##### Table of Contents



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 June 30, 2011
 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
    
    Smaller reporting company o
  o þ




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##### 



Index
    
    PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010
    
    
    3Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended
June 30, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended
June 30, 2011 and 2010
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31Part II. Other Information
    
    
    31Item 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Default Upon Senior Securities
    
    
    32Item 6. Exhibits
    
    
    33Signatures
    
    
    34EX-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
    
    2011
    
    
    2010AssetsCash and due from banks
    
    $
    8,842
    
    
    $
    7,228Federal funds sold
    
    
    22,500
    
    
    
    13,550Interest-bearing deposits with banks
    
    
    2,134
    
    
    
    3,289Investment securities available for sale
    
    
    99,678
    
    
    
    105,420Loans
    
    
    225,214
    
    
    
    244,955Less: Allowance for loan losses
    
    
    10,895
    
    
    
    10,626Net loans
    
    
    214,319
    
    
    
    234,329Premises and equipment
    
    
    2,776
    
    
    
    2,974Accrued interest receivable
    
    
    1,705
    
    
    
    1,933Bank-owned life insurance
    
    
    5,824
    
    
    
    5,730Other real estate owned
    
    
    1,959
    
    
    
    1,997Other assets
    
    
    6,455
    
    
    
    10,817Total assets
    
    $
    366,192
    
    
    $
    387,267Liabilities and Stockholders EquityDeposits:Demand
    
    $
    45,089
    
    
    $
    35,132Savings
    
    
    112,483
    
    
    
    130,663Time
    
    
    162,760
    
    
    
    172,756Total deposits
    
    
    320,332
    
    
    
    338,551Accrued expenses and other liabilities
    
    
    5,278
    
    
    
    6,620Short-term portion of long-term debt
    
    
    5,000
    
    
    
    5,000Long-term debt
    
    
    14,200
    
    
    
    14,200Total liabilities
    
    
    344,810
    
    
    
    364,371Commitments and contingenciesStockholders equityPreferred stock, no par value: Authorized 100,000 shares ;Series A, issued and outstanding 8 shares in 2011 and 2010
    
    
    200
    
    
    
    200Series C, issued and outstanding 108 shares in 2011 and 2010
    
    
    27
    
    
    
    27Series D, issued and outstanding 3,280 shares in 2011 and 2010
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2011 and 2010
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2011 and 2010
    
    
    6,790
    
    
    
    6,790Preferred stock, no par value, perpetual cumulative: Authorized 9,439 shares;Series G, issued and outstanding 9,439 shares in 2011 and 2010
    
    
    10,244
    
    
    
    9,990Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2011 and 2010131,326 shares outstanding in 2011 and 131,290 in 2010
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    (2,412
    )
    
    
    514Accumulated other comprehensive income (loss)
    
    
    1,029
    
    
    
    (127
    )Treasury stock, at cost-3,204 and 3,240 common shares in 2011 and 2010, respectively
    
    
    (226
    )
    
    
    (228
    )Total stockholders equity
    
    
    21,382
    
    
    
    22,896Total liabilities and stockholders equity
    
    $
    366,192
    
    
    $
    387,267




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Dollars in thousands, except per share data
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Interest incomeInterest and fees on loans
    
    $
    2,984
    
    
    $
    3,709
    
    
    $
    5,945
    
    
    $
    7,479Interest on federal funds sold and securities
purchased under agreements to resell
    
    
    8
    
    
    
    13
    
    
    
    19
    
    
    
    21Interest on deposits with banks
    
    
    59
    
    
    
    7
    
    
    
    118
    
    
    
    14Interest and dividends on investment securities:Taxable
    
    
    945
    
    
    
    1,304
    
    
    
    1,928
    
    
    
    2,758Tax-exempt
    
    
    61
    
    
    
    240
    
    
    
    123
    
    
    
    523Total interest income
    
    
    4,057
    
    
    
    5,273
    
    
    
    8,133
    
    
    
    10,795Interest expenseInterest on deposits
    
    
    1,074
    
    
    
    1,472
    
    
    
    2,195
    
    
    
    3,041Interest on long-term debt
    
    
    201
    
    
    
    423
    
    
    
    401
    
    
    
    852Total interest expense
    
    
    1,275
    
    
    
    1,895
    
    
    
    2,596
    
    
    
    3,893Net interest income
    
    
    2,782
    
    
    
    3,378
    
    
    
    5,537
    
    
    
    6,902Provision for loan losses
    
    
    814
    
    
    
    1,010
    
    
    
    2,014
    
    
    
    2,391Net interest income after provision
for loan losses
    
    
    1,968
    
    
    
    2,368
    
    
    
    3,523
    
    
    
    4,511Other operating incomeService charges on deposit accounts
    
    
    289
    
    
    
    340
    
    
    
    571
    
    
    
    702Agency fees on commercial loansAward income
    
    
    25
    
    
    
    1,025
    
    
    
    50
    
    
    
    1,050Other income
    
    
    304
    
    
    
    279
    
    
    
    634
    
    
    
    582Net gains on sales of investment securities
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    529Total other operating income
    
    
    618
    
    
    
    2,172
    
    
    
    1,255
    
    
    
    2,863Other operating expensesSalaries and other employee benefits
    
    
    1,483
    
    
    
    1,559
    
    
    
    2,918
    
    
    
    3,143Occupancy expense
    
    
    258
    
    
    
    470
    
    
    
    626
    
    
    
    837Equipment expense
    
    
    112
    
    
    
    146
    
    
    
    245
    
    
    
    300Data processing expense
    
    
    94
    
    
    
    86
    
    
    
    188
    
    
    
    181Appraisal fees
    
    
    5
    
    
    
    146
    
    
    
    120
    
    
    
    161Professional fees
    
    
    185
    
    
    
    317
    
    
    
    379
    
    
    
    456Marketing expense
    
    
    63
    
    
    
    97
    
    
    
    122
    
    
    
    174Management consulting fees
    
    
    554
    
    
    
    89
    
    
    
    1,039
    
    
    
    354Regulatory expense
    
    
    395
    
    
    
    272
    
    
    
    690
    
    
    
    562OREO expense
    
    
    140
    
    
    
    15
    
    
    
    243
    
    
    
    35Other expenses
    
    
    395
    
    
    
    468
    
    
    
    849
    
    
    
