LIABILITIES
    
    $
    263,867,593
    
    
    $
    259,039,192SHAREHOLDERS EQUITYCommon stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares issued at December 31, 2009 and
2008 and 443,648 and 449,151 outstanding at December 31, 2009
and 2008, respectively
    
    $
    458,048
    
    
    $
    458,048Capital surplus
    
    
    4,163,592
    
    
    
    4,163,592Retained earnings
    
    
    22,476,562
    
    
    
    21,015,652Accumulated other comprehensive income (loss)
    
    
    (642,839
    )
    
    
    (1,848,990
    )$
    26,455,363
    
    
    $
    23,788,302Less treasury stock, at cost, 14,400 shares in 2009 and 8,897
shares in 2008
    
    
    (825,068
    )
    
    
    (570,512
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    25,630,295
    
    
    $
    23,217,790TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    289,497,888
    
    
    $
    282,256,982
  39




---



##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007INTEREST INCOMEInterest and fees on loans
    
    $
    12,846,225
    
    
    $
    13,971,297
    
    
    $
    14,585,845Interest and dividends on securities:U.S. Government agencies and
corporations
    
    
    247,780
    
    
    
    660,426
    
    
    
    1,372,612Corporate bonds
    
    
    361,768
    
    
    
    346,400
    
    
    
    Mortgage backed securities
    
    
    1,362,588
    
    
    
    1,409,912
    
    
    
    708,398State and political subdivisions
    
    
    798,067
    
    
    
    520,511
    
    
    
    398,255Interest on certificates of deposit
    
    
    18,484
    
    
    
    
    
    
    
    Dividend income from FHLB stock
    
    
    
    
    
    
    84,316
    
    
    
    93,883Interest on FHLB deposits
    
    
    35
    
    
    
    2,766
    
    
    
    5,489Interest on federal funds sold and deposits
    
    
    7,002
    
    
    
    
    
    
    
    36,921$
    15,641,949
    
    
    $
    16,995,628
    
    
    $
    17,201,403INTEREST EXPENSEInterest on interest bearing demand,
savings and time deposits
    
    $
    5,106,052
    
    
    $
    5,539,747
    
    
    $
    6,809,967Interest on FHLB borrowings
    
    
    305,530
    
    
    
    767,619
    
    
    
    915,241$
    5,411,582
    
    
    $
    6,307,366
    
    
    $
    7,725,208NET INTEREST INCOME
    
    $
    10,230,367
    
    
    $
    10,688,262
    
    
    $
    9,476,195PROVISION FOR LOAN LOSSES
    
    
    1,852,726
    
    
    
    940,500
    
    
    
    168,999NET INTEREST INCOME AFTERPROVISION FOR LOAN LOSSES
    
    $
    8,377,641
    
    
    $
    9,747,762
    
    
    $
    9,307,196NONINTEREST INCOMEService charges on deposit accounts
    
    $
    1,321,910
    
    
    $
    1,390,288
    
    
    $
    1,389,868Other service charges and fees
    
    
    605,545
    
    
    
    577,337
    
    
    
    541,753Trust fee income
    
    
    197,232
    
    
    
    231,660
    
    
    
    242,831Other operating income
    
    
    135,030
    
    
    
    68,315
    
    
    
    129,322Net gain on sales of loans
    
    
    36,125
    
    
    
    51,782
    
    
    
    86,871Net gain (loss) on sales and calls of securities
    
    
    35,444
    
    
    
    119,550
    
    
    
    (2,688
    )Other than temporary impairment on investment securities
    
    
    
    
    
    
    (86,468
    )
    
    
    Net gain (loss) on sale of other real estate owned
    
    
    (148,921
    )
    
    
    (69,264
    )
    
    
    Net gain (loss) on disposal of premises, equipment and
software
    
    
    (7,575
    )
    
    
    (49,212
    )
    
    
    225Net gain (loss) on sale of repossessed assets
    
    
    (11,600
    )
    
    
    
    
    
    
    Income from title company
    
    
    8,262
    
    
    
    7,030
    
    
    
    12,023$
    2,171,452
    
    
    $
    2,241,018
    
    
    $
    2,400,205NONINTEREST EXPENSESSalaries
    
    $
    2,714,069
    
    
    $
    2,883,534
    
    
    $
    2,928,925Employee benefits
    
    
    1,148,288
    
    
    
    1,277,780
    
    
    
    1,241,633Occupancy of premises
    
    
    492,600
    
    
    
    504,608
    
    
    
    521,962Furniture and equipment expense
    
    
    576,456
    
    
    
    779,423
    
    
    
    784,588Other operating expenses
    
    
    2,902,331
    
    
    
    2,520,944
    
    
    
    2,535,246$
    7,833,744
    
    
    $
    7,966,289
    
    
    $
    8,012,354INCOME BEFORE INCOME TAXES
    
    $
    2,715,349
    
    
    $
    4,022,491
    
    
    $
    3,695,047PROVISION FOR INCOME TAXES
    
    
    565,618
    
    
    
    1,307,280
    
    
    
    1,190,791NET INCOME
    
    $
    2,149,731
    
    
    $
    2,715,211
    
    
    $
    2,504,256BASIC EARNINGS PER SHARE
    
    $
    4.82
    
    
    $
    6.01
    
    
    $
    5.48
  40




---



##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 AccumulatedOther
    
    
    TotalCommon
    
    
    Treasury
    
    
    Capital
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Surplus
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBALANCE, DECEMBER 31, 2006
    
    $
    458,048
    
    
    $
    
    
    
    $
    4,163,592
    
    
    $
    17,421,402
    
    
    $
    (1,720,780
    )
    
    $
    20,322,262Comprehensive income:Net income for 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,504,256
    
    
    
    
    
    
    
    2,504,256Change in unrealized gains
(losses) on securities available
for sale (net of tax of $395,359)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    645,060
    
    
    
    645,060Change in unfunded pension liability
( net of tax of $200,979)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327,914
    
    
    
    327,914Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,477,230Acquisition of treasury stock, at cost,
3,099 shares
    
    
    
    
    
    
    (207,633
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207,633
    )Cash dividends ($1.69 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770,414
    )
    
    
    
    
    
    
    (770,414
    )BALANCE, DECEMBER 31, 2007
    
    $
    458,048
    
    
    $
    (207,633
    )
    
    $
    4,163,592
    
    
    $
    19,155,244
    
    
    $
    (747,806
    )
    
    $
    22,821,445Comprehensive income:Net income for 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,715,211
    
    
    
    
    
    
    
    2,715,211Change in unrealized gains
(losses) on securities available
for sale (net of tax of $112,510)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,569
    )
    
    
    (183,569
    )Change in unfunded pension liability
( net of tax of $562,408)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (917,615
    )
    
    
    (917,615
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,614,027Acquisition of treasury stock, at cost,
5,798 shares
    
    
    
    
    
    
    (362,879
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (362,879
    )Cash dividends ($1.90 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (854,803
    )
    
    
    
    
    
    
    (854,803
    )BALANCE, DECEMBER 31, 2008
    
    $
    458,048
    
    
    $
    (570,512
    )
    
    $
    4,163,592
    
    
    $
    21,015,652
    
    
    $
    (1,848,990
    )
    
    $
    23,217,790Comprehensive income:Net income for 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,149,731
    
    
    
    
    
    
    
    2,149,731Change in unrealized gains
(losses) on securities available
for sale (net of tax of $578,321)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943,577
    
    
    
    943,577Change in unfunded pension liability
( net of tax of $160,932)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262,574
    
    
    
    262,574Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,355,882Acquisition of treasury stock, at cost,
5,503 shares
    
    
    
    
    
    
    (254,556
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254,556
    )Cash dividends ($1.55 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (688,821
    )
    
    
    
    
    
