##### 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, 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
    
    22-2434751(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)900 Broad Street,Newark, New Jersey
    
    07102(Address of principal executive offices)
    
    (Zip Code)
    
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-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 June 30, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income (Unaudited) for the Three Months and Six Months Ended June 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4.
    
    Submission for Matters to a Vote of Security Holders
    
    
    21Part II Other Information
    
    
    21Item 1.
    
    Legal proceedings
    
    
    21Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    22Signatures
    
    
    24EX-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
    
    2009
    
    2008AssetsCash and due from banks
    
    $
    7,921
    
    
    $
    7,613Federal funds sold
    
    
    6,300
    
    
    
    18,200Interest bearing deposits with banks
    
    
    604
    
    
    
    726Investment securities available for sale
    
    
    122,991
    
    
    
    125,591Investment securities held to maturity (Market value of $48,135
at June 30, 2009 and $54,537 at December 31,2008 )
    
    
    47,377
    
    
    
    53,714Loans held for sale
    
    
    122
    
    
    
    267Loans
    
    
    279,409
    
    
    
    271,906Less: Allowance for loan losses
    
    
    4,500
    
    
    
    3,800Net loans
    
    
    274,909
    
    
    
    268,106Premises and equipment
    
    
    3,068
    
    
    
    3,242Accrued interest receivable
    
    
    2,822
    
    
    
    2,796Bank-owned life insurance
    
    
    5,441
    
    
    
    5,345Other real estate owned
    
    
    1,985
    
    
    
    1,547Other assets
    
    
    9,391
    
    
    
    7,392Total assets
    
    $
    482,931
    
    
    $
    494,539Liabilities and Stockholders EquityDeposits:Demand
    
    $
    39,529
    
    
    $
    36,270Savings
    
    
    158,505
    
    
    
    183,172Time
    
    
    189,401
    
    
    
    187,675Total deposits
    
    
    387,435
    
    
    
    407,117Accrued expenses and other liabilities
    
    
    7,380
    
    
    
    5,880Short-term borrowings
    
    
    720
    
    
    
    1,850Long-term debt
    
    
    50,600
    
    
    
    51,600Total liabilities
    
    
    446,135
    
    
    
    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 20078
    
    
    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
    
    
    
    6,790Preferred stock, no par value, perpetual cumulative: Authorized 9,439 shares;Series G, issued and outstanding 9,439 shares
    
    
    9,501
    
    
    
    Common 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
    
    
    16,494
    
    
    
    16,694Accumulated other comprehensive loss
    
    
    (1,718
    )
    
    
    (1,124
    )Treasury stock, at cost  3,240 and 3,200 common shares in 2009 and 2008, respectively
    
    
    (228
    )
    
    
    (225
    )Total stockholders equity
    
    
    36,796
    
    
    
    28,092Total liabilities and stockholders equity
    
    $
    482,931
    
    
    $
    494,539




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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
    
    2009
    
    2008
    
    2009
    
    2008Interest incomeInterest and fees on loans
    
    $
    3,976
    
    
    $
    4,138
    
    
    $
    7,864
    
    
    $
    8,386Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    14
    
    
    
    39
    
    
    
    43
    
    
    
    174Interest on deposits with banks
    
    
    3
    
    
    
    5
    
    
    
    5
    
    
    
    16Interest and dividends on investment securities:Taxable
    
    
    1,719
    
    
    
    1,838
    
    
    
    3,528
    
    
    
    3,576Tax-exempt
    
    
    324
    
    
    
    321
    
    
    
    657
    
    
    
    643Total interest income
    
    
    6,036
    
    
    
    6,341
    
    
    
    12,097
    
    
    
    12,795Interest expenseInterest on deposits
    
    
    1,943
    
    
    
    2,297
    
    
    
    4,030
    
    
    
    4,950Interest on short-term borrowings
    
    
    2
    
    
    
    11
    
    
    
    2
    
    
    
    15Interest on long-term debt
    
    
    462
    
    
    
    345
    
    
    
    929
    
    
    
