1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
June 30, 1997
[ ] 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
(Exact name of registrant as specified in its charter)
New Jersey 22-2434751
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 Broad Street, 07102
Newark, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 624-0865
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class
Common stock, par value $10 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The aggregate market value of voting stock held by non affiliates of the
Registrant as of July 31, 1997 was approximately $1,287,320.
There were 114,141 shares of common stock outstanding at July 31, 1997.
<PAGE>
Index Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1997 and
December 31, 1996..................................................3
Consolidated Statement of Income for the Six Months Ended June 30,
1997 and 1996 and for the Three Months Ended June 30, 1997 and
1996...............................................................4
Consolidated Statement of Changes in Stockholders' Equity for the Six
Months Ended June 30, 1997 and 1996 5
Consolidated Statement of Cash Flows for the Six Months Ended June 30,
1997 and 1996.......................................................6
Notes to Consolidated Financial Statements.........................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operaions 8
Part II. Other Information.................................................12
Signatures...................................................................14
Item 4. Submission of matters to a vote of security holders
Item. 6. Exhibits and reports on Form 8-K..................................15
2
<PAGE>
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, December 31,
Dollars in thousands, except per share data 1997 1996
Assets
Cash and due from banks $3,510 $2,767
Federal funds sold - 8,900
Interest bearing deposits with banks 38 74
Investment securities available for sale 31,668 30,997
Investment securities held to maturity (Market value of $28,772
at June 30, 1997 and $29,517 at December 31,1996 29,252 29,866
Loans held for sale 551 291
loans 56,937 57,128
Less: Reserve for possible loan losses 800 750
Net loans 56,137 56,378
Premises and equipment 3,318 3,331
Accrued interest receivable 1,011 1,078
Other real estate owned 627 672
Other assets 1,673 597
Total assets $127,785 $134,951
Liabilities and Stockholders' Equity
Deposits:
Demand $13,482 $13,699
Savings 27,726 37,527
Time 64,289 64,628
Total deposits 105,497 115,854
Short-term borrowings 8,000 5,175
Accrued expenses and other liabilities 1,103 3,886
Long-term debt 3,749 1,749
Total liabilities 118,349 126,664
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value: Authorized 100,000 shares;
Series A , issued and outstanding 8 shares in 1997 and 1996 200 200
Series B , issued and outstanding 20 shares in 1997 and 1996 500 500
Series C , issued and outstanding 108 shares in 1997 and 1996 27 27
Series D , issued and outstanding 3,208 shares in 1997 820 -
Common stock, par value $10: Authorized 400,000 shares;
114,980 shares issued in 1997 and 1996,
114,141 shares outstanding in 1997 and 1996 1,150 1,150
Surplus 901 901
Retained earnings 5,933 5,645
Less:
Net unrealized loss on investment securities available 70 111
Treasury stock, at cost - 839 shares 25 25
Total stockholders' equity 9,436 8,287
Total liabilities and stockholders' equity $127,785 $134,951
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
<S> <C> <C> <C> <C>
Consolidated Statement of Income (Unaudited)
Dollars in thousands, except per share data 1997 1996 1997 1996
Interest income
Interest and fees on loans $1,282 $1,200 $2,535 $2,245
Interest on Federal funds sold and securities
purchased under agreements to resell 122 61 243 116
Interest on other short-term investments 39 36 39 144
Interest on deposits with banks - 2 1 4
Interest and dividends on investment securities:
Taxable 960 897 1,857 1,715
Tax-exempt 29 29 58 58
Total interest income 2,432 2,225 4,733 4,282
Interest expense
Interest on deposits 1,003 798 1,924 1,523
Interest on short-term borrowings 68 65 116 102
Interest on long-term debt 55 24 91 49
Net interest income 1,306 1,338 2,602 2,608
Provision for possible loan losses 23 23 50 33
Net interest income after provision
for possible loan losses 1,283 1,315 2,552 2,575
Other operating income
Service charges on deposit accounts 142 136 285 279
Other income 146 164 304 333
Net gain on sales of investment securities 19 (1) 40 9
Total other operating income 307 299 629 621
Other operating expenses
Salaries and other employee benefits 666 649 1,307 1,310
Occupancy expense 78 70 165 134
Equipment expense 93 105 190 178
Other expenses 358 340 727 706
Total other operating expenses 1,195 1,164 2,389 2,328
Income before income tax expense 395 450 792 868
Income tax expense 143 157 287 303
Net income $252 $293 $505 $565
Net income per share
Primary $2.21 $2.57 $4.04 $4.96
Fully diluted 1.99 2.31 3.65 4.47
Primary average shares outstanding 114,141 114,141 114,141 113,501
Fuully diluted average shares outstanding 127,991 127,991 127,991 127,351
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Changes
In Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Unrealized
Gain (Loss) on
Investment
Common Preferred Retained Securities Treasury
Dollars in thousands, except per share Stock Surplus Stock Earnings Available for Sale Stock Total
Balance, December 31, 1995 $1,120 $886 $200 $4,856 $(141) $(25) $6,896
Net income - - - 565 - - 565
Proceeds from issuance of common stock 30 15 - - - - 45
Proceeds from issuance of preferred st - - 527 - - - 527
Change in net unrealized loss on investment
securities available for sale - - - - (60) - (60)
Dividends paid - - (156) - - (156)
Balance, June 30, 1996 $1,150 $901 $727 $5,265 $(201) $(25) $7,817
Balance, December 31, 1996 $1,150 $901 $727 $5,645 $(111) $(25) $8,287
Net income - - - 505 - - 505
Proceeds from issuance of preferred st - - 820 - - - 820
Change in net unrealized loss on
investment securities available - - - - 41 - 41
Dividends paid - - - (217) - - (217)
Balance, June 30, 1997 $1,150 $901 $1,547 $5,933 $(70) $(25) $9,436
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
In thousands 1997 1996
Operating activities
Net income $505 $565
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 183 158
Provision for possible loan losses 50 33
Discount accretion, net of premium amortization
on investment securities (12) 26
Net gains on calls of investment securities held to maturity (42) (10)
Gains and commissions on loans held for sale (12) (40)
Decrease (increase) in accrued interest receivable 67 (165)
Deferred (benefit) income tax expense (26) 80
(Increase) decrease in other assets (1,078) 223
