##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission file number 0-11535
 City National Bancshares Corporation
  New Jersey
    
    22-2434751State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization
    
    Identification No.)
  (Address of principal executive offices)
    
    (Zip Code)
 (973) 624-0865
  Title of each class
    
    Name of each exchange on which registered
  
   
  o þ
 o þ
 þ o
 o
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer  
þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



PagePART IItem 1. Business
    
    
    1Item 1a Risk Factors
    
    
    3Item 2. Properties
    
    
    4Item 3. Legal Proceedings
    
    
    5Item 4. Submission of Matters to a Vote of Security Holders
    
    
    5PART IIItem 5. Market for the Registrants Common Equity and Related Stockholder Matters
    
    
    5Item 6. Selected Financial Data
    
    
    6Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    7  16Item 7a.Quantitative and Qualitative Disclosure about Market Risk
    
    
    17Item 8. Financial Statements and Supplementary Data
    
    
    18  35Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
    
    
    36Item 9a.Controls and Procedures
    
    
    36PART IIIItem 10. Directors and Executive Officers of Registrant
    
    
    36Item 11. Executive Compensation
    
    
    36Item 12. Security Ownership of Certain Beneficial Owners and Management
    
    
    36Item 13. Certain Relationships and Related Transactions
    
    
    36PART IVItem 14. Principal Accountant Fees and Services
    
    
    36Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    36  38Signatures
    
    
    39EX-31: CERTIFICATIONEX-32: CERTIFICATION
  ii




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Part I
 
 Item 1. Business
 Description of business
        Competition
   Supervision and regulation
  Governmental policies and legislation
    1




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Bank holding company regulations
   de novo de novo de novo
 de novo de novo
   Regulation of bank subsidiary
      2




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Community reinvestment
  Government policies
     Employees
  
 Item 1a. Risk factors
   3




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Changes in interest rates
   Competition
  Regulation
   Concentration of deposit accounts
  Recent negative developments in the financial services industry and global credit markets
  Changes in economic conditions within the Corporations market area
  
 Item 2. Properties
   4




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Item 3. Legal Proceedings
  
 Item 4. Submission of matters to a vote of security holders
  
 Part II
 
 Item 5. Market for the registrants common equity and related stockholders matters
    Form 10-K
 The annual report filed with the Securities and Exchange Commission on Form 10-K is available
without charge upon written request to City National Bancshares Corporation, Edward R. Wright,
Senior Vice President and Chief Financial Officer, 900 Broad Street, Newark, New Jersey, 07102.
 Transfer Agent
 
 5




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##### Table of Contents



Item 6. Selected Financial Data
 Five-Year Summary
 Dollars in thousands, except per share data
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Year-end Balance Sheet dataTotal assets
    
    $
    494,539
    
    
    $
    449,748
    
    
    $
    395,217
    
    
    $
    363,541
    
    
    $
    325,412Gross loans
    
    
    271,906
    
    
    
    232,824
    
    
    
    199,284
    
    
    
    179,093
    
    
    
    159,359Allowance for loan losses
    
    
    3,800
    
    
    
    3,000
    
    
    
    2,400
    
    
    
    2,165
    
    
    
    2,076Investment securities
    
    
    178,061
    
    
    
    157,556
    
    
    
    169,598
    
    
    
    149,144
    
    
    
    142,470Total deposits
    
    
    407,117
    
    
    
    394,856
    
    
    
    342,416
    
    
    
    312,429
    
    
    
    280,863Long-term debt
    
    
    51,600
    
    
    
    19,800
    
    
    
    19,606
    
    
    
    20,700
    
    
    
    22,750Stockholders equity
    
    
    28,092
    
    
    
    28,872
    
    
    
    27,762
    
    
    
    25,142
    
    
    
    16,279Income Statement dataInterest income
    
    
    25,902
    
    
    
    25,978
    
    
    
    21,649
    
    
    
    18,173
    
    
    
    14,411Interest expense
    
    
    11,309
    
    
    
    14,233
    
    
    
    10,848
    
    
    
    7,280
    
    
    
    4,767Net interest income
    
    
    14,593
    
    
    
    11,745
    
    
    
    10,801
    
    
    
    10,893
    
    
    
    9,644Provision for loan losses
    
    
    1,586
    
    
    
    772
    
    
    
    279
    
    
    
    115
    
    
    
    144Net interest income after provision
for loan losses
    
    
    13,007
    
    
    
    10,973
    
    
    
    10,522
    
    
    
    10,778
    
    
    
    9,500Other operating income
    
    
    279
    
    
    
    2,694
    
    
    
    2,724
    
    
    
    2,136
    
    
    
    2,573Other operating expenses
    
    
    12,278
    
    
    
    11,428
    
    
    
    10,035
    
    
    
    9,717
    
    
    
    9,085Income before income tax expense
    
    
    1,008
    
    
    
    2,239
    
    
    
    3,211
    
    
    
    3,197
    
    
    
    2,988Income tax (benefit) expense
    
    
    (50
    )
    
    
    372
    
    
    
    743
    
    
    
    862
    
    
    
    862Net income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468
    
    
    $
    2,335
    
    
    $
    2,126Per common share dataNet income per basic share
    
    $
    1.87
    
    
    $
    8.28
    
    
    $
    13.04
    
    
    $
    16.20
    
    
    $
    15.52Net income per diluted share
    
    
    1.87
    
    
    
    8.09
    
    
    
    12.54
    
    
    
    15.52
    
    
    
    15.52Book value
    
    
    130.10
    
    
    
    141.04
    
    
    
    129.88
    
    
    
    118.23
    
    
    
    113.79Dividends declared
    
    
    3.60
    
    
    
    3.50
    
    
    
    3.25
    
    
    
    3.00
    
    
    
    2.75Basic average number of common shares
outstanding
    
    
    131,688
    
    
    
    132,306
    
    
    
    133,246
    
    
    
    133,654
    
    
    
    132,646Diluted average number of common shares
outstanding
    
    
    148,005
    
    
    
    148,623
    
    
    
    143,924
    
    
    
    139,511
    
    
    
    132,646Number of common shares outstanding at year-end
    
    
    131,330
    
    
    
    131,987
    
    
    
    132,926
    
    
    
    133,650
    
    
    
    133,866Financial ratiosReturn on average assets
    
    
    .23
    %
    
    
    .44
    %
    
    
    .65
    %
    
    
    .66
    %
    
    
    .71
    %Return on average common equity
    
    
    1.38
    
    
    
    6.35
    
    
    
    10.90
    
    
    
    13.83
    
    
    
    14.90Stockholders equity as a percentage of total assets
    
    
    5.68
    
    
    
    6.42
    
    
    
    6.96
    
    
    
    6.92
    
    
    
    5.00Common dividend payout ratio
    
    
    
    
    
    
    42.22
    
    
    
    25.92
    
    
    
    19.33
    
    
    
    17.72
 6




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary statement concerning forward-looking statements
  Executive summary
      Cash and due from banks
  Federal funds sold
  Interest-bearing deposits with banks
  Investments
      7




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Investment Securities Available for Sale
    
    Maturing After One
    
    Maturing After FiveMaturing Within
    
    Year But Within
    
    Years But Within
    
    Maturing AfterOne Year
    
    Five Years
    
    Ten Years
    
    Ten Years
    
    Total
    
    TotalDollars in thousands
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    YieldU.S. Treasury securities and
obligations of U.S.
government agencies
    
    $
    1,083
    
    
    
    1.97
    %
    
    $
    
    
    
    
    
    %
    
    $
    2,264
    
    
    
    2.84
    %
    
    $
    662
    
    
    
    1.91
    %
    
    $
    4,009
    
    
    
    2.46
    %Obligations of U.S. govern-
ment sponsored
entities
    
    
    
    
    
    
    
    
    
    
    3,805
    
    
    
    4.42
    
    
    
    3,431
    
    
    
    4.32
    
    
    
    11,921
    
    
    
    3.50
    
    
    
    19,157
    
    
    
    3.83Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    162
    
    
    
    3.92
    
    
    
    5,975
    
    
    
    4.52
    
    
    
    82,219
    
    
    
    5.32
    
    
    
    88,356
    
    
    
    5.29Obligations of state and
political and subdivisions
    
    
    
    
    
    
    
    
    
    
    548
    
    
    
    5.41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    548
    
    
    
    5.41Other debt securities
    
    
    
    
    
    
    
    
    
    
    498
    
    
    
    5.61
    
    
    
    1,000
    
    
    
    4.00
    
    
    
    10,147
    
    
    
    4.75
    
    
    
    11,645
    
    
    
    4.24Total amortized cost
    
    $
    1,083
    
    
    
    1.97
    %
    
    $
    5,013
    
    
    
    4.63
    %
    
    $
    12,670
    
    
    
    4.12
    %
    
    $
    104,949
    
    
    
    5.04
    %
    
    $
    123,715
    
    
    
    4.66
    %
 Investment Securities Held to Maturity
    
    
    
    Maturing After One
    
    Maturing After FiveMaturing Within
    
    Year But Within
    
    Years But Within
    
    Maturing AfterOne Year
    
    Five Years
    
    Ten Years
    
    Ten Years
    
    Total
    
    TotalDollars in thousands
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    YieldObligations of U.S. govern-
ment sponsored entities
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,000
    
    
    
    4.65
    %
    
    $
    7,499
    
    
    
    5.60
    %
    
    $
    8,499
    
    
    
    5.48
    %Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243
    
    
    
    5.25
    
    
    
    11,847
    
    
    
    5.35
    
    
    
    12,090
    
    
    
    5.35Obligations of state and
political subdivisions
    
    
    336
    
    
    
    6.12
    %
    
    
    7,473
    
    
    
    5.75
    
    
    
    14,745
    
    
    
    5.98
    
    
    
    9,075
    
    
    
    6.56
    
    
    
    31,629
    
    
    
    6.09Other debt securities
    
    
    1,001
    
    
    
    8.06
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    495
    
    
    
    7.84
    
    
    
    1,496
    
    
    
    7.99Total amortized cost
    
    $
    1,337
    
    
    
    7.58
    %
    
    $
    7,473
    
    
    
    5.75
    %
    
    $
    15,988
    
    
    
    5.89
    %
    
    $
    28,916
    
    
    
    5.84
    %
    
    $
    53,714
    
    
    
    5.88
    %
    2008
    
    2007
    
    2006Investment Securities Available for Sale
    
    Amortized
    
    Market
    
    Amortized
    
    Market
    
    Amortized
    
    MarketIn thousands
    
    Cost
    
    Value
    
    Cost
    
    Value
    
    Cost
    
    ValueU.S. Treasury securities and obligations
of U.S. government agencies
    
    $
    4,009
    
    
    $
    3,957
    
    
    $
    6,860
    
    
    $
    6,832
    
    
    $
    2,080
    
    
    $
    2,080Obligations of U.S. government sponsored entities
    
    
    19,157
    
    
    
    19,012
    
    
    
    10,844
    
    
    
    10,895
    
    
    
    37,840
    
    
    
    37,414Obligations of state and political subdivisions
    
    
    548
    
    
    
    552
    
    
    
    551
    
    
    
    557
    
    
    
    3,395
    
    
    
    3,437Mortgage-backed securities
    
    
    88,356
    
    
    
    90,630
    
    
    
    74,640
    
    
    
    74,273
    
    
    
    64,519
    
    
    
    63,342Other debt securities
    
    
    11,645
    
    
    
    7,798
    
    
    
    9,618
    
    
    
    8,968
    
    
    
    7,874
    
    
    
    7,859Equity securities:Marketable securities
    
    
    678
    
    
    
    638
    
    
    
    646
    
    
    
    618
    
    
    
    618
    
    
    
    586Nonmarketable securities
    
    
    115
    
    
    
    115
    
    
    
    115
    
    
    
    115
    
    
    
    115
    
    
    
    115Federal Reserve Bank and Federal Home Loan Bank stock
    
    
    2,889
    
    
    
    2,889
    
    
    
    1,360
    
    
    
