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SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 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)Registrants telephone number,
including area code: (973) 624-0865
   
 þ o
 o þ
 o þ




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##### 



Index
    
    
    
    PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance
Sheet as of September 30, 2007 (Unaudited) and December 31, 2006
    
    
    3Consolidated Statement of Income (Unaudited) for the Three and Nine Months Ended September 30, 2007 and 2006
    
    
    4Consolidated Statement of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2007 and 2006
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    7Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    12Item 4. Controls and Procedures
    
    
    13Part II. Other Information
    
    
    13Item 1. Legal proceedings
    
    
    13Item 1a. Risk Factors
    
    
    13Item 6. Exhibits and Reports on Form 8-K
    
    
    13Signatures
    
    
    15EX-31: CERTIFICATIONEX-32: CERTIFICATION
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Balance Sheets
(Unaudited)
 September 30,
    
    December 31,Dollars in thousands, except per share data
    
    2007
    
    2006AssetsCash and due from banks
    
    $
    7,528
    
    
    $
    7,231Federal funds sold
    
    
    64,300
    
    
    
    5,000Interest bearing deposits with banks
    
    
    781
    
    
    
    653Investment securities available for sale
    
    
    99,654
    
    
    
    116,118Investment securities held to maturity (Market value of $56,356
at September 30, 2007 and $53,332 at December 31, 2006)
    
    
    56,745
    
    
    
    53,480Loans held for sale
    
    
    262
    
    
    
    609Loans
    
    
    223,133
    
    
    
    199,284Less: Allowance for loan losses
    
    
    2,600
    
    
    
    2,400Net loans
    
    
    220,533
    
    
    
    196,884Premises and equipment
    
    
    3,701
    
    
    
    3,729Accrued interest receivable
    
    
    2,504
    
    
    
    2,505Bank-owned life insurance
    
    
    4,886
    
    
    
    4,743Other assets
    
    
    5,456
    
    
    
    4,265Total assets
    
    $
    466,350
    
    
    $
    395,217Liabilities and Stockholders EquityDeposits:Demand
    
    $
    33,771
    
    
    $
    36,807Savings
    
    
    227,552
    
    
    
    140,787Time
    
    
    152,390
    
    
    
    164,822Total deposits
    
    
    413,713
    
    
    
    342,416Accrued expenses and other liabilities
    
    
    4,924
    
    
    
    5,033Short-term borrowings
    
    
    
    
    
    
    400Long-term debt
    
    
    19,820
    
    
    
    19,606Total liabilities
    
    
    438,457
    
    
    
    367,455Commitments and contingenciesStockholders equityPreferred stock, no par value: Authorized 100,000 shares;Series A, issued and outstanding 8 shares in 2007 and 2006
    
    
    200
    
    
    
    200Series C, issued and outstanding 108 shares in 2007 and 2006
    
    
    27
    
    
    
    27Series D, issued and outstanding 3,280 shares in 2007 and 2006
    
    
    820
    
    
    
    820Preferred stock, no par value, perpetual noncumulative: Authorized 200 shares;Series E, issued and outstanding 49 shares in 2007 and 2006
    
    
    2,450
    
    
    
    2,450Preferred stock, no par value, perpetual noncumulative: Authorized 7,000 shares;Series F, issued and outstanding 7,000 shares in 2007 and 2006
    
    
    6,790
    
    
    
    6,790Common stock, par value $10: Authorized 400,000 shares;134,530 shares issued in 2007 and 2006132,010 shares outstanding in 2007 and 132,786 shares outstanding in 2006
    
    
    1,345
    
    
    
    1,345Surplus
    
    
    1,115
    
    
    
    1,115Retained earnings
    
    
    16,604
    
    
    
    16,102Accumulated other comprehensive loss
    
    
    (1,287
    )
    
    
    (978
    )Treasury stock, at cost - 2,520 and 1,744 common shares in 2007 and 2006, respectively
    
    
    (171
    )
    
    
    (109
    )Total stockholders equity
    
    
    27,893
    
    
    
    27,762Total liabilities and stockholders equity
    
    $
    466,350
    
    
    $
    395,217
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Income (Unaudited)
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,Dollars in thousands, except per share data
    
    2007
    
    2006
    
    2007
    
    2006Interest incomeInterest and fees on loans
    
    $
    4,224
    
    
    $
    3,630
    
    
    $
    12,038
    
    
    $
    9,926Interest on Federal funds sold and securities
purchased under agreements to resell
    
    
    429
    
    
    
    48
    
    
    
    982
    
    
    
    691Interest on deposits with banks
    
    
    13
    
    
    
    14
    
    
    
    39
    
    
    
    55Interest and dividends on investment securities:Taxable
    
    
    1,639
    
    
    
    1,476
    
    
    
    4,930
    
    
    
    4,399Tax-exempt
    
    
    341
    
    
    
    314
    
    
    
    1,048
    
    
    
    861Total interest income
    
    
    6,646
    
    
    
    5,482
    
    
    
    19,037
    
    
    
    15,932Interest expenseInterest on deposits
    
    
    3,421
    
    
    
    2,277
    
    
    
