CBFC CNB Financial Services Inc (CE)

CNB Financial Services, Inc.
Stock Comparison Chart
Characteristic		Common		Common A		Common B
Voting Rights		Full voting rights		As required by law and for a Merger/Share Exchange		As required by law and for a Merger/Share Exchange
Dividends		As declared		10% premium over CNB Common Stock dividends with payment before all other shares		20% premium over CNB Common Stock dividends
Liquidation Preference		Last Preference		Priority over all others Distribution — same as CNB Common Stock or book value of common, whichever is greater		After Class A Common Stock but before CNB Common Stock
Conversion to Common Stock		N/A		Conversion to CNB Common Stock at change in control		Conversion to CNB Common Stock at change in control
Transfer Restrictions		No		Yes — Holding Company has right of first refusal		Yes — Holding Company has right of first refusal
Redemption		None		None		None

EFFECTS OF THE MERGER

EFFECTS ON CNB . The merger will have various effects on CNB, as described below.

REDUCTION IN THE NUMBER OF COMMON STOCK SHAREHOLDERS AND COMMON STOCK SHARES OUTSTANDING . CNB believes the merger will reduce the number of shareholders owning the Company’s existing CNB Common Stock from approximately 653 to approximately 237. Accordingly, the number of outstanding shares of Common Stock held by current Company shareholders will decrease from approximately 441,348 to approximately 426,208.

INCREASE IN THE NUMBER OF SHAREHOLDERS OWNING CLASS A COMMON STOCK SHARES . The Company currently has no issued or outstanding Class A Common Stock shares. CNB believes the merger will result in the issuance of approximately 15,140 Class A Common Stock shares to approximately 416 shareholders.

NO CHANGE TO COMPANY CAPITAL . It is not expected the merger will change the Company’s consolidated capital. The merger is simply a reorganization that will result in certain shares of the Company’s existing CNB Common Stock being reclassified into the right to receive the newly created Class A Common Stock on a one-share-for-one-share exchange basis. The Company may experience a reduction in capital if Company shareholders exercise their right to dissent from the transaction.

TERMINATION OF EXCHANGE ACT REGISTRATION . The Company is currently required to comply with SEC reporting requirements pursuant to Section 12(g) of the 1934 Act. According to Rule 12g-4, Section 12(g)

filers may terminate their obligation to comply with SEC reporting requirements if the number of shareholders owning the class of stock subject to the SEC reporting requirements is reduced to below 300 and no other class of stock is owned by more than 500 shareholders. Termination of the Company’s reporting requirements under the 1934 Act would substantially reduce the information required to be furnished by CNB to its shareholders and to the SEC and would make certain provisions of the 1934 Act no longer applicable to CNB. Accordingly, CNB estimates it will eliminate the cost and expenses associated with complying with SEC reporting requirements. CNB estimates these costs to be approximately $143,000 annually. CNB intends to apply for such termination as soon as practicable following completion of the merger.

EFFECT ON MARKET FOR SHARES . CNB’s Common Stock is not traded on the Over-the-Counter Bulletin Board or any exchange. Any trades are conducted through privately negotiated transactions.

The rights and privileges of the Class A Common Stock provide the Company a right of first refusal to purchase the shares in the event of a transfer of ownership. The Company expects, but is not required, to repurchase the Class A Common Stock shares in the event of a transfer of ownership. Therefore, it is not expected there will be a material trading market for the newly created Class A Common Stock shares. Instead, it is expected the Company will act as the market maker for these shares.

EFFECTS ON AFFILIATES . As a result of the merger, Merger Corp. will cease to exist. All affiliated shareholders will be treated in the same manner as all unaffiliated shareholders. Affiliated shareholders will not receive preferential treatment in any manner in this transaction. Therefore, the transaction’s effects on affiliates will be the same as the effects on unaffiliated shareholders. As used in this proxy statement, the term “affiliated shareholder” means any person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with CNB. The term “unaffiliated shareholder” means any shareholder other than an affiliated shareholder.

INCREASED SHARE OWNERSHIP OF OFFICERS AND DIRECTORS . As a result of the merger, CNB expects that the percentage of ownership of CNB Common Stock held by current officers and directors of CNB as a group will increase from 15.96% to approximately 16.50%.

EFFECTS ON SHAREHOLDERS . The merger will have various effects on the Company’s shareholders, as described below. As noted above, these effects will not vary based on whether the shareholder is an affiliated or unaffiliated shareholder. Affiliated and unaffiliated shareholders will be treated the same in this transaction. The effects of the merger to a shareholder will vary based on whether the shareholder’s shares will be exchanged for newly created Class A Common Stock shares as a result of the merger. The determination of whether any particular shares of CNB Common Stock will be exchanged for newly created Class A Common Stock Shares as a result of the merger will be based on whether the holder of those shares holds, in the aggregate, fewer than 150 shares at the effective time of the merger.

•

SHAREHOLDERS RECEIVING CLASS A COMMON STOCK. Shareholders owning, in the aggregate, less than 150 shares of CNB Common Stock at the effective time of the merger will, upon consummation of the merger:

	•		have each CNB Common Stock share be converted into the right to receive newly created Class A Common Stock shares on a one-share-for-one-share exchange basis; and
	•		enjoy all the rights and privileges associated with the newly created Class A Common Stock.

•

SHAREHOLDERS RETAINING COMMON STOCK SHARES. Shareholders owning, in the aggregate, 150 or more CNB Common Stock shares immediately prior to the effective time of the merger will, upon consummation of the merger, retain their CNB Common Stock shares without change.

•

Potential effects on all shareholders, including both affiliated and unaffiliated shareholders, following the merger transaction include:

	•		DECREASED ACCESS TO INFORMATION. If the merger is effected, CNB intends to terminate the reporting requirements of its Common Stock under the 1934 Act. As a result, CNB will no longer be subject to the periodic reporting requirements of the 1934 Act.
	•		DIVIDENDS. CNB currently intends to continue to declare and pay cash dividends on its CNB Common Stock in the foreseeable future. You should read the discussion under “PROPOSAL TWO — Dividend Policies” for more information regarding CNB’s dividend policies and the effects of the merger on CNB’s payment of dividends.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

Summarized below are the material federal income tax consequences to CNB and its shareholders resulting from the merger. This summary is based on existing U.S. federal income tax law, which may change, even retroactively. This summary does not discuss all aspects of federal income taxation which may be important to you in light of your individual circumstances. Many shareholders (such as financial institutions, insurance companies, broker-dealers, tax-exempt organizations, and foreign persons) may be subject to special tax rules. Other shareholders may also be subject to special tax rules, including but not limited to shareholders who received CNB Common Stock as compensation for services. In addition, this summary does not discuss any state, local, foreign, or other tax considerations.

This summary assumes that you are one of the following: (1) a citizen or resident of the United States; (2) a corporation or other entity taxable as a corporation created or organized under U.S. law (federal or state); (3) an estate the income of which is subject to U.S. federal income taxation regardless of its sources; (4) a trust if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or (5) any other person whose worldwide income and gain is otherwise subject to U.S. federal income taxation on a net basis. This summary also assumes that you have held and will continue to hold your shares as capital assets for investment purposes under the Internal Revenue Code of 1986, as amended.

For federal income tax purposes, it is intended that neither CNB nor Merger Corp. will recognize gain or loss for federal or state income tax purposes as a result of the merger.

SHAREHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES, IN LIGHT OF THEIR SPECIFIC CIRCUMSTANCES.

FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS WHO HOLD, IN THE AGGREGATE, 150 OR MORE COMMON STOCK SHARES OF COMPANY STOCK AT THE EFFECTIVE TIME OF THE TRANSACTION

If you (1) hold, in the aggregate, 150 or more CNB Common Stock shares at the effective time of the merger, (2) continue to hold CNB Common Stock immediately after the merger, and (3) receive no cash as a result of your dissent from the merger, you will not recognize any gain or loss in the merger and you will have the same adjusted tax basis and holding period in your CNB Common Stock as you had in such stock immediately prior to the merger.

FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS WHO HOLD, IN THE AGGREGATE, LESS THAN 150 COMMON STOCK SHARES OF COMPANY STOCK AT THE EFFECTIVE TIME OF TRANSACTION

If you (1) hold, in the aggregate, less than 150 shares of CNB Common Stock at the effective time of the merger, (2) have your existing CNB Common Stock converted into the right to receive Class A Common Stock, (3) exchange your existing CNB Common Stock for shares of newly created Class A Common Stock on a one-

share-for-one-share exchange basis, and (4) do not receive cash as a result of your dissent from the merger, you will not recognize any gain or loss in the merger and you will have the same adjusted tax basis and holding period in your CNB Common Stock as you had in such stock immediately prior to the merger.

FEDERAL INCOME TAX CONSEQUENCES TO ANY SHAREHOLDER WHO DISSENTS FROM THE TRANSACTION

Any shareholder who dissents from the transaction and receives in cash the fair value of their shares will have a taxable event. These shareholders should consult their individual tax advisor to determine whether the shares qualify for capital gains treatment and the other specific information related to their situation.

YOU ARE URGED TO CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF THE TRANSACTION, IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.

CAPITAL GAIN AND LOSS

For those individuals who may choose to dissent from the transaction and instead receive the fair value in cash for their CNB Common Stock shares, net capital gain (defined generally as your total capital gains in excess of capital losses for the year) recognized upon the sale of capital assets that have been held for more than 12 months generally will be subject to tax at a rate not to exceed 20%. Net capital gain recognized from the sale of capital assets that have been held for 12 months or less will continue to be subject to tax at ordinary income tax rates. In addition, capital gain recognized by a corporate taxpayer will continue to be subject to tax at the ordinary income tax rates applicable to corporations. There are limitations on the deductibility of capital losses.

BACKUP WITHHOLDING

Shareholders who dissent from the transaction and instead receive in cash the fair value for their shares and those shareholders who exchange their CNB Common Stock shares for Class A Common Stock may be required to provide their social security or other taxpayer identification numbers (or, in some instances, additional information) in connection with the merger to avoid backup withholding requirements that might otherwise apply. The letter of transmittal that is used to submit CNB Common Stock share certificates will require each shareholder to deliver such information when the CNB Common Stock certificates are surrendered following the effective date of the merger. Failure to provide such information may result in backup withholding.

AS EXPLAINED ABOVE, ANY AMOUNTS PAID TO YOU AS A RESULT OF THE MERGER MAY RESULT IN CAPITAL GAIN INCOME, DEPENDING ON YOUR INDIVIDUAL CIRCUMSTANCES. THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO CHANGE POSSIBLY WITH RETROACTIVE EFFECT. YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF THE TRANSACTION, IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.

RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE AMENDMENT AND MERGER PROPOSAL

The Board believes the amendment and the merger agreement, taken as a whole, is fair to, and in the best interests of, CNB and its shareholders, including unaffiliated shareholders. The Board believes the transaction is fair to those shareholders who will retain their CNB Common Stock shares, and to those shareholders whose CNB Common Stock shares will be converted into the right to receive Class A Common Stock shares on a one-for-one share basis. The Board also believes that the process by which the transaction is to be approved is fair.

The Board recommends that the shareholders vote for approval and adoption of the amendment and the merger agreement as described in this document. Each member of the Board and each officer of CNB who owns shares of CNB Common Stock has advised CNB that he intends to vote his shares in favor of the amendment and merger agreement. As of October 7, 2010, the directors and officers of CNB beneficially owned a total of 70,439 shares of CNB Common stock, or approximately 15.96% of the total shares entitled to vote at the Special Meeting.