(Decrease) increase in accrued expenses and other liabilities (2,783) 59
Net cash (used in) provided by operating activities (3,148) 929
Investing activities
Loans originated for sale (756) (1,439)
Proceeds from sales of loans held for sale 480 1,313
Decrease (increase) in loans 170 (5,321)
Purchase of loans in conjunction with branch acquisitions - (4,035)
Decrease in interest bearing deposits with banks 36 286
Proceeds from sales and calls of investment securities available for 4,718 -
Proceeds from maturities of investment securities availabe for sale,
including principal payments 18,625 3,446
Proceeds from maturities of investment securities held to maturity,
including principal payments 604 3,787
Purchases of investment securities available for sale (23,881) (2,200)
Purchases of investment securities held to maturity - (10,025)
Purchases of premises and equipment (170) (1,144)
Decrease in other real estate owned 94 -
Net cash used in investing activities (80) (15,332)
Financing activities
Deposits acquired in branch acquisition - 7,661
Issuance of long-term debt 2,000
Decrease in deposits (10,357) (5,468)
Increase in short-term borrowings 2,825 6,526
Proceeds from issuance of common stock - 45
Proceeds from issuance of preferred stock 820 527
Dividends paid on preferred stock (44) -
Dividends paid on common stock (173) (156)
Net cash (used in) provided by financing activities (4,929) 9,135
Net decrease in cash and cash equivalents (8,157) (5,268)
Cash and cash equivalents at beginning of period 11,667 10,294
Cash and cash equivalents at end of period $3,510 $5,026
Cash paid during the year:
Interest $1,982 $1,646
Income taxes 303 168
Noncash investing activities:
Transfer of loans to other real estate owned 49 94
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CITY NATIONAL BANCSHARES CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the financial statements have been
included. Operating results for the six months and three months ended June
30, 1997 are not necessarily indicative of the results that may be expected
for the year ended December 31,1997.
2. Principles of consolidation
The accompanying consolidated financial statements include the accounts of
City National Bancshares Corporation (the "Corporation") and its
subsidiary, City National Bank of New Jersey (the "Bank"). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
3. Net income per common share
Primary income per common share is calculated by dividing net income less
dividends on preferred stock by the weighted average number of common
shares outstanding. Common shares issuable upon conversion of the
subordinated debentures have been excluded from the primary income per
common share as they are not considered to be common stock equivalents. On
a fully diluted basis, both net income and common shares outstanding are
adjusted to assume the conversion of the convertible subordinated
debentures from the date of issue.
4. Recent accounting pronouncements
Financial Accounting Board Statement of Financial Accounting Standards No.
128, "Earnings per share" (SFAS 128) establishes standards for computing
and presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. SFAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS and requires
dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures. SFAS 128 is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods, and earlier application is not
permitted. SFAS 128 also requires restatement of all prior period EPS data
presented. SFAS 128 in not expected to have a material effect on the
Corporation's consolidated financial statements.
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Results of operations
Net income for the first half of 1997 was $505,000 compared to $565,000 for
the similar 1996 period. Returns on average stockholders' equity and
average assets were 12.13% and .72% for the 1997 first half and 14.94% and
.88% for the corresponding 1996 period. Related earnings per share on a
fully diluted basis decreased to $3.65 from $4.47.
1997 second quarter net income declined to $252,000 from $293,000 a year
earlier. Returns on average stockholders' equity and average assets were
12.12% and .71% for the 1997 second quarter, while the corresponding 1996
returns were 15.34% and .88%. Related fully diluted per share earnings were
$1.99 compared to $2.31.
Lower gains and commissions on loan sales resulting from a decrease in
mortgage loans originated for sale, along with higher operating expenses
were the primary reasons for the lower earnings in both periods.
Net interest income
For the first half of 1997, net interest income was relatively unchanged
from the same 1996 period, although the related net interest margin
declined to 4.09% from to 4.47%. The decreased margin resulted from a
higher cost of funds. Average interest earning assets for the first half of
1997 rose to $139.3 million from $127.1 million in 1996. Most of this
growth occurred within the loan portfolio, which averaged $57 million
compared to $50.2 million , a 20.2 % increase. Most of this increase
resulted from greater commercial real estate loan activity.
Interest income was higher due to the increase in earning assets and a the
increase in loan volume contributed to an increase in the average rate
earned to 7.40% from 7.31%. Interest expense rose as well, due to an
increase in the cost of funding interest earning assets, from 2.84% to
3.31%.
Net interest income for the second quarter of 1997 was also relatively
unchanged from a year earlier, decreasing slightly, by 2.4%, due to higher
deposit costs which were not offset by commensurate increases in interest
income.
<PAGE>
Provision and reserve for possible loan losses
Changes in the reserve for possible loan losses are set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Six Months Three Months
Ended June 30, Ended June 30,
(Dollars in thousands) 1997 1996 1997 1996
Balance at beginning of period $750 $650 $760 $675
Provision for possible loan losses 50 33 23 23
Recoveries of previous charge-offs 29 84 17 66
829 767 800 764
Less: Charge-offs 29 67 - 64
Balance at end of period $800 $700 $800 $700
</TABLE>
Management believes that the reserve for possible loan losses is adequate
based on an ongoing evaluation of the loan portfolio. This evaluation
includes consideration of past loan loss experience, the level and
composition of nonperforming loans, collateral adequacy, and general
economic conditions within the Bank's market area, including the effect of
such conditions on particular industries.
While management uses available information to determine the adequacy of
the reserve, future additions may be necessary based on changes in economic
conditions or in subsequently occurring events unforeseen at the time of
evaluation.