    990Total other operating expenses
    
    
    3,684
    
    
    
    3,665
    
    
    
    7,419
    
    
    
    7,188(Loss) income before income tax expense
    
    
    (1,098
    )
    
    
    875
    
    
    
    (2,641
    )
    
    
    186Income tax expense
    
    
    19
    
    
    
    53
    
    
    
    31
    
    
    
    68Net (loss) income
    
    $
    (1,117
    )
    
    $
    822
    
    
    $
    (2,672
    )
    
    $
    118Net (loss) income per common shareBasic
    
    $
    (9.48
    )
    
    $
    5.32
    
    
    $
    (22.28
    )
    
    $
    (0.94
    )Diluted
    
    
    (9.48
    )
    
    
    5.32
    
    
    
    (22.28
    )
    
    
    (0.94
    )Basic average common shares outstanding
    
    
    131,326
    
    
    
    131,290
    
    
    
    131,313
    
    
    
    131,290Diluted average common shares outstanding
    
    
    131,326
    
    
    
    131,290
    
    
    
    131,313
    
    
    
    131,290
  4




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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (Unaudited)
 Six Months EndedDollars in thousands
    
    2011
    
    
    2010Operating activitiesNet (loss) income
    
    $
    (2,672
    )
    
    $
    118Adjustments to reconcile net (loss) income to net cash from operating activities:Depreciation and amortization
    
    
    213
    
    
    
    210Provision for loan losses
    
    
    2,014
    
    
    
    2,391Premium amortization on investment securities
    
    
    54
    
    
    
    61Amortization of intangible assets
    
    
    
    
    
    
    75Net gains on securities transactions
    
    
    
    
    
    
    (529
    )Net writedowns (gains) on loans held for sale
    
    
    
    
    
    
    (6
    )Net losses on sales of real estate owned
    
    
    178
    
    
    
    (17
    )Proceeds from sales and principal payments from loans held for sale
    
    
    
    
    
    
    196Decrease in accrued interest receivable
    
    
    228
    
    
    
    401Deferred tax
    
    
    
    
    
    
    1,195Net increase in bank-owned life insurance
    
    
    (94
    )
    
    
    (96
    )Decrease in other assets
    
    
    4,311
    
    
    
    205(Decrease) increase in accrued expenses and other liabilities
    
    
    (1,342
    )
    
    
    296Net cash provided by operating activities
    
    
    2,890
    
    
    
    4,500Investing activitiesDecrease in loans, net
    
    
    17,862
    
    
    
    10,148Decrease in interest-bearing deposits with banks
    
    
    1,155
    
    
    
    27Proceeds from maturities of investment securities available for sale,
including principal payments and early redemptions
    
    
    10,223
    
    
    
    23,594Proceeds from maturities of investment securities held to maturity,
including principal payments and early redemptions
    
    
    
    
    
    
    1,247Proceeds from sales of investment securities available for sale
    
    
    
    
    
    
    14,502Purchases of investment securities available for sale
    
    
    (3,334
    )
    
    
    (14,257
    )Proceeds from sales of other real estate owned
    
    
    
    
    
    
    556Purchases of premises and equipment
    
    
    (15
    )
    
    
    (456
    )Net cash provided by investing activities
    
    
    25,891
    
    
    
    35,361Financing activitiesDecrease in deposits
    
    
    (18,219
    )
    
    
    (9,336
    )Increase in short-term borrowings
    
    
    
    
    
    
    500Decrease in long-term debt
    
    
    
    
    
    
    (2,000
    )Issuance of treasury stock
    
    
    2
    
    
    
    Net cash used by financing activities
    
    
    (18,217
    )
    
    
    (10,836
    )Net increase in cash and cash equivalents
    
    
    10,564
    
    
    
    29,025Cash and cash equivalents at beginning of period
    
    
    20,778
    
    
    
    12,308Cash and cash equivalents at end of period
    
    $
    31,342
    
    
    $
    41,333Cash paid during the yearInterest
    
    $
    2,495
    
    
    $
    3,706Income taxes
    
    
    66
    
    
    
    10Non-cash transactionsTransfer of held to maturity securities to available for sale
    
    
    
    
    
    
    39,144Transfer of loans to other real estate owned
    
    
    140
    
    
    
    




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##### Table of Contents




    
    within five (5) days of the Order, the Bank Board must appoint a Compliance Committee to be
comprised of at least three directors, none of whom may be an employee, former employee or
controlling shareholder of the Bank or any of its affiliates, to monitor and coordinate the
Banks adherence to the Order.
    
    within ninety (90) days of the Order, the Bank Board must develop and submit to the OCC for
review a written strategic plan covering at least a three-year period, establishing objectives
for the overall risk profile, earnings performance, growth, balance sheet mix, off-balance
sheet activities, liability structure, capital adequacy, reduction in the volume of
nonperforming assets, product line development, and market segments that the Bank intends to
promote or develop, together with strategies to achieve those objectives.
    
    by March 31, 2011, and thereafter the Bank must maintain total capital at least equal to 13%
of risk-weighted assets and Tier 1 capital at least equal to 9% of adjusted total assets; this
requirement means that the Bank may not be considered well capitalized as otherwise defined
in applicable regulations.
    
    within ninety (90) days of the Order, the Bank Board must submit to the OCC a written capital
plan for the Bank covering at least a three-year period, including specific plans for the
achievement and maintenance of adequate capital and projections for growth and capital
requirements, based upon a detailed analysis of the Banks assets, liabilities, earnings,
fixed assets and off-balance sheet activities; identification of the primary sources from
which the
 6




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Bank will maintain an appropriate capital structure to meet the Banks future needs,
as set forth in the strategic plan;
specific plans detailing how the Bank will comply with restrictions or requirements set forth in
the Order and with the restrictions against brokered deposits in 12 C.F.R. § 337.6; contingency
plans that identify alternative methods to strengthen capital, should the primary source(s) not
be available; and a prohibition on the payment of director fees unless the Bank is in compliance
with the minimum capital ratios previously identified in the prior paragraph or express written
authorization is provided by the OCC.
    
    the Bank is restricted on the payment of dividends.
    