The Board has retained for itself the absolute authority to reject (and not implement) the amendment and the merger agreement (even after approval thereof by shareholders) if it determines subsequently that the amendment and/or the merger agreement is not then in the best interests of CNB and its shareholders. A Board decision to terminate the transaction would occur only after the occurrence of some material event after the mailing of these proxy materials and would be based upon full Board deliberation regarding the benefits and detriments of both completing and terminating the transaction in light of such an event. The Board’s deliberations would include discussions as to the effects on all shareholders, including affiliated and unaffiliated shareholders, of abandoning the transaction. Such a termination would occur only by a majority vote of the Board of Directors. If the Board chose to terminate the transaction following shareholder approval, all shareholders would be notified by a Company letter describing the reasons for the termination and the Company’s filing of a Form 8-K with the SEC. It is not expected the Board will choose to terminate the transaction following shareholder approval.

The Board unanimously approved the amendment and the merger agreement.

The Board considered a number of factors in determining whether to approve the merger agreement. CNB’s primary reason for adopting the amendment and the merger agreement is that, following the effective time of the transaction, the Company will be able to terminate its SEC reporting requirements. The Board considered the views of management relating to cost savings to be achieved by terminating the registration requirements of the CNB Common Stock under the 1934 Act. CNB’s management determined that cost savings of approximately $143,000 per year could be achieved if CNB terminated its SEC reporting obligations imposed by the 1934 Act, including indirect savings resulting from reductions in the time and effort currently required of management to comply with the reporting and other requirements associated with continued reporting of the CNB Common Stock under the 1934 Act. The Board also considered the effect that terminating the reporting requirements of the CNB Common Stock would have on the market for the CNB Common Stock and the ability of shareholders to buy and sell shares, as well as the market for the newly created Class A Common Stock. The Board determined that, even as a publicly-traded corporation, there is a limited market for the shares of the CNB Common Stock, especially for sales of large blocks of such shares, and that CNB’s shareholders derive little benefit from CNB’s status as an SEC reporting company. The Board determined that the cost savings and reduced burden on management to be achieved by terminating the Company’s reporting requirements on the CNB Common Stock under the 1934 Act outweighed any potential detriment from terminating such reporting requirements.

The Board considered numerous factors, discussed below, in reaching its conclusion as to the fairness of the amendment and merger agreement to our shareholders, including both affiliated and unaffiliated shareholders. The Board also engaged the services of a financial adviser to provide an opinion as to the fairness of the transaction, from a financial point of view, to the Company’s shareholders who will retain their CNB Common Stock, and the Company’s shareholders who will exchange their CNB Common Stock for newly created Class A Common Stock on a one-share-for-one-share exchange basis. The Board did not assign any specific weights to the factors listed below. Moreover, in their considerations, individual directors may have given differing weights to different factors.

	•		BURDEN OF SEC REPORTING REQUIREMENTS — The Board considered the time and expense involved in preparing and filing the documents the Company is required to file with the SEC pursuant to Section 12(g) of the Exchange Act. In considering this burden, the Board considered both the actual money expended on the preparation and filing of the documents, as well as the time Company officers and directors spent in preparing the required documentation.
	•		LACK OF PERCEIVED BENEFIT FROM REPORTING COMPANY STATUS — The Board considered the benefits afforded to the Company by reason of its reporting Company status. The directors considered both the information that was made publicly available through the SEC filings, as well as what information would be available to shareholders following the termination of the SEC reporting requirements, which include quarterly call reports for CNB’s subsidiary bank and biannual bank holding company financial reports for the Company. Following the termination of the Company’s SEC reporting requirements, the Company’s obligation to file these quarterly and biannual financial reports will continue under Federal banking laws. In addition, the Company’s Board of Directors has indicated the Company will continue to produce an annual report to shareholders, which will contain information similar to the information currently disclosed in the Company’s quarterly and annual SEC reports. Based on this review, the Board

felt the cost and time associated with preparing the SEC filings was not justified, based on the Company information that would still be publicly available following the suspension of the reporting requirements.

	•		RIGHTS AND PRIVILEGES OF NEWLY CREATED CLASS A COMMON STOCK — The Board considered the rights and privileges of the newly created Class A Common Stock. The Board considered the voting rights, dividend preferences, conversion rights, redemption rights, right of first refusal in favor of the Company, and the liquidation preference of the newly created Class A Common Stock and the Class B Common Stock. After reviewing the rights and privileges of the newly created classes, the Board felt the rights and privileges of the Class A Common Stock and Class B Common Stock presented rights and privileges that were commensurate with the rights and privileges of the existing CNB Common Stock.
	•		FAIRNESS TO ALL SHAREHOLDERS — The Board considered the overall fairness of the transaction to both those shareholders retaining their existing CNB Common Stock and those shareholders who will have their CNB Common Stock converted into the right to receive Class A Common Stock on a one-share-for-one-share exchange basis. The Board also considered the fairness of the transaction procedure.
	•		OPINION OF FINANCIAL ADVISOR. The Board considered the opinion of Howe Barnes Hoefer & Arnett rendered to the Board on June 24, 2010 to the effect of, as of the date of such opinion and based upon and subject to certain matters stated therein, the terms of the merger agreement providing for certain Company shareholders to retain their CNB Common Stock shares and certain Company shareholders to exchange their CNB Common Stock shares for newly created Class A Common Stock shares, was fair, from a financial point of view, to CNB’s shareholders, including affiliated and unaffiliated shareholders.

In connection with its deliberations, the Board did not consider CNB’s current market prices, historical market prices, net book value, going concern value or liquidation value. The Board did not view the Company’s current or historical stock prices or book, going concern or liquidation values to be material to the determination of fairness to the shareholders because the terms of the merger agreement provide each Company shareholder the ability retain an ongoing equity interest in Company. The Company’s Board of Directors recognized those shareholders exchanging their Common Shares would be doing so for other equity securities, as opposed to cash. Thus, the various cash values described above were not deemed to be material to the determination of fairness.

In accordance with the West Virginia Business Corporation Act, the amendment and the merger agreement require the approval at least a majority of the shares entitled to vote at the Special Meeting of Shareholders. Neither the amendment nor the merger agreement requires a separate majority approval from the unaffiliated shareholders. This separate majority approval is not required because the West Virginia Business Corporation Act does not require such a separate approval and the Company’s directors do not believe such a separate approval is required to make the transaction procedurally fair. The Company’s Board of Directors believes the transaction to be procedurally fair to all shareholders based on the compliance of the transaction with the West Virginia Business Corporation Act and the ability for each shareholder to dissent from the transaction.

The Company’s directors unanimously approved the amendment and the merger agreement. Accordingly, a majority of the Company’s directors who are not employees of the Company voted in favor of the transaction. The Company directors who are not Company employees have not retained an unaffiliated representative to act solely on behalf of the unaffiliated security holders for purposes of negotiating the amendment or merger agreement and/or preparing a report concerning the fairness of the transaction. An unaffiliated representative to act solely on behalf of the unaffiliated shareholders was not appointed because the West Virginia Business Corporation Act does not require such an appointment and the Company’s directors do not believe such a representative is required to make the transaction procedurally fair. The Company’s Board of Directors believes the transaction to be procedurally fair to all shareholders based on the compliance of the transaction with the West Virginia Business Corporation Act and the ability for each shareholder to dissent from the transaction.

Affiliated security holders will have access to the Company’s corporate files only as allowed by applicable West Virginia law. Further, unaffiliated shareholders shall not have the right to obtain counsel or appraisal services at the Company’s expense.

No firm offers, other than in conjunction with the merger, of which the Board is aware have been made by an unaffiliated person during the preceding two years for (i) the merger or consolidation of CNB into or with such person, (ii) the sale or other transfer of all or any substantial part of the assets of CNB, or (iii) the purchase of a number of shares of CNB Common Stock that would enable the holder thereof to exercise control of CNB.

After consideration of all this information, the Board determined that the amendment and the merger agreement, which provides for the shares held by those shareholders who hold, in the aggregate, 150 or more CNB Common Stock shares to remain as existing CNB Common Stock shares, and those shares held by any shareholder who holds, in the aggregate, less than 150 shares to be converted into the right to receive the newly created Class A Common Stock on a one-share-for-one-share exchange basis to be fair to and in the best interest of the Company’s shareholders.

OPINION OF FINANCIAL ADVISOR

CNB engaged Howe Barnes Hoefer & Arnett (“Howe Barnes”) to issue a fairness opinion in connection with the merger. The Company’s Board of Directors engaged Howe Barnes to determine whether the exchange of the Company’s Class A Common Stock, the terms of which were set by the Board of Directors prior to the engagement of Howe Barnes, were fair, from a financial point of view, to the Company’s shareholders. Howe Barnes is a full service brokerage firm that specializes in preparing and issuing fairness opinions. The Company engaged Howe Barnes following a review of multiple proposals for the engagement based on their reputation and prior experience in evaluating similar transactions. Howe Barnes’ fee for preparing and issuing the opinion was approximately $16,000.

Howe Barnes’ fairness opinion sets forth the terms of the transaction, including the rights and privileges of the newly created Class A Common Stock, discloses the various items Howe Barnes relied upon in forming the fairness opinion, which include discussions with Company representatives, the merger agreement, audited and unaudited Company financial statements, Company financial forecasts and projections, (including the 2010 budget, securities portfolio report, listing of OREO and fixed assets, loan watch list and assumed asset growth and profitability rates), historical Company stock activity and financial performance, similar transactions and other relevant information, and indicates the merger agreement and the actions related thereto are fair, from a financial point of view, to all Company shareholders. The report will be available to the Company’s shareholders and any shareholder representative who has been so designated in writing for inspection and copying at the Company’s principal executive offices during its regular business hours up to the time of the Company’s special meeting of shareholders.

As described in its opinion, Howe Barnes assumed and relied upon, without independent verification, the accuracy, completeness and fairness of the information furnished to or otherwise reviewed by Howe Barnes for purposes of their opinion. With respect to the information relating to the prospects of CNB, Howe Barnes assumed that such information reflected the best currently available judgments and estimates of the management of CNB as to the likely future financial performance of CNB. Howe Barnes did not verify through independent inspection or examination the specific assets or liabilities of CNB. Howe Barnes did not make nor were they provided with an independent evaluation or appraisal of the assets or liabilities of CNB.

The full text of the written opinion of Howe Barnes dated June 29, 2010, which set forth the assumptions made, matters considered and limitations of the review undertaken, is attached as Annex C hereto and is incorporated herein by reference. Howe Barnes’ opinion is directed to the Board, addresses only the fairness from a financial point of view of the transaction, and does not constitute a recommendation to any shareholder as to how such shareholder should vote. The Company’s Board of Directors expressly adopts the fairness opinion as its own.

In rendering its fairness opinion, Howe Barnes presented to the Company’s Board of Directors a Documentation Report Relating to the Fairness of the Proposed Merger of CNB Financial Services, Inc. With and Into CNB Merger Corp. (“Fairness Report”). This report contains a description of the assignment, which explains the Company engaged Howe Barnes to determine whether the terms of the proposed merger of the Company with and into CNB Merger Corp. with the Company being the surviving corporation pursuant to the merger agreement are fair to the shareholders of CNB from a financial point of view.

The Fairness Report also discusses the terms of the transaction, which provide all CNB Common Stock shares held by any shareholder who holds, in the aggregate 150 or more CNB Common Stock shares will remain CNB Common Stock shares and CNB Common Stock shares held by any shareholder who holds, in the aggregate, less than 150 CNB Common Stock shares will be converted into the right to receive CNB Class A Common Stock on a one-share-for-one-share exchange basis and discusses the Class A Common Stock rights and privileges, which were set by the Company’s Board of Directors, not Howe Barnes.

The Fairness Report details 20 selected going private transactions (the “Guideline Transactions”) announced from June 30, 2005 to June 18, 2010 involving U.S. banking organizations. Howe Barnes reviewed the terms of the transactions and the characteristics of the new classes of common stock and preferred stocks for those transactions and compared them with the terms of the merger and the newly created Class A Common Stock. The Fairness Report finds the dividend premium for the new classifications of common and preferred stocks from the 20 Guideline Transactions ranged from 0 to 10%. In this transaction, the Class A Common Stock will receive a 10% premium on the dividends paid to holders of Class A Common Stock, which falls within the range of values in the Guidelines Transactions, which, according to the Fairness Report, supports the fairness of the transaction.