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
(Dollars in thousands) June 30, 1997 March 31, 1997 December 31, 1996 June 30, 1996
- --------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses as a percentage of:
Total loans 1.41% 1.34% 1.31% 1.29%
Total nonperforming loans 85.02% 77.08% 70.89% 78.83%
Total nonperforming assets
(nonperforming loans and OREO) 51.02% 46.51% 43.35% 83.75%
Net charge-offs (recoveries) as a
percentage of average -% (.03)% .02% (.03)%
loans
(year-to-date)
</TABLE>
Nonperforming loans
Nonperforming loans include loans on which the accrual of interest has been
discontinued or loans which are contractually past due 90 days or more as
to interest or principal payments on which interest income is still being
<PAGE>
accrued. Nonaccrual loans include loans where principal or interest
interest income is still being accrued Delinquent interest payments are
credited to income when received. The following table presents the
principal amounts of nonperforming loans past due 90 days or more and
accruing.
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
(Dollars in thousands) June 30, 1997 December 31, 1996 June 30, 1996
- --------------------------------------------------------------------------------------------
Nonaccrual loans
Commercial $381 $ 423 $143
Installment 8 4 2
Real estate 322 598 393
Total 711 1,025 536
Loans past due 90 days
or more and still accruing
Commercial - 14 -
Installment - - -
Real estate 230 19 351
Total 230 33 351
Total nonperforming loans $941 $1,058 $888
</TABLE>
Nonperforming assets are generally well secured by real estate and small
commercial buildings. It is the Bank's intent to move nonperforming loans
into other real estate owned ("OREO") as rapidly as possible and to dispose
of all OREO properties at the earliest possible date at prices considered
reasonable under the circumstances.
Other operating income
Other operating income, including the results of investment securities
transactions, rose slightly in both the first half and second quarter of
1997 compared to the similar 1996 periods, as gains and commissions on
sales of residential mortgages, which are included in other income,
decreased, offset by higher net gains on sales of investment securities
available for sale.
Other operating expenses
Other operating expenses rose 2.6% for both the first half and second
quarter of 1997 compared to the similar 1996 periods. The six-month
increase resulted primarily from higher occupancy and equipment expense
associated with the completion of the administrative office renovations,
along with the operation of a branch office acquired on March 8, 1996 for a
full six months in 1997. 1997 second quarter expenses rose due to higher
salaries and other operating benefits and increased other expenses.
Income tax expense
Income tax expense as a percentage of pretax income rose from 34.9% in the
first quarter and first half of 1996 to 36.2% for the similar 1997 periods
as a result of higher levels of income subject to state income tax.
<PAGE>
Short-term interest earning assets
Short-term interest earning assets rose 6.5%, averaging $10.6 million for
the first six months of 1997 compared to $9.9 million for the similar 1996
period.
Investment securities
The available for sale portfolio was relatively unchanged, totalling $31.7
million at June 30, 1997 compared to $31 million at the end of 1996, an
increase of 2.2%. Related unrealized depreciation decreased to $52,000
compared to $106,000 at 1996 year-end.
The held to maturity portfolio also changed nominally, declining by 2.1%,
from $29.9 million at December 31, 1996 to $29.3 million at June 30, 1997.
Related unrealized depreciation was up, increasing from $349,000 to
$480,000 at June 30, 1997.
At June 30, 1997, included in both the aforementioned portfolios were six
structured notes with a carrying value of $5.2 million and a related market
value of $5 million, reflecting unrealized depreciation of $211,000,
compared to $143,000 at 1996 year-end. These notes consist of step-up,
dual-index and deleveraged notes, the market values of which do not
necessarily move in the same direction as general changes in bond prices.
Management believes that holding these notes will not have a significant
impact on the financial condition or operations of the Corporation.
Loans
Loans held for sale rose from $291,000 at December 31,1996 to $551,000 at
June 30, 1997 while loans originated for sale during the 1997 first half
totalled $756,000 compared to $1.4 million during the half of 1996. Loans
totalled $56.9 million at June 30, 1997 compared to $57.1 million at
December 31, 1996.
Deposits
Average deposits for the first half of 1997 rose 7.2 %, to $120.4 million
compared to $112.3 million for the first half of 1996, with most of the
growth occurring in certificates of deposits of $100,000 or more issued to
local municipalities.
Short-term borrowings
Average short-term borrowings rose 13% from the first half of 1996 to the
corresponding 1997 period, reflecting higher levels of U.S. Treasury tax
and loan note option balances.
Long-term debt
Long-term debt increased $2 million in the first half of 1997 from December
31, 1996, as a result of $2 million in Federal Home Loan Bank advances
incurred in February, 1997.
<PAGE>
Liquidity
The liquidity position of the Corporation is dependent on the successful
management of its assets and liabilities so as to meet the needs of both
deposit and credit customers. Liquidity needs arise primarily to
accommodate possible deposit outflows and to meet borrowers' requests for
loans. Such needs can be satisfied by investment and loan maturities and
payments, along with the ability to raise short-term funds from external
sources.
It is the responsibility of the Asset/Liability Management Committee
("ALCO") to monitor and oversee all activities relating to liquidity
management and the protection of net interest income from fluctuations in
interest rates.
The Bank depends primarily on deposits as a source of funds and also
provides for a portion of its funding needs through short-term borrowings,
such as Federal Funds purchased, securities sold under repurchase
agreements and borrowings under the U.S. Treasury tax and loan note option
program.
The major contribution during the first quarter of 1997 from operating
activities to the Corporation's liquidity came from higher accrued expenses
and other liabilities.
Net cash used in investing activities was primarily the result of the
purchase of investment securities available for sale, which totalled $23.9
million, while sources of cash provided by investing activities were
derived primarily from proceeds from maturities, principal payments and
early redemptions of investment securities available for sale, which
amounted to $18.6 million.
The primary source of funds from financing activities resulted from an
increase in long-term debt of $2 million while a decrease in deposits of
$10.4 million representing the highest use of cash in financing activities.