    1,360
    
    
    
    1,285
    
    
    
    1,285Total
    
    $
    127,397
    
    
    $
    125,591
    
    
    $
    104,634
    
    
    $
    103,618
    
    
    $
    117,726
    
    
    $
    116,118
 2008
    
    2007
    
    2006Investment Securities Held to Maturity
    
    Amortized
    
    Market
    
    Amortized
    
    Market
    
    Amortized
    
    MarketIn thousands
    
    Cost
    
    Value
    
    Value
    
    Value
    
    Cost
    
    ValueU.S. Treasury securities and obligations
of U.S. government agencies
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Obligations of U.S. government sponsored entities
    
    
    8,500
    
    
    
    8,520
    
    
    
    14,594
    
    
    
    14,522
    
    
    
    14,753
    
    
    
    14,417Mortgage-backed securities
    
    
    12,089
    
    
    
    12,358
    
    
    
    5,175
    
    
    
    5,132
    
    
    
    5,177
    
    
    
    5,027Obligations of state and political subdivisions
    
    
    31,629
    
    
    
    32,222
    
    
    
    31,665
    
    
    
    31,868
    
    
    
    31,042
    
    
    
    31,273Other debt securities
    
    
    1,496
    
    
    
    1,437
    
    
    
    2,504
    
    
    
    2,483
    
    
    
    2,508
    
    
    
    2,615Total
    
    $
    53,714
    
    
    $
    54,537
    
    
    $
    53,938
    
    
    $
    54,005
    
    
    $
    53,480
    
    
    $
    53,332
 8




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##### Table of Contents



Consolidated
Average Balance Sheet with Related Interest and Rates
 2008
    
    2007
    
    2006Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageTax equivalent basis; dollars in thousands
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateAssetsInterest earning assets:Federal funds sold and securities purchased
under agreements to resell
    
    $
    10,647
    
    
    $
    217
    
    
    
    2.04
    %
    
    $
    28,179
    
    
    $
    1,392
    
    
    
    4.94
    %
    
    $
    19,575
    
    
    $
    940
    
    
    
    4.80
    %Interest-bearing deposits with banks1
    
    
    1,008
    
    
    
    24
    
    
    
    2.41
    
    
    
    1,429
    
    
    
    90
    
    
    
    6.30
    
    
    
    950
    
    
    
    69
    
    
    
    7.26Investment securities2:Taxable
    
    
    145,963
    
    
    
    7,404
    
    
    
    5.07
    
    
    
    126,327
    
    
    
    6,613
    
    
    
    5.23
    
    
    
    121,173
    
    
    
    5,851
    
    
    
    4.83Tax-exempt
    
    
    32,123
    
    
    
    1,955
    
    
    
    6.08
    
    
    
    34,095
    
    
    
    2,080
    
    
    
    6.10
    
    
    
    29,444
    
    
    
    1,801
    
    
    
    6.12Total investment securities
    
    
    178,086
    
    
    
    9,359
    
    
    
    5.25
    
    
    
    160,422
    
    
    
    8,693
    
    
    
    5.42
    
    
    
    150,617
    
    
    
    7,652
    
    
    
    5.08Loans 3, 4,6Commercial
    
    
    44,929
    
    
    
    2,832
    
    
    
    6.28
    
    
    
    38,882
    
    
    
    2,640
    
    
    
    6.79
    
    
    
    26,255
    
    
    
    1,901
    
    
    
    7.24Real estate
    
    
    206,289
    
    
    
    14,026
    
    
    
    6.80
    
    
    
    178,579
    
    
    
    13,753
    
    
    
    7.70
    
    
    
    160,887
    
    
    
    11,577
    
    
    
    7.20Installment
    
    
    1,434
    
    
    
    109
    
    
    
    7.57
    
    
    
    1,576
    
    
    
    117
    
    
    
    7.30
    
    
    
    1,565
    
    
    
    124
    
    
    
    7.92Total loans
    
    
    252,652
    
    
    
    16,967
    
    
    
    6.71
    
    
    
    219,037
    
    
    
    16,510
    
    
    
    7.54
    
    
    
    188,707
    
    
    
    13,602
    
    
    
    7.21Total interest earning assets
    
    
    442,393
    
    
    
    26,567
    
    
    
    6.00
    
    
    
    409,067
    
    
    
    26,685
    
    
    
    6.52
    
    
    
    359,849
    
    
    
    22,263
    
    
    
    6.19Noninterest earning assets:Cash and due from banks
    
    
    8,605
    
    
    
    
    
    
    
    
    
    
    
    7,591
    
    
    
    
    
    
    
    
    
    
    
    6,983Net unrealized loss on investment
securities available for sale
    
    
    (2,850
    )
    
    
    
    
    
    
    
    
    
    
    (1,806
    )
    
    
    
    
    
    
    
    
    
    
    (2,221
    )Allowance for loan losses
    
    
    (3,231
    )
    
    
    
    
    
    
    
    
    
    
    (2,529
    )
    
    
    
    
    
    
    
    
    
    
    (2,256
    )Other assets
    
    
    16,708
    
    
    
    
    
    
    
    
    
    
    
    15,597
    
    
    
    
    
    
    
    
    
    
    
    14,889Total noninterest earning assets
    
    
    19,232l
    
    
    
    
    
    
    
    
    
    
    
    18,853
    
    
    
    
    
    
    
    
    
    
    
    17,395Total assets
    
    $
    461,625
    
    
    
    
    
    
    
    
    
    
    $
    427,920
    
    
    
    
    
    
    
    
    
    
    $
    377,244Liabilities and stockholders equityInterest bearing liabilities:Demand deposits
    
    $
    46,320
    
    
    $
    456
    
    
    
    .99
    
    
    $
    37,804
    
    
    $
    737
    
    
    
    1.95
    %
    
    $
    34,366
    
    
    $
    517
    
    
    
    1.50
    %Money market deposits
    
    
    98,804
    
    
    
    2,107
    
    
    
    2.13
    
    
    
    108,498
    
    
    
    4,324
    
    
    
    3.99
    
    
    
    88,869
    
    
    
    3,552
    
    
    
    4.00Savings deposits
    
    
    26,608
    
    
    
    138
    
    
    
    .52
    
    
    
    29,881
    
    
    
    157
    
    
    
    .53
    
    
    
    32,101
    
    
    
    168
    
    
    
    .52Time deposits
    
    
    177,503
    
    
    
    7,005
    
    
    
    3.95
    
    
    
    159,059
    
    
    
    7,676
    
    
    
    4.83
    
    
    
    130,293
    
    
    
    5,180
    
    
    
    3.98Total interest bearing deposits
    
    
    349,235
    
    
    
    9,706
    
    
    
    2.78
    
    
    
    335,242
    
    
    
    12,894
    
    
    
    3.85
    
    
    
    285,629
    
    
    
    9,417
    
    
    
    3.30Short-term borrowings
    
    
    2,751
    
    
    
    59
    
    
    
    2.17
    
    
    
    537
    
    
    
    23
    
    
    
    4.28
    
    
    
    2,460
    
    
    
    128
    
    
    
    5.20Long-term debt
    
    
    38,299
    
    
    
    1,544
    
    
    
    4.03
    
    
    
    21,613
    
    
    
    1,316
    
    
    
    6.09
    
    
    
    20,599
    
    
    
    1,303
    
    
    
    6.33Total interest bearing liabilities
    
    
    390,285
    
    
    
    11,309
    
    
    
    2.90
    
    
    
    357,392
    
    
    
    14,233
    
    
    
    3.98
    
    
    
    308,688
    
    
    
    10,848
    
    
    
    3.51Noninterest bearing liabilities:Demand deposits
    
    
    38,149
    
    
    
    
    
    
    
    
    
    
    
    37,393
    
    
    
    
    
    
    
    
    
    
    
    37,792Other liabilities
    
    
    5,082
    
    
    
    
    
    
    
    
    
    
    
    5,588
    
    
    
    
    
    
    
    
    
    
    
    5,388Total noninterest bearing liabilities
    
    
    43,231
    
    
    
    
    
    
    
    
    
    
    
    42,981
    
    
    
    
    
    
    
    
    
    
    
    43,180Stockholders equity
    
    
    28,109
    
    
    
    
    
    
    
    
    
    
    
    27,547
    
    
    
    
    
    
    
    
    
    
    
    25,376Total liabilities and stockholders equity
    
    $
    461,625
    
    
    
    
    
    
    
    
    
    
    $
    427,920
    
    
    
    
    
    
    
    
    
    
    $
    377,244Net interest income (tax equivalent basis)
    
    
    
    
    
    
    15,258
    
    
    
    3.10
    
    
    
    
    
    
    
    12,452
    
    
    
    2.54
    
    
    
    
    
    
    
    11,415
    
    
    
    2.68Tax equivalent basis adjustment5
    
    
    
    
    
    
    (665
    )
    
    
    
    
    
    
    
    
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    (615
    )Net interest income7
    
    
    
    
    
    $
    14,593
    
    
    
    
    
    
    
    
    
    
    $
    11,745
    
    
    
    
    
    
    
    
    
    
    $
    10,800Average rate
paid to fund interest earning Assets
    
    
    
    
    
    
    
    
    
    
    2.56
    
    
    
    
    
    
    
    
    
    
    
    3.48
    
    
    
    
    
    
    
    
    
    
    
    3.01Net interest income as a percentage of
interest earning assets (tax equivalent basis)
    
    
    
    
    
    
    
    
    
    
    3.44
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %
 1
    
    Includes $- in 2008, $39,000 in 2007 and $42,000 in 2006, representing income received under
the U.S. Treasury Departments Bank Enterprise Award certificate of deposit program.2
    
    Includes investment securities available for sale and held to maturity.3
    
    Includes nonperforming loans.4
    
    Includes loan fees of $413,000, $611,000 and $428,000 in 2008, 2007 and 2006 respectively.5
    
    The tax equivalent adjustment was computed assuming a 34% statutory federal income tax rate in
2008, 2007 and 2006.6
    
    Includes $421,000 in 2008, $336,000 in 2007 and $64,000 in 2006 representing income received
under the U.S. Treasury Departments Bank Enterprise Award loan program. 9




---



##### Table of Contents



7
    
    The total yield enhancements on the interest bearing deposits with banks and loans increased
net interest income by nine basis points in 2008, 2007 and 2006, respectively.  2008 Net Interest Income Increase
    
    2007 Net Interest Income Increase(Decrease) from 2007 due to:
    
    (Decrease) from 2006 due to:In thousands
    
    Volume
    
    Rate
    
    Total
    
    Volume
    
    Rate
    
    TotalInterest incomeLoans:Commercial
    
    $
    349
    
    
    $
    (157
    )
    
    $
    192
    
    
    $
    914
    
    
    $
    (175
    )
    
    $
    739Real estate
    
    
    2,134
    
    
    
    (1,861
    )
    
    
    273
    
    
    
    1,274
    
    
    
    902
    
    
    
    2,176Installment
    
    
    (1
    )
    
    
    (7
    )
    
    
    (8
    )
    
    
    87
    
    
    
    (94
    )
    
    
    (7
    )Total loans
    
    
    2,482
    
    
    
    (2,025
    )
    
    
    457
    
    
    
    2,275
    
    
    
    633
    
    
    
    2,908Taxable investment securities
    
    
    1,027
    
    
    
    ( 236
    )
    
    
    791
    
    
    
    249
    
    
    
    513
    
    
    
    762Tax-exempt investment securities
    
    
    (120
    )
    
    
    (5
    )
    
    
    (125
    )
    
    
    285
    
    
    
    (6
    )
    
    
    279Federal funds sold and securities
purchased under agreements to resell
    
    
    (866
    )
    
    
    (309
    )
    
    
    (1,175
    )
    
    
    413
    
    
    
    39
    
    
    
    452Interest-bearing deposits with banks
    
    
    (20
    )
    
    
    (46
    )
    
    
    (66
    )
    
    
    35
    
    
    
    (14
    )
    
