##### 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 March 31, 2008
 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
    
    07102
(Zip Code)(Address of principal executive offices)
    
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



Index
    
    PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    13Item 4. Controls and Procedures
    
    
    14Part II Other Information
    
    
    14Item 1. Legal proceedings
    
    
    14Item 6. Exhibits and Reports on Form 8-K
    
    
    14Signatures
    
    
    17EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Balance Sheets
(Unaudited)
 March 31,
    
    December 31,Dollars in thousands, except per share data
    
    2008
    
    2007AssetsCash and due from banks
    
    $
    8,774
    
    
    $
    22,819Federal funds sold
    
    
    5,100
    
    
    
    22,000Interest bearing deposits with banks
    
    
    5,298
    
    
    
    278Investment securities available for sale
    
    
    122,910
    
    
    
    103,618Investment securities held to maturity (Market value of $55,786
at March 31, 2008 and $54,005 at December 31,2007 )
    
    
    55,317
    
    
    
    53,938Loans held for sale
    
    
    312
    
    
    
    226Loans
    
    
    246,031
    
    
    
    232,824Less: Allowance for loan losses
    
    
    3,100
    
    
    
    3,000Net loans
    
    
    242,931
    
    
    
    229,824Premises and equipment
    
    
    3,532
    
    
    
    3,601Accrued interest receivable
    
    
    2,557
    
    
    
    2,672Bank-owned life insurance
    
    
    5,197
    
    
    
    4,928Other assets
    
    
    6,823
    
    
    
    5,844Total assets
    
    $
    458,751
    
    
    $
    449,748Liabilities and Stockholders EquityDeposits:Demand
    
    $
    39,739
    
    
    $
    34,543Savings
    
    
    170,018
    
    
    
    200,996Time
    
    
    169,414
    
    
    
    159,317Total deposits
    
    
    379,171
    
    
    
    394,856Accrued expenses and other liabilities
    
    
    7,626
    
    
    
    5,070Short-term borrowings
    
    
    400
    
    
    
    1,150Long-term debt
    
    
    42,300
    
    
    
    19,800Total liabilities
    
    
    429,497
    
    
    
    420,876Commitments and contingenciesStockholders equityPreferred stock, no par value: Authorized 100,000 shares ;Series A , issued and outstanding 8 shares in 2008 and 2007
    
    
    200
    
    
    
    200Series C , issued and outstanding 108 shares in 2008 and 2007
    
    
    27
    
    
    
    27Series D , issued and outstanding 3,280 shares in 2008 and 2007
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2008 and 2007
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2008 and 2007
    
    
    6,790
    
    
    
    6,790Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2008 and 2007131,888 shares outstanding in 2008 and 131,987 shares outstanding in 2007
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    17,224
    
    
    
    16,922Accumulated other comprehensive loss
    
    
    (535
    )
    
    
    (623
    )Treasury stock, at cost - 2,642 and 2,543 common shares in 2008 and 2007, respectively
    
    
    (182
    )
    
    
    (174
    )Total stockholders equity
    
    
    29,254
    
    
    
    28,872Total liabilities and stockholders equity
    
    $
    458,751
    
    
    $
    449,748
  3




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Income (Unaudited)
 Three months ended March 31,Dollars in thousands, except per share data
    
    2008
    
    2007Interest incomeInterest and fees on loans
    
    $
    4,248
    
    
    $
    3,775Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    135
    
    
    
    252Interest on deposits with banks
    
    
    11
    
    
    
    14Interest and dividends on investment securities:Taxable
    
    
    1,738
    
    
    
    1,660Tax-exempt
    
    
    322
    
    
    
    350Total interest income
    
    
    6,454
    
    
    
    6,051Interest expenseInterest on deposits
    
    
    2,653
    
    
    
    2,990Interest on short-term borrowings
    
    
    4
    
    
    
    6Interest on long-term debt
    
    
    352
    
    
    
    336Total interest expense
    
    
    3,009
    
    
    
    3,332Net interest income
    
    
    3,445
    
    
    
    2,719Provision for loan losses
    
    
    168
    
    
    
