##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 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
    
    22-2434751(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)900 Broad Street,
    
    07102Newark, New Jersey
    
    (Zip Code)(Address of principal executive offices)
    
  þ o
  o o
 Rule 12b-2
 Large accelerated filer o   
    Accelerated filer
o
    Non-accelerated filer
þ
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



Index
    
    PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended
June 30, 2010 and 2009
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Part II Other Information
    
    
    24Item 1. Legal proceedings
    
    
    24Item 6. Exhibits and Reports on Form 8-K
    
    
    26Signatures
    
    
    27EX-31EX-32
  2




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Balance Sheets

(Unaudited)
 June 30,
    
    December 31,Dollars in thousands, except per share data
    
    2010
    
    2009AssetsCash and due from banks
    
    $
    8,753
    
    
    $
    6,808Federal funds sold
    
    
    32,580
    
    
    
    5,500Interest bearing deposits with banks
    
    
    582
    
    
    
    609Investment securities available for sale
    
    
    140,560
    
    
    
    122,006Investment securities held to maturity (Market value of
$41,782 at December 31, 2009)
    
    
    
    
    
    
    40,395Loans held for sale
    
    
    
    
    
    
    190Loans
    
    
    262,987
    
    
    
    276,242Less: Allowance for loan losses
    
    
    7,934
    
    
    
    8,650Net loans
    
    
    255,053
    
    
    
    267,592Premises and equipment
    
    
    3,195
    
    
    
    2,949Accrued interest receivable
    
    
    2,145
    
    
    
    2,546Bank-owned life insurance
    
    
    5,633
    
    
    
    5,537Other real estate owned
    
    
    1,813
    
    
    
    2,352Other assets
    
    
    7,295
    
    
    
    9,855Total assets
    
    $
    457,609
    
    
    $
    466,339Liabilities and Stockholders EquityDeposits:Demand
    
    $
    30,909
    
    
    $
    29,304Savings
    
    
    150,496
    
    
    
    149,853Time
    
    
    189,535
    
    
    
    201,119Total deposits
    
    
    370,940
    
    
    
    380,276Accrued expenses and other liabilities
    
    
    6,246
    
    
    
    5,950Short-term portion of long-term debt
    
    
    5,000
    
    
    
    5,000Short-term borrowings
    
    
    600
    
    
    
    100Long-term debt
    
    
    42,000
    
    
    
    44,000Total liabilities
    
    
    424,786
    
    
    
    435,326Commitments and contingenciesStockholders equityPreferred stock, no par value: Authorized 100,000 shares;Series A , issued and outstanding 8 shares in 2010 and 2009
    
    
    200
    
    
    
    200Series C , issued and outstanding 108 shares in 2010 and 2009
    
    
    27
    
    
    
    27Series D , issued and outstanding 3,280 shares in 2010 and 2009
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2010 and 2009
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2010 and 2009
    
    
    6,790
    
    
    
    6,790Preferred stock, no par value, perpetual cumulative: Authorized 9,439 shares;Series G, issued and outstanding 9,439 shares in 2010 and 2009
    
    
    9,740
    
    
    
    9,499Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2010 and 2009131,290 shares outstanding in 2010 and 2009
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    8,339
    
    
    
    8,462Accumulated other comprehensive income
    
    
    2,225
    
    
    
    533Treasury stock, at cost - 3,240 common shares in 2010 and 2009, respectively
    
    
    (228
    )
    
    
    (228
    )Total stockholders equity
    
    
    32,823
    
    
    
    31,013Total liabilities and stockholders equity
    
    $
    457,609
    
    
    $
    466,339
  3




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Operations

(Unaudited)
 Three months ended
    
    Six months endedJune 30,
    
    June 30,Dollars in thousands, except per share data
    
    2010
    
    2009
    
    2010
    
    2009Interest incomeInterest and fees on loans
    
    $
    3,709
    
    
    $
    3,976
    
    
    $
    7,479
    
    
    $
    7,864Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    13
    
    
    
    14
    
    
    