    
    21Total interest income
    
    
    2,503
    
    
    
    (2,621
    )
    
    
    (118
    )
    
    
    3,257
    
    
    
    1,165
    
    
    
    4,422Interest expenseDemand deposits
    
    
    (166
    )
    
    
    447
    
    
    
    281
    
    
    
    (52
    )
    
    
    (168
    )
    
    
    (220
    )Savings deposits
    
    
    17
    
    
    
    2
    
    
    
    19
    
    
    
    12
    
    
    
    (1
    )
    
    
    11Money market deposits
    
    
    (387
    )
    
    
    2,605
    
    
    
    2218
    
    
    
    (785
    )
    
    
    13
    
    
    
    (772
    )Time deposits
    
    
    (891
    )
    
    
    1,562
    
    
    
    671
    
    
    
    (1,145
    )
    
    
    (1,351
    )
    
    
    (2,496
    )Short-term borrowings
    
    
    (95
    )
    
    
    58
    
    
    
    (37
    )
    
    
    100
    
    
    
    5
    
    
    
    105Long-term debt
    
    
    (1,017
    )
    
    
    789
    
    
    
    (228
    )
    
    
    (64
    )
    
    
    51
    
    
    
    (13
    )Total interest expense
    
    
    (2,539
    )
    
    
    5,463
    
    
    
    2,924
    
    
    
    (1,934
    )
    
    
    (1,451
    )
    
    
    (3,385
    )Net interest income
    
    $
    (36
    )
    
    $
    2,842
    
    
    $
    2,806
    
    
    $
    1,323
    
    
    $
    (286
    )
    
    $
    1,037
 Loans
      Maturities and interest sensitivities of loans
  Due fromOne YearDue in One
    
    Through
    
    Due AfterIn thousands
    
    Year or Less
    
    Five Years
    
    Five Years
    
    TotalCommercial
    
    $
    20,229
    
    
    $
    10,319
    
    
    $
    13,800
    
    
    $
    44,348Real estate:Construction
    
    
    47,938
    
    
    
    1,803
    
    
    
    
    
    
    
    49,741Mortgage
    
    
    25,194
    
    
    
    20,823
    
    
    
    130,646
    
    
    
    176,663Installment
    
    
    588
    
    
    
    374
    
    
    
    192
    
    
    
    1,154Total
    
    $
    93,949
    
    
    $
    33,319
    
    
    $
    144,638
    
    
    $
    271,906Loans at fixed
interest rates
    
    $
    24,654
    
    
    $
    20,998
    
    
    $
    28,227
    
    
    $
    73,879Loans at variable
interest rates
    
    
    69,295
    
    
    
    12,321
    
    
    
    116,411
    
    
    
    198,027Total
    
    $
    93,949
    
    
    $
    33,319
    
    
    $
    144,638
    
    
    $
    271,906
  In thousands
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Commercial
    
    $
    44,366
    
    
    $
    44,504
    
    
    $
    32,572
    
    
    $
    2,536
    
    
    $
    16,450Real estate
    
    
    226,546
    
    
    
    187,447
    
    
    
    165,828
    
    
    
    155,711
    
    
    
    142,085Installment
    
    
    1,153
    
    
    
    1,061
    
    
    
    1,176
    
    
    
    1,261
    
    
    
    1,171Total loans
    
    
    272,065
    
    
    
    233,012
    
    
    
    199,576
    
    
    
    179,508
    
    
    
    159,706Less: Unearned income
    
    
    159
    
    
    
    188
    
    
    
    292
    
    
    
    291
    
    
    
    347Loans
    
    $
    271,906
    
    
    $
    232,824
    
    
    $
    199,284
    
    
    $
    179,217
    
    
    $
    159,359
 10




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##### Table of Contents



Summary of loan loss experience
  Dollars in thousands
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Balance, January 1
    
    $
    3,000
    
    
    $
    2,400
    
    
    $
    2,165
    
    
    $
    2,076
    
    
    $
    2,145Charge-offs:Commercial loans
    
    
    651
    
    
    
    118
    
    
    
    108
    
    
    
    68
    
    
    
    229Real estate loans
    
    
    118
    
    
    
    22
    
    
    
    2
    
    
    
    
    
    
    
    8Installment loans
    
    
    23
    
    
    
    66
    
    
    
    39
    
    
    
    16
    
    
    
    9Total
    
    
    792
    
    
    
    206
    
    
    
    149
    
    
    
    84
    
    
    
    246Recoveries:Commercial loans
    
    
    5
    
    
    
    2
    
    
    
    87
    
    
    
    5
    
    
    
    23Real estate loans
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    29
    
    
    
    Installment loans
    
    
    1
    
    
    
    30
    
    
    
    18
    
    
    
    24
    
    
    
    10Total
    
    
    6
    
    
    
    34
    
    
    
    105
    
    
    
    58
    
    
    
    33Net (charge-offs) recoveries
    
    
    (786
    )
    
    
    (172
    )
    
    
    (44
    )
    
    
    (26
    )
    
    
    (213
    )Provision for loan
losses charged to operations
    
    
    1,586
    
    
    
    772
    
    
    
    279
    
    
    
    115
    
    
    
    144Balance, December 31
    
    $
    3,800
    
    
    $
    3,000
    
    
    $
    2,400
    
    
    $
    2,165
    
    
    $
    2,076Net charge-offs as a
percentage of average loans
    
    
    .31
    %
    
    
    .08
    %
    
    
    .03
    %
    
    
    .02
    %
    
    
    .15
    %Allowance for loan losses as a
percentage of loans
    
    
    1.40
    
    
    
    1.29
    
    
    
    1.20
    
    
    
    1.21
    
    
    
    1.30Allowance for loan losses as a
percentage of nonperforming loans
    
    
    44.13
    
    
    
    37.67
    
    
    
    40.45
    
    
    
    107.39
    
    
    
    171.15
     Allocation of the allowance for loan losses
  2008
    
    2007
    
    2006
    
    2005
    
    2004Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof Loan
    
    
    
    
    
    of Loan
    
    
    
    
    
    of Loan
    
    
    
    
    
    of Loan
    
    
    
    
    
    of LoanCategory
    
    
    
    
    
    Category
    
    
    
    
    
    Category
    
    
    
    
    
    Category
    
    
    
    
    
    Categoryto Gross
    
    
    
    
    
    to Gross
    
    
    
    
    
    to Gross
    
    
    
    
    
    to Gross
    
    
    
    
    
    to GrossDollars in thousands
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    LoansCommercial
    
    $
    1,102
    
    
    
    15.22
    %
    
    $
    1,098
    
    
    
    19.11
    %
    
    $
    730
    
    
    
    16.32
    %
    
    $
    626
    
    
    
    13.14
    %
    
    $
    567
    
    
    
    10.32
    %Real estate
    
    
    2,306
    
    
    
    84.00
    
    
    
    1,709
    
    
    
    80.43
    
    
    
    1,427
    
    
    
    83.09
    
    
    
    1,174
    
    
    
    86.39
    
    
    
    1,120
    
    
    
    88.94Installment
    
    
    6
    
    
    
    .78
    
    
    
    91
    
    
    
    .46
    
    
    
    21
    
    
    
    .49
    
    
    
    25
    
    
    
    .47
    
    
    
    35
    
    
    
    .74Unallocated
    
    
    386
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    354
    
    
    
    Total
    
    $
    3,800
    
    
    
    100.00
    %
    
    $
    3,000
    
    
    
    100.00
    %
    
    $
    2,400
    
    
    
    100.00
    %
    
    $
    2,165
    
    
    
    100.00
    %
    
    $
    2,076
    
    
    
    100.00
    %
  11




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##### Table of Contents



Nonperforming assets
  In thousands
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Loans past due 90 days or more and
still accruing:Commercial
    
    $
    
    
    
    $
    43
    
    
    $
    
    
    
    $
    
    
    
    $
    Real estate
    
    
    376
    
    
    
    377
    
    
    
    1,254
    
    
    
    162
    
    
    
    218Installment
    
    
    8
    
    
    
    18
    
    
    
    5
    
    
    
    7
    
    
    
    4Loans past due 90 days or more and
still accruing
    
    
    384
    
    
    
    438
    
    
    
    1,259
    
    
    
    169
    
    
    
    222Nonaccrual loans:Commercial
    
    
    1,864
    
    
    
    1,996
    
    
    
    797
    
    
    
    742
    
    
    
    146Real estate
    
    
    6,356
    
    
    
    5,485
    
    
    
    3,899
    
    
    
    1,020
    
    
    
    763Installment
    
    
    7
    
    
    
    45
    
    
    
    38
    
    
    
    85
    
    
    
    82Total nonaccrual loans
    
    
    8,227
    
    
    
    7,526
    
    
    
    4,734
    
    
    
    1,847
    
    
    
    991Total nonperforming loans
    
    
    8,611
    
    
    
    7,964
    
    
    
    5,993
    
    
    
    2,016
    
    
    
    1,213Other real estate owned
    
    
    1,547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    10,158
    
    
    $
    7,964
    
    
    $
    5,993
    
    
    $
    2,016
    
    
    $
    1,213
     Deposits
         Short-term borrowings
  Long-term debt
  Results of operations  2008 compared with 2007
   12




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##### Table of Contents



Liquidity
        Contractual obligations
   Commitments, contingent liabilities, and off-balance sheet arrangements
  13




---



##### Table of Contents



One toOne Year
    
    Three
    
    Three toIn thousands
    
    or Less
    
    Years
    
    Five Years
    
    TotalCommitments to
extend credit:Commercial loans
and lines of credit
    
    $
    45,025
    
    
    $
    
    
    
    $
    
    
    
    $
    45,025Commercial
mortgages
    
    
    35,070
    
    
    
    
    
    
    
    
    
    
    
    35,070Credit cards
    
    
    
    
    
    
    
    
    
    
    924
    
    
    
    924Residential
mortgages
    
    
    1,079
    
    
    
    
    
    
    
    
    
    
    
    1,079Home equity and
other revolving
lines of credit
    
    
    1,109
    
    
    
    
    
    
    
    
    
    
    
    1,109Standby letters of
credit
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34
  Effects of inflation
    Interest rate sensitivity
      Interest Sensitivity Gap Analysis
 December 31, 2008One Year
    
    Two Years
    
    Three Years
    
    Four YearsOne Year
    
    to
    
    to
    
    to
    
    to
    
    More thanIn thousands
    
    Or Less
    
    Two Years
    
    Three Years
    
    Four Years
    
    Five Years
    
    Five Years
    
    TotalInterest earning assets:Federal funds sold and securities
purchased under agreements
to resell
    
    $
    18,200
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    18,200Interest-bearing deposits with
banks
    
    
    226
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    726Investment securities
    
    
    66,599
    
    
    
    26,403
    
    
    
    10,595
    
    
    
    12,881
    
    
    
    8,988
    
    
    
    53,839
    
    
    
    179,305Loans
    
    
    144,143
    
    
    
    31,888
    
    
    
    30,589
    
    
    
    18,311
    
    
    
    27,031
    
    
    
    19,944
    
    
    
    271,906229,168
    
    
    
    58,291
    
    
    
    41,684
    
    
    
    31,192
    
    
    
    36,019
    
    
    
    73,783
    
    
    
    470,137Interest bearing liabilities:Deposits:Savings
    
    
    183,172
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,172Time
    
    
    128,425
    
    
    
    26,883
    
    
    
    13,241
    
    
    
    5,428
    
    
    
    8,587
    
    
    
    5,111
    
    
    
    187,675Short-term borrowings
    
    
    1,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,850Long-term debt
    
    
    2,600
    
    
    
    3,300
    
    
    
    16,000
    
    
    
    2,000
    
    
    
    8,500
    
    
    
    19,200
    
    
    
    51,600316,047
    
    
    
    30,183
    
    
    
    29,241
    
    
    
    7,428
    
    
    
    17,087
    
    
    
    24,311
    
    
    
    424,297Interest sensitivity gap:Period gap
    
    $
    (86,879
    )
    