    225Net interest income after provision
for loan losses
    
    
    3,277
    
    
    
    2,494Other operating incomeService charges on deposit accounts
    
    
    351
    
    
    
    270Agency fees on commercial loans
    
    
    81
    
    
    
    63Other income
    
    
    241
    
    
    
    272Net gains on sales of investment securities
    
    
    6
    
    
    
    Total other operating income
    
    
    679
    
    
    
    605Other operating expensesSalaries and other employee benefits
    
    
    1,605
    
    
    
    1,379Occupancy expense
    
    
    324
    
    
    
    254Equipment expense
    
    
    166
    
    
    
    139Data processing expense
    
    
    78
    
    
    
    84Other expenses
    
    
    934
    
    
    
    760Total other operating expenses
    
    
    3,107
    
    
    
    2,616Income before income tax expense
    
    
    849
    
    
    
    483Income tax expense
    
    
    184
    
    
    
    111Net income
    
    $
    665
    
    
    $
    372Net income per common shareBasic
    
    $
    2.28
    
    
    $
    0.37Diluted
    
    
    2.28
    
    
    
    0.37Basic average common shares outstanding
    
    
    131,945
    
    
    
    132,738Diluted average common shares outstanding
    
    
    131,945
    
    
    
    132,738
  4




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (Unaudited)
 Three Months EndedMarch 31,In thousands
    
    2008
    
    2007Operating activitiesNet income
    
    $
    665
    
    
    $
    372Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    139
    
    
    
    107Provision for loan losses
    
    
    168
    
    
    
    225Discount accretion of investment securities
    
    
    (48
    )
    
    
    (69
    )Amortization of intangible assets
    
    
    53
    
    
    
    38Net gains on securities transactions
    
    
    (6
    )
    
    
    Net gains on sales of loans held for sale
    
    
    (4
    )
    
    
    (32
    )Loans originated for sale
    
    
    (312
    )
    
    
    (1,081
    )Proceeds from sales and principal payments from loans held for sale
    
    
    230
    
    
    
    1,722Decrease in accrued interest receivable
    
    
    115
    
    
    
    161Deferred taxes
    
    
    70
    
    
    
    74Increase in bank-owned life insurance
    
    
    (269
    )
    
    
    (56
    )Increase in other assets
    
    
    (1,172
    )
    
    
    (820
    )Increase in accrued expenses and other liabilities
    
    
    2,556
    
    
    
    1,094Net cash provided by operating activities
    
    
    2,185
    
    
    
    1,735Investing activitiesPurchase of loans
    
    
    
    
    
    
    (18,734
    )(Increase) decrease in loans, net
    
    
    (13,275
    )
    
    
    1,109Increase in interest-bearing deposits with banks
    
    
    (5,020
    )
    
    
    (30
    )Proceeds from maturities of investment securities available for
sale, including principal repayments and early redemptions
    
    
    4,240
    
    
    
    15,485Proceeds from maturities of investment securities held to
maturity, including principal repayments and early redemptions
    
    
    6,567
    
    
    
    170Proceeds from sales of investment securities available for sale
    
    
    
    
    
    
    Purchases of investment securities available for sale
    
    
    (23,317
    )
    
    
    (1,203
    )Purchases of investment securities held to maturity
    
    
    (7,949
    )
    
    
    (4,280
    )Purchases of premises and equipment
    
    
    (70
    )
    
    
    (182
    )Net cash used in investing activities
    
    
    (38,824
    )
    
    
    (7,665
    )Financing activitiesPurchase of deposits
    
    
    
    
    
    
    11,016Decrease in deposits
    
    
    (15,685
    )
    
    
    (6,029
    )Increase in long-term debt
    
    
    22,500
    
    
    
    4,969(Decrease) increase in short-term borrowings
    
    
    (750
    )
    
    
    1,080Purchases of treasury stock
    
    
    (8
    )
    
    
    (10
    )Dividends paid on preferred stock
    
    
    (363
    )
    
    
    (323
    )Net cash provided by financing activities
    
    
    5,694
    
    
    
    10,703Net increase in cash and cash equivalents
    
    
    (30,945
    )
    