    to ensure the Bank has competent management in place at all times, including: within ninety
(90) days of the Order, the Bank Board shall provide to the OCC qualified and capable
candidates for the positions of President, Senior Credit Officer, Consumer Compliance Officer
and Bank Secrecy Officer; within ninety (90) days of the date of the Order, the Bank Board
(with the exception of Bank executive officers) shall prepare a written assessment of the
Banks executive officers to perform present and anticipated duties; prior to appointment of
any individual to an executive position provide notice to the OCC, who shall have the power to
veto such appointment; and the Bank Board shall at least annually perform a written
performance appraisal for each Bank executive officer.
    
    within sixty (60) days of the Order, the Bank Board shall develop and the Bank shall
implement, and thereafter ensure compliance with, a written credit policy to ensure the Banks
compliance with written programs to improve the Banks loan portfolio management.
    
    within ninety (90) days of the Order the Bank Board shall develop, implement and thereafter
ensure Bank adherence to a written program to improve the Banks loan portfolio management,
including: requiring that extensions of credit are granted, by renewal or otherwise, to any
borrower only after obtaining, performing, and documenting a global analysis of current and
satisfactory credit information; requiring that existing extensions of credit structured as
single pay notes are revised upon maturity to conform to the Banks revised loan policy;
ensuring satisfactory and perfected collateral documentation; tracking and analyzing credit,
collateral, and policy exceptions; providing for accurate risk ratings consistent with the
classification standards contained in the Comptrollers Handbook on Rating Credit Risk;
providing for identification, measurement, monitoring, and control of concentrations of
credit; ensuring compliance with Call Report instructions, the Banks lending policies, and
laws, rules, and regulations pertaining to the Banks lending function; ensuring the accuracy
of internal management information systems; and providing adequate training of Bank personnel
performing credit analyses in cash flow analysis, particularly analysis using information from
tax returns, and implement processes to ensure that additional training is provided as needed.
    
    within sixty (60) days of the Order, the Bank Board must establish a written performance
appraisal and salary administration process for loan officers that adequately consider
performance relative to job descriptions, policy compliance, documentation standards, accuracy
in credit grading, and other loan administration matters.
    
    the Bank must implement and maintain an effective, independent, and ongoing loan review
program to review, at least quarterly, the Banks loan and lease portfolios, to assure the
timely identification and categorization of problem credits.
    
    the Bank is also required to implement and adhere to a written program for the maintenance of
an adequate Allowance for Loan and Lease Losses, providing for review of the allowance by the
Bank Board at least quarterly.
    
    within sixty (60) days of the Order, the Bank Board shall adopt and the Bank (subject to Bank
Board review and ongoing monitoring) shall implement and thereafter ensure adherence to a
written program designed to protect the Banks interest in those assets criticized in the most
recent Report of Examination (ROE) by the OCC, in any subsequent ROE, by any internal or
external loan review, or in any list provided to management by the national bank examiners
during any examination as doubtful, substandard, or special mention.
    
    within one hundred twenty (120) days of the Order, the Bank Board must revise and maintain a
comprehensive liquidity risk management program, which assesses, on an ongoing basis, the
Banks current and projected funding needs, and ensures that sufficient funds or access to
funds exist to meet those needs, and that includes effective methods to achieve and maintain
sufficient liquidity and to measure and monitor liquidity risk.
    
    within ninety (90) days of the Order, the Bank Board shall identify and propose for
appointment a minimum of two (2) new independent directors that have a background in banking,
credit, accounting, or financial reporting, and such appointment will be subject to veto power
of the OCC.
    
    within ninety (90) days of the Order, the Bank Board shall adopt, implement, and thereafter
ensure adherence to a written consumer compliance program designed to ensure that the Bank is
operating in compliance with all applicable consumer protection laws, rules, and regulations.
 7




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
    
    within ninety (90) days of the Order, the Bank Board shall develop, implement, and thereafter
ensure Bank adherence to a written program of policies and procedures to provide for
compliance with the Bank Secrecy Act, as amended (31 U.S.C. §§ 5311 et seq.), the regulations
promulgated thereunder and regulations of the Office of Foreign Assets Control (OFAC), 31
C.F.R. Chapter V, as amended (collectively referred to as the Bank Secrecy Act or BSA) and
for the appropriate identification and monitoring of transactions that pose greater than
normal risk for compliance with the BSA.
    
    within ninety (90) days of the Order, the Bank Board shall develop, implement, and thereafter
ensure Bank adherence to an independent, internal audit program sufficient to detect
irregularities and weak practices in the Banks operations; determine the Banks level of
compliance with all applicable laws, rules, and regulations; assess and report the
effectiveness of policies, procedures, controls, and management oversight relating to
accounting and financial reporting; evaluate the Banks adherence to established policies and
procedures, with particular emphasis directed to the Banks adherence to its loan, consumer
compliance, and BSA policies and procedures; evaluate and document the root causes for
exceptions; and establish an annual audit plan using a risk-based approach sufficient to
achieve these objectives.
    
    within ninety (90) days of the Order, the Bank Board must develop and implement a
comprehensive compliance audit function to include an independent review of all products and
services offered by the Bank, including without limitation, a risk-based audit program to test
for compliance with consumer protection laws, rules, and regulations that includes an adequate
level of transaction testing; procedures to ensure that exceptions noted in the audit reports
are corrected and responded to by the appropriate Bank personnel; and periodic reporting of
the results of the consumer compliance audit to the Bank Board or a committee thereof.
    
    the Bank Board shall require and the Bank shall immediately take all necessary steps to
correct each violation of law, rule, or regulation cited in any ROE, or brought to the Bank
Boards or Banks attention in writing by management, regulators, auditors, loan review, or
other compliance efforts.
        8




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,In thousands, except per share data
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Net (loss) income
    
    $
    (1,117
    )
    
    $
    822
    
    
    $
    (2,672
    )
    
    $
    118Dividends on preferred stock
    
    
    128
    
    
    
    122
    
    
    
    254
    
    
    
    240Net (loss) income applicable to basic
common shares
    
    
    (1,245
    )
    
    
    700
    
    
    
    (2,926
    )
    
    
    (122
    )Dividends applicable to convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    Net (loss) income applicable to diluted common shares
    
    $
    (1,245
    )
    
    $
    700
    
    
    $
    (2,779
    )
    
    $
    (122
    )Number of average common sharesBasic
    
    
    131,326
    
    
    
    131,290
    
    
    
    131,313
    
    
    
    131,290Diluted
    
    
    131,326
    
    
    
    131,290
    
    
    
    131,313
    
    
    