In addition to reviewing the Guideline Transactions, the fairness opinion includes an analysis of the Company’s historical financial performance for the years 2006 through 2009 and through March 31, 2010.

In forming the fairness opinion, Howe Barnes reviewed and relied upon a number of Company documents, reports, budgets, growth assumptions, and other similar information. The information requested by and provided to Howe Barnes is described below.

	•		Howe Barnes requested a list of all shareholders owning more than 5% of the Company’s outstanding common shares. The Company has two shareholders that own more than 5% of the Company’s outstanding common shares.
	•		Howe Barnes requested and was provided with a copy of the Company’s December 31, 2009 holding company Y-9 report. Howe Barnes also requested and was provided with a copy of the Bank’s March 31, 2010 Report of Condition and Income (Bank “Call Report”). Both of these reports are available online at www.ffiec.gov .
	•		Howe Barnes requested and was provided with a copy of the Company’s 2009 Annual Report. Copies of the Company’s 2009 Annual Report were previously provided to Company shareholders and are available online at www.sec.gov .
	•		Howe Barnes requested and was provided with a copy of the Company’s 2010 budget prepared by the Company’s officers for the Company’s Board of Directors. The budget was originally approved by the Company’s Board of Directors on February 18, 2010 and updated in July, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s security portfolio schedule showing the book value and fair market values and maturity for each of the Company’s securities as of March 31, 2010. This information is summarized in the Company’s Call Report as of the same date.
	•		Howe Barnes requested and was provided a listing of the stated book value and fair market or assessed value of the Company’s fixed assets and other real estate owned as of March 31, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s loan watch list as of March 31, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s loan loss reserve adequacy calculation as of March 31, 2010.
	•		Howe Barnes requested information relating to the Company’s expected asset growth rate, return on assets, and cash dividend payout rate for the years 2010 through 2014. The information provided to Howe Barnes in response to such request is set forth below.

		Asset Growth Rate				Return on Assets				Cash Dividend Payout Rate
2010			2.20	%			0.75	%			30.00	%
2011			5.00	%			0.80	%			30.00	%
2012			5.00	%			0.85	%			30.00	%
2013			7.00	%			0.95	%			30.00	%
2014			7.00	%			1.00	%			30.00	%

The information below presents projected financial information for CNB for 2010, including the projected Balance Sheet and Income Statement, as per CNB’s budget.

BALANCE SHEET

		December 2010 Budget
ASSETS
Total Cash		$	1,918,268
Total Cash Items			1,155
Total Due from Banks			2,469,775
Total Cash/Due from Banks			4,389,198
Total Investments			81,007,908
Total Real Estate Loans			123,504,407
Total Commercial Real Estate Loans			42,269,949
Total Consumer Loans			15,305,207
Total Commercial Loans			8,187,730
Total Loans in Process			418,859
Total Net Deferred Fees			398,867
Gross Loans			190,085,019
Allowance for Loan Losses			(5,077,094	)
Net Loans			185,007,925
Total Premises and Equipment			5,722,026
Other Real Estate Owned			391,667
Total Interest Receivable Investment			578,693
Total Interest Receivable Loan			791,327
Total Taxes Receivable			(6,015	)
Total Deferred Fees			1,897,637
Total Prepaids			1,320,185
Other Assets			1,575,500
Total Other Assets			6,157,327
TOTAL ASSETS		$	282,676,051
LIABILITIES
Total Deposits		$	249,401,018
Borrowed Funds			—
Total Interest Payable			1,057,550
Total Taxes Payable			205,604
Total Payroll Taxes Payable			413
Total Miscellaneous Payable			353,573
Total Other Payable Loans			91,628
Total Other Payables Employees			4,399,391
Total Other Liabilities			6,108,159
Total Equity Capital			27,166,874
TOTAL LIABILITIES AND EQUITY		$	282,676,051

INCOME STATEMENT

		December 2010 Budget
INTEREST INCOME
Total Investment Income		$	2,967,897
Total Real Estate Loan Income			7,801,215
Total Commercial Real Estate Loan Income			2,439,728
Total Consumer Loan Income			1,385,663
Total Commercial Loan Income			282,692
Total Loan Income			11,909,298
TOTAL INTEREST INCOME		$	14,877,195
INTEREST EXPENSE
Total Deposit Expense		$	4,800,721
Total Borrowed Funds Expense			30,402
TOTAL INTEREST EXPENSE		$	4,831,123
NET INTEREST INCOME		$	10,046,072
TOTAL NON-INTEREST INCOME		$	2,240,655
TOTAL NON-INTEREST EXPENSE		$	8,606,593
PROVISION FOR LOAN LOSSES		$	1,820,000
INCOME BEFORE TAX		$	1,860,134
NET TAXES AND ADJUSTMENTS			285,030
NET INCOME		$	1,575,104

The original 2010 budget was completed in early January 2010. In July 2010, a revised second half 2010 budget was developed to incorporate new business and economic trends in CNB’s market area. Earnings projections for the last six months of 2010 are expected to be impacted by the continued slowing in CNB’s loan demand and poor economic conditions. CNB is anticipating an additional expense of approximately $990,000 to the provision for loan losses for the last six months of 2010 due to the continued foreclosure activity, increased number of impaired loans and loans with weaknesses. Another significant factor affecting the 2010 net income are increased expenses related to the FDIC insurance regular assessment. The Federal Reserve amended Regulation E to require financial institutions to obtain a specific opt-in consent from customers in order for the institution to be able to pay into overdraft and charge an overdraft fee whenever a customer’s ATM transactions and one-time debit card transactions, such as point of sale transactions, cause an account to go into overdraft. This amendment will have an impact on CNB’s overdraft fee income in 2010. The passage of the interchange act by Congress in July 2010 will have an impact on CNB’s ATM and debit card interchange fee income in 2010.

In conducting its review and arriving at its opinion, Howe Barnes relied upon and assumed the accuracy and completeness of the financial and other information provided to it, or made publicly available, and has not assumed any responsibility for independent verification of the same. In performing the fairness opinion, Howe Barnes relied upon the management of CNB as to the reasonableness of the financial and operating forecast and projections (and the assumption and bases therefor) provided. Howe Barnes has assumed that such forecasts and projections reflect the best currently available estimates and judgment of the management of CNB. Howe Barnes did not make or obtain any evaluations or appraisals of the assets or liabilities of CNB.

Based on the projected cost savings from terminating SEC reporting obligations, which are assumed to be approximately $143,000 annually, the comparative analysis with the Guideline Transactions and, assuming the accuracy and completeness of the information and data provided to Howe Barnes by CNB, Howe Barnes is of the opinion that, as of the date of the fairness opinion, the terms of the proposed transactions are fair to the shareholders of CNB, from a financial point of view. The Company’s Board of Directors expressly adopts the fairness opinion as its own.

YOU ARE ENCOURAGED TO READ THE HOWE BARNES FAIRNESS OPINION AND FAIRNESS REPORT IN THEIR ENTIRETY. THE FULL TEXT OF THE HOWE BARNES OPINION AND REPORT ARE ATTACHED AS ANNEX C TO THIS PROXY STATEMENT.

SUMMARY FINANCIAL INFORMATION

SUMMARY HISTORICAL FINANCIAL INFORMATION OF CNB

The following summary historical consolidated financial data for CNB for the fiscal years ended December 31, 2007, 2008 and 2009, was derived from the audited consolidated financial statements of CNB. The unaudited historical consolidated financial data of CNB as of and for the six months ended June 30, 2009 and 2010 was derived from CNB’s unaudited interim consolidated financial statements which, in the opinion of management of CNB, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the financial data for such periods. The income statement data for the six months ended June 30, 2010 is not necessarily indicative of results for a full year. This financial information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of CNB and the notes thereto included in our 2009 Annual Report to Shareholders and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and the “Selected Historical Financial Data” included elsewhere in this proxy statement.

		YEAR ENDED												SIX MONTHS ENDED
		DECEMBER 31,												JUNE 30,
		2009				2008				2007				2010				2009
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)														(unaudited)
CONSOLIDATED INCOME STATEMENT DATA:
Total interest income		$	15,642			$	16,996			$	17,201			$	7,504			$	7,870
Total interest expense			5,412				6,307				7,725				2,458				2,689
Net interest income			10,230				10,688				9,476				5,046				5,181
Income before income taxes			2,715				4,022				3,695				991				1,615
Income tax expense			566				1,307				1,191				142				470
Net Income			2,150				2,715				2,504				850				1,145
PER SHARE INFORMATION:
Net Income			4.82				6.01				5.48				1.92				2.56
Cash Dividends			1.55				1.90				1.69				.53				.53
CONSOLIDATED BALANCE SHEET DATA:
Total assets		$	289,498			$	282,257			$	290,415			$	282,821			$	289,498
Shareholders’ equity			25,630				23,218				22,821				26,704				25,630
Tier 1 capital			8.8	%			8.6	%			7.7	%			9.3	%			9.0	%
RATIO OF EARNINGS TO FIXED CHARGES*:			1.60				1.64				1.48				1.40				1.50

PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The CNB Common Stock 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. The prices listed below are based upon information available to management through discussions with shareholders, and to management’s knowledge, 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:

		HIGH				LOW				CASH
		TRADE				TRADE				DIVIDENDS
		PRICE				PRICE				DECLARED
2008
First Quarter		$	80.00			$	65.00			$
Second Quarter			67.00				65.50				0.53
Third Quarter			63.50				63.50
Fourth Quarter			63.85				49.40				1.37
2009
First Quarter		$	66.00			$	47.00			$
Second Quarter			60.00				44.50				0.53
Third Quarter			46.70				46.70
Fourth Quarter			46.60				45.25				1.02
2010
First Quarter			47.00				47.00				0.00
Second Quarter			51.50				49.50				0.53

As of October 7, 2010, the Company had approximately 653 shareholders, including registered holders and beneficial owners of shares held in street name.

As a bank holding company, the Company’s ability to pay dividends will depend upon the dividends it receives from CNB Bank, Inc. (“Bank”), the holding company’s sole subsidiary. Also, the ability of the Company to pay dividends depends on the extent of any Company obligations, such as debt service and whether the Company is current with any debt service obligations and not in default with the terms of any loan agreement. The Company’s ability to pay dividends is also restricted by federal and state banking regulations and, in particular, the Company’s obligation to act as a source of strength to its wholly owned subsidiary bank.

As the sole Bank shareholder, the Company is entitled to dividends as may be declared by the Board of Directors of the Bank out of funds legally available for dividends. The future dividend policies of the Bank, however, are subject to the discretion of the Board of Directors of the Bank and will depend upon such factors as future earnings, financial condition, cash needs, capital adequacy, compliance with applicable statutory and regulatory requirements and general business conditions. West Virginia state law allows a bank’s board of directors to declare a dividend of so much of the Bank’s net profits as they shall judge expedient, except that until the surplus fund of such banking institution equals its common stock, no dividends shall be declared unless there has been carried to the surplus fund not less than 10% of the Bank’s net profits of the preceding half year in the case of quarterly or semi-annual dividends, or not less than 10% of the Bank’s net profits of the preceding two consecutive half-years in the case of annual dividends. Further, West Virginia state law requires approval of the State Banking Commissioner before a bank may declare dividends which exceed the total of its net profits of that year, combined with its retained net profits of the preceding two years. As of January 1, 2010, CNB had $5,744,000 available for dividends.

On August 23, 2007, the Board of Directors approved a stock repurchase program to repurchase issued shares of common stock of CNB. Management is authorized to repurchase up to 45,504 shares or 10% of the outstanding shares of CNB’s Common Stock at the prevailing fair market value. Below is a listing of the shares repurchased during the past two years (by quarter) and information relating to the repurchase price of those shares.