    $
    28,108
    
    
    $
    12,443
    
    
    $
    23,764
    
    
    $
    18,932
    
    
    $
    49,472
    
    
    $
    45,840Cumulative gap
    
    
    (86,879
    )
    
    
    (58,771
    )
    
    
    (46,328
    )
    
    
    (22,564
    )
    
    
    (3,632
    )
    
    
    45,840
    
    
    
    
 14




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##### Table of Contents



Capital
  Consolidated
    
    Bank OnlyDecember 31,
    
    December 31,Dollars in thousands
    
    2008
    
    2007
    
    2008
    
    2007Total stockholders equity
    
    $
    28,092
    
    
    $
    28,872
    
    
    $
    32,386
    
    
    $
    29,155Net unrealized loss
on investment securities
available for sale
    
    
    1,124
    
    
    
    623
    
    
    
    1,124
    
    
    
    623Net unrealized loss on
equity securities available
for sale
    
    
    (25
    )
    
    
    (17
    )
    
    
    (25
    )
    
    
    (17
    )Disallowed intangibles
    
    
    (985
    )
    
    
    (1,254
    )
    
    
    (985
    )
    
    
    (1,254
    )Qualifying trust preferred
securities
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    Tier 1 capital
    
    
    32,206
    
    
    
    32,226
    
    
    
    32,500
    
    
    
    28,507Qualifying long-term debt
    
    
    5,220
    
    
    
    5,260
    
    
    
    5,000
    
    
    
    5,000Allowance for loan
losses
    
    
    3,800
    
    
    
    3,000
    
    
    
    3,800
    
    
    
    3,000Other
    
    
    165
    
    
    
    165
    
    
    
    165
    
    
    
    165Tier 2 capital
    
    
    9,185
    
    
    
    8,425
    
    
    
    8,965
    
    
    
    8,165Total capital
    
    $
    41,391
    
    
    $
    40,651
    
    
    $
    41,465
    
    
    $
    36,672Risk-adjusted assets
    
    $
    327,479
    
    
    $
    280,964
    
    
    $
    326,961
    
    
    $
    280,815Average total assets
    
    
    492,388
    
    
    
    445,077
    
    
    
    492,827
    
    
    
    444,890Risk-based capital ratios:Tier 1 capital to risk-
adjusted assets
    
    
    9.83
    %
    
    
    11.47
    %
    
    
    9.94
    %
    
    
    10.15
    %Regulatory minimum
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00Total capital to risk-
adjusted assets
    
    
    12.64
    
    
    
    14.47
    
    
    
    12.68
    
    
    
    13.06Regulatory minimum
    
    
    8.00
    
    
    
    8.00
    
    
    
    8.00
    
    
    
    8.00Leverage ratio
    
    
    6.54
    
    
    
    6.41
    
    
    
    6.61
    
    
    
    6.41Total stockholders equity
to total assets
    
    
    5.68
    
    
    
    6.43
    
    
    
    6.55
    
    
    
    6.49
     Results of operations  2007 compared with 2006
  15




---



##### Table of Contents



Critical accounting policies and use of estimates
 Allowance for loan losses
    Deferred income taxes
  16




---



##### Table of Contents



Asset impairment judgments
     
 Item 7a. Quantitative and Qualitative Disclosure about Market Risk
  17




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##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 Consolidated Balance Sheets
 December 31,Dollars in thousands, except per share data
    
    2008
    
    2007AssetsCash and due from banks (Note 2)
    
    $
    7,613
    
    
    $
    22,819Federal funds sold (Note 3)
    
    
    18,200
    
    
    
    22,000Interest-bearing deposits with banks
    
    
    726
    
    
    
    278Investment securities available for sale (Note 4)
    
    
    125,591
    
    
    
    103,618Investment securities held to maturity (Market value of $54,537
at December 31, 2008 and $54,005 at December 31, 2007) (Note 5)
    
    
    53,714
    
    
    
    53,938Loans held for sale
    
    
    267
    
    
    
    226Loans (Note 6)
    
    
    271,906
    
    
    
    232,824Less: Allowance for loan losses (Note 7)
    
    
    3,800
    
    
    
    3,000Net loans
    
    
    268,106
    
    
    
    229,824Premises and equipment (Note 8)
    
    
    3,242
    
    
    
    3,601Accrued interest receivable
    
    
    2,796
    
    
    
    2,672Cash surrender value of life insurance
    
    
    5,345
    
    
    
    4,928Other real estate owned
    
    
    1,547
    
    
    
    Other assets (Notes 13 and 14)
    
    
    7,392
    
    
    
    5,844Total assets
    
    $
    494,539
    
    
    $
    449,748Liabilities and Stockholders EquityDeposits: (Notes 4, 5, and 9)Demand
    
    $
    36,270
    
    
    $
    34,543Savings
    
    
    183,172
    
    
    
    200,996Time
    
    
    187,675
    
    
    
    159,317Total deposits
    
    
    407,117
    
    
    
    394,856Accrued expenses and other liabilities
    
    
    5,880
    
    
    
    5,070Short-term borrowings (Note 10)
    
    
    1,850
    
    
    
    1,150Long-term debt (Note 11)
    
    
    51,600
    
    
    
    19,800Total liabilities
    
    
    466,447
    
    
    
    420,876Commitments and contingencies (Note 20)Stockholders equity (Notes 15, 16 and 23):Preferred stock, no par value: Authorized 100,000 shares (Note 15);Series A , issued and outstanding 8 shares in 2008 and 2007
    
    
    200
    
    
    
    200Series C , issued and outstanding 108 shares in 2008 and 2007
    
    
    27
    
    
    
    27Series D , issued and outstanding 3,280 shares in 2008 and 2007
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2008 and 2007
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2008 and 2007
    
    
    6,790
    
    
    
    6,790Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2008 and 2007131,330 shares outstanding in 2008 and 131,987 shares outstanding in 2007
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    16,694
    
    
    
    16,922Accumulated other comprehensive loss
    
    
    (1,124
    )
    
    
    (623
    )Treasury stock, at cost - 3,200 and 2,543 common shares in 2008 and 2007, respectively
    
    
    (225
    )
    
    
    (174
    )Total stockholders equity
    
    
    28,092
    
    
    
    28,872Total liabilities and stockholders equity
    
    $
    494,539
    
    
    $
    449,748
  18




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##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 Consolidated Statements of Income
 Year Ended December 31,Dollars in thousands, except per share data
    
    2008
    
    2007
    
    2006Interest incomeInterest and fees on loans
    
    $
    16,967
    
    
    $
    16,510
    
    
    $
    13,602Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    217
    
    
    
    1,392
    
    
    
    940Interest on deposits with banks
    
    
    24
    
    
    
    90
    
    
    
    67Interest and dividends on investment securities:Taxable
    
    
    7,404
    
    
    
    6,613
    
    
    
    5,851Tax-exempt
    
    
    1,290
    
    
    
    1,373
    
    
    
    1,189Total interest income
    
    
    25,902
    
    
    
    25,978
    
    
    
    21,649Interest expenseInterest on deposits (Note 9)
    
    
    9,706
    
    
    
    12,894
    
    
    
    9,417Interest on short-term borrowings
    
    
    59
    
    
    
    23
    
    
    
    128Interest on long-term debt
    
    
    1,544
    
    
    
    1,316
    
    
    
    1,303Total interest expense
    
    
    11,309
    
    
    
    14,233
    
    
    
    10,848Net interest income
    
    
    14,593
    
    
    
    11,745
    
    
    
    10,801Provision for loan losses (Note 7)
    
    
    1,586
    
    
    
    772
    
    
    
    279Net interest income after provision
for loan losses
    
    
    13,007
    
    
    
    10,973
    
    
    
    10,522Other operating incomeService charges on deposit accounts
    
    
    1,443
    
    
    
    1,332
    
    
    
    1,157Other income (Note 12)
    
    
    1,568
    
    
    
    1,352
    
    
    
    1,586Net (losses) gains on securities transactions (Notes 4 and 5)
    
    
    (2,732
    )
    
    
    10
    
    
    
    (19
    )Total other operating income
    
    
    279
    
    
    
    2,694
    
    
    
    2,724Other operating expensesSalaries and other employee benefits (Note 14)
    
    
    6,205
    
    
    
    5,992
    
    
    
    5,503Occupancy expense (Note 8)
    
    
    1,304
    
    
    
    1,201
    
    
    
    920Equipment expense (Note 8)
    
    
    651
    
    
    
    562
    
    
    
    577Other expenses (Note 12)
    
    
    4,118
    
    
    
    3,673
    
    
    
    3,035Total other operating expenses
    
    
    12,278
    
    
    
    11,428
    
    
    
    10,035Income before income tax expense
    
    
    1,008
    
    
    
    2,239
    
    
    
    3,211Income tax (benefit) expense (Note 13)
    
    
    (50
    )
    
    
    372
    
    
    
    743Net income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468Net income per common share (Note 17)Basic
    
    $
    1.87
    
    
    $
    8.28
    
    
    $
    13.04Diluted
    
    
    1.87
    
    
    
    8.09
    
    
    
    12.54Basic average common shares outstanding
    
    
    131,688
    
    
    
    132,306
    
    
    
    133,246Diluted average common shares outstanding
    
    
    131,688
    
    
    
    148,623
    
    
    
    143,924Cash dividends declared per common share
    
    $
    3.60
    
    
    $
    3.50
    
    
    $
    3.25
  19




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##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 Consolidated Statements of Changes
in Stockholders Equity
 AccumulatedOtherCommon
    
    
    
    
    
    Preferred
    
    Retained
    
    Comprehensive
    
    TreasuryDollars in thousands
    
    Stock
    
    Surplus
    
    Stock
    
    Earnings
    
    (Loss) Income
    
    Stock
    
    TotalBalance, December 31, 2005
    
    $
    1,345
    
    
    $
    1,115
    
    
    $
    9,237
    
    
    $
    14,799
    
    
    $
    (973
    )
    
    $
    (46
    )
    
    $
    25,477Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,468
    
    
    
    
    
    
    
    
    
    
    
    2,468Unrealized holding losses on securities
arising during the period (net of tax of $(7))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Reclassification adjustment for losses
included in net income (net of tax of $7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,463Conversion of long-term debt into preferred stock
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    800Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    (63
    )Dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (434
    )
    
    
    
    
    
    
    
    
    
    
    (434
    )Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (731
    )
    
    
    
    
    
    
    
    
    
    
    (731
    )Balance, December 31, 2006
    
    
    1,345
    
    
    
    1,115
    
    
    
    10,287
    
    
    
    16,102
    
    
    
    (978
    )
    
    
    (109
    )
    
    
    27,762Cumulative adjustment to beginning retained
earnings upon adoption of FIN #48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    188Adjusted Balance, January 1, 2007
    
    
    1,345
    
    
    
    1,115
    
    
    
    10,287
    
    
    
    16,290
    
    
    
    (978
    )
    
    
    (109
    )
    
    
    27,950Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,867
    
    
    
    
    
    
    
    
    
    
    
    1,867Unrealized holding gains on securities
arising during the period (net of tax of $145)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    363
    
    
    
    
    
    
    
    363Reclassification adjustment for losses
included in net income (net of tax of $(3))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,222Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    (65
    )Dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    (464
    )Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (771
    )
    
    
    
    
    
    
    
    
    
    
    (771
    )Balance, December 31, 2007
    
    
    1,345
    
    
    
    1,115
    
    
    
    10,287
    
    
    
    16,922
    
    
    
    (623
    )
    
    
    (174
    )
    
    
    28,872Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,058
    
    
    
    
    
    
    
    
    
    
    
    1,058Unrealized holding gains on securities
arising during the period (net of tax of $922))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,304
    )
    
    
    
    
    
    
    (2,304
    )Reclassification adjustment for losses included in net income (net of tax of $(929))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,803
    
    
    
    
    
    
    
    1,803Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    557Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )Dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (474
    )
    
    
    
    
    
    
    
    
    
    
    (474
    )Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (812
    )
    
    
    
    
    
    
    
    
    