Interest rate sensitivity
The management of interest rate risk is also important to the profitability
of the Corporation. Interest rate risk arises when an earning asset matures
or when its interest rate changes in a time period different from that of a
supporting interest bearing liability, or when its interest rate changes in
a time period different from that of an interest earning asset that it
supports. While the Corporation does not match specific assets and
liabilities, total earnings assets and interest bearing liabilities are
grouped to determine the overall interest rate risk within a number of
specific time frames.
Interest sensitivity analysis attempts to measure the responsiveness of net
interest income to changes in interest rate levels. The difference between
interest sensitive assets and interest sensitive liabilities is referred to
as the interest sensitivity gap. At any given point in time, the
Corporation may be in an asset-sensitive position, whereby its
interest-sensitive assets exceed its interest-sensitive liabilities or in a
liability-sensitive position, whereby its interest-sensitive liabilities
exceed its interest-sensitive assets, depending on management's judgment as
to projected interest rate trends.
One measure of interest rate risk is the interest-sensitvity analysis,
which details the repricing differences for assets and liabilities for
given periods. The primary limitation of this analysis is that it is a
static (i.e, as of a specific point in time) measurement which does not
capture risk that varies nonproportionally with changes in interest rates.
Because of this limitation, the Corporation uses a simulation model as its
<PAGE>
primary method of measuring interest rate risk. This model, because of its
dynamic nature, forecasts the effects of different patterns of rate
movement and variances in the effects of rate changes on the Corporations'
mix of interest-sensitive assets and liabilities.
At June 30,1997, the Corporation had a cumulative one-year static gap of a
negative $10 million, representing 7.88% of total assets compared to a
negative $12.4 million gap at December 31,1996, which represented 9.19% of
total assets. Utilizing a dynamic simulation model, management believes
that this amount would not result in a significant change in net interest
income should interest rates rise or fall up to 300 basis points, which is
the maximum change that management uses to measure the Corporation's
exposure to interest rate risk.
Capital
On June 28, 1997 the Corporation issued $820,000 of 6.5% noncumulative
preferred stock in a placement. Stockholders' equity amounted to $9.4
million at June 30, 1997 compared to $8.3 million to December 31, 1996.
Stockholders' equity as a percentage of total assets was 7.39% at June 30,
1997 compared to 6.14% at December 31, 1996.
Risk-based capital ratios are expressed as a percentage of risk-adjusted
assets, and relate capital to the risk factors of a bank's asset base,
including off-balance sheet risk exposures. Various weights are assigned to
different asset categories as well as off-balance sheet exposures depending
on the risk associated with each. In general, less capital is required for
less risk.
At June 30,1997, the Corporation's core capital (Tier 1 ) and total (Tier 1
plus Tier 2) risked-based capital ratios were 16.90% and 22.05%,
respectively.
PART II Other information
Item 4. Submission of matters to a Vote of Security Holders
a) The Annual Meeting of Stockholders of City National Bancshares
Corporation was held on April 16, 1997. The stockholders voted upon the
election of one person, named in the proxy statement, to serve as a
director of the Corporation for a term of three years. One director was
elected at the Annual Meeting with the number of votes "For" and
"Abstained" indicated. There were no votes "Against".
Number of Votes
Name For Abstained
Leon Ewing 68,197 239
The terms of the following directors were continued after the Annual
Meeting: Douglas Anderson, Eugene Giscombe, Barbara Bell Coleman, Norman
Jeffries, Louis E. Prezeau, and Lamar Whigam.
Stockholders also voted to amend the articles of incorporation to authorize
a new class of non-voting common stock. Stockholders voted 67,396 "For" the
proposal, 537 shares " Against" the proposal and 503 shares "Abstained".
Finally, stockholders also voted upon the ratification of the appointment
of KMPG Peat Marwick as independent auditors for the fiscal year ended
December 31, 1997. Stockholders voted 68,198 shares "For" the proposal, 42
shares " Against" and 196 shares "Abstained".
<PAGE>
Item 5. Other Matters
a) On March 31, 1997, the Board approved the declaration of a $1.50 per
share dividend to common stockholders, payable on May 2, 1997 to
stockholders of record on April 2, 1997.
Item 6. Exhibits
(a)Exhibits
(3)(i) Certificate of Designation Establishing and Fixing the Powers,
Designations, Preferences and Relative Participating, Optional and Other
Special Rights, and the Qualifications, Limitation and Restrictions of the
6 1/2% Non-cumulative Perpetual Preferred Stock, Series D
(10) Material Contracts Employment Agreement between Registrant to Louis E.
Prezeau, President & CEO dated May 24, 1997
(11) Statement Regarding Calculation of Per Share Earnings
(27) Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CITY NATIONAL BANCSHARES CORPORATION
(Registrant)
August 11, 1997 ____________________
Edward R. Wright
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer)
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
CITY NATIONAL BANCSHARES CORPORATION
TO: THE SECRETARY OF STATE
STATE OF NEW JERSEY
Pursuant to the provision of Section 14A:7-2(2) of the New Jersey Business
Corporation Act, the undersigned corporation executes the following Certificate
of Amendment to its Certificate of Incorporation.
1. The name of the corporation is City National Bancshares Corporation.
2. The following resolution, establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof
was duly adopted by the Board of Directors of the corporation on the 31st day of
March, 1997, pursuant to authority vested in it by the Certificate of
Incorporation:
RESOLVED, pursuant to the authority expressly vested in the Board of Directors
of the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby classify 3,280 shares of preferred stock of the Corporation as a
class designated 6 1/2% Non-cumulative, Perpetual Preferred Stock, Series Dand
it is further
RESOLVED, a description of such 6 1/2% Non-cumulative Perpetual Preferred Stock,
Series D, including the preferences and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions for redemption, all as set by the Board of Directors of the
Corporation, is set forth in the attached Certificate of Designation
Establishing the 6 1/2% Non-cumulative Perpetual Preferred Stock, Series D and
Fixing the Powers, Designations, Preferences and Relative, Participating,
Optional and Other Special Rights, and the Qualifications, Limitations and
Restrictions, of the 6 1/2% Non-cumulative Perpetual Preferred Stock, Series D.