		Total Number of
Period		Shares Purchased				Range of Prices				Average Purchase Price
2008
First Quarter			—				—				—
Second Quarter			3,900			$	65.50 — $66.00			$	65.87
Third Quarter			820				63.50 — 63.85				63.64
Fourth Quarter			1,078				49.40 — 50.00				49.93
2009
First Quarter			1,753			$	47.00 — $50.00			$	47.34
Second Quarter			1,550				44.50 — 48.50				45.56
Third Quarter			400				46.70				46.70
Fourth Quarter			1,800				45.25 — 46.60				45.70
2010
First Quarter			844				$47.00			$	47.00
Second Quarter			1,456				49.50 —  51.50				50.25

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

“FORWARD LOOKING STATEMENTS” ARE THOSE STATEMENTS THAT DESCRIBE MANAGEMENT’S BELIEFS AND EXPECTATIONS ABOUT THE FUTURE. WE HAVE IDENTIFIED FORWARD-LOOKING STATEMENTS BY USING WORDS SUCH AS “ANTICIPATE,” “BELIEVE,” “COULD,” “ESTIMATE,” “MAY,” “EXPECT,” AND “INTEND.” ALTHOUGH WE BELIEVE THESE EXPECTATIONS ARE REASONABLE, OUR OPERATIONS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED IN THIS PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, THESE TYPES OF STATEMENTS MAY PROVE TO BE INCORRECT.

INTRODUCTION

GENERAL

The accompanying Proxy is solicited by and on behalf of the Board of Directors of CNB for use at the Special Meeting of Shareholders to be held on December 9, 2010, at the time and place and for the purposes set forth in the accompanying Notice and at any recess or adjournments thereof. The original solicitation will be made by mail. The total expense of such solicitation will be borne by CNB and will include reimbursement paid to brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding solicitation material regarding the meeting to beneficial owners. Further solicitation of Proxies may be made personally, electronically or by telephone following the original solicitation. All further solicitation will be by regular employees of CNB.

Any Proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted at the Special Meeting. Proxies may be revoked by delivering to Rebecca Stotler, CNB Bank, Inc., 101 South Washington Street, P. O. Box 130, Berkeley Springs, West Virginia 25411, a written notice of revocation bearing a later date than the Proxy, by duly executing and delivering a subsequently dated Proxy relating to the same shares or by attending the Special Meeting and voting in person (although attendance at the Special Meeting will not in and of itself constitute revocation of a Proxy).

All shares entitled to vote represented by a properly executed and unrevoked Proxy received in time for the meeting will be voted at the meeting in accordance with the instructions given, but in the absence of instructions to the contrary, such shares will be voted FOR the proposal to approve the merger agreement. Persons empowered as Proxies will also be empowered to vote in their discretion upon such other matters as may properly come before the meeting or any adjournment thereof, except that discretionary authority on the part of the Proxies will be limited to matters of which we did not have notice a reasonable time before our mailing of this Proxy Statement and the Proxy. The Proxy Statement and Proxy are being mailed to shareholders on or about November 5, 2010.

ANNUAL REPORT AND QUARTERLY REPORT

CNB’s Annual Report to Shareholders and 10-K for the fiscal year ended December 31, 2009, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 are available on www.sec.gov and upon request from CNB.

VOTING OF SHARES

Holders of record of CNB Common Stock at the close of business on October 15, 2010, the record date for those entitled to notice of the meeting, will be entitled to vote at the Special Meeting. The proposal to approve the amendment to the Company’s Articles of Incorporation and the proposal to approve the merger agreement must receive the affirmative vote of at least a majority of the shares of CNB entitled to vote at the special meeting of shareholders. With respect to any matter other than the approval of the merger agreement, the vote of the holders of a majority of the shares present or represented by proxy at the meeting and entitled to vote shall be the act of the shareholders, unless the vote of a different number is required by the West Virginia Business Corporation Act or Bylaws of CNB. As of October 7, 2010, there were 441,348 issued and outstanding shares of CNB Common Stock held of record by 653 shareholders.

The officers and directors of CNB together beneficially own approximately 15.96% of the outstanding CNB Common Stock. Each share of CNB Common Stock is entitled to one vote on the matters presented at the meeting. In accordance with the Company’s Articles of Incorporation, no cumulative voting shall be allowed.

QUORUM

A quorum for the transaction of business at the Special Meeting consists of holders of a majority of the outstanding shares of CNB’s Common Stock, present in person or by proxy. In the event that less than a majority of the outstanding shares are present at the Special Meeting, either in person or by proxy, a majority of the shares so represented may vote to adjourn the Special Meeting from time to time without further notice, until a quorum shall be present or represented. Any proxies received that vote “Against” the amendment or the merger agreement will not be voted in favor of an adjournment.

Abstentions and broker non-votes (shares held by broker or nominee as to which a broker or nominee indicates on the proxy that it does not have the authority, either express or discretionary, to vote on a particular matter) are counted for the purpose of determining the presence or absence of a quorum at the Special Meeting. For all other matters, an abstention from voting and broker non-votes, since they are not affirmative votes, will have the same practical effect as a vote against the respective matters.

PROXIES

Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies with rubber stamped facsimile signatures may be used and unexecuted proxies may be counted upon receipt of a photographic, photo-static, facsimile or similar reproduction of an executed proxy from the shareholder. Proxies meeting these requirements submitted at any time prior to the votes being taken during the Special Meeting will be accepted.

COMPANY OFFICERS AND DIRECTORS

Set forth in the table below are the (i) name, (ii) address, (iii) current principal occupation or employment, and the name, principal business and address of any corporation or other organization in which the employment or occupation is conducted, and (iv) material occupations, positions, offices or employment during the past five years, and the name, principal business and address of any corporation or other organization in which the occupation, position, office or employment was carried on, of each of the Company’s directors and executive officers. None of the listed individuals was convicted in a criminal proceeding in the past five years (excluding traffic violations or similar misdemeanors) and was not a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each person identified below is a United States citizen. Unless otherwise noted, the principal business address of each person identified below is 101 South Washington Street, P. O. Box 130, Berkeley Springs, West Virginia 25411.

				Director		Principal Occupation for Past Five Years
Name		Age		Since		and Position Held with CNB
Jay E. Dick		57		1983		Retired — Manager — Hunters’ Hardware, Inc.,
29 Pendle Court						155 Independence Street, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411
Jerald McGraw		63		1988		Insurance — Smith Nadenbousch Insurance Agency,
PO Box 495						28 North Washington Street, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411
Thomas F. Rokisky		63		1993		President and Chief Executive Officer, CNB and CNB Bank, Inc.
Arlie R. Yost		62		1988		Licensed Residential Appraiser — Appraisal Services,
250 Spring Valley Drive						1809 Valley Road, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411
J. Robert Ayers		80		1974		Retired — President, Citizens National Bank (predecessor to
1187 Winchester Grade Road						CNB Bank, Inc.),
Berkeley Springs, WV 25411						101 South Washington Street, Berkeley Springs, WV 25411
John E. Barker		81		1972		Auto Sales-Service — Barker’s Auto Sales,
820 Fairview Drive						347 North Washington Street, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411
Herbert L. Eppinger		77		1979		Retired — Agriculture — Executive Director, Agricultural
40 Rockwell Court						Stabilization and Conservation Service, Farm Service Agency,
Berkeley Springs, WV 25411						1450-5 Edwin Miller Boulevard, Martinsburg, WV 25401
J. Philip Kesecker		80		1965		Real Estate Development — JPK, Inc.,
78 Fairfax Lane						PO Box 400, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411
Kenneth W. Apple		53		2003		Certified Public Accountant — Kenneth Apple, CPA,
71 Mohican Way						105 South Tennessee Avenue, Martinsburg, WV 25401
Falling Waters, WV 25419
Margaret S. Bartles		55		2002		Realtor — Long and Foster of West Virginia,
348 Miranda Court						976 Foxcroft Avenue, Martinsburg, WV 25401
Martinsburg, WV 25401
Martha H. Quarantillo		50		1999		Pharmacist — Reed’s Pharmacy,
94 Ironwood Drive						343 North Pennsylvania Avenue, Hancock, MD 21750
Berkeley Springs, WV 25411
Charles S. Trump IV		49		1986		Attorney at Law — Trump and Trump, LC,
491 Cacapon Road						171 South Washington Street, Berkeley Springs, WV 25411
Berkeley Springs, WV 25411

AFFILIATED PARTY BUSINESS RELATIONSHIPS

Management personnel of CNB have had and expect to continue to have banking transactions with CNB Bank, Inc. in the ordinary course of business. Extensions of credit to such persons are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. It is the opinion of management that these transactions do not involve more than a normal risk of collectability or present other unfavorable features.

As of September 30, 2010, outstanding loan balances to related parties totaled $2,512,310 or 9.1% of equity capital with unused lines of credit of $240,561 or .9% of the equity capital of CNB outstanding to these parties.

Other than loans originated in the normal course of business by the Bank, none of the directors, executive officers, five percent or more beneficial stockholders or their immediate family members have an interest or are involved in any transactions with CNB or the Bank in which the amount involved exceeds $120,000, or was not subject to the usual terms or conditions, or was not determined by competitive bids. Information related to loans granted to related parties in excess of $120,000 are set forth below. Similarly, no director, executive officer or five percent or more beneficial stockholder has an equity interest in excess of 10 percent in a business or professional entity that has made payments to or received payments from CNB or the Bank in 2009 for property or services which exceeds five percent of either party’s gross revenue.

As of June 8, 2010, the Company’s Directors have the following transactions with CNB Bank, Inc.: 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 $73,071 for year-to-date 2010 and $67,367 during 2009.

CONDUCT OF CNB’S BUSINESS AFTER THE MERGER

CNB expects its business and operations to continue as they are currently being conducted and, except as disclosed below, the amendment and merger agreement are not anticipated to have any effect upon the conduct of such business. The CNB Board believes the going-private transaction is consistent with CNB’s vision of maintaining an independent banking strategy. If the merger is consummated, those shares held by any shareholder who holds, in the aggregate, 150 or more CNB Common Stock shares will remain as existing CNB Common Stock, and those shares held by any shareholder who holds, in the aggregate, less than 150 CNB Common Stock shares will have their shares converted into the right to receive the newly created Class A Common Stock on a one-share-for-one-share exchange basis. All shareholders (except those shareholders who may choose to dissent from the transaction) will retain an equity interest in, and will be shareholders of, CNB, and will participate in its future potential or earnings and growth, subject to the rights and privileges of each class of stock.

If the amendment and the merger agreement are effected, CNB believes that, based on CNB’s shareholder records, approximately 237 record shareholders will remain as CNB Common Stock shareholders, and approximately 416 record shareholders will have their shares converted into the right to receive the newly created Class A Common Stock. In addition, individuals who are currently members of the Board of Directors and of management of CNB now owning approximately 15.96% of the CNB Common Stock will own approximately 16.50% of the CNB Common Stock after the merger.

CNB plans, as a result of the merger, to terminate its SEC reporting obligations by filing the appropriate forms and documents with the Securities and Exchange Commission. Because the CNB Common Stock will no longer be subject to public company reporting requirements, CNB will be relieved of the obligation to file certain quarterly and annual documents required by the SEC. You should read the discussion under “The Effects of the Merger” for more discussion regarding the effects of CNB terminating its SEC reporting obligations. CNB estimates that termination of the Company’s reporting obligations under the 1934 Act will save CNB approximately $143,000 per year in legal, accounting and other expenses.