    697Total interest expense
    
    
    2,407
    
    
    
    2,653
    
    
    
    4,961
    
    
    
    5,662Net interest income
    
    
    3,629
    
    
    
    3,688
    
    
    
    7,136
    
    
    
    7,133Provision for loan losses
    
    
    436
    
    
    
    265
    
    
    
    937
    
    
    
    433Net interest income after provision
for loan losses
    
    
    3,193
    
    
    
    3,423
    
    
    
    6,199
    
    
    
    6,700Other operating incomeService charges on deposit accounts
    
    
    370
    
    
    
    335
    
    
    
    730
    
    
    
    686Agency fees on commercial loans
    
    
    59
    
    
    
    93
    
    
    
    134
    
    
    
    174Other income
    
    
    379
    
    
    
    330
    
    
    
    822
    
    
    
    571Net gains (losses) on sales of investment securities
    
    
    10
    
    
    
    (50
    )
    
    
    10
    
    
    
    (44
    )Other than temporary impairment losses on securities
    
    
    (2,183
    )
    
    
    
    
    
    
    (2,315
    )
    
    
    Portion of loss recognized in other comprehensive income, before tax
    
    
    1,128
    
    
    
    
    
    
    
    1,128
    
    
    
    Net impairment losses on securities recognized in earnings
    
    
    (1,055
    )
    
    
    
    
    
    
    (1,187
    )
    
    
    Total other operating income
    
    
    (237
    )
    
    
    708
    
    
    
    509
    
    
    
    1,387Other operating expensesSalaries and other employee benefits
    
    
    1,626
    
    
    
    1,683
    
    
    
    3,225
    
    
    
    3,288Occupancy expense
    
    
    326
    
    
    
    301
    
    
    
    652
    
    
    
    625Equipment expense
    
    
    181
    
    
    
    157
    
    
    
    340
    
    
    
    323Data processing expense
    
    
    73
    
    
    
    55
    
    
    
    144
    
    
    
    133Other expenses
    
    
    1,452
    
    
    
    978
    
    
    
    2,389
    
    
    
    1,912Total other operating expenses
    
    
    3,658
    
    
    
    3,174
    
    
    
    6,750
    
    
    
    6,281(Loss) income before income tax expense
    
    
    (702
    )
    
    
    957
    
    
    
    (42
    )
    
    
    1,806Income tax expense
    
    
    119
    
    
    
    257
    
    
    
    281
    
    
    
    441Net (loss) income
    
    $
    (821
    )
    
    $
    700
    
    
    $
    (323
    )
    
    $
    1,365Net (loss) income per common shareBasic
    
    $
    (8.21
    )
    
    $
    4.18
    
    
    $
    (7.18
    )
    
    $
    6.46Diluted
    
    
    (8.21
    )
    
    
    3.72
    
    
    
    (7.18
    )
    
    
    6.46Basic average common shares outstanding
    
    
    131,290
    
    
    
    131,793
    
    
    
    131,309
    
    
    
    131,869Diluted average common shares outstanding
    
    
    147,607
    
    
    
    148,110
    
    
    
    147,626
    
    
    
    131,869
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (Unaudited)
 Six Months EndedJune 30,Dollars in thousands
    
    2009
    
    2008Operating activitiesNet (loss) income
    
    $
    (323
    )
    
    $
    1,365Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    276
    
    
    
    259Provision for loan losses
    
    
    937
    
    
    
    433Discount accretion on investment securities
    
    
    (2
    )
    
    
    (69
    )Amortization of intangible assets
    
    
    102
    
    
    
    106Net impairment losses on securities
    
    
    1,187
    
    
    
    Net (gains) losses on securities transactions
    
    
    (10
    )
    
    
    43Net gains on sales of loans held for sale
    
    
    (5
    )
    
    
    (10
    )Loans originated for sale
    
    
    (122
    )
    
    
    (312
    )Proceeds from sales and principal payments from loans held for sale
    
    
    272
    
    
    
    548Increase in accrued interest receivable
    
    
    (26
    )
    