    9,599
    
    
    
    6,616Interest on short-term borrowings
    
    
    4
    
    
    
    85
    
    
    
    16
    
    
    
    108Interest on long-term debt
    
    
    305
    
    
    
    334
    
    
    
    1,016
    
    
    
    971Total interest expense
    
    
    3,730
    
    
    
    2,696
    
    
    
    10,631
    
    
    
    7,695Net interest income
    
    
    2,916
    
    
    
    2,786
    
    
    
    8,406
    
    
    
    8,237Provision for loan losses
    
    
    10
    
    
    
    65
    
    
    
    306
    
    
    
    114Net interest income after provision
for loan losses
    
    
    2,906
    
    
    
    2,721
    
    
    
    8,100
    
    
    
    8,123Other operating incomeService charges on deposit accounts
    
    
    351
    
    
    
    296
    
    
    
    955
    
    
    
    869Agency fees on commercial loans
    
    
    77
    
    
    
    73
    
    
    
    254
    
    
    
    254Other income
    
    
    244
    
    
    
    201
    
    
    
    739
    
    
    
    611Net gains (losses) on sales of investment securities
    
    
    10
    
    
    
    (3
    )
    
    
    10
    
    
    
    (19
    )Total other operating income
    
    
    682
    
    
    
    567
    
    
    
    1,958
    
    
    
    1,715Other operating expensesSalaries and other employee benefits
    
    
    1,560
    
    
    
    1,406
    
    
    
    4,460
    
    
    
    4,133Occupancy expense
    
    
    326
    
    
    
    232
    
    
    
    893
    
    
    
    684Equipment expense
    
    
    138
    
    
    
    137
    
    
    
    414
    
    
    
    413Data processing expense
    
    
    67
    
    
    
    73
    
    
    
    232
    
    
    
    235Other expenses
    
    
    858
    
    
    
    670
    
    
    
    2,376
    
    
    
    2,037Total other operating expenses
    
    
    2,949
    
    
    
    2,518
    
    
    
    8,375
    
    
    
    7,502Income before income tax expense
    
    
    639
    
    
    
    770
    
    
    
    1,683
    
    
    
    2,336Income tax expense
    
    
    95
    
    
    
    173
    
    
    
    283
    
    
    
    539Net income
    
    $
    544
    
    
    $
    597
    
    
    $
    1,400
    
    
    $
    1,797Net income per common shareBasic
    
    $
    2.99
    
    
    $
    3.36
    
    
    $
    5.88
    
    
    $
    9.11Diluted
    
    
    2.66
    
    
    
    3.11
    
    
    
    5.88
    
    
    
    8.91Basic average common shares outstanding
    
    
    132,024
    
    
    
    133,114
    
    
    
    132,409
    
    
    
    133,382Diluted average common shares outstanding
    
    
    148,341
    
    
    
    144,103
    
    
    
    132,409
    
    
    
    143,898
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CITY NATIONAL BANCSHARES CORPORATION AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (Unaudited)
 Nine Months EndedSeptember 30,Dollars in thousands
    
    2007
    
    2006Operating activitiesNet income
    
    $
    1,400
    
    
    $
    1,797Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    318
    
    
    
    443Provision for loan losses
    
    
    306
    
    
    
    114(Discount accretion) premium amortization on investment securities
    
    
    (227
    )
    
    
    127Amortization of intangible assets
    
    
    144
    
    
    
    90Net (gains) losses on securities transactions
    
    
    (10
    )
    
    
    19Net gains on sales of loans held for sale
    
    
    (66
    )
    
    
    (24
    )Loans originated for sale
    
    
    (3,086
    )
    
    
    (2,414
    )Proceeds from sales and principal payments from loans held for sale
    
    
    3,499
    
    
    
    2,038Decrease (increase) in accrued interest receivable
    
    
    1
    
    
    
    (304
    )Net increase in bank-owned life insurance
    
    
    (143
    )
    
    
    (822
    )Deferred taxes
    
    
    (194
    )
    
    
    (81
    )Increase in other assets
    
    
    (948
    )
    
    
    (317
    )Increase in accrued expenses and other liabilities
    
    
    79
    
    
    
    1,041Net cash provided by operating activities
    
    
    1,073
    
    
    
    1,707Investing activitiesPurchase of loans
    
    
    (18,734
    )
    
    
    Increase in loans, net
    
    
    (5,221
    )
    
    
    (16,414
    )(Increase) decrease in interest bearing deposits with banks
    
    
    (128
    )
    
    
    589Proceeds from maturities of investment securities available for sale,
including principal payments and early redemptions
    
    
    33,683
    
    
    
    35,930Proceeds from maturities of investment securities held to maturity,
including principal payments and early redemptions
    
    
    991
    
    
    
    701Proceeds from sales of investment securities available for sale
    
    
    3,178
    
    
    
    3,339Purchases of investment securities available for sale
    
    
    (20,638
    )
    
    
    (31,116
    )Purchases of investment securities held to maturity
    
    
    (4,280
    )
    
    
    (6,350
    )Purchases of premises and equipment
    
    
    (290
    )
    