As stated throughout this Proxy Statement, CNB believes there are significant advantages in effecting the amendment and the merger agreement and the “going private” transaction. CNB plans to avail itself of any opportunities it may hereafter have as a non-SEC reporting company, including, but not limited to, making itself a more viable candidate with respect to and entering into a merger or acquisition transaction, making any public or private offering for its shares, or entering into any other arrangement or transaction as it may deem appropriate. Although management does not presently have an intent to enter into any such transaction nor is management currently in negotiations with respect to any such transaction, there is always a possibility that CNB may enter into such an arrangement or transaction in the future and the shareholders of CNB may receive payment for their shares in any such transaction. Such consideration may be lower than, equal to or in excess of any consideration that may be paid to shareholders in connection with the merger.

Other than as described in this Proxy Statement, neither CNB nor its management has any current plans or proposals to effect any extraordinary corporate transaction, such as a merger, reorganization or liquidation; to sell or transfer any material amount of its assets; to change its Board of Directors or management; to change materially its indebtedness or capitalization; or otherwise to effect any material change in its corporate structure or business.

OPINION OF FINANCIAL ADVISOR

CNB engaged Howe Barnes Hoefer & Arnett (“Howe Barnes”) to issue a fairness opinion in connection with the merger. The Company’s Board of Directors engaged Howe Barnes to determine whether the exchange of the Company’s Class A Common Stock, the terms of which were set by the Board of Directors prior to the engagement of Howe Barnes, were fair, from a financial point of view, to the Company’s shareholders. Howe Barnes is a full service brokerage firm that specializes in preparing and issuing fairness reports. The Company engaged Howe Barnes following a review of multiple proposals for the engagement based on their reputation and prior experience in evaluating similar transactions. Howe Barnes’ fee for preparing and issuing the opinion was approximately $16,000.

Howe Barnes’ fairness opinion sets forth the terms of the transaction, including the rights and privileges of the newly created Class A Common Stock, discloses the various items Howe Barnes relied upon in forming the fairness opinion, which include discussions with Company representatives, the merger agreement, audited and unaudited Company financial statements, Company financial forecasts and projections, (including the 2009 budget, securities portfolio report, listing of OREO and fixed assets, loan watch list and assumed asset growth and profitability rates) historical Company stock activity and financial performance, similar transactions and other relevant information, and indicates the merger agreement and the actions related thereto are fair, from a financial point of view, to all Company shareholders. In rendering its fairness opinion, Howe Barnes presented to the Company’s Board of Directors a Documentation Report relating to the Fairness of the Proposed Merger of CNB Financial Services, Inc. With and Into CNB Merger Corp.(“Fairness Report”). This report contains a description of the assignment, which explains the Company engaged Howe Barnes to determine whether the terms of the proposed merger of the Company with and into CNB Merger Corp. with the Company being the surviving corporation pursuant to the merger agreement, are fair to the shareholders of CNB from a financial point of view.

As described in its opinion, Howe Barnes assumed and relied upon, without independent verification, the accuracy, completeness and fairness of the information furnished to or otherwise reviewed by Howe Barnes for purposes of their opinion. With respect to the information relating to the prospects of CNB, Howe Barnes assumed that such information reflected the best currently available judgments and estimates of the management of CNB as to the likely future financial performance of CNB. Howe Barnes did not verify through independent inspection or examination the specific assets or liabilities of CNB. Howe Barnes did not make nor were they provided with an independent evaluation or appraisal of the assets or liabilities of CNB.

The full text of the written opinion of Howe Barnes dated June 29, 2010, which set forth the assumptions made, matters considered and limitations of the review undertaken, is attached as Annex C hereto and is incorporated herein by reference. Howe Barnes’ opinion is directed to the Board, addresses only the fairness from a financial point of view of the transaction, and does not constitute a recommendation to any shareholder as to how such shareholder should vote. The Company’s Board of Directors expressly adopts the Fairness Opinion as its own.

The Fairness Report also discusses the terms of the transaction, which provide all CNB Common Stock shares held by any shareholder who holds, in the aggregate 150 or more CNB Common Stock shares will remain CNB Common Stock shares and CNB Common Stock shares held by any shareholder who holds, in the aggregate, less than 150 CNB Common Stock shares will be converted into the right to receive CNB Class A Common Stock on a one-share-for-one-share exchange basis and discusses the Class A Common Stock rights and privileges, which were set by the Company’s Board of Directors, not Howe Barnes.

The Fairness Report details 20 selected going private transactions (the “Guideline Transactions”) announced from June 30, 2005 to June 18, 2010 involving U.S. banking organizations. Howe Barnes reviewed the terms of the transactions and the characteristics of the new classes of common stock and preferred stocks for those transactions and compared them with the terms of the merger and the newly created Class A Common Stock. The Report finds the dividend premium for the new classifications of common and preferred stocks from the 20 Guideline Transactions ranged from 0 to 10%. In this transaction, the Class A Common Stock will receive a 10% premium on the dividends paid to holders of Class A Common Stock, which falls within the range of values in the Guidelines Transactions, which, according to the Fairness Report, supports the fairness of the transaction.

In addition to reviewing the Guideline Transactions, the fairness opinion includes an analysis of the Company’s historical financial performance for the years 2006 through 2009 and through March 31, 2010.

	•		Howe Barnes requested a list of all shareholders owning more than 5% of the Company’s outstanding common shares. The Company has two shareholders that own more than 5% of the Company’s outstanding common shares.
	•		Howe Barnes requested and was provided with a copy of the Company’s 2009 Annual Report. Copies of the Company’s 2009 Annual Report were previously provided to Company shareholders and are available online at www.sec.gov and a copy is enclosed herewith.
	•		Howe Barnes requested and was provided with a copy of the Company’s 2010 budget prepared by the Company’s officers for the Company’s Board of Directors. The budget was originally approved by the Company’s Board of Directors on February 18, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s security portfolio schedule showing the book value and fair market values and maturity for each of the Company’s securities as of March 31, 2010. This information is summarized in the Company’s Call Report as of the same date.
	•		Howe Barnes requested and was provided a listing of the stated book value and fair market or assessed value of the Company’s fixed assets and other real estate owned as of March 31, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s loan watch list as of March 31, 2010.
	•		Howe Barnes requested and was provided a copy of the Company’s loan loss reserve adequacy calculation as of March 31, 2010.
	•		Howe Barnes requested information relating to the Company’s expected asset growth rate, return on assets, and cash dividend payout rate for the years 2010 through 2014. The information provided to Howe Barnes in response to such request is set forth below.

		Asset Growth Rate				Return on Assets				Cash Dividend Payout Rate
2010			2.20	%			0.75	%			30.00	%
2011			5.00	%			0.80	%			30.00	%
2012			5.00	%			0.85	%			30.00	%
2013			7.00	%			0.95	%			30.00	%
2014			7.00	%			1.00	%			30.00	%

In conducting its review and arriving at its opinion, Howe Barnes relied upon and assumed the accuracy and completeness of the financial and other information provided to it, or made publicly available, and has not assumed any responsibility for independent verification of the same. In performing the Fairness Opinion, Howe Barnes relied upon the management of CNB as to the reasonableness of the financial and operating forecast and projections (and the assumption and bases therefor) provided. Howe Barnes has assumed that such forecasts and projections reflect the best currently available estimates and judgment of the management of CNB. Howe Barnes did not make or obtain any evaluations or appraisals of the assets or liabilities of CNB.

Based on the projected cost savings from terminating SEC reporting obligations, which are assumed to be approximately $143,000 annually, the comparative analysis with the Guideline Transactions and, assuming the accuracy and completeness of the information and data provided to Howe Barnes by CNB, Howe Barnes is of the opinion that, as of the date of the Fairness Report, the terms of the proposed transactions are fair to the shareholders of CNB, from a financial point of view. The Company’s Board of Directors expressly adopts the Fairness Report as its own.

YOU ARE ENCOURAGED TO READ THE HOWE BARNES FAIRNESS OPINION AND FAIRNESS REPORT IN THEIR ENTIRETY. THE FULL TEXT OF THE HOWE BARNES FAIRNESS OPINION AND REPORT ARE ATTACHED AS ANNEX C TO THIS PROXY STATEMENT.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based upon information received by CNB upon request from the persons concerned, each person known by CNB to be the beneficial owner of more than five percent of CNB’s Common Stock, each director, named executive officer and all directors and executive officers of CNB as a group, owned beneficially as of October 7, 2010, the number and percentage of outstanding shares indicated in the following table:

Name and Address		Number of Shares				Percent of Class (1)
Kenneth W. Apple (2)(14)			1,850				*0.42
J. Robert Ayers (3)(14)			1,415				*0.32
John E. Barker (4)(14)			18,394				4.17
Margaret S. Bartles (5)(14)			300				*0.07
Jay E. Dick (6)(14)			15,691				3.56
Herbert L. Eppinger (7)(14)			2,870				0.65
J. Philip Kesecker (8)(14)			13,146				2.98
Jerald McGraw (9)(14)			1,454				*0.33
Martha H. Quarantillo (14)			400				*0.09
Thomas F. Rokisky (10)(14)			1,580				*0.36
Charles S. Trump IV (11)(14)			10,910				2.47
Arlie R. Yost (12)(14)			2,230				*0.51
Rebecca S. Stotler (13)(14)			199				*0.05
All directors and executive officers as a group (13 persons) (14)			70,439				15.96
Deborah Dhayer, 3077 Valley Road, Berkeley Springs, WV 25411			44,810				10.15
Mary Lou Trump, 298 Grove Heights, Berkeley Springs, WV 25411			53,470				12.12

PROPOSAL ONE

APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION

SUMMARY

The Board of Directors of CNB adopted the amendment to the Company’s Articles of Incorporation on June 10, 2010. A copy of the amendment to the Articles of Incorporation is attached to this proxy statement as Annex A. It is expected the amendment to the Company’s Articles of Incorporation will be filed and will become effective shortly after shareholder approval of the amendment is obtained. Upon filing of the amendment, the Company’s Articles of Incorporation will be amended to authorize 5,000,000 shares of Class A Common Stock and 5,000,000 shares of Class B Common Stock. The Company’s existing 5,000,000 authorized shares of CNB Common Stock will remain unchanged. Both the Class A Common Stock and the Class B Common Stock will have distinct rights and privileges, which will allow the existing CNB Common Stock, the Class A Common Stock, and the Class B Common Stock to be viewed as separate classes of securities for SEC purposes. The amendment to the Articles of Incorporation requires the approval of the holders of at least a majority of shares entitled to vote at the special meeting.

REASONS FOR THE AMENDMENT

The primary reason for the amendment to the Articles of Incorporation is to authorize a Class A Common Stock which the Company can exchange for its existing CNB Common Stock following the effective date of the merger agreement. The Company’s Articles of Incorporation currently do not provide the Company with authorized Class A Common Stock shares that it could use to exchange for CNB Common Stock shares.

The amendment provides for the creation of a new Class B Common Stock so the Company will have the ability to sell or convert shares in the future, in the event the Company’s Board of Directors determines such a sale to be in the Company’s best interest. Authorizing the Class B Common Stock will allow the Company to have authorized but not issued a distinct class of securities which, if sold, would not result in the loss of the termination of the reporting obligations unless such class was held by more than 500 shareholders on January 1 of any year. No Class B Common Stock shares will be issued in connection with the transaction.

EFFECT ON SHAREHOLDERS

The amendment to the Articles of Incorporation will not have an immediate effect on the shareholders. The amendment will only serve to amend the Company’s Articles of Incorporation to provide for Class A Common Stock and Class B Common Stock. The amendment to the Articles of Incorporation will not change the number of authorized CNB Common Stock shares, which will remain at its current level of 5,000,000 shares.