    21
    
    
    
    43Interest on deposits with banks
    
    
    7
    
    
    
    3
    
    
    
    14
    
    
    
    5Interest and dividends on investment securities:Taxable
    
    
    1,304
    
    
    
    1,719
    
    
    
    2,758
    
    
    
    3,528Tax-exempt
    
    
    240
    
    
    
    324
    
    
    
    523
    
    
    
    657Total interest income
    
    
    5,273
    
    
    
    6,036
    
    
    
    10,795
    
    
    
    12,097Interest expenseInterest on deposits
    
    
    1,472
    
    
    
    1,943
    
    
    
    3,041
    
    
    
    4,030Interest on short-term borrowings
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Interest on long-term debt
    
    
    423
    
    
    
    462
    
    
    
    852
    
    
    
    929Total interest expense
    
    
    1,895
    
    
    
    2,407
    
    
    
    3,893
    
    
    
    4,961Net interest income
    
    
    3,378
    
    
    
    3,629
    
    
    
    6,902
    
    
    
    7,136Provision for loan losses
    
    
    1,010
    
    
    
    436
    
    
    
    2,391
    
    
    
    937Net interest income after provision
for loan losses
    
    
    2,368
    
    
    
    3,193
    
    
    
    4,511
    
    
    
    6,199Other operating incomeService charges on deposit accounts
    
    
    340
    
    
    
    370
    
    
    
    702
    
    
    
    730Agency fees on commercial loans
    
    
    4
    
    
    
    59
    
    
    
    18
    
    
    
    134Award income
    
    
    1,025
    
    
    
    51
    
    
    
    1,050
    
    
    
    25Other income
    
    
    275
    
    
    
    328
    
    
    
    564
    
    
    
    797Net gains on sales of investment securities
    
    
    528
    
    
    
    10
    
    
    
    529
    
    
    
    10Other than temporary impairment losses on securities
    
    
    
    
    
    
    (2,183
    )
    
    
    
    
    
    
    (2,315
    )Portion of loss recognized in other comprehensive income, before tax
    
    
    
    
    
    
    1,128
    
    
    
    
    
    
    
    1,128Net impairment losses on securities recognized in earnings
    
    
    
    
    
    
    (1,055
    )
    
    
    
    
    
    
    (1,187
    )Total other operating income
    
    
    2,172
    
    
    
    (237
    )
    
    
    2,863
    
    
    
    509Other operating expensesSalaries and other employee benefits
    
    
    1,559
    
    
    
    1,626
    
    
    
    3,143
    
    
    
    3,225Occupancy expense
    
    
    470
    
    
    
    326
    
    
    
    837
    
    
    
    652Equipment expense
    
    
    146
    
    
    
    181
    
    
    
    300
    
    
    
    340Appraisal fees
    
    
    146
    
    
    
    3
    
    
    
    161
    
    
    
    3Audit fees
    
    
    193
    
    
    
    68
    
    
    
    257
    
    
    
    118Legal fees
    
    
    124
    
    
    
    71
    
    
    
    199
    
    
    
    109Management consulting fees
    
    
    89
    
    
    
    101
    
    
    
    354
    
    
    
    178FDIC insurance expense
    
    
    225
    
    
    
    469
    
    
    
    468
    
    
    
    587Data processing expense
    
    
    86
    
    
    
    73
    
    
    
    177
    
    
    
    144Other expenses
    
    
    627
    
    
    
    740
    
    
    
    1,292
    
    
    
    1,394Total other operating expenses
    
    
    3,665
    
    
    
    3,658
    
    
    
    7,188
    
    
    
    6,750Income (loss) before income tax expense
    
    
    875
    
    
    
    (702
    )
    
    
    186
    
    
    
    (42
    )Income tax expense
    
    
    53
    
    
    
    119
    
    
    
    68
    
    
    
    281Net income (loss)
    
    $
    822
    
    
    $
    (821
    )
    
    $
    118
    
    
    $
    (323
    )Net income (loss) per common shareBasic
    
    $
    5.32
    
    
    $
    (8.21
    )
    
