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SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 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
(State or other jurisdiction of 
incorporation or organization)
    
    22-2434751
(I.R.S. Employer
Identification No.)
 900 Broad Street, 
Newark, New Jersey(Address of principal executive offices)
    
    07102
(Zip Code)
    
 þ o
 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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##### 



Index
    
    PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    15Part II Other Information
    
    
    15Item 1. Legal proceedings
    
    
    15Item 6. Exhibits and Reports on Form 8-K
    
    
    15Signatures
    
    
    18EX-31EX-32




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Balance Sheets (Unaudited)
 March 31,
    
    December 31,Dollars in thousands, except per share data
    
    2009
    
    2008AssetsCash and due from banks
    
    $
    5,865
    
    
    $
    7,613Federal funds sold
    
    
    68,400
    
    
    
    18,200Interest bearing deposits with banks
    
    
    802
    
    
    
    726Investment securities available for sale
    
    
    122,251
    
    
    
    125,591Investment securities held to maturity (Market value of $52,030
at March 31, 2009 and $54,537 at December 31,2008 )
    
    
    51,106
    
    
    
    53,714Loans held for sale
    
    
    
    
    
    
    267Loans
    
    
    277,714
    
    
    
    271,906Less: Allowance for loan losses
    
    
    4,200
    
    
    
    3,800Net loans
    
    
    273,514
    
    
    
    268,106Premises and equipment
    
    
    3,164
    
    
    
    3,242Accrued interest receivable
    
    
    2,658
    
    
    
    2,796Bank-owned life insurance
    
    
    5,392
    
    
    
    5,345Other real estate owned
    
    
    1,985
    
    
    
    1,547Other assets
    
    
    8,396
    
    
    
    7,392Total assets
    
    $
    543,533
    
    
    $
    494,539Liabilities and Stockholders EquityDeposits:Demand
    
    $
    35,442
    
    
    $
    36,270Savings
    
    
    231,403
    
    
    
    183,172Time
    
    
    189,551
    
    
    
    187,675Total deposits
    
    
    456,396
    
    
    
    407,117Accrued expenses and other liabilities
    
    
    7,134
    
    
    
    5,880Short-term borrowings
    
    
    1,910
    
    
    
    1,850Long-term debt
    
    
    50,600
    
    
    
    51,600Total liabilities
    
    
    516,040
    
    
    
    466,447Commitments and contingenciesStockholders equityPreferred stock, no par value: Authorized 100,000 shares ;Series A , issued and outstanding 8 shares in 2009 and 2008
    
    
    200
    
    
    
    200Series C , issued and outstanding 108 shares in 2009 and 2008
    
    
    27
    
    
    
    27Series D , issued and outstanding 3,280 shares in 2009 and 2008
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2009 and 2008
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2009 and 2008
    
    
    6,790
    
    
    
    6,790Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2009 and 2008131,290 shares outstanding in 2009 and 131,330 shares outstanding in 2008
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    16,829
    
    
    
    16,694Accumulated other comprehensive loss
    
    
    (1,855
    )
    
    
    (1,124
    )Treasury stock, at cost - 3,240 and 3,200 common shares in 2009 and 2008, respectively
    
    (228
    )
    
    
    (225
    )Total stockholders equity
    
    
    27,493
    
    
    
    28,092Total liabilities and stockholders equity
    
    $
    543,533
    
    
    $
    494,539
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Income (Unaudited)
 Three months ended March 31,Dollars in thousands, except per share data
    
    2009
    
    2008Interest incomeInterest and fees on loans
    
    $
    3,888
    
    
    $
    4,248Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    29
    
    
    
    135Interest on deposits with banks
    
    
    2
    
    
    
    11Interest and dividends on investment securities:Taxable
    
    
    1,809
    
    
    
    1,738Tax-exempt
    
    
    333
    
    
    
    322Total interest income
    
    
    6,061
    
    
    
    6,454Interest expenseInterest on deposits
    
    
    2,087
    
    
    
    2,653Interest on short-term borrowings
    
    
    
    
    
    
    4Interest on long-term debt
    
    
    467
    
    
    
    352Total interest expense
    
    
    2,554
    
    
    
    3,009Net interest income
    
    
    3,507
    
    
    
    3,445Provision for loan losses
    
    
    501
    
    
    
    168Net interest income after provision
for loan losses
    
    
    3,006
    
    
    
    3,277Other operating incomeService charges on deposit accounts
    
    
    360
    
    
    
    351Agency fees on commercial loans
    
    
    75
    
    
    
    81Other income
    
    
    443
    
    
    
    241Net (losses) gains on sales of investment securities and other than temporary
impairment charges
    
    
    (132
    )
    
    
    6Total other operating income
    
    
    746
    
    
    
    679Other operating expensesSalaries and other employee benefits
    
    
    1,599
    
    
    
    1,605Occupancy expense
    
    
    326
    
    
    
    324Equipment expense
    
    
    159
    
    
    
    166Data processing expense
    
    
    71
    
    
    
    78Other expenses
    
    
    937
    
    
    
    934Total other operating expenses
    
    
    3,092
    
    
    
    3,107Income before income tax expense
    
    
    660
    
    
    
    849Income tax expense
    
    
    162
    
    
    
    184Net income
    
    $
    498
    
    
    $
    665Net income per common shareBasic
    
    $
    1.02
    
    
    $
    2.28Diluted
    
    
    1.02
    
    
    
    2.28Basic average common shares outstanding
    
    
    131,329
    
    
    
    131,945Diluted average common shares outstanding
    
    
    131,329
    
    
    
    131,945
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (Unaudited)
 Three Months EndedMarch 31,In thousands
    
    2009
    
    2008Operating activitiesNet income
    
    $
    498
    
    
    $
    665Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    112
    
    
    
    139Provision for loan losses
    
    
    501
    
    
    
    168Discount accretion of investment securities
    
    
    (6
    )
    
    
    (48
    )Amortization of intangible assets
    
    
    53
    
    
    
    53Net losses (gains) on securities transactions
    
    
    132
    
    
    
    (6
    )Net gains on sales of loans held for sale
    
    
    (5
    )
    
    
    (4
    )Loans originated for sale
    
    
    
    
    
    
    (312
    )Proceeds from sales and principal payments from loans held for sale
    
    
    272
    
    
    
    230Decrease in accrued interest receivable
    
    
    138
    
    
    
    115Deferred taxes
    
    
    (427
    )
    
    
    70Increase in bank-owned life insurance
    
    
    (47
    )
    
    
    (269
    )Increase in other assets
    
    
    (163
    )
    
    
    (1,172
    )Increase in accrued expenses and other liabilities
    
    
    1,254
    
    
    
    2,556Net cash provided by operating activities
    
    
    2,312
    
    
    
    2,185Investing activitiesIncrease in loans, net
    
    
    (6,347
    )
    
    
    (13,275
    )Increase in interest-bearing deposits with banks
    
    
    (76
    )
    
    
    (5,020
    )Proceeds from maturities of investment securities available for
sale, including principal repayments and early redemptions
    
    
    5,842
    
    
    
    4,240Proceeds from maturities of investment securities held to
maturity, including principal repayments and early redemptions
    
    
    2,600
    
    
    
    6,567Proceeds from sales of investment securities available for sale
    
    
    
    
    
    
    Purchases of investment securities available for sale
    
    
    (3,818
    )
    
    
    (23,317
    )Purchases of investment securities held to maturity
    
    
    
    
    
    
    (7,949
    )Purchases of premises and equipment
    
    
    (34
    )
    
    
    (70
    )Net cash used in investing activities
    
    
    (1,833
    )
    
    
    (38,824
    )Financing activitiesIncrease (decrease) in deposits
    
    
    49,279
    
    
    
    (15,685
    )(Decrease) increase in long-term debt
    
    
    (1,000
    )
    
    
    22,500Increase (decrease) in short-term borrowings
    
    
    60
    
    
    
    (750
    )Purchases of treasury stock
    
    
    (3
    )
    
    
    (8
    )Dividends paid on preferred stock
    
    
    (363
    )
    
    
    (363
    )Net cash provided by financing activities
    
    
    47,973
    
    
    
    5,694Net increase in cash and cash equivalents
    
    
    48,452
    
    
    
    (30,945
    )Cash and cash equivalents at beginning of period
    
    
    25,813
    
    
    
    44,819Cash and cash equivalents at end of period
    
    $
    74,265
    
    
    $
    13,874Cash paid during the yearInterest
    
    $
    1,062
    
    
    $
    2,959Income taxes
    
    
    285
    
    
    
    Non-cash transactionsTransfer of loans to other real estate owned
    
    
    438
    
    
    
    
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Three Months EndedMarch 31,In thousands, except per share data
    
    
    2009
    
    
    
    2008Net income
    
    $
    498
    
    
    $
    665Dividends on preferred stock
    
    
    363
    
    
    
    364Net income applicable to
Common shares
    
    $
    135
    
    
    $
    301Number of average common sharesBasic
    
    
    131,329
    
    
    
    131,945Diluted
    
    
    131,329
    
    
    
    131,945Net income per common shareBasic
    
    $
    1.02
    
    
    $
    2.28Diluted
    
    
    1.02
    
    
    
    2.28
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(Dollars in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities available for sale
    
    $
    122,251
    
    
    $
    1,001
    
    
    $
    120,480
    
    
    $
    770Loans held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    $
    122,251
    
    
    $
    1,001
    
    
    $
    120,480
    
    
    $
    770Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
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Item 2
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary statement concerning forward-looking statements
  Executive summary
  9




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Financial Condition
           Three MonthsEnded March 31,(Dollars in thousands)
    
    2009
    
    
    2008Balance at beginning of period
    
    $
    3,800
    
    
    $
    3,000Provision for loan losses
    
    
    501
    
    
    
    168Recoveries of previous charge-offs
    
    
    
    
    
    
    64,301
    
    
    
    3,174Less: Charge-offs
    
    
    101
    
    
    
    74Balance at end of period
    
    $
    4,200
    
    
    $
    3,100
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March 31,
    
    December 31,
    
    March 31,2009
    
    2008
    
    2008Allowance for loan
losses as a percentage of:Total loans
    
    
    1.51
    %
    
    
    1.40
    %
    
    
    1.26
    %Total nonperforming loans
    
    
    49.04
    %
    
    
    44.13
    %
    
    
    38.23
    %Total nonperforming assets
(nonperforming loans and OREO)
    
    
    39.81
    %
    
    
    37.67
    %
    
    
    38.23
    %Net charge-offs as a percentage
of average loans (year-to-date)
    
    
    .03
    %
    
    
    .31
    %
    
    
    .03
    %
   March 31,
    
    
    December 31,
    
    
    March 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2008Loans past due 90 days
or more and still accruingCommercial
    
    $
    
    
    
    $
    
    
    
    $
    Real estate
    
    
    117
    
    
    
    376
    
    
    
    697Installment
    
    
    20
    
    
    
    8
    
    
    
    22Total
    
    
    137
    
    
    
    384
    
    
    
    719Nonaccrual loansCommercial
    
    
    2,203
    
    
    
    1,864
    
    
    
    1,995Real estate
    
    
    6,216
    
    
    
    6,356
    
    
    
    5,360Installment
    
    
    9
    
    
    
    7
    
    
    
    35Total nonaccrual loans
    
    
    8,428
    
    
    
    8,227
    
    
    
    7,390Total nonperforming loans
    
    
    8,565
    
    
    
    8,611
    
    
    
    8,109Other real estate owned
    
    
    1,985
    
    
    
    1,547
    
    
    
    35Total nonperforming assets
    
    $
    10,550
    
    
    $
    10,158
    
    
    $
    8,144
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Results of Operations
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Liquidity
     14




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Quantitative and Qualitative Disclosures about Market Risk
      
 PART II Other information
 
 Item 1. Legal Proceedings
  Item 1a. Risk Factors
  
 Item 6. 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).(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).
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(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)
    
    Amendment to the Corporations Articles of Incorporation establishing the Fixed Rate
Cumulative Perpetual Preferred Stock, Series G (incorporated herein by reference to
Exhibit 3.1 to the Corporations Current Report on Form 8-K dated April 10, 2009).(3)(i)
    
    Amendment to the Corporations Articles of Incorporation reallocating unissued Series
B, Series C and Series E Preferred Stock to unallocated and unissued preferred stock
(incorporated herein by reference to Exhibit 3.2 to the Corporations Current Report on
Form 8-K dated April 10, 2009).(3)(j)
    
    The amendment to 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, 1991).(3)(k)
    
    The By-Laws of the Corporation (incorporated herein by reference to Exhibit (3)(b) of
the Corporations Annual report on Form 10-K fro 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
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(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).(10)(q)
    
    Letter Agreement, dated April 10, 2009, including the Securities Purchase Agreement
 Standard Terms incorporated by reference therein (collectively, the Purchase
Agreement), between the Corporation and the United States Department of the Treasury
(the Treasury Department) (incorporated herein by reference to Exhibit 10.1 to the
Corporations Current Report on Form 8-K dated April 10, 2009).(10)(r)
    
    Side Letter Agreement, dated April 10, 2009, between the Corporation and the Treasury
Department pertaining to the American Recovery and Reinvestment Act of 2009
(incorporated herein by reference to Exhibit 10.2 to the Corporations Current Report on
Form 8-K dated April 10, 2009).(10)(s)
    
    Side Letter Agreement, dated April 10, 2009, between the Corporation and the Treasury
Department pertaining to the amendment of certain provisions of the Purchase Agreement
(incorporated herein by reference to Exhibit 10.3 to the Corporations Current Report on
Form 8-K dated April 10, 2009).(10)(t)
    
    Side Letter Agreement, dated April 10, 2009, between the Corporation and the Treasury
Department pertaining to the amendment of certain provisions of the Purchase Agreement
relating to CDFI Exemption (incorporated herein by reference to Exhibit 10.4 to the
Corporations Current Report on Form 8-K dated April 10, 2009).(10)(u)
    
    Form of Waiver, executed by each of Louis E. Prezeau, Edward R. Wright, Stanley M.
Weeks, and Raul Oseguera (incorporated herein by reference to Exhibit 10.5 to the
Corporations Current Report on Form 8-K dated April 10, 2009).(11)
    
    Statement regarding computation of per share earnings. The required information
is included on page 6.(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).
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CITY NATIONAL BANCSHARES CORPORATION
(Registrant)May 12, 2009
    
    /s/ Edward R. WrightEdward R. WrightSenior Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 18