EXISTING COMMON STOCK RIGHTS AND PRIVILEGES

Following the Effective Time of the amendment, the Company’s existing CNB Common Stock will continue to enjoy the same rights and privileges that are currently associated with the CNB Common Stock. These rights and privileges include:

	•		VOTING RIGHTS — The Company’s existing CNB Common Stock has full voting rights. All CNB Common Stock shareholders are entitled to vote on any and all matters that may come before a vote of the Company’s shareholders. This includes the right to participate in the annual election of directors.
	•		DIVIDENDS — The company’s existing CNB Common Stock is entitled to receive dividends as may be declared from time to time by the Company’s Board of Directors. The Company’s existing CNB Common Stock does not cumulate dividends, and there is no obligation on behalf of the Company’s Board of Directors to pay dividends on the CNB Common Stock.
	•		CONVERSION — Not applicable. The CNB Common Stock is not convertible to any other class of Company stock.

	•		REDEMPTION — The Company’s existing CNB Common Stock has no redemption features.
	•		RIGHT OF FIRST REFUSAL — The Company’s existing CNB Common Stock has no right of first refusals. The foregoing does not limit any Company shareholders from individually contracting such rights.
	•		LIQUIDATION PREFERENCE — The Company’s existing CNB Common Stock does not have a liquidation preference because there is currently only one class of Company Stock. Following the transaction, the existing CNB Common Stock will have last preference in Company liquidation rights.

CLASS A COMMON STOCK RIGHTS AND PRIVILEGES

The amendment provides the Class A Common Stock will have rights and privileges separate and distinct from the existing CNB Common Stock and the Class B Common Stock. The Class A Common Stock will enjoy the following rights and privileges:

	•		VOTING RIGHTS — The Class A Common Stock will be allowed voting rights only if the shareholders are being asked to approve a merger, consolidation, conversion, sale of assets other than in the regular course of business, voluntary dissolution of the corporation, or as required by law. The Class A Common Stock will not enjoy general voting rights, including the right to participate in the annual election of directors.
	•		DIVIDENDS — If the Company declares dividends, dividends must be paid on the Class A Common Stock before dividends may be paid on the existing CNB Common Stock. However, the Company shall be under no obligation to pay dividends, and dividends are not cumulative. If dividends are paid, the dividends paid on the Class A Common Stock will enjoy a 10% premium over and above what is paid on the CNB Common Stock.
	•		CONVERSION — In the event the Company is party to a merger, share exchange, sale of assets other than in the regular course of business, voluntary dissolution of the Company, or other change in control which will result in the merger, sale, dissolution or effective dissolution of the Company, the Class A Common Stock will be converted into CNB Common Stock shares and will be treated equally in all respects with the existing CNB Common Stock.
	•		REDEMPTION — The Class A Common Stock will have no redemption rights.
	•		RIGHT OF FIRST REFUSAL — The Class A Common Stock has a right of first refusal in favor of the Company. Generally, this right of first refusal requires a Class A Common Stock shareholder to notify the Company in writing of the terms of any transfer or sale of the Class A Common Stock. Following receipt of the written notice, the Company has five (5) business days to either request additional information regarding the sale or to immediately exercise its right of first refusal and purchase the shares of Class A Common Stock that are subject to the proposed transfer or sale upon the same terms as the proposed transfer or sale. If the transfer is to be made without consideration (i.e., a gift), the Company shall have the right to purchase the shares for an amount determined by the Board to be the fair value of the shares. The Company retains the right to not exercise its right of first refusal, which will allow the Class A Common Stock shareholder to sell or transfer the shares in accordance with the terms of the proposed transfer or offer. Any Class A Common Stock shares transferred in violation of the right of first refusal is void and of no effect and will not be recognized by the Company.
	•		LIQUIDATION PREFERENCE — The Class A Common Stock will have a liquidation preference over the existing CNB Common Stock and the Class B Common Stock. In the event of a liquidation, the Class A Common Stock shareholders will be entitled to receive liquidation assets equal to those assets received by the CNB Common Stock shareholders or the book value of CNB’s Common Stock, whichever is greater.

CLASS B COMMON STOCK RIGHTS AND PRIVILEGES

The amendment provides the Class B Common Stock will have rights and privileges separate and distinct from the existing CNB Common Stock and the Class A Common Stock. The Class B Common Stock will enjoy the following rights and privileges:

	•		VOTING RIGHTS — The Class B Common Stock will be allowed voting rights only if the shareholders are being asked to approve a merger, consolidation, conversion, sale of assets other than in the regular course of business, voluntary dissolution of the Company, or as required by law. The Class B Common Stock will not enjoy general voting rights, including the right to participate in the annual election of directors.
	•		DIVIDENDS — If the Company declares dividends, dividends must be paid on the Class B Common Stock after dividends are paid on the Class A Common Stock, but before dividends may be paid on the existing CNB Common Stock. However, there shall be no obligation to pay dividends and dividends shall not be cumulative. If dividends are paid, the dividends paid on the Class B Common Stock will enjoy a 20% premium over and above what is paid on the CNB Common Stock.
	•		CONVERSION — In the event the Company is party to a merger, share exchange, sale of assets other than in the regular course of business, voluntary dissolution of the corporation, or other change in control which will result in the merger, sale, dissolution or effective dissolution of the corporation, the Class B Common Stock will be converted into CNB Common Stock shares and will be treated equally in all respects with the existing CNB Common Stock.
	•		REDEMPTION — The Class B Common Stock will have no redemption rights.
	•		RIGHT OF FIRST REFUSAL — The Class B Common Stock has a right of first refusal in favor of the Company. Generally, this right of first refusal requires a Class B Common Stock shareholder to notify the Company in writing of the terms of any transfer or sale of the Class B Common Stock. Following receipt of the written notice, the Company has five (5) business days to either request additional information regarding the sale or to immediately exercise its right of first refusal and purchase the shares of Class B Common Stock that are subject to the proposed transfer or sale upon the same terms as the proposed transfer or sale. If the transfer is to be made without consideration (i.e. a gift), the Company shall have the right to purchase the shares for an amount determined by the Board to be the fair value of the shares. The Company retains the right to not exercise its right of first refusal, which will allow the Class B Common Stock shareholder to sell or transfer the shares in accordance with the terms of the proposed transfer or offer. Any Class B Common Stock shares transferred in violation of the right of first refusal will be void and of no effect and will not be recognized by the Company.
	•		LIQUIDATION PREFERENCE — The Class B Common Stock will have a liquidation preference superior to the existing CNB Common Stock, but after the Class A Common Stock.

CNB Financial Services, Inc. Stock Comparison Chart
Characteristic		Common		Common A		Common B
Voting Rights		Full voting rights		As required by law and for a Merger/Share Exchange		As required by law and for a Merger/Share Exchange
Dividends		As declared		10% premium over CNB Common Stock dividends with payment before all other shares		20% premium over CNB Common Stock dividends
Liquidation Preference		Last Preference		Priority over all others Distribution — same as common or book value of CNB Common Stock, whichever is greater		After Class A Common Stock but before CNB Common Stock
Conversion to CNB Common Stock		N/A		Conversion to CNB Common Stock at change in control		Conversion to CNB Common Stock at change in control
Transfer Restrictions		No		Yes — Holding Company has right of first refusal		Yes — Holding Company has right of first refusal
Redemption		None		None		None

PROPOSAL TWO

APPROVAL OF THE AGREEMENT OF MERGER

SUMMARY

The Board of Directors of CNB adopted the Agreement of Merger with CNB Merger Corp. on June 10, 2010. CNB Merger Corp.’s Board of Directors adopted the Agreement of Merger on June 10, 2010. A copy of the merger agreement as adopted is attached to this proxy statement as Annex B. Both CNB and Merger Corp. will execute the merger agreement and file it, along with Articles of Merger, with the West Virginia Secretary of State, shortly after the merger agreement is approved by CNB shareholders (“Effective Time”). At the Effective Time, CNB’s Common Stock held by any shareholder who holds, in the aggregate, 150 or more CNB Common Stock shares of CNB Common Stock will retain its status as CNB Common Stock. At the Effective Time, all shares held by any shareholder who holds, in the aggregate, less than 150 shares of CNB Common Stock will be converted into the right to receive newly created Class A Common Stock on a one-share-for-one-share exchange basis. The merger agreement requires the approval of the holders of at least a majority of the shares entitled to vote at the Special Meeting. All shareholders have the right to dissent from the transaction in accordance with the West Virginia Business Corporation Act. See “Dissenters’ and Appraisal Rights” on page 42.

SHAREHOLDER RIGHTS TO PURCHASE ADDITIONAL SHARES

All Company shareholders have the right to purchase additional shares of the Company Stock which are already issued and outstanding to increase their share ownership to more than 150 shares and retain their existing CNB Common Stock. Any shareholders wishing to purchase such shares so they may retain their common stock are encouraged to complete such a purchase prior to the Special Meeting of Shareholders to ensure their share purchase will be recorded on the Company’s transfer book prior to the effective time of the transaction. Shareholders purchasing additional Company shares after the Special Meeting of Shareholders are not assured such purchases will be recorded on the Company’s stock transfer books prior to the Effective Time. The number of shares attributable to each shareholder will be determined by the Company’s transfer book at the effective time of the transaction.

ESTABLISHING SHARE OWNERSHIP

According to the terms of the merger agreement, CNB has the right to assume those shareholders owning fewer than 150 record shares hold, in the aggregate, less than 150 shares total. However, shareholders have the right to prove to the Company that the shareholder’s total share ownership, aggregating both record shares and shares held in another capacity (such as in a trust, IRA or objecting beneficial owner account) exceeds 150 shares. Company shareholders seeking to establish ownership of shares held in a capacity other than record ownership must prove their share ownership to the Company’s satisfaction by providing customary business records that establish the shareholder’s ownership of the non-record shares. These customary business records could include, but are not limited to, trust documents, IRA documents, a letter from a broker/dealer indicating share ownership or otherwise. These documents should be provided to the Company following the shareholder’s receipt of the Letter of Transmittal.

REASONS FOR THE MERGER

The primary reason for the merger is to terminate the Company’s reporting obligations imposed by Section 12(g) of the Exchange Act of 1934. CNB’s Board of Directors and management are of the view that the cost associated with maintaining the Company’s SEC reporting status is not justified by the benefits received from its status as an SEC reporting company. CNB also believes there is a very limited market for the shares of CNB’s Common Stock, especially for sales of large blocks of such shares, and that CNB’s shareholders derive little benefit from CNB’s status as a publicly-held corporation.

THE PARTIES

	•		CNB is a West Virginia corporation and registered bank holding company.
	•		CNB Merger Corp. is a recently-formed West Virginia corporation organized for the sole purpose of the merger.
	•		Charles S. Trump IV is Chairman of the Board of both CNB Financial and the Bank.
	•		Thomas F. Rokisky is the President and Chief Executive Officer of both CNB and Merger Corp.
	•		The principal executive offices of both CNB and Merger Corp. are located at 101 S. Washington Street, P.O. Box 130, Berkeley Springs, West Virginia 25411.
	•		The telephone number for both CNB and CNB Merger Corp. is (304) 258-1520.

EFFECT ON SHAREHOLDERS

If approved at the Special Meeting, the merger agreement will affect CNB shareholders as follows after completion:

Shareholder as of Effective Time		Net Effect After Merger
Shareholders holding, in the aggregate, 150 or more shares of CNB Common Stock		Shares of CNB Common Stock will continue to be outstanding.
Shareholders holding, in the aggregate, less than 150 shares of CNB Common Stock		Shares of CNB Common Stock will be converted into the right to receive newly created Class A Common Stock on a one-share-for-one-share exchange basis.

As described below under “—The Merger Agreement—Conversion of Shares in the Merger,” the merger agreement contains specific provisions regarding the treatment of shares held in nominee form, or “street name”. In determining the number of shares held beneficially in street name by any shareholder, CNB may, in its discretion, rely on “no objection” lists provided by any nominee holder. Further, after the Effective Time, CNB will deliver to each shareholder who would appear to be entitled to exchange their existing CNB Common Stock for newly created Class A shares on a one-share-for-one-share exchange basis, a letter of transmittal requesting certain information from such shareholder and requiring the shareholder to certify as to the number of shares actually held, whether in registered form or in street name. Letters of transmittal will be delivered to any shareholder who (a) holds of record fewer than 150 shares, and (b) according to records made available to CNB from the nominee holder for any shares held in street name, holds fewer than 150 shares in street name or holds shares in street name which CNB is not provided by the nominee holder the number of shares so held.