    
    (688,821
    )BALANCE, DECEMBER 31, 2009
    
    $
    458,048
    
    
    $
    (825,068
    )
    
    $
    4,163,592
    
    
    $
    22,476,562
    
    
    $
    (642,839
    )
    
    $
    25,630,295
  41




---



##### Table of Contents



CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    2,149,731
    
    
    $
    2,715,211
    
    
    $
    2,504,256Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization on premises, equipment and
software
    
    
    505,206
    
    
    
    547,736
    
    
    
    579,761Amortization of intangible assets
    
    
    111,517
    
    
    
    111,516
    
    
    
    111,517Provision for loan losses
    
    
    1,852,726
    
    
    
    940,500
    
    
    
    168,999Deferred income taxes
    
    
    (603,173
    )
    
    
    (286,984
    )
    
    
    (42,015
    )Net (gain) loss on sales and calls of securities
    
    
    (35,444
    )
    
    
    (119,550
    )
    
    
    2,688Other than temporary impairment on investment securities
    
    
    
    
    
    
    86,468
    
    
    
    Loss on sale of real estate owned
    
    
    148,921
    
    
    
    69,264
    
    
    
    Deferred gains on sale of real estate owned
    
    
    (26,514
    )
    
    
    
    
    
    
    (Gain) loss on disposal of premises, equipment and software
    
    
    7,575
    
    
    
    49,212
    
    
    
    (225
    )Net (gain) on loans sold
    
    
    (36,125
    )
    
    
    (51,782
    )
    
    
    (86,871
    )Loans originated for sale
    
    
    (7,776,218
    )
    
    
    (4,239,250
    )
    
    
    (5,314,950
    )Proceeds from loans sold
    
    
    7,812,168
    
    
    
    4,291,032
    
    
    
    5,401,821(Gain) on sale of stock
    
    
    
    
    
    
    
    
    
    
    (59,369
    )(Increase) decrease in accrued interest receivable
    
    
    (61,962
    )
    
    
    134,062
    
    
    
    (52,763
    )(Increase) decrease in other assets
    
    
    (1,712,600
    )
    
    
    299,867
    
    
    
    (86,477
    )Increase (decrease) in accrued interest payable
    
    
    44,198
    
    
    
    (154,947
    )
    
    
    209,176(Increase) in cash surrender value on life insurance in excess
of premiums paid
    
    
    (123,641
    )
    
    
    (67,528
    )
    
    
    (38,138
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    (144,079
    )
    
    
    924,764
    
    
    
    (394,537
    )Amortization of deferred loan (fees) cost
    
    
    172,404
    
    
    
    71,137
    
    
    
    82,770Amortization (accretion) of premium and discount on investments
    
    
    52,012
    
    
    
    12,375
    
    
    
    13,254Amortization (accretion) of premium and discount on
certificates of deposit
    
    
    (380
    )
    
    
    
    
    
    
    NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    2,336,322
    
    
    $
    5,333,103
    
    
    $
    2,998,897CASH FLOWS FROM INVESTING ACTIVITIESNet decrease in loans
    
    $
    3,073,475
    
    
    $
    229,039
    
    
    $
    1,252,722Proceeds from sales of securities
    
    
    3,809,934
    
    
    
    2,803,399
    
    
    
    3,796,972Proceeds from maturities, repayments and calls of securities
    
    
    18,319,500
    
    
    
    35,569,701
    
    
    
    4,250,091Proceeds from maturities of certificates of deposit
    
    
    4,660,000
    
    
    
    
    
    
    
    Purchases of securities
    
    
    (30,298,214
    )
    
    
    (35,230,720
    )
    
    
    (22,177,257
    )Purchases of certificates of deposit
    
    
    (6,648,620
    )
    
    
    
    
    
    
    Purchases of Federal Home Loan Bank stock
    
    
    
    
    
    
    (1,697,000
    )
    
    
    (2,598,500
    )Redemptions of Federal Home Loan Bank stock
    
    
    
    
    
    
    1,999,300
    
    
    
    1,727,900Redemptions of Federal Reserve Bank stock
    
    
    
    
    
    
    
    
    
    
    Purchases of premises, equipment and software
    
    
    (194,502
    )
    
    
    (400,745
    )
    
    
    (408,326
    )Proceeds from sales of premises and equipment
    
    
    
    
    
    
    
    
    
    
    1,270Proceeds from sale of real estate owned
    
    
    725,430
    
    
    
    471,282
    
    
    
    Proceeds from life insurance death benefits
    
    
    194,184
    
    
    
    
    
    
    
    Costs to acquire foreclosed real estate
    
    
    (34,491
    )
    
    
    (17,034
    )
    
    
    (5,188
    )Proceeds from sale of stock
    
    
    
    
    
    
    
    
    
    
    59,369Investment in and/or return of capital from title company
    
    
    1,173
    
    
    
    70
    
    
    
    (123
    )Net decrease in federal funds sold
    
    
    
    
    
    
    
    
    
    
    9,000Premiums paid on life insurance
    
    
    (55,208
    )
    
    
    (58,434
    )
    
    
    (58,434
    )NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    $
    (6,447,339
    )
    
    $
    3,668,858
    
    
    $
    (14,150,504
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in demand and savings deposits
    
    $
    5,371,582
    
    
    $
    (2,931,661
    )
    
    $
    (21,417,803
    )Net increase in time deposits
    
    
    19,025,206
    
    
    
    4,182,013
    
    
    
    14,979,777Net increase (decrease) in FHLB borrowings
    
    
    (19,045,000
    )
    
    
    (12,055,000
    )
    
    
    19,000,000Purchase of treasury stock
    
    
    (254,556
    )
    
    
    (362,879
    )
    
    
    (207,633
    )Cash dividends paid
    
    
    (688,821
    )
    
    
    (854,803
    )
    
    
    (770,414
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    $
    4,408,411
    
    
    $
    (12,022,330
    )
    
    $
    11,583,927NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    $
    297,394
    
    
    $
    (3,020,369
    )
    
    $
    432,320CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    4,770,724
    
    
    
    7,791,093
    
    
    
    7,358,773CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    5,068,118
    
    
    $
    4,770,724
    
    
    $
    7,791,093SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid during the year:Interest paid on deposits and borrowed funds
    
    $
    5,367,384
    
    
    $
    6,462,313
    
    
    $
    7,516,032Income taxes
    
    $
    1,217,700
    
    
    $
    1,577,750
    
    
    $
    1,165,500Net transfer to foreclosed real estate, held for sale
from loans receivable
    
    $
    1,395,474
    
    
    $
    767,341
    
    
    $
    145,657Unrealized gain (loss) on investment securities
available for sale (net of tax)
    
    $
    943,578
    
    
    $
    (183,569
    )
    
    $
    645,060
  42




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Nature of Operations
      Principles of Consolidation
  Use of Estimates
  Securities and Mortgage-Backed Securities
     43




---



##### Table of Contents



Impaired loans
 Accounting by Creditors for Impairment of a Loan
 Allowance for Loan Losses
   Loans Held for Sale
  Intangible Assets
  Loan Servicing
  44




---



##### Table of Contents



Interest Income on Loans
  Nonperforming/Nonaccrual Assets
  Loans and Leases Receivable
  Loan Origination Fees and Costs
  Premises and Equipment
  Income Taxes
     Pension Plan
  45




---



##### Table of Contents



Cash and Cash Equivalents
  Earnings and Dividends Per Share
  Off-Balance Sheet Financial Instruments
  Postretirement and Postemployment Benefits Other Than Pensions
  Foreclosed Real Estate
  Trust Assets
  Advertising Costs
  Comprehensive Income
   46




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Additional pension liability adjustment
arising during the year
    
    $
    423,506
    
    
    $
    (1,480,023
    )
    
    $
    528,893Unrealized holding gains (losses) arising during
the year on securities available for sale and
certificates of deposit
    