    
    (191
    )Net cash used in investing activities
    
    
    (11,439
    )
    
    
    (13,512
    )Financing activitiesPurchase of deposits
    
    
    11,016
    
    
    
    Increase in deposits
    
    
    60,281
    
    
    
    5,393Decrease in short-term borrowings
    
    
    (400
    )
    
    
    (540
    )Increase (decrease) in long-term debt
    
    
    214
    
    
    
    (162
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    250Purchases of treasury stock
    
    
    (62
    )
    
    
    (53
    )Dividends paid on preferred stock
    
    
    (622
    )
    
    
    (582
    )Dividends paid on common stock
    
    
    (464
    )
    
    
    (434
    )Net cash provided (used) by financing activities
    
    
    69,963
    
    
    
    3,872Net increase (decrease) cash and cash equivalents
    
    
    59,597
    
    
    
    (7,933
    )Cash and cash equivalents at beginning of period
    
    
    12,231
    
    
    
    21,460Cash and cash equivalents at end of period
    
    $
    71,828
    
    
    $
    13,527Cash paid during the yearInterest
    
    $
    10,384
    
    
    $
    6,776Income taxes
    
    
    734
    
    
    
    922
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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,In thousands, except per share data
    
    2007
    
    2006
    
    2007
    
    2006Net income
    
    $
    544
    
    
    $
    597
    
    
    $
    1,400
    
    
    $
    1,797Dividends on preferred stock
    
    
    149
    
    
    
    149
    
    
    
    622
    
    
    
    582Net income applicable to basic
common shares
    
    
    395
    
    
    
    448
    
    
    
    778
    
    
    
    1,215Dividends applicable to convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    67Net income applicable to diluted common
Shares
    
    $
    395
    
    
    $
    448
    
    
    $
    884
    
    
    $
    1,282Number of average common sharesBasic
    
    
    132,024
    
    
    
    133,114
    
    
    
    132,409
    
    
    
    133,382Diluted
    
    
    148,341
    
    
    
    144,103
    
    
    
    132,409
    
    
    
    143,898Net income per common shareBasic
    
    $
    2.99
    
    
    $
    3.36
    
    
    $
    5.88
    
    
    $
    9.11Diluted
    
    
    2.66
    
    
    
    3.11
    
    
    
    5.88
    
    
    
    8.91
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Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary statement concerning forward-looking statements
  Executive summary
    Financial Condition
    9




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Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Balance at beginning of period
    
    $
    2,600
    
    
    $
    2,200
    
    
    $
    2,400
    
    
    $
    2,165Provision for loan losses
    
    
    10
    
    
    
    65
    
    
    
    306
    
    
    
    114Recoveries of previous
charge-offs
    
    
    3
    
    
    
    11
    
    
    
    34
    
    
    
    562,613
    
    
    
    2,276
    
    
    
    2,740
    
    
    
    2,335Less: Charge-offs
    
    
    13
    
    
    
    1
    
    
    
    140
    
    
    
    60Balance at end of period
    
    $
    2,600
    
    
    $
    2,275
    
    
    $
    2,600
    
    
    $
    2,275
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Nine Months
    
    
    Nine MonthsEnded
    
    Year Ended
    
    
    EndedSeptember 30,
    
    December 31,
    
    
    September 30,(Dollars in thousands)
    
    
    2007
    
    2006
    
    2006Allowance for loan
losses as a percentage of:Total loans
    
    
    1.17
    %
    
    
    1.20
    %
    
    
    1.16
    %Total nonperforming loans
    
    
    38.26
    %
    
    
    40.05
    %
    
    
    39.10
    %Total nonperforming assets
(nonperforming loans and OREO)
    
    
    38.26
    %
    
    
    40.05
    %
    
    
    39.10
    %Net charge-offs as a percentage
of average loans (year-to-date)
    
    
    .05
    %
    
    
    .03
    %
    
    
    
    %Nonperforming loans
  September 30,
    
    
    December 31,
    
    
    September 30,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006Nonaccrual loansCommercial
    
    $
    1,604
    
    
    $
    797
    
    
    $
    794Installment
    
    
    57
    
    
    
    38
    
    
    
    43Real estate
    
    
    4,386
    
    
    
    3,899
    
    
    
    3,574Total
    
    
    6,047
    
    
    
    4,734
    
    
    
    4,411Loans past due 90 days
or more and still accruingCommercial
    
    
    398
    
    
    
    
    
    
    
    Installment
    
    
    21
    
    
    
    5
    
    
    
    41Real estate
    
    
    330
    
    
    
    1,254
    
    
    
    1,366Total
    
    
    749
    
    
    
    1,259
    
    
    
    1,407Total nonperforming loans
    
    $
    6,796
    
    
    
    5,993
    
    
    $
    5,818
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Results of operations
       13




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Liquidity
  14




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Quantitative and Qualitative Disclosures about Market Risk
      15




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PART II Other information
 
 Item 1. Legal Proceedings
  
 Item 1a. Risk Factors
  
 Item 6. Exhibits and Reports on Form 8-K
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November 9, 2007
    
    /s/ Edward R. WrightEdward R. WrightSenior Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 18