    $
    (0.94
    )
    
    $
    (7.18
    )Diluted
    
    
    5.32
    
    
    
    (8.21
    )
    
    
    (0.94
    )
    
    
    (7.18
    )Basic average common shares outstanding
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,309Diluted average common shares outstanding
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,309
  4




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows

(Unaudited)
 Six Months EndedJune 30,Dollars in thousands
    
    2010
    
    2009Operating activitiesNet income (loss)
    
    $
    118
    
    
    $
    (323
    )Adjustments to reconcile net income (loss) to net cash from operating activities:Depreciation and amortization
    
    
    210
    
    
    
    276Provision for loan losses
    
    
    2,391
    
    
    
    937Premium amortization (discount accretion) of investment securities
    
    
    61
    
    
    
    (2
    )Amortization of intangible assets
    
    
    75
    
    
    
    102Net impairment losses on securities
    
    
    
    
    
    
    1,187Net gains on securities transactions
    
    
    (529
    )
    
    
    (10
    )Net gains on sales of loans held for sale
    
    
    (6
    )
    
    
    (5
    )Net gains on sales of other real estate owned
    
    
    (17
    )
    
    
    Loans originated for sale
    
    
    
    
    
    
    (122
    )Proceeds from sales and principal payments from loans held for sale
    
    
    196
    
    
    
    272Decrease (increase) in accrued interest receivable
    
    
    401
    
    
    
    (26
    )Deferred tax expense (benefit)
    
    
    1,195
    
    
    
    (531
    )Net increase in bank-owned life insurance
    
    
    (96
    )
    
    
    (96
    )Decrease (increase) in other assets
    
    
    205
    
    
    
    (1,211
    )Increase in accrued expenses and other liabilities
    
    
    296
    
    
    
    1,500Net cash provided by operating activities
    
    
    4,500
    
    
    
    1,948Investing activitiesDecrease (increase) in loans, net
    
    
    10,148
    
    
    
    (8,178
    )Decrease in interest bearing deposits with banks
    
    
    27
    
    
    
    122Proceeds from maturities of investment securities available for sale,
including principal payments and early redemptions
    
    
    23,594
    
    
    
    11,302Proceeds from maturities of investment securities held to maturity,
including principal payments and early redemptions
    
    
    1,247
    
    
    
    7,790Proceeds from sales of investment securities available for sale
    
    
    14,502
    
    
    
    1,985Purchases of investment securities available for sale
    
    
    (14,257
    )
    
    
    (11,799
    )Purchases of investment securities held to maturity
    
    
    
    
    
    
    (1,462
    )Proceeds from sales of other real estate owned
    
    
    556
    
    
    
    Purchases of premises and equipment
    
    
    (456
    )
    
    
    (102
    )Net cash provided by (used in) investing activities
    
    
    35,361
    
    
    
    (342
    )Financing activitiesDecrease in deposits
    
    
    (9,336
    )
    
    
    (19,682
    )Increase (decrease) in short-term borrowings
    
    
    500
    
    
    
    (1,130
    )Decrease in long-term debt
    
    
    (2,000
    )
    
    
    (1,000
    )Issuance of preferred stock
    
    
    
    
    
    
    9,439Purchases of treasury stock
    
    
    
    
    
    
    (3
    )Dividends paid on preferred stock
    
    
    
    
    
    
    (559
    )Dividends paid on common stock
    
    
    
    
    
    
    (263
    )Net cash used by financing activities
    
    
    (10,836
    )
    
    
    (13,198
    )Net increase (decrease) cash and cash equivalents
    
    
    29,025
    
    
    
    (11,592
    )Cash and cash equivalents at beginning of period
    
    
    12,308
    
    
    
    25,813Cash and cash equivalents at end of period
    
    $
    41,333
    
    
    $
    14,221Cash paid during the yearInterest
    
    $
    3,706
    
    
    $
    4,711Income taxes
    
    
    10
    
    
    