    131,290Net (loss) income per common shareBasic
    
    $
    (9.48
    )
    
    $
    5.32
    
    
    $
    (22.28
    )
    
    $
    (.94
    )Diluted
    
    
    (9.48
    )
    
    
    5.32
    
    
    
    (22.28
    )
    
    
    (.94
    )
     9




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10




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
    Gross
    
    
    GrossJune 30, 2011
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairIn thousands
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    3,178
    
    
    $
    101
    
    
    $
    24
    
    
    $
    3,255Obligations of U.S.
government sponsored
entities
    
    
    14,963
    
    
    
    102
    
    
    
    157
    
    
    
    14,908Obligations of state and
political subdivisions
    
    
    9,592
    
    
    
    267
    
    
    
    71
    
    
    
    9,788Mortgage-backed
securities
    
    
    59,804
    
    
    
    2,148
    
    
    
    
    
    
    
    61,952Other debt securities
    
    
    8,362
    
    
    
    75
    
    
    
    1,392
    
    
    
    7,045Equity securities:Marketable securities
    
    
    765
    
    
    
    
    
    
    
    20
    
    
    
    745Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal HomeLoan Bank stock
    
    
    1,870
    
    
    
    
    
    
    
    
    
    
    
    1,870Total
    
    $
    98,649
    
    
    $
    2,693
    
    
    $
    1,664
    
    
    $
    99,678
 11




---



##### Table of Contents



Gross
    
    
    GrossDecember 31, 2010
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair2010 In thousands
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    3,389
    
    
    $
    64
    
    
    $
    24
    
    
    $
    3,429Obligations of U.S.
government sponsored
entities
    
    
    15,447
    
    
    
    100
    
    
    
    267
    
    
    
    15,280Obligations of state and
political subdivisions
    
    
    9,604
    
    
    
    194
    
    
    
    285
    
    
    
    9,513Mortgage-backed
securities
    
    
    66,037
    
    
    
    1,892
    
    
    
    24
    
    
    
    67,905Other debt securities
    
    
    8,358
    
    
    
    37
    
    
    
    1,839
    
    
    
    6,556Equity securities:Marketable securities
    
    
    748
    
    
    
    
    
    
    
    21
    
    
    
    727Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal HomeLoan Bank stock
    
    
    1,895
    
    
    
    
    
    
    
    
    
    
    
    1,895Total
    
    $
    105,593
    
    
    $
    2,287
    
    
    $
    2,460
    
    
    $
    105,420
  12




---



##### Table of Contents



June 30, 2011
    
    Amortized
    
    
    FairIn thousands
    
    Cost
    
    
    ValueDue within one year:Mortgage-backed securities
    
    $
    2
    
    
    $
    2Due after one year but within five years:U.S. Treasury securities and
obligations of U.S. government
agencies
    
    
    34
    
    
    
    34Obligations of state and political
subdivisions
    
    
    2,232
    
    
    
    2,381Obligations of U.S. government sponsored
entities
    
    
    644
    
    
    
    649Mortgage-backed securities
    
    
    460
    
    
    
    486Other debt securities
    
    
    1,000
    
    
    
    939Due after five years but within ten years:U.S. Treasury securities and
obligations of U.S. government
agencies
    
    
    87
    
    
    
    87Obligations of state and political
subdivisions
    
    
    3,624
    
    
    
    3,694Obligations of U.S. government sponsored
entities
    
    
    3,408
    
    
    
    3,348Mortgage-backed securities
    
    
    408
    
    
    
    427Due after ten years:U.S. Treasury securities and
obligations of U.S. government
agencies
    
    
    3,057
    
    
    
    3,134Obligations of state and political
subdivisions
    
    
    3,736
    
    
    
    3,713Obligations of U.S. government sponsored
entities
    
    
    10,911
    
    
    
    10,911Mortgage-backed securities
    
    
    58,934
    
    
    
    61,037Other debt securities
    
    
    7,362
    
    
    
    6,106Total debt securities
    
    
    95,899
    
    
    
    96,948Equity securities
    
    
    2,750
    
    
    
    2,730Total
    
    $
    98,649
    
    
    $
    99,678
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossJune 30, 2011
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Treasury securities and
obligations of U.S. government
agencies
    
    $
    938
    
    
    $
    24
    
    
    $
    65
    
    
    $
    
    
    
    $
    1,003
    
    
    $
    24Obligations of U.S. government
sponsored entities
    
    
    6,846
    
    
    
    141
    
    
    
    1,972
    
    
    
    16
    
    
    
    8,818
    
    
    
    157Obligations of state and political
subdivisions
    
    
    3,269
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    3,269
    
    
    
    71Other debt securities
    
    
    
    
    
    
    
    
    
    
    5,501
    
    
    
    1,392
    
    
    
    5,501
    
    
    
    1,392Marketable equity securities
    
    
    
    
    
    
    
    
    
    
    765
    
    
    
    20
    
    
    
    765
    
    
    
    20Total
    
    $
    11,053
    
    
    $
    236
    
    
    $
    8,303
    
    
    $
    1,428
    
    
    $
    19,356
    
    
    $
    1,664
 13




---



##### Table of Contents



Less than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossDecember 31, 2010
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Treasury securities and
obligations of U.S. government
agencies
    
    $
    1,054
    
    
    $
    23
    
    
    $
    162
    
    
    $
    1
    
    
    $
    1,216
    
    
    $
    24Obligations of U.S. government
sponsored entities
    
    
    6,733
    
    
    
    254
    
    
    
    2,080
    
    
    
    13
    
    
    
    8,813
    
    
    
    267Mortgaged-backed securities
    
    
    6,219
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    6,219
    
    
    
    24Obligations of state and political
subdivisions
    
    
    5,147
    
    
    
    285
    
    
    
    
    
    
    
    
    
    
    
    5,147
    
    
    
    285Other debt securities
    
    
    
    
    
    
    
    
    
    
    5,050
    
    
    
    1,839
    
    
    
    5,050
    
    
    
    1,839Equity securities
    
    
    
    
    
    
    
    
    
    
    727
    
    
    
    21
    
    
    
    727
    
    
    
    21Total
    
    $
    19,153
    
    
    $
    586
    
    
    $
    8,019
    
    
    $
    1,874
    
    
    $
    27,172
    
    
    $
    2,460
     For the Six Months
    
    
    For the Six MonthsIn thousands
    
    Ended June 30, 2011
    
    
    Ended June 30, 2010Balance, December 31, 2010 and 2009
    
    $
    
    
    