    
    (60
    )Deferred taxes
    
    
    (531
    )
    
    
    (826
    )Net increase in bank-owned life insurance
    
    
    (96
    )
    
    
    (312
    )(Increase) decrease in other assets
    
    
    (1,211
    )
    
    
    274Increase in accrued expenses and other liabilities
    
    
    1,500
    
    
    
    1,220Net cash provided by operating activities
    
    
    1,948
    
    
    
    2,659Investing activitiesIncrease in loans, net
    
    
    (8,178
    )
    
    
    (19,111
    )Decrease in interest bearing deposits with banks
    
    
    122
    
    
    
    61Proceeds from maturities of investment securities available for sale,
including principal payments and early redemptions
    
    
    11,302
    
    
    
    14,385Proceeds from maturities of investment securities held to maturity,
including principal payments and early redemptions
    
    
    7,790
    
    
    
    8,448Proceeds from sales of investment securities available for sale
    
    
    1,985
    
    
    
    4,698Purchases of investment securities available for sale
    
    
    (11,799
    )
    
    
    (31,086
    )Purchases of investment securities held to maturity
    
    
    (1,462
    )
    
    
    (11,780
    )Purchases of premises and equipment
    
    
    (102
    )
    
    
    (124
    )Net cash used in investing activities
    
    
    (342
    )
    
    
    (34,509
    )Financing activitiesDecrease in deposits
    
    
    (19,682
    )
    
    
    (23,810
    )(Decrease) increase in short-term borrowings
    
    
    (1,130
    )
    
    
    5,920(Decrease) increase in long-term debt
    
    
    (1,000
    )
    
    
    16,000Issuance of preferred stock
    
    
    9,439
    
    
    
    Purchases of treasury stock
    
    
    (3
    )
    
    
    (26
    )Dividends paid on preferred stock
    
    
    (559
    )
    
    
    (513
    )Dividends paid on common stock
    
    
    (263
    )
    
    
    (474
    )Net cash used by financing activities
    
    
    (13,198
    )
    
    
    (2,903
    )Net decrease cash and cash equivalents
    
    
    (11,592
    )
    
    
    (34,753
    )Cash and cash equivalents at beginning of period
    
    
    25,813
    
    
    
    44,819Cash and cash equivalents at end of period
    
    $
    14,221
    
    
    $
    10,066Cash paid during the yearInterest
    
    $
    4,711
    
    
    $
    1,481Income taxes
    
    
    1,248
    
    
    
    902Non-cash transactionsTransfer of loans to other real estate owned
    
    
    438
    
    
    
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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,In thousands, except per share data
    
    2009
    
    2008
    
    2009
    
    2008Net (loss) income
    
    $
    (821
    )
    
    $
    700
    
    
    $
    (323
    )
    
    $
    1,365Dividends on preferred stock
    
    
    257
    
    
    
    149
    
    
    
    621
    
    
    
    513Net (loss) income applicable to basic
common shares
shares
    
    
    (1,078
    )
    
    
    551
    
    
    
    (944
    )
    
    
    852Dividends applicable to convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    147Net (loss) income applicable to diluted
common shares
    
    $
    (1,078
    )
    
    $
    551
    
    
    $
    (797
    )
    
    $
    999Number of average common sharesBasic
    
    
    131,290
    
    
    
    131,793
    
    
    
    131,309
    
    
    
    131,869Diluted
    
    
    131,290
    
    
    
    148,110
    
    
    
    131,309
    
    
    
    131,869Net (loss) income per common shareBasic
    
    $
    (8.21
    )
    
    $
    4.18
    
    
    $
    (7.18
    )
    
    $
    6.46Diluted
    
    
    (8.21
    )
    
    
    3.72
    
    
    
    (7.18
    )
    
    
    6.46
      6




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7




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Gross
    
    GrossJune 30, 2009
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    5,350
    
    
    $
    86
    
    
    $
    54
    
    
    $
    5,382Obligations of U.S.
government sponsored
entities
    
    
    15,843
    
    
    