3. The resolution was adopted by the Board of Directors at a meeting duly
called and held on March 31, 1997, at which a quorum was present throughout.
4. The Certificate of Incorporation of the corporation is amended so that
the designation and number of shares of each class and series acted upon in the
resolution, and the relative rights, preferences and limitations of each such
class and series are as stated in the resolution.
City National Bancshares Corporation
By:______________________________________
Edward R. Wright, Senior Vice President and CFO
1
CITY NATIONAL BANCSHARES CORPORATION
Certificate of Designation Establishing the 6 1/2% Non-cumulative Perpetual
Preferred Stock, Series D and Fixing the Powers, Designations, Preferences and
Relative, Participating, Optional and Other Special Rights, and the
Qualifications, Limitations and Restrictions, of the 6 1/2% Non-cumulative
Perpetual Preferred Stock, Series D
There is hereby established a new series of the preferred stock ("Preferred
Stock") of City National Bancshares Corporation, a New Jersey corporation
("Corporation"), to which the following powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions, of the shares of such new series of
preferred stock shall apply:
Designation and Rank.
The series (this "Series") of shares of Preferred Stock shall be designated
as "6 1/2% Non-cumulative Perpetual Preferred Stock, Series D" (the "Series D
Preferred Stock"), and each share of Series D Preferred Stock shall have a
liquidation value of $250 per share. Shares of Series D Preferred Stock shall
have a liquidation preference of $250 per share, plus an amount per share equal
to any dividends declared but unpaid, without interest.
The Series D Preferred Stock shall rank prior to common stock of all
classes (collectively, "Common Stock") of the Corporation and, except as
provided below, to all other classes and series of equity securities of the
Corporation now or hereafter authorized, issued or outstanding (the Common Stock
and such other classes and series of equity securities of the Corporation are
collectively referred to herein as the "Junior Stock"), other than any class or
series of equity securities of the Corporation expressly designated as ranking
on a parity with (the "Parity Stock") or senior to (the "Senior Stock") the
Series D Preferred Stock as to dividend rights and rights upon liquidation,
winding up or dissolution of the Corporation. The Series D Preferred Stock shall
be on a parity with all other series of Preferred Stock of the Corporation. The
Series D Preferred Stock shall be junior to the Creditors of the Corporation,
including its depositors. The Series D Preferred Stock shall be subject to the
creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by the Charter of the Corporation.
The number of shares of Series D Preferred Stock may be increased or
decreased form time to time by a vote of not less than a majority of the members
of the Board then in office, provided that no decrease shall reduce the number
of shares of Series D Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of any outstanding options, rights or warrants, if any, to purchase
shares of Series D Preferred Stock, or upon the conversion of any outstanding
securities issued by the Corporation convertible into shares of Series D
Preferred Stock.
Dividends.
(a) Payment of Dividends. Holders of shares of Series D Preferred Stock
shall be entitled to receive, if, when and as declared by the Board of
Directors, out of funds legally available therefor, noncumulative cash dividends
at an annual rate of 6 1/2% of the $250 liquidation preference per share ($16.25
per share per annum), and no more. Such noncumulative cash dividends shall be
payable, if declared, annually on February 28, in each year, or if such day is
not a business day, on the next business day (each such date, a "Dividend
Payment Date"). The first Dividend Payment Date shall be February 28, 1998. Each
declared dividend shall be payable to holders of record of the Series D
Preferred Stock as they appear on the stock books of the Corporation at the
close of business on such record dates, not more than forty-five (45) calendar
days nor less than ten (10) calendar days preceding the Dividend Payment Date
therefor, as determined by the Board of Directors (each such date, a "Record
Date"). Annually dividend periods (each a "Dividend Period") shall commence on
and include the first day, and shall end on and include the last day, of the
calendar year that immediately precedes the calendar year in which the
corresponding Dividend Payment Date occursprovided, however, that the first
Dividend Period (the "Initial Dividend Period") shall commence on and include
the first day upon which a share of Series D Preferred Stock shall be issued and
shall end on and include December 31, 1997.
The amount of dividends payable on each share of the Series D Preferred
Stock for each full Dividend Period during which such share is outstanding shall
be $16.25. The amount of dividends payable for the Initial Dividend Period and
for any Dividend Period which, as to a share of Series D Preferred Stock
(determined by reference to the issuance date and the redemption or retirement
date thereof), is less than a full year shall be computed on the basis of a
360-day year composed of twelve (12) thirty (30) day months and the actual
number of days elapsed in the Initial Dividend Period or such Dividend Period.
Holders of the Series D Preferred Stock shall not be entitled to any
interest, or any sum of money in lieu of interest, in respect of any dividend
payment or payments on the Series D Preferred Stock declared by the Board of
Directors which may be unpaid. Any dividend payment made on the Series D
Preferred Stock shall first be credited against the earliest declared but unpaid
cash dividend with respect to the Series D Preferred Stock.
(b) Dividends Noncumulative. The right of holders of Series D Preferred
Stock to receive dividends is noncumulative. Accordingly, if the Board does not
declare a dividend payable in respect of any Dividend Period, holders of shares
of Series D Preferred Stock shall have no right to receive a dividend in respect
of such Dividend Period, and the Corporation shall have no obligation to pay a
dividend in respect of such Dividend Period, whether or not dividends are
declared payable in respect of any future Dividend Period.
(c) Priority as to Dividends. No full dividends shall be declared or paid
or set apart for payment on any Parity Stock or Junior Stock for any Dividend
Period unless full dividends have been or contemporaneously are declared and
paid (or declared and a sum sufficient for the payment thereof set apart for
such payment) on the Series D Preferred Stock for such Dividend Period. When
dividends are not paid in full (or declared and a sum sufficient for such full
payment is not so set apart) for any Dividend Period on the Series D Preferred
Stock and any Parity Stock, dividends declared on the Series D Preferred Stock
and Parity Stock shall only be declared pro rata based upon the respective
amounts that would have been paid on the Series D Preferred Stock and such
Parity Stock had dividends been declared in full.
