<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    Form 10-K

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

                   For the fiscal year ended December 31, 2005

                                       Or

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

            For the transition period from ___________ to ___________

                         Commission file number 0-30665

                          CNB Financial Services, Inc.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
              West Virginia                                       55-0773918
     (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)
</TABLE>

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

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

           Securities to be registered under Section 12(b) of the Act:
                                      None

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.

                                Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter periods that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                                 Yes [X] No [ ]

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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated files, or a non-accelerated file. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                Yes [ ] No [X]

The aggregate value of the common stock of the Registrant that was held by
non-affiliates as of the most recently completed second fiscal quarter (June 30,
2005), was approximately $25.7 million. This amount was based on the last
closing sale price of a share of common stock of $67.00 as of the same date.

As of March 23, 2006, there were 458,048 shares of Common Stock, Par Value $1.00
per share, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None

<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I

Item 1.  Business .......................................................     4
Item 1A. Risk Factors ...................................................     7
Item 2.  Properties .....................................................     9
Item 3.  Legal Proceedings ..............................................     9
Item 4.  Submission of Matters to a Vote of Security Holders ............    10

PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder
            Matters and Issuer Purchases of Equity Securities ...........    11
Item 6.  Selected Financial Data ........................................    12
Item 7.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations .......................................    13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .....    29
Item 8.  Financial Statements and Supplementary Data ....................    30
Item 9.  Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosures .......................................    61
Item 9A. Controls and Procedures ........................................    61
Item 9B. Other Information ..............................................    61

PART III

Item 10. Directors and Executive Officers of the Registrant .............    62
Item 11. Executive Compensation .........................................    64
Item 12. Security Ownership of Certain Beneficial Owners and
            Management ..................................................    68
Item 13. Certain Relationships and Related Transactions .................    68
Item 14. Principal Accountant's Fees and Services .......................    69

PART IV

Item 15. Exhibits and Financial Statement Schedules .....................    70

SIGNATURES ..............................................................    71
</TABLE>


                                        2

<PAGE>

FORWARD LOOKING STATEMENTS

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

-    Changes in market interest rates;

-    Local and national economic trends and conditions;

-    Competition for products and services among community, regional and
     national financial institutions;

-    New services and product offerings by competitors;

-    Changes in customer preferences;

-    Changes in technology;

-    Legislative and regulatory changes;

-    Delinquency rates on loans; and

-    Changes in accounting principles, policies or guidelines;

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


                                        3
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

ORGANIZATIONAL HISTORY AND SUBSIDIARIES

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

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

          CNB became a 50% member of a limited liability company, Morgan County
Title Insurance Agency, LLC in February 2001, for the purpose of selling title
insurance. As of January 2003, CNB's percentage of ownership in Morgan County
Title Insurance Agency, LLC decreased to 33%.

          The Bank was organized on June 20, 1934 and has operated as a national
banking association continuously since that time. The Bank formed CNB Insurance
Services, Inc., a wholly owned subsidiary, which is a property and casualty
insurance agency selling primarily personal lines of insurance.

EMPLOYEES

          As of December 31, 2005 and 2004, CNB employed 107 and 102 full-time
equivalent employees, respectively.

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

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

          Citizens National Bank is a full-service commercial bank conducting
general banking and trust activities through five full-service offices and five
automated teller machines located in Morgan and Berkeley Counties, West Virginia
and Washington County, Maryland. The Bank exercised an option in December 2003
to purchase a parcel of land in Falling Waters, Berkeley County, West Virginia.
Construction on an additional full-service branch began August 2004 and was
completed in April 2005.

          On January 26, 2004, CNB entered into an agreement to purchase certain
assets and liabilities associated with the Hancock Branch of Fidelity Bank, a
subsidiary bank of Mercantile Bankshares Corporation (formerly Home Federal).
The purchase, which took place on June 11, 2004, increased the assets and
liabilities of CNB by $14.6 million. CNB assumed responsibility for all the
deposit services including checking, savings and certificate of deposits.
Additionally, CNB acquired loans, equipment and leasehold improvements and
assumed the lease for the real estate located at 333 East Main Street, Hancock,
Maryland.

          Citizens National Bank accepts time, demand and savings deposits
including NOW accounts, regular savings accounts, money market accounts,
fixed-rate certificates of deposit and club accounts. In addition, the Bank
provides safe deposit box rentals, wire transfer services and 24-hour ATM
services through a regional network known as STAR. STAR is a participant in the
nationwide Cirrus network.

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

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


                                       4

<PAGE>

COMPETITION

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

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

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

AVAILABLE INFORMATION

          Our Internet address is www.cnbwv.com. The SEC maintains an Internet
website at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, and our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available,
free of charge, as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the SEC. In addition, any document filed
by the company with the SEC can be read and copied at the SEC's public reference
facilities at 100 F Street, NE, Washington, DC 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. Copies of documents can also be obtained free of charge by any
shareholder by writing to Rebecca S. Stotler, VP/CFO, CNB Financial Services,
Inc., 101 S. Washington Street, Berkeley Springs, WV 25411.

SUPERVISION AND REGULATION

          The following is a summary of certain statutes and regulations
affecting the Company and its subsidiaries and is qualified in its entirety by
reference to such statutes and regulations:

          BANK HOLDING COMPANY REGULATION. The Company is a bank holding company
under the Bank Holding Company Act of 1956 ("BHCA"), which restricts the
activities of the Company and any acquisition by the Company of voting stock or
assets of any bank, savings association or other company. The Company is subject
to the reporting requirements of, and examination and regulation by, the Federal
Reserve Board. The Company's subsidiary bank is subject to restrictions imposed
by the Federal Reserve Act on transactions with affiliates, including any loans
or extensions of credit to the Company or its subsidiaries, investments in the
stock or other securities thereof and the taking of such stock or securities as
collateral for loans to any borrower; the issuance of guarantees, acceptances or
letters of credit on behalf of the Company and its subsidiaries; purchases or
sales of securities or other assets; and the payment of money or furnishing of
services to the Company and other subsidiaries. The Bank is prohibited from
acquiring direct or indirect control of more than 5% of any class of voting
stock or substantially all of the assets of any bank holding company without the
prior approval of the Federal Reserve Board. The Company and its subsidiaries
are prohibited from engaging in certain tying arrangements in connection with
extensions of credit and/or the provision of other property or services to a
customer by the Company or its subsidiaries.

          The BHCA also permits the Company to purchase or redeem its own
securities. However, Regulation Y provides that prior notice must be given to
the Federal Reserve Board if the gross consideration for such purchase or
consideration, when aggregated with the net consideration paid by the Company
for all such purchases or redemptions during the preceding 12 months, is equal
to 10 percent or more of the Company's consolidated net worth. Prior notice is
not required if (i) both before and immediately after the redemption, the bank
holding company is well-capitalized; (ii) the financial holding company is
well-managed and (iii) the bank holding company is not the subject of any
unresolved supervisory issues.

          The Gramm-Leach-Bliley Act (also known as the Financial Services
Modernization Act of 1999) permits bank holding companies to become financial
holding companies. This allows them to affiliate with securities firms and
insurance companies and to engage in other activities that are financial in
nature. A bank holding company may become a financial holding company if each of
its subsidiary banks is well capitalized, is well managed and has at least a
satisfactory rating under the Community Reinvestment Act. No regulatory approval
will be required for a financial holding company to acquire a company, other
than a bank or savings association, engaged in activities that are financial in
nature or incidental to activities that are financial in nature, as determined
by the Federal Reserve Board.

          The Financial Services Modernization Act defines "financial in nature"
to include: securities underwriting, dealing and market making; sponsoring
mutual funds and investment companies; insurance underwriting and agency;
merchant banking activities; and activities that the Federal Reserve Board has
determined to be closely related to banking. A bank also may engage, subject to
limitations on investment, in activities that are financial in nature, other
than insurance underwriting, insurance company portfolio investment, real estate
development and real estate investment, through a financial subsidiary of the
bank, if the bank is well capitalized, well managed and has at least a
satisfactory Community Reinvestment Act rating.

          Effective August 29, 2002, as directed by Section 302(a) of
Sarbanes-Oxley, the company's chief executive officer and chief financial
officer are each required to certify that the company's Quarterly and Annual
Reports do not contain any untrue statement of a material fact. The rules have
several requirements, including having these officers certify that: they are
responsible for establishing, maintaining, and


                                       5

<PAGE>

regularly evaluating the effectiveness of the company's internal controls; they
have made certain disclosures to the company's auditors and the audit committee
of the Board of Directors about the company's internal controls; and they have
included information in the company's Quarterly and Annual Reports about their
evaluation and whether there have been significant changes in the company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the evaluation. Effective in 2007, Section 404 of
Sarbanes-Oxley will become applicable to the company.

          BANK SUBSIDIARY REGULATION. The Bank, as a national banking
association, is subject to supervision, examination and regulation by the Office
of the Comptroller of the Currency ("OCC"). It is also a member of the Federal
Reserve System, and as such is subject to applicable provisions of the Federal
Reserve Act and regulations issued thereunder.

          The deposits of the Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the extent provided by law. Accordingly, the Bank is
also subject to regulation by the FDIC. The FDIC may terminate a bank's deposit
insurance upon finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order or condition enacted or
imposed by the bank's regulatory agency.

CAPITAL REQUIREMENTS

          As a bank holding company, the Company is subject to Federal Reserve
Board risk-based capital guidelines. The guidelines establish a systematic
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations, takes off-balance
sheet exposures into account and minimizes disincentives to holding liquid,
low-risk assets. Under the guidelines bank holding companies must maintain
capital sufficient to meet both a risk-based asset ratio test and leverage ratio
test on a consolidated basis. The risk-based ratio is determined by allocating
assets and specified off-balance-sheet commitments into four weighted
categories, with higher levels of capital being required for categories
perceived as representing greater risk. The Bank is subject to substantially
similar capital requirements adopted by its applicable regulatory agencies. In
addition, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established a regulatory framework which ties the level of
supervisory intervention by bank regulatory authorities primarily to a
depository institution's capital category. Among other things, FDICIA authorized
regulatory authorities to take "prompt corrective action" with respect to
depository institutions that do not meet minimum capital requirements. FDICIA
established five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. The Company is well capitalized as detailed in Note 21 to the
accompanying consolidated financial statements.

FEDERAL AND STATE LAWS

          The Bank is subject to regulatory oversight under various consumer
protection and fair lending laws. These laws govern, among other things,
truth-in-lending disclosure, equal credit opportunity, fair credit reporting and
community reinvestment. Failure to abide by federal laws and regulations
governing community reinvestment could limit the ability of a bank to open a new
branch or engage in a merger transaction. Community reinvestment regulations
evaluate how well and to what extent a bank lends and invests in its designated
service area, with particular emphasis on low-to-moderate income communities and
borrowers in such areas.

MONETARY POLICY AND ECONOMIC CONDITIONS

          The business of financial institutions is affected not only by general
economic conditions, but also by the policies of various governmental regulatory
agencies, including the Federal Reserve Board. The Federal Reserve Board
regulates money and credit conditions and interest rates to influence general
economic conditions primarily through open market operations in U.S. government
securities, changes in the discount rate on bank borrowings and changes in the
reserve requirements against depository institutions' deposits. These policies
and regulations significantly affect the overall growth and distribution of
loans, investments and deposits, and the interest rates charged on loans, as
well as the interest rates paid on deposits and accounts.

          The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of financial institutions in the
past and are expected to continue to have significant effects in the future. In
view of the changing conditions in the economy and the money markets and the
activities of monetary and fiscal authorities, the Company cannot definitely
predict future changes in interest rates, credit availability or deposit levels.

EFFECT OF ENVIRONMENTAL REGULATION

          The Bank's primary exposure to environmental risk is through its
lending activities. In cases when management believes environmental risk
potentially exists, the Bank mitigates its environmental risk exposures by
requiring environmental site assessments at the time of loan origination to
confirm collateral quality as to commercial real estate parcels posing higher
than normal potential for environmental impact, as determined by reference to
present and past uses of the subject property and adjacent sites. Environmental
assessments are typically required prior to any foreclosure activity involving
non-residential real estate collateral.

          With regard to residential real estate lending, management reviews
those loans with inherent environmental risk on an individual basis and makes
decisions based on the dollar amount of the loan and the materiality of the
specific credit.


                                       6

<PAGE>

          The Company anticipates no material effect on anticipated capital
expenditures, earnings or competitive position as a result of compliance with
federal, state or local environmental protection laws or regulations.

INTERNATIONAL MONEY LAUNDERING ABATEMENT AND
ANTI-TERRORIST FINANCING ACT OF 2001 (U.S. PATRIOT ACT)

          The International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001 (the "Patriot Act") was adopted in response to the
September 11, 2001 terrorist attacks. The Patriot Act provides law enforcement
with greater powers to investigate terrorism and prevent future terrorist acts.
Among the broad-reaching provisions contained in the Patriot Act are several
designed to deter terrorists' ability to launder money in the United States and
provide law enforcement with additional powers to investigate how terrorists and
terrorist organizations are financed. The Patriot Act creates additional
requirements for banks, which were already subject to similar regulations. The
Patriot Act authorizes the Secretary of the Treasury to require financial
institutions to take certain "special measures" when the Secretary suspects that
certain transactions or accounts are related to money laundering. These special
measures may be ordered when the Secretary suspects that a jurisdiction outside
of the United States, a financial institution operating outside of the United
States, a class of transactions involving a jurisdiction outside of the United
States or certain types of accounts are of "primary money laundering concern."
The special measures include the following: (a) require financial institutions
to keep records and report on the transactions or accounts at issue; (b) require
financial institutions to obtain and retain information related to the
beneficial ownership of any account opened or maintained by foreign persons; (c)
require financial institutions to identify each customer who is permitted to use
a payable-through or correspondent account and obtain certain information from
each customer permitted to use the account; and (d) prohibit or impose
conditions on the opening or maintaining of correspondent or payable-through
accounts.

CRITICAL ACCOUNTING POLICIES

          CNB's financial position and results of operations are impacted by
management's application of accounting policies involving judgments made to
arrive at the carrying value of certain assets. Management's greatest challenge
in implementing its policies is the need to make estimates about the effect of
matters that are inherently less than certain. For a detailed discussion of
CNB's significant accounting policies, see Note 1: Summary of Significant
Accounting Policies in the Notes to Consolidated Financial Statements. A
material estimate that is susceptible to significant change is the determination
of the allowance for loan losses. Both the estimates of the amount of the
allowance for loan losses and the placement of loans on non-accrual status
affect the carrying amount of the loan portfolio.

          The allowance for loan losses is a subjective judgment that management
must make regarding the loan portfolio, and is established and maintained at
levels that management believes are adequate to cover losses resulting from the
inability of borrowers to make required payments on loans. Where there is a
question as to the impairment of a specific loan, management obtains valuations
of the property or collateral securing the loan, and current financial
information of the borrower, including financial statements, when available.
Since the calculation of appropriate loan loss allowances relies on management's
estimates and judgments relating to inherently uncertain events, actual results
may differ from these estimates. For a more detailed discussion on the allowance
for loan losses, see Nonperforming Loans and Allowance For Loan Losses in this
Management's Discussion and Analysis and Allowance for Loan Losses in Note 1:
Summary of Significant Accounting Policies and Note 5: Loans and Leases
Receivable in the Notes to Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

          This report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this report.

THE BANKING BUSINESS IS VERY COMPETITIVE.

          The banking business is generally a highly competitive business. As of
June 30, 2005, based on an FDIC analysis done as of June 30 each year, there
were twelve other banks in CNB's market area. The total Morgan County commercial
bank deposits, which include a total of five banking offices, as of June 30,
2005, were in excess of $202.7 million. The total Berkeley County commercial
bank deposits, which include a total of twenty eight banking offices, as of June
30, 2005, were in excess of $883.8 million. The total Hancock, Maryland
commercial bank deposits, which include four banking office, as of June 30,
2005, were in excess of $81.9 million. At this same date CNB had a 74.8% share
of the Morgan County commercial bank deposits, a 5.6% share of the Berkeley
County commercial bank deposits and a 21.2% share of the Hancock, Maryland
commercial bank deposits. CNB represents Morgan County's only locally owned
bank, as the other existing commercial banks have their parent-Bank headquarters
in Charleston, West Virginia (City National) and Charlotte, North Carolina
(BB&T).

          For most of the services which CNB provides, there is also competition
from financial institutions other than commercial banks in attracting deposits
and in making loans with local offices and those that do business over the
internet. We compete for loans principally through the interest rates and loan
fees we charge and the efficiency and quality of services we provide. Increasing
levels of competition in our banking and financial services businesses may
reduce our market share or cause the prices we charge for our services to fall.
Our results may differ in future periods depending upon the nature or level of
competition. In addition, some traditional banking services or competing
services


                                       7

<PAGE>

are offered by insurance companies, investment counseling firms and other
business firms and individuals. Many of CNB's competitors have significantly
greater financial and marketing resources than we have.

          The existence of larger financial institutions in Morgan and Berkeley
Counties, West Virginia and Washington County, Maryland, some of which are owned
by larger regional or national companies, influence the competition in Citizens
National Bank's market area. The principal competitive factors in the market for
deposits and loans are interest rates, either paid on deposits or charged on
loans. West Virginia law allows statewide branch banking which provides
increased opportunities for Citizens National Bank, but it also increases the
potential competition for our service area. In addition, in 1994, Congress
passed the Riegle-Neal Interstate Banking and Branching Efficiency Act. Under
this Act, absent contrary action by a state's legislature, interstate branch
banking was allowed to occur after June 1, 1997. States are permitted to elect
to participate to a variety of degrees in interstate banking or states may elect
to "opt out." In 1996, the West Virginia Legislature elected to "opt in."
Accordingly, out-of-state banks may form de novo banks or may acquire existing
branches of West Virginia banks on a reciprocal basis.

IN THE FUTURE, CNB'S LENDING LIMIT COULD CREATE A COMPETITIVE DISADVANTAGE.

          In the future, CNB may not be able to attract larger volume customers
because the size of loans that CNB can offer to potential customers is less than
the size of the loans that many of CNB's larger competitors can offer.
Accordingly, CNB may lose customers seeking large loans to mortgage companies,
larger commercial banks and other financial institutions. We anticipate that our
lending limit will continue to increase proportionately with CNB's growth in
earnings; however, CNB may not be able to successfully attract or maintain
larger customers.

CNB ENGAGES IN COMMERCIAL AND CONSUMER LENDING ACTIVITIES WHICH ARE RISKIER THAN
RESIDENTIAL REAL ESTATE LENDING.

          CNB makes loans that involve a greater degree of risk than loans
involving residential real estate lending. Commercial business loans may involve
greater risks than other types of lending because they are often made based on
varying forms of collateral, and repayment of these loans often depends on the
success of the commercial venture. Consumer loans may involve greater risk
because adverse changes in borrowers' incomes and employment after funding of
the loans may impact their abilities to repay the loans.

          CNB's loan portfolio at December 31, 2005, consists of the following:

<TABLE>
<CAPTION>
TYPE OF LOAN                                        PERCENTAGE OF PORTFOLIO
------------                                        -----------------------
<S>                                                 <C>
Residential Real Estate Loans                                 69%
Commercial Loans, principally real estate secured             21%
Consumer Loans                                                10%
</TABLE>

CNB HAS LIMITED CONTROL OVER ITS PROFITABILITY BECAUSE CNB CANNOT CONTROL THE
VARIOUS FACTORS THAT CAN CAUSE FLUCTUATIONS IN INTEREST RATES.

          Aside from credit risk, the most significant risk resulting from CNB's
normal course of business, extending loans and accepting deposits, is interest
rate risk. If market interest rate fluctuations cause CNB's cost of funds to
increase faster than the yield of its interest-earning assets, then its net
interest income will be reduced. CNB's results of operations depend to a large
extent on the level of net interest income, which is the difference between
income from interest-earning assets, such as loans and investment securities,
and interest expense on interest-bearing liabilities, such as deposits and
borrowings. Interest rates are highly sensitive to many factors that are beyond
CNB's control, including general economic conditions and the policies of various
governmental and regulatory authorities. In establishing interest rates on
deposit accounts, CNB considers various factors, including rates offered by
competing institutions in their local market. In doing so, CNB does not try to
offer the highest rates in their local market which may result in a loss of
deposits in other institutions offering marginally higher rates.

          To effectively monitor the interest rate risk discussed above, CNB
uses a computer model to project the change in net interest income under various
changes in interest rates. To provide guidance to management, CNB's board of
directors, through its Asset/Liability/Investment Committee, has established a
policy related thereto which includes interest rate risk parameters within which
to operate. As of December 31, 2005, CNB's interest rate risk is within the
parameters.

CNB'S SUCCESS DEPENDS ON CNB'S MANAGEMENT TEAM.

          The departure of one or more of CNB's officers or other key personnel
could adversely affect CNB's operations and financial position. The Company's
management makes most decisions that involve CNB's operations. The key personnel
have all been with CNB since 2001. They include Thomas F. Rokisky, Patricia C.
Muldoon and Rebecca S, Stotler.



                                       8

<PAGE>

AN ECONOMIC SLOWDOWN IN OUR MARKET AREA COULD HURT CNB'S BUSINESS.

          Because we focus our business in the Eastern Panhandle of West
Virginia and the western part of Maryland, an economic slowdown in these areas
could hurt our business. An economic slowdown could have the following
consequences:

          -    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 the CNB may
               decline in value, in turn reducing customers' borrowing power and
               making existing loans less secure.

CNB IS HIGHLY REGULATED.

          The operations of CNB are subject to extensive regulation by federal,
state and local governmental authorities and are subject to various laws and
judicial and administrative decisions imposing requirements and restrictions on
them. Policies adopted or required by these governmental authorities can affect
CNB's business operations and the availability, growth and distribution of CNB's
investments, borrowings and deposits.

CNB MAY INCUR INCREASED CHARGE-OFFS AND ADDITIONAL LOAN LOSS PROVISION DUE TO
NEGATIVE CREDIT IN THE FUTURE.