    260
    
    
    
    138
    
    
    
    15,965Obligations of state and
political subdivisions
    
    
    2,097
    
    
    
    16
    
    
    
    
    
    
    
    2,113Mortgage-backed
securities
    
    
    85,192
    
    
    
    2,320
    
    
    
    92
    
    
    
    87,420Other debt securities
    
    
    13,464
    
    
    
    45
    
    
    
    5,220
    
    
    
    8,289Equity securities:Marketable securities
    
    
    695
    
    
    
    
    
    
    
    25
    
    
    
    670Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    3,037
    
    
    
    
    
    
    
    
    
    
    
    3,037Total
    
    $
    125,793
    
    
    $
    2,727
    
    
    $
    5,529
    
    
    $
    122,991
 8




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Gross
    
    GrossDecember 31, 2008
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities
and obligations of U.S.
government agencies
    
    $
    4,009
    
    
    $
    5
    
    
    $
    57
    
    
    $
    3,957Obligations of U.S.
government sponsored
entities
    
    
    19,157
    
    
    
    181
    
    
    
    326
    
    
    
    19,012Obligations of state and
political subdivisions
    
    
    548
    
    
    
    4
    
    
    
    
    
    
    
    552Mortgage-backed
securities
    
    
    88,356
    
    
    
    2,408
    
    
    
    134
    
    
    
    90,630Other debt securities
    
    
    11,645
    
    
    
    149
    
    
    
    3,996
    
    
    
    7,798Equity securities:Marketable securities
    
    
    678
    
    
    
    
    
    
    
    40
    
    
    
    638Nonmarketable
securities
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115Federal Reserve Bank
and Federal Home
Loan Bank stock
    
    
    2,889
    
    
    
    
    
    
    
    
    
    
    
    2,889Total
    
    $
    127,397
    
    
    $
    2,747
    
    
    $
    4,553
    
    
    $
    125,591
  Amortized
    
    FairIn thousands
    
    Cost
    
    ValueDue within one year:Obligations of state and political subdivisions
    
    $
    2,097
    
    
    $
    2,113Obligations of U.S. government sponsored
entities
    
    
    3,000
    
    
    
    3,074Due after one year but within five years:Obligations of U.S. government sponsored
entities
    
    
    620
    
    
    
    630Mortgage-backed securities
    
    
    124
    
    
    
    126Other debt securities
    
    
    2,426
    
    
    
    2,407Due after five years but within ten years:U.S. Treasury securities and
obligations of U.S. government
agencies
    
    
    2,640
    
    
    
    2,618Obligations of U.S. government sponsored
entities
    
    
    4,532
    
    
    
    4,621Mortgage-backed securities
    
    
    5,293
    
    
    
    5,409Other debt securities
    
    
    1,000
    
    
    
    480Due after ten years:U.S. Treasury securities and
obligations of U.S. government
agencies
    
    
    2,710
    
    
    
    2,764Obligations of U.S. government sponsored
entities
    
    
    7,691
    
    
    
    7,640Mortgage-backed securities
    
    
    79,775
    
    
    
    81,885Other debt securities
    
    
    10,038
    
    
    
    5,402Total debt securities
    
    
    121,946
    
    
    
    119,169Equity securities
    
    
    3,847
    
    
    
    3,822Total
    
    $
    125,793
    
    
    $
    122,991
  9




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June 30, 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
    
    $
    2,667
    
    
    $
    49
    
    
    $
    160
    
    
    $
    4
    
    
    $
    2,827
    
    
    $
    53Obligations of U.S. government
sponsored entities
    
    
    1,159
    
    
    
    80
    
    
    
    2,482
    
    
    
    58
    
    
    
    3,641
    
    
    
    138Mortgage-backed securities
    
    
    7,938
    
    
    
    80
    
    
    
    995
    
    
    
    10
    
    
    
    8,933
    
    
    
    90Other debt securities
    
    
    1,726
    
    
    
    142
    
    
    
    5,416
    
    
    