In addition to the foregoing restriction, the Corporation shall not
declare, pay or set apart funds for any dividends or other distributions (other
than in Common Stock or other Junior Stock) with respect to any Common Stock or
other Junior Stock of the Corporation or repurchase, redeem or otherwise
acquire, or set apart funds for repurchase, redemption or other acquisition of
any Common Stock or other Junior Stock through a sinking fund or otherwise,
unless and until (i) the Corporation shall have paid full dividends on the
Series D Preferred Stock for the most recent preceding Dividends Periods or
funds have paid over to the dividend disbursing agent of the Corporation for
payment of such dividends, and (ii) the Corporation has declared a cash dividend
on the Series D Preferred Stock for the current Dividend Period, and sufficient
funds have been paid over to the dividend disbursing agent for the Corporation
for the payment of such cash dividend for such current Dividend Period.
No dividend shall be paid or set aside for holders of Series D Preferred
Stock for any Dividend Period unless full dividends have been paid or set aside
for the holders of each class or series of equity securities of the Corporation,
if any, ranking prior to the Series D Preferred Stock as to dividends for such
Dividend Period.
(d) Any reference to "dividends" or "distributions" in this Section 2 shall
not be deemed to include any distribution made in connection with any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation.
Redemption
(a) General. The shares of Series D Preferred Stock are not subject to
mandatory redemption by the holders thereof, and, except as hereinafter provided
in Section 3(c) below, are not subject to redemption prior to December 31, 2000.
On or after January 1, 2001, shares of Series D Preferred Stock may be redeemed
by the Corporation or its successor or any acquiring or resulting entity with
respect to the Corporation (including by any parent or subsidiary of the
Corporation, any such successor, or any such acquiring or resulting entity), as
applicable, at its option, in whole or in part, at any time or from time to
time, upon notice as provided in subsection (c) of this Section 3, by resolution
of the Board of Directors of the Corporation or its successor or any acquiring
or resulting entity with respect to the Corporation (including by any parent or
subsidiary of the Corporation, any such successor, or any such acquiring or
resulting entity), as applicable, at the redemption price of $250 per share in
cash, plus, in each case, an amount in cash equal to all declared and unpaid
dividends to the date fixed for redemption, without interest.
The aggregate redemption price payable to each holder of record of Series D
Preferred Stock to be redeemed shall be rounded to the nearest cent ($0.01).
Ifless than all of the outstanding shares of Series D Preferred Stock are to be
redeemed, the Corporation will select those shares to be redeemed pro rata, by
lot or such other methods as the Board of Directors in its sole discretion
determines to be equitable. If redemption is being affected by the Corporation,
on and after the redemption date, dividends shall cease to accrue on the shares
of Series D Preferred Stock called for redemption, and they shall be deemed to
cease to be outstanding, provided that the redemption price (including any
declared but unpaid dividends to the date fixed for redemption) has been duly
paid or provided for. If redemption is being effected by an entity other than
the Corporation, on and as of the redemption date such entity shall be deemed to
own the shares being redeemed for all purposes hereof provided that the
redemption price (including the amount of any declared but unpaid dividends to
the date fixed for redemption) has been duly paid or provided for.
(b) Change of Control. In addition to the redemption provisions of
subsection (a) above and not in lieu of or in substitution therefor, in the
event of a Change of Control, the Series D Preferred Stock shall be redeemable
at the option of the Corporation or its successor or any acquiring or resulting
entity with respect to the Corporation (including by any parent or subsidiary of
the Corporation, any such successor, or any such acquiring or resulting entity),
as applicable, in whole but not in part. Redemption of the Series D Preferred
Stock pursuant to this subsection (b) shall be effected by notice as provided in
subsection (c) of this Section 3, by resolution of the Board of Directors of the
Corporation or its successor or any acquiring or resulting entity with respect
to the Corporation (including by any parent or subsidiary of the Corporation,
any such successor, or any such acquiring or resulting entity), as applicable,
at the liquidation value per share in cash, plus, in each case, an amount in
cash equal to all declared and unpaid dividends.
"Change of Control" means (a) a sale of all or substantially all of the
property and assets of the Corporation (other than a reorganization transaction
in which such properties and assets are transferred to a subsidiary of the
Corporation), (b) a reorganization, merger, consolidation or other transaction
or transactions (whether or not the Corporation is a party thereto and
specifically including, without limitation, open market purchases of securities)
as a result of which any person or entity or "group" of persons and/or entities
becomes the "beneficial owner" (as those terms are defined in and construed by
judicial authority under Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended, as that Rule may be amended from time to time) of
securities representing at least 50% of the ordinary voting power of the
Corporation in the election of directors, (c) any event as a result of which
City National Bank of New Jersey (the Bank) ceases to be owned and controlled by
the Corporation or (d) all or substantially all the assets of the Bank are
transferred to a party which is not an affiliate of the Corporation or the Bank.
If redemption is being effected by the Corporation, on and as of the
redemption date, dividends shall cease to accrue on the shares of Series D
Preferred Stock called for redemption, and they shall be deemed to cease to be
outstanding, provided that the redemption price (including any declared but
unpaid dividends to the date fixed for redemption) has been duly paid or
provided for. If redemption is being effected by an entity other than the
Corporation, on and as of the redemption date such entity shall be deemed to own
the shares being redeemed for all purposes of hereunder, provided that the
redemption price (including the amount of any declared but unpaid dividends to
the date fixed for redemption) has been duly paid or provided for.