          In the future, CNB could experience negative credit quality trends
that could head to a deterioration of asset quality. Such deterioration could
require CNB to incur loan charge-offs in the future and incur additional loan
loss provision, both of which would have the effect of decreasing earnings.

MARKETABILITY OF COMMON STOCK.

          There is no active market for our outstanding shares, and it is
unlikely that an established market for our shares will develop in the near
future. We presently do not intend to seek listing of the shares on any
securities exchange, or quotation on the Nasdaq interdealer quotation system. It
is not known whether significant trading activity will take place for several
years, if at all. Accordingly, a shareholder may not be able to sell their
shares immediately upon offering them for sale.

ITEM 2. PROPERTIES

CNB Financial Services, Inc.

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

Citizens National Bank

          The principal executive office and main banking office is located at
101 South Washington Street, Berkeley Springs, West Virginia. In addition, the
bank has owned and operated a full service branch bank located at 2450 Valley
Road, Berkeley Springs, West Virginia since 1991. In October 1998, the bank
opened a full service branch located at 2646 Hedgesville Road, Martinsburg, West
Virginia. In March 2002, the bank opened a full service branch located at 14994
Apple Harvest Drive, Martinsburg, West Virginia. In April 2005, the bank opened
an additional full service branch located at 1231 T.J. Jackson Drive, Falling
Waters, West Virginia. Each of the bank's locations provides ATM services, in
addition to traditional lobby and drive-in services. On January 26, 2004, CNB
entered into an agreement to purchase certain assets and liabilities associated
with the Hancock Branch of Fidelity Bank, a subsidiary bank of Mercantile
Bankshares Corporation (formerly Home Federal). The purchase, which took place
on June 11, 2004, increased the assets and liabilities of CNB by $14.6 million.
CNB assumed responsibility for all the deposit services including checking,
savings and certificate of deposits. Additionally, CNB acquired loans, equipment
and leasehold improvements and assumed the lease for the real estate located at
333 East Main Street, Hancock, Maryland. In November of 1998, the bank acquired
CNB Insurance Services, Inc. which is operated out of the main office in
Berkeley Springs. The main office and branches are owned free and clear of any
indebtedness. The Bank owns all of the facilities described above. Management
believes that the facilities are of sound construction, in good operating
condition, are appropriately insured and are adequately equipped for carrying on
the business of the Company. The net book value of the bank's premises and
equipment as of December 31, 2005 is $6.6 million.

ITEM 3. LEGAL PROCEEDINGS

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

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


                                       9

<PAGE>

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

          No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 2005.


                                       10
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
     ISSUER PURCHASES OF EQUITY SECURITIES

          The price of CNB's common stock ranged from $67.00 to $100.00 in 2005
and from $62.00 to $100.00 in 2004. The prices listed below represent the high
and low market prices for stock trades reported during each quarter.

<TABLE>
<CAPTION>
                                    PER SHARE
                   HIGH      LOW     DIVIDEND
                 -------   ------   ---------
<S>              <C>       <C>      <C>
2005
First quarter    $ 68.00   $68.00
Second quarter   $ 67.00   $67.00     $0.42
Third quarter    $100.00   $67.00
Fourth quarter   $ 90.00   $67.00     $1.02

2004
First quarter    $ 90.00   $71.00
Second quarter   $100.00   $62.00     $0.39
Third quarter    $100.00   $62.00
Fourth quarter   $ 75.00   $68.00     $0.99
</TABLE>

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

          The ability of CNB to pay dividends is subject to certain limitations
imposed by national banking laws. For a more detailed discussion on the
limitations, see Note 22: Regulatory Restrictions of the Notes to Consolidated
Financial Statements. As of March 3, 2006, the number of record holders was 636.

          During the fourth quarter of the fiscal year, CNB did not purchase any
of its own common stock.


                                       11

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

TABLE 1. FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                     2005       2004       2003       2002       2001
                                   --------   --------   --------   --------   --------
                                          In thousands except for per share data
<S>                                <C>        <C>        <C>        <C>        <C>
AT YEAR-END
   Total assets                    $258,953   $236,998   $201,056   $191,602   $171,541
   Securities available for sale     55,194     59,740     39,362     43,430     49,668
   Loans and lease, net of
      unearned income               180,207    154,920    146,273    129,815    111,874
   Deposits                         219,288    207,729    180,899    173,063    154,381
   Shareholders' equity              19,008     18,149     16,569     16,270     14,926

SIGNIFICANT RATIOS
   Return on average assets            1.00%      1.07%      0.89%      0.71%      0.77%
   Return on average
      shareholders' equity            12.91      13.38      10.44       8.38       8.49
   Average shareholders' equity
      to average assets                7.76       8.03       8.48       8.49       9.12
   Net interest margin                 4.12       4.11       3.83       3.36       3.73

SUMMARY OF OPERATIONS
   Interest income                 $ 13,420   $ 11,715   $ 11,569   $ 11,489   $ 11,868
   Interest expense                   3,850      3,169      4,152      5,342      5,937
   Net interest income                9,570      8,546      7,417      6,147      5,931
   Provision for loan losses            352        393        312        261        226
   Net interest income after
      provision for loan losses       9,218      8,153      7,105      5,886      5,705
   Non-interest income                2,007      1,972      1,728      1,403      1,025
   Non-interest expense               7,541      6,789      6,007      5,300      4,794
   Income before income taxes         3,684      3,336      2,826      1,989      1,936
   Income tax expense                 1,238        992      1,083        681        700
   Net income                         2,446      2,344      1,743      1,308      1,236

PER SHARE DATA
   Net income                      $   5.34   $   5.12   $   3.80   $   2.86   $   2.70
   Cash dividends                      1.44       1.38       1.20       1.02       1.02
   Net book value                     41.50      39.62      36.17      35.52      32.59
</TABLE>


                                       12

<PAGE>

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

          The following discussion and analysis presents the significant changes
in financial condition and results of operations of CNB, for the years ended
December 31, 2005 and 2004. This discussion and analysis should be read in
conjunction with the audited, consolidated financial statements and accompanying
notes. This discussion includes forward-looking statements based upon
management's expectations; actual results may differ. Amounts and percentages
used in this discussion have been rounded. All average balances are based on
monthly averages.

EARNINGS SUMMARY

          CNB had net income totaling $2.4 million or $5.34 per share, $2.3
million or $5.12 per share and $1.7 million or $3.80 per share for fiscal years
2005, 2004 and 2003, respectively. Annualized return on average assets and
average equity were 1.0% and 12.9%, respectively for 2005 compared to 1.1% and
13.4% for 2004 and .9% and 10.4% for 2003.

          Growth in net income for the year 2006 is projected to increase
slightly compared to the growth in net income for 2005 due to the strong loan
demand the company experienced in 2005 continuing in 2006 offset by a tighter
net interest margin caused by the increased cost of funds

NET INTEREST INCOME

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

          Net interest income in 2005 increased by $1.0 million or 12.0% over
2004. Interest income in 2005 increased by $1.7 million or 14.6% compared to
2004, while interest expense increased by $681,000 or 21.5% during 2005 as
compared to 2004. Interest income increased during 2005 compared to 2004 as a
result of an increase in the average balances of loans and investment securities
offset by a decrease in the average balance of federal funds sold. Average rates
earned on all interest earning assets increased during 2005 compared to 2004.
Interest expense increased during 2005 compared to 2004 as a result of an
increase in the average balance of savings deposits, NOW accounts, money market
accounts and borrowings and an increase in the average rates paid on those
accounts. Interest expense was also affected by an increase in the average rates
paid on time deposits offset by a decrease in the average balance of those
accounts.

          Net interest income in 2004 increased by $1.1 million or 15.2% over
2003. Interest income in 2004 increased by $146,000 or 1.3% compared to 2003,
while interest expense decreased by $983,000 or 23.7% during 2004 as compared to
2003. Interest income increased during 2004 compared to 2003 as a result of an
increase in the average balances of loans, investment securities and federal
funds sold offset by a decrease in the average rates earned on loans and
investment securities. Interest expense decreased during 2004 compared to 2003
as a result of a decrease in the average balance and average rates paid on time
deposits offset by an increase in the average balances of savings, NOW accounts
and money market accounts and average rates paid on those balances.

          During 2005 and 2004, the Bank used funds generated from deposit
account growth, sale of investment securities and FHLB borrowings to fund loan
commitments.

          The net interest margin is impacted by the change in the spread
between yields on earning assets and rates paid on interest bearing liabilities.
Net interest margin increased from 2005 to 2004. See Table 2 - Distribution of
Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest
Differential.


                                       13
<PAGE>

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

<TABLE>
<CAPTION>
                                    DECEMBER 31, 2005              DECEMBER 31, 2004              DECEMBER 31, 2003
                              ----------------------------   ----------------------------   ----------------------------
                                 YTD                            YTD                            YTD
                               AVERAGE      YTD     YIELD/    AVERAGE      YTD     YIELD/    AVERAGE      YTD     YIELD/
                               BALANCE   INTEREST    RATE     BALANCE   INTEREST    RATE     BALANCE   INTEREST    RATE
                              --------   --------   ------   --------   --------   ------   --------   --------   ------
                                                                     In thousands
<S>                           <C>        <C>        <C>      <C>        <C>        <C>      <C>        <C>        <C>
Interest earning assets:
   Federal funds sold         $     28    $     5    3.11%   $  2,384    $    34    1.25%   $  1,521    $    17    1.02%
   Securities:
      Taxable                   43,245      1,894    4.38      37,526      1,569    4.18      42,602      1,887    4.43
      Tax-exempt (1)            12,092        410    5.14       8,070        273    5.13       1,718         59    5.20
   Loans (net of unearned
      interest) (2) (4) (5)    170,158     10,826    6.36     152,984      9,559    6.25     136,658      9,187    6.72
                              --------    -------    ----    --------    -------    ----    --------    -------    ----
Total interest
   earning assets (1)         $225,523    $13,135    5.82%   $200,964    $11,435    5.69%   $182,499    $11,150    6.11%
                              --------    -------    ----    --------    -------    ----    --------    -------    ----
Nonearning assets:
   Cash and due
      from banks              $  9,577                       $  9,459                       $  6,934
   Bank premises and
      equipment, net             6,455                          5,494                          4,734
   Other assets                  4,635                          3,880                          4,193
   Allowance for
      loan losses               (1,956)                        (1,731)                        (1,543)
                              --------                       --------                       --------
Total assets                  $244,234                       $218,066                       $196,817
                              ========                       ========                       ========
Interest bearing
   liabilities:
   Savings deposits           $ 32,340    $   162    0.50%   $ 28,622    $   147    0.51%   $ 22,876    $   114    0.50%
   Time deposits                87,977      2,391    2.72      92,959      2,493    2.68      94,497      3,685    3.90
   NOW accounts                 43,790        908    2.07      32,196        436    1.35      25,432        290    1.14
   Money market
      accounts                  10,101         91    0.90       9,685         79    0.82       6,836         53    0.78
   Borrowings                    8,393        298    3.55         873         14    1.60         728         10    1.37
                              --------    -------    ----    --------    -------    ----    --------    -------    ----
Total interest
   bearing liabilities        $182,601    $ 3,850    2.11%   $164,335    $ 3,169    1.93%   $150,369    $ 4,152    2.76%
                              --------    -------    ----    --------    -------    ----    --------    -------    ----
Noninterest bearing
   liabilities:
   Demand deposits            $ 40,314                       $ 33,931                       $ 27,319
   Other liabilities             2,368                          2,287                          2,431
   Shareholders' equity         18,951                         17,513                         16,698
                              --------                       --------                       --------
Total liabilities and
   shareholders' equity       $244,234                       $218,066                       $196,817
                              ========                       ========                       ========
                                          -------                        -------                        -------
Net interest income (1)                   $ 9,285                        $ 8,266                        $ 6,998
                                          =======                        =======                        =======
Net interest spread (3)                              3.71%                          3.76%                          3.35%
                                                     ====                           ====                           ====
Net interest income to
   average interest earning
   assets (1)                                        4.12%                          4.11%                          3.83%
                                                     ====                           ====                           ====
</TABLE>

(1)  Yields are expressed on a tax equivalent basis using a 34% tax rate.

(2)  For the purpose of these computations, nonaccruing loans are included in
     the amounts of average loans outstanding.

(3)  Net interest spread is the difference between the weighted average yield on
     interest-earning assets and the weighted average cost of interest-bearing
     liabilities.

(4)  Interest income on loans excludes fees of $285,000 in 2005, $280,000 in
     2004 and $419,000 in 2003.

(5)  Interest income on loans includes fees of $68,484 in 2005, $100,527 in 2004
     and $155,942 in 2003 from the Business Manager Program, student loans and
     lease receivables.


                                       14
<PAGE>

          Table 3 sets forth a summary of the changes in interest earned and
interest expense detailing the amounts attributable to (i) changes in volume
(change in average volume times the prior year's average rate), (ii) changes in
rate (change in the average rate times the prior year's average volume). The
changes in rate/volume (change in the average volume times the change in the
average rate), had been allocated to the changes in volume and changes in rate
in proportion to the relationship of the absolute dollar amounts of the change
in each. During 2005, net interest income increased $1.2 million due to changes
in volume and ($193,000) due to changes in interest rates. Also, net interest
income was affected by a $5,000 increase in loan fees. In 2004, net interest
income increased $835,000 due to changes in volume and $433,000 due to changes
in interest rates. Also, net interest income was affected by a $139,000 decrease
in loan fees.

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

(Taxable equivalent basis)

<TABLE>
<CAPTION>
                                2005 OVER 2004             2004 OVER 2003
                           -----------------------   --------------------------
                            CHANGE DUE TO              CHANGE DUE TO
                           --------------    TOTAL   ----------------    TOTAL
                           VOLUME    RATE   CHANGE   VOLUME     RATE     CHANGE
                           ------   -----   ------   ------   -------   -------
                                               In thousands
<S>                        <C>      <C>     <C>      <C>      <C>       <C>
Interest earned on:
   Federal funds sold      $   56   $ (84)  $  (28)   $  12   $     5   $    17
   Taxable securities         248      78      326     (216)     (102)     (318)
   Tax-exempt securities      136       1      137      215        (1)      214
   Loans                    1,094     171    1,265      909      (537)      372
                           ------   -----   ------    -----   -------   -------
Total interest earned      $1,534   $ 166   $1,700    $ 920   $  (635)  $   285
                           ------   -----   ------    -----   -------   -------
Interest expense on:
   Savings deposits        $   19   $  (3)  $   16    $  31   $     2   $    33
   Time deposits             (136)     38      (98)     (58)   (1,134)   (1,192)
   NOW accounts               188     281      469       87        59       146
   Money market accounts        4       8       12       23         3        26
   Other borrowing            247      35      282        2         2         4
                           ------   -----   ------    -----   -------   -------
Total interest expense     $  322   $ 359   $  681    $  85   $(1,068)  $  (983)
                           ------   -----   ------    -----   -------   -------
Net interest income        $1,212   $(193)  $1,019    $ 835   $   433   $ 1,268
                           ======   =====   ======    =====   =======   =======
</TABLE>

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


                                       15

<PAGE>

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

(Taxable equivalent basis)

<TABLE>
<CAPTION>
                                     2005              2004              2003
                               ---------------   ---------------   ---------------
                                AVERAGE           AVERAGE           AVERAGE
                                BALANCE   RATE    BALANCE   RATE    BALANCE   RATE
                               --------   ----   --------   ----   --------   ----
                                                   In thousands
<S>                            <C>        <C>    <C>        <C>    <C>        <C>
Earning assets                 $225,523   5.82%  $200,964   5.69%  $182,499   6.11%
                               ========          ========          ========
Interest bearing liabilities   $182,601   2.11%  $164,335   1.93%  $150,369   2.76%
                                          ----              ----              ----
Interest rate spread                      3.71%             3.76%             3.35%
Interest free sources used
   to fund earning assets(1)     42,922   0.41%    36,629   0.35%    32,130   0.48%
                               --------   ----   --------   ----   --------   ----
Total sources of funds         $225,523          $200,964          $182,499
                               ========          ========          ========
Net interest margin                       4.12%             4.11%             3.83%
                                          ====              ====              ====
</TABLE>

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

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

          Interest rate spread decreased 5 basis points in 2005 while the net
interest margin increased 1 basis point. The interest rate spread was negatively
impacted by an 18 basis point increase in interest bearing liability costs
offset by a 13 basis point increase in earning asset yields. Interest rate
spread increased 41 basis points in 2004 while the net interest margin increased
28 basis points. Both the interest rate spread and margin were positively
impacted by an 83 basis point decrease in interest bearing liability costs
offset by a 42 basis point decrease in earning asset yields.

          The prime rate increased 200 basis points during 2005 and 125 basis
point during the latter half of 2004, however long term rates have fluctuated in
a relatively narrow range, resulting in a flatter yield curve. Loan yields
increased 11 basis points in 2005 and decreased 47 basis points in 2004. The
variances in 2004 are due to a significant portion of the loan portfolio
repricing at lower rates through cash out refinancing or variable rate loans.
The variable rate loan portfolio is tied to mid term Treasury rates, and these
rates during 2005 increased in the first, third and fourth quarters and
decreased in the second quarter. In 2005, the increase in liability costs is
primarily the result of the higher cost of funds on NOW, money market accounts
and borrowings during the year. In 2004, the decrease in liability costs is the
result of the lower cost of funds on savings, NOW, money market and time deposit
accounts during the year.

PROVISION FOR LOAN LOSSES

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

NONINTEREST INCOME

          Noninterest income increased $35,000 or 1.8% during 2005 over 2004.
Noninterest income increased $244,000 or 14.1% during 2004 over the prior
comparable period. The increases in 2005 and 2004 were attributable to fees
generated from the Bounce Protection program, debit card income, ATM fees and
trust fees. These increases were offset by a decrease in overdraft fees and a
decrease in gain on sale of investment securities and, for 2004 only, travel
club fees and miscellaneous customer service fees also reflected a decrease. For
2004, the increase was affected by service charge fees being increased effective
October 1, 2003. Income from CNB's insurance operations increased due to
additional new written business, rate increases by companies and a large group
health plan written in September 2004.

          The level of trust assets being managed increased from $27.9 million
at December 31, 2004 to $36.9 million at December 31, 2005 and the fees earned
on these assets increased by $35,000. The increase in fees is due to a 32%
increase in assets being managed and the fee schedule for trust fees was
increased by 10% during the fourth quarter of 2004 and fee income was received
for the settlement of an estate during the first quarter of 2005.

NONINTEREST EXPENSES


                                       16

<PAGE>

          Noninterest expenses increased $752,000 or 11.1% during 2005 over the
prior comparable period. The increase was primarily due to an increase in
salaries and employee benefits, occupancy expense, furniture and equipment
expense and other operating expenses. Salaries and employee benefits increased
due to normal merit increases, several new hires, a partial year of salaries and
benefits for employees of the Spring Mills branch in northern Berkeley County
and a full year of salaries and benefits for employees of the acquired Hancock,
Maryland branch. Employee benefits increased due to an increase in pension
expense and the increased number of employees. Although the bank changed its
health insurance program, effective January 1, 2005, to a high deductible plan
with reduced per employee premiums the insurance expense for 2005 showed an
increase over the same period last year due to the increased number of
employees. Concurrent with the creation of the high deductible insurance plan,
the Bank established a vested health contribution plan which enables the Bank to
contribute to health reimbursement accounts for each employee on the plan. A
$58,989 expense was incurred in 2005 for the health reimbursement accounts.

          Additional utilities expense and depreciation related to the new
branch facility in Spring Mills and a full year of expenses related to the
acquired Hancock branch caused occupancy expense and furniture and equipment
expense to increase.

          Components of other operating expense, which significantly increased
during 2005, included telephone expense, debit card expense, outside service
fees, audit, tax and accounting fees, miscellaneous NSF check and other losses
and the amortization of premium purchased for the Hancock branch facility. These
increases were offset by decreases in advertising, stationary, supplies and
printing, employee training, bounce protection expense, legal fees and business
manager expense. Telephone expense increased due to the addition of two branch
facilities and increased usage. The increase in debit card expense is a result
of the increased deposit base of the bank and additional fraud protection
expense. Outside service fees and audit, tax and accounting fees increased due
to additional costs of compliance with new banking regulations and the
provisions of the Sarbanes-Oxley Act of 2002. The increase in miscellaneous NSF
check and other losses is due to an increased exposure of the bank to fraudulent
financial instruments and schemes. Stationary, supplies and printing decreased
due to the purchase of free Citizens National Bank checks for all checking
account customers of the acquired Hancock branch in 2004. Employee training
decreased as a result of the outsourced staff training on Windows based products
and other specialized product training in 2004. Bounce protection expense
decreased due to the expiration of the Bank's contract with Pinnacle Financial
Strategies in February 2004. Legal fees decreased as 2004 included expenses
pertaining to the Hancock branch acquisition. Business manager expense decreased
due to the continued decrease in the volume of receivables the bank purchased
throughout 2005 due to a decline in customer need for the program. Advertising
expense decreased due to the concentrated advertising campaign in early 2004
which related to the Hancock branch acquisition.

          Noninterest expenses increased $783,000 or 13.0% during 2004 over the
prior comparable period. The increase was primarily due to an increase in
occupancy expense, furniture and equipment expense, salaries and employee
benefits and other operating expenses. Salaries and employee benefits increased
due to normal merit increases, several new hires, one half year of salaries and
benefits for employees of the acquired Hancock branch and additional payroll
expenses related to the conversion of the Hancock branch. Also, salaries
increased in the fourth quarter due to bonuses paid to employees, three officer
level positions being filled and an increase in the number of hours worked by
employees. During the fourth quarter of 2004, employees of the acquired Hancock
branch were eligible for health insurance coverage which caused the Bank's group
insurance to increase. Additional depreciation and amortization related to the
new computer equipment, software and peripherals associated with the upgrade of
the Bank's technology systems caused furniture and equipment expense to
increase. Another factor relating to the increase in furniture and equipment
expense was an increase in the cost and number of equipment maintenance
contracts the Bank entered into primarily due to the 2004 technology system
upgrade. Occupancy expense increased due to additional operating expenses
related to the acquired Hancock branch and non-recurring maintenance expenses
incurred in the fourth quarter of 2004.

          Components of other operating expense, which significantly increased
during 2004, included stationary, supplies and printing, advertising, employee
training, legal fees, debit card expense, other loan expense and amortization of
premium purchased. These increases were offset by decreases to Bounce Protection
expense, mortgage servicing rights, business manager expense, amortization of
business assets purchased and outside service fees expense. The increase in
stationary, supplies and printing, advertising, legal fees and amortization of
premium purchased are a direct result of the Bank's acquisition of the full
service branch of Fidelity Bank in Hancock, Maryland. The training expense
increased due to additional staff training on Windows based products and
specialized technical training during the fourth quarter 2004. Debit card
expense increased due to the increased volume of transactions processed on our
increased deposit base. Other loan expense increased due to adjustments made
pertaining to the bank's sold loan portfolio.

          Bounce Protection expense decreased due to the expiration of the
Bank's contract with Pinnacle Financial Strategies in February 2004. Outside
service fees decreased due to the lower usage of outside professionals by the
bank in 2004. The expense related to mortgage servicing rights and amortization
of business assets purchased decreased due to additional write-off of these
expenses occurring in 2003. Business manager expense decreased as a direct
result of the lower volume of activity in the program.

          Additional other noninterest expenses which increased during the
fourth quarter 2004 were postage, director's fees, employees' and officer's
travel, food and entertainment expense and legal fees. Postage expense increased
as a direct result of the Bank's increased customer base. A semi-annual increase
in Director's fees of $12,000 was expensed when paid in the fourth quarter. Due
to the outsourced staff training on Windows based products, employees' and
officer's travel and food and entertainment expenses increased. Legal fees
increased as a direct result of the increased volume of legal services used by
the Bank in the fourth quarter regarding loan collections.

          The Bank performed an analysis of the predominant risk characteristics
of the previously capitalized mortgage servicing rights on December 31, 2003.
This analysis indicated prepayment risk for the underlying loans is higher due
to lower current interest rates and thus a


                                       17

<PAGE>

write-down of the remaining balance was necessary. Management recognized a
direct write off of $27,674 which was recorded in other expenses on the December
31, 2003 income statement.

          The Bank performs an annual test of impairment of acquired customer
lists. On December 31, 2003, based on the results of these tests, the Bank
concluded that there was an impairment of the amortizable intangible assets as a
result of the rate of attrition of the acquired customers. Management determined
the fair value of the intangible assets based on a multiple of commission income
to determine the amount of impairment. The impairment recorded in 2003 was
$64,003, which is included in other expenses on the income statement. The annual
test for impairment resulted in no loss for the years ended December 31, 2005 or
2004.

INCOME TAXES

          Provision for income tax totaled $1.2 million in 2005, $992,000 in
2004 and $1.1 million in 2003. The effective tax rate was 33.6% in 2005 compared
to 29.7% and 38.3% in 2004 and 2003, respectively. The Bank's income tax expense
differs from the amount computed at statutory rates primarily due to the
tax-exempt earnings from certain investment securities, and non-deductible
expenses, such as life insurance premiums. See Note 16 of the Notes to
Consolidated Financial Statements for a comprehensive analysis of income tax
expense.

FINANCIAL CONDITION

          Table 5 examines Citizens National Bank's financial condition in terms
of its sources and uses of funds. Average funding sources and uses increased
$24.6 million or 12.2% in 2005 compared with an increase of $18.5 million or
10.1% in 2004.

TABLE 5. SOURCES AND USES OF FUNDS

<TABLE>
<CAPTION>
                                        2005                             2004                   2003
                          -------------------------------   -------------------------------   --------
                                      INCREASE (DECREASE)               INCREASE (DECREASE)
                            AVERAGE   -------------------     AVERAGE   -------------------    AVERAGE
                            BALANCE    AMOUNT      %          BALANCE    AMOUNT       %       BALANCE
                           --------   --------   -----      ---------   --------    ----      --------
<S>                       <C>         <C>        <C>        <C>         <C>         <C>       <C>
                                                          In thousands
Funding uses:
      Federal funds
      sold                 $     28   $ (2,356)  (98.8)%      $  2,384   $    863    56.7%    $  1,521
   Securities available
      for sale               55,337      9,741    21.4          45,596      1,276     2.9       44,320
   Loans                    170,158     17,174    11.2         152,984     16,326    11.9      136,658
                           --------   --------                --------   -------              --------
   Total uses              $225,523   $ 24,559    12.2%       $200,964   $18,465     10.1%    $182,499
                           ========   ========   =====        ========   =======    =====     ========
Funding sources:
    Interest-bearing
      demand deposits      $ 53,891   $ 12,010    28.7%       $ 41,881   $  9,613    29.8%    $ 32,268
   Savings deposits          32,340      3,718    13.0          28,622      5,746    25.1       22,876
   Time deposits             87,977     (4,982)   (5.4)         92,959     (1,538)   (1.6)      94,497
   Short-term
      borrowings              8,393      7,520   861.4             873        145   100.0          728
   Noninterest bearing
      funds, net(1)          42,922      6,293    17.2          36,629      4,499    14.0       32,130
                           --------   --------                --------   -------              --------
      Total sources        $225,523   $ 24,559    12.2%       $200,964   $ 18,465    10.1%    $182,499
                           ========   ========   =====        ========   =======    =====     ========
</TABLE>

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

          Total assets increased $22.0 million or 9.3% to $259.0 million from
December 31, 2004 to December 31, 2005 due primarily to a $25.3 million increase
in loans and $557,000 increase in premises and equipment, net offset by a
$53,000 decrease in federal funds sold, $4.5 million decrease in investment
securities and a $666,000 decrease in other assets. The decrease in other assets
is due to WV Housing Clearing account for loans in process balance being greater
at December 31, 2004 than December 31, 2005 due to the timing of the settlement
of these loans.

          Total liabilities increased $21.1 million or 9.6% to $239.9 million
from December 31, 2004 to December 31, 2005 substantially due to the increase in
deposits of $11.6 million and the increase in FHLB borrowings of $9.2 million.
Shareholders' equity increased $859,000 to


                                       18

<PAGE>

$19.0 million at December 31, 2005 primarily due to net income of $2.4 million,
offset by a $927,000 decrease in accumulated other comprehensive income and cash
dividends of $660,000.

          The components of accumulated other comprehensive income at December
31, 2005, were unrealized gains and losses on available for sale securities, net
of deferred income taxes and additional minimum pension liability, net of
deferred income taxes. The decrease in accumulated other comprehensive income
was due to the unrealized market value depreciation of the available for sale
investment security portfolio and additional minimum pension liability
adjustment. The unrealized gains and losses are primarily a function of
available market interest rates relative to the yield being generated on the
available for sale portfolio. No earnings impact results, however, unless the
securities are actually sold. The additional minimum pension liability
adjustment results from the accumulated benefit obligation exceeding the fair
value of plan assets.

LOAN PORTFOLIO

          At December 31, 2005, total loans increased $25.3 million or 16.3% to
$180.2 million from $154.9 million at December 31, 2004. The Bank experienced
steady loan growth throughout 2005 with $17.8 million of the growth being in the
second and third quarters of 2005. This increase is mainly a result of a focused
effort by all loan officers to generate loans. Loan officers have increased
personal contact with realtors, auto dealers and commercial businesses
throughout 2005. In addition, the Bank offered a fixed rate residential mortgage
promotion which ended in June 2005 and a mortgage program in which the Bank paid
up to $2,000 of certain closing costs which ended in October 2005. Also, the
Bank had several large commercial real estate loans funded in the first half of
2005. The Bank and its branches are centered in a naturally growing part of West
Virginia. The average home price in Berkeley County in 2005 has increased over
2004 by over 20%. The average dollar amount borrowed against these homes has
also increased by over 15%. Berkeley County was recently rated the 3rd most
populous county in West Virginia and in the top 100 for the fastest growing
counties in the United States. The loan mix remained constant with December 31,
2004 but continued to grow in all loan areas. The Bank's management believes
additional growth in all lending areas is possible into year 2006. Management's
intent is to control the loan volume in a manner which would produce a loan to
deposit ratio between 75% and 90% and maintain credit quality. The loan to
deposit ratio was 82.2% at December 31, 2005 and 74.6% at December 31, 2004. The
ratio of net charge-offs to average loans outstanding was .08% in 2005 and .13%
in 2004.



                                       19
<PAGE>
          Table 6 sets forth the amount of loans outstanding (net of unearned
income) as of the dates shown:

TABLE 6. LOANS AND LEASES OUTSTANDING

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                             ----------------------------------------------------
                               2005       2004       2003       2002       2001
                             --------   --------   --------   --------   --------
                                                 In thousands
<S>                          <C>        <C>        <C>        <C>        <C>
Real estate                  $125,723   $108,159   $ 98,405   $ 83,239   $ 67,860
Commercial real estate         29,492     22,759     21,521     13,935     12,459
Consumer                       16,802     16,405     16,853     22,575     24,198
Commercial                      9,314      8,881      8,934      9,685      6,978
Overdrafts                        356         82        136         73         87
                             --------   --------   --------   --------   --------
                             $181,687   $156,286   $145,849   $129,507   $111,582
Leases:                           145        166        186        135        139
                             --------   --------   --------   --------   --------
                             $181,832   $156,452   $146,035   $129,642   $111,721
Net deferred loan fees,
   premiums and discounts         397        275        238        172        153
Allowance for loan losses      (2,022)    (1,807)    (1,608)    (1,484)    (1,337)
                             --------   --------   --------   --------   --------
                             $180,207   $154,920   $144,665   $128,330   $110,537
                             ========   ========   ========   ========   ========
</TABLE>

          The commercial loan portfolio consisting of commercial business and
commercial real estate loans showed an increase in outstanding loans of $7.2
million from $31.6 million at December 31, 2004 to $38.8 million at December 31,
2005. The commercial loan portfolio is approximately 21% of the total loan
portfolio at December 31, 2005 compared to 20% at December 31, 2004. The Bank's
activity in the Berkeley County market expanded significantly after opening a
branch location in 1999. The same also occurred in the Maryland market after
acquiring the Hancock, Maryland branch in June 2004. In addition, the Bank's
loan growth has benefited from significant real estate development activity in
Berkeley County, West Virginia. Management believes additional growth in both
commercial business and commercial real estate loans is possible in 2006.

          Real estate mortgage loans comprised mainly of one to four family
residences continued to be the Bank's dominant loan category. Mortgage lending
comprises approximately 69% or $125.7 million of the total loan portfolio at
December 31, 2005 compared to 69% or $108.2 million at December 31, 2004. Most
of the increase in real estate lending is attributable to the Bank offering a
fixed rate residential mortgage promotion which ended in June 2005 and a
mortgage program in which the Bank pays up to $2,000 of certain closing costs
which ended in October 2005.

          Table 7 summarizes the approximate contractual maturity and
sensitivity of certain loan types to changes in interest rates as of December
31, 2005:


                                       20

<PAGE>

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 2005
                                          ----------------------------------------------
                                          ONE YEAR   ONE THROUGH      OVER
                                           OR LESS    FIVE YEARS   FIVE YEARS     TOTAL
                                          --------   -----------   ----------   --------
                                                           In thousands
<S>                                       <C>        <C>           <C>          <C>
Commercial, financial and agricultural:
   Floating rate                           $19,382     $ 8,272       $   300    $ 27,954
   Fixed rate                                2,872       4,514         3,466      10,852
                                           -------     -------       -------    --------
      Total                                $22,254     $12,786       $ 3,766    $ 38,806
                                           =======     =======       =======    ========
Real estate - mortgage:
   Floating rate                           $ 9,220     $42,726       $    --    $ 51,946
   Fixed rate                                2,132       3,427        63,006      68,565
                                           -------     -------       -------    --------
      Total                                $11,352     $46,153       $63,006    $120,511
                                           =======     =======       =======    ========
Real estate - construction:
   Floating rate                           $ 1,104     $    --       $    --    $  1,104
   Fixed rate                                4,108          --            --       4,108
                                           -------     -------       -------    --------
      Total                                $ 5,212     $    --       $    --    $  5,212
                                           =======     =======       =======    ========
Consumer:
   Floating rate                           $    66     $   141       $    --    $    207
   Fixed rate                                1,478      13,256         2,217      16,951
                                           -------     -------       -------    --------
      Total                                $ 1,544     $13,397       $ 2,217    $ 17,158
                                           =======     =======       =======    ========
Lease financing:
   Floating rate                           $    --     $    --       $    --    $     --
   Fixed rate                                    7          16           122         145
                                           -------     -------       -------    --------
      Total                                $     7     $    16       $   122    $    145
                                           =======     =======       =======    ========
</TABLE>

          The Bank has experienced a shift from a demand for variable rate loans
to a demand for fixed rate mortgage products. Demand for the variable rate loans
has fallen due to the rising interest rate environment causing these products to
not be as attractive as in the past. The Bank's in-house fixed rate products and
secondary market fixed rates products, which are sold to various investors, have
seen a greater demand during 2005. As of December 31, 2005, 51.2% of the Bank's
mortgage loans were adjustable rate loans and 48.8% were fixed rate loans.
Compared to December 31, 2004, 57.3% of the Bank's mortgage loans were
adjustable rate loans and 42.7% were fixed rate loans. Currently, the Bank has
approximately $2.8 million in fixed rate loans in the portfolio which were
originated under terms that would allow them to be sold on the secondary market,
although there is no intent to sell these loans.

          The consumer loan portfolio showed an increase of $397,000. The
primary factor causing the increase was an increase in mobile homes financed
through our Berkeley County branches along with an increase in loan volume at
our Hancock branch.

          Bank policy requires those loans which are past due 90 days or more be
placed on nonaccrual status unless they are both well secured and in the process
of collection. As of December 31, 2005 and 2004, nonaccrual loans approximated
..44% and .25% of total loans (net), respectively.


                                       21

<PAGE>


NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES

          Nonperforming loans consist of loans in nonaccrual status and loans
which are past due 90 days or more and still accruing interest. The Bank has no
loans which are considered to be impaired as of December 31, 2005 and 2004. As
of December 31, 2005, management is aware of seven borrowers who have exhibited
weaknesses. Their loans have aggregate uninsured balances of $3.4 million. A
specific allowance of $150,000 related to these loans has been established as
part of the allowance for loan losses. The loans are collateralized primarily by
real estate and management anticipates that any additional potential loss would
be minimal.

          Table 8 sets forth the amounts of nonperforming loans as of the dates
indicated:

TABLE 8. NONPERFORMING ASSETS

<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                         --------------------------------
                                                         2005   2004   2003   2002   2001
                                                         ----   ----   ----   ----   ----
                                                                   In thousands
<S>                                                      <C>    <C>    <C>    <C>    <C>
Nonaccrual loans                                         $790   $381   $349   $ 13   $ 25
Loans past due 90 days or more still accruing interest    --     --      27    553    450
Other real estate                                         --     --      --      2     15
                                                         ----   ----   ----   ----   ----
   Total                                                 $790   $381   $376   $568   $490
                                                         ====   ====   ====   ====   ====
</TABLE>

          The allowance for loan losses is the best estimate by management of
the probable losses which have been incurred as of the respective balance sheet
date. Management makes a determination quarterly by analyzing overall loan
quality, changes in the mix and size of the loan portfolio, previous loss
experience, general economic conditions, information about specific borrowers
and other factors. The Bank's methodology for determining the allowance for loan
losses establishes both an allocated and an unallocated component. The allocated
portion of the allowance represents the results of analyses of individual loans
that are being monitored for potential credit problems and pools of loans within
the portfolio. The allocated portion of the allowance for loans is based
principally on current loan risk ratings, historical loan loss rates adjusted to
reflect current conditions, as well as analyses of other factors that may have
affected the collectibility of loans in the portfolio. The Bank analyzes all
commercial loans that are being monitored as potential credit problems to
determine whether such loans are impaired, with impairment measured by reference
to the borrowers' collateral values and cash flows. The unallocated portion of
the allowance for loan losses represents the results of analyses that measure
probable losses inherent in the portfolio that are not adequately captured in
the allocated allowance analyses. These analyses include consideration of
unidentified losses inherent in the portfolio resulting from changing
underwriting criteria, changes in the types and mix of loans originated,
industry concentrations and evaluations, allowance levels relative to selected
overall credit criteria and other economic indicators used to estimate probable
incurred losses. At December 31, 2005 and 2004, the allowance for loan losses
totaled $2.0 million and $1.8 million, respectively. The allowance for loan
losses as a percentage of loans was 1.1% and 1.2% as of December 31, 2005 and
2004, respectively. The provision for loan losses exceeded net charge-offs by
$215,000 and $200,000 in 2005 and 2004, respectively.


                                       22
<PAGE>

          Table 9 shows a summary of the Bank's loan loss experience:

TABLE 9. ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                              2005       2004       2003       2002       2001
                                            --------   --------   --------   --------   --------
                                                                In thousands
<S>                                         <C>        <C>        <C>        <C>        <C>
Loans outstanding at end of year            $180,207   $154,920   $144,665   $128,330   $110,537
                                            ========   ========   ========   ========   ========
Daily average balance of loans and leases   $170,158   $152,984   $136,658   $118,530   $108,526
                                            ========   ========   ========   ========   ========
Balance of allowance for loan losses
   at beginning of year                     $  1,807   $  1,608   $  1,484   $  1,337   $  1,216
                                            --------   --------   --------   --------   --------
Loans charged off:
   Commercial, financial and agricultural   $     --   $     41   $      7   $      1   $      3
   Real estate - mortgage                         --         --         --          5         --
   Consumer                                      306        311        262        145        132
                                            --------   --------   --------   --------   --------
   Total loans charged off                  $    306   $    352   $    269   $    151   $    135
                                            --------   --------   --------   --------   --------
Recoveries:
   Commercial, financial and agricultural   $      2   $      5   $      2   $      2   $      2
   Consumer                                      167        153         79         35         28
                                            --------   --------   --------   --------   --------
   Total recoveries                         $    169   $    158   $     81   $     37   $     30
                                            --------   --------   --------   --------   --------
   Net charge-offs                          $    137   $    194   $    188   $    114   $    105
                                            --------   --------   --------   --------   --------
Provision charged to expense                $    352   $    393   $    312   $    261   $    226
                                            --------   --------   --------   --------   --------
Balance, end of year                        $  2,022   $  1,807   $  1,608   $  1,484   $  1,337
                                            ========   ========   ========   ========   ========
SELECTED ASSET QUALITY RATIOS:
Net charge-offs to average loans                0.08%      0.13%      0.14%      0.10%      0.10%
Allowance for loan losses to loans
   outstanding at end of year                   1.12%      1.17%      1.11%      1.16%      1.21%
Non-performing assets (1) to total assets       0.31%      0.16%      0.19%      0.30%      0.29%
Non-accrual loans to total loans                0.44%      0.25%      0.24%      0.01%      0.02%
</TABLE>

(1)  Includes accruing loans past due 90 days or more


                                       23

<PAGE>

          Table 10 summarizes the allocation of the allowance for loan losses by
loan type:

TABLE 10. LOAN LOSS HISTORY

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                        -------------------------------------------------------------------------------------------------
                               2005                2004                2003                2002                2001
                        -----------------   -----------------   -----------------   -----------------   -----------------
                                   % OF                % OF                % OF                % OF                % OF
                                 LOANS IN            LOANS IN            LOANS IN            LOANS IN            LOANS IN
                                   EACH                EACH                EACH                EACH                EACH
                        AMOUNT   CATEGORY   AMOUNT   CATEGORY   AMOUNT   CATEGORY   AMOUNT   CATEGORY   AMOUNT   CATEGORY
                        ------   --------   ------   --------   ------   --------   ------   --------   ------   --------
                                                                   In thousands
<S>                     <C>      <C>        <C>      <C>        <C>      <C>         <C>     <C>        <C>      <C>
Commercial, financial
   and agriculture      $1,056      21%     $  810      20%     $  782      21%     $  330       8%     $  363       6%
Real estate-
   construction and
   mortgages               528      69         467      69         401      67         391      75         294      72
Consumer, leasing
   and other               303      10         323      11         274      12         364      17         370      22
Unallocated                135     N/A         207     N/A         151     N/A         399     N/A         310     N/A
                        ------     ---      ------     ---      ------     ---      ------     ---      ------     ---
      Total             $2,022     100%     $1,807     100%     $1,608     100%     $1,484     100%     $1,337     100%
                        ======     ===      ======     ===      ======     ===      ======     ===      ======     ===
</TABLE>

          The provision for loan losses is a charge to earnings which is made to
maintain the allowance for loan losses at a sufficient level. In 2005, 2004 and
2003, the provision totaled $352,000, $393,000 and $312,000, respectively. Past
due and nonaccrual loans have increased but continue to be minimal and loan
quality remains good. Also, net charge offs as a percentage of average loans
decreased from .13% in 2004 to .08% in 2005. Therefore, management decreased the
provision for loan losses in 2005. Having decreased the provision for loan
losses, management believes the allowance for loan losses to be adequate and is
not aware of any information relating to the loan portfolio which it expects
will materially impact future operating results, liquidity or capital resources.
In addition, federal regulators may require additional reserves as a result of
their examination of the Bank. The allowance for loan losses reflects what
management currently believes is an adequate level of allowance, although there
can be no assurance that future losses will not exceed the estimated amounts,
thereby adversely affecting future results of operations.

SECURITIES PORTFOLIO AND FEDERAL FUNDS SOLD

          The Bank's securities portfolio consists of available for sale
securities and restricted investments. Classifying the securities portfolio as
available for sale provides management with increased ability to manage the
balance sheet structure and address asset/liability management issues when
needed. The fair value of the investment portfolio has decreased $4.0 million to
$57.0 million at December 31, 2005 from 2004.

          The composition of the portfolio continues to reflect the Bank's
conservative philosophy which places greater importance on safety and liquidity
than on yield. At December 31, 2005, approximately 60.0% of the portfolio is
comprised of U.S. Government agencies and corporations, 15.0% in Mortgage Backed
securities, 21.8% in State and Municipal securities and 3.2% in restricted
investments. The term to maturity is limited to seven years for Treasury and
Agency bonds and 10 years for Municipal bonds. Typically, investments in Agency
bonds contain a call feature. These bonds generally have a somewhat higher
yield. The average term to maturity of the portfolio as of December 31, 2005 was
5.1 years.


                                       24

<PAGE>

          Table 11 sets forth the carrying amount of investment securities as of
the dates shown:

TABLE 11. INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                                       DECEMBER 31
                                               ---------------------------
                                                 2005      2004     2003
                                               -------   -------   -------
                                                       In thousands
<S>                                            <C>       <C>       <C>
Available for sale:
   U.S. Government agencies and corporations   $34,235   $39,114   $25,219
   State and municipal securities               12,415    12,264     4,655
   Mortgage-backed securities                    8,544     8,362     9,488
Restricted securities                            1,809     1,300       995
                                               -------   -------   -------
      Total                                    $57,003   $61,040   $40,357
                                               =======   =======   =======
</TABLE>

          The Bank generally participates in the overnight federal funds sold
market. Depending upon specific investing or funding strategies and/or normal
fluctuations in loan and deposit balances, the Bank may need, on occasion, to
purchase funds on an overnight basis. The average balance in federal funds sold
decreased from $2.4 million in 2004 to $28,000 in 2005. This decrease is a
result of funding the loan growth not funded by deposit growth.

          See Note 4 of the Notes to Consolidated Financial Statements for a
comprehensive analysis of the securities portfolio.

DEPOSITS AND OTHER FUNDING SOURCES

          Total deposits were $219.3 million at December 31, 2005, an increase
of $11.6 million or 5.6% over deposits at December 31, 2004. The increase is due
to the continued customer growth in the Bank's market area of Morgan and
Berkeley Counties, West Virginia and Washington County, Maryland. $6.2 million
of the increase is a direct result of a single public fund deposit account which
operates in the bank's market area. Average deposits, however, showed a $17.1
million, or 8.7% growth, to $214.5 million in 2005. Deposits at the Hedgesville
branch totaled $20.8 million at December 31, 2005, an increase of $468,000 over
December 31, 2004. Deposits at the Martinsburg branch totaled $26.0 million at
December 31, 2005, an increase of $4.8 million over December 31, 2004, which is
the direct result of an increase of $6.2 million in the balances of the large
public fund deposit account offset by a decrease of $1.4 million in core
deposits. Deposits at the Hancock Maryland branch totaled $18.3 million at
December 31, 2005, an increase of $4.4 million over December 31, 2004. Deposits
at the Spring Mills branch totaled $2.6 million at December 31, 2005. The Bank
has continued to experience a change in the deposit account mix during 2005. In
establishing interest rates on deposit accounts, management considers various
factors, including rates offered by competing institutions in their local
market. In doing so, the Bank does not try to offer the highest rates in their
local market. Consequently, customers have moved time deposits and jumbo
certificates of deposit to other institutions that are offering marginally
higher rates. Although, the Bank has experienced a decrease in time deposits and
jumbo certificates of deposit, in October 2005, the Bank began offering a new
nonrenewable 27-month certificate of deposit product with an attractive rate.
Customers have shown interest in this new time deposit product and in turn, the
runoff of the Bank's time deposits and jumbo certificates of deposit has slowed.
The increase in demand, interest bearing demand and savings accounts is the
continued customer growth in all the Bank's branches. The new 27-month
nonrenewable Certificate of Deposit and the 36-month Ultimate Certificate of
Deposit are the deposit alternatives of choice for CNB customers. The Bank's
27-month nonrenewable Certificate of Deposit allows the customer to withdraw all
of the CD on the fifteen month anniversary date without penalty. No deposits may
be made to this CD. The Bank's 36-month Ultimate Certificate of Deposit allows
the customer to withdraw all or a portion of the CD on the first or second year
anniversary date without penalty. Deposits may also be made to this CD at any
time.

          Noninterest-bearing deposits also grew by $5.7 million or 15.4%,
during 2005, from $37.0 million at December 31, 2004, to $42.7 million at
December 31, 2005. At December 31, 2005, noninterest-bearing deposits
represented 19.5% of total deposits, compared to 17.8% for 2004. Average
noninterest-bearing deposits increased 18.8% from $33.9 million in 2004 to $40.3
million in 2005. The growth is attributable, in part, to the additional new
accounts gained from the Washington County, Maryland area.

          Interest-bearing deposits increased by $5.9 million or 3.4% to $176.6
million at December 31, 2005. Interest-bearing checking deposits increased by
$6.8 million in 2005, while, the average interest-bearing checking deposits
increased $12.0 million. Included in this category are NOW accounts and Money
Market accounts. The Bank's deposit growth is primarily due to the increase in
the deposits of the one large public fund depositor. The higher average balance
growth in deposits is due to the consistent level of growth from the second
quarter throughout the end of the year. While the average savings deposits
increased $3.7 million or 13.0% to $32.3 million in 2005, actual savings
accounts only increased $361,000 at December 31, 2005 to $32.3 million. The
Bank's largest source of interest-bearing funds is certificates of deposit.
These accounts totaled $89.4 million at December 31, 2005, a decrease of $1.4
million or 1.5%. The continued decrease is primarily due to the lack of customer
commitment to place their deposits in longer term time deposits with the
anticipation of additional interest rate increases.

          Table 12 is a summary of the maturity distribution of certificates of
deposit in amounts of $100,000 or more as of December 31, 2005:


                                       25

<PAGE>

TABLE 12. MATURITY OF TIME DEPOSITS OF $100,000 OR MORE

<TABLE>
<CAPTION>
                             AMOUNT   PERCENT
                            -------   -------
                               In thousands
<S>                         <C>       <C>
Three months or less        $ 1,264     4.12%
Three through six months      1,730     5.64
Six through twelve months     2,924     9.54
Over twelve months           24,742    80.70
                            -------    -----
   Total                    $30,660      100%
                            =======    =====
</TABLE>

CONTRACTUAL OBLIGATIONS

          Table 13 shows the Bank's significant contractual obligations as of
December 31, 2005:

                             PAYMENTS DUE BY PERIOD

<TABLE>
<CAPTION>
                                                       LESS THAN     1-3       4-5      MORE THAN
                                             TOTAL       1 YEAR     YEARS     YEARS     5 YEARS
                                          ----------   ---------   -------   -------   ----------
<S>                                       <C>           <C>        <C>       <C>       <C>
Purchase obligations                      $   66,253    $ 66,253   $    --   $    --   $       --
Other long-term liabilities
   reflected on the registrant's
   balance sheet under GAAP
      Supplemental retirement liability       65,283          --        --        --       65,283
      Pension liability                      793,994          --        --        --      793,994
      401k liability                          62,482      62,482        --        --           --
      Deferred compensation                  768,646      10,338     8,435     2,173      747,700
      Post retirement liability              178,627      26,459    54,809    64,722       32,637
                                          ----------    --------   -------   -------   ----------
Total contractual obligations             $1,935,285    $165,532   $63,244   $66,895   $1,639,614
                                          ==========    ========   =======   =======   ==========
</TABLE>

CAPITAL RESOURCES

          The Bank remains well capitalized. Total shareholders' equity at
December 31, 2005 of $19.0 million represents 7.3% of total assets. This
compares to $18.1 million or 7.7%, at December 31, 2004. Included in capital at
December 31, 2005 is $756,000 of unrealized losses on available for sale
securities and $516,000 minimum pension liability adjustment, both net of
deferred income taxes. At December 31, 2004, the Bank had unrealized losses on
available for sale securities of $49,000 and $296,000 minimum pension liability
adjustment, both net of deferred income taxes. Such unrealized gains and losses
are recorded net of related deferred taxes and are primarily a function of
available market interest rates relative to the yield being generated on the
available for sale portfolio. No earnings impact will result, however, unless
the securities are actually sold.

          The stock of CNB Financial Services, Inc., and prior to the formation
of CNB, the Bank, is not listed on an exchange and is not heavily traded. The
trades that have occurred are those that, to management's knowledge, have been
individually arranged. Based on information that management is aware of, the
majority of shares sold during 2005 were at a price that ranged from $67 to $100
per share. During 2004, information available to management indicates that stock
trades ranged from $62 to $100 per share. Book value per share increased from
$39.62 at December 31, 2004 to $41.50 at December 31, 2005.

          Dividends which have been declared by the Board of Directors
semiannually, increased from $1.38 per share in 2004 to $1.44 per share in 2005,
a 4.4% increase.

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


                                       26
<PAGE>

RETURN ON EQUITY AND ASSETS

          Table 14 shows consolidated operating and capital ratios for the
periods indicated:

TABLE 14. OPERATING AND CAPITAL RATIOS

<TABLE>
<CAPTION>
                                          YEARS ENDED
                                          DECEMBER 31,
                                         -------------
                                          2005    2004
                                         -----   -----
<S>                                      <C>     <C>
Return on average assets                  1.00%   1.07%
Return on average equity                 12.91   13.38
Dividend payout ratio                    26.97   26.97
Average equity to average assets ratio    7.76    8.03
</TABLE>

LIQUIDITY AND INTEREST RATE SENSITIVITY

          The objective of the Bank's liquidity management program is to ensure
the continuous availability of funds to meet the withdrawal demands of
depositors and the credit needs of borrowers. The basis of the Bank's liquidity
comes from the stability of its core deposits. Liquidity is also available
through the available for sale securities portfolio and short-term funds such as
federal funds sold. At December 31, 2005, these sources totaled $55.2 million,
or 21.3% of total assets. In addition, liquidity may be generated through loan
repayments and over $7.5 million of available borrowing arrangements with
correspondent banks. At December 31, 2005, management considered the Bank's
ability to satisfy its anticipated liquidity needs over the next twelve months.
Management believes that the Bank is well positioned and has ample liquidity to
satisfy these needs. The Bank generated $4.1 million of cash from operations in
2005, which compares to $2.2 million in 2004 and $2.5 million in 2003.
Additional cash of $19.9 million, $19.2 million and $8.5 million was generated
through net financing activities in 2005, 2004 and 2003, respectively. These
proceeds along with proceeds from the sales and maturities of investment
securities were used to fund loans and purchase securities during each year. Net
cash used in investing activities totaled $24.0 million in 2005 compared to
$19.1 million in 2004 and $11.1 million in 2003. Details on both the sources and
uses of cash are presented in the Consolidated Statements of Cash Flows
contained in the financial statements.

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

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


                                       27

<PAGE>

TABLE 15. INTEREST SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>

                                                         DECEMBER 31, 2005 INTEREST SENSITIVITY PERIOD
                                          ---------------------------------------------------------------------------
                                            2006      2007        2008        2009      2010    THEREAFTER     TOTAL
                                          -------   --------    --------    -------   -------   ----------   --------
                                                                          In thousands
<S>                                       <C>       <C>         <C>         <C>       <C>        <C>         <C>
Rate sensitive assets
Loans, net of unearned interest           $86,444   $ 18,875    $ 18,526    $ 9,074   $ 8,999    $38,290     $180,207
   Average interest rate                     7.06%      7.40%       7.64%      7.75%     8.15%      7.75%        7.65%
Securities                                  4,612        817       1,311      9,536     9,242     29,678       55,194
   Average interest rate                     4.95%      4.91%       4.90%      4.92%     4.96%      5.00%        4.92%
                                          -------   --------    --------    -------   -------    -------     --------
   Total interest sensitive assets        $91,056   $ 19,692    $ 19,837    $18,609   $18,240    $67,968     $235,401
                                          =======   ========    ========    =======   =======    =======     ========
Interest sensitive liabilities
Non-interest-bearing deposits             $ 4,267   $  4,267    $  4,267    $ 4,267   $ 4,267    $ 8,534       42,670
   Average interest rate                       --%        --%         --%        --%       --%        --%          --%
Savings and interest-bearing checking       8,724      8,724       8,724      8,724     8,724     17,449       87,244
   Average interest rate                     1.34%      1.34%       1.34%      1.34%     1.34%      1.34%        1.34%
Time deposits                              19,149     20,264      39,820      5,107     5,035         --       89,375
   Average interest rate                     2.59%      3.28%       3.70%      3.70%     4.30%        --%        3.37%
                                          -------   --------    --------    -------   -------    -------     --------
   Total interest sensitive liabilities   $32,140   $ 33,255    $ 52,811    $18,098   $18,026    $25,983     $219,289
                                          =======   ========    ========    =======   =======    =======     ========
GAP                                       $58,916   $(13,564)   $(32,975)   $   512   $   215    $41,985
Cumulative GAP                            $58,916   $ 45,352    $ 12,377    $12,889   $13,103    $55,088
GAP to sensitive assets ratio               25.03%     (5.76)%    (14.01)%     0.22%     0.09%     17.84%
Cumulative GAP to sensitive
    assets ratio                            25.03%     19.27%       5.26%      5.48%     5.57%     23.40%
GAP to total assets ratio                   24.86%     (5.72)%    (13.91)%     0.22%     0.09%     17.72%
Cumulative GAP to total assets ratio        24.86%     19.14%       5.22%      5.44%     5.53%     23.24%
</TABLE>

RECENTLY ISSUED ACCOUNTING STANDARDS

          In November 2005, FASB Staff Position (FSP) 115-1 "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments" was
issued. The FSP addresses the determination as to when an investment is
considered impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. This FSP also includes accounting
considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary impairments. The guidance in this
FSP amends FASB Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" and APB Opinion No. 18, "The Equity Method of Accounting
for Investments in Common Stock". The FSP applies to investments in debt and
equity securities and cost-method investments. The application guidance within
the FSP includes items to consider in determining whether an investment is
impaired, in evaluating if an impairment is other than temporary and recognizing
impairment losses equal to the difference between the investment's cost and its
fair value when an impairment is determined. The FSP is required for all
reporting periods beginning after December 15, 2005. Earlier application is
permitted. The Bank does not anticipate the amendment will have a material
effect on its financial statements.

          In May 2005, the Financial Accounting Standards Board ("FASB") issued
Statement No. 154, ("SFAS No. 154") "Accounting Changes and Error Corrections -
A Replacement of APB Opinion No. 20 and FASB Statement No. 3." The new standard
changes the requirements for the accounting for and reporting of a change in
accounting principle. Among other changes, SFAS No. 154 requires that a
voluntary change in accounting principle be applied retrospectively with all
prior period financial statements presented on the new accounting principle,
unless it is impracticable to do so. SFAS No. 154 also provides that (1) a
change in method of depreciating or amortizing a long-lived nonfinancial asset
be accounted for as a change in estimate (prospectively) that was effected by a
change in accounting principle, and (2) correction of errors in previously
issued financial statements should be termed a "restatement. " The new standard
is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The Bank does not anticipate this
revision will have a material effect on its financial statements.

          In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement No. 123 (Revised 2004) (SFAS No. 123R) "Share-Based Payment",
which requires that the compensation cost relating to share-based payment
transactions be recognized in financial


                                       28

<PAGE>

statements. SFAS No. 123R replaces SFAS No. 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued
to Employees." Share-based compensation arrangements include share options,
restricted share plans, performance-based awards, share appreciation rights and
employee share purchase plans. SFAS No. 123R requires all share-based payments
to employees to be valued using a fair value method on the date of grant and
expensed based on that fair value over the applicable vesting period. SFAS No.
123R also amends SFAS No. 95 "Statement of Cash Flows" requiring the benefits of
tax deductions in excess of recognized compensation cost be reported as
financing instead of operating cash flows. The Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 107 ("SAB 107"), which
expresses the SEC's views regarding the interaction between SFAS No. 123R and
certain SEC rules and regulations. Additionally, SAB No. 107 provides guidance
related to share-based payment transactions for public companies. The Bank will
be required to apply SFAS No. 123R as of the annual reporting period that begins
January 1, 2006, however the Bank does not currently have any share-based
payments to which SFAS No. 123R applies.

          In December 2003, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer"
("SOP 03-3"). SOP 03-3 addresses accounting for differences between contractual
cash flows and cash flows expected to be collected from an investor's initial
investment in loans or debt securities (loans) acquired in a transfer if those
differences are attributable, at least in part, to credit quality. It includes
loans purchased by the Corporation or acquired in business combinations. SOP
03-3 does not apply to loans originated by the Corporation. The Bank adopted the
provisions of SOP 03-3 effective January 1, 2005. The initial implementation had
no material effect on the Bank's financial statements.

IMPACT OF INFLATION

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

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

          A comparison of the carrying value of the Bank's financial instruments
to their estimated fair value as of December 31, 2005 and December 31, 2004 is
disclosed in Note 23 of the Notes to the Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


                                       29

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

<TABLE>
<S>                                                         <C>
CNB Financial Services, Inc. and Subsidiary
   Independent Registered Public Accounting Firm Report..   31
   Consolidated Balance Sheets...........................   32
   Consolidated Statements of Income.....................   33
   Consolidated Statements of Stockholders' Equity.......   34
   Consolidated Statements of Cash Flows.................   35
   Notes to Consolidated Financial Statements............   36
</TABLE>


                                       30

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

               We have audited the accompanying consolidated statements of
financial condition of CNB Financial Services, Inc. and subsidiary as of
December 31, 2005 and 2004, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 2005. These financial statements are the
responsibility of CNB Financial Services, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audits.

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

               In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of CNB
Financial Services, Inc. and subsidiary as of December 31, 2005 and 2004, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America.


                                        /s/ SMITH ELLIOTT KEARNS & COMPANY, LLC

Hagerstown, Maryland

February 3, 2006


                                       31
<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                       2005           2004
                                                   ------------   ------------
<S>                                                <C>            <C>
ASSETS
   Cash and due from banks                         $ 10,085,252   $ 10,047,939
   Federal funds sold                                    38,000         91,000
   Securities available for sale
      (at approximate market value)                  55,194,216     59,740,291
   Federal Home Loan Bank stock, at cost              1,669,900      1,169,800
   Federal Reserve Bank stock, at cost                  138,650        129,650
   Loans and leases receivable, net                 180,207,390    154,919,582
   Accrued interest receivable                        1,230,777      1,042,573
   Premises and equipment, net                        6,601,463      6,044,446
   Deferred income taxes                              1,159,595        512,224
   Cash surrender value of life insurance             1,279,690      1,168,922
   Intangible assets                                    620,593        738,057
   Other assets                                         727,896      1,393,582
                                                   ------------   ------------
      TOTAL ASSETS                                 $258,953,422   $236,998,066
                                                   ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
   Deposits:
      Demand                                       $ 42,669,886   $ 36,965,406
      Interest-bearing demand                        54,900,737     48,055,089
      Savings                                        32,342,957     31,981,754
      Time, $100,000 and over                        30,659,767     34,265,305
      Other time                                     58,715,079     56,460,984
                                                   ------------   ------------
                                                   $219,288,426   $207,728,538
   Accrued interest payable                             611,512        543,551
   FHLB borrowings                                   17,800,000      8,600,000
   Securities sold under repurchase agreement                --        216,909
   Accrued expenses and other liabilities             2,245,443      1,760,328
                                                   ------------   ------------
      TOTAL LIABILITIES                            $239,945,381   $218,849,326
                                                   ------------   ------------

SHAREHOLDERS' EQUITY
   Common stock, $1 par value; 5,000,000  shares
      authorized; 458,048 shares outstanding       $    458,048   $    458,048
   Capital surplus                                    4,163,592      3,863,592
   Retained earnings                                 15,658,134     14,172,144
   Accumulated other comprehensive income            (1,271,733)      (345,044)
                                                   ------------   ------------
      TOTAL SHAREHOLDERS' EQUITY                   $ 19,008,041   $ 18,148,740
                                                   ------------   ------------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $258,953,422   $236,998,066
                                                   ============   ============
</TABLE>

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


                                       32

<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                   2005          2004         2003
                                               -----------   -----------   -----------
<S>                                            <C>           <C>           <C>
INTEREST INCOME
   Interest and fees on loans                  $11,110,517   $ 9,839,122   $ 9,605,998
   Interest and dividends on securities:
      U.S. Government agencies and
         corporations                            1,489,230     1,191,842     1,306,566
      Mortgage backed securities                   358,302       357,734       545,307
      State and political subdivisions             417,242       273,249        72,512
      Other                                         40,212        19,718        22,116
   Interest on federal funds sold                    4,785        33,817        16,676
                                               -----------   -----------   -----------
                                               $13,420,288   $11,715,482   $11,569,175
                                               -----------   -----------   -----------
INTEREST EXPENSE
   Interest on interest bearing demand,
      savings and time deposits                $ 3,551,774   $ 3,154,811   $ 4,142,283
   Interest on federal  funds purchased                 --            --           825
   Interest on FHLB borrowings                     298,287        14,622         9,100
                                               -----------   -----------   -----------
                                               $ 3,850,061   $ 3,169,433   $ 4,152,208
                                               -----------   -----------   -----------
         NET INTEREST INCOME                   $ 9,570,227   $ 8,546,049   $ 7,416,967
PROVISION FOR LOAN LOSSES                          352,000       393,000       312,000
                                               -----------   -----------   -----------
         NET INTEREST INCOME AFTER
            PROVISION FOR LOAN LOSSES          $ 9,218,227   $ 8,153,049   $ 7,104,967
                                               -----------   -----------   -----------
NONINTEREST INCOME
   Service charges on deposit accounts         $ 1,227,521   $ 1,177,252   $   989,244
   Other service charges, commissions
      and fees                                     565,999       434,649       366,004
   Insurance income                                142,523       135,068       115,883
   Other operating income                           59,224        54,306        63,547
   Net gain (loss) on sale of securities           (16,165)      135,546       141,450
   Income from title company                        27,924        35,207        54,550
   (Loss) on sale of other real estate owned            --            --        (2,674)
                                               -----------   -----------   -----------
                                               $ 2,007,026   $ 1,972,028   $ 1,728,004
                                               -----------   -----------   -----------
NONINTEREST EXPENSES
   Salaries                                    $ 3,061,375   $ 2,708,253   $ 2,338,063
   Employee benefits                             1,092,788       930,597       855,183
   Occupancy of premises                           436,247       377,322       300,728
   Furniture and equipment expense                 891,768       790,932       646,528
   Other operating expenses                      2,059,080     1,982,363     1,866,176
                                               -----------   -----------   -----------
                                               $ 7,541,258   $ 6,789,467   $ 6,006,678
                                               -----------   -----------   -----------
         INCOME BEFORE INCOME TAXES            $ 3,683,995   $ 3,335,610   $ 2,826,293
PROVISION FOR INCOME TAXES                       1,238,416       991,917     1,083,453
                                               -----------   -----------   -----------
         NET INCOME                            $ 2,445,579   $ 2,343,693   $ 1,742,840
                                               ===========   ===========   ===========
BASIC EARNINGS PER SHARE                       $      5.34   $      5.12   $      3.80
                                               ===========   ===========   ===========
</TABLE>