    $
    2,489Add: Initial credit impairments
    
    
    
    
    
    
    Additional credit impairments
    
    
    
    
    
    
    Less: Sale of investment securities
    
    
    
    
    
    
    ( 2,489
    )Balance, June 30, 2011 and 2010
    
    $
    
    
    
    $
    
    14




---



##### Table of Contents



June 30,
    
    
    December 31,In thousands
    
    2011
    
    
    2010Commercial
    
    $
    31,727
    
    
    $
    38,225Real estate
    
    
    192,676
    
    
    
    206,072Installment
    
    
    864
    
    
    
    718Total loans
    
    
    225,267
    
    
    
    245,015Less: Unearned income
    
    
    53
    
    
    
    60Loans
    
    $
    225,214
    
    
    $
    244,955
  Pass 
 Special Mention 
 Substandard 
 Doubtful 
 15




---



##### Table of Contents



Loss 
   SpecialIn thousands
    
    Pass
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    Loss
    
    
    TotalCommercial loans
    
    $
    29,697
    
    
    $
    52
    
    
    $
    1,902
    
    
    $
    76
    
    
    $
    
    
    
    $
    31,727Real estate loansChurch
    
    
    35,882
    
    
    
    11,218
    
    
    
    13,561
    
    
    
    
    
    
    
    
    
    
    
    60,661Construction  other than
third-party originated
    
    
    2,662
    
    
    
    
    
    
    
    11,281
    
    
    
    
    
    
    
    
    
    
    
    13,943Construction  third-party originated
    
    
    
    
    
    
    
    
    
    
    8,670
    
    
    
    2,291
    
    
    
    
    
    
    
    10,961Multifamily
    
    
    10,897
    
    
    
    1,462
    
    
    
    1,134
    
    
    
    273
    
    
    
    
    
    
    
    13,766Other
    
    
    43,235
    
    
    
    4,720
    
    
    
    20,067
    
    
    
    968
    
    
    
    
    
    
    
    68,990Residential
    
    
    21,061
    
    
    
    
    
    
    
    3,294
    
    
    
    
    
    
    
    
    
    
    
    24,355Installment
    
    
    864
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    864$
    144,298
    
    
    $
    17,452
    
    
    $
    59,909
    
    
    $
    3,608
    
    
    $
    
    
    
    $
    225,267
  SpecialIn thousands
    
    Pass
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    Loss
    
    
    TotalCommercial loans
    
    $
    35,776
    
    
    $
    916
    
    
    $
    1,384
    
    
    $
    149
    
    
    $
    
    
    
    $
    38,225Real estate loansChurch
    
    
    38,785
    
    
    
    8,893
    
    
    
    15,106
    
    
    
    
    
    
    
    
    
    
    
    62,784Construction  other than
third-party originated
    
    
    1,879
    
    
    
    598
    
    
    
    10,593
    
    
    
    579
    
    
    
    
    
    
    
    13,649Construction  third-party originated
    
    
    
    
    
    
    
    
    
    
    9,514
    
    
    
    4,017
    
    
    
    
    
    
    
    13,531Multifamily
    
    
    11,742
    
    
    
    1,578
    
    
    
    1,240
    
    
    
    273
    
    
    
    
    
    
    
    14,833Other
    
    
    46,544
    
    
    
    5,064
    
    
    
    20,973
    
    
    
    1,202
    
    
    
    
    
    
    
    73,783Residential
    
    
    24,286
    
    
    
    
    
    
    
    2,714
    
    
    
    492
    
    
    
    
    
    
    
    27,492Installment
    
    
    696
    
    
    
    16
    
    
    
    1
    
    
    
    5
    
    
    
    
    
    
    
    718$
    159,708
    
    
    $
    17,065
    
    
    $
    61,525
    
    
    $
    6,717
    
    
    $
    
    
    
    $
    245,015
   30-60
    
    
    60-90
    
    
    More than
    
    
    Total PastIn thousands
    
    0-30 Days
    
    
    Days
    
    
    Days
    
    
    90 Days
    
    
    Due
    
    
    Current
    
    
    TotalCommercial loans
    
    $
    2,075
    
    
    $
    1,044
    
    
    $
    2,569
    
    
    $
    2,333
    
    
    $
    8,021
    
    
    $
    23,706
    
    
    $
    31,727Real estate loansChurch
    
    
    2,079
    
    
    
    5,663
    
    
    
    4,802
    
    
    
    4,990
    
    
    
    17,534
    
    
    
    43,127
    
    
    
    60,661Construction  other than
third-party originated
    
    
    686
    
    
    
    2,879
    
    
    
    
    
    
    
    6,756
    
    
    
    10,321
    
    
    
    3,622
    
    
    
    13,943Construction  third-party
originated
    
    
    1,482
    
    
    
    1,512
    
    
    
    
    
    
    
    7,967
    
    
    
    10,961
    
    
    
    
    
    
    
    10,961Multifamily
    
    
    545
    
    
    
    1,206
    
    
    
    99
    
    
    
    1,308
    
    
    
    3,158
    
    
    
    10,608
    
    
    
    13,766Other
    
    
    2,208
    
    
    
    1,825
    
    
    
    488
    
    
    
    9,216
    
    
    
    13,737
    
    
    
    55,253
    
    
    
    68,990Residential
    
    
    269
    
    
    
    421
    
    
    
    115
    
    
    
    2,283
    
    
    
    3,088
    
    
    
    21,267
    
    
    
    24,355Installment
    
    
    11
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    852
    
    
    
    864$
    9,355
    
    
    $
    14,550
    
    
    $
    8,074
    
    
    $
    34,853
    
    
    $
    66,832
    
    
    $
    157,535
    
    
    $
    225,267
 16




---



##### Table of Contents



30-60
    
    
    60-90
    
    
    More than
    
    
    Total PastIn thousands
    
    0-30 Days
    
    
    Days
    
    
    Days
    
    
    90 Days
    
    
    Due
    
    
    Current
    
    
    TotalCommercial loans
    
    $
    3,251
    
    
    $
    1,336
    
    
    $
    1,449
    
    
    $
    2,308
    
    
    $
    8,344
    
    
    $
    29,881
    
    
    $
    38,225Real estate loansChurch
    
    
    339
    
    
    