(c) Notice of Redemption. Notice of any redemption, setting forth (i) the
date and place fixed for said redemption, (ii) the redemption price and (iii) a
statement that dividends on the shares of Series D Preferred Stock (A) to be
redeemed by the Corporation will cease to accrue on such redemption date, or (B)
to be redeemed by an entity other than the Corporation will thereafter accrue
solely for the benefit of such entity, shall be mailed, postage prepaid, at
least thirty (30) days, but not more than sixty (60) days, prior to said
redemption date to each holder of record of Series D Preferred Stock to be
redeemed at his or her address as the same shall appear on the stock books of
the Corporation. If less than all of the shares of Series D Preferred Stock
owned by such holder are then to be redeemed, such notice shall specify the
number of shares thereof that are to be redeemed and the numbers of the
certificates representing such shares. Notice of any redemption shall be given
by first class mail, postage prepaid. Neither failure to mail such notice, nor
any defect therein or in the mailing thereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in the
manner herein provided shall be conclusively presumed to have been duly given
whether or not the holder receives such notice.
If such notice of redemption shall have been so mailed, and if, on or
before the redemption date specified in such notice, all funds necessary for
such redemption shall have been set aside by the Corporation (or other entity as
provided in subsection (a) or (b) of this Section 3) separate and apart from its
other funds in trust for the account of the holders of shares of Series D
Preferred Stock to be redeemed (so as to be and continue to be available
therefor), then, on and after said redemption date, notwithstanding that any
certificate for shares of Series D Preferred Stock so called for redemption
shall not have been surrendered for cancellation or transfer, the shares of
Series D Preferred Stock (A) so called for redemption by the Corporation shall
be deemed to be no longer outstanding and all rights with respect to such shares
of Series D Preferred Stock so called for redemption shall forthwith cease and
terminate, or (B) so called for redemption by an entity other than the
Corporation shall be deemed owned for all purposes hereof by such entity, except
in each case for the right of the holders thereof to receive, out of the funds
so set aside in trust, the amount payable on redemption thereof, but without
interest, upon surrender (and endorsement or assignment for transfer, if
required by the Corporation or such other entity) of their certificates.
In the event that holders of shares of Series D Preferred Stock that shall
have been redeemed shall not within two (2) years (or any longer period if
required by law) after the redemption date claim any amount deposited in trust
with a Corporation or trust company for the redemption of such shares, such
Corporation or trust company shall, upon demand and if permitted by applicable
law, pay over to the Corporation (or other entity that redeemed the shares) any
such unclaimed amount so deposited with it, and shall thereupon be relieved of
all responsibility in respect thereof, and thereafter the holders of such shares
shall, subject to applicable escheat laws, look only to the Corporation (or
other entity that redeemed the shares) for payment of the redemption price
thereof, but without interest from the date of redemption.
(d) Status of Shares Redeemed. Shares of Series D Preferred Stock redeemed,
purchased or otherwise acquired for value by the Corporation shall, after such
acquisition, have the status of authorized and unissued shares of Preferred
Stock and may be reissued by the Corporation at any time as shares of any series
of Preferred Stock other than as shares of Series D Preferred Stock.
Liquidation Preference.
(a) Liquidating Distributions. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of Series D Preferred Stock shall be entitled to receive for each
share thereof, out of the assets of the Corporation legally available for
distribution to shareholders under applicable law, or the proceeds thereof,
before any payment or distribution of the assets shall be made to holders of
shares of Common Stock or any other Junior Stock (subject to the rights of the
holders of any class or series of equity securities having preference with
respect to distributions upon liquidation and the Corporation's general
creditors, including its depositors), liquidating distributions in the amount of
$250 per share, plus an amount per share equal to any dividends declared but
unpaid, without interest.
If the amounts available for distribution in respect of shares of Series D
Preferred Stock and any outstanding Parity Stock are not sufficient to satisfy
the full liquidation rights of all of the outstanding shares of Series D
Preferred Stock and such Parity Stock, then the holders of such outstanding
shares shall share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of Series D Preferred Stock will not be entitled
to any further participation in any liquidating distribution of assets by the
Corporation. All distributions made in respect of Series D Preferred Stock in
connection with such a liquidation, dissolution or winding up of the Corporation
shall be made pro rata to the holders entitled thereto.
(b) Consolidation, Merger or Certain Other Actions. Neither the
consolidation, merger or other business combination of the Corporation with or
into any other person, nor the sale of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 4.
5. Voting Rights.
Holders of shares of Series D Preferred Stock shall have no voting rights.
6. No Conversion Rights.
The holders of shares of Series D Preferred Stock shall not have any rights
to convert such shares into shares of any other class or series of capital stock
or into any other securities of, or any interest in, the Corporation.
7. No Sinking Fund.
No sinking fund shall be established for the retirement or redemption of
shares of Series D Preferred Stock.
8. Preemptive or Subscription Rights.
No holder of shares of Series D Preferred Stock shall have any preemptive
or subscription rights in respect of any shares of the Corporation that may be
issued.
9. No other Rights.
The shares of Series D Preferred Stock shall not have any designations,
preferences or relative, participating, optional or other special rights except
as set forth herein, or as otherwise required by law.
10. Compliance with Applicable Law.
Declaration by the Board of Directors and payment by the Corporation of
dividends to holders of the Series D Preferred Stock and repurchase, redemption
or other acquisition by the Corporation (or another entity as provided in
subsections (a) and (b) of Section 3 hereof) of shares of Series D Preferred
Stock shall be subject in all respects to any and all restrictions and
limitations placed on dividends, redemptions or other distributions by the
Corporation (or any such other entity) under (i) laws, regulations and
regulatory conditions or limitations applicable to or regarding the Corporation
(or any such other entity) from time to time and (ii) agreements with federal
banking authorities with respect to the Corporation (or any such other entity)
from time to time in effect.
CITY NATIONAL BANCSHARES CORPORATION
By:______________________________________ May 30, 1997
Edward R. Wright, Senior Vice President and CFO
1
EMPLOYMENT AGREEMENT
AGREEMENT made effective as of May 24, 1997 by and among CITY NATIONAL
BANK OF NEW JERSEY (the "Bank") a national banking association, CITY
NATIONAL BANCSHARES CORPORATION (the "Corporation"), a New Jersey
corporation, each with its principal office at 900 Broad Street, Newark,
New Jersey (the Bank and the Corporation sometimes collectively referred to
as the "Employer"), and LOUIS E. PREZEAU ("Executive").