    5,078
    
    
    
    7,142
    
    
    
    5,220Marketable equity securities
    
    
    670
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    670
    
    
    
    25Total
    
    $
    14,160
    
    
    $
    376
    
    
    $
    9,053
    
    
    $
    5,150
    
    
    $
    23,213
    
    
    $
    5,526
 December 31, 2008

    
    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
    
    $
    2,701
    
    
    $
    53
    
    
    $
    168
    
    
    $
    4
    
    
    $
    2,869
    
    
    $
    57Obligations of U.S. Government sponsored entities
    
    
    3,891
    
    
    
    68
    
    
    
    4,881
    
    
    
    258
    
    
    
    8,772
    
    
    
    326Mortgaged-backed securities
    
    
    5,142
    
    
    
    65
    
    
    
    2,760
    
    
    
    69
    
    
    
    7,902
    
    
    
    134Other debt securities
    
    
    2,722
    
    
    
    274
    
    
    
    3,829
    
    
    
    3,722
    
    
    
    6,551
    
    
    
    3,996Equity securities
    
    
    
    
    
    
    
    
    
    
    678
    
    
    
    40
    
    
    
    678
    
    
    
    40Total
    
    $
    14,456
    
    
    $
    460
    
    
    $
    12,316
    
    
    $
    4,093
    
    
    $
    26,772
    
    
    $
    4,553
  For the Three Months(in thousands)
    
    Ended June 30, 2009Beginning balance as of April 1, 2009
    
    $
    288Add: Initial other-than-temporary credit losses
    
    
    302Additional other-than-temporary credit losses
    
    
    753$
    1,344
    10




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##### Table of Contents



Gross
    
    GrossJune 30, 2009
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueObligations of U.S.
government
sponsored entities
    
    $
    6,457
    
    
    $
    19
    
    
    $
    27
    
    
    $
    6,449Obligations of state and
political subdivisions
    
    
    29,869
    
    
    
    755
    
    
    
    235
    
    
    
    30,389Mortgage-backed
securities
    
    
    10,555
    
    
    
    268
    
    
    
    
    
    
    
    10,823Other debt securities
    
    
    496
    
    
    
    
    
    
    
    22
    
    
    
    474Total
    
    $
    47,377
    
    
    $
    1,042
    
    
    $
    284
    
    
    $
    48,135
 Gross
    
    GrossDecember 31, 2008
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairIn thousands
    
    Cost
    
    Gains
    
    Losses
    
    ValueObligations of U.S.
government
sponsored entities
    
    $
    8,500
    
    
    $
    20
    
    
    $
    
    
    
    $
    8,520Obligations of state and
political subdivisions
    
    
    31,629
    
    
    
    814
    
    
    
    221
    
    
    
    32,222Mortgage-backed
securities
    
    
    12,089
    
    
    
    269
    
    
    
    
    
    
    
    12,358Other debt securities
    
    
    1,496
    
    
    
    
    
    
    
    59
    
    
    
    1,437Total
    
    $
    53,714
    
    
    $
    1,103
    
    
    $
    280
    
    
    $
    54,537
 11




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##### Table of Contents



Amortized
    
    FairIn thousands
    
    Cost
    
    ValueDue within one year:Obligations of state and political
subdivisions
    
    $
    335
    
    
    $
    336Due after one year but within five years:Obligations of state and political
subdivisions
    
    
    7,284
    
    
    
    7,647Due after five years but within ten years:Obligations of U.S. government sponsored
entities
    
    
    1,000
    
    
    
    994Obligations of state and political
subdivisions
    
    
    14,065
    
    
    
    14,309Mortgage-backed securities
    
    
    213
    
    
    
    220Due after ten years:Obligations of U.S. government sponsored
entities
    
    
    5,457
    
    
    
    5,455Obligations of state and political
subdivisions
    
    
    8,185
    
    
    
    8,097Mortgage-backed securities
    
    
    10,342
    
    
    
    10,603Other debt securities
    
    
    496
    
    
    