    
    1,557,342
    
    
    
    (176,529
    )
    
    
    1,037,731Reclassification adjustment for (gains) losses
realized in net income on sale of securities
    
    
    (35,444
    )
    
    
    (119,550
    )
    
    
    2,688Net change in accumulated other comprehensive
income before taxes
    
    $
    1,945,404
    
    
    $
    (1,776,102
    )
    
    $
    1,569,312Tax effect
    
    
    (739,253
    )
    
    
    674,918
    
    
    
    (596,338
    )Net change
    
    $
    1,206,151
    
    
    $
    (1,101,184
    )
    
    $
    972,974
 Recently Issued Accounting Standards
 FASB Accounting Standards Codification (ASC) Topic 105  Generally Accepted Accounting
Principles (Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162)
(ASC 105).
 ASC Topic 855  Subsequent Events (Statement No. 165 , Subsequent Events) (ASC 855) .
 ASC Topic 860  Transfers and Servicing (Statement No. 166, Accounting for Transfers of
Financial Assets  an amendment of FASB Statement No. 140) (ASC 860).
 ASC Topic 810  Consolidation (Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statement s  an amendment of ARB No. 51) (ASC 810).
 47




---



##### Table of Contents



ASC Topic 810  Consolidation (Statement No. 167, Amendments to FASB Interpretation No.
46R) (ASC 810)
 ASC Topic 820  Fair Value Measurements and Disclosures (Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderly) (ASC 820).
 ASC Topic 825  Financial Instruments (FSP FAS 107-1 and APB 28-1, Interim Disclosures
about Fair Value of Financial Instruments) (ASC 825).
 ASC Topic 320  Investments  Debt and Equity Securities (FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments) (ASC 320).
 ASC Topic 805  Business Combinations (Statement No. 141 (Revised 2008), Business
Combinations) (ASC 805).
 ASC Topic 944  Financial Services  Insurance (Statement No. 163, Accounting for
Financial Guarantee Insurance Contracts  an interpretation of FASB Statement No. 60) (ASC
944).
 ASC Topic 715  Compensation  Retirement Benefits (FSP FAS 132R-1, Employers
Disclosures about Postretirement Benefit Plan Assets) (ASC 715).
 48




---



##### Table of Contents



Accounting Standards Update (ASU) 2010-6  Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements.
    NOTE 2. INVESTMENT IN LIMITED LIABILITY COMPANY
   MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
DECEMBER 31, 2009 AND 2008
 2009
    
    
    2008ASSETSCash
    
    $
    
    
    
    $
    3,474TOTAL ASSETS
    
    $
    
    
    
    $
    3,474MEMBERS EQUITY
    
    $
    
    
    
    $
    3,474TOTAL MEMBERS EQUITY
    
    $
    
    
    
    $
    3,474
 49




---



##### Table of Contents



MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
STATEMENTS OF INCOME
(Unaudited)
YEARS ENDED DECEMBER 31, 2009, 2008AND 2007
 2009
    
    
    2008
    
    
    2007INCOMEInsurance commissions
    
    $
    35,688
    
    
    $
    39,005
    
    
    $
    65,653TOTAL INCOME
    
    $
    35,688
    
    
    $
    39,005
    
    
    $
    65,653EXPENSESManagement fees
    
    $
    7,665
    
    
    $
    14,695
    
    
    $
    26,776Other expenses
    
    
    3,193
    
    
    
    3,220
    
    
    
    2,908TOTAL EXPENSES
    
    $
    10,858
    
    
    $
    17,915
    
    
    $
    29,684NET INCOME
    
    $
    24,830
    
    
    $
    21,090
    
    
    $
    35,969
 MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
STATEMENTS OF CASH FLOWS
(Unaudited)
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    24,830
    
    
    $
    21,090
    
    
    $
    35,969NET CASH PROVIDED BY OPERATING
ACTIVITIES
    
    $
    24,830
    
    
    $
    21,090
    
    
    $
    35,969CASH FLOWS FROM FINANCING ACTIVITIESProfit and capital distributed
    
    $
    (28,304
    )
    
    $
    (21,300
    )
    
    $
    (35,700
    )NET CASH (USED IN) FINANCING ACTIVITIES
    
    $
    (28,304
    )
    
    $
    (21,300
    )
    
    $
    (35,700
    )NET INCREASE IN CASH AND CASH
EQUIVALENTS
    
    $
    (3,474
    )
    
    $
    (210
    )
    
    $
    269CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    3,474
    
    
    
    3,684
    
    
    
    3,415CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    
    
    
    $
    3,474
    
    
    $
    3,684
 50




---



##### Table of Contents



NOTE 3. SECURITIES
   Weighted2009
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies and corporationsWithin one year
    
    $
    864,592
    
    
    $
    18,441
    
    
    $
    
    
    
    $
    883,033
    
    
    
    3.68
    %After 1 but within 5 years
    
    
    2,006,039
    
    
    
    1,077
    
    
    
    17,468
    
    
    
    1,989,648
    
    
    
    1.60After 5 but within 10 years
    
    
    5,742,908
    
    
    
    29,965
    
    
    
    22,737
    
    
    
    5,750,136
    
    
    
    3.27$
    8,613,539
    
    
    $
    49,483
    
    
    $
    40,205
    
    
    $
    8,622,817
    
    
    
    2.92
    %Corporate BondsWithin one year
    
    $
    252,711
    
    
    $
    
    
    
    $
    7,614
    
    
    $
    245,097
    
    
    
    6.76
    %After 1 but within 5 years
    
    
    1,490,853
    
    
    
    47,318
    
    
    
    7,029
    
    
    
    1,531,142
    
    
    
    4.84After 5 but within 10 years
    
    
    2,997,344
    
    
    
    57,064
    
    
    
    19,138
    
    
    
    3,035,270
    
    
    
    5.60$
    4,740,908
    
    
    $
    104,382
    
    
    $
    33,781
    
    
    $
    4,811,509
    
    
    
    5.42
    %States and political subdivisionsWithin one year
    
    $
    2,898,507
    
    
    $
    19,824
    
    
    $
    
    
    
    $
    2,918,331
    
    
    
    1.92
    %After 1 but within 5 years
    
    
    9,567,178
    
    
    
    314,547
    
    
    
    357
    
    
    
    9,881,368
    
    
    
    2.98After 5 but within 10 years
    
    
    19,656,673
    
    
    
    216,197
    
    
    
    139,565
    
    
    
    19,733,305
    
    
    
    4.20$
    32,122,358
    
    
    $
    550,568
    
    
    $
    139,922
    
    
    $
    32,533,004
    
    
    
    3.63
    %Mortgage backed securities:Government issued or
guaranteed
    
    $
    12,775,369
    
    
    $
    640,601
    
    
    $
    
    
    
    $
    13,415,970
    
    
    
    5.35
    %Collateralized mortgage obligations:Government issued or
guaranteed
    
    $
    11,489,702
    
    
    $
    346,900
    
    
    $
    21,947
    
    
    $
    11,814,655
    
    
    
    4.12
    %Privately issued
    
    
    1,321,605
    
    
    
    
    
    
    
    246,895
    
    
    
    1,074,710
    
    
    
    7.17$
    12,811,307
    
    
    $
    346,900
    
    
    $
    268,842
    
    
    $
    12,889,365
    
    
    
    4.43
    %Total securities available for sale
    
    $
    71,063,481
    
    
    $
    1,691,934
    
    
    $
    482,750
    
    
    $
    72,272,665
    
    
    
    4.12
    %Restricted:Federal Home Loan Bank stock
    
    $
    2,321,300
    
    
    $
    
    
    
    $
    
    
    
    $
    2,321,300
    
    
    
    
    %Certificates of deposit
    
    $
    1,989,000
    
    
    $
    209
    
    
    $
    192
    
    
    $
    1,989,017
    
    
    