WHEREAS, the Corporation is a bank holding company, and the Bank is a
wholly owned subsidiary of the Corporation
WHEREAS, the Bank, the Corporation and the Executive have previously
entered into an Employment Agreement made as of May 24, 1993, which
employment Agreement has been extended to the date hereof by action of the
respective Boards of Directors of the Bank and the Corporation:
WHEREAS, the Bank and the Corporation desire to continue to retain the
services of Executive as President and Chief Executive Officer of the
Corporation and the Bank for the period provided in this Agreement and
subject to the terms and conditions hereofand
WHEREAS, Executive is willing to serve in the employ of the Bank and
the Corporation as President and Chief Executive Officer on a full-time
basis for said period on the terms and conditions specified herein:
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided,
the parties hereto agree as follows.
1. POSITION AND RESPONSIBILITIES.
(a) During the period of his employment hereunder, Executive shall
serve as President and Chief Executive Officer of the Corporation and the
Bank. Executive shall have such duties as are customarily or appropriately
vested in the President and Chief Executive Officer of a publicly-held bank
holding company and a national bank, and as from time to time may be
prescribed by the Board, provided such duties are consistent with
Executive's present duties and with Executive's current position as the
President and Chief Executive Officer of the Employer. During the period of
his employment hereunder, Executive shall devote substantially all of his
business time, attention, skill, and efforts to the faithful performance of
his duties hereunder, including activities and services related to the
organization, operation and management of the Employer. Executive shall be
allowed to devote a sufficient amount of time to service his existing
private accounting practice clients, provided that such practice does not
interfere with the adequate performance of his obligations hereunder.
(b) During the period of employment hereunder, Corporation shall elect
Executive as director of the Bank and shall nominate and recommend the
Executive for election as a director of the Corporation.
2. TERM.
The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the effective date first above written and
shall continue for a period of three (3) years thereafter. Thereafter,
subject to Section 9(b) hereof, the Employer may, in its discretion, renew
this Agreement upon such terms and conditions as shall be mutually
agreeable to the parties.
3. COMPENSATION AND RELATED MATTERS.
(a) Salary. As compensation for the responsibilities and duties
described in Section 1, the Employer shall pay Executive an annual salary
of $150,000 during the First year of employment (such annual salary as
adjusted from time to time, the "Base Salary"), payable biweekly.
Executive's salary during the second and third year of employment hereunder
may be increased from the immediately preceding year as determined by the
Board or a duly appointed committee prior to commencement of such second
and third year. At Executive's option and expense, the Executive may defer
part of his salary pursuant to Section 83 of the Internal Revenue Code, and
Executive shall be responsible for notifying Employer of such election and
making all necessary arrangements for such deferral (with respect to any
trusts, agreements, etc.). In addition to his Base Salary, Executive shall
be entitled to the same directors fees as directors of the Bank and the
Corporation.
(b) Employee Benefits. So long as Executive shall be employed,
hereunder, the Bank shall provide Executive. at no cost to Executive, with
all such other benefits as are provided uniformly to permanent full-time
employees of the Employer. In addition, Executive will be entitled to
incentive compensation and bonuses as provided in any plan of the Employer
in which officers of the Bank are eligible to participate.
(c) Expenses. In addition to the salary and other benefits provided
hereunder, the Employer shall reimburse Executive for all reasonable
travel, commutation and other expenses incurred and accounted for by
Executive in performing his obligations under this Agreement. In addition.
Employer shall pay executive an additional non-accountable expense
allowance of $6,000.00 irrespective of actual expenses incurred by the
Executive. Executive may receive advances for business expenses to be
incurred by Executive in accordance with normal business practices. The
non-accountable expense allowance will increase by $2,000 a year for each
new branch.
(d) Life Insurance. So long as Executive is employed by the Employer
hereunder, the Employer shall pay, for the benefit of Executive, 100% of
that amount of annual premium on life insurance policy no. 37-627041 issued
by the Equitable Life Insurance Company as is allocable to a death benefit
of up to three (3) times the Executive's annual Base Salary then in effect.
Executive shall be the owner of such policy and shall be entitled to
exercise all rights of ownership of such policy, including naming the
beneficiary of such policy.
(e) Automobile. So long as Executive is employed hereunder, the
Employer shall provide Executive, for his exclusive use, with a 1995
Oldsmobile Aurora, or an automobile (which shall be new or used within
Executive's discretion) of comparable make and model, which is no more than
three (3) years old from model year. The Employer shall pay (or reimburse
Executive for) all expenses relate to the operation, maintenance and
up-keep of such automobile, including insurance, gas, service and repairs.
(f) Vacation. Executive shall be entitled to four weeks paid vacation
per year, of which up to two weeks vacation may be carried forward to the
next year (entitling Executive to a maximum of six weeks vacation in any
one year if two weeks of vacation from the prior year were not used). Time
spent at banking conventions shall not be counted as vacation time.
Executive will be compensated for all unused vacation at the termination of
his employment for any reason (to extent Executive would have been entitled
to such vacation time in the year of termination).
(g) Conventions. Employer shall reimburse Executive and his spouse for
all expenses related to their attendance at three banking conventions a
year selected by the Executive (such as the National Bankers Association,
the New Jersey Bankers Association and the American Bankers Association,
etc.). (h) Financial Tax/Legal Consultant. Employer shall reimburse
Executive for expenses related to to the consultation of a Financial
Tax/Legal Consultant for his personal finances. This benefit is available
for one time anytime during his contract.
(i) Annual Medical Checkup. Employer shall reimburse Executive for the
expenses related to an annual complete physical.
4. PERFORMANCE BONUS.
(a) Calculation of Bonus. Executive shall be entitled to an annual
performance bonus ("Performance Bonus") equal to the following:
0 to 10% Return on Average Common Equity (ROACE) - No Bonus Over 10% up to
15% ROