A N N UA L R E P O R T H I G H L I G H T S 2 CNB FINANCIAL CORPORATION | 2010 ANNUAL REPORT HIGHLIGHTS T A B L E O F CONTENTS Consolidated Financial Highlights Message to Shareholders Executive Management and Board of Directors Officers Shareholder Information 4 5 8 9 11 3 Consolidated Financial Highlights (in thousands, except per share data) FOR THE YEAR Interest Income Interest Expense Net Interest Income Non-interest Income Non-interest Expense Net Income Operating Earnings* Net Income Return on: Average Assets Average Equity AT YEAR END Assets Loans, net of unearned Deposits Shareholders’ Equity Wealth Assets Under Management (at market value) PER SHARE DATA 2010 2009 % Change $61,147 19,056 42,091 9,650 31,798 11,316 12,773 $55,870 18,468 37,402 7,950 30,021 8,512 10,100 0.87% 11.62% 0.79% 12.86% $1,413,511 794,562 1,162,868 109,645 $1,161,591 715,142 956,858 69,409 9.4% 3.2% 12.5% 21.4% 5.9% 32.9% 26.5% 10.1% (9.6%) 21.7% 11.1% 21.5% 58.0% 327,575 304,068 7.7% Net Income, diluted Dividends Book Value Market Value $1.06 0.66 8.96 14.81 $0.98 0.66 7.92 15.99 8.2% 0.0% 13.1% (7.4%) *2010 and 2009 operating earnings amounts are shown before effect of $1,457 and $1,588 (after tax) non-cash charges due to write-downs of other-than-temporarily impaired securities. 4 M E S S A G E T O SHAREHOLDERS To Our Shareholders, Customers, Employees & Friends: Twelve months ago, I shared the optimism CNB Financial Corporation felt as the economy showed signs of recovery during the last quarter of 2009. CNB was in an excellent position to help the communities we serve to grow again after many months of recession. Through strategies executed during 2010, CNB is now in an even better position to allow for economic growth to continue. In April of 2010, CNB’s Board of Directors decided to pursue a common stock offering. The additional capital was necessary primarily as a result of the outstanding growth that CNB had experienced beginning in 2007 as assets grew from $781 million to $1.2 billion. In addition to the growth, we believe that the solid growth potential will continue into 2011 and 2012. Finally, the uncertainty surrounding increased regulation created a need across the financial services industry for higher levels of common equity. The end result was a highly successful capital raise of $34.5 million. The market was very receptive to CNB’s continuing story of positive balance sheet growth coupled with solid core earnings and stable asset quality. The successful common stock offering was one of the ways our capital improved. CNB’s continued strong earnings in 2010 added to our capital position. Our Corporation reported record earnings of $11.3 million, or $1.06 per share, an increase of 32.9% over the prior year earnings of $8.5 million. The 2010 earnings allowed for our equity to grow by an additional $5 million after dividends were paid to our shareholders. CNB continues to remain well above all regulatory capital ratios. A significant contribution to our increased earnings was the large growth in earning assets during 2010. Loans grew 11.1% while investments increased 45% over 2009 levels. This growth was critical to increasing our overall earnings as the net interest margin declined from 4.0% in 2009 to 3.7% for 2010. Many factors contributed to the reduction of the margin, but the foremost cause is lower yields within our securities portfolio caused by the historically low interest rate cycle that we have been experiencing since early 2009. As we are able to move more assets into the loan portfolio, the margin will begin to improve. Our earning asset growth was driven by the third consecutive year of excellent core deposit gathering. Total deposits grew $206 million or 21.5% during the year. With our strong equity position, CNB remains aggressive in the acquisition of new customers. Our permanent ERIEBANK Meadville store opened in May of 2010, while CNB Bank opened a new office in Kylertown in September, bringing our franchise to a total of 28 banking locations in the state of Pennsylvania. The new locations are proving valuable to our strategy of gaining core deposit