    1,248Non-cash transactionsTransfer of held to maturity securities to available for sale
    
    
    39,144Transfer of loans to other real estate owned
    
    
    
    
    
    
    438
  5




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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,In thousands, except per share data
    
    2010
    
    2009
    
    2010
    
    2009Net income (loss)
    
    $
    822
    
    
    $
    (821
    )
    
    $
    118
    
    
    $
    (323
    )Dividends on preferred stock
    
    
    122
    
    
    
    257
    
    
    
    240
    
    
    
    621Net income (loss) applicable to basic common shares
    
    
    700
    
    
    
    (1,078
    )
    
    
    (122
    )
    
    
    (944
    )Dividends applicable to convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147Net income (loss) applicable to diluted
common shares
    
    $
    700
    
    
    $
    (1,078
    )
    
    $
    (122
    )
    
    $
    (797
    )Number of average common sharesBasic
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,309Diluted
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,290
    
    
    
    131,309Net income (loss) per common shareBasic
    
    $
    5.32
    
    
    $
    (8.21
    )
    
    $
    (.94
    )
    
    $
    (7.18
    )Diluted
    
    
    5.32
    
    
    
    (8.21
    )
    
    
    (.94
    )
    
    
    (7.18
    )
     6




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8




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Gross
    
    GrossJune 30, 2010
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    15,864
    
    
    $
    508
    
    
    $
    43
    
    
    $
    16,329Obligations of U.S.
government sponsored
entities
    
    
    15,999
    
    
    
    223
    
    
    
    26
    
    
    
    16,196Obligations of state and
political subdivisions
    
    
    14,519
    
    
    
    464
    
    
    
    48
    
    
    
    14,935Mortgage-backed
securities
    
    
    73,795
    
    
    
    4,333
    
    
    
    35
    
    
    
    78,093Other debt securities
    
    
    12,693
    
    
    
    303
    
    
    
    1,969
    
    
    
    11,027Equity securities:Marketable securities
    
    
    731
    
    
    
    
    
    
    
    7
    
    
    
    724Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    3,141
    
    
    
    
    
    
    
    
    
    
    
    3,141Total
    
    $
    136,857
    
    
    $
    5,831
    
    
    $
    2,128
    
    
    $
    140,560
 Gross
    
    GrossDecember 31, 2009
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    12,518
    
    
    $
    231
    
    
    $
    49
    
    
    $
    12,700Obligations of U.S.
government sponsored
entities
    
    
    17,289
    
    
    
    222
    
    
    
    187
    
    
    
    17,324Obligations of state and
political subdivisions
    
    
    546
    
    
    
    7
    
    
    
    
    
    
    
    553Mortgage-backed
securities
    
    
    74,417
    
    
    
    2,797
    
    
    
    76
    
    
    
    77,138Other debt securities
    
    
    12,269
    
    
    
    266
    
    
    
    2,267
    
    
    
    10,268Equity securities:Marketable securities
    
    
    713
    
    
    
    
    
    
    
    18
    
    
    
    695Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    3,213
    
    
    
    
    
    
    
    
    
    
    
    3,213Total
    
    $
    121,080
    
    
    $
    3,523
    
    
    $
    2,597
    
    
    $
    122,006
  9




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Amortized
    
    FairIn thousands
    
    Cost
    
    ValueDue within three months:Obligations of U.S. government sponsored entities
    
    $
    1,000
    
    
    $
    1,000Other debt securities
    
    
    999
    
    
    
    1,004Due within one year:Obligations of U.S. government sponsored entities
    
    
    230
    
    
    
    234Due after one year but within five years:Obligations of state and political subdivisions
    
    
    3,511
    
    
    
    3,696Obligations of U.S. government sponsored entities
    
    
    2,077
    
    
    
    2,136Mortgage-backed securities
    
    
    831
    
    
    
    874Other debt securities
    
    
    2,467
    
    
    
    2,355Due after five years but within ten years:U.S. Treasury securities and obligations of U.S. government agencies
    
    
    5,763
    
    
    