    474Total
    
    $
    47,377
    
    
    $
    48,135
  June 30, 2009

    
    Less than 12 Months
    
    12 Months or More
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    UnrealizedIn thousands
    
    Fair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of U.S. government
sponsored entities
    
    $
    3,385
    
    
    $
    27
    
    
    $
    
    
    
    $
    
    
    
    $
    3,385
    
    
    $
    27Obligations of states and political
subdivisions
    
    
    3,739
    
    
    
    58
    
    
    
    2,984
    
    
    
    177
    
    
    
    6,723
    
    
    
    235Other debt securities
    
    
    471
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    471
    
    
    
    22Total
    
    $
    9,518
    
    
    $
    107
    
    
    $
    2,984
    
    
    $
    177
    
    
    $
    2,502
    
    
    $
    284
 December 31, 2008
    
    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
    
    $
    4,753
    
    
    $
    146
    
    
    $
    647
    
    
    $
    75
    
    
    $
    5,400
    
    
    $
    221Other debt securities
    
    
    1,437
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    1,437
    
    
    
    59Total
    
    $
    6,190
    
    
    $
    205
    
    
    $
    647
    
    
    $
    75
    
    
    $
    6,837
    
    
    $
    280
      12




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##### Table of Contents



(Dollars in thousands)
    
    Total
    
    Level 1
    
    Level 2
    
    Level 3Investment securities available for sale
    
    $
    122,991
    
    
    $
    
    
    
    $
    122,787
    
    
    $
    204Total assets
    
    $
    122,991
    
    
    $
    
    
    
    $
    122,787
    
    
    $
    204Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2009
    
    June 30, 2009Balance, beginning of period
    
    $
    770
    
    
    $
    1,144Net transfers into Level 3
    
    
    
    
    
    
    Total gains (losses) included in:Net income
    
    
    (1,055
    )
    
    
    (1,187
    )Other comprehensive income
    
    
    489
    
    
    
    247Balance, end of period
    
    $
    204
    
    
    $
    204
     9. Fair value of financial instruments
     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
  Deposit liabilities
  Short-term borrowings
  Long-term debt
  Commitments to extend credit and letters of credit
   June 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairIn thousands
    
    Value
    
    Value
    
    Value
    
    ValueFinancial assetsCash and other short-term
investments
    
    $
    14,221
    
    
    $
    14,221
    
    
    $
    25,813
    
    
    $
    25,813Interest-bearing deposits
with banks
    
    
    604
    
    
    
    601
    
    
    
    726
    
    
    
    719Investment securities AFS
    
    
    122,991
    
    
    
    122,991
    
    
    
    125,591
    
    
    
    125,591Investment securities HTM
    
    
    47,377
    
    
    
    48,135
    
    
    
    53,714
    
    
    
    54,537Loans
    
    
    279,409
    
    
    
    263,838
    
    
    
    271,906
    
    
    
    259,226Loans held for sale
    
    
    122
    
    
    
    122
    
    
    
    267
    
    
    
    267Financial liabilitiesDeposits
    
    
    387,435
    
    
    
    374,421
    
    
    
    407,117
    
    
    
    396,503Short-term borrowings
    
    
    720
    
    
    
    720
    
    
    
    1,850
    
    
    
    1,850Long-term debt
    
    
    50,600
    
    
    
    50,771
    
    
    
    51,600
    
    
    
    51,692
    14




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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
  Financial Condition
      15




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##### Table of Contents



Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2009
    
    2008
    
    2009
    
    2008Balance at beginning of period
    
    $
    4,200
    
    
    $
    3,100
    
    
    $
    3,800
    
    
    $
    3,000Provision for loan losses
    
    
    436
    
    
    
    265
    
    
    
    937
    
    
    
    433Recoveries of previous charge-offs
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    
    64,651
    
    
    
    3,365
    
    
    
    4,752
    
    
    
    3,439Less: Charge-offs
    
    
    151
    
    
    
    15
    
    
    
    252
    
    
    
    89Balance at end of period
    
    $
    4,500
    
    
    $
    3,350
    
    
    $
    4,500
    
    
    $
    3,350
  16




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##### Table of Contents



June 30,
    
    March 31,
    
    December 31,2009
    
    2009
    
    2008Allowance for loan losses as a percentage ofTotal loans
    
    
    1.61
    %
    
    
    1.51
    %
    
    
    1.40
    %Total nonperforming loans
    
    
    36.36
    %
    
    
    49.04
    %
    
    
    44.13
    %Total nonperforming assets
(nonperforming loans and OREO)
    
    
    31.33
    %
    
    
    39.81
    %
    
    
    37.67
    %Net charge-offs as a percentage
of average loans (year-to-date)
    
    
    .10
    %
    
    
    .03
    %
    
    
    .31
    %
   June 30,
    
    March 31,
    
    December,(Dollars in thousands)
    
    2009
    
    2009
    
    2008Loans past due 90 days
or more and still accruingCommercial
    
    $
    
    
    
    $
    
    
    
    $
    Real estate
    
    
    3,294
    
    
    
    117
    
    
    
    376Installment
    
    
    17
    
    
    
    20
    
    
    
    8Total
    
    
    3,311
    
    
    
    137
    
    
    
    384Nonaccrual loansCommercial
    
    
    1,901
    
    
    
    2,203
    
    
    
    1,864Real estate
    
    
    7,160
    
    
    
    6,216
    
    
    
    6,356Installment
    
    
    5
    
    
    
    9
    
    
    
    7Total
    
    
    9,066
    
    
    
    8,428
    
    
    
    8,227Total nonperforming loans
    
    
    12,377
    
    
    
    8,565
    
    
    
    8,611Other real estate owned
    
    
    1,985
    
    
    
    1,985
    
    
    
    1,547Total nonperforming assets
    
    $
    14,362
    
    
    $
    10,550
    
    
    $
    10,158
      17




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##### Table of Contents



18




---



##### Table of Contents



Results of Operations
         19




---



##### Table of Contents



Liquidity
    
  Quantitative and Qualitative Disclosures about Market Risk
  20




---



##### Table of Contents



PART II Other information
 
 Item 1. Legal Proceedings
  Item 1a. Risk Factors
  The Bank is subject to a Formal Agreement with the Comptroller of the Currency
  FDIC Special Assessment
    21




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##### Table of Contents



Item 4. Submission for Matters to a Vote of Security Holders
  
 Item 6. Exhibits
 (a)
    
    Exhibits
 (3)(a)
    
    The Corporations Restated Articles of Incorporation (incorporated herein by
reference to Exhibit (3)(d) of the Corporations Current Report on Form 8-K dated
July 28, 1992).(3)(b)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series A (incorporated
herein by reference to Exhibit (3)(b) of the Corporations Annual Report on Form
10-K for the year ended December 31, 1995).(3)(c)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series B (incorporated
herein by reference to Exhibit (3)(c) of the Corporations Annual Report on Form
10-K for the year ended December 31, 1995).(3)(d)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series C (incorporated
herein by reference to Exhibit (3(i) to the Corporations Annual Report on Form
10-K for the year ended December 31, 1996).(3)(e)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series D (incorporated
herein by reference to Exhibit (3)(i) filed with the Corporations Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).(3)(f)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations Non-cumulative Perpetual Preferred Stock, Series E (incorporated
herein by reference to Exhibit (3)(i) filed with the Corporations Quarterly
Report on Form 10-Q filed on March 4, 2005).(3)(g)
    
    Amendments to the Corporations Articles of Incorporation establishing the
Corporations MultiMode Series F Non-cumulative Redeemable Preferred Stock
(incorporated herein by reference to Exhibit (3)(f) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).(3)(h)
    
    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 for the year ended
December 31, 1988).(10)(a)
    
    The Employees Profit Sharing Plan of City National Bank of New Jersey
(incorporated herein by reference to Exhibit (10) of the Corporations Annual
Report on Form 10-K for the year ended December 31, 1988).(10)(b)
    
    The Employment Agreement among the Corporation, the Bank and Louis E. Prezeau
dated May 26, 2006 (incorporated herein by reference to Exhibit (10.1) to the
Corporations Current Report on Form 8-K dated December 4, 2006).
 22




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##### Table of Contents



(10)(d)
    
    Amended and Restated Asset Purchase and Sale Agreement between the Bank and
Carver Federal Savings Bank dated as of February 27, 2001 (incorporated by
reference to Exhibit 10(d) to the Corporations Annual Report on Form 10-K for
the year ended December 31, 2000).(10)(f)
    
    Loan Agreement dated December 28, 2001 by and between the Corporation and
National Community Investment Fund (incorporated by reference to Exhibit 10(f) to
the Corporations Annual Report on Form 10-K for the year ended December 31,
2001).(10)(g)
    
    Pledge Agreement dated December 28, 2001 by and between the Corporation and
National Community Investment Fund (incorporated by reference to Exhibit (g) to
the Corporations Annual Report on Form 10-K for the year ended December 31,
2001).(10)(h)
    
    Asset Purchase and Sale Agreement between City National Bank of New Jersey and
Carver Federal Savings Bank dated as of January 26, 1998 (incorporated by
reference to Exhibit 10(h) to the Corporations Annual Report on Form 10-K for
the year ended December 31, 1998).(10)(i)
    
    Promissory Note dated May 6, 2002 payable to United Negro College Fund, Inc.,
in the principal amount of $200,000 (incorporated by reference to Exhibit 10(i)
to the Corporations Quarterly Report on Form 10-Q for quarter ended March 31,
2002).(10)(l)
    
    Purchase and Assumption Agreement dated as of March 31, 2004, by and among The
Prudential Savings Bank, F.S.B., The Prudential Bank and Trust Company and City
National Bank of New Jersey (incorporated herein by reference to Exhibit 10(l) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended March 31,
2004).(10)(m)
    
    Guarantee Agreement dated March 17, 2004 from the Corporation in favor of U.S.
Bank, N.A., as trustee for holders of securities issued by City National Bank of
New Jersey Capital Statutory Trust II (incorporated herein by reference to
Exhibit (10)(m) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004).(10)(n)
    
    Purchase Agreement dated September 27, 2005 by and between Sandler ONeil &
Partners, L.P., and the Corporation with respect to issue and sale of 7,000
shares of the Corporations MultiMode Series F Non-cumulative Redeemable
Preferred Stock (incorporated herein by reference to Exhibit (10)(n) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September 30,
2005).(10)(o)
    
    Credit Agreement dated February 21, 2007 by and between The Prudential
Insurance Company of America and the Corporation with respect to a $5,000,000
loan to the Corporation (incorporated by reference to Exhibit 10.1 to the
Corporations Current Report on Form 8-K dated February 23, 2007).(10)(p)
    
    Branch Purchase and Assumption Agreement, dated as of November 1, 2006, by and
between City National Bank of New Jersey (CNB) and Sun National Bank (Sun),
as amended by Amendment to Branch Purchase and Assumption Agreement, dated as of
March 8, 2007, by and between CNB and Sun (incorporated by reference to Exhibit
10.1 to the Corporations Current Report on Form 8-K dated March 14, 2007).(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
 23




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##### Table of Contents



(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 10.3 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 L. Oseguera (incorporated herein by reference to Exhibit 10.3 to
the Corporations Current Report on Form 8-K dated April 10, 2009).(10)(v)
    
    Agreement, dated June 29, 2009, by and between the City National Bank of New
Jersey and the Comptroller of the Currency (incorporated herein by reference to
Exhibit 10.1 to the Corporations Current Report on Form 8-K dated June 29, 2009).(11)
    
    Statement regarding computation of per share earnings. The required
information is included on page 19.(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).
 
   CITY NATIONAL BANCSHARES
CORPORATION
(Registrant)August 13, 2009
    /s/ Edward R. WrightEdward R. WrightSenior Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer) 24