    
    (812
    )Balance, December 31, 2008
    
    $
    1,345
    
    
    $
    1,115
    
    
    $
    10,287
    
    
    $
    16,694
    
    
    $
    (1,124
    )
    
    $
    (225
    )
    
    $
    28,092
  20




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 Consolidated Statements of Cash Flows
 Year Ended December 31,In thousands
    
    2008
    
    2007
    
    2006Operating activitiesNet income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    495
    
    
    
    430
    
    
    
    458Provision for loan losses
    
    
    1,586
    
    
    
    772
    
    
    
    279(Discount accretion) premium amortization of investment securities
    
    
    (65
    )
    
    
    (335
    )
    
    
    122Amortization of intangible assets
    
    
    213
    
    
    
    197
    
    
    
    120Net losses (gains) on sales and early redemptions of investment securities
    
    
    44
    
    
    
    (10
    )
    
    
    19Net gains on sales of loans held for sale
    
    
    (18
    )
    
    
    (72
    )
    
    
    (39
    )Writedowns of investment securities
    
    
    2,688
    
    
    
    
    
    
    
    Net gain on sale of bank-owned properties
    
    
    
    
    
    
    
    
    
    
    (583
    )Loans originated for sale
    
    
    (1,001
    )
    
    
    (3,312
    )
    
    
    (3,279
    )Proceeds from sales and principal payments from loans held for sale
    
    
    978
    
    
    
    3,767
    
    
    
    2,833Increase in accrued interest receivable
    
    
    (124
    )
    
    
    (167
    )
    
    
    (588
    )Deferred taxes
    
    
    (1,056
    )
    
    
    236
    
    
    
    (629
    )Net increase in bank-owned life insurance
    
    
    (197
    )
    
    
    (185
    )
    
    
    (159
    )(Increase) decrease in other assets
    
    
    (383
    )
    
    
    (2,249
    )
    
    
    742Increase in accrued expenses and other liabilities
    
    
    777
    
    
    
    226
    
    
    
    638Net cash provided by operating activities
    
    
    4,995
    
    
    
    1,165
    
    
    
    2,402Investing activitiesPurchase of loans
    
    
    
    
    
    
    (18,734
    )
    
    
    Increase in loans, net
    
    
    (41,415
    )
    
    
    (14,978
    )
    
    
    (20,235
    )(Increase) decrease in interest bearing deposits with banks
    
    
    (448
    )
    
    
    375
    
    
    
    607Proceeds from maturities of investment securities available for
sale, including principal repayments and early redemptions
    
    
    21,774
    
    
    
    48,501
    
    
    
    47,062Proceeds from maturities of investment securities held to
maturity, including principal repayments and early redemptions
    
    
    10,964
    
    
    
    4,792
    
    
    
    918Proceeds from sales of investment securities available for sale
    
    
    5,179
    
    
    
    3,195
    
    
    
    3,725Purchases of investment securities available for sale
    
    
    (50,849
    )
    
    
    (38,230
    )
    
    
    (57,298
    )Purchases of investment securities held to maturity
    
    
    (12,274
    )
    
    
    (5,280
    )
    
    
    (15,009
    )Purchases of bank-owned life insurance, net
    
    
    (220
    )
    
    
    
    
    
    
    (714
    )Proceeds from sale of bank-owned properties
    
    
    
    
    
    
    
    
    
    
    1,013Purchases of premises and equipment
    
    
    (136
    )
    
    
    (302
    )
    
    
    (275
    )Net cash used in investing activities
    
    
    (67,425
    )
    
    
    (20,661
    )
    
    
    (40,206
    )Financing activitiesPurchase of deposits
    
    
    
    
    
    
    11,016
    
    
    
    Increase in deposits
    
    
    12,261
    
    
    
    41,424
    
    
    
    29,987Increase (decrease) in short-term borrowings
    
    
    700
    
    
    
    750
    
    
    
    (140
    )Proceeds from issuance of long-term debt
    
    
    43,000
    
    
    
    5,000
    
    
    
    Decrease in long-term debt
    
    
    (11,200
    )
    
    
    (4,806
    )
    
    
    (294
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    250Purchases of treasury stock
    
    
    (51
    )
    
    
    (65
    )
    
    
    (63
    )Dividends paid on preferred stock
    
    
    (812
    )
    
    
    (771
    )
    
    
    (731
    )Dividends paid on common stock
    
    
    (474
    )
    
    
    (464
    )
    
    
    (434
    )Net cash provided by financing activities
    
    
    43,424
    
    
    
    52,084
    
    
    
    28,575Net (decrease) increase in cash and cash equivalents
    
    
    (19,006
    )
    
    
    32,588
    
    
    
    (9,229
    )Cash and cash equivalents at beginning of year
    
    
    44,819
    
    
    
    12,231
    
    
    
    21,460Cash and cash equivalents at end of year
    
    $
    25,813
    
    
    $
    44,819
    
    
    $
    12,231Cash paid during the year:Interest
    
    $
    11,728
    
    
    $
    14,050
    
    
    $
    10,315Income taxes
    
    
    1,582
    
    
    
    842
    
    
    
    996Non-cash transactionsTransfer of investments from held to maturity to available for sale
    
    
    1,500
    
    
    
    
    
    
    
    Transfer of loans to other real estate owned
    
    
    1,547
    
    
    
    
    
    
    
    Conversion of long-term debt into preferred stock
    
    
    
    
    
    
    
    
    
    
    800
  21




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##### Table of Contents



Note 1 Summary of significant accounting policies
  Business
   Principles of consolidation
  Cash and cash equivalents
  Investment securities held to maturity and investment securities available for sale
     Loans held for sale
  Loans
     Allowance for loan losses
  22




---



##### Table of Contents



Bank premises and equipment
  Other assets
  Other real estate owned
   Core deposit premiums
  Long-term debt
   Income taxes
   Net income per common share
  Comprehensive income
  Recent accounting pronouncements
  23




---



##### Table of Contents



Reclassifications
  Note 2 Cash and due from banks
  Note 3 Federal funds sold and securities purchased under agreements to resell
  Note 4 Investment securities available for sale
  Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair2008 In thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    4,009
    
    
    $
    5
    
    
    $
    57
    
    
    $
    3,957Obligations of U.S.
government sponsored
entities
    
    
    19,157
    
    
    
    181
    
    
    
    326
    
    
    
    19,012Obligations of state and
political subdivisions
    
    
    548
    
    
    
    4
    
    
    
    
    
    
    
    552Mortgage-backed
securities
    
    
    88,356
    
    
    
    2,408
    
    
    
    134
    
    
    
    90,630Other debt securities
    
    
    11,645
    
    
    
    149
    
    
    
    3,996
    
    
    
    7,798Equity securities:Marketable securities
    
    
    678
    
    
    
    
    
    
    
    40
    
    
    
    638Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    2,889
    
    
    
    
    
    
    
    
    
    
    
    2,889Total
    
    $
    127,397
    
    
    $
    2,747
    
    
    $
    4,553
    
    
    $
    125,591
 24




---



##### Table of Contents



Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair2007 In thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    6,860
    
    
    $
    198
    
    
    $
    226
    
    
    $
    6,832Obligations of U.S.
government sponsored
entities
    
    
    10,844
    
    
    
    62
    
    
    
    11
    
    
    
    10,895Obligations of state and
political subdivisions
    
    
    551
    
    
    
    6
    
    
    
    
    
    
    
    557Mortgage-backed
securities
    
    
    74,640
    
    
    
    196
    
    
    
    563
    
    
    
    74,273Other debt securities
    
    
    9,618
    
    
    
    15
    
    
    
    665
    
    
    
    8,968Equity securities:Marketable securities
    
    
    646
    
    
    
    
    
    
    
    28
    
    
    
    618Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    1,360
    
    
    
    
    
    
    
    
    
    
    
    1,360Total
    
    $
    104,634
    
    
    $
    477
    
    
    $
    1,493
    
    
    $
    103,618
  Amortized
    
    FairIn thousands
    
    Cost
    
    ValueDue within one year:U.S. Treasury securities and obligations
of U.S. government agencies
    
    $
    1,083
    
    
    $
    1,088Obligations of U.S. government sponsored
entities
    
    
    
    
    
    
    Due after one year but within five years:Obligations of U.S. government sponsored
entities
    
    
    3,805
    
    
    
    3,922Mortgage-backed securities
    
    
    162
    
    
    
    166Obligations of state and political subdivisions
    
    
    548
    
    
    
    552Other debt securities
    
    
    498
    
    
    
    489Due after five years but within ten years:U.S. Treasury securities and obligations
of U.S. government agencies
    
    
    2,264
    
    
    
    2,218Obligations of U.S.
government sponsored
entities
    
    
    3,431
    
    
    
    3,427Mortgage-backed securities
    
    
    5,975
    
    
    
    6,094Other debt securities
    
    
    1,000
    
    
    
    544Due after ten years:U.S. Treasury securities and obligations
of U.S. government agencies
    
    
    662
    
    
    
    651Obligations of U.S. government sponsored
entities
    
    
    11,921
    
    
    
    11,663Mortgage-backed securities
    
    
    82,219
    
    
    
    84,370Other debt securities
    
    
    10,147
    
    
    
    6,765Total debt securities
    
    
    123,715
    
    
    
    121,949Equity securities
    
    
    3,682
    
    
    
    3,642Total
    
    $
    127,397
    
    
    $
    125,591
   In thousands
    
    2008
    
    2007
    
    2006Taxable
    
    $
    6,001
    
    
    $
    5,187
    
    
    $
    4,853Tax-exempt
    
    
    20
    
    
    
    94
    
    
    
    110Total
    
    $
    6,021
    
    
    $
    5,281
    
    
    $
    4,963
   Less than 12 Months
    
    12 Months or More
    
    TotalGross Unrealized
    
    
    
    
    
    Gross Unrealized
    
    
    
    
    
    Gross Unrealized2008 In thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesU.S. Treasury securities and
obligations
of U.S. government agencies
    
    $
    2,701
    
    
    $
    53
    
    
    $
    168
    
    
    $
    4
    
    
    $
    2,869
    
    
    $
    57Obligations of U.S. Government
sponsored entities
    
    
    3,891
    
    
    
    68
    
    
    
    4,881
    
    
    
    258
    
    
    
    8,772
    
    
    
    326Mortgaged-backed securities
    
    
    5,142
    
    
    
    65
    
    
    
    2,760
    
    
    
    69
    
    
    
    7,902
    
    
    
    134Other debt securities
    
    
    2,722
    
    
    
    274
    
    
    
    3,829
    
    
    
    3,722
    
    
    
    6,551
    
    
    
    3,996Equity securities
    
    
    
    
    
    
    
    
    
    
    678
    
    
    
    40
    
    
    
    678
    
    
    
    40Total
    
    $
    14,456
    
    
    $
    460
    
    
    $
    12,316
    
    
    $
    4,093
    
    
    $
    26,772
    
    
    $
    4,553
 25




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##### Table of Contents



Less than 12 Months
    
    12 Months or More
    
    TotalGross Unrealized
    
    
    
    
    
    Gross Unrealized
    
    
    
    
    
    Gross Unrealized2007 In thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesU.S. Treasury securities and
obligations
of U.S. government agencies
    
    $
    4,402
    
    
    $
    36
    
    
    $
    12,525
    
    
    $
    190
    
    
    $
    16,927
    
    
    $
    226Obligations of U.S. government
sponsored entities
    
    
    721
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    721
    
    
    
    11Mortgaged-backed securities
    
    
    5,272
    
    
    
    14
    
    
    
    31,353
    
    
    
    549
    
    
    
    36,625
    
    
    
    563Other debt securities
    
    
    6,120
    
    
    
    429
    
    
    
    1,765
    
    
    
    236
    
    
    
    7,885
    
    
    
    665Equity securities
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    28
    
    
    
    646
    
    
    