    5,958Obligations of state and political subdivisions
    
    
    5,739
    
    
    
    5,963Obligations of U.S. government sponsored entities
    
    
    3,083
    
    
    
    3,145Mortgage-backed securities
    
    
    1,362
    
    
    
    1,415Due after ten years:U.S. Treasury securities and obligations of U.S. government agencies
    
    
    10,101
    
    
    
    10,371Obligations of state and political subdivisions
    
    
    5,269
    
    
    
    5,276Obligations of U.S. government sponsored
entities
    
    
    9,609
    
    
    
    9,681Mortgage-backed securities
    
    
    71,602
    
    
    
    75,804Other debt securities
    
    
    9,227
    
    
    
    7,668Total debt securities
    
    
    132,870
    
    
    
    136,580Equity securities
    
    
    3,987
    
    
    
    3,980Total
    
    $
    136,857
    
    
    $
    140,560
  June 30, 2010
    
    Less than 12 Months
    
    12 Months or More
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesU.S. Treasury securities and
obligations of U.S. government
agencies
    
    $
    2,265
    
    
    $
    23
    
    
    $
    2,177
    
    
    $
    20
    
    
    $
    4,442
    
    
    $
    43Obligations of U.S. government
sponsored agencies
    
    
    875
    
    
    
    6
    
    
    
    2,231
    
    
    
    20
    
    
    
    3,106
    
    
    
    26Obligations of state and
political subdivisions
    
    
    989
    
    
    
    10
    
    
    
    685
    
    
    
    38
    
    
    
    1,674
    
    
    
    48Mortgage-backed securities
    
    
    4,463
    
    
    
    34
    
    
    
    16
    
    
    
    1
    
    
    
    4,479
    
    
    
    35Other debt securities
    
    
    
    
    
    
    
    
    
    
    4,917
    
    
    
    1,969
    
    
    
    4,917
    
    
    
    1,969Marketable equity securities
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    7
    
    
    
    724
    
    
    
    7Total
    
    $
    8,592
    
    
    $
    73
    
    
    $
    10,750
    
    
    $
    2,055
    
    
    $
    19,342
    
    
    $
    2,128
 10




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##### Table of Contents



December 31, 2009
    
    Less than 12 Months
    
    12 Months or More
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesU.S. Treasury securities and
obligations of U.S. government
agencies
    
    $
    2,050
    
    
    $
    14
    
    
    $
    2,598
    
    
    $
    35
    
    
    $
    4,648
    
    
    $
    49Obligations of U.S. Government
sponsored entities
    
    
    2,822
    
    
    
    143
    
    
    
    2,323
    
    
    
    44
    
    
    
    5,145
    
    
    
    187Mortgaged-backed securities
    
    
    4,947
    
    
    
    73
    
    
    
    248
    
    
    
    3
    
    
    
    5,195
    
    
    
    76Other debt securities
    
    
    43
    
    
    
    1
    
    
    
    4,352
    
    
    
    2,266
    
    
    
    4,395
    
    
    
    2,267Equity securities
    
    
    
    
    
    
    
    
    
    
    713
    
    
    
    18
    
    
    
    713
    
    
    
    18Total
    
    $
    9,862
    
    
    $
    231
    
    
    $
    10,234
    
    
    $
    2,366
    
    
    $
    20,096
    
    
    $
    2,597
  For the Six MonthsIn thousands
    
    Ended June 30, 2010Balance, December 31, 2009
    
    $
    2,489Add: Initial credit impairments
    
    
    Additional credit impairments
    
    
    Less: Sale of investment securities
    
    
    (2,489
    )Balance, June 30, 2010
    
    $
    
      11




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##### Table of Contents



Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities and obligations of U.S.
government agencies
    
    $
    1,585
    
    
    $
    62
    
    
    $
    
    
    
    $
    1,647Obligations of U.S.
government
sponsored entities
    
    
    2,459
    
    
    
    19
    
    
    
    73
    
    
    
    2,405Obligations of state and
political subdivisions
    
    
    27,979
    
    
    