    0.33
    %
 51




---



##### Table of Contents



Weighted2008
    
    
    AverageGross
    
    
    Gross
    
    
    Estimated
    
    
    TaxAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    EquivalentCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    YieldAvailable for sale:U.S. Government agencies and corporationsWithin one year
    
    $
    3,714,859
    
    
    $
    4,957
    
    
    $
    
    
    
    $
    3,719,816
    
    
    
    3.90
    %After 1 but within 5 years
    
    
    1,592,342
    
    
    
    368
    
    
    
    
    
    
    
    1,592,710
    
    
    
    3.15After 5 but within 10 years
    
    
    5,394,502
    
    
    
    96,724
    
    
    
    
    
    
    
    5,491,226
    
    
    
    4.56$
    10,701,703
    
    
    $
    102,049
    
    
    $
    
    
    
    $
    10,803,752
    
    
    
    4.12
    %Corporate BondsAfter 1 but within 5 years
    
    $
    1,735,480
    
    
    $
    
    
    
    $
    173,968
    
    
    $
    1,561,512
    
    
    
    5.64
    %After 5 but within 10 years
    
    
    5,478,377
    
    
    
    
    
    
    
    448,115
    
    
    
    5,030,262
    
    
    
    5.47$
    7,213,857
    
    
    $
    
    
    
    $
    622,083
    
    
    
    6,591,774
    
    
    
    5.51
    %States and political subdivisionsWithin one year
    
    $
    874,070
    
    
    $
    5,303
    
    
    $
    
    
    
    $
    879,373
    
    
    
    2.80
    %After 1 but within 5 years
    
    
    4,635,138
    
    
    
    46,652
    
    
    
    5,120
    
    
    
    4,676,670
    
    
    
    3.33After 5 but within 10 years
    
    
    11,581,159
    
    
    
    35,359
    
    
    
    207,323
    
    
    
    11,409,195
    
    
    
    3.72$
    17,090,367
    
    
    $
    87,314
    
    
    $
    212,443
    
    
    $
    16,965,238
    
    
    
    3.57
    %Mortgage backed securities:Government issued or
guaranteed
    
    $
    17,278,086
    
    
    $
    511,216
    
    
    $
    5,937
    
    
    $
    17,783,365
    
    
    
    5.35
    %Collateralized mortgage obligations:Government issued or
guaranteed
    
    $
    8,942,326
    
    
    $
    141,517
    
    
    $
    41,825
    
    
    $
    9,042,018
    
    
    
    5.06
    %Privately issued
    
    
    1,691,093
    
    
    
    
    
    
    
    272,505
    
    
    
    1,418,588
    
    
    
    7.01$
    10,633,419
    
    
    $
    141,517
    
    
    $
    314,330
    
    
    $
    10,460,606
    
    
    
    5.37
    %Total securities available for sale
    
    $
    62,917,432
    
    
    $
    842,096
    
    
    $
    1,154,793
    
    
    $
    62,604,735
    
    
    
    4.68
    %Restricted:Federal Home Loan Bank stock
    
    $
    2,321,300
    
    
    $
    
    
    
    $
    
    
    
    $
    2,321,300
    
    
    
    2.35
    %
   52




---



##### Table of Contents



2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    990,185
    
    
    $
    19,138
    
    
    $
    723,796
    
    
    $
    14,643
    
    
    $
    1,713,981
    
    
    $
    33,781U.S. Government agencies
and corporations
    
    $
    3,207,366
    
    
    $
    40,205
    
    
    $
    
    
    
    $
    
    
    
    $
    3,207,366
    
    
    $
    40,205State and political
subdivisions
    
    
    8,689,560
    
    
    
    124,471
    
    
    
    929,785
    
    
    
    15,451
    
    
    
    9,619,345
    
    
    
    139,922Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    1,995,305
    
    
    
    19,204
    
    
    
    370,595
    
    
    
    2,742
    
    
    
    2,365,900
    
    
    
    21,946Privately issued
    
    
    
    
    
    
    
    
    
    
    1,074,651
    
    
    
    246,896
    
    
    
    1,074,651
    
    
    
    246,896Certificates of deposit
    
    
    499,808
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    499,808
    
    
    
    192Total temporarily impaired
securities
    
    $
    15,382,224
    
    
    $
    203,210
    
    
    $
    3,098,827
    
    
    $
    279,732
    
    
    $
    18,481,051
    
    
    $
    482,942
 2008Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate bonds
    
    $
    6,591,774
    
    
    $
    622,083
    
    
    $
    
    
    
    $
    
    
    
    $
    6,591,774
    
    
    $
    622,083State and political
subdivisions
    
    
    7,296,127
    
    
    
    210,761
    
    
    
    217,773
    
    
    
    1,682
    
    
    
    7,513,900
    
    
    
    212,443Mortgage backed securities:Government issued or
guaranteed
    
    
    296,216
    
    
    
    271
    
    
    
    492,011
    
    
    
    5,666
    
    
    
    788,227
    
    
    
    5,937Collateralized mortgage
obligations:Government issued or
guaranteed
    
    
    1,130,704
    
    
    
    9,320
    
    
    
    393,802
    
    
    
    32,505
    
    
    
    1,524,506
    
    
    
    41,825Privately issued
    
    
    1,418,529
    
    
    
    272,505
    
    
    
    
    
    
    
    
    
    
    
    1,418,529
    
    
    
    272,505Total temporarily impaired
securities
    
    $
    16,733,350
    
    
    $
    1,114,940
    
    
    $
    1,103,586
    
    
    $
    39,853
    
    
    $
    17,836,936
    
    
    $
    1,154,793
   53




---



##### Table of Contents



NOTE 4. LOANS AND LEASES RECEIVABLE
  2009
    
    
    2008Loans:Real estate
    
    $
    129,509,117
    
    
    $
    137,770,172Commercial real estate
    
    
    43,972,033
    
    
    
    40,613,894Consumer
    
    
    16,683,611
    
    
    
    16,665,647Commercial
    
    
    7,276,430
    
    
    
    7,931,399Overdrafts
    
    
    203,337
    
    
    
    91,515$
    197,644,528
    
    
    $
    203,072,627Leases
    
    
    585,393
    
    
    
    105,219$
    198,229,921
    
    
    $
    203,177,846Net deferred loan fees, costs, premiums and discounts
    
    
    380,025
    
    
    
    325,742Allowance for loan losses
    
    
    (3,902,720
    )
    
    
    (2,751,386
    )$
    194,707,226
    
    
    $
    200,752,202
  2009
    
    
    2008
    
    
    2007Balance, beginning
    
    $
    2,751,386
    
    
    $
    2,144,461
    
    
    $
    2,131,523Provision charged to
operations
    
    
    1,852,726
    
    
    
    940,500
    
    
    
    168,999Recoveries
    
    
    116,135
    
    
    
    188,860
    
    
    
    183,281Loans charged off
    
    
    (817,527
    )
    
    
    (522,435
    )
    
    
    (339,342
    )Balance, ending
    
    $
    3,902,720
    
    
    $
    2,751,386
    
    
    $
    2,144,461
  54




---



##### Table of Contents



December 31,2009
    
    
    2008(in thousands)Impaired loans without a valuation allowance
    
    $
    
    
    
    $
    Impaired loans with a valuation allowance (1)
    
    
    935,785
    
    
    
    1,227,068Total impaired loans
    
    $
    935,785
    
    
    $
    1,227,068Valuation allowance related to impaired loans
    
    $
    235,073
    
    
    $
    383,350
 
 (1)
    
    Some of these loans have government agency guarantees reducing the banks exposure by $31,379
for December 31, 2009 and $57,611 for December 31, 2008. Years Ended December 31,2009
    
    
    2008(in thousands)Average investment in impaired loans
    
    $
    1,081,427
    
    
    $
    1,318,584Interest income recognized on impaired loans
    
    $
    56,662
    
    
    $
    52,430Interest income recognized on a cash basis on
impaired loans
    
    $
    56,662
    
    
    $
    52,430
  December 31,2009
    
    
    2008Foreclosed real estate (other real estate owned)
    
    $
    386,500
    
    
    $
    253,300Impaired loans, not on nonaccrual
    
    
    826,658
    
    
    
    130,905Nonaccrual loans, impaired (1)
    
    
    109,127
    
    
    
    1,096,163Nonaccrual loans, not impaired
    
    
    1,456,367
    
    
    
    402,520Loans past due 90 days or more still accruing interest
    
    
    
    
    
    
    Total non-performing assets
    
    $
    2,778,652
    
    
    $
    1,882,888
 
 (1)
    
    Some of these loans have government agency guarantees reducing the
banks exposure by $31,379
for December 31, 2009 and $57,611 for December 31, 2008.   55




---



##### Table of Contents



NOTE 5. LOAN SERVICING
    NOTE 6. PREMISES AND EQUIPMENT
  2009
    
    
    2008Land and land improvements
    
    $
    2,077,658
    
    
    $
    2,077,658Banking house  Main
    
    
    1,559,630
    
    
    
    1,528,011Banking house  Valley Road branch
    
    
    552,628
    
    
    
    547,936Banking house  Hedgesville branch
    
    
    783,368
    
    
    
    783,368Banking house  Martinsburg branch
    
    
    697,006
    
    
    
    697,006Banking house  Hancock branch
    
    
    239,870
    
    
    
    235,589Banking house  Spring Mills branch
    
    
    885,697
    
    
    
    885,697Bank owned automobiles
    
    
    66,027
    
    
    
    49,752Furniture, fixtures and equipment
    
    
    2,954,057
    
    
    
    2,961,545$
    9,815,941
    
    
    $
    9,766,562Less accumulated depreciation
    
    
    4,261,014
    
    
    
    3,924,194$
    5,554,927
    
    
    $
    5,842,368
   NOTE 7. INTANGIBLE ASSETS
    2010
    
    $
    111,5162011
    
    $
    51,112
 56




---



##### Table of Contents



NOTE 8. TIME DEPOSITS
  Time Deposits
    
    
    All Time$100,000 and over
    
    
    Deposits2010
    
    $
    34,241,940
    
    
    $
    63,331,2892011
    
    
    23,910,310
    
    
    
    48,547,8182012
    
    
    10,159,088
    
    
    
    25,122,0852013
    
    
    1,843,252
    
    
    
    5,263,2242014
    
    
    2,827,606
    
    
    
    6,155,443$
    72,982,196
    
    
    $
    148,419,859
 NOTE 9. FEDERAL HOME LOAN BANK BORROWINGS
 December 31,2009
    
    
    2008Federal Home Loan Bank advances
    
    $
    6,400,000
    
    
    $
    25,445,000
  2009
    
    
    2008Maximum balance outstanding
at any month-end during the year
    
    $
    25,200,000
    
    
    $
    34,900,000Average balance for the year
    
    
    12,663,041
    
    
    
    30,549,453Weighted average rate for the year
    
    
    2.35
    %
    
    
    2.47
    %Weighted average rate at year-end
    
    
    1.61
    %
    
    
    1.47
    %
 NOTE 10. UNUSED LINES OF CREDIT
  57




---



##### Table of Contents



NOTE 11. PENSION PLAN
   December 31,
    
    
    December 31,
    
    
    October 31,2009 (2)
    
    
    2008
    
    
    2007Change in benefit obligation:Benefit obligation at
beginning of year
    
    $
    5,372,411
    
    
    $
    5,014,903
    
    
    $
    4,859,682Adjustment for plan changes
    
    
    
    
    
    
    
    
    
    
    Service cost
    
    
    236,398
    
    
    
    257,310
    
    
    
    247,821Interest cost
    
    
    316,247
    
    
    
    333,188
    
    
    
    267,244Actuarial (gain) loss
    
    
    138,183
    
    
    
    (11,106
    )
    
    
    (181,949
    )Benefits paid
    
    
    (199,674
    )
    
    
    (221,884
    )
    
    
    (177,895
    )Benefit obligation at end of
year
    
    $
    5,863,565
    
    
    $
    5,372,411
    
    
    $
    5,014,903Change in plan assets:Fair value of plan assets at
beginning of year
    
    $
    2,923,037
    
    
    $
    4,097,489
    
    
    $
    3,365,278Actual return on plan assets
    
    
    793,121
    
    
    
    (1,202,568
    )
    
    
    522,339Employer contribution
    
    
    477,092
    
    
    
    250,000
    
    
    
    387,767Benefits paid
    
    
    (199,674
    )
    
    
    (221,884
    )
    
    
    (177,895
    )Fair value of plan assets
at end of year
    
    $
    3,993,576
    
    
    $
    2,923,037
    
    
    $
    4,097,489Funded status
    
    $
    (1,869,989
    )
    
    $
    (2,449,374
    )
    
    $
    (917,414
    )Unrecognized net actuarial
(gain) loss
    
    
    2,145,217
    
    
    
    2,545,932
    
    
    
    1,061,955Unrecognized prior service
cost
    
    
    100,821
    
    
    
    113,165
    
    
    
    127,566Prepaid (accrued) benefit cost
    
    $
    376,049
    
    
    $
    209,723
    
    
    $
    272,107
  58




---



##### Table of Contents



December 31,
    
    
    December 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2007Components of net periodic cost:Service cost
    
    $
    236,398
    
    
    $
    220,551
    
    
    $
    247,821Interest cost
    
    
    316,247
    
    
    
    285,590
    
    
    
    267,244Expected return on plan assets
    
    
    (327,508
    )
    
    
    (302,628
    )
    
    
    (267,153
    )Amortization of prior service costs
    
    
    12,344
    
    
    
    12,344
    
    
    
    12,344Recognized net actuarial loss
    
    
    73,285
    
    
    
    51,902
    
    
    
    79,414Adjustment due to change in measurement date (1)
    
    
    
    
    
    
    44,625
    
    
    
    Net periodic plan cost
    
    $
    310,766
    
    
    $
    312,384
    
    
    $
    339,670
 
 (1)
    
    - This amount was run through current net periodic pension costs rather than directly to retained earnings as theamount is not considered significant or material.(2)
    
    - The disclosure information shown below as of December 31, 2009 was estimated by projecting employee data forwardfrom November 1, 2009 to December 31, 2009, assuming no experience gains or losses. December 31,
    
    
    December 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2007Weighted average assumptions used to
determine benefit obligations for the years ended:Discount rate
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.0
    %Expected return on plan
assets
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    8.0
    %Rate of compensation increase
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    3.5
    %Weighted average assumptions used to determine
net periodic benefit cost for the years ended:Discount rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    5.75
    %Expected return on plan
assets
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    8.0
    %Rate of compensation increase
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    3.5
    %Amounts recognized in the statement of financial
condition
consist of:Accrued benefit cost
    
    $
    (1,869,989
    )
    
    $
    (2,449,374
    )
    
    $
    (917,414
    )Accumulated other comprehensive income
    
    
    2,246,038
    
    
    
    2,659,097
    
    
    
    1,189,521Net amount recognized
    
    $
    376,049
    
    
    $
    209,723
    
    
    $
    272,107
 Plan assets
 Target
    
    
    Allowable
    
    
    Percentage of Plan Assets atAllocation
    
    
    Allocation
    
    
    December 31,
    
    
    December 31,2009
    
    
    Range
    
    
    2009
    
    
    2008Plan assetsEquity securities
    
    
    70
    %
    
    
    40-80
    %
    
    
    63
    %
    
    
    64
    %Debt securities
    
    
    25
    %
    
    
    20-40
    %
    
    
    32
    %
    
    
    30
    %Real estate
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Other
    
    
    5
    %
    
    
    3-10
    %
    
    
    5
    %
    
    
    6
    %Total
    
    
    