    13,096
    
    
    
    7,630
    
    
    
    4,909
    
    
    
    25,974
    
    
    
    36,810
    
    
    
    62,784Construction  other than
third-party originated
    
    
    4,025
    
    
    
    
    
    
    
    
    
    
    
    8,057
    
    
    
    12,082
    
    
    
    1,567
    
    
    
    13,649Construction  third-party
originated
    
    
    454
    
    
    
    1,531
    
    
    
    530
    
    
    
    9,253
    
    
    
    11,768
    
    
    
    1,763
    
    
    
    13,531Multifamily
    
    
    
    
    
    
    2,608
    
    
    
    1,248
    
    
    
    273
    
    
    
    4,129
    
    
    
    10,704
    
    
    
    14,833Other
    
    
    2,837
    
    
    
    2,109
    
    
    
    4,861
    
    
    
    6,375
    
    
    
    16,182
    
    
    
    57,601
    
    
    
    73,783Residential
    
    
    564
    
    
    
    809
    
    
    
    118
    
    
    
    2,333
    
    
    
    3,824
    
    
    
    23,668
    
    
    
    27,492Installment
    
    
    31
    
    
    
    17
    
    
    
    
    
    
    
    6
    
    
    
    54
    
    
    
    664
    
    
    
    718$
    11,501
    
    
    $
    21,506
    
    
    $
    15,836
    
    
    $
    33,514
    
    
    $
    82,357
    
    
    $
    162,658
    
    
    $
    245,015
   UnpaidRecorded
    
    
    Principal
    
    
    RelatedIn thousands
    
    Investment
    
    
    Balance
    
    
    AllowanceCommercial loans
    
    $
    254
    
    
    $
    258
    
    
    $
    1Real estate loansChurch
    
    
    6,920
    
    
    
    7,283
    
    
    
    18Construction  other than
third-party originated
    
    
    6,662
    
    
    
    7,438
    
    
    
    722Construction  third-party
originated
    
    
    10,961
    
    
    
    14,463
    
    
    
    509Multifamily
    
    
    1,035
    
    
    
    1,882
    
    
    
    Other
    
    
    10,431
    
    
    
    11,354
    
    
    
    73Residential
    
    
    2,464
    
    
    
    2,511
    
    
    
    4Installment
    
    
    
    
    
    
    
    
    
    
    $
    38,727
    
    
    $
    45,189
    
    
    $
    1,327
  UnpaidRecorded
    
    
    Principal
    
    
    RelatedIn thousands
    
    Investment
    
    
    Balance
    
    
    AllowanceCommercial loans
    
    $
    10
    
    
    $
    10
    
    
    $
    Real estate loansChurch
    
    
    5,460
    
    
    
    5,624
    
    
    
    Construction  other than
third-party originated
    
    
    6,689
    
    
    
    7,067
    
    
    
    242Construction  third-party
originated
    
    
    13,078
    
    
    
    16,315
    
    
    
    1,123Multifamily
    
    
    273
    
    
    
    824Other
    
    
    7,024
    
    
    
    7,798
    
    
    
    102Residential
    
    
    2,227
    
    
    
    2,394
    
    
    
    35Installment
    
    
    
    
    
    
    
    
    
    
    $
    34,761
    
    
    $
    40,032
    
    
    $
    1,502
  17




---



##### Table of Contents



June 30,
    
    
    December 31,In thousands
    
    2011
    
    
    2010Nonaccrual loans
    
    $
    40,263
    
    
    $
    35,916Loans with interest or principal 90
days or more past due and still accruing
    
    
    1,991
    
    
    
    2,343Total nonperforming loans
    
    $
    42,254
    
    
    $
    38,259
       Allowance for Loan Losses
    
    
    Recorded InvestmentIndividually
    
    
    Collectively
    
    
    Total
    
    
    Individually
    
    
    CollectivelyIn thousands
    
    Evaluated
    
    
    Evaluated
    
    
    Allowance
    
    
    Evaluated
    
    
    Evaluated
    
    
    TotalCommercial loans
    
    $
    1
    
    
    $
    2,694
    
    
    $
    2,695
    
    
    $
    254
    
    
    $
    31,473
    
    
    $
    31,727Real estate loansChurch
    
    
    18
    
    
    
    1,729
    
    
    
    1,747
    
    
    
    6,920
    
    
    
    53,741
    
    
    
    60,661Construction  other than
third-party originated
    
    
    722
    
    
    
    849
    
    
    
    1,571
    
    
    
    6,662
    
    
    
    7,281
    
    
    
    13,943Construction  third-party
originated
    
    
    509
    
    
    
    
    
    
    
    509
    
    
    
    10,961
    
    
    
    
    
    
    
    10,961Multifamily
    
    
    
    
    
    
    371
    
    
    
    371
    
    
    
    1,035
    
    
    
    12,731
    
    
    
    13,766Commercial
    
    
    73
    
    
    
    2,538
    
    
    
    2,611
    
    
    
    10,431
    
    
    
    58,559
    
    
    
    68,990Residential
    
    
    4
    
    
    
    1,101
    
    
    
    1,105
    
    
    
    2,464
    
    
    
    21,891
    
    
    
    24,355Installment
    
    
    
    
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    Unallocated
    
    
    
    
    
    
    240
    
    
    
    240
    
    
    
    
    
    
    
    864
    
    
    
    864$
    1,327
    
    
    $
    9,568
    
    
    $
    10,895
    
    
    $
    38,727
    
    
    $
    186,540
    
    
    $
    225,267
 18




---



##### Table of Contents



Individually
    
    
    Collectively
    
    
    TotalIn thousands
    
    Evaluated
    
    
    Evaluated
    
    
    AllowanceCommercial loans
    
    $
    
    
    
    $
    2,770
    
    
    $
    2,770Real estate loansChurch
    
    
    
    
    
    
    1,559
    
    
    
    1,559Construction  other than
third-party originated
    
    
    242
    
    
    
    220
    
    
    
    462Construction  third-party
originated
    
    
    1,123
    
    
    
    452
    
    
    
    1,575Multifamily
    
    
    
    
    
    
    633
    
    
    
    633Other
    
    
    102
    
    
    
    2,231
    
    
    
    2,333Residential
    
    
    35
    
    
    
    701
    
    
    
    736Installment
    
    
    