    28Total
    
    $
    16,515
    
    
    $
    490
    
    
    $
    46,289
    
    
    $
    1,003
    
    
    $
    62,804
    
    
    $
    1,493
   Note 5 Investment securities held to maturity
  Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair2008 In thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueObligations of U.S.
government
sponsored entities
    
    $
    8,500
    
    
    $
    20
    
    
    $
    
    
    
    $
    8,520Obligations of state
and
political subdivisions
    
    
    31,629
    
    
    
    814
    
    
    
    221
    
    
    
    32,222Mortgage-backed
securities
    
    
    12,089
    
    
    
    269
    
    
    
    
    
    
    
    12,358Other debt securities
    
    
    1,496
    
    
    
    
    
    
    
    59
    
    
    
    1,437Total
    
    $
    53,714
    
    
    $
    1,103
    
    
    $
    280
    
    
    $
    54,537
 Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair2007 In thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueObligations of U.S.
government
sponsored entities
    
    $
    14,594
    
    
    $
    45
    
    
    $
    117
    
    
    $
    14,522Mortgage-backed
securities
    
    
    5,175
    
    
    
    25
    
    
    
    68
    
    
    
    5,132Obligations of state
and
political subdivisions
    
    
    31,665
    
    
    
    406
    
    
    
    203
    
    
    
    31,868Other debt securities
    
    
    2,504
    
    
    
    47
    
    
    
    68
    
    
    
    2,483Total
    
    $
    53,938
    
    
    $
    523
    
    
    $
    456
    
    
    $
    54,005
   Amortized
    
    FairIn thousands
    
    Cost
    
    ValueDue within one year:Obligations
of state and political subdivisions
    
    $
    336
    
    
    $
    341Other debt securities
    
    
    1,001
    
    
    
    991Due after one year but within five years:Obligations of state and political
subdivisions
    
    
    7,473
    
    
    
    7,744Due after five years but within ten years:Obligations of U.S. government sponsored
entities
    
    
    1,000
    
    
    
    1,000Obligations of state and political
subdivisions
    
    
    14,745
    
    
    
    15,134Mortgage-backed securities
    
    
    243
    
    
    
    248Due after ten years:Obligations of U.S. government sponsored
entities
    
    
    7,499
    
    
    
    7,519Obligations of state and political
subdivisions
    
    
    9,075
    
    
    
    9,003Mortgage-backed securities
    
    
    11,847
    
    
    
    12,111Other debt securities
    
    
    495
    
    
    
    446Total
    
    $
    53,714
    
    
    $
    54,537
  In thousands
    
    2008
    
    2007
    
    2006Taxable
    
    $
    1,403
    
    
    $
    1,426
    
    
    $
    998Tax-exempt
    
    
    1,270
    
    
    
    1,279
    
    
    
    1,079Total
    
    $
    2,673
    
    
    $
    2,705
    
    
    $
    2,077
  26




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##### Table of Contents



Less than 12 Months
    
    12 Months or More
    
    TotalGross Unrealized
    
    
    
    
    
    Gross Unrealized
    
    
    
    
    
    Gross Unrealized2008 In thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of state and political
subdivisions
    
    $
    4,753
    
    
    $
    146
    
    
    $
    647
    
    
    $
    75
    
    
    $
    5,400
    
    
    $
    221Other debt securities
    
    
    1,437
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    1,437
    
    
    
    59Total
    
    $
    6,190
    
    
    $
    205
    
    
    $
    647
    
    
    $
    75
    
    
    $
    6,837
    
    
    $
    280
 Less than 12 Months
    
    12 Months or More
    
    TotalGross Unrealized
    
    
    
    
    
    Gross Unrealized
    
    
    
    
    
    Gross Unrealized2007 In thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of U.S. government
sponsored entities
    
    $
    1,784
    
    
    $
    4
    
    
    $
    6,402
    
    
    $
    113
    
    
    $
    8,186
    
    
    $
    117Mortgaged-backed securities
    
    
    
    
    
    
    
    
    
    
    1,935
    
    
    
    68
    
    
    
    1,935
    
    
    
    68Obligations
of state and political subdivisions
    
    
    3,248
    
    
    
    158
    
    
    
    4,294
    
    
    
    45
    
    
    
    7,542
    
    
    
    203Other debt securities
    
    
    1,432
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    1,432
    
    
    
    68Total
    
    $
    6,464
    
    
    $
    230
    
    
    $
    12,631
    
    
    $
    226
    
    
    $
    19,095
    
    
    $
    456
  Note 6 Loans
  In thousands
    
    2008
    
    2007Commercial
    
    $
    44,366
    
    
    $
    44,504Real estate
    
    
    226,546
    
    
    
    187,447Installment
    
    
    1,153
    
    
    
    1,061Total loans
    
    
    272,065
    
    
    
    233,012Less:Unearned income
    
    
    159
    
    
    
    188Loans
    
    $
    271,906
    
    
    $
    232,824
   In thousands
    
    2008
    
    2007Nonaccrual loans
    
    $
    8,227
    
    
    $
    7,527Loans with interest or principal 90
days or more past due and still accruing
    
    
    384
    
    
    
    438Total nonperforming loans
    
    $
    8,611
    
    
    $
    7,965
  In thousands
    
    2008
    
    2007
    
    2006Interest income foregone
    
    $
    (692
    )
    
    $
    (465
    )
    
    $
    (174
    )Interest income received
    
    
    467
    
    
    
    429
    
    
    
    296$
    (225
    )
    
    $
    (36
    )
    
    $
    122
    Note 7 Allowance for loan losses
  In thousands
    
    2008
    
    2007
    
    2006Balance, January 1
    
    $
    3,000
    
    
    $
    2,400
    
    
    $
    2,165Provision for loan
losses
    
    
    1,586
    
    
    
    772
    
    
    
    279Recoveries of loans previously
charged off
    
    
    6
    
    
    
    34
    
    
    
    1054,592
    
    
    
    3,206
    
    
    
    2,549Less: Charge-offs
    
    
    792
    
    
    
    206
    
    
    
    149Balance, December 31
    
    $
    3,800
    
    
    $
    3,000
    
    
    $
    2,400
 Note 8 Premises and equipment
  In thousands
    
    2008
    
    2007Land
    
    $
    329
    
    
    $
    329Premises
    
    
    1,520
    
    
    
    1,530Furniture and equipment
    
    
    4,238
    
    
    
    4,092Leasehold improvements
    
    
    3,316
    
    
    
    3,315Total cost
    
    
    9,403
    
    
    
    9,266Less: Accumulated depreciation and amortization
    
    
    6,161
    
    
    
    5,665Total premises and equipment
    
    $
    3,242
    
    
    $
    3,601
  27




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##### Table of Contents



Note 9 Deposits
  In thousands
    
    2008
    
    2007Noninterest bearing demand
    
    $
    36,270
    
    
    $
    34,543Interest bearing:Demand
    
    
    39,040
    
    
    
    66,276Savings
    
    
    24,670
    
    
    
    28,149Money market
    
    
    119,462
    
    
    
    106,571Time
    
    
    187,675
    
    
    
    159,317Total interest bearing deposits
    
    
    370,847
    
    
    
    360,313Total deposits
    
    $
    407,117
    
    
    $
    394,856
  In thousands
    
    2008
    
    2007Three months or less
    
    $
    47,301
    
    
    $
    37,759Over three months but within six months
    
    
    4,893
    
    
    
    15,685Over six months but within twelve months
    
    
    21,370
    
    
    
    8,871Over twelve months
    
    
    24,733
    
    
    
    19,791Total deposits
    
    $
    98,297
    
    
    $
    82,106
  Note 10 Short-term borrowings
  AverageInterest
    
    
    
    
    
    Average
    
    MaximumRate on
    
    Average
    
    Interest
    
    BalanceDecem-
    
    Decem-
    
    Balance
    
    Rate
    
    at anyber 31
    
    ber 31
    
    During
    
    During
    
    Month-Dollars in thousands
    
    Balance
    
    Balance
    
    the Year
    
    the Year
    
    End2008Federal funds
purchased
    
    $
    
    
    
    
    
    %
    
    $
    2,140
    
    
    
    2.23
    %
    
    $
    19,780Securities sold under
repurchase
agreements
    
    
    1,850
    
    
    
    .30
    %
    
    
    157
    
    
    
    1.39
    
    
    
    2,000Demand note issued
to the U.S. Treasury
    
    
    
    
    
    
    
    
    
    
    454
    
    
    
    2.13
    
    
    
    6,000Total
    
    $
    1,850
    
    
    
    .30
    %
    
    $
    2,751
    
    
    
    2.17
    %
    
    $
    27,7802007Federal funds
purchased
    
    $
    
    
    
    
    
    %
    
    $
    11
    
    
    
    5.53
    %
    
    $
    Securities sold under
repurchase
agreements
    
    
    1,150
    
    
    
    .50
    %
    
    
    63
    
    
    
    .54
    
    
    
    2,000Demand note issued
to the U.S. Treasury
    
    
    
    
    
    
    
    
    
    
    463
    
    
    
    4.76
    
    
    
    5,216Total
    
    $
    1,150
    
    
    
    .50
    %
    
    $
    537
    
    
    
    4.28
    %
    
    $
    7,216
   Note 11 Long-term debt
  In thousands
    
    2008
    
    2007FHLB convertible advances due from
July 17, 2009 through August 6, 2018
    
    $
    42,200
    
    
    $
    10,2005.00% capital note, due July 1, 2008
    
    
    
    
    
    
    1006.00% capital note, due December 28, 2010
    
    
    200
    
    
    
    3008.00% capital note, due May 6, 2017
    
    
    200
    
    
    
    2005.00% senior note, due February 21, 2022
    
    
    5,000
    
    
    
    5,000Subordinated debt
    
    
    4,000
    
    
    
    4,000Total
    
    $
    51,600
    
    
    $
    19,800
         In thousands
    
    Amount2009
    
    $
    2,6002010
    
    
    3,3002011
    
    
    16,0002012
    
    
    2,0002013
    
    
    8,500Thereafter
    
    
    19,200Total
    
    $
    51,600
 28




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##### Table of Contents



Note 12 Other operating income and expenses
  In thousands
    
    2008
    
    2007
    
    2006Other incomeIncome from off-site ATMs
    
    $
    428
    
    
    $
    420
    
    
    $
    384Agency fees on commercial loans
    
    
    318
    
    
    
    328
    
    
    
    323Earnings on cash surrender value of
life insurance
    
    
    248
    
    
    
    225
    
    
    
    198Gain on sale of bank-owned properties
    
    
    
    
    
    
    
    
    
    
    583Undistributed gain (loss) from
unconsolidated investee
    
    
    185
    
    
    
    (9
    )
    
    
    (335
    )Miscellaneous other income
    
    
    389
    
    
    
    388
    
    
    
    433Total other income
    
    $
    1,568
    
    
    $
    1,352
    
    
    $
    1,586Other expensesMerchant card charges
    
    $
    491
    
    
    $
    334
    
    
    $
    273Marketing expense
    
    
    471
    
    
    
    447
    
    
    
    359FDIC insurance
    
    
    429
    
    
    
    40
    
    
    
    39Professional fees
    
    
    342
    
    
    
    264
    
    
    
    231Data processing
    
    
    341
    
    
    
    396
    
    
    
    378Management consulting fees
    
    
    212
    
    
    
    256
    
    
    
    170Miscellaneous other expenses
    
    
    1,832
    
    
    
    1,936
    
    
    
    1,585Total other expenses
    
    $
    4,118
    
    
    $
    3,673
    
    
    $
    3,035
 Note 13 Income taxes
  In thousands
    
    2008
    
    2007
    
    2006Current expenseFederal
    
    $
    755
    
    
    $
    613
    
    
    $
    1,103State
    
    
    251
    
    
    
    212
    
    
    
    2691,006
    
    
    
    825
    
    
    
    1,372Deferred expense (benefit)Federal
    
    
    (826
    )
    
    
    (368
    )
    
    
    (552
    )State
    
    
    (230
    )
    
    
    (85
    )
    
    
    (77
    )(1,056
    )
    
    
    (453
    )
    