REASONS FOR THE MERGER

CNB’s reason for the merger is to reduce the number of shareholders owning its existing CNB Common Stock to below 300 and restricting the number of shareholders owning its newly created Class A Common Stock to below 500, which will allow the Company to terminate its SEC reporting obligations under the Exchange Act of 1934.

The Board believes that the disadvantages of having CNB continue to be a reporting company outweigh any advantages. The Board has no present intention to acquire other business entities using stock as the consideration for any such acquisition. Accordingly, CNB is not likely to make use of any advantage that CNB’s status as a public company may offer.

CNB incurs direct and indirect costs associated with compliance with the SEC’s filing and reporting requirements imposed on public companies. CNB also incurs substantial indirect costs as a result of, among other things, the executive time expended to prepare and review such filings. Since CNB has relatively few executive personnel, these indirect costs can be substantial. CNB’s direct and indirect costs related to being a reporting company are estimated to approximate $143,000 annually as follows:

		Approximate
		Annual Costs
Independent Auditors		$	85,276
SEC Counsel			13,094
Printing and Mailing			11,483
Internal Costs			15,385
Other			—
Total		$	142,718

In light of these disproportionate costs, the Board believes that it is in the best interests of CNB and its shareholders as a whole to eliminate the administrative burden and costs associated with being a reporting company.

The Board has determined that the Agreement of Merger is the most expeditious and economical way of reducing the number of shareholders owning the CNB’s Common Stock to below 300 and having no other class of stock with more than 500 owners, which will allow the Company to terminate its SEC reporting obligations. You should read the discussion under “Special Factors — Recommendation of the Board of Directors; Fairness of the Merger Proposal” for more information regarding the Board’s reasons for the merger proposal.

The merger is structured to be a “going private” transaction as defined in Rule 13e-3 promulgated under the Exchange Act because it is intended to, and, if completed, will likely terminate CNB’s reporting requirements under Section 12(g) of the Exchange Act and will likely suspend CNB’s reporting obligations under Section 15(d) under the Exchange Act. In connection with the Merger Proposal, CNB has filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the SEC.

EFFECT OF THE MERGER PROPOSAL ON CNB SHAREHOLDERS

The merger will have various effects on the Company’s shareholders, as described below. The effects of the merger to a shareholder will vary based on whether all or any portion of the shareholder’s shares will be converted into the right to receive the newly created Class A Common Stock shares as a result of the merger. The determination of whether any particular shares of CNB Common Stock will be converted into the right to receive the newly created Class A Common Stock Shares as a result of the merger will be based on whether the holder of those shares holds, in the aggregate, fewer than 150 shares at the effective time of the merger.

EXCHANGE AND PAYMENT PROCEDURES

Following the Effective Time, CNB will mail to each shareholder entitled to exchange their share certificates for newly created Class A Common Stock, a letter of transmittal and instructions explaining how to exchange their share certificates for new share certificates. Upon surrender to CNB of valid share certificates (or lost stock affidavit, if appropriate) and properly completed letters of transmittal, along with such other documents as CNB may reasonably require, those shareholders holding, in the aggregate, less than 150 shares at the Effective Time will be entitled to receive newly created Class A Common Stock shares on a one-share-for-one-share exchange basis. Until surrendered in this manner, each stock certificate representing shares that have been converted into the right to receive Class A Common Stock, will represent only the right to receive the Class A Common Stock provided as consideration in the merger. No service charges will be payable by shareholders in connection with the exchange of certificates. All expenses will be borne by CNB.

YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER YOU RECEIVE A LETTER OF TRANSMITTAL FROM CNB. LETTERS OF TRANSMITTAL WILL BE MAILED SOON AFTER THE MERGER IS COMPLETED. A SAMPLE COPY OF THE LETTER OF TRANSMITTAL IS ATTACHED AS EXHIBIT E.

DISSENTERS’ AND APPRAISAL RIGHTS

CNB stockholders have the right to dissent from the merger in accordance with sections 31D-13-1301 et seq. of the West Virginia Business Corporation Act (“Article 13”). If the statutory procedures are complied with and the merger is consummated, dissenting holders would be entitled to receive cash equal to the “fair value” of the CNB Common Stock held by them. Such “fair value” is determined as of the day immediately preceding the special meeting. Any judicial determination of the fair value of the shares could be based upon considerations other than or in addition to the cash consideration payable in the merger and the market value of the shares, including asset values, the investment value of the CNB Common Stock and any other valuation considerations generally accepted in the investment community. The value so determined for dissenting shares could be more or less than the cash consideration payable in the merger, and payment of such consideration would take place subsequent to payment pursuant to the merger.

Article 13 provides that the statutory appraisal rights remedy provided under Article 13 to a stockholder objecting to the merger is the exclusive remedy for the recovery of the value of such stockholder’s shares or for money damages to such stockholder with respect to the merger. If CNB complies with the requirements of Article 13, any stockholder who fails to comply with the requirements of that Article shall not be entitled to bring suit for the recovery of the value of his shares or for money damages to the stockholder with respect to the merger.

The rights of dissenting holders of shares are governed by Article 13. The following summary of applicable provisions of Article 13 is not intended to be a complete statement of such provisions and is qualified in its entirety by reference to the full text of Article 13, which is included as Annex D to the proxy statement.

A holder of CNB Common Stock as of the record date for the Special Meeting who files written notice of his or her intent to demand payment with CNB prior to the vote on the merger at the Special Meeting, who has not voted in favor of the merger agreement and who has made a demand for compensation as provided under Article 13 is entitled under such provisions, as an alternative to receiving the consideration offered in the merger for all of his or her CNB Common Stock, to the fair value of his or her CNB Common Stock. The following is a summary of the procedural steps that must be taken if the appraisal rights are to be validly exercised.

Any stockholder of CNB may elect to exercise his or her right to dissent from the merger by filing with CNB, at the address set forth below, prior to the vote on the merger at the Special Meeting, a written objection to the merger, setting out that such stockholder’s appraisal rights will be exercised if the merger is effected.

Within ten (10) days of the effective date of the merger, CNB will deliver or mail to such stockholder written notice that the merger has been effected and supply a form that specifies the date of the first announcement of the principle terms of the proposed corporation action and requires the dissenting stockholder to certify (1) whether or not the dissenting stockholder held beneficial ownership of his or her shares for which appraisal rights are asserted prior to the date of the announcement; and (2) that the stockholder did not vote in favor of the merger. CNB’s notice also must state:

	•		Where the form must be sent and where certificates for certificated shares must be deposited and the date by which those certificates must be deposited;
	•		A date by which CNB must receive the form which date may not be fewer than forty (40) nor more than sixty (60) days after the date the appraisal notice and form are sent and state that the stockholder is deemed to have waived the right to demand appraisal unless the form is received by CNB by the specified date;
	•		CNB’s estimate of the fair value of the shares;
	•		That, if requested in writing, CNB will provide to the stockholder requesting, within ten (10) days after the date upon which the Company must receive the form, the number of stockholders who return the forms and the number of shares owned by them; and
	•		The date by which a stockholder may provide notice to withdraw his or her request for appraisal rights.

CNB’s notice also must be accompanied by Article 13. A dissenting stockholder who wishes to exercise appraisal rights must certify on the form sent by CNB whether he or she acquired beneficial ownership of the shares prior to the date set forth in the notice, must execute and return the form and, in the case of certificated shares, deposit his or her stock certificates in accordance with the terms of the notice. Once a dissenting stockholder deposits his or her certificates or, in the case of uncertificated shares, returns the executed forms, the dissenting stockholder loses all rights as a stockholder unless he or she withdraws the request for appraisal rights.

A dissenting stockholder may decline to exercise appraisal rights and withdraw from the appraisal process by notifying CNB in writing by the date set forth in the appraisal notice. If the dissenting stockholder fails to withdraw from the appraisal process by the date given in the notice, he or she may not withdraw without CNB’s written consent.

Within thirty (30) days after receipt of the appraisal notice from the dissenting stockholder, CNB shall pay in cash to those stockholders who properly exercise their appraisal rights, the amount that CNB estimates to be the fair value of their shares, plus interest. This payment to each dissenting stockholder will be accompanied by:

	•		CNB financial statements, consisting of a balance sheet as of the end of the most recent fiscal year, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any;
	•		A statement of CNB’s estimate of the fair value of the shares, which must equal or exceed CNB’s estimate given in the appraisal notice; and
	•		A statement that dissenting stockholders have the right to demand further payment and that if any dissenting stockholder does not make a demand for further payment within the time period specified, the dissenting stockholder is deemed to have accepted the payment in full satisfaction of CNB’s obligations under Article 13.

CNB may elect to withhold payment from any dissenting stockholder who does not certify that he or she had beneficial ownership of all of the shares for which he or she asserted appraisal rights prior to the date set forth in the appraisal notice. If CNB elects to withhold payment, it must, within thirty (30) days after the appraisal notice is due, provide all dissenting stockholders holding “after acquired shares”:

	•		CNB financial statements consisting of a balance sheet as of the end of the most recent fiscal year, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any; CNB’s estimate of fair value;
	•		That they may accept CNB’s estimate of fair value, plus interest, in full satisfaction of their demands or demand payment under Section 31D-13-1326 of the West Virginia Business Corporation Act;
	•		That those dissenting stockholders who wish to accept the offer must notify CNB within thirty (30) days after receiving the offer; and
	•		That those dissenting stockholders who do not satisfy the requirements for demanding appraisal under Section 31D-13-1326 of the West Virginia Business Corporation Act are deemed to have accepted CNB’s offer. CNB will pay all stockholders who accept the offer within ten (10) days after receiving the stockholder’s acceptance in full satisfaction of the stockholder’s demand. Within forty (40) days after sending notice, CNB must pay in cash the amount it offered to each dissenting stockholder that did not qualify to demand appraisal under Section 31D-13-1326.

If a dissenting stockholder is dissatisfied with the amount of payment, he or she must notify CNB in writing of the dissenting stockholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest less any payment already made by CNB. A stockholder of after acquired shares who is dissatisfied with that offer must reject the offer and demand payment of the dissenting stockholder’s stated estimate of the fair value of the shares plus interest.

A dissenting stockholder who fails to notify CNB in writing of the dissenting stockholders demand to be paid his or her stated estimate of the fair value plus interest within thirty (30) days after receiving CNB’s offer of payment waives the right to demand payment and is entitled only to the payment made or offered by CNB. If there is still a disagreement between CNB and the dissenting stockholder after compliance by both parties with the provisions listed above, CNB, within sixty (60) days after receiving the payment demand from the dissenting stockholder, shall commence proceeding and petition the court to determine the fair value of the shares and accrued interest. If CNB does not commence the proceeding within the sixty (60) day period, it shall pay in cash to each dissenting stockholder the amount that the dissenting stockholder demanded plus interest. CNB shall make all dissenting stockholders whose demands remain unsettled parties to the proceeding and all parties must be served with a copy of the petition.

The jurisdiction of the court in the proceeding is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The stockholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There is no right to a jury trial. Each stockholder made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of the stockholder’s shares, plus interest, exceeds the amount paid by CNB to the stockholder; or for the fair value, plus interest, of the stockholder’s shares for which CNB elected to withhold payment.