    
    
    
    
    
    
    
    100
    %
    
    
    100
    %
 59




---



##### Table of Contents



Investment Policy and Strategy
      Determination of Expected Long-term Rate of Return
  Cash flows
 Expected contributions for fiscal year ending December 31, 2010Expected employer contributions
    
    $
    304,000Expected employee contributions
    
    $
    Estimated future benefit payments reflecting expected
future service for the fiscal year(s) ending12/31/2010
    
    $
    204,04012/31/2011
    
    $
    219,94712/31/2012
    
    $
    276,72212/31/2013
    
    $
    279,30512/31/2014
    
    $
    293,25312/31/2015 - 12/31/2019
    
    $
    1,732,014
  60




---



##### Table of Contents



December 31,
    
    
    Fair Value Measurements Using2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3($ in Thousands)Pension Plan Master Trust Investments:Cash
    
    $
    97
    
    
    $
    97
    
    
    $
    
    
    
    $
    Money fund
    
    
    1,738
    
    
    
    1,738
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    429
    
    
    
    429
    
    
    
    
    
    
    
    Mutual funds
    
    
    6,195
    
    
    
    6,195
    
    
    
    
    
    
    
    U.S. government securities
    
    
    2,936
    
    
    
    2,936
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    7,060
    
    
    
    
    
    
    
    7,060
    
    
    
    Common stock and options
    
    
    26,331
    
    
    
    26,331
    
    
    
    
    
    
    
    Exchange traded and closed end funds
    
    
    5,369
    
    
    
    5,369
    
    
    
    
    
    
    
    Total Pension Plan Master Trust Investments
    
    $
    50,155
    
    
    $
    43,095
    
    
    $
    7,060
    
    
    $
    
  NOTE 12. 401(k) PROFIT SHARING PLAN
   NOTE 13. DEFERRED COMPENSATION PLAN
  NOTE 14. INCOME TAXES
  Accounting for Uncertainty in Income
Taxes
  61




---



##### Table of Contents



Years ended December 31,2009
    
    
    2008
    
    
    2007Federal:Current
    
    $
    1,009,704
    
    
    $
    1,414,802
    
    
    $
    1,114,801Deferred
    
    
    (552,946
    )
    
    
    (252,298
    )
    
    
    (35,201
    )State:Current
    
    
    159,085
    
    
    
    179,462
    
    
    
    118,005Deferred
    
    
    (50,225
    )
    
    
    (34,686
    )
    
    
    (6,814
    )Provision for income taxes
    
    $
    565,618
    
    
    $
    1,307,280
    
    
    $
    1,190,791
   Years ended December 31,2009
    
    
    2008
    
    
    2007Income tax expense at the
statutory rate (34%)
    
    $
    923,219
    
    
    $
    1,367,647
    
    
    $
    1,256,316Increases (decreases) resulting
from:Nontaxable interest income,
net of non-deductible interest
expense
    
    
    (239,097
    )
    
    
    (164,855
    )
    
    
    (116,607
    )State income taxes, net of
federal income tax benefit
    
    
    81,945
    
    
    
    112,366
    
    
    
    102,085Tax exempt life insurance proceeds and cash
surrender value
    
    
    (172,189
    )
    
    
    
    
    
    
    Other
    
    
    (28,260
    )
    
    
    (7,878
    )
    
    
    (51,003
    )Provision for income taxes
    
    $
    565,618
    
    
    $
    1,307,280
    
    
    $
    1,190,791Effective income tax rate
    
    
    20.83
    %
    
    
    32.50
    %
    
    
    32.23
    %
  62




---



##### Table of Contents



2009
    
    
    2008Deferred tax assets:Provision for loan losses
    
    $
    1,340,617
    
    
    $
    926,135Deferred compensation plan
    
    
    431,036
    
    
    
    383,808Postretirement benefits
    
    
    99,173
    
    
    
    103,705Intangible asset
    
    
    118,653
    
    
    
    97,242Unrecognized pension costs
    
    
    853,494
    
    
    
    1,014,427Net unrealized (gain) loss on securities
available for sale
    
    
    (459,497
    )
    
    
    118,825$
    2,383,476
    
    
    $
    2,644,142Deferred tax liabilities:CSV life insurance
    
    $
    (172,269
    )
    
    $
    (323,411
    )Defined benefit plan
    
    
    (135,378
    )
    
    
    (75,500
    )Depreciation
    
    
    (322,164
    )
    
    
    (355,485
    )$
    (629,811
    )
    
    $
    (754,396
    )Net deferred tax asset (liability)
    
    $
    1,753,665
    
    
    $
    1,889,746
  NOTE 15. LEASE AGREEMENT
    2010
    
    $
    22,1712011
    
    $
    22,6142012
    
    $
    23,0662013
    
    $
    23,5282014
    
    $
    23,9982015
    
    $
    24,4782016
    
    $
    24,9682017
    
    $
    8,378
  63




---



##### Table of Contents



NOTE 16. OTHER OPERATING EXPENSES
 Years ended December 31,2009
    
    
    2008
    
    
    2007Stationery, supplies and printing
    
    $
    159,637
    
    
    $
    190,764
    
    
    $
    194,794Data processing
    
    
    301,193
    
    
    
    100,305
    
    
    
    118,212Directors fees and deferred
compensation
    
    
    257,564
    
    
    
    253,491
    
    
    
    261,667Postage
    
    
    133,577
    
    
    
    130,675
    
    
    
    130,305Telephone
    
    
    109,253
    
    
    
    113,422
    
    
    
    105,471Professional fees
    
    
    342,070
    
    
    
    376,252
    
    
    
    408,285Regulatory assessment fees
    
    
    406,798
    
    
    
    102,917
    
    
    
    45,550Outside service fees
    
    
    10,003
    
    
    
    8,012
    
    
    
    29,354ATM and debit card fees
    
    
    267,005
    
    
    
    265,795
    
    
    
    250,814Advertising
    
    
    124,751
    
    
    
    185,769
    
    
    
    205,444Amortization of intangible
    
    
    111,517
    
    
    
    111,516
    
    
    
    111,516Amortization of software
    
    
    71,611
    
    
    
    66,075
    
    
    
    65,620Other
    
    
    607,352
    
    
    
    615,951
    
    
    
    608,214Total other operating expenses
    
    $
    2,902,331
    
    
    $
    2,520,944
    
    
    $
    2,535,246
 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
      64




---



##### Table of Contents



2009
    
    
    2008Commitments to originate:Fixed rate loans:Residential real estate loans to be sold
    
    $
    363,300
    
    
    $
    478,700Other residential real estate
    
    
    14,000
    
    
    
    358,726Adjustable rate loans:Other commerical real estate and
construction
    
    
    1,054,330
    
    
    
    862,500Other residential real estate
    
    
    254,500
    
    
    
    278,400Commerical and other
    
    
    
    
    
    
    765,000Letters of credit
    
    
    3,000
    
    
    
    227,237Undisbursed portion of construction
loans
    
    
    1,312,571
    
    
    
    882,893Available credit granted on commercial
loans
    
    
    6,840,488
    
    
    
    6,106,161Available credit on personal lines
of credit
    
    
    157,980
    
    
    
    279,112Undisbursed portion of home equity loans
    
    
    4,436,185
    
    
    
    4,937,093Commitments to sell real estate loans
    
    
    268,000
    
    
    
    $
    14,704,354
    
    
    $
    15,175,822
 NOTE 18. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
     NOTE 19. LEGAL CONTINGENCIES
  NOTE 20. REGULATORY MATTERS
   65