    1,135
    
    
    
    72
    
    
    
    29,042Mortgage-backed
securities
    
    
    7,877
    
    
    
    309
    
    
    
    
    
    
    
    8,186Other debt securities
    
    
    495
    
    
    
    7
    
    
    
    
    
    
    
    502Total
    
    $
    40,395
    
    
    $
    1,532
    
    
    $
    145
    
    
    $
    41,782
 12




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##### Table of Contents



Less than 12 Months
    
    12 Months or More
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of
state and political
subdivisions
    
    $
    2,268
    
    
    $
    22
    
    
    $
    672
    
    
    $
    50
    
    
    $
    2,940
    
    
    $
    72Obligations of U.S.
government
sponsored entities
    
    
    1,351
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    1,351
    
    
    
    73Total
    
    $
    3,619
    
    
    $
    95
    
    
    $
    672
    
    
    $
    50
    
    
    $
    4,291
    
    
    $
    145
       June 30, 2010(Dollars in thousands)
    
    Total
    
    Level 1
    
    Level 2
    
    Level 3Investment securities available for sale
    
    $
    140,560
    
    
    $
    16,329
    
    
    $
    123,735
    
    
    $
    496Loans held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    $
    140,560
    
    
    $
    16,329
    
    
    $
    123,735
    
    
    $
    496
 December 31, 2009(Dollars in thousands)
    
    Total
    
    Level 1
    
    Level 2
    
    Level 3Investment securities available for sale
    
    $
    122,006
    
    
    $
    12,700
    
    
    $
    108,804
    
    
    $
    502Loans held for sale
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    190Total assets
    
    $
    122,196
    
    
    $
    12,700
    
    
    $
    108,804
    
    
    $
    692
   13




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##### Table of Contents



Cash, short-term investments and interest-bearing deposits with banks
  Investment securities
  Loans
  Loans held for sale
  14




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##### Table of Contents



Deposit liabilities
   Short-term borrowings
  Long-term debt
  Commitments to extend credit and letters of credit
   June 30, 2010
    
    December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    FairIn thousands
    
    Value
    
    Value
    
    Value
    
    ValueFinancial assetsCash and other short-term
Investments
    
    $
    41,333
    
    
    $
    41,333
    
    
    $
    12,308
    
    
    $
    12,308Interest-bearing deposits
with banks
    
    
    582
    
    
    
    582
    
    
    
    609
    
    
    
    607Investment securities AFS
    
    
    140,560
    
    
    
    140,560
    
    
    
    122,006
    
    
    
    122,006Investment securities HTM
    
    
    
    
    
    
    
    
    
    
    40,395
    
    
    
    41,782Loans
    
    
    262,987
    
    
    
    257,301
    
    
    
    276,242
    
    
    
    270,054Financial liabilitiesDeposits
    
    
    370,940
    
    
    
    362,994
    
    
    
    380,276
    
    
    
    369,758Short-term borrowings
    
    
    600
    
    
    
    600
    
    
    
    100
    
    
    
    100Long-term debt
    
    
    47,000
    
    
    
    48,358
    
    
    
    49,000
    
    
    
    49,664
     Subsequent Events
 15




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##### Table of Contents



Item 2
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary statement concerning forward-looking statements
  Executive summary
      16




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##### Table of Contents



Financial Condition
          Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2010
    
    2009
    
    2010
    
    2009Balance at beginning of period
    
    $
    8,000
    
    
    $
    4,200
    
    
    $
    8,650
    
    
    $
    3,800Provision for loan losses
    
    
    1,010
    
    
    
    436
    
    
    
    2,391
    
    
    
    937Recoveries of previous charge-offs
    
    
    37
    
    
    
    15
    
    
    
    46
    
    
    
    159,047
    
    
    
    4,651
    
    
    
    11,087
    
    
    
    4,752Less: Charge-offs
    
    
    1,113
    
    
    
    151
    
    
    
    3,153
    
    
    