    
    4,773Cash and cash equivalents at beginning of period
    
    
    44,819
    
    
    
    12,231Cash and cash equivalents at end of period
    
    $
    13,874
    
    
    $
    17,004Cash paid during the yearInterest
    
    $
    2,959
    
    
    $
    2,866Income taxes
    
    
    
    
    
    
    230See accompanying notes to unaudited consolidated financial statements.
 5




---



##### Table of Contents



Three Months EndedMarch 31,In thousands, except per share data
    
    2008
    
    2007Net income
    
    $
    665
    
    
    $
    372Dividends on preferred stock
    
    
    364
    
    
    
    323Net income applicable to common
shares
    
    $
    301
    
    
    $
    49Number of average common sharesBasic
    
    
    131,945
    
    
    
    132,738Diluted
    
    
    131,945
    
    
    
    132,738Net income per common shareBasic
    
    $
    2.28
    
    
    $
    .37Diluted
    
    
    2.28
    
    
    
    .37
       6




---



##### Table of Contents



7




---



##### Table of Contents



(Dollars in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities available for sale
    
    $
    122,910
    
    
    $
    5,249
    
    
    $
    114,601
    
    
    $
    3,060Loans held for sale
    
    
    312
    
    
    
    312
    
    
    
    
    
    
    
    Total assets
    
    $
    123,222
    
    
    $
    5,561
    
    
    $
    114,601
    
    
    $
    3,060Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  
 
   
  Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary statement concerning forward-looking statements
  8




---



##### Table of Contents



Executive summary
   Financial Condition
           9




---



##### Table of Contents



Three MonthsEnded March 31,(Dollars in thousands)
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    3,000
    
    
    $
    2,400Provision for loan losses
    
    
    168
    
    
    
    225Recoveries of previous charge-offs
    
    
    6
    
    
    
    23,174
    
    
    
    2,627Less: Charge-offs
    
    
    74
    
    
    
    127Balance at end of period
    
    $
    3,100
    
    
    $
    2,500
  March 31,
    
    
    December 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2007Allowance for loan
losses as a percentage of:Total loans
    
    
    1.26
    %
    
    
    1.29
    %
    
    
    1.15
    %Total nonperforming loans
    
    
    38.23
    %
    
    
    37.67
    %
    
    
    39.35
    %Total nonperforming assets
(nonperforming loans and OREO)
    
    
    38.23
    %
    
    
    37.67
    %
    
    
    39.35
    %Net charge-offs as a percentage
of average loans (year-to-date)
    
    
    .03
    %
    
    
    .08
    %
    
    
    .06
    %
   March 31,
    
    
    December 31,
    
    
    March 31,(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2007Loans past due 90 days
or more and still accruingCommercial
    
    $
    
    
    
    $
    43
    
    
    $
    10Real estate
    
    
    697
    
    
    
    377
    
    
    
    607Installment
    
    
    22
    
    
    
    18
    
    
    
    Total
    
    
    719
    
    
    
    438
    
    
    
    617Nonaccrual loansCommercial
    
    
    1,995
    
    
    
    1,996
    
    
    
    841Real estate
    
    
    5,360
    
    
    
    5,485
    
    
    
    4,854Installment
    
    
    35
    
    
    
    45
    
    
    
    41Total
    
    
    7,390
    
    
    
    7,526
    
    
    
    5,736Total nonperforming loans
    
    $
    8,109
    
    
    $
    7,964
    
    
    $
    6,353
 10




---



##### Table of Contents



11




---



##### Table of Contents



Results of Operations
         12




---



##### Table of Contents



Liquidity
     
  Quantitative and Qualitative Disclosures about Market Risk
  13




---



##### Table of Contents



PART II Other information
 
 Item 1. Legal Proceedings
  Item 1a. Risk Factors
  
 Item 6. Exhibits
         14




---



##### Table of Contents



15




---



##### Table of Contents



CITY NATIONAL BANCSHARES CORPORATION(Registrant)May 12, 2008
    
    /s/ Edward R. WrightEdward R. WrightSenior Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 16