---



##### Table of Contents



Minimum
    
    Minimum To Be Well CapitalizedActual
    
    Capital Requirements
    
    Under Prompt Corrective Action ProvisionsAmount
    
    
    
    
    
    Amount
    
    
    
    
    
    Amountin
    
    
    
    
    
    in
    
    
    
    
    
    inThousands
    
    Ratio
    
    Thousands
    
    Ratio
    
    Thousands
    
    RatioAs of December 31,
2009:Total Capital
(to Risk Weighted
Assets)
    
    $
    27,958
    
    
    
    15.91
    %
    
    $
    14,058
    
    
    
    8.0
    %
    
    $
    17,573
    
    
    
    10.0
    %Tier I Capital
(to Risk Weighted
Assets)
    
    $
    25,740
    
    
    
    14.65
    %
    
    $
    7,028
    
    
    
    4.0
    %
    
    $
    10,542
    
    
    
    6.0
    %Tier I Capital
(to Average Assets)
    
    $
    25,740
    
    
    
    8.78
    %
    
    $
    11,727
    
    
    
    4.0
    %
    
    $
    14,658
    
    
    
    5.0
    %As of December 31,
2008:Total Capital
(to Risk Weighted
Assets)
    
    $
    26,616
    
    
    
    15.19
    %
    
    $
    14,017
    
    
    
    8.0
    %
    
    $
    17,522
    
    
    
    10.0
    %Tier I Capital
(to Risk Weighted
Assets)
    
    $
    24,419
    
    
    
    13.94
    %
    
    $
    7,007
    
    
    
    4.0
    %
    
    $
    10,510
    
    
    
    6.0
    %Tier I Capital
(to Average Assets)
    
    $
    24,419
    
    
    
    8.56
    %
    
    $
    11,411
    
    
    
    4.0
    %
    
    $
    14,263
    
    
    
    5.0
    %
 NOTE 21. REGULATORY RESTRICTIONS
   NOTE 22. FAIR VALUE OF FINANCIAL INSTRUMENTS
  
    
    Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
 66




---



##### Table of Contents




    
    Level 2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable for the
asset or liability, either directly or indirectly, for substantially the full term
of the financial instrument.
    
    Level 3 inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
  Securities available for sale and certificates of deposit investments
   Valuation of our Financial Instruments by Fair Value Hierarchy Levels  Recurring
Basis
 December 31, 2009(In Thousands)In Active Markets
    
    Significant Other
    
    Significantfor Identical
    
    Observable Inputs
    
    Unobservable InputsDescription
    
    Total
    
    Assets (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:U.S. government agencies and corporations
    
    $
    8,623
    
    
    $
    
    
    
    $
    8,623
    
    
    $
    Corporate bonds
    
    
    4,812
    
    
    
    
    
    
    
    4,812
    
    
    
    State and municipal securities
    
    
    32,533
    
    
    
    
    
    
    
    32,533
    
    
    
    Residential mortage-backed securities
    
    
    13,416
    
    
    
    
    
    
    
    13,416
    
    
    
    Collateralized mortgage obligtions
    
    
    12,889
    
    
    
    
    
    
    
    12,889
    
    
    
    Certificates of deposit investments
    
    
    1,989
    
    
    
    
    
    
    
    1,989
    
    
    
    
 December 31, 2008(In Thousands)In Active Markets
    
    Significant Other
    
    Significantfor Identical
    
    Observable Inputs
    
    Unobservable InputsDescription
    
    Total
    
    Assets (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:U.S. government agencies and corporations
    
    $
    10,804
    
    
    $
    
    
    
    $
    10,804
    
    
    $
    Corporate bonds
    
    
    6,592
    
    
    
    
    
    
    
    6,592
    
    
    
    State and municipal securities
    
    
    16,965
    
    
    
    
    
    
    
    16,965
    
    
    
    Residential mortage-backed securities
    
    
    17,783
    
    
    
    
    
    
    
    17,783
    
    
    
    Collateralized mortgage obligtions
    
    
    10,461
    
    
    
    
    
    
    
    10,461
    
    
    
    
  67




---



##### Table of Contents



Loans held for sale
  Impaired loans
   Other Real Estate Owned
  68




---



##### Table of Contents



The following table summarized CNBs financial and nonfinancial assets that were
measured at fair value on a nonrecurring basis during the period.
 Valuation of our Financial Instruments by Fair Value Hierarchy Levels  Non-recurring Basis
 December 31, 2009(In Thousands)Quoted Prices
    
    
    SignificantIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Recognized GainsDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired loans, net of government
agency guarantees and reserve for losses
    
    $
    669
    
    
    $
    
    
    
    $
    669
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    387
    
    
    $
    
    
    
    $
    387
    
    
    $
    
    
    
    $
    (149
    )
 December 31, 2009(In Thousands)Quoted Prices
    
    
    SignificantIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Recognized GainsDescription
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired loans, net of government
agency guarantees and reserve for losses
    
    $
    786
    
    
    $
    
    
    
    $
    786
    
    
    $
    
    
    
    $
    Other real estate owned
    
    $
    253
    
    
    $
    
    
    
    $
    253
    
    
    $
    
    
    
    $
    (69
    )
          69




---



##### Table of Contents



2009
    
    
    2008Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash, due from banks and federal funds sold
    
    $
    5,068,118
    
    
    $
    5,068,118
    
    
    $
    4,770,724
    
    
    $
    4,770,724Securities available for sale
    
    
    72,272,665
    
    
    
    72,272,665
    
    
    
    62,604,735
    
    
    
    62,604,735Loans
    
    
    194,707,226
    
    
    
    191,450,941
    
    
    
    200,752,202
    
    
    
    201,347,332Accrued interest receivable
    
    
    1,334,704
    
    
    
    1,334,704
    
    
    
    1,272,742
    
    
    
    1,272,742Financial Liabilities:Demand deposits
    
    $
    103,871,995
    
    
    $
    103,871,995
    
    
    $
    98,500,413
    
    
    $
    98,500,413Time deposits
    
    
    148,419,859
    
    
    
    157,634,463
    
    
    
    129,394,653
    
    
    
    137,539,118Accrued interest payable
    
    
    1,170,417
    
    
    
    1,170,417
    
    
    
    1,126,219
    
    
    
    1,126,219FHLB borrowings
    
    
    6,400,000
    
    
    
    6,400,000
    
    
    
    25,445,000
    
    
    
    25,445,000Off-Balance SheetFinancial Instruments:Letters of credit
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,149
 NOTE 23. RELATED PARTY TRANSACTIONS
  70




---



##### Table of Contents



NOTE 24. PARENT COMPANY ONLY FINANCIAL INFORMATION
  STATEMENTS OF FINANCIAL CONDITION (PARENT ONLY)  DECEMBER 31, 2009 AND 2008
 ASSETS
    
    2009
    
    
    2008Cash
    
    $
    270,750
    
    
    $
    289,968Investment in CNB Bank, Inc.
    
    
    25,260,693
    
    
    
    22,843,976Investment in Morgan County Title Insurance Agency, LLC
    
    
    
    
    
    
    1,173Other assets
    
    
    99,805
    
    
    
    84,052TOTAL ASSETS
    
    $
    25,631,248
    
    
    $
    23,219,169LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESAccrued expenses and other liabilities
    
    $
    953
    
    
    $
    1,379TOTAL LIABILITIES
    
    $
    953
    
    
    $
    1,379SHAREHOLDERS EQUITYCommon stock, $1 par value; 5,000,000 shares authorized; 458,048 shares issued at December 31, 2009 and 2008 and 443,648 and 449,151 outstanding at December 31, 2009 and 2008, respectively
    
    $
    458,048
    
    
    $
    458,048Capital surplus
    
    
    4,163,592
    
    
    
    4,163,592Retained earnings
    
    
    22,476,562
    
    
    
    21,015,652Accumulated other comprehensive income (loss)
    
    
    (642,839
    )
    
    
    (1,848,990
    )$
    26,455,363
    
    
    $
    23,788,302Less treasury stock, at cost, 14,400 shares in 2009 and 8,897 shares in 2008
    
    
    (825,068
    )
    
    
    (570,512
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    25,630,295
    
    
    $
    23,217,790TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    25,631,248
    
    
    $
    23,219,169
 71




---



##### Table of Contents



STATEMENTS OF INCOME (PARENT ONLY)
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007Dividend income
    
    $
    966,410
    
    
    $
    1,250,000
    
    
    $
    1,154,024Income from title company
    
    
    8,262
    
    
    
    7,030
    
    
    
    12,023Noninterest expense
    
    
    (51,260
    )
    
    
    (70,863
    )
    
    
    (118,006
    )INCOME
BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF CNB BANK, INC.
    