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


                                       33
<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                              ACCUMULATED
                                                                                                 OTHER           TOTAL
                                                      COMMON       CAPITAL      RETAINED     COMPREHENSIVE   SHAREHOLDERS'
                                                       STOCK       SURPLUS      EARNINGS         INCOME          EQUITY
                                                    ----------   ----------   ------------   -------------   -------------
<S>                                                 <C>          <C>          <C>            <C>             <C>
BALANCE, DECEMBER 31, 2002                          $  458,048   $3,863,592   $ 11,267,374    $   681,004     $ 16,270,018
                                                                                                              ------------
Comprehensive income:
   Net income for 2003                                      --           --      1,742,840             --        1,742,840
   Change in unrealized gains
      (losses) on securities
      available for sale (net of tax of $382,304)           --           --             --       (623,758)        (623,758)
   Change in minimum pension liability
      adjustment (net of tax of $165,792)                   --           --             --       (270,501)        (270,501)
                                                                                                              ------------
Total Comprehensive Income                                                                                         848,581
                                                                                                              ------------
Cash dividends ($1.20 per share)                            --           --       (549,658)            --         (549,658)
                                                    ----------   ----------   ------------    -----------     ------------
BALANCE, DECEMBER 31, 2003                          $  458,048   $3,863,592   $ 12,460,556    $  (213,255)    $ 16,568,941
                                                                                                              ------------
Comprehensive income:
   Net income for 2004                                      --           --      2,343,693             --        2,343,693
   Change in unrealized gains
      (losses) on securities
      available for sale (net of tax of $65,354)            --           --             --       (106,630)        (106,630)
   Change in minimum pension liability
     adjustment (net of tax of $15,419)                     --           --             --        (25,159)         (25,159)
                                                                                                              ------------
Total Comprehensive Income                                                                                       2,211,904
                                                                                                              ------------
Cash dividends ($1.38 per share)                            --           --       (632,105)            --         (632,105)
                                                    ----------   ----------   ------------    -----------     ------------
BALANCE, DECEMBER 31, 2004                          $  458,048   $3,863,592   $ 14,172,144    $  (345,044)    $ 18,148,740
                                                                                                              ------------
Comprehensive income:
   Net income for 2005                                      --           --      2,445,579             --        2,445,579
   Transfer to capital surplus                              --      300,000       (300,000)            --               --
   Change in unrealized gains
      (losses) on securities
      available for sale (net of tax of $432,965)           --           --             --       (706,418)        (706,418)
   Change in minimum pension liability
      adjustment (net of tax of $135,005)                   --           --             --       (220,271)        (220,271)
                                                                                                              ------------
Total Comprehensive Income                                                                                       1,518,890
                                                                                                              ------------
Cash dividends ($1.44 per share)                            --           --       (659,589)            --         (659,589)
                                                    ----------   ----------   ------------    -----------     ------------
BALANCE, DECEMBER 31, 2005                          $  458,048   $4,163,592   $ 15,658,134    $(1,271,733)    $ 19,008,041
                                                    ==========   ==========   ============    ===========     ============
</TABLE>

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


                                       34

<PAGE>

                   CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                      2005           2004           2003
                                                                  ------------   ------------   ------------
<S>                                                               <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                        $  2,445,579   $  2,343,693   $  1,742,840
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation and amortization                                       833,406        691,928        556,075
   Impairment loss                                                          --             --         91,677
   Provision for loan losses                                           352,000        393,000        312,000
   Deferred income taxes                                               (79,401)       (79,046)        37,422
   Net (gain) loss on sale of securities                                16,165       (135,546)      (141,450)
   Loss on sale of real estate owned                                        --             --          2,674
   Loss on disposal and abandonment of fixed assets                         --            273         18,867
   (Increase) decrease in accrued interest receivable                 (188,204)      (169,388)        53,327
   (Increase) decrease in other assets                                 562,856       (713,422)      (170,046)
   Increase (decrease) in accrued interest payable                      67,961       (130,073)      (336,462)
   (Increase) in cash surrender value on life insurance in
      excess of premiums paid                                          (51,946)       (44,665)       (32,690)
   Increase in accrued expenses and other liabilities                   31,265          1,465        174,253
   Amortization of deferred loan (fees) cost                            64,778         25,490          4,190
   Amortization (accretion) of premium and discount on
      investments                                                       63,184         62,601        151,844
                                                                  ------------   ------------   ------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                   $  4,117,643   $  2,246,310   $  2,464,521
                                                                  ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) in loans                                         (25,704,586)    (2,252,891)   (16,756,623)
   Proceeds from sales of securities                                37,026,097      6,391,436     13,044,280
   Proceeds from maturities, repayments and calls of securities      2,711,425     13,152,311     27,017,894
   Purchases of securities                                         (36,410,179)   (40,021,143)   (37,010,662)
   Purchases of Federal Home Loan Bank stock                        (6,909,700)    (1,146,200)      (727,700)
   Purchases of Federal Reserve Bank stock                              (9,000)            --             --
   Redemptions of Federal Home Loan Bank stock                       6,409,600        842,100        291,000
   Purchases of premises and equipment and computer software        (1,072,130)      (917,609)    (1,161,939)
   Proceeds from sale of other real estate owned, net                       --             --        104,654
   Investment in (return of capital from) title company                    575           (607)           865
   Net (increase) decrease in federal funds sold                        53,000        (88,000)     4,124,299
   Premiums paid on life insurance                                     (58,822)       (58,822)       (68,566)
   Cash from acquired branch                                                --      5,020,017             --
                                                                  ------------   ------------   ------------
      NET CASH (USED IN) INVESTING ACTIVITIES                     $(23,963,720)  $(19,079,408)  $(11,142,498)
                                                                  ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in demand and savings deposits                    $ 12,911,331   $ 20,904,756   $  9,647,217
   Net increase (decrease) in time deposits                         (1,351,443)    (8,649,803)    (1,811,037)
   Net increase (decrease) in securities sold under repurchase
      agreement                                                       (216,909)       216,909             --
   Net increase in FHLB borrowings                                   9,200,000      7,400,000      1,200,000
   Cash dividends paid                                                (659,589)      (632,105)      (549,658)
                                                                  ------------   ------------   ------------
      NET CASH PROVIDED BY FINANCING ACTIVITIES                   $ 19,883,390   $ 19,239,757   $  8,486,522
                                                                  ------------   ------------   ------------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        $     37,313   $  2,406,659   $   (191,455)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                      10,047,939      7,641,280      7,832,735
                                                                  ------------   ------------   ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                          $ 10,085,252   $ 10,047,939   $  7,641,280
                                                                  ============   ============   ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the year:
      Interest                                                    $  3,782,100   $  3,299,506   $  4,488,670
      Income taxes                                                $  1,362,725   $  1,169,009   $    947,000
   Net transfer to foreclosed real estate, held for sale
      from loans receivable                                       $         --   $         --   $    105,528

The Company acquired certain assets and liabilities associated
   with the Hancock Branch of Fidelity Bank. In conjunction
   with the acquisition, the assets acquired and liabilities
   assumed were as follows:
      Fair value of assets acquired                                              $  9,561,420
                                                                                 ------------
   Fair value of liabilities assumed                                             $ 14,581,437
                                                                                 ------------
   Liabilities assumed in excess of assets acquired (cash received)              $  5,020,017
                                                                                 ============
</TABLE>

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


                                       35
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     NATURE OF OPERATIONS:

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

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

     In February 2001, CNB became a 50% member in a limited liability company,
     Morgan County Title Insurance Agency, LLC which sells title insurance. In
     January 2003, the other two members in the limited liability corporation
     purchased a portion of CNB's membership making each member's share 33%.

     CNB Insurance Services, Inc., a wholly owned subsidiary of Citizens
     National Bank, is an independent insurance agency selling primarily
     personal lines of insurance in Morgan and Berkeley Counties, West Virginia
     and Washington County, Maryland.

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

     PRINCIPLES OF CONSOLIDATION:

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

     USE OF ESTIMATES:

     The preparation of the consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates. CNB's most significant
     estimates are the allowance for loan losses, depreciable lives of fixed
     assets and actuarial assumptions used in determining pension expense and
     liability, liability for postretirement benefits and liability for deferred
     compensation.


                                       36

<PAGE>

     SECURITIES AND MORTGAGE-BACKED SECURITIES:

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

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

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

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

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

     Interest and dividends on securities, including amortization of premiums
     and accretion of discounts, are included in interest income. Declines in
     the fair value of available-for-sale securities below their cost that are
     deemed to be other than temporary are reflected in earnings as realized
     losses. In estimating other-than-temporary impairment losses, management
     considers (1) the length of time and the extent to which the fair value has
     been less than cost, (2) the financial condition and near-term prospects of
     the issuer, and (3) the intent and ability of the Company to retain its
     investment in the issuer for a period of time sufficient to allow for any
     anticipated recovery in fair value. Realized gains and losses from the
     sales of securities are determined using the specific identification
     method.

     IMPAIRED LOANS:

     Impaired loans are defined as those loans for which it is probable that
     contractual amounts due will not be received. Statement of Financial
     Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
     Impairment of a Loan," as amended by SFAS No. 118, requires that the
     measurement of impaired loans is based on the present value of expected
     future cash flows discounted at the historical effective interest rate,
     except that all collateral-dependent loans are measured for impairment
     based on the fair value of the collateral. Larger groups of small-balance
     loans such as residential mortgage and installment loans that are
     considered to be part of homogeneous loan pools are aggregated for the
     purpose of measuring impairment, and therefore, are not subject to these
     statements. Management has established a dollar-value threshold for
     commercial loans. The larger commercial loans are evaluated for impairment.
     No loans are considered to be impaired at December 31, 2005 and 2004.

     ALLOWANCE FOR LOAN LOSSES:

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

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

     LOANS HELD FOR SALE:

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

     INTANGIBLE ASSETS:

     Intangible assets represent the acquisition of customer lists, contracts
     and records in the amount of $66,267 by CNB Insurance Services, Inc. and
     the $780,616 premium from the purchase of core deposit relationships as
     part of the Hancock branch acquisition. The CNB Insurance Services, Inc.
     intangible assets are being amortized over four years on a straight line
     basis and the core deposit intangible relationships from the Hancock branch
     acquisition are being amortized over seven years on a straight line basis.


                                       37

<PAGE>

     LOAN SERVICING:

     The cost of mortgage servicing rights is amortized in proportion to, and
     over the period of, estimated net servicing revenues. Impairment of
     mortgage servicing rights is assessed based on the fair value of those
     rights. Fair values are estimated using discounted cash flows based on a
     current market interest rate. For purposes of measuring impairment, the
     rights are stratified based on the predominant risk characteristics of the
     underlying loans: product type, investor type, interest rate, term and
     geographic location. An analysis of the risk characteristics of CNB's loan
     servicing portfolio allows for all loans to be defined by one risk
     category. See Note 6 for additional discussion.

     INTEREST INCOME ON LOANS:

     Interest on loans is accrued and credited to income based on the principal
     amount outstanding. The accrual of interest on loans is discontinued at the
     time the loan becomes 90 days past due unless in management's judgement
     collectibility of interest is assured.

     NONPERFORMING/NONACCRUAL ASSETS:

     Nonperforming/nonaccrual assets consist of loans on which interest is no
     longer accrued, loans which have been restructured in order to allow the
     borrower the ability to maintain control of the collateral, real estate
     acquired by foreclosure and real estate upon which deeds in lieu of
     foreclosure have been accepted. Interest previously accrued but not
     collected on nonaccrual loans is reversed against current income when a
     loan is placed on a nonaccrual basis. Nonaccrual loans are restored to
     accrual status when all delinquent principal and interest become less than
     90 days past due.

     LOANS AND LEASES RECEIVABLE:

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

     LOAN ORIGINATION FEES AND COSTS:

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

     PREMISES AND EQUIPMENT:

     Premises and equipment are carried at cost less accumulated depreciation.
     Depreciation is calculated on both straight-line and accelerated methods
     over the estimated useful lives of 5 to 50 years for buildings and
     improvements, 10 to 20 years for land improvements, 5 years for bank owned
     automobiles and 3 to 40 years for equipment. Computer software is being
     amortized over 3 years. Maintenance and repairs are charged to operating
     expenses as incurred.

     INCOME TAXES:

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

     PENSION PLAN:

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

     CASH AND CASH EQUIVALENTS:

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

     EARNINGS AND DIVIDENDS PER SHARE:

     Basic earnings and dividends per share are computed on the basis of the
     weighted average number of 458,048 shares of common stock outstanding in
     2005, 2004 and 2003.

     OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:

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


                                       38

<PAGE>

     POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS:

     Postretirement insurance benefits are provided to selected officers and
     employees. During the years that the employee renders the necessary
     service, the Bank accrues the cost of providing postretirement health and
     life insurance benefits to the employee.

     FORECLOSED REAL ESTATE:

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

     TRUST ASSETS:

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

     ADVERTISING COSTS:

     The Company expenses advertising costs in the period in which they are
     incurred. Advertising cost amounted to $106,076, $160,581 and $81,960 for
     the years ended December 31, 2005, 2004 and 2003, respectively.

     COMPREHENSIVE INCOME:

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

     CNB has elected to report its comprehensive income in the Consolidated
     Statements of Changes in Shareholders' Equity. The elements of "other
     comprehensive income" that CNB has are the unrealized gains or losses on
     available for sale securities and additional minimum pension liability
     adjustment.

     The components of the change in "other comprehensive income" were as
     follows:

<TABLE>
<CAPTION>
                                                       2005         2004         2003
                                                   -----------   ---------   -----------
<S>                                                <C>           <C>         <C>
Additional minimum pension liability adjustment
   arising during the year                         $  (355,276)  $ (40,578)  $  (436,293)
Unrealized holding gains (losses) arising during
   the year                                         (1,155,548)    (36,438)     (864,612)
Reclassification adjustment for (gains) losses
   realized in net income                               16,165    (135,546)     (141,450)
                                                   -----------   ---------   -----------
Net unrealized holding gains
   (losses) before taxes                           $(1,494,659)  $(212,562)  $(1,442,355)
Tax effect                                             567,970      80,773       548,096
                                                   -----------   ---------   -----------
Net change                                         $  (926,689)  $(131,789)  $  (894,259)
                                                   ===========   =========   ===========
</TABLE>

     RECENTLY ISSUED ACCOUNTING STANDARDS

     In November 2005, FASB Staff Position (FSP) 115-1 "The Meaning of
     Other-Than-Temporary Impairment and Its Application to Certain Investments"
     was issued. The FSP addresses the determination as to when an investment is
     considered impaired, whether that impairment is other than temporary, and
     the measurement of an impairment loss. This FSP also includes accounting
     considerations subsequent to the recognition of an other-than-temporary
     impairment and requires certain disclosures about unrealized losses that
     have not been recognized as other-than-temporary impairments. The guidance
     in this FSP amends FASB Statement No. 115, "Accounting for Certain
     Investments in Debt and Equity Securities" and APB Opinion No. 18, "The
     Equity Method of Accounting for Investments in Common Stock". The FSP
     applies to investments in debt and equity securities and cost-method
     investments. The application guidance within the FSP includes items to
     consider in determining whether an investment is impaired, in evaluating if
     an impairment is other than temporary and recognizing impairment losses
     equal to the difference between the investment's cost and its fair value
     when an impairment is determined. The FSP is required for all reporting
     periods beginning after December 15, 2005. Earlier application is
     permitted. The Company does not anticipate the amendment will have a
     material effect on its financial statements.


                                       39

<PAGE>

     In May 2005, the Financial Accounting Standards Board ("FASB") issued
     Statement No. 154, ("SFAS No. 154") "Accounting Changes and Error
     Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No.
     3." The new standard changes the requirements for the accounting for and
     reporting of a change in accounting principle. Among other changes, SFAS
     No. 154 requires that a voluntary change in accounting principle be applied
     retrospectively with all prior period financial statements presented on the
     new accounting principle, unless it is impracticable to do so. SFAS No. 154
     also provides that (1) a change in method of depreciating or amortizing a
     long-lived nonfinancial asset be accounted for as a change in estimate
     (prospectively) that was effected by a change in accounting principle, and
     (2) correction of errors in previously issued financial statements should
     be termed a "restatement. " The new standard is effective for accounting
     changes and corrections of errors made in fiscal years beginning after
     December 15, 2005. The Company does not anticipate this revision will have
     a material effect on its financial statements.

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
     Statement No. 123 (Revised 2004) (SFAS No. 123R) "Share-Based Payment",
     which requires that the compensation cost relating to share-based payment
     transactions be recognized in financial statements. SFAS No. 123R replaces
     SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB
     Opinion No. 25, "Accounting for Stock Issued to Employees." Share-based
     compensation arrangements include share options, restricted share plans,
     performance-based awards, share appreciation rights and employee share
     purchase plans. SFAS No. 123R requires all share-based payments to
     employees to be valued using a fair value method on the date of grant and
     expensed based on that fair value over the applicable vesting period. SFAS
     No. 123R also amends SFAS No. 95 "Statement of Cash Flows" requiring the
     benefits of tax deductions in excess of recognized compensation cost be
     reported as financing instead of operating cash flows. The Securities and
     Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 107 ("SAB
     107"), which expresses the SEC's views regarding the interaction between
     SFAS No. 123R and certain SEC rules and regulations. Additionally, SAB No.
     107 provides guidance related to share-based payment transactions for
     public companies. The Company will be required to apply SFAS No. 123R as of
     the annual reporting period that begins January 1, 2006, however the
     Company does not currently have any share-based payments to which SFAS No.
     123R applies.

     In December 2003, the Accounting Standards Executive Committee of the
     American Institute of Certified Public Accountants issued Statement of
     Position 03-3, "Accounting for Certain Loans or Debt Securities Acquired in
     a Transfer" ("SOP 03-3"). SOP 03-3 addresses accounting for differences
     between contractual cash flows and cash flows expected to be collected from
     an investor's initial investment in loans or debt securities (loans)
     acquired in a transfer if those differences are attributable, at least in
     part, to credit quality. It includes loans purchased by the Corporation or
     acquired in business combinations. SOP 03-3 does not apply to loans
     originated by the Corporation. The Company adopted the provisions of SOP
     03-3 effective January 1, 2005. The initial implementation had no material
     effect on the Company's financial statements.

NOTE 2. BUSINESS COMBINATIONS

     On June 11, 2004, Citizens National Bank purchased certain assets and
     liabilities associated with the Hancock Branch of Fidelity Bank, a
     subsidiary bank of Mercantile Bankshares Corporation (formerly Home
     Federal). The results of the Hancock Branch's operations have been included
     in the consolidated financial statements since that date.


                                       40

<PAGE>

     The following table provides information concerning the allocations of the
     purchase price and the fair values of the assets and liabilities acquired
     of the Hancock branch:

<TABLE>
<CAPTION>
                                             AT JUNE 11, 2004
                                             ----------------
<S>                                          <C>
Assets acquired:
   Loans                                       $  8,419,973
      Accrued interest receivable                    34,526
      Fixed assets                                  324,166
      Intangible asset-premium on deposits          780,616
      Prepaid expenses                                2,139
                                               ------------
Total assets acquired                          $  9,561,420
                                               ------------
Liabilities assumed:
      Deposit accounts                         $(14,574,856)
      Accrued expenses                               (6,581)
                                               ------------
Total liabilities assumed                      $(14,581,437)
                                               ------------
Cash from acquired branch                      $ (5,020,017)
                                               ============
</TABLE>

     Citizens National Bank recorded $781,000 of core deposit intangible, which
     has a weighted-average useful life of 7 years.

NOTE 3. INVESTMENT IN LIMITED LIABILITY COMPANY

     In February 2001, CNB paid $5,000 to become a 50% member in a limited
     liability company, Morgan County Title Insurance Agency, LLC for the
     purpose of selling title insurance. In January 2003, the other two members
     in the limited liability company purchased a portion of CNB's membership
     making each member's share 33%. CNB accounts for their investment in Morgan
     County Title Insurance Agency, LLC as part of "Other Assets" using the
     equity method of accounting.

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

                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                        STATEMENTS OF FINANCIAL CONDITION
                                   (UNAUDITED)
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                               2005     2004
                              ------   ------
<S>                           <C>      <C>
ASSETS
   Cash                       $4,356   $6,082
                              ------   ------
      TOTAL ASSETS            $4,356   $6,082
                              ======   ======
MEMBERS' EQUITY               $4,356   $6,082
                              ------   ------
      TOTAL MEMBERS' EQUITY   $4,356   $6,082
                              ======   ======
</TABLE>


                                       41
<PAGE>

                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                              STATEMENTS OF INCOME
                                   (UNAUDITED)
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                             2005       2004       2003
                           --------   --------   --------
<S>                        <C>        <C>        <C>
INCOME
   Insurance commissions   $122,148   $185,154   $378,172
                           --------   --------   --------
      TOTAL INCOME         $122,148   $185,154   $378,172
                           --------   --------   --------
EXPENSES
   Management fees         $ 37,500   $ 72,328   $200,384
   Other expenses               874      8,806     12,808
                           --------   --------   --------
      TOTAL EXPENSES       $ 38,374   $ 81,134   $213,192
                           --------   --------   --------
      NET INCOME           $ 83,774   $104,020   $164,980
                           ========   ========   ========
</TABLE>

                    MORGAN COUNTY TITLE INSURANCE AGENCY, LLC
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                    2005        2004        2003
                                                  --------   ---------   ---------
<S>                                               <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                        $ 83,774   $ 104,020   $ 164,980
                                                  --------   ---------   ---------
      NET CASH PROVIDED BY OPERATING ACTIVITIES   $ 83,774   $ 104,020   $ 164,980
                                                  --------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES
   Profit and capital distributed                 $(85,500)  $(103,800)  $(164,309)
                                                  --------   ---------   ---------
      NET CASH (USED IN) FINANCING ACTIVITIES     $(85,500)  $(103,800)  $(164,309)
                                                  --------   ---------   ---------
      NET INCREASE IN CASH AND CASH
         EQUIVALENTS                              $ (1,726)  $     220   $     671
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       6,082       5,862       5,191
                                                  --------   ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR          $  4,356   $   6,082   $   5,862
                                                  ========   =========   =========
</TABLE>

NOTE 4. SECURITIES

     The amortized cost and estimated market value of debt securities at
     December 31, 2005 and 2004 by contractual maturity are shown below.
     Expected maturities will differ from contractual maturities because
     borrowers may have the right to call or prepay obligations with or without
     call or prepayment penalties.


                                       42

<PAGE>

Securities are summarized as follows:

<TABLE>
<CAPTION>
                                                               2005                           WEIGHTED
                                       ---------------------------------------------------     AVERAGE
                                                        GROSS        GROSS      ESTIMATED        TAX
                                        AMORTIZED    UNREALIZED   UNREALIZED       FAIR      EQUIVALENT
                                           COST         GAINS       LOSSES        VALUE         YIELD
                                       -----------   ----------   ----------   -----------   ----------
<S>                                    <C>           <C>          <C>          <C>           <C>
Available for sale:
   U.S. Government agencies
      and corporations
      After 1 but within 5 years       $16,826,758     $  225     $  485,392   $16,341,591      4.10%
      After 5 but within 10 years       18,217,740         --        324,090    17,893,650      4.77
                                       -----------     ------     ----------   -----------
                                       $35,044,498     $  225     $  809,482   $34,235,241      4.45%
                                       -----------     ------     ----------   -----------
   States and political subdivisions
      After 1 but within 5 years       $ 2,641,897     $1,376     $   52,169   $ 2,591,104      3.04%
      After 5 but within 10 years        9,980,628      4,224        160,963     9,823,889      3.51
                                       -----------     ------     ----------   -----------
                                       $12,622,525     $5,600     $  213,132   $12,414,993      3.41%
                                       -----------     ------     ----------   -----------
   Mortgage backed securities          $ 8,746,228     $   --     $  202,246   $ 8,543,982      4.72%
                                       -----------     ------     ----------   -----------
Total securities available for sale    $56,413,251     $5,825     $1,224,860   $55,194,216      4.26%
                                       ===========     ======     ==========   ===========
Restricted:
   Federal Reserve Bank stock          $   138,650     $   --     $       --   $   138,650      6.00%
   Federal Home Loan Bank stock          1,669,900         --             --     1,669,900      3.00
                                       -----------     ------     ----------   -----------
Total restricted investments           $ 1,808,550     $   --     $       --   $ 1,808,550      3.23%
                                       ===========     ======     ==========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                               2004                           WEIGHTED
                                       ---------------------------------------------------     AVERAGE
                                                        GROSS        GROSS      ESTIMATED        TAX
                                        AMORTIZED    UNREALIZED   UNREALIZED       FAIR      EQUIVALENT
                                           COST         GAINS       LOSSES        VALUE         YIELD
                                       -----------   ----------   ----------   -----------   ----------
<S>                                    <C>           <C>          <C>          <C>           <C>
Available for sale:
   U.S. Government agencies
      and corporations
      Within one year                  $11,846,301    $109,738     $ 49,839    $11,906,200      3.81%
      After 1 but within 5 years         8,906,924      49,196       35,373      8,920,747      4.14
      After 5 but within 10 years       18,454,860      40,148      207,732     18,287,276      4.16
                                       -----------    --------     --------    -----------
                                       $39,208,085    $199,082     $292,944    $39,114,223      4.05%
                                       -----------    --------     --------    -----------
   States and political subdivisions
      After 1 but within 5 years       $ 1,663,643    $  4,690     $  3,714    $ 1,664,619      3.95%
      After 5 but within 10 years       10,541,257     106,488       48,389     10,599,356      6.09
                                       -----------    --------     --------    -----------
                                       $12,204,900    $111,178     $ 52,103    $12,263,975      5.80%
                                       -----------    --------     --------    -----------
   Mortgage backed securities          $ 8,406,958    $ 17,066     $ 61,931    $ 8,362,093      4.49%
                                       -----------    --------     --------    -----------
Total securities available for sale    $59,819,943    $327,326     $406,978    $59,740,291      4.38%
                                       ===========    ========     ========    ===========
Restricted:
   Federal Reserve Bank stock          $   129,650    $     --     $     --    $   129,650      6.00%
   Federal Home Loan Bank stock          1,169,800          --           --      1,169,800      2.43
                                       -----------    --------     --------    -----------
Total restricted investments           $ 1,299,450    $     --     $     --    $ 1,299,450      2.79%
                                       ===========    ========     ========    ===========
</TABLE>


                                       43

<PAGE>

     The carrying value of securities pledged to secure public deposits and for
     other purposes as required or permitted by law totaled $40,610,746 at
     December 31, 2005 and $32,538,864 at December 31, 2004.

     Also, a security that had a carrying value of $247,275 was designated for
     customer repurchase agreements at December 31, 2004. As of December 31,
     2005, the bank has no repurchase agreements on their books.

     Proceeds from sales of securities available for sale (excluding maturities)
     for the years ended December 31, 2005, 2004 and 2003 were $37,026,097,
     $6,391,436 and $13,044,280, respectively. Gross gains and (losses) of
     $145,013 and $(161,178) in 2005, $135,546 and $(0) in 2004, and $210,572
     and $(69,122) in 2003 were realized on the respective sales.

     The following tables show our investments' gross unrealized losses and fair
     value, aggregated by investment category and length of time that individual
     securities have been in a continuous unrealized loss position, at December
     31, 2005 and 2004, respectively.

<TABLE>
<CAPTION>
                                                                        2005
                                   ------------------------------------------------------------------------------
                                      LESS THAN 12 MONTHS         12 MONTHS OR MORE                TOTAL
                                   ------------------------   ------------------------   ------------------------
                                       FAIR      UNREALIZED       FAIR      UNREALIZED       FAIR      UNREALIZED
DESCRIPTION OF SECURITIES             VALUE        LOSSES        VALUE        LOSSES        VALUE        LOSSES
-------------------------          -----------   ----------   -----------   ----------   -----------   ----------
<S>                                <C>           <C>          <C>           <C>          <C>           <C>
U.S. Government agenices
   and corporations                $18,797,616    $281,814    $13,938,525    $527,668    $32,736,141   $  809,482
State and political subdivisions     9,722,997     134,731      2,531,396      78,401     12,254,393      213,132
Mortgage backed securities           4,418,522      69,934      4,125,462     132,312      8,543,984      202,246
                                   -----------    --------    -----------    --------    -----------   ----------
Total temporarily impaired
   securities                      $32,939,135    $486,479    $20,595,383    $738,381    $53,534,518   $1,224,860
                                   ===========    ========    ===========    ========    ===========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                        2004
                                   ------------------------------------------------------------------------------
                                      LESS THAN 12 MONTHS         12 MONTHS OR MORE                TOTAL
                                   ------------------------   ------------------------   ------------------------
                                       FAIR      UNREALIZED       FAIR      UNREALIZED       FAIR      UNREALIZED
DESCRIPTION OF SECURITIES             VALUE        LOSSES        VALUE        LOSSES        VALUE        LOSSES
-------------------------          -----------   ----------   -----------   ----------   -----------   ----------
<S>                                <C>           <C>          <C>           <C>          <C>           <C>
U.S. Government agenices
   and corporations                $17,999,875    $207,515    $ 2,412,150    $ 85,429    $20,412,025    $292,944
State and political subdivisions     4,919,844      52,103             --          --      4,919,844      52,103
Mortgage backed securities           5,913,016      39,117        866,422      22,814      6,779,438      61,931
                                   -----------    --------    -----------    --------    -----------    --------
Total temporarily impaired
   securities                      $28,832,735    $298,735    $ 3,278,572    $108,243    $32,111,307    $406,978
                                   ===========    ========    ===========    ========    ===========    ========
</TABLE>

     Management evaluates securities for other-than-temporary impairment at
     least on a quarterly basis, and more frequently when economic or market
     concerns warrant such evaluation. Consideration is given to (1) the length
     of time and the extent to which the fair value has been less than cost, (2)
     the financial condition and near-term prospects of the issuer, and (3) the
     intent and ability of the bank to retain its investment in the issuer for a
     period of time sufficient to allow for any anticipated recovery in fair
     value.

     At December 31, 2005, there were 114 available for sale securities that
     have unrealized losses with aggregate depreciation of 2.2% from the
     securities amortized cost basis. The unrealized losses relate principally
     to government obligations. In analyzing the issuer's financial condition,
     management considers whether the securities are issued by the federal
     government or its agencies and whether


                                       44

<PAGE>

     downgrades by bond rating agencies have occurred. Since the securities are
     primarily government bonds or agency issues and management has the ability
     to hold the securities until maturity or until such a time that the market
     value has recovered the unrealized losses, management determined that no
     declines are deemed to be other-than-temporary.


                                       45
<PAGE>

NOTE 5. LOANS AND LEASES RECEIVABLE

     Major classifications of loans at December 31, 2005 and 2004 were as
     follows:

<TABLE>
<CAPTION>
                                     2005           2004
                                 ------------   ------------
<S>                              <C>            <C>
Loans:
   Real estate                   $125,722,303   $108,158,901
   Commercial real estate          29,492,744     22,758,761
   Consumer                        16,801,986     16,404,853
   Commercial                       9,314,491      8,880,771
   Overdrafts                         356,329         82,556
                                 ------------   ------------
                                 $181,687,853   $156,285,842
Leases:                               144,869        166,389
                                 ------------   ------------
                                 $181,832,722   $156,452,231
Net deferred loan fees, costs,
    premiums and discounts            396,798        274,800
Allowance for loan losses          (2,022,130)    (1,807,449)
                                 ------------   ------------
                                 $180,207,390   $154,919,582
                                 ============   ============
</TABLE>

     At December 31, 2005, approximately $75,594,000 or 48.8% of the real estate
     loans had fixed rates of interest and $79,186,000 or 51.2% had adjustable
     rates of interest.

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

<TABLE>
<CAPTION>
                             2005         2004         2003
                          ----------   ----------   ----------
<S>                       <C>          <C>          <C>
Balance, beginning        $1,807,449   $1,607,763   $1,484,448
   Provision charged to
      operations             352,000      393,000      312,000
   Recoveries                168,413      158,850       80,626
   Loans charged off        (305,732)    (352,164)    (269,311)
                          ----------   ----------   ----------
Balance, ending           $2,022,130   $1,807,449   $1,607,763
                          ==========   ==========   ==========
</TABLE>

     Loans are placed on nonaccrual status when, at the time the loan becomes 90
     days past due or unless in management's judgement collectibility is
     assured. A summary of nonperforming loans is follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         -------------------
                                                           2005       2004
                                                         --------   --------
<S>                                                      <C>        <C>
Nonaccrual  loans                                        $789,684   $380,731
Loans past due 90 days or more still accruing interest         --         --
                                                         --------   --------
   Total                                                 $789,684   $380,731
                                                         ========   ========
</TABLE>

     The contractual amount of interest that would have been recorded on
     nonaccrual loans during 2005 and 2004 was $48,044 and $35,507,
     respectively. The amount of interest income that was recorded on nonaccrual
     loans during 2005 and 2004 was $20,832 and $16,980, respectively.

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

     The Bank has no loans which are considered to be impaired at December 31,
     2005 and 2004.


                                       46

<PAGE>

NOTE 6. LOAN SERVICING

     Mortgage loans serviced for others are not included in the accompanying
     financial statements. The unpaid principal balances of mortgage loans
     serviced for others were $3,670,323 and $4,465,919 at December 31, 2005 and
     2004, respectively.

     Custodial balances maintained in connection with the foregoing loan
     servicing, and included in demand deposits, were $48,288 and $70,211 at
     December 31, 2005 and 2004, respectively.

     The Bank did not capitalize any mortgage servicing rights in 2005, 2004 or
     2003. The Company performed an analysis of the predominant risk
     characteristics of the previously capitalized mortgage servicing rights on
     December 31, 2003. This analysis indicated prepayment risk for the
     underlying loans is high due to lower current interest rates and thus a
     write-down of the remaining balance was necessary. During the year ended
     December 31, 2003, management recognized a direct write-off of $27,674
     included in other expenses on the income statement. Amortization of
     mortgage servicing rights was $0, $0 and $2,247 in 2005, 2004 and 2003,
     respectively. There were no mortgage servicing rights at December 31, 2005
     and 2004.

NOTE 7. PREMISES AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                         2005         2004
                                      ----------   ----------
<S>                                   <C>          <C>
Land and land improvements            $2,072,388   $1,942,910
Banking house - Main                   1,491,251    1,484,500
Banking house - Valley Road branch       547,936      547,936
Banking house - Hedgesville branch       766,743      766,743
Banking house - Martinsburg branch       697,006      697,006
Banking house - Hancock branch           230,999      230,999
Banking house - Spring Mills branch      882,844           --
Bank owned automobiles                    37,228       31,580
Furniture, fixtures and equipment      2,848,095    2,328,129
                                      ----------   ----------
                                      $9,574,490   $8,029,803
   Less accumulated depreciation       2,973,027    2,583,405
                                      ----------   ----------
                                      $6,601,463   $5,446,398
Construction in progress                      --      598,048
                                      ----------   ----------
                                      $6,601,463   $6,044,446
                                      ==========   ==========
</TABLE>

     Depreciation expense amounted to $462,198, $370,056 and $338,062 in 2005,
     2004 and 2003, respectively.

     The Bank purchased a parcel of land in Falling Waters, Berkeley County,
     West Virginia on December 15, 2003 for $503,261 to construct a new branch
     facility. Construction on the new branch facility began in August 2004 and
     was completed in April 2005. On April 27, 2005, the new branch building
     opened.

     Computer software, net of accumulated amortization, included in the
     statement of financial condition caption "Other Assets" amounted to
     $167,212 and $368,040 at December 31, 2005 and 2004, respectively.
     Amortization expense on computer software amounted to $253,744, $255,518
     and $209,328 in 2005, 2004 and 2003, respectively.

NOTE 8. INTANGIBLE ASSETS

     Amortized intangible assets representing customer lists, contracts and
     records acquired by CNB Insurance Services, Inc. have a carrying amount of
     $66,267 and accumulated amortization of $54,370 and $48,421 at December 31,
     2005 and 2004, respectively. These intangibles are amortized on a straight
     line basis through 2007. Amortized intangible asset representing the
     $780,616 premium from the purchase of core deposit relationships as part of
     the Hancock branch acquisition has accumulated amortization of $171,921 and
     $60,405 at December 31, 2005 and 2004, respectively. This core deposit
     intangible asset from the Hancock branch acquisition is being amortized
     over seven years on a straight line basis.

     Amortization expense on intangible assets amounted to $117,465, $66,354 and
     $8,685 in 2005, 2004 and 2003, respectively.

     The estimated amortization expense for the next five succeeding years will
     be:


                                       47

<PAGE>


<TABLE>
<S>   <C>
2006  $117,465
2007  $117,465
2008  $111,516
2009  $111,516
2010  $111,516
</TABLE>

NOTE 9. TIME DEPOSITS

     At December 31, 2005, the scheduled maturities of time deposits are as
     follows:

<TABLE>
<CAPTION>
         TIME DEPOSITS       ALL TIME
       $100,000 AND OVER     DEPOSITS
       -----------------   -----------
<S>    <C>                 <C>
2006      $ 5,918,172       19,148,902
2007        8,328,314       20,263,992
2008       13,711,453       39,819,838
2009        1,335,749        5,106,596
2010        1,366,079        5,035,518
          -----------      -----------
          $30,659,767      $89,374,846
          ===========      ===========
</TABLE>

NOTE 10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     Securities sold under agreements to repurchase, which are classified as
     secured borrowings, generally mature within one to four days from the
     transaction date. Securities sold under agreements to repurchase are
     reflected at the amount of cash received in connection with the
     transaction. The Bank may be required to provide additional collateral
     based on the fair value of the underlying securities. The only repurchase
     agreement the Bank entered into in 2004 was a retail repurchase agreement
     with a customer. As of December 31, 2005, the Bank has no repurchase
     agreements.

NOTE 11. FEDERAL HOME LOAN BANK BORROWINGS

<TABLE>
<CAPTION>
                                        DECEMBER 31,
                                  ------------------------
                                      2005         2004
                                  -----------   ----------
<S>                               <C>           <C>
Federal Home Loan Bank advances   $17,800,000   $8,600,000
</TABLE>

     Citizens National Bank is a member of the Federal Home Loan Bank of
     Pittsburgh ("FHLB") and, as such, can take advantage of the FHLB program
     for overnight and term advances at published daily rates. At December 31,
     2005, the Bank only has overnight advances with FHLB. FHLB advances mature
     in January 2006 and carry an interest rate of 4.2%. Under the terms of a
     blanket collateral agreement, advances from the FHLB are collateralized by
     qualifying mortgages and U.S. Government agencies and mortgage-backed
     securities. In addition, all of the Bank's stock in the FHLB is pledged as
     collateral for such debt. Advances available under this agreement are
     limited by available and qualifying collateral and the amount of FHLB stock
     held by the borrower.

<TABLE>
<CAPTION>
                                                2005         2004
                                            -----------   ----------
<S>                                         <C>           <C>
Maximum balance (outstanding and pledged)   $17,800,000   $8,600,000
   at any month-end during the year
Average balance for the year                  8,212,740      757,377
Weighted average rate for the year                 3.55%        1.60%
Weighted average rate at year-end                  4.20%        2.24%
</TABLE>


                                       48
<PAGE>

NOTE 12. UNUSED LINES OF CREDIT

     The Bank entered into an open-ended unsecured line of credit with
     Mercantile Safe Deposit and Trust Company for $3,000,000 for federal fund
     purchases. Funds issued under this agreement are at the Mercantile Safe
     Deposit and Trust Company federal funds rate effective at the time of
     borrowing. The line matures October 19, 2006 and has a compensating balance
     requirement of $250,000. The Bank had not drawn on these funds at December
     31, 2005. The Bank entered into a line of credit with SunTrust Bank for
     $4,500,000 for federal fund purchases. Funds issued under this agreement
     are at the SunTrust Bank federal funds rate effective at the time of
     borrowing. The Bank had not drawn on these funds at December 31, 2005.

NOTE 13. PENSION PLAN

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

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

<TABLE>
<CAPTION>
                                             2005         2004          2003
                                         -----------   ----------   -----------
<S>                                      <C>           <C>          <C>
CHANGE IN BENEFIT OBLIGATION:
   Benefit obligation at
      beginning of year                  $ 3,423,734   $3,269,219   $ 2,917,840
   Adjustment for plan changes               106,789           --            --
   Service cost                              162,067      144,323       115,397
   Interest cost                             229,400      200,152       201,998
   Actuarial (gain) loss                     428,791       47,693       181,139
   Benefits paid                            (164,757)    (237,653)     (147,155)
                                         -----------   ----------   -----------
   Benefit obligation at end of
      year                               $ 4,186,024   $3,423,734   $ 3,269,219
                                         -----------   ----------   -----------

CHANGE IN PLAN ASSETS:
   Fair value of plan assets at
      beginning of year                  $ 2,427,640   $2,246,999   $ 1,904,046
   Actual return on plan assets              212,052      198,364       244,353
   Employer contribution                     285,150      249,348       245,755
   Administrative expenses                        --      (29,418)           --
   Benefits paid                            (164,757)    (237,653)     (147,155)
                                         -----------   ----------   -----------
   Fair value of plan assets
      at end of year                     $ 2,760,085   $2,427,640   $ 2,246,999
                                         -----------   ----------   -----------
Funded status                            $(1,425,939)  $ (996,094)  $(1,022,220)
Unrecognized net actuarial
      (gain) loss                          1,464,092    1,054,208       968,629
Unrecognized prior service
      cost                                    98,574           --         2,753
                                         -----------   ----------   -----------
      Prepaid (accrued) benefit cost     $   136,727   $   58,114   $   (50,838)
                                         ===========   ==========   ===========

ADDITIONAL INFORMATION
Increase in minimum liability included
      in other comprehensive income      $   355,276   $   40,578   $   436,293
</TABLE>


                                       49

<PAGE>

<TABLE>
<CAPTION>
                                                               2005        2004        2003
                                                            ---------   ---------   ---------
<S>                                                         <C>         <C>         <C>
WEIGHTED AVERAGE ASSUMPTIONS USED TO
   DETERMINE BENEFIT OBLIGATIONS AS OF OCTOBER 31:
      Discount rate                                               5.8%        6.5%        6.5%
      Expected return on plan
         assets                                                   8.5%        8.5%        8.5%
      Rate of compensation increase                               3.0%        3.5%        3.5%
WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE
   NET PERIODIC BENEFIT COST FOR YEARS ENDED OCTOBER 31:
      Discount rate                                               6.5%        6.5%        7.0%
      Expected return on plan
         assets                                                   8.5%        8.5%        8.5%
      Rate of compensation increase                               3.5%        3.5%        4.0%
AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION
   CONSIST OF:
      Accrued benefit cost                                  $(793,994)  $(418,757)  $(489,884)
      Intangible assets                                        98,574          --       2,753
      Accumulated other comprehensive income                  832,147     476,871     436,293
                                                            ---------   ---------   ---------
      Net amount recognized                                 $ 136,727   $  58,114   $ (50,838)
                                                            =========   =========   =========
</TABLE>

     The accumulated benefit obligation for the defined benefit pension plan was
     $3,554,079 and $2,846,397 at October 31, 2005 and October 31, 2004,
     respectively.

<TABLE>
<S>                                                <C>         <C>         <C>
COMPONENTS OF NET PERIODIC COST:
   Service cost                                    $ 162,067   $ 136,170   $ 115,397
   Interest cost                                     229,400     207,304     201,998
   Expected return on plan assets                   (230,617)   (224,567)   (210,046)
   Amortization of prior service costs                 8,215       2,753      21,051
   Recognized net actuarial loss                      37,472      18,736          --
   Amortization of transition obligation/(asset)          --          --      (7,371)
                                                   ---------   ---------   ---------
      Net periodic plan cost                       $ 206,537   $ 140,396   $ 121,029
                                                   =========   =========   =========
</TABLE>

<TABLE>
<CAPTION>
                           2005    RANGE    2005   2004
                           ----   -------   ----   ----
<S>                        <C>    <C>       <C>    <C>
(1) Plan assets
   (a) Equity securities    70%   40 - 80%   73%    72%
   (b) Debt securities      25%   20 - 40%   22%    23%
   (c) Real estate           0%         0%    0%     0%
   (d) Other                 5%     3 -10%    5%     5%
                                            ---    ---
   (e) Total                                100%   100%
                                            ===    ===
</TABLE>


                                       50

<PAGE>

     INVESTMENT POLICY AND STRATEGY

     The policy, as established by the Pension Committee, is to invest assets
     per the target allocations stated above. The assets will be reallocated
     periodically to meet the above target allocations. The investment policy
     will be reviewed periodically, under the advisement of a certified
     investment advisor, to determine if the policy should be changed.

     The overall investment return goal is to achieve a return greater than a
     blended mix of stated indices tailored to the same asset mix of the plan
     assets by 0.5% after fees over a rolling 5-year moving average basis.

     Allowable assets include cash equivalents, fixed income securities, equity
     securities, exchange traded index funds and GICs. Prohibited investments
     include, but are not limited to, commodities and future contracts, private
     placements, options, limited partnerships, venture capital investments,
     real estate and IO, PO, and residual tranche CMOs. Unless a specific
     derivative security is allowed per the plan document, permission must be
     sought from the Pension Committee to include such investments.

     In order to achieve a prudent level of portfolio diversification, the
     securities of any one company should not exceed more than 10% of the total
     plan assets, and no more than the 25% of total plan assets should be
     invested in any one industry (other than securities of US Government or
     agencies). Additionally, no more than 20% of the plan assets shall be
     invested in foreign securities (both equity and fixed).

     DETERMINATION OF EXPECTED LONG-TERM RATE OF RETURN

     The expected long-term rate of return for the plan's total assets is based
     on the expected return of each of the above categories, weighted based on
     the median of the target allocation for each class.

CASH FLOWS

<TABLE>
<C>                                                                  <C>
(1) Expected contributions for fiscal year ending October 31, 2006
    (a)  Expected employer contributions                             $  241,656
    (b)  Expected employee contributions                             $       --

(2) Estimated future benefit payments reflecting expected
       future service for the fiscal year(s) ending
    (a)  10/31/2006                                                  $  161,178
    (b)  10/31/2007                                                  $  164,459
    (c)  10/31/2008                                                  $  169,134
    (d)  10/31/2009                                                  $  185,761
    (e)  10/31/2010                                                  $  196,549
    (f)  10/31/2011 - 10/31/2015                                     $1,202,349
</TABLE>

NOTE 14. 401(K) PROFIT SHARING PLAN

     All employees are eligible to participate in the Bank's 401(k) Profit
     Sharing Plan after completing one year of service. Employees may defer up
     to 15% of their salary in 2005, 2004 and 2003. The Bank may, at the
     discretion of the Board of Directors, match all or part of the employee
     deferrals. For 2005, 2004 and 2003, the Bank matched 75% of employee
     deferrals up to 5% of salary. The percentage of match varies based on the
     Bank's profit level. The assets of 401(k) Profit Sharing Plan are managed
     by the Bank's trust department.

     The Bank's contribution charged to income during 2005, 2004 and 2003 was
     $63,789, $53,783 and $49,287, respectively.

NOTE 15. DEFERRED COMPENSATION PLAN

     The Bank has a plan pursuant to which a director may elect to waive receipt
     of all or a portion of his fees for Board of Directors' meetings or
     committee meetings in exchange for a retirement benefit to be received
     during a ten-year period after attaining a certain age. The Bank has
     acquired life insurance on the lives of participating directors to fund its
     obligation under the plan. The cash surrender value of these life insurance
     policies has been recorded as an asset. The present value of payments to be
     paid to directors or their beneficiaries for services rendered to date has
     been recorded as a liability. The net expense for these benefits was
     $17,948, $17,702 and $22,405 for 2005, 2004 and 2003, respectively.


                                       51
<PAGE>

NOTE 16. INCOME TAXES

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

<TABLE>
<CAPTION>
                                        YEARS ENDED DECEMBER 31,
                                   ----------------------------------
                                      2005        2004        2003
                                   ----------   --------   ----------
<S>                                <C>          <C>        <C>
Federal:
   Current                         $1,154,256   $942,169   $  921,863
   Deferred                           (68,049)   (67,864)      35,600
State:
   Current                            163,560    128,886      124,169
   Deferred                           (11,351)   (11,274)       1,821
                                   ----------   --------   ----------
      Provision for income taxes   $1,238,416   $991,917   $1,083,453
                                   ==========   ========   ==========
</TABLE>

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

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

<TABLE>
<CAPTION>
                                               YEARS ENDED DECEMBER 31,
                                        ------------------------------------
                                           2005         2004         2003
                                        ----------   ----------   ----------
<S>                                     <C>          <C>          <C>
Income tax expense at the
   statutory rate (34%)                 $1,252,558   $1,134,107   $  960,940
Increases (decreases) resulting from:
   Nontaxable interest income,
      net of non-deductible interest
      expense                             (164,735)    (121,892)     (58,527)
   State income taxes, net of federal
      income tax benefit                    91,908       83,217      125,990
   Other                                    58,685     (103,515)      55,050
                                        ----------   ----------   ----------
      Provision for income taxes        $1,238,416   $  991,917   $1,083,453
                                        ==========   ==========   ==========
</TABLE>

     Federal and state income taxes receivable included in the balance sheet as
     other assets was $212,091 and $157,183 at December 31, 2005 and 2004,
     respectively.

     The components of deferred taxes included in the statement of financial
     condition as of December 31 are as follows:


                                       52

<PAGE>

<TABLE>
<CAPTION>
                                             2005         2004
                                          ----------   ----------
<S>                                       <C>          <C>
Deferred tax assets:
   Provision for loan losses              $  663,605   $  585,959
   Deferred compensation plan                276,713      248,792
   Postretirement benefits                    64,306       69,236
   Defined benefit plan                           --       19,625
   Organizational costs                           --          602
   Intangible asset                           54,081       33,653
   Minimum pension liability adjustment      316,216      181,211
   Net unrealized loss on securities
      available for sale                     463,233       30,268
                                          ----------   ----------
                                          $1,838,154   $1,169,346
                                          ----------   ----------

Deferred tax liabilities:
   CSV life insurance                     $ (255,938)  $ (233,784)
   Defined benefit plan                      (49,222)          --
   Depreciation                             (373,399)    (423,338)
                                          ----------   ----------
                                          $ (678,559)  $ (657,122)
                                          ----------   ----------
Net deferred tax asset (liability)        $1,159,595   $  512,224
                                          ==========   ==========
</TABLE>

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

NOTE 17. OTHER OPERATING EXPENSES

<TABLE>
<CAPTION>
                                          YEARS ENDED DECEMBER 31,
                                    ------------------------------------
                                       2005         2004         2003
                                    ----------   ----------    ---------
<S>                                 <C>          <C>          <C>
Stationery, supplies and printing   $  206,124   $  240,711   $  197,000
Data processing                        132,595      134,100      180,353
Director's fees                        178,375      178,650      149,733
Postage                                132,363      129,122      121,285
Telephone                              104,249       88,985       70,288
Professional fees                      297,449      252,160      295,259
ATM and debit card fees                222,539      188,147      168,136
Advertising and public relations       145,297      200,272      105,995
Other                                  640,089      570,216      578,127
                                    ----------   ----------   ----------
   Total other operating expenses   $2,059,080   $1,982,363   $1,866,176
                                    ==========   ==========   ==========
</TABLE>

NOTE 18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

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


                                       53

<PAGE>

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

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

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

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

<TABLE>
<CAPTION>
                                               2005          2004
                                           -----------   -----------
<S>                                        <C>           <C>
Commitments to originate:
   Fixed rate loans                        $ 2,697,280   $ 2,702,708
   Adjustable rate loans                     2,396,328     2,542,317
                                           -----------   -----------
                                           $ 5,093,608   $ 5,245,025
Letters of credit                            1,990,600     1,341,186
Undisbursed portion of construction
   loans                                     3,689,992     4,801,629
Available credit granted on commercial
   loans                                    10,213,982     9,619,306
Available credit on personal lines
   of credit                                   296,856       439,713
Undisbursed portion of home equity loans     3,743,253     6,212,908
                                           -----------   -----------
                                           $25,028,291   $27,659,767
                                           ===========   ===========
</TABLE>

NOTE 19. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

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

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

     The Company maintains substantial balances of cash on hand, federal funds
     sold and investments held in safekeeping at corresponding banks. The
     balances held at the correspondent banks are in excess of the Federal
     Deposit Insurance Corporation insurance limit. Management considers this to
     be a normal business risk.

NOTE 20. LEGAL CONTINGENCIES

     Various legal claims arise from time to time in the normal course of
     business which, in the opinion of management, will have no material effect
     on the bank's consolidated financial statements.


                                       54
<PAGE>

NOTE 21. REGULATORY MATTERS

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

     Quantitative measures established by regulation to ensure capital adequacy
     require the Bank to maintain minimum amounts and ratios of total and Tier I
     capital to risk-weighted assets (as defined), and of Tier I capital (as
     defined) to average assets (as defined). Management believes, as of
     December 31, 2005, that the Bank meets all capital adequacy requirements to
     which it is subject.

     As of December 31, 2005 and 2004, the most recent notification from the
     Office of the Comptroller of the Currency categorized the Bank as
     well-capitalized under the regulatory framework for prompt corrective
     action. To be categorized as well-capitalized the Bank must maintain
     minimum total risk-based, Tier I risk-based, and Tier I leverage ratios.
     There are no conditions or events since that notification that management
     believes have changed the institution's category.

     The Bank's actual capital amounts and ratios are presented in the table.
     There were no deductions from capital for interest-rate risk in 2005 and
     2004.

<TABLE>
<CAPTION>
                                                             RATIO
                                        ----------------------------------------------
                              ACTUAL                                     TO BE WELL
                              AMOUNT                                 CAPITALIZED UNDER
                                IN                  FOR CAPITAL      PROMPT CORRECTIVE
                            THOUSANDS   ACTUAL   ADEQUACY PURPOSES   ACTION PROVISIONS
                            ---------   ------   -----------------   -----------------
<S>                         <C>         <C>      <C>                 <C>
As of December 31, 2005:
   Total Capital
      (to Risk Weighted
       Assets)               $21,066    13.68%          8.0%               10.0%
   Tier I Capital
      (to Risk Weighted
      Assets)                $19,140    12.43%          4.0%                6.0%
   Tier I Capital
      (to Average Assets)    $19,140     7.49%          4.0%                5.0%

As of December 31, 2004:
   Total Capital
      (to Risk Weighted
       Assets)               $19,898    14.42%          8.0%               10.0%
   Tier I Capital
      (to Risk Weighted
      Assets)                $18,172    13.17%          4.0%                6.0%
   Tier I Capital
      (to Average Assets)    $18,172     7.74%          4.0%                5.0%
</TABLE>

NOTE 22. REGULATORY RESTRICTIONS

     Included in Cash and Due From Banks are average daily reserve balances the
     Bank is required to maintain with the Federal Reserve Bank. The amount of
     these required reserves, calculated based on percentages of certain deposit
     balances was $6.9 million at December 31, 2005.

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


                                       55

<PAGE>

     Certain regulations prohibit the transfer of funds from the Bank to
     affiliates in the form of loans or advances exceeding 10% of its capital
     stock and surplus. In addition, all loans or advances to nonbank affiliates
     must be secured by specific collateral. Based on this limitation, there was
     approximately $2,026,000 available for loans or advances to affiliates of
     the Bank as of December 31, 2005, at which time there were no material
     loans or advances outstanding.

NOTE 23. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

     Financial Assets:

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

     Financial Liabilities:

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

     Off-Balance-Sheet-Financial Instruments:

          The fair value of commitments to extend credit and standby letters of
          credit is estimated using the fees currently charged to enter into
          similar agreements.


                                       56

<PAGE>

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

<TABLE>
<CAPTION>
                                                             2005                          2004
                                                 ---------------------------   ---------------------------
                                                   CARRYING                      CARRYING
                                                    AMOUNT       FAIR VALUE       AMOUNT       FAIR VALUE
                                                 ------------   ------------   ------------   ------------
<S>                                              <C>            <C>            <C>            <C>
Financial Assets:
   Cash, due from banks and
      federal funds sold                         $ 10,123,252   $ 10,123,252   $ 10,138,939   $ 10,138,939
    Securities available for
      sale                                         55,194,216     55,194,216     59,740,291     59,740,291
   Loans                                          180,207,390    179,658,280    154,919,582    155,324,574
   Accrued interest receivable                      1,230,777      1,230,777      1,042,573      1,042,573
Financial Liabilities:
   Demand deposits                               $129,913,580   $129,913,580   $117,002,249   $117,002,249
   Time deposits                                   89,374,846     91,424,100     90,726,289     92,637,563
   Accrued interest payable                           611,512        611,512        543,551        543,551
   FHLB borrowings                                 17,800,000     17,800,000      8,600,000      8,600,000
   Securities sold under repurchase agreements             --             --        216,909        216,909
Off Balance - Sheet
   Financial Instruments:
   Letters of credit                             $         --   $     16,488   $         --   $     10,338
</TABLE>

NOTE 24. RELATED PARTY TRANSACTIONS

     In the ordinary course of business, the Bank has granted loans to officers,
     directors, and their affiliates amounting to $2,448,437 and $1,915,773 at
     December 31, 2005 and 2004, respectively. During 2005, $1,053,547 of new
     loans were made, or became reportable, and repayments and other decreases
     totaled $520,883. Deposits from related parties held by the Bank at
     December 31, 2005 and 2004 amounted to $5,794,438 and $5,264,183,
     respectively.


                                       57
<PAGE>

NOTE 25. PARENT COMPANY ONLY FINANCIAL INFORMATION

          The following represents parent company only financial information:

                 STATEMENTS OF FINANCIAL CONDITION (PARENT ONLY)
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                       2005          2004
                                                   -----------   -----------
<S>                                                <C>           <C>
ASSETS
   Cash                                            $        37   $    22,098
   Investment in Citizens National Bank             18,992,776    18,123,499
   Investment in Morgan County
      Title Insurance Agency, LLC                        1,452         2,027
   Deferred income taxes                                    --           602
   Other assets                                         11,795           594
                                                   -----------   -----------
      TOTAL ASSETS                                 $19,006,060   $18,148,820
                                                   ===========   ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
   Accrued expenses and other liabilities          $    (1,981)  $        80
                                                   -----------   -----------
      TOTAL LIABILITIES                            $    (1,981)  $        80
                                                   -----------   -----------

SHAREHOLDERS' EQUITY
   Common stock, $1 par value; 5,000,000 shares
      authorized; 458,048 shares outstanding       $   458,048   $   458,048
   Capital surplus                                   4,163,592     3,863,592
   Retained earnings                                15,658,134    14,172,144
   Accumulated other comprehensive income           (1,271,733)     (345,044)
                                                   -----------   -----------
      TOTAL SHAREHOLDERS' EQUITY                   $19,008,041   $18,148,740
                                                   -----------   -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $19,006,060   $18,148,820
                                                   ===========   ===========
</TABLE>

                       STATEMENTS OF INCOME (PARENT ONLY)
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                              2005         2004         2003
                                           ----------   ----------   ----------
<S>                                        <C>          <C>          <C>
Dividend income                            $  659,589   $  662,106   $  549,658
Income from title company                      27,924       35,207       54,550
Noninterest expense                           (44,744)     (58,038)     (56,422)
                                           ----------   ----------   ----------

INCOME BEFORE INCOME TAXES AND EQUITY
   IN UNDISTRIBUTED EARNINGS OF CITIZENS
   NATIONAL BANK                           $  642,769   $  639,275   $  547,786
Income tax (expense) benefit                    6,844        7,595         (774)
                                           ----------   ----------   ----------

INCOME BEFORE EQUITY IN UNDISTRIBUTED
   EARNINGS OF CITIZENS NATIONAL BANK      $  649,613   $  646,870   $  547,012
Equity in undistributed earnings of
   Citizens National Bank                   1,795,966    1,696,823    1,195,828
                                           ----------   ----------   ----------
NET INCOME                                 $2,445,579   $2,343,693   $1,742,840
                                           ==========   ==========   ==========
</TABLE>


                                       58

<PAGE>

                     STATEMENTS OF CASH FLOWS (PARENT ONLY)
                  YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                      2005          2004          2003
                                                  -----------   -----------   -----------
<S>                                               <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                        $ 2,445,579   $ 2,343,693   $ 1,742,840
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Deferred income taxes                                  602           898           774
   (Increase) decrease in other assets                (11,201)        1,507            --
   Increase (decrease) in accrued expenses and
      other liabilities                                (2,061)           80       (52,528)
   Equity in undistributed earnings of
      Citizens National Bank                       (1,795,966)   (1,696,823)   (1,195,828)
                                                  -----------   -----------   -----------
      NET CASH PROVIDED BY OPERATING ACTIVITIES   $   636,953   $   649,355   $   495,258
                                                  -----------   -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Investment in title company                    $       575   $      (607)  $       865
                                                  -----------   -----------   -----------
      NET CASH PROVIDED BY (USED IN)
         INVESTING ACTIVITIES                     $       575   $      (607)  $       865
                                                  -----------   -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Cash dividends paid                            $  (659,589)  $  (632,106)  $  (549,658)
                                                  -----------   -----------   -----------
      NET CASH (USED IN) FINANCING ACTIVITIES     $  (659,589)  $  (632,106)  $  (549,658)
                                                  -----------   -----------   -----------
      NET INCREASE (DECREASE) IN CASH AND CASH
         EQUIVALENTS                              $   (22,061)  $    16,642   $   (53,535)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR    $    22,098   $     5,456   $    58,991
                                                  -----------   -----------   -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR          $        37   $    22,098   $     5,456
                                                  ===========   ===========   ===========
</TABLE>


                                       59

<PAGE>

NOTE 26. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                              2005
                             -------------------------------------
                              FIRST     SECOND    THIRD     FOURTH
                             QUARTER   QUARTER   QUARTER   QUARTER
                             -------   -------   -------   -------
                                          In thousands
<S>                          <C>       <C>       <C>       <C>
Interest income              $3,073     $3,282    $3,454   $3,611
Interest expense                808        888     1,004    1,150
                             ------     ------    ------   ------
Net interest income           2,265      2,394     2,450    2,461

Provision for loan losses       106        102        72       72
Noninterest income              449        513       531      530
Noninterest expense           1,771      1,926     1,892    1,952
Securities gains (losses)        (2)         1         3      (18)
                             ------     ------    ------   ------
Income before income taxes      835        880     1,020      949
Provision for income taxes      307        281       315      335
                             ------     ------    ------   ------
Net income                   $  528     $  599    $  705   $  614
                             ======     ======    ======   ======
Basic earnings per share     $  1.15    $ 1.31    $ 1.54   $  1.34
                             =======    ======    ======   =======
</TABLE>

<TABLE>
<CAPTION>
                                              2004
                             -------------------------------------
                              FIRST     SECOND    THIRD     FOURTH
                             QUARTER   QUARTER   QUARTER   QUARTER
                             -------   -------   -------   -------
                                          In thousands
<S>                          <C>       <C>       <C>       <C>
Interest income               $2,768    $2,827    $3,031    $3,089
Interest expense                 782       747       807       833
                              ------    ------    ------    ------
Net interest income            1,986     2,080     2,224     2,256

Provision for loan losses         87        94       102       110
Noninterest income               407       453       489       487
Noninterest expense            1,510     1,670     1,685     1,924
Securities gains (losses)         50        86        --        --
                              ------    ------    ------    ------

Income before income taxes       846       855       926       709
Provision for income taxes       277       267       291       157
                              ------    ------    ------    ------
Net income                    $  569    $  588    $  635    $  552
                              ======    ======    ======    ======
Basic earnings per share      $ 1.24    $ 1.28    $ 1.39    $ 1.21
                              ======    ======    ======    ======
</TABLE>


                                       60

<PAGE>

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

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

ITEM 9A. CONTROLS AND PROCEDURES

     The Company's chief executive officer and chief financial officer have
     concluded that as of December 31, 2005, which is the end of the period
     covered by this Annual Report on Form 10-K, the Company's disclosure
     controls and procedures are adequate and effective for purposes of Rule
     13(a)-15(e) and timely, alerting them to material information relating to
     the Company required to be included in the Company's filings with the
     Securities and Exchange Commission under the Securities Exchange Act of
     1934.

     There have been no changes in the Company's internal controls over
     financial reporting in the fiscal quarter ended December 31, 2005, that
     have materially affected, or are reasonably likely to materially affect,
     our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

     None.


                                       61
<PAGE>

                                         PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table contains certain information, as of March 3, 2006, with
     respect to current directors, nominees for directors and certain officers
     of CNB.

<TABLE>
<CAPTION>
                                   DIRECTOR     PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
              NAME           AGE     SINCE             AND POSITION HELD WITH CNB
              ----           ---   --------   -------------------------------------------
<S>                          <C>   <C>        <C>
     Kenneth W. Apple         49     2003     Certified Public Accountant

     J. Robert Ayers          76     1974     Retired - President, Citizens National Bank

     John E. Barker           77     1972     Auto Sales - Service

     Margaret S. Bartles      51     2002     Realtor

     Jay E. Dick              53     1983     Retired - Manager-Hunters' Hardware, Inc.

     Herbert L. Eppinger      73     1979     Retired - Agriculture

     Robert L. Hawvermale     76     1967     Retired - Professional Engineer

     J. Philip Kesecker       76     1965     Real Estate Development

     Jerry McGraw             59     1988     Insurance

     Martha H. Quarantillo    46     1999     Pharmacist

     Thomas F. Rokisky        59     1993     President and Chief Executive Officer,
                                              CNB and Citizens National Bank

     Charles S. Trump IV      45     1986     Attorney at Law

     Arlie R. Yost            58     1988     Licensed Residential Appraiser
</TABLE>

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

     CNB's bylaws provide that the board of directors can set the number of
     directors but also provide that the board of directors must have no less
     than five nor more than 25 directors. The board of directors has set the
     number of directors to serve in 2006 at 13, which means that 13 directors
     will be elected at the 2006 Annual Meeting and will serve a term expiring
     at the next Annual Meeting or until a successor is selected.


                                            62

<PAGE>

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

<TABLE>
<CAPTION>
                              AGE AS OF
                              MARCH 20,
              NAME              2006                     POSITION AND EXPERIENCE DURING THE PAST 5 YEARS
              ----            ---------   ----------------------------------------------------------------------------
<S>                           <C>         <C>
     J. Philip Kesecker (1)       76      2000 to present - Chairman of the Board, CNB Financial Services, Inc.
                                          1987 to present - Chairman of the Board, Citizens National Bank

     Thomas F. Rokisky            59      2000 to present - President/CEO, CNB Financial Services, Inc.
                                          1996 to present - President/CEO, Citizens National Bank
                                          1990 to 1996 - Executive Vice President/COO, Citizens National Bank

     Rebecca S. Stotler           45      2000 to present - Vice President/CFO, CNB Financial Services, Inc.
                                          1999 to present - Vice President/CFO, Citizens National Bank
                                          1996 to 1999 - Vice President of Finance/Cashier, Citizens National Bank

     Patricia C. Muldoon          45      2003 to present - Senior Vice President/COO, Citizens National Bank
                                          2001 to 2003 - Vice President/COO, Citizens National Bank
                                          1999 to 2001 - Consultant/Audit Staff, Smith Elliott Kearns & Company, LLC
                                          1997 to 1999 - VP/Mgr of Accounting Operations and Financial Reporting
                                          Farmers and Mechanics National Bank
</TABLE>

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

     CNB's board of directors has determined that Kenneth W. Apple, CPA, meets
     the requirements of an audit committee financial expert as defined by the
     Securities and Exchange Commission. The board of directors believes that
     Mr. Apple has the following five attributes that qualify him as an audit
     committee financial expert. This director, through education and
     experience, has:

     -    An understanding of financial statements and generally accepted
          accounting principles;

     -    An ability to assess the general application of generally accepted
          accounting principles in connection with accounting for estimates,
          accruals and reserves;

     -    Some experience in preparing, auditing, analyzing and evaluating
          financial statements that present a level of complexity of accounting
          issues comparable to the breadth of issues that could reasonably be
          expected to be presented by CNB's financial statements;

     -    An understanding of internal controls; and

     -    An understanding of audit committee functions.

     Mr. Apple acquired these attributes through his Bachelor of Science degree
     from Shepherd College in Shepherdstown, West Virginia, and over 20 years of
     experience in public accounting, including auditing.

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


                                            63
<PAGE>

     CODES OF ETHICS

     Both CNB and the Bank have adopted Codes of Ethics as defined by the rules
     of the SEC. The Code of Ethics applies to all of CNB's and the Bank's
     directors, officers, including the Bank's Chief Executive Officer and Chief
     Financial Officer, and employees. Additionally, CNB and the Bank have
     adopted a Code of Ethics for Senior Financial Officers. The codes of ethics
     for all employees and for senior financial officers of CNB and the Bank
     have been filed as an exhibit to this Annual Report on Form 10-K. If CNB or
     the Bank makes substantive amendments to the Code of Ethics or the Code of
     Ethics for Senior Financial Officers or grants any waiver, including any
     implicit waiver, that applies to any director or executive officer of CNB
     or the Bank, it will disclose the nature of such amendment or waiver on the
     website or in a report on Form 8-K in accordance with applicable SEC rules.

ITEM 11. EXECUTIVE COMPENSATION

     The table below reflects information concerning the annual compensation for
     services in all capacities to the corporation for the fiscal years ended
     December 31, 2005, 2004 and 2003, of those persons who were, as of December
     31, 2005, (a) the chief executive officer, and (b) the four other most
     highly compensated executive officers to the extent that such persons,
     total annual salary and bonus exceeded $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                   OTHER ANNUAL
        NAME AND PRINCIPAL POSITION     YEAR    SALARY    BONUS    COMPENSATION
        ---------------------------     ----   --------   -----   --------------
<S>                                     <C>    <C>        <C>     <C>
     Thomas F. Rokisky, President/CEO   2005   $126,592    $-0-   $22,845 (1)(2)
                                        2004   $121,380    $-0-   $22,071 (1)(2)
                                        2003   $108,330    $-0-   $20,172 (1)(2)
</TABLE>

     (1) CNB's group life and health insurance program, which is paid for by
     CNB, is made available to all full-time employees. Effective January 1,
     2005, the bank changed its health insurance program to a high deductible
     plan and concurrently established health reimbursement accounts for each
     employee on the plan. The bank funded $750 for each participant in 2005. In
     accordance with IRS Code Section 79, the cost of group life insurance
     coverage for an individual in excess of $50,000 is added to the
     individual's earnings and is included in salary. Also included in this
     figure are board fees earned and the corporation's contributions to the
     individual's 401(k) retirement savings program to which the individual has
     a vested interest.

     (2) CNB's contributions to the pension plan, a defined benefit plan, are
     not and cannot be calculated separately for specific participants.
     Contributions for the plan year of $285,150, $249,348 and $245,755 were
     made by CNB in 2005, 2004 and 2003, respectively.

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

     CNB maintains a non-contributory defined benefit pension plan with employer
     contributions being based on a pension formula, which targets a certain
     monthly benefit for each plan participant at retirement. This pension plan
     is a qualified retirement plan and is available to all full-time employees,
     including officers, who meet the eligibility requirements. Directors do not
     participate in this plan.

     The pension plan is integrated with social security and is applicable to
     all participants. Pensions for all participants are based on an average of
     the highest five-years compensation. Annual compensation for the pension
     plan is defined as the total cash remuneration reportable on the employee's
     IRS form W-2, plus pre-tax contributions to employee benefit plans. The
     formula for determining the annual pension benefit is 2.0 percent of the
     5-year average compensation multiplied by years of service up to a 25-year
     maximum effective for the plan year beginning November 1, 2004.

     The pension benefits are payable to participants on a monthly basis in the
     form of a joint and 50 percent survivor annuity for all married
     participants who do not elect otherwise, or in the form of a single life
     annuity for all other participants or survivors. Joint and 100 percent
     survivorship, single life annuity or 120 payments guaranteed are other
     optional forms of distribution. The normal retirement date for employees is
     the later of the participant's 65th birthday, or the fifth anniversary of
     the participant joining the plan. An employee must be at least 21 years of
     age and have one full year of service to become a plan participant. Full
     vesting in accumulated plan benefits occurs at the end of five years of
     service; there is no partial vesting. For the 2005 plan year, the employer
     contribution for all


                                       64

<PAGE>

     plan participants was $285,150. Estimated credited years of service and the
     compensation covered by the plan for each of the individuals named in the
     Summary Compensation Table are as follows: Mr. Rokisky, 15, and $126,592.

     The following table represents the normal pension, beginning at age
     sixty-five, based upon assumed final pay and years of credited service:

<TABLE>
<CAPTION>
                                Pension Plan Table
                    -----------------------------------------
                                  Annual Benefits
                    -----------------------------------------
                     10 yrs.    15 yrs.    20 yrs.    25 yrs.
        Assumed     Credited   Credited   Credited   Credited
     Remuneration    Service    Service    Service    Service
     ------------   --------   --------   --------   --------
<S>                 <C>        <C>        <C>        <C>
       $ 80,000      $16,000    $24,000    $32,000    $40,000
         90,000       18,000     27,000     36,000     45,000
        100,000       20,000     30,000     40,000     50,000
        110,000       22,000     33,000     44,000     55,000
        120,000       24,000     36,000     48,000     60,000
        130,000       26,000     39,000     52,000     65,000
</TABLE>

     Directors receive $150 for each board meeting of the bank they attend, $150
     for each discount committee meeting and $75 for other committee meetings
     they attend. There is no compensation for attendance at CNB board meetings.
     In addition, each director receives a fee of $6,000 per year. The chairman
     of the board receives an additional $3,500 per year and the vice chairman
     receives an additional $1,000 per year. Other than the deferred
     compensation/supplemental insurance plan described below, there are no
     other special arrangements with any directors. In 2005, the board of
     directors of CNB received $178,375, in the aggregate, for all board of
     directors' meetings attended and all fees paid.

     CNB maintains a deferred compensation/supplemental insurance plan for
     directors pursuant to which a director may elect to defer receipt of a
     portion of fees for board meetings for at least four years or until he
     reaches age 65, whichever is later. An amount equal to fees waived in
     addition to interest at an annual rate of 10% per year will be paid to each
     participating director or his designated beneficiary during a period of 10
     years after the director reaches age 65. The payments after retirement will
     be paid from the general funds of CNB. CNB purchases and is the beneficiary
     of insurance on the lives of participants, the proceeds of which are used
     to help recover the net after-tax cost of the benefits and insurance
     premiums paid. Funds from the deferred fees of a participating director
     will be used to reimburse CNB for the costs of the premium for the
     insurance policies. The cost of the insurance premiums in 2005 was $58,822.
     At December 31, 2005, these policies had a net accumulated cash value of
     $1,279,690.

     Effective January 2, 2004, CNB entered into a nonqualified supplemental
     retirement benefit agreement with the President which when fully vested
     would pay the President or his beneficiary an amount of $30,000 per year
     for 10 years beginning June 11, 2011, if he retires on or after May 29,
     2011. Termination of employment prior to that date other than by reasons of
     death or disability will result in a reduced benefit. Contributions to the
     plan charged to operations during 2005 amounted to $32,641. The benefits to
     be provided by this plan are not being funded by current resources.

     The personnel (compensation) committee of the board of directors has
     furnished the following report on executive compensation.

          The committee establishes the compensation for the Chief Executive
          Officer of CNB and the bank and reviews all personnel related issues
          including salary administration related to other employees and benefit
          programs. The CEO establishes compensation levels for all other
          personnel which are reviewed by the personnel committee. Committee
          objectives include administration of a total compensation package that
          allows CNB to attract and retain qualified persons to fill key
          executive positions and to utilize effective


                                       65

<PAGE>

          compensation programs which are directly related to executive officers
          accomplishing corporate goals and objectives, both operational and
          financial, aimed at achieving lasting improvement in CNB's long-term
          financial performance.

          The committee and the CEO utilize human resources' staff, and, as
          appropriate, other qualified consultants to review compensation
          practices as they compare to industry norms.

          The committee utilizes an internal salary administration plan for the
          basis of its analysis of compensation levels throughout CNB, including
          the CEO. The plan includes job descriptions for all positions and
          considers the overall responsibility of each position based on
          characteristics including, job knowledge, problem-solving,
          accountability, human relations, communications, supervision of others
          and marketing. Salary ranges for each position are developed based on
          market information available for similar positions at financial
          institutions both in the communities where CNB does business and
          outside its market area. Salary surveys utilized include those
          provided by the West Virginia Bankers Association, Topnet, Cumberland
          Valley Chapter of the Society for Human Resources Management and
          Business and Legal Reports, Inc. These results are updated annually by
          the human resources staff using current market data which reflects
          marketplace changes, inflation, and, if applicable, corporate
          performance. This information is considered by the committee.

          The individual components of CNB's compensation program include:

     (a)  Base Salary. Base salary levels are established for the CEO primarily
          based upon evaluation of the historical performance, degree of
          responsibility, level of experience and number of years with CNB. In
          addition, the committee considers compensation data available for
          similar positions in financial institutions in the same geographic
          area.

          With respect to the base salary granted to Mr. Rokisky for the year
          2005, the committee took into account the performance during 2004 and
          information referred to above. Particular emphasis was placed on Mr.
          Rokisky's individual performance, including his leadership role
          through a period of continued growth, and CNB's continued strong
          financial performance.

     (b)  Annual Incentives/Bonuses. Bonuses are not granted to senior officers
          as a regular component of compensation. Contributions to the 401(k)
          plan on behalf of all employees who defer into the plan are based on
          bank performance as a percentage of assets.

          The committee believes that the total compensation awarded to the CEO
          and other officers of CNB is consistent with the committee's
          objectives. The amounts paid to individual executives are consistent
          with competition within the market and with banks of similar size as
          reflected by individual performance of each executive, and are
          rationally linked with the fulfillment of corporate objectives and
          corporate financial performance.

          This report shall not be deemed to be incorporated by reference into
          any filing under the Securities Act of 1933 or the Securities Exchange
          Act of 1934, unless the company specifically incorporates this report
          by reference. It will not otherwise be filed under such Acts.

          The report is submitted by the compensation committee which consists
          of the following individuals:

               Jay E. Dick, Personnel Committee Chairman
               Charles S. Trump IV, Personnel Committee Member
               Robert L. Hawvermale, Personnel Committee Member
               Herbert L. Eppinger, Personnel Committee Member
               J. Robert Ayers, Personnel Committee Member

          March 1, 2006

     The following graph compares the yearly percentage change in CNB's
     cumulative total shareholder return on common stock for the five-year
     period ending December 31, 2005, with the cumulative total return of the
     Hemscott Index (SIC Code Index 6712-Bank Holding Companies). Shareholders
     may obtain a copy of the index by calling Hemscott, Inc., at telephone
     number (804) 775-8118. There is no assurance that CNB's stock performance
     will continue in the future with the same or similar trends as depicted in
     the graph.


                                       66

<PAGE>

     The information used to determine CNB's cumulative total shareholder return
     on its common stock is based upon information furnished to CNB or the bank
     by one or more parties involved in purchases or sales of CNB's common
     stock. There is no public market for CNB's common stock and share prices
     used to determine CNB's cumulative shareholder return are based upon
     sporadic trading activity in privately negotiated transactions. We have not
     attempted to verify or determine the accuracy of the representations made
     to CNB or the bank.

                         COMPARE CUMULATIVE T0TAL RETURN
                      AMONG CNB FINANCIAL SERVICES, INC.,
                       HEMSCOTT INDEX AND SIC CODE INDEX

                              (PERFORMANCE GRAPH)

<TABLE>
<CAPTION>
                                2000     2001     2002     2003     2004     2005
                               ------   ------   ------   ------   ------   ------
<S>                            <C>      <C>      <C>      <C>      <C>      <C>
CNB FINANCIAL SERVICES, INC.   100.00    74.08    83.09   108.95   109.69   132.80
SIC CODE INDEX                 100.00   145.56   176.26   236.26   271.19   270.19
HEMSCOTT INDEX                 100.00    88.54    70.33    93.63   105.02   112.46
</TABLE>

                     ASSUMES $100 INVESTED ON DEC. 31, 2000
                          ASSUMES DIVIDEND REINVESTED
                        FISCAL YEAR ENDING DEC. 31, 2005

     SIC Code Index is SIC 6712 Bank Holding Companies

     Hemscott Index is Hemscott Financial Information Composite Market Value
     Index

     This graph shall not be deemed to be incorporated by reference in to any
     filing under the Securities Act of 1933 or the Securities Exchange Act of
     1934, unless the company specifically incorporates this report by
     reference. It will not otherwise by filed under such Acts.


                                       67
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT

     The following table sets forth information as of February 21, 2006,
     relating to the beneficial ownership of the common stock by (a) each person
     or group known by CNB to own beneficially more than 5% of the outstanding
     common stock; (b) each of CNB's directors; and (c) all directors and
     executive officers of CNB as a group. Unless otherwise noted below, the
     persons named in the table have sole investment power with respect to each
     of the shares reported as beneficially owned by such person.

<TABLE>
<CAPTION>
                                                      NUMBER OF   PERCENT OF
     NAME AND ADDRESS                                   SHARES     CLASS (1)
     ----------------                                 ---------   ----------
<S>                                                   <C>         <C>
     Kenneth W. Apple                                    1,450           *
     J. Robert Ayers (2)                                 1,915           *
     John E. Barker (3)                                 18,162        3.97
     Margaret S. Bartles (4)                               200           *
     Jay E. Dick (5)                                    15,691        3.43
     Herbert L. Eppinger (6)                             2,870           *
     Robert L. Hawvermale (7)                            3,730           *
     J. Philip Kesecker (8)                             13,632        2.98
     Jerald McGraw (9)                                   1,514           *
     Martha H. Quarantillo                                 400           *
     Thomas F. Rokisky (10)                              1,544           *
     Charles S. Trump IV (11)                           11,410        2.49
     Arlie R. Yost (12)                                  2,210           *
     All directors and executive officers
        as a group (18 persons)                         75,116       16.18
     D. Louise Stotler and Deborah Dhayer
        RR 6 Box 12460, Berkeley Springs, WV, 25411     47,488       10.37
     Mary Lou Trump
        RR 7 Box 12840, Berkeley Springs, WV, 25411     53,470       11.67
</TABLE>

*    Indicates holdings of less than 1%.

(1)  Includes shares of common stock held by the named individual as of February
     21, 2006.

(2)  Includes 1,000 shares held in an Individual Retirement Account.

(3)  Includes 1,815 shares held jointly with spouse.

(4)  Includes 14,300 shares held jointly with spouse and 3,562 shares held
     jointly with children.

(5)  Includes 100 shares held jointly with spouse.

(6)  Includes 15,591 shares held jointly with spouse.

(7)  Includes 2,770 shares held jointly with spouse.

(8)  Includes 1,200 shares held by spouse and 100 shares held jointly with
     spouse.

(9)  Includes 3,098 shares held by spouse and 1,860 shares held jointly with
     spouse and 350 held in an educational trust.

(10) Includes 110 shares held by spouse and 964 shares held jointly with spouse.

(11) Includes 1,425 shares held in an Individual Retirement Account.

(12) Includes 842 shares held by spouse and 300 shares held as custodian for
     children.

(13) Includes 1,770 shares held jointly with spouse.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     CNB has had and intends to continue to have banking and financial
     transactions in the ordinary course of business with directors and
     executive officers of CNB and their associates. Total loans outstanding
     from CNB at December 31, 2005, to CNB's officers and directors as a group
     and members of their immediate families and companies in which they had an
     ownership interest of 10% or more was $2,066,153, or approximately 10.9% of
     total equity capital. These loans do not involve more than the normal risk
     of collectibility or present other unfavorable features. These loans were
     made in the ordinary course of business and were made on substantially the
     same terms, including interest rates and collateral, as those prevailing at
     the time for comparable transactions with other persons.


                                       68

<PAGE>

     Trump and Trump, in which director Charles S. Trump, IV is a partner,
     performed legal services for CNB and the bank. Fees paid by CNB and the
     bank to that law firm were $40,214 during 2005.

     CNB, Charles S. Trump, IV and George I. McVey are members in a Limited
     Liability Company, Morgan County Title Insurance Agency, LLC, which was
     formed in February 2001. Morgan County Title Insurance Agency, LLC, paid
     Trump and Trump management fees of $29,400. Charles S. Trump, IV and George
     I. McVey are partners in Trump and Trump.

ITEM 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES

     The following fees were paid by CNB and the bank to Smith Elliott Kearns &
     Company, LLC:

<TABLE>
<CAPTION>
                                2005      2004
                              -------   -------
<S>                           <C>       <C>
     Audit Fees               $59,100   $52,400
     Audit-Related Fees (a)       900     1,795
     Tax Fees (b)               8,650     4,600
     All Other Fees (c)         8,100     4,995
</TABLE>

     (a)  Principally consultation about the application of accounting
          principles to specific transactions and consultation about internal
          control matters.

     (b)  Principally tax compliance services (including federal and state
          returns).

     (c)  Principally consultation related to tax depreciation and agreed upon
          procedures related to the trust department.

     The audit committee charter requires that the audit committee pre-approve
     all audit and non-audit services to be provided to the company by the
     independent accountants; provided, however, that the audit committee has
     specifically authorized its chairman to pre-approve the provision of any
     non-audit service to the company. Further, the foregoing pre-approval
     policies may be waived, with respect to the provision of any non-audit
     services consistent with the exceptions for federal securities law. All of
     the services described above for which Smith Elliott Kearns & Company, LLC
     billed the company for the fiscal year ended December 31, 2005, were
     pre-approved by the company's audit committee. For the fiscal year ended
     December 31, 2005, the company's audit committee did not waive the
     pre-approval requirement of any non-audit services to be provided to CNB by
     Smith Elliott Kearns & Company, LLC.


                                       69

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  1.   Financial Statements

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

     2.   Financial Statement Schedules

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

     3.   Exhibits

<TABLE>
<S>              <C>
          2.2    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.

          14     Code of Ethics filed as an exhibit hereto.

          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 2002

          31.2   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 2002

          32.1   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 2002

          32.2   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
</TABLE>

(b)  See (a) 3 above.

(c)  See (a) 1 and 2 above.


                                       70

<PAGE>

                                   SIGNATURES

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

CNB Financial Services, Inc.
(Registrant)


Date March 30, 2006                     /s/ Thomas F. Rokisky
                                        ----------------------------------------
                                        Thomas F. Rokisky, President/CEO


Date March 30, 2006                     /s/ Rebecca S. Stotler
                                        ----------------------------------------
                                        Rebecca S. Stotler, Vice President/CFO
                                        (Principal Financial and
                                        Accounting Officer)


                                       71

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities indicated on the 23th March 2006.

<TABLE>
<CAPTION>
              Signatures                           Title
              ----------                           -----
<S>                                     <C>


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


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


/s/ Kenneth W. Apple                    Director
-------------------------------------
KENNETH W. APPLE


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


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


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


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


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


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


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


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


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


/s/ Arlie R. Yost                       Director
-------------------------------------
ARLIE R. YOST
</TABLE>


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