    
    
    
    55
    
    
    
    55Unallocated
    
    
    
    
    
    
    503
    
    
    
    503$
    1,502
    
    
    $
    9,124
    
    
    $
    10,626
   Balance,
    
    
    Provision
    
    
    
    
    
    
    
    
    
    
    Balance,December
    
    
    for Loan
    
    
    Recover-
    
    
    Charge-
    
    
    June 30,In thousands
    
    31, 2010
    
    
    Losses
    
    
    ies
    
    
    offs
    
    
    2011Commercial loans
    
    $
    2,770
    
    
    $
    (15
    )
    
    $
    70
    
    
    $
    130
    
    
    $
    2,695Real estate loansChurch
    
    
    1,559
    
    
    
    249
    
    
    
    2
    
    
    
    63
    
    
    
    1,747Construction  other than
third-party originated
    
    
    462
    
    
    
    2,052
    
    
    
    
    
    
    
    943
    
    
    
    1,571Construction  third-party
originated
    
    
    1,575
    
    
    
    (959
    )
    
    
    
    
    
    
    107
    
    
    
    509Multifamily
    
    
    633
    
    
    
    (194
    )
    
    
    
    
    
    
    68
    
    
    
    371Other
    
    
    2,333
    
    
    
    655
    
    
    
    56
    
    
    
    433
    
    
    
    2,611Residential
    
    
    736
    
    
    
    485
    
    
    
    6
    
    
    
    122
    
    
    
    1,105Installment
    
    
    55
    
    
    
    4
    
    
    
    
    
    
    
    13
    
    
    
    46Unallocated
    
    
    503
    
    
    
    (263
    )
    
    
    
    
    
    
    0
    
    
    
    240$
    10,626
    
    
    $
    2,014
    
    
    $
    134
    
    
    $
    1,879
    
    
    $
    10,895
 Balance,
    
    
    Provision
    
    
    
    
    
    
    
    
    
    
    Balance,March 31,
    
    
    for Loan
    
    
    Recover-
    
    
    Charge-
    
    
    June 30,In thousands
    
    2011
    
    
    Losses
    
    
    ies
    
    
    offs
    
    
    2011Commercial loans
    
    $
    2,491
    
    
    $
    187
    
    
    $
    29
    
    
    $
    12
    
    
    $
    2,695Real estate loansChurch
    
    
    2,101
    
    
    
    (345
    )
    
    
    2
    
    
    
    11
    
    
    
    1,747Construction  other than
third-party originated
    
    
    960
    
    
    
    1,094
    
    
    
    
    
    
    
    483
    
    
    
    1,571Construction  third-party
originated
    
    
    1,045
    
    
    
    (429
    )
    
    
    
    
    
    
    107
    
    
    
    509Multifamily
    
    
    269
    
    
    
    170
    
    
    
    
    
    
    
    68
    
    
    
    371Other
    
    
    2,717
    
    
    
    (36
    )
    
    
    
    
    
    
    76
    
    
    
    2,611Residential
    
    
    944
    
    
    
    177
    
    
    
    6
    
    
    
    22
    
    
    
    1,105Installment
    
    
    45
    
    
    
    14
    
    
    
    
    
    
    
    13
    
    
    
    46Unallocated
    
    
    258
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    240$
    10,830
    
    
    $
    814
    
    
    $
    43
    
    
    $
    792
    
    
    $
    10,895
   19




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##### Table of Contents



Level 1
 Level 2
 Level 3
   (In thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment
securities
available for sale
    
    $
    99,678
    
    
    $
    3,255
    
    
    $
    95,915
    
    
    $
    508Total assets
    
    $
    99,678
    
    
    $
    3,255
    
    
    $
    95,915
    
    
    $
    508
  (In thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available for sale
    
    $
    105,420
    
    
    $
    3,429
    
    
    $
    102,492
    
    
    $
    499Total assets
    
    $
    105,420
    
    
    $
    3,429
    
    
    $
    102,492
    
    
    $
    499
       20




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##### Table of Contents



Cash, short-term investments and interest-bearing deposits with banks
  Investment securities
  Loans
  Loans held for sale
  Deposit liabilities
  21




---



##### Table of Contents



Short-term borrowings
  Long-term debt
  Commitments to extend credit and letters of credit
   June 30, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(In thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assetsCash and other short-term
Investments
    
    $
    31,342
    
    
    $
    31,342
    
    
    $
    20,778
    
    
    $
    20,778Interest-bearing deposits
with banks
    
    
    2,134
    
    
    
    2,134
    
    
    
    3,289
    
    
    
    3,289Investment securities AFS
    
    
    99,678
    
    
    
    99,678
    
    
    
    105,420
    
    
    
    105,420Loans
    
    
    225,214
    
    
    
    220,196
    
    
    
    244,955
    
    
    
    239,242Loans held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial liabilitiesDeposits
    
    
    320,331
    
    
    
    313,415
    
    
    
    338,551
    
    
    
    331,434Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    19,200
    
    
    
    19,826
    
    
    
    19,200
    
    
    
    19,631
      
 Item 2
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary statement concerning forward-looking statements
  22




---



##### Table of Contents



Executive summary
       Financial Condition
        23




---



##### Table of Contents



Balance,
    
    
    Provision
    
    
    
    
    
    
    
    
    
    
    Balance,December
    
    
    for Loan
    
    
    
    
    
    
    
    
    June 30,In thousands
    
    31, 2010
    
    
    Losses
    
    
    Recoveries
    
    
    Charge-offs
    
    
    2011Commercial loans
    
    $
    2,770
    
    
    $
    (15
    )
    
    $
    70
    
    
    $
    130
    
    
    $
    2,695Real estate loansChurch
    
    
    1,559
    
    
    
    249
    
    
    
    2
    
    
    
    63
    
    
    
    1,747Construction  other than
third-party originated
    
    
    462
    
    
    
    2,052
    
    
    
    
    
    
    
    943
    
    
    
    1,571Construction  third-party
originated
    
    
    1,575
    
    
    
    (959
    )
    
    
    
    
    
    
    107
    
    
    
    509Multifamily
    
    
    633
    
    
    
    (194
    )
    
    
    
    
    
    
    68
    
    
    
    371Other
    
    
    2,333
    
    
    
    655
    
    
    
    56
    
    
    
    433
    
    
    
    2,611Residential
    
    
    736
    
    
    
    485
    
    
    
    6
    
    
    
    122
    
    
    
    1,105Installment
    
    
    55
    
    
    
    4
    
    
    
    
    
    
    
    13
    
    
    
    46Unallocated
    
    
    503
    
    
    
    (263
    )
    
    
    
    
    
    
    0
    
    
    
    240$
    10,626
    
    
    $
    2,014
    
    
    $
    134
    
    
    $
    1,879
    
    
    $
    10,895
 Three Months
    
    
    Six Months
    
    
    Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,
    
    
    Ended June 30,
    
    
    Ended June 30,(Dollars in thousands)
    
    2011
    
    
    2011
    
    
    2010
    
    
    2010Balance at beginning of period
    
    $
    10,830
    
    
    $
    10,626
    
    
    $
    8,000
    
    
    $
    8,650Provision for loan losses
    
    
    814
    
    
    
    2,014
    
    
    
    1,010
    
    
    
    2,391Recoveries of previous charge-offs
    
    
    53
    
    
    
    134
    
    
    
    37
    
    
    
    4611,687
    
    
    
    12,774
    
    
    
    9,047
    
    
    
    11,087Less: Charge-offs
    
    
    792
    
    
    
    1,879
    
    
    
    1,113
    
    
    
    3,153Balance at end of period
    
    $
    10,895
    
    
    $
    10,895
    
    
    $
    7,934
    
    
    $
    7,934
  24




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##### Table of Contents



June 30,
    
    
    December 31,
    
    
    June 30,2011
    
    
    2010
    
    
    2010Allowance for loan losses as a
percentage of:Total loans
    
    
    4.84
    %
    
    
    4.34
    %
    
    
    3.02
    %Total nonperforming loans
    
    
    25.78
    %
    
    
    27.77
    %
    
    
    24.58
    %Year-to-date net charge-offs as a
percentage of average loans
(annualized)
    
    
    1.59
    %
    
    
    2.87
    %
    
    
    1.15
    %
   25




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##### Table of Contents



June 30,
    
    
    December 31,
    
    
    June 30,(In thousands)
    
    2011
    
    
    2010
    
    
    2010Loans past due 90 days
or more and still accruing
Commercial
    
    $
    605
    
    
    $
    928
    
    
    $
    335Real estate
    
    
    1,386
    
    
    
    1,415
    
    
    
    3,462Installment
    
    
    
    
    
    
    
    
    
    
    1Total
    
    
    1,991
    
    
    
    2,343
    
    
    
    3,798Nonaccrual loansCommercial
    
    
    1,966
    
    
    
    1,436
    
    
    
    3,047Real estate
    
    
    38,297
    
    
    
    34,480
    
    
    
    25,438Installment
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    40,263
    
    
    
    35,916
    
    
    
    28,485Total nonperforming loans
    
    
    42,254
    
    
    
    38,259
    
    
    
    32,283Other real estate owned
    
    
    1,959
    
    
    
    1,997
    
    
    
    1,813Total nonperforming assets
    
    $
    44,213
    
    
    $
    40,256
    
    
    $
    34,096
        26




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27




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##### Table of Contents



Consolidated
    
    
    Bank Only__________June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Risk-based capital ratios:Tier 1 capital to risk-
adjusted assets
    
    
    9.22
    %
    
    
    9.47
    %
    
    
    11.12
    %
    
    
    11.21
    %Minimum to be considered
well-capitalized
    
    
    6.00
    
    
    
    6.00
    
    
    
    6.00
    
    
    
    6.00Minimum to be considered
well-capitalized under OCC
Consent Order
    
    
    N/A
    
    
    
    N/A
    
    
    
    10.00
    
    
    
    10.00Total capital to risk-
adjusted assets
    
    
    12.48
    
    
    
    12.59
    
    
    
    12.41
    
    
    
    12.49Minimum to be considered
well-capitalized
    
    
    10.00
    
    
    
    10.00
    
    
    
    10.00
    
    
    
    10.00Minimum to be considered
well-capitalized under OCC
Consent Order
    
    
    N/A
    
    
    
    N/A
    
    
    
    13.00
    
    
    
    13.00Leverage ratio
    
    
    6.18
    
    
    
    6.30
    
    
    
    7.46
    
    
    
    7.45Minimum to be considered
well-capitalized
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00
    
    
    
    5.00Minimum to be considered
well-capitalized under OCC
Consent Order
    
    
    N/A
    
    
    
    N/A
    
    
    
    9.00
    
    
    
    8.00
     Results of Operations
  28




---



##### Table of Contents



29




---



##### Table of Contents



Liquidity
         
 Item 3
 Quantitative and Qualitative Disclosures About Market Risk
  30




---



##### Table of Contents



Item 4
 Controls and Procedures
   
 PART II. Other information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1a. Risk Factors
 The Bank is subject to a Consent Order and the Corporation is subject to the FRBNY Agreement. The
Bank is not in compliance with the capital ratio requirements of the Consent Order
  31




---



##### Table of Contents



The Corporations Financial Results and the Banks Failure to Comply with the Consent Order Raises
Substantial Doubt About the Corporations and the Banks Ability to Continue as Going Concerns
Through the End of 2011.
  The Corporation Has Deferred Payment of Dividends on its Series G Preferred Stock and Certain
Debentures and May Not Pay Dividends on its Common or other Preferred Stock Until Such Series G
Dividends and Interest on Debentures are Paid.
    The Standard & Poors downgrade in the U.S. governments sovereign credit rating, and in the credit
ratings of instruments issued, insured or guaranteed by certain related institutions, agencies and
instrumentalities, could result in risks to the Company and general economic conditions that we are
not able to predict.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3.
    
    Defaults Upon Senior Securities
  32




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##### Table of Contents



Series
    
    Amount Deferred in First Half
    
    
    Total Deferred to DateA
    
    $
    12,000
    
    
    $
    12,000C
    
    
    2,160
    
    
    
    2,160D
    
    
    3,300
    
    
    
    3,300E
    
    
    147,000
    
    
    
    147,000F
    
    
    149,318
    
    
    
    895,912
  
 Item 6.
    
    Exhibits
 (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).
 33




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION
(Registrant)August 14, 2011
    /s/ Edward R. WrightEdward R. WrightDuly Authorized Signatory and Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer) 34




---



##### Table of Contents



(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).