    $
    923,412
    
    
    $
    1,186,167
    
    
    $
    1,048,041Income tax (benefit)
    
    
    (15,752
    )
    
    
    (16,207
    )
    
    
    (36,884
    )INCOME
BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF CNB BANK, INC.
    
    $
    939,164
    
    
    $
    1,202,374
    
    
    $
    1,084,925Equity in undistributed earnings of CNB Bank, Inc.
    
    
    1,210,567
    
    
    
    1,512,837
    
    
    
    1,419,331NET INCOME
    
    $
    2,149,731
    
    
    $
    2,715,211
    
    
    $
    2,504,256
 STATEMENTS OF CASH FLOWS (PARENT ONLY)
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    2,149,731
    
    
    $
    2,715,211
    
    
    $
    2,504,256Adjustments
to reconcile net income to net cash provided by operating activities:(Increase) decrease in other assets
    
    
    (15,752
    )
    
    
    (16,207
    )
    
    
    (36,884
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    (426
    )
    
    
    (23,813
    )
    
    
    26,408Equity in undistributed earnings of CNB Bank, Inc.
    
    
    (1,210,567
    )
    
    
    (1,512,837
    )
    
    
    (1,419,331
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    922,986
    
    
    $
    1,162,354
    
    
    $
    1,074,449CASH FLOWS FROM INVESTING ACTIVITIESInvestment in title company
    
    $
    1,173
    
    
    $
    70
    
    
    $
    (123
    )NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    $
    1,173
    
    
    $
    70
    
    
    $
    (123
    )CASH FLOWS FROM FINANCING ACTIVITIESCash dividends paid
    
    $
    (688,821
    )
    
    $
    (854,803
    )
    
    $
    (770,414
    )Purchase of treasury stock, cost
    
    
    (254,556
    )
    
    
    (362,879
    )
    
    
    (207,633
    )NET CASH (USED IN) FINANCING ACTIVITIES
    
    $
    (943,377
    )
    
    $
    (1,217,682
    )
    
    $
    (978,047
    )NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    $
    (19,218
    )
    
    $
    (55,258
    )
    
    $
    96,279CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    $
    289,968
    
    
    $
    345,226
    
    
    $
    248,947CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    270,750
    
    
    $
    289,968
    
    
    $
    345,226
 NOTE 25. SUBSEQUENT EVENTS
 .
 72




---



##### Table of Contents



Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 Item 9A(T). CONTROLS AND PROCEDURES
    
 Item 9B. OTHER INFORMATION
  73




---



##### Table of Contents



Part III
 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
      Age asof February 25,Name
    
    2010
    
    Position and Experience during the Past 5 YearsCharles S. Trump IV (1)
    
    
    49
    
    
    2008 to present  Chairman of the Board, CNB Financial Services, Inc.2000 to present  Member of the Board, CNB Financial Services, Inc.1986 to present  Member of the Board, CNB Bank, Inc.Thomas F. Rokisky
    
    
    63
    
    
    2000 to present  President/CEO, CNB Financial Services, Inc.1996 to present  President/CEO, CNB Bank, Inc.1990 to 1996   Executive Vice President/COO, CNB Bank, Inc.Rebecca S. Stotler
    
    
    49
    
    
    2007 to present  Senior Vice President/CFO, CNB Financial Services, Inc.2007 to present  Senior Vice President/CFO, CNB Bank, Inc.2000 to 2007   Vice President/CFO, CNB Financial Services, Inc.1999 to 2007   Vice President/CFO, CNB Bank, Inc.1996 to 1999    Vice President of Finance/Cashier, Citizens National BankPatricia C. Muldoon
    
    
    49
    
    
    2007 to present  Executive Vice President/COO, CNB Financial Services, Inc.2007 to present  Executive Vice President/COO, CNB Bank, Inc.2003 to 2007   Senior Vice President/COO, CNB Financial Services, Inc.2003 to 2007   Senior Vice President/COO, CNB Bank, Inc.2001 to 2003   Vice President/COO, Citizens National Bank
 
 (1)
    
    Mr. Trump is not an employee of CNB. 74




---



##### Table of Contents



CODES OF ETHICS
  
 Item 11. EXECUTIVE COMPENSATION
  
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
  
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 Item 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
  75




---



##### Table of Contents



Part IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    1. Financial StatementsThe 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 SchedulesAll schedules applicable to the Registrant are shown in the respective financial
statements or in the notes thereto included in this Annual Report.3. Exhibits2.2 Articles of Incorporation of CNB Financial Services, Inc. filed as exhibit 3.1
to the Registration Statement on Form S-4 , Registration No. 333-36186, filed May 3,
2000 with the Securities and Exchange Commission and incorporated by reference
herein.2.3 Bylaws of CNB Financial Services, Inc. filed as exhibit 3.2 to the Registration
Statement on Form S-4, Registration No. 333-36186, filed May 3, 2000 with the
Securities and Exchange Commission and incorporated by reference herein.2.4 Amendment to Articles of Incorporation of CNB Financial Services, Inc. filed as
exhibit 3(i) to the Form 8-K, File No. 000-30665, filed April 29, 2008 with the
Securities and Exchange Commission and incorporated by reference herein.2.5 Amendment to Bylaws of CNB Financial Services, Inc. filed as exhibit 3(ii) to the
Form 8-K, File No. 000-30665, filed April 29, 2008 with the Securities and Exchange
Commission and incorporated by reference herein.21 Subsidiaries of CNB Financial Services, Inc. filed as an exhibit hereto.31.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 (b)
    
    See (a) 3 above.(c)
    
    See (a) 1 and 2 above.
 76




---



##### Table of Contents



CNB Financial Services, Inc.

(Registrant)
 Date          February 25, 2010
    /s/ Thomas F. RokiskyThomas F. Rokisky, President/CEODate          February 25, 2010
    /s/ Rebecca S. StotlerRebecca S. Stotler, Vice President/CFO(Principal Financial and Accounting
Officer) 77




---



##### Table of Contents



th
 Signatures
    

    Title/s/ Charles S. Trump IV

Charles S. Trump IV
    

    Chairman and
Director/s/ Thomas F. Rokisky
    

    President/CEO and
DirectorThomas F. Rokisky/s/ Kenneth W. Apple

Kenneth W. Apple
    

    Director/s/ J. Robert Ayers

J. Robert Ayers
    

    Director/s/ John E. Barker

John E. Barker
    

    Director/s/ Margaret S. Bartles

Margaret S. Bartles
    

    Director/s/ Jay E. Dick

Jay E. Dick
    

    Director/s/ Herbert L. Eppinger

Herbert L. Eppinger
    

    Director/s/ J. Philip Kesecker

J. Philip Kesecker
    

    Director/s/ Jerald McGraw

Jerald McGraw
    

    Director/s/ Martha H. Quarantillo

Martha H. Quarantillo
    

    Director/s/ Arlie R. Yost

Arlie R. Yost
    

    Director
 78