The court in an appraisal proceeding shall determine all costs of the proceeding, including reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against CNB, except that the court may assess costs against some or all of the stockholders demanding appraisal, in amounts the court finds equitable to the extent the court finds the stockholders acted arbitrarily, vexatiously or not in good faith. The court in an appraisal proceeding may also assess the fees and expenses of counsel and experts for the respective parties in amounts the court finds equitable:

	•		Against CNB and in favor of any and all stockholders demanding appraisal if the court finds that CNB did not substantially comply with the requirements of Article 13; or
	•		Against either CNB or the stockholder(s) demanding appraisal, in favor of any other party, if the court finds that the party against whom fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith.

If the court finds that the services of counsel for any stockholder were of substantial benefit to other dissenting stockholders, and that fees for those services should not be assessed against CNB, the court may award to counsel reasonable fees to be paid out of the amounts awarding to the dissenting stockholders who are benefited.

To the extent CNB fails to make a required payment pursuant to Article 13, the stockholder may sue directly for the amount owed and, to the extent successful, the stockholder is entitled to recover from CNB all costs and expenses of that suit including counsel fees.

A dissenting stockholder’s written objection to the merger and demand for payment must be in addition to and separate from any vote against the merger. Voting against the merger will not constitute the written notice required to be filed by a dissenting CNB stockholder. A stockholder voting for the merger or not voting on the merger will be deemed to have waived his dissenters’ rights.

Under Article 13 holders of record of CNB Common Stock are entitled to dissenters’ rights as described above, and he procedures to perfect such rights must be carried out by and in the name of holders of record. Persons who are beneficial but not record owners of CNB Common Stock and who wish to exercise dissenters’ rights with respect to the merger should consult promptly with the record holders of their shares as to the exercise of such rights. All written objections and demands for payment should be addressed to CNB Financial Services, Inc.,

101 S. Washington Street, Berkeley Springs, West Virginia 25411, Attention: Rebecca Stotler. All written objections and demand for payment must be received before the Special Meeting or be delivered at such meeting prior to the vote. Demands for payment must be made as described above.

FEES AND EXPENSES

CNB estimates that the fees and expenses associated with the amendment and the merger agreement, consisting primarily of financial advisory fees, SEC filing fees, fees and expenses of attorneys and accountants and other related charges, will total approximately $84,072, assuming both the amendment and merger agreement are completed. This amount consists of the following estimated fees:

Description		Amount
Advisory fees and expenses		$	16,000
Legal fees and expenses			42,000
SEC filing fee			72
Printing, solicitation and mailing costs			16,000
Miscellaneous expenses			10,000
Total		$	84,072

REGULATORY REQUIREMENTS

In connection with the merger, CNB will be required to make a number of filings with and obtain a number of approvals from various federal and state governmental agencies, including:

	•		filing of articles of merger with the West Virginia Secretary of State in accordance with the West Virginia Business Corporation Act after the approval of the merger agreement by CNB’s shareholders; and
	•		complying with federal and state securities laws, including CNB’s and Merger Corp.’s filing, prior to the date of this proxy statement, of a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the Securities and Exchange Commission.

THE MERGER AGREEMENT

This section is a summary of the material terms of the merger agreement, a copy of which is attached as Annex B to this document. Because this is a summary, it does not include all of the information that may be important to you. You should read the entire merger agreement and this Proxy Statement and related annexes before deciding how to vote at the Special Meeting.

THE MERGER

CNB Merger Corp (“Merger Corp”), formed for the sole purpose of effecting the merger, will be merged with and into CNB (“CNB”), with CNB surviving the merger. The merger will occur following the approval of the Agreement of Merger by the CNB shareholders and the satisfaction of other conditions to the merger.

CONVERSION OF SHARES IN THE MERGER

The Agreement of Merger provides that, at the Effective time of the merger:

(a)

All outstanding shares of CNB Common Stock, whether Record Shares (as hereinafter defined) or Street Shares (as hereinafter defined), held by a Holder (as hereinafter defined) holding fewer than 150 shares immediately prior to the Effective Time shall, without any action on the part of the Holder thereof, be converted into the right to receive CNB Class A Common Stock on a one share for one share exchange basis; provided, however, that CNB may presume that all Street Shares are held by Holders holding fewer than 150 shares immediately prior to the Effective Time unless either CNB or a Beneficial Owner of Street

			Shares are able to demonstrate to CNB’s satisfaction that such shares are held beneficially by a Holder holding 150 or more CNB Shares immediately prior to the Effective Time, in which event such CNB Common Stock shall remain outstanding with all rights, privileges, and powers existing immediately before the Effective Time.
	(b)		All outstanding CNB shares, other than those described in Paragraph (a) as being converted into the right to receive CNB Class A Common Stock, shall remain outstanding with all rights, privileges, and powers existing immediately before the Effective Time.
	(c)		The shares of Merger Corp. shall be cancelled and of no further effect.

The merger agreement further provides that:

In no event shall any Holder holding, of record or beneficially, immediately prior to the Effective Time, 150 or more CNB Common Stock shares (including any combination of Record Shares and Street Shares), be entitled to receive CNB Class A Common Stock with respect to the shares so held. It shall be a condition precedent to the right of any Holder to receive CNB Class A Common Stock, if any, that such Holder certify to CNB in a Letter of Transmittal delivered by CNB that such Holder held, of record and beneficially, immediately prior to the Effective Time, fewer than 150 shares (including any combination of Record Shares and Street Shares) in the aggregate.

For purposes of the foregoing, the merger agreement further provides:

	(1)		The term “Record Shares” shall mean shares of CNB Common Stock, other than Street Shares, and any Record Share shall be deemed to be held by the registered holder thereof as reflected on the books of the Company;
	(2)		The term “Street Shares” shall mean CNB shares held of record in street name, and any Street Share shall be deemed to be held by the Beneficial Owner thereof as reflected on the books of the nominee holder thereof;
	(3)		The term “Holder” shall mean any record holder or holders of Record Shares who would be deemed, under Rule 12(g)5-1 promulgated under the Securities Exchange Act of 1934, as amended, to be a ‘person’ for purposes of determining the number of record shareholders of CNB.

EXCHANGE OF CERTIFICATES

The merger agreement requires the Company to mail to each shareholder who held, at the effective time of the transaction, in the aggregate, less than 150 shares of CNB Common Stock, a letter of transmittal with instructions to effect the surrender of the certificates in exchange for the share certificate(s) representing an equal number of Class A Common Stock shares.

TIMING OF CLOSING

If the merger agreement is approved by the CNB shareholders, the merger closing will take place as soon as practicable after the Special Meeting, provided that all other conditions to the closing have been satisfied or waived. On the date the merger closes, articles of merger will be filed with the West Virginia Secretary of State. The merger will become effective when the certificate of merger has been duly filed with the West Virginia Secretary of State.

ARTICLES OF INCORPORATION

The merger agreement provides that the Articles of Incorporation of CNB, as amended and in effect immediately prior to the effective time of the merger, shall be the Articles of Incorporation of CNB, as the surviving corporation, immediately after the merger.

AMENDMENT OF AGREEMENT OF MERGER

The merger agreement may be amended at the election of the Board of Directors of CNB or Merger Corp., whether before or after approval of the merger agreement by the shareholders, provided that an amendment made following shareholder approval shall not:

	•		Alter or change the amount or kind of shares to be received in exchange for CNB’s existing Common Stock;
	•		Alter or change any term of the Articles of Incorporation of the surviving corporation; or
	•		Alter or change any of the terms and conditions of the agreement if such change or alteration would adversely affect the holders of CNB Common Stock.

TERMINATION OF AGREEMENT OF MERGER

The merger agreement allows the Board of Directors of CNB or Merger Corp. the ability to terminate and abandon the merger at the election of either Board, whether before or after shareholder approval, if the Board determines the merger is not in the best interest of the Company, the Merger Corp. or the Company’s shareholders.

DIVIDEND POLICIES

The Company has paid the following semi-annual dividends since January 1, 2007:

										Per Share
		High				Low				Dividend
2009
First quarter		$	66.00			$	47.00			$
Second quarter			60.00				44.50				0.53
Third quarter			46.70				46.70
Fourth quarter			46.60				45.25				1.02
2008
First quarter		$	80.00			$	65.00			$
Second quarter			67.00				65.50				0.53
Third quarter			63.50				63.50
Fourth quarter			63.85				49.40				1.37
2007
First quarter		$	80.00			$	72.00			$
Second quarter			80.00				70.00				0.50
Third quarter			72.00				71.00
Fourth quarter			72.00				67.00				1.19

The CNB board, in its discretion, will determine whether to declare and pay dividends in the future. Any future declaration and payment of dividends will depend upon:

	•		CNB’s results of operations;
	•		CNB’s consolidated earnings and financial condition;
	•		cash requirements;
	•		future prospects;

	•		applicable law and regulations; and
	•		other factors deemed relevant by CNB’s board of directors.

The rights and privileges of the newly created Class A Common Stock provide that the holders of the Class A Common Stock have a dividend preference over the Company’s existing CNB Common Stock shareholders. Specifically, dividends must be paid on the Class A Common Stock prior to dividends being paid on the existing CNB Common Stock. Further, the dividends paid on the Class A Common Stock will enjoy a 10% premium over any dividends paid on CNB’s Common Stock. For example, if the Company declares a $1 dividend on its existing CNB Common Stock, the Class A shareholders will receive $1.10 per Class A Common Stock share held, which must be paid prior to the payment of any dividends on CNB’s Common Stock.

SELECTED HISTORICAL FINANCIAL DATA

The following selected historical consolidated financial data are derived from, and qualified by reference to, CNB’s Consolidated Financial Statements and the notes thereto included in CNB’s 2009 Annual Report to Shareholders and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, which are available to shareholders at www.sec.gov or upon request. You should read the selected historical consolidated financial information in conjunction with the Consolidated Financial Statements of CNB and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in CNB’s 2009 Annual Report to Shareholders and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

SELECTED HISTORICAL FINANCIAL DATA
FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA

		For the
		Quarter Ended
		June 30																For the Year Ended
		2010				2009				2009				2008				2007				2006				2005
		In thousands except for per share data
At Period-End
Total assets		$	282,821			$	285,655			$	289,498			$	282,257			$	290,415			$	276,069			$	258,953
Securities available for sale			74,136				58,727				72,273				62,605				66,017				50,873				55,194
Loans and lease, net of unearned income			189,827				198,584				194,707				200,752				202,669				204,319				180,207
Deposits			248,164				261,349				252,292				227,895				226,645				233,083				219,288
Shareholders’ equity			26,704				24,306				25,630				23,218				22,821				20,322				19,008
Significant Ratios
Return on average assets			0.60	%			0.70	%			0.75	%			0.96	%			0.90	%			0.92	%			1.00	%
Return on average shareholders’ equity			6.5				8.6				8.88				11.66				11.88				12.46				12.91
Net interest margin			3.15				3.21				3.71				3.92				3.53				3.77				4.12
Summary of Operations
Interest income		$	7,504			$	7,870			$	15,642			$	16,995			$	17,201			$	15,989			$	13,420
Interest expense			2,458				2,689				5,412				6,307				7,725				6,269				3,850
Net interest income			5,046				5,181				10,230				10,688				9,476				9,720				9,570
Provision for loan losses			910				765				1,853				940				169				275				352
Net interest income after provision for loan losses			4,136				4,416				8,377				9,748				9,307				9,445				9,218
Non-interest income			1,093				1,121				2,172				2,241				2,400				1,968				2,007
Non-interest expense			4,238				3,922				7,834				7,967				8,012				7,760				7,541
Income before income taxes and discontinued operations			991				1,615				2,715				4,022				3,695				3,653				3,684
Income tax expense			142				470				565				1,307				1,191				1,308				1,238
Net income			850				1,145				2,150				2,715				2,504				2,469				2,446
Per Share Data
Net income		$	1.92			$	2.56			$	4.82			$	6.01			$	5.48			$	5.39			$	5.34
Cash dividends			.53				.53				1.55				1.90				1.69				1.54				1.44
Net book value			59.55				54.52				57.77				51.69				50.16				44.37				41.50