    252Balance at end of period
    
    $
    7,934
    
    
    $
    4,500
    
    
    $
    7,934
    
    
    $
    4,500
   17




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##### Table of Contents



June 30,
    
    March 31,
    
    December 31,2010
    
    2010
    
    2009Allowance for loan losses as a
percentage of:Total loans
    
    
    3.02
    %
    
    
    2.99
    %
    
    
    3.13
    %Total nonperforming loans
    
    
    24.58
    %
    
    
    36.72
    %
    
    
    48.35
    %Year-to-date net charge-offs as
a percentage
of average loans (annualized)
    
    
    1.15
    %
    
    
    2.97
    %
    
    
    1.17
    %
   18




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##### Table of Contents



June 30,
    
    March 31,
    
    December 31,(Dollars in thousands)
    
    2010
    
    2010
    
    2009Loans past due 90 days or more and still accruingCommercial
    
    $
    335
    
    
    $
    112
    
    
    $
    555Real estate
    
    
    3,462
    
    
    
    375
    
    
    
    1,012Installment
    
    
    1
    
    
    
    1
    
    
    
    Total
    
    
    3,798
    
    
    
    488
    
    
    
    1,567Nonaccrual loansCommercial
    
    
    3,047
    
    
    
    3,349
    
    
    
    1,237Real estate
    
    
    25,438
    
    
    
    17,943
    
    
    
    15,080Installment
    
    
    
    
    
    
    2
    
    
    
    6Total
    
    
    28,485
    
    
    
    21,294
    
    
    
    16,323Total nonperforming loans
    
    
    32,283
    
    
    
    21,782
    
    
    
    17,890Other real estate owned
    
    
    1,813
    
    
    
    2,352
    
    
    
    2,352Total nonperforming assets
    
    $
    34,096
    
    
    $
    24,134
    
    
    $
    20,242
       19




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20




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##### Table of Contents



Consolidated
    
    Bank OnlyJune 30,
    
    December 31,
    
    June 30,
    
    December 31,2010
    
    2009
    
    2010
    
    2009Risk-based capital ratios:Tier 1 capital to risk-adjusted assets
    
    
    10.86
    %
    
    
    10.45
    %
    
    
    10.84
    %
    
    
    10.62
    %Minimum to be considered well-capitalized
    
    
    6.00
    
    
    
    6.00
    
    
    
    6.00
    
    
    
    6.00Total capital to risk-adjusted assets
    
    
    13.79
    
    
    
    13.32
    
    
    
    13.71
    
    
    
    13.44Minimum to be considered well-capitalized
    
    
    10.00
    
    
    
    10.00
    
    
    
    10.00
    
    
    
    10.00Leverage ratio
    
    
    7.27
    
    
    
    6.96
    
    
    
    7.25
    
    
    
    7.08Minimum to be considered well-capitalized
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00Total stockholders equity
to total assets
    
    
    7.16
    
    
    
    6.65
    
    
    
    8.02
    
    
    
    7.63
      21




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Results of Operations
         22




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##### Table of Contents



Liquidity
   23




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##### Table of Contents



Quantitative and Qualitative Disclosures about Market Risk
       
 PART II Other information
 
 Item 1. Legal Proceedings
  24




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##### Table of Contents



Item 1a. Risk Factors
  Financial reform legislation recently enacted will, among other things, create a new Consumer
Financial Protection Bureau, tighten capital standards and result in new laws and regulations that
are expected to increase our costs of operations.
        25




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##### Table of Contents



Item 6. Exhibits
   (10.1)
    
    Employment Agreement, dated as of May 18, 2010, by and among City National
Bancshares Corporation, City National Bank of New Jersey and Louis E Prezeau
(incorporated herein by reference to Exhibit 10.1 to the Corporations Current Report on
Form 8-K dated May 18, 2010 and filed May 21, 2010).(31)
    
    Certifications of Principal Executive Officer and Principal Financial
Officer (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith).(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)
(filed herewith).
 26




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##### Table of Contents



August 16, 2010
    
    /s/ Edward R. WrightEdward R. WrightSenior Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 27