relationships. CNB FINANCIAL CORPORATION | 2010 ANNUAL REPORT HIGHLIGHTS 5 ASSET GROWTH (in thousands) $ 700 $ 800 $ 900 $1,000 $ 1,100 $ 1,200 $ 1,300 $ 1,400 $ 1,500 $780,850 $858,700 $1,016,518 $1,161,591 $1,413,511 2006 2007 2008 2009 2010 DEPOSIT GROWTH (in thousands) $ 650 $ 700 $ 750 $ 800 $ 850 $ 900 $ 950 $ 1000 $1,050 $1,100 $1,150 $631,322 $659,157 2006 2007 2008 2009 2010 $814,596 $956,858 $1,162,868 EARNINGS PER SHARE (fully diluted) $ 0.65 $ 0.70 $ 0.75 $ 0.80 $ 0.85 $ 0.90 $ 0.95 $ 1.00 $ 1.05 $ 1.10 2006 2007 2008 $0.61 2009 2010 6 $1.07 $1.05 $0.98 $1.06 DIVIDENDS PAID PER SHARE $ 0.50 $ 0.55 $ 0.60 $ 0.65 $ 0.70 $ 0.75 $ 0.80 $ 0.85 $ 0.90 $ 0.95 $0.57 $0.62 $0.645 2006 2007 2008 2009 2010 $0.66 $0.66 Message to Shareholders continued… Asset quality continued to be an issue for the financial services industry during 2010, and CNB was not immune. The ratio of net charge-offs to average loans increased this year to 0.56% as compared to 0.49% in 2009. This was primarily due to a $1.8 million charge to one loan during the fourth quarter. Management does not expect any further charge on the remaining $6.0 million loan balance. Overall, CNB’s asset quality improved during the year as nonperforming assets decreased as a percentage of loans to 1.66% from 1.90% at December 31, 2009. These ratios remain very favorable as compared to our peer group and a true testament to our credit standards and underwriting. As we look forward to 2011 and beyond, I would like to thank all of our long-term shareholders that have enjoyed CNB’s growth and prosperity through the years as well as welcome all of our new shareholders that helped us execute a successful capital raise this year. With this strength, CNB’s team is looking forward to all of the opportunities in our region that will come as the economy continues to rebuild. Joseph B. Bower, Jr. President and Chief Executive Officer 7 CNB FINANCIAL CORPORATION | 2010 ANNUAL REPORT HIGHLIGHTS E X E C U T I V E M A N A G E M E N T & BOARD OF DIRECTORS Corporate Officers, CNB Financial Corporation Joseph B. Bower, Jr. President & Chief Executive Officer Charles R. Guarino Treasurer & Principal Financial Officer Richard L. Greslick, Jr. Secretary Vincent C. Turiano Assistant Secretary Executive Officers, CNB Bank Joseph B. Bower, Jr. President & Chief Executive Officer Mark D. Breakey Executive Vice President & Chief Credit Officer Richard L. Greslick, Jr. Senior Vice President/ Administration Charles R. Guarino Vice President & Chief Financial Officer Richard L. Sloppy Executive Vice President & Chief Lending Officer Vincent C. Turiano Senior Vice President/ Operations Board of Directors CNB Financial Corporation and CNB Bank Dennis L. Merrey Chairman of the Board Retired, Formerly President, Clearfield Powdered Metals, Inc. (Manufacturer) Joseph B. Bower, Jr. President and Chief Executive Officer, CNB Financial Corporation; President and Chief Executive Officer, CNB Bank Robert E. Brown Vice President, E. M. Brown, Inc. (Reclamation, Auto Dealer and Concrete Supplier) William F. Falger Retired, Formerly President and Chief Executive Officer, CNB Financial Corporation, CNB Bank Robert W. Montler President & Chief Executive Officer, Lee Industries and Keystone Process Equipment (Manufacturers) Deborah Dick Pontzer Economic Development and Workforce Specialist, Office of Congressman Glenn Thompson Jeffrey S. Powell President, J.J. Powell, Inc. (Petroleum Distributor) Charles H. Reams President, C.H. Reams & Associates, Inc. (Insurance) James B. Ryan Retired, Formerly Vice President of Sales, Marketing, Windfall Products, Inc. (Manufacturer) 8 Richard B. Seager President and Chief Executive Officer, Beacon Light Behavioral Health Systems (Health Services) Peter F. Smith Attorney at Law DIRECTOR EMERITUS L. E. Soult, Jr. O F F I C E R S Administrative Services Mary Ann Conaway Vice President, Human Resources Carolyn B. Smeal Assistant Vice President/Operations Edward H. Proud Vice President, Information Systems Susan M. Warrick Assistant Vice President/Operations Shannon L. Irwin Human Resources Officer Susan B. Kurtz Customer Service Officer Thomas J. Ammerman, Jr. Assistant Vice President/Security Brian W. Wingard Assistant Vice President/Controller Dennis J. Sloppy Information Systems Officer Donna J. Collins Assistant Vice President/Compliance Carol J. Cossick Assistant Controller Leanne D. Kassab Assistant Vice President/Marketing Thomas W. Grice Network Administration Officer BJ Sterndale Training Officer Brenda L. Terry Banking Officer Branch Division Vickie L. Baker Assistant Vice President, Regional Branch Administration, Bradford Main Street Office Ruth Anne Ryan-Catalano Assistant Vice President, Regional Branch Administration, Industrial Park Road Office, Clearfield Mary A. Baker Assistant Vice President, Northern Cambria Office Deborah M. Young Assistant Vice President, Washington Street Office, St. Marys Lending Division Robert S. Berezansky Senior Vice President, Corporate Lending James M. Baker Vice President, Commercial Banking, DuBois Michael E. Haines Vice President, Commercial Banking, St. Marys Robin L. Hay Vice President, Commercial Banking Jeffrey A. Herr Vice President, Commercial Banking, Philipsburg Denise J. Greene Community Office Manager, DuBois Office Douglas M. Shaffer Community Office Manager, Punxsutawney Office Francine M. Papa Community Office Manager, Ridgway Office Larry A. Putt Banking Officer, Clearfield Mary Ann Roney Banking Officer, Bradford Susan J. Shimmel Community Office Manager, Old Town Road Office, Clearfield Theresa L. Swanson Community Office Manager, Warren Office Gregory R. Williams Banking Officer, Clearfield Charles C. Shrader Vice President, Commercial Banking, Warren Joseph H. Yaros Vice President, Commercial Banking Bradford Gregory M. Dixon Vice President/Credit Administration David W. Ogden Vice President, Credit Administration Christopher L. Stott Vice President, Retail Lending James C. Davidson Mortgage Lending Officer Cory Johnston Credit Administration Officer Paul A. McDermott Collections Officer Jennifer L. Mowery Staff Commercial Lender Johnstown Eileen F. Ryan Assistant Vice President/ Mortgage Lending Michael C. Sutika Vice President, Commercial Banking Steven C. Tunall Commercial Banking, Kane Wealth & Asset Management Services Todd M. Abrams Senior Vice President/Managing Director, Wealth & Asset Management Natalie R. Barnett Financial Consultant, Wealth Management Craig C. Ball Vice President, Wealth Management Calvin R. Thomas, Jr. Vice President, Trust Officer Eric A. Johnson Trust Officer Glenn R. Pentz Trust Officer 9 CNB FINANCIAL CORPORATION | 2010 ANNUAL REPORT HIGHLIGHTS O F F I C E R S & AFFILIATES ERIEBANK, a Division of CNB Bank David J. Zimmer President Donald W. Damon Senior Vice President Steven M. Cappellino Senior Vice President, Meadville Office William L. DeLuca, Jr. Senior Vice President Betsy Bort Vice President Scott O. Calhoun Vice President John M. Schulze Vice President William J. Vitron, Jr. Vice President, Wealth Management Carla M. LaBoda Regional Retail Administrator, Asbury Office Kelly S. Buck Community Office Manager, Downtown Office Matthew V. Feleppa Community Office Manager, Meadville Office ERIEBANK Regional Board of Directors Katie J. Jones Community Office Manager, Harborcreek Office Abby L. Mouyard Community Office Manager, Main Office Paul D. Sallie Private Banking Officer Timothy Roberts Commercial Lending Officer Joseph B. Bower, Jr. President and Chief Executive Officer, CNB Financial Corporation, CNB Bank Mark D. Breakey Executive Vice President & Chief Credit Officer Harry E. Brown Vice President, Specialty Bar Products, EBC Industries (Manufacturing) Gary L. Clark Vice President, Chief Financial Officer and Chief Administrative Officer, Snap- tite, Inc. (Manufacturing) Thomas L. Doolin President, New Age Business Solutions, LLC (Consulting) James E. Spoden Esquire, MacDonald Illig Jones & Britton, LLP (Law office) David J. Zimmer President, ERIEBANK David K. Galey Treasurer, Chief Financial Officer, Greenleaf Corporation (Manufacturing) Thomas Kennedy President, Professional Development Associates, Inc. (Real estate developer) Charles H. Reams President, C. H. Reams & Associates, Inc. (Insurance) Holiday Financial Services Corporation, a Subsidiary of CNB Financial Corporation Board of Directors & Corporate Officers Administrative Services Joseph B. Bower, Jr. Director & President Richard L. Greslick, Jr. Director & Secretary Charles R. Guarino Director & Treasurer Joseph P. Strouse Vice President Jonathan L. Holler Assistant Vice President 10 CNB Securities Corporation, a Subsidiary of CNB Financial Corporation, Wilmington, DE Board of Directors Brian W. Wingard Director Glenn R. Pentz Director Donald R. McLamb, Jr. Wilmington Trust SP Services, Inc. Corporate Officers Richard L. Greslick, Jr. President Donald R. McLamb, Jr. Treasurer, Wilmington Trust SP Services, Inc. Elizabeth F. Bothner Secretary, Wilmington Trust SP Services, Inc. Annual Meeting The Annual Meeting of the Shareholders of CNB Financial Corporation will be held Tuesday, April 19, 2011 at 2:00 p.m. at the Corporation’s Headquarters in Clearfield, PA. Corporate Address CNB Financial Corporation 1 S. Second Street P.O. Box 42 Clearfield, PA 16830 (814) 765-9621 Stock Transfer Agent & Registrar Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 (908) 497-2300 Form 10-K Shareholders may obtain a copy of the Annual Report to the Securities and Exchange Commission on Form 10-K by writing to: CNB Financial Corporation 1 S. Second Street P.O. Box 42 Clearfield, PA 16830 ATTN: Shareholder Relations Quarterly Share Data For information regarding the Corporation’s quarterly share data, please refer to page 27 in the 2010 Form 10-K. Market Makers The following firms have chosen to make a market in the stock of the Corporation. Inquiries concerning their services should be directed to: Boenning & Scattergood, Inc. 1700 Market Street, Ste 1420 Philadelphia, PA 19103 (800) 842-8928 RBC Capital Markets Three World Financial Center 200 Vesey Street, 9th Floor New York, NY 10281 (212) 428-6200 S H A R E H O LD E R INFORMATION Corporate Profile CNB Financial Corporation is a leader in providing integrated financial solutions which creates value for both consumers and businesses. These solutions encompass checking, savings, time and deposit accounts, Private Banking, loans and lines of credit (real estate, commercial, industrial, residential and consumer), credit cards, cash management, online banking, electronic check deposit, merchant credit card processing, on-site banker and accounts receivable handling. In addition, the Corporation provides wealth and asset management services, retirement plans and other employee benefit plans. CNB Bank A subsidiary of CNB Financial Corporation, CNB is a regional independent community bank in North Central Pennsylvania with approximately 303 employees who make customer service more responsive and reliable. For over 145 years, the Bank has strived to be more customer-driven than its competitors thus building long-term customer relationships by being reliable and competitively priced. CNB continually seeks innovative ways to execute a personal, quality customer service strategy and prides itself for being first-to-market many of these innovations. To satisfy customers’ financial needs and expectations, it offers a variety of delivery channels, which includes 22 full-service offices, 20 ATMs, 1 loan production office, telephone banking (1-866-224-7314), Internet banking (www.bankcnb.com) and a centralized customer service center (1-800-492-3221). ERIEBANK Headquartered in Erie, Pennsylvania, ERIEBANK is a division of CNB Bank. Presently, there are five full service locations which house its commercial, retail and Private Banking divisions. Holiday Financial Services Another subsidiary of CNB Financial Corporation, Holiday Financial Services, a consumer loan company, currently has eight conveniently located offices in Bellefonte, Bradford, Clearfield, Erie, Hollidaysburg, Northern Cambria, Ridgway and Sidman, Pennsylvania. The common stock of the Corporation trades on the NASDAQ National Market under the symbol CCNE. 11 CNB FINANCIAL CORPORATION | 2010 ANNUAL REPORT HIGHLIGHTS CNB Financial Corporation 1 South Second Street P.O. Box 42 Clearfield, PA 16830 800-492-3221 www.bankcnb.com