    
    (629
    )Total income tax expense
    
    $
    (50
    )
    
    $
    372
    
    
    $
    743
  In thousands
    
    2008
    
    2007
    
    2006Federal income tax at statutory rate
    
    $
    343
    
    
    $
    756
    
    
    $
    1,092Increase (decrease) in income tax
expense resulting from:State income tax expense, net of
federal benefit
    
    
    60
    
    
    
    83
    
    
    
    127Tax-exempt income
    
    
    (462
    )
    
    
    (485
    )
    
    
    (465
    )Life insurance
    
    
    (66
    )
    
    
    (63
    )
    
    
    (54
    )Increase in valuation allowance
    
    
    423
    
    
    
    
    
    
    
    Decrease in FIN 48
    
    
    (363
    )
    
    
    
    
    
    
    Other, net
    
    
    15
    
    
    
    81
    
    
    
    43Total income tax expense
    
    $
    (50
    )
    
    $
    372
    
    
    $
    743
  In thousands
    
    2008
    
    2007Deferred tax assetsUnrealized losses on investment
securities available for sale
    
    $
    1,539
    
    
    $
    393Allowance for loan losses
    
    
    1,370
    
    
    
    964Premises and equipment
    
    
    453
    
    
    
    153Deposit intangible
    
    
    6
    
    
    
    145Deferred compensation
    
    
    1,166
    
    
    
    1,020Deferred income
    
    
    295
    
    
    
    225Investment in partnership
    
    
    114
    
    
    
    Other assets
    
    
    25
    
    
    
    98Total deferred tax asset
    
    
    4,968
    
    
    
    2,998Deferred tax liabilitiesInvestment in partnership
    
    
    
    
    
    
    245Other
    
    
    220
    
    
    
    123Total deferred tax liabilities
    
    
    220
    
    
    
    368Deferred tax asset
    
    $
    4,748
    
    
    
    2,630Valuation allowance
    
    
    423
    
    
    
    Net deferred tax asset
    
    $
    4,325
    
    
    $
    2,630
     In thousandsBalance at January 1,2008 $188
    
    $
    427Additions based on tax positions related to the current year
    
    
    48Additions for tax positions of prior years
    
    
    Reductions for tax positions of prior years
    
    
    (363
    )Balance at December 3l, 2008
    
    $
    112
  29




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##### Table of Contents



Note 14 Benefit plans
          Note 15 Preferred stock
   Year
    
    Dividend
    
    Stated
    
    Number
    
    December 31,Issued
    
    Rate
    
    Value
    
    of Shares
    
    2008
    
    2007Series A
    
    
    1996
    
    
    
    6.00
    %
    
    $
    25,000
    
    
    
    8
    
    
    $
    200,000
    
    
    $
    200,000Series C
    
    
    1996
    
    
    
    8.00
    
    
    
    250
    
    
    
    108
    
    
    
    27,000
    
    
    
    27,000Series D
    
    
    1997
    
    
    
    6.50
    
    
    
    250
    
    
    
    3,280
    
    
    
    820,000
    
    
    
    820,000Series E
    
    
    2005
    
    
    
    6.00
    
    
    
    50,000
    
    
    
    28
    
    
    
    1,400,000
    
    
    
    1,400,000Series F
    
    
    2005
    
    
    
    8.53
    
    
    
    7,000,000
    
    
    
    7,000
    
    
    
    6,790,000
    
    
    
    6,790,000Series E
    
    
    2006
    
    
    
    6.00
    
    
    
    50,000
    
    
    
    21
    
    
    
    1,050,000
    
    
    
    1,050,000$
    10,287,000
    
    
    $
    10,287,000
   Note 16 Restrictions on subsidiary bank dividends
   Note 17 Net income per common share
  In thousands, except per share data
    
    2008
    
    2007
    
    2006Net income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468Dividends on preferred stock
    
    
    (812
    )
    
    
    (771
    )
    
    
    (731
    )Net income applicable to basic
common shares
    
    
    246
    
    
    
    1,096
    
    
    
    1,737Dividends applicable to convertible
preferred stock
    
    
    147
    
    
    
    106
    
    
    
    67Net income applicable to diluted
common shares
    
    $
    393
    
    
    $
    1,202
    
    
    $
    1,804Number of average common sharesBasic
    
    
    131,688
    
    
    
    132,306
    
    
    
    133,246Diluted:Average common shares outstanding
    
    
    131,688
    
    
    
    132,306
    
    
    
    133,246Average potential dilutive common
shares
    
    
    16,317
    
    
    
    16,317
    
    
    
    10,678148,005
    
    
    
    148,623
    
    
    
    143,924Net income per common shareBasic
    
    $
    1.87
    
    
    $
    8.28
    
    
    $
    13.04Diluted
    
    
    1.87
    
    
    
    8.09
    
    
    
    12.54
 Note 18 Related party transactions
   Note 19 Fair value measurement of assets and liabilities
  30




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##### Table of Contents



(Dollars in thousands)
    
    Total
    
    Level 1
    
    Level 2
    
    Level 3Investment securities
available for sale
    
    $
    125,591
    
    
    $
    1,008
    
    
    $
    123,439
    
    
    $
    1,144Loans held for sale
    
    
    267
    
    
    
    267
    
    
    
    
    
    
    
    Total assets
    
    $
    125,858
    
    
    $
    1,275
    
    
    $
    123,439
    
    
    $
    1,144Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    Note 20 Fair value of financial instruments
     Cash, short-term investments and interest-bearing deposits with banks
  Investment securities
  Loans
  Loans held for sale
  Deposit liabilities
  Short-term borrowings
  Long-term debt
  Commitments to extend credit and letters of credit
  31




---



##### Table of Contents



2008
    
    2007Carrying
    
    Fair
    
    Carrying
    
    FairIn thousands
    
    Value
    
    Value
    
    Value
    
    ValueFinancial assetsCash and other short-term
Investments
    
    $
    25,813
    
    
    $
    25,813
    
    
    $
    44,819
    
    
    $
    44,819Interest-bearing deposits
with banks
    
    
    726
    
    
    
    719
    
    
    
    278
    
    
    
    278Investment securities AFS
    
    
    125,591
    
    
    
    125,591
    
    
    
    103,618
    
    
    
    103,618Investment securities HTM
    
    
    53,714
    
    
    
    54,537
    
    
    
    53,938
    
    
    
    54,005Loans
    
    
    271,906
    
    
    
    259,226
    
    
    
    232,824
    
    
    
    233,918Loans held for sale
    
    
    267
    
    
    
    267
    
    
    
    226
    
    
    
    226Financial liabilitiesDeposits
    
    
    407,117
    
    
    
    396,503
    
    
    
    394,856
    
    
    
    376,054Short-term borrowings
    
    
    1,850
    
    
    
    1,850
    
    
    
    1,150
    
    
    
    1,150Long-term debt
    
    
    51,600
    
    
    
    51,692
    
    
    
    19,800
    
    
    
    19,440
 Note 21 Commitments and contingencies
    Note 22 Financial instruments with off-balance sheet risk
       Note 23 Parent company information
  Condensed Balance Sheet
 December 31,In thousands
    
    2008
    
    2007AssetsCash and cash equivalents
    
    $
    32
    
    
    $
    4Investment in subsidiary
    
    
    32,551
    
    
    
    29,173Due from subsidiary
    
    
    5,075
    
    
    
    9,150Other assets
    
    
    499
    
    
    
    350Total assets
    
    $
    38,157
    
    
    $
    38,677Liabilities and stockholders equityOther liabilities
    
    $
    541
    
    
    $
    81Notes payable
    
    
    5,400
    
    
    
    5,600Subordinated debt
    
    
    4,124
    
    
    
    4,124Total liabilities
    
    
    10,065
    
    
    
    9,805Stockholders equity
    
    
    28,092
    
    
    
    28,872Total liabilities and stockholders equity
    
    $
    38,157
    
    
    $
    38,677
 Condensed Statement of Income
 Year Ended December 31,In thousands
    
    2008
    
    2007
    
    2006IncomeInterest income
    
    $
    4
    
    
    $
    13
    
    
    $
    7Dividends from subsidiaries
    
    
    870
    
    
    
    750
    
    
    
    900Interest from subsidiaries
    
    
    579
    
    
    
    835
    
    
    
    1,110Total income
    
    
    1,453
    
    
    
    1,598
    
    
    
    2,017ExpensesInterest expense
    
    
    542
    
    
    
    756
    
    
    
    730Other operating income
    
    
    31
    
    
    
    
    
    
    
    4Other operating expenses
    
    
    3
    
    
    
    3
    
    
    
    2Income tax expense
    
    
    21
    
    
    
    36
    
    
    
    155Total expenses
    
    
    535
    
    
    
    795
    
    
    
    883Income before equity in undistributed income of
subsidiaries
    
    
    918
    
    
    
    803
    
    
    
    1,134Equity in undistributed income
of subsidiaries
    
    
    140
    
    
    
    1,064
    
    
    
    1,334Net income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468
 32




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##### Table of Contents



Condensed Statement of Cash Flows
 Year Ended December 31,In thousands
    
    2008
    
    2007
    
    2006Operating activitiesNet income
    
    $
    1,058
    
    
    $
    1,867
    
    
    $
    2,468Adjustments to reconcile net income
to cash used in operating activities:Equity in undistributed income of
subsidiaries
    
    
    (140
    )
    
    
    (1,064
    )
    
    
    (1,335
    )(Increase) decrease in other assets
    
    
    (149
    )
    
    
    (228
    )
    
    
    49Increase (decrease) in other liabilities
    
    
    460
    
    
    
    (78
    )
    
    
    (21
    )Net cash provided by operating activities
    
    
    1,229
    
    
    
    497
    
    
    
    1,161Investing activitiesProceeds from sales and maturities of
investment securities available for sale
including principal payments
    
    
    543
    
    
    
    
    
    
    
    Purchases of investment securities
available for sale
    
    
    (543
    )
    
    
    
    
    
    
    Increase in investment in
subsidiaries
    
    
    (3,739
    )
    
    
    (1,784
    )
    
    
    (2,999
    )Decrease in loans to
subsidiaries
    
    
    4,075
    
    
    
    740
    
    
    
    3,300Net cash provided by (used in) investing
activities
    
    
    336
    
    
    
    (1,044
    )
    
    
    301Financing activitiesDecrease in subordinated debt
    
    
    
    
    
    
    (3,093
    )
    
    
    (Decrease) increase in notes payable
    
    
    (200
    )
    
    
    4,694
    
    
    
    (1,094
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    1,050Purchases of treasury stock
    
    
    (51
    )
    
    
    (65
    )
    
    
    (63
    )Dividends paid
    
    
    (1,286
    )
    
    
    (1,235
    )
    
    
    (1,165
    )Net cash (used in) provided by financing
activities
    
    
    (1,537
    )
    
    
    301
    
    
    
    (1,272
    )Increase (decrease) in cash and
cash equivalents
    
    
    28
    
    
    
    (246
    )
    
    
    190Cash and cash equivalents at
beginning of year
    
    
    4
    
    
    
    250
    
    
    
    60Cash and cash equivalents at
end of year
    
    $
    32
    
    
    $
    4
    
    
    $
    250
 Note 24 Regulatory capital requirements
      FDIC RequirementsMinimum Capital For ClassificationBank Actual
    
    Adequacy
    
    as Well-CapitalizedIn thousands
    
    Amount Ratio
    
    Amount Ratio
    
    Amount RatioDecember 31, 2008Leverage (Tier 1)
capital
    
    $
    32,500
    
    
    
    6.61
    %
    
    $
    13,078
    
    
    
    4.00
    %
    
    $
    16,347
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    
    32,500
    
    
    
    9.94
    
    
    
    13,078
    
    
    
    4.00
    
    
    
    19,617
    
    
    
    6.00Total
    
    
    41,465
    
    
    
    12.68
    
    
    
    26,156
    
    
    
    8.00
    
    
    
    38,694
    
    
    
    10.00December 31, 2007Leverage (Tier 1)
capital
    
    $
    28,507
    
    
    
    6.41
    %
    
    $
    11,233
    
    
    
    4.00
    %
    
    $
    14,041
    
    
    
    5.00
    %Risk-based capital:Tier 1
    
    
    28,507
    
    
    
    10.15
    
    
    
    11,233
    
    
    
    4.00
    
    
    
    16,849
    
    
    
    6.00Total
    
    
    36,672
    
    
    
    13.06
    
    
    
    22,466
    
    
    
    8.00
    
    
    
    28,082
    
    
    
    10.00
   Note 25 Summary of quarterly financial information
 (unaudited)
    
    2008Dollars in thousands,
    
    First
    
    Second
    
    Third
    
    Fourthexcept per share data
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterInterest income
    
    $
    6,454
    
    
    $
    6,341
    
    
    $
    6,467
    
    
    $
    6,640Interest expense
    
    
    3,009
    
    
    
    2,653
    
    
    
    2,862
    
    
    
    2,785Net interest income
    
    
    3,445
    
    
    
    3,688
    
    
    
    3,605
    
    
    
    3,855Provision for loan losses
    
    
    168
    
    
    
    265
    
    
    
    189
    
    
    
    964Net gains (losses) on securities transactions
    
    
    6
    
    
    
    (50
    )
    
    
    (1,429
    )
    
    
    (1,259
    )Other operating income
    
    
    673
    
    
    
    758
    
    
    
    804
    
    
    
    776Other operating expenses
    
    
    3,107
    
    
    
    3,174
    
    
    
    2,861
    
    
    
    3,136Income (loss) before income
tax expense
    
    
    849
    
    
    
    957
    
    
    
    (70
    )
    
    
    (728
    )Income tax expense
(benefit)
    
    
    184
    
    
    
    257
    
    
    
    (120
    )
    
    
    (371
    )Net income (loss)
    
    $
    665
    
    
    $
    700
    
    
    $
    50
    
    
    $
    (357
    )Net income (loss) per
share- basic
    
    $
    2.28
    
    
    $
    4.18
    
    
    $
    (.75
    )
    
    $
    (3.84
    )Net income (loss) per
share- diluted
    
    $
    2.28
    
    
    $
    3.72
    
    
    $
    (.75
    )
    
    $
    (3.38
    )
 33




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##### Table of Contents



(unaudited)
    
    2007Dollars in thousands,
    
    First
    
    Second
    
    Third
    
    Fourthexcept per share data
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterInterest income
    
    $
    6,051
    
    
    $
    6,340
    
    
    $
    6,646
    
    
    $
    6,883Interest expense
    
    
    3,332
    
    
    
    3,569
    
    
    
    3,730
    
    
    
    3,602Net interest income
    
    
    2,719
    
    
    
    2,771
    
    
    
    2,916
    
    
    
    3,281Provision for loan losses
    
    
    225
    
    
    
    71
    
    
    
    10
    
    
    
    466Net gains on sales
of investment securities
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    Other operating income
    
    
    605
    
    
    
    671
    
    
    
    672
    
    
    
    794Other operating expenses
    
    
    2,616
    
    
    
    2,810
    
    
    
    2,949
    
    
    
    3,053Income before income
tax expense
    
    
    483
    
    
    
    561
    
    
    
    639
    
    
    
    556Income tax expense
    
    
    111
    
    
    
    77
    
    
    
    95
    
    
    
    89Net income
    
    $
    372
    
    
    $
    484
    
    
    $
    544
    
    
    $
    467Net income per share- basic
    
    $
    .37
    
    
    $
    2.53
    
    
    $
    2.99
    
    
    $
    2.41Net income per share-
diluted
    
    $
    .37
    
    
    $
    2.25
    
    
    $
    2.66
    
    
    $
    2.14
  Note 25. Cumulative adjustment to retained earnings under SEC Staff Accounting Bulletin No. 108
   34




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Report of Independent Registered Public Accounting Firm
 
 
     35




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A Controls and Procedures
 (a)
    
    Evaluation of Disclosure Controls and Procedures.Management of the Corporation, including the Chief Executive Officer and the Chief Financial
Officer, have conducted an evaluation of the effectiveness of the Corporations disclosure
controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 as of
the end of the period covered by this report (the Evaluation Date). Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded that, as of the Evaluation
Date, the Corporations disclosure controls and procedures were effective in ensuring that all
material information relating to the Corporation, including all consolidated subsidiaries,
required to be filed in this report has been made known to them in a timely manner.(b)
    
    Managements Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities
Exchange Act of 1934. Under the supervision and with the participation of the principal
executive officer and the principal financial officer, management has conducted an evaluation of
the effectiveness of the Corporations control over financial reporting based on the framework
in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based on the evaluation under the framework, management has
concluded that the internal control over financial reporting was effective as of December 31,
2008.This annual report does not include an attestation report of the Corporations registered public
accounting firm regarding internal control over financial reporting. Managements report was
not subject to attestation by the Corporations registered public accounting firm pursuant to
temporary rules of the Securities Exchange Commission that permit the Corporation to provide
only managements report in this annual report.(c)
    
    Changes in Internal Control Over Financial Reporting.There have not been any changes in the Companys internal control over financial reporting as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the final
fiscal quarter of the year to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Corporations internal control over financial
reporting.
 Item 9B. Other Information.
  
 Part III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions
  
 Part IV
 
 Item 14. Principal Accountant Fees and Services
 
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Exhibits
 (3
    )(a)
    
    The Corporations Restated Articles of Incorporation (incorporated herein by
reference to Exhibit (3)(d) of the Corporations Current Report on Form 8-K dated
July 28, 1992).(3
    )(b)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series A (incorporated
herein by reference to Exhibit (3)(b) of the Corporations Annual Report on Form
10-K for the year ended December 31, 1995).(3
    )(c)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series B (incorporated
herein by reference to Exhibit (3)(c) of the Corporations Annual Report on Form
10-K for the year ended December 31, 1995).(3
    )(d)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series C (incorporated
herein by reference to Exhibit (3(i) to the Corporations Annual Report on Form
10-K for the year ended December 31, 1996).
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##### Table of Contents



(3
    )(e)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series D (incorporated
herein by reference to Exhibit (3)(i) filed with the Corporations Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).(3
    )(f)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series E (incorporated
herein by reference to Exhibit (3)(i) filed with the Corporations Quarterly
Report on Form 10-Q filed on March 4, 2005).(3
    )(g)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations MultiMode Series F Non-cumulative Redeemable Preferred Stock
(incorporated herein by reference to Exhibit (3)(f) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).(3
    )(h)
    
    The amendment to the By-Laws of the Corporation (incorporated herein by
reference to Exhibit (3)(c) of the Corporations Annual Report on Form 10-K for
the year ended December 31, 1991).(3
    )(i)
    
    The By-Laws of the Corporation (incorporated herein by reference to Exhibit
(3)(b) of the Corporations Annual Report on Form 10-K for the year ended
December 31, 1988).(10
    )(a)
    
    The Employees Profit Sharing Plan of City National Bank of New Jersey
(incorporated herein by reference to Exhibit (10) of the Corporations Annual
Report on Form 10-K for the year ended December 31, 1988).(10
    )(b)
    
    The Employment Agreement among the Corporation, the Bank and Louis E. Prezeau
dated May 26, 2006 (incorporated herein by reference to Exhibit (10.1) to the
Corporations Current Report on Form 8-K dated December 4, 2006).(10
    )(d)
    
    Amended and Restated Asset Purchase and Sale Agreement between the Bank and
Carver Federal Savings Bank dated as of February 27, 2001 (incorporated by
reference to Exhibit 10(d) to the Corporations Annual Report on Form 10-K for
the year ended December 31, 2000).(10
    )(f)
    
    Loan Agreement dated December 28, 2001 by and between the Corporation and
National Community Investment Fund (incorporated by reference to Exhibit 10(f) to
the Corporations Annual Report on Form 10-K for the year ended December 31,
2001).(10
    )(g)
    
    Pledge Agreement dated December 28, 2001 by and between the Corporation and
National Community Investment Fund (incorporated by reference to Exhibit (g) to
the Corporations Annual Report on Form 10-K for the year ended December 31,
2001).(10
    )(h)
    
    Asset Purchase and Sale Agreement between City National Bank of New Jersey and
Carver Federal Savings Bank dated as of January 26, 1998 (incorporated by
reference to Exhibit 10(h) to the Corporations Annual Report on Form 10-K for
the year ended December 31, 1998).(10
    )(i)
    
    Promissory Note dated May 6, 2002 payable to United Negro College Fund, Inc.,
in the principal amount of $200,000 (incorporated by reference to Exhibit 10(i)
to the Corporations Quarterly Report on Form 10-Q for quarter ended March 31,
2002).(10
    )(l)
    
    Purchase and Assumption Agreement dated as of March 31, 2004, by and among The
Prudential Savings Bank, F.S.B., The Prudential Bank and Trust Company and City
National Bank of New Jersey (incorporated herein by reference to Exhibit 10(l) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended March 31,
2004).(10
    )(m)
    
    Guarantee Agreement dated March 17, 2004 from the Corporation in favor of U.S.
Bank, N.A., as trustee for holders of securities issued by City National Bank of
New Jersey Capital Statutory Trust II (incorporated herein by reference to
Exhibit (10)(m) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004).(10
    )(n)
    
    Purchase Agreement dated September 27, 2005 by and between Sandler ONeil &
Partners, L.P., and the Corporation with respect to issue and sale of 7,000
shares of the Corporations MultiMode Series F Non-cumulative Redeemable
Preferred Stock (incorporated herein by reference to Exhibit (10)(n) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September 30,
2005).(10
    )(o)
    
    Credit Agreement dated February 21, 2007 by and between The Prudential
Insurance Company of America and the Corporation with respect to a $5,000,000
loan to the Corporation (incorporated by reference to Exhibit 10.1 to the
Corporations Current Report on Form 8-K dated February 23, 2007).(10
    )(p)
    
    Branch Purchase and Assumption Agreement, dated as of November 1, 2006, by and
between City National Bank of New Jersey (CNB) and Sun National Bank (Sun),
as amended by Amendment to Branch Purchase and Assumption Agreement, dated as of
March 8, 2007, by and between CNB and Sun (incorporated by reference to Exhibit
10.1 to the Corporations Current Report on Form 8-K dated March 14, 2007).(11
    )
    
    Statement regarding computation of per share earnings. The required
information is included on page 6.
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##### Table of Contents



(31
    )
    
    Certifications of Principal Executive Officer and Principal Financial
Officer (Section 302 of the Sarbanes-Oxley Act of 2002).(32
    )
    
    Certifications of Principal Executive Officer and Principal Financial
Officer under 18 U.S.C.Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).
 (c)
    
    Reports on Form 8-K.No reports on Form 8-K were filed during the quarter ended December 31, 2008.
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##### Table of Contents



By:
    
    /s/ Louis E. Prezeau

Louis E. Prezeau
    
    
    
    By:
    
    /s/ Edward R. Wright

Edward R. WrightPresident and Chief
    
    
    
    
    
    Chief Financial OfficerExecutive Officer
    
    
    
    
    
    and Principal Accounting OfficerDate: March 24, 2009
    
    
    
    Date: March 24, 2009
  Signature
    
    Title
    
    Date/s/ Douglas E. Anderson

Douglas E. Anderson
    
    Director
    
    March 26, 2009/s/ Barbara Bell Coleman

Barbara Bell Coleman
    
    Director
    
    March 26, 2009/s/ Eugene Giscombe

Eugene Giscombe
    
    Director,
Chairperson of the Board
    
    March 26, 2009/s/ Louis E. Prezeau

Louis E. Prezeau
    
    Director,
President and Chief
Executive Officer
    
    March 26, 2009/s/ Lemar C. Whigham

Lemar C. Whigham
    
    Director
    
    March 26, 2009/s/ H. ONeil Williams

H. ONeil Williams
    
    Director
    
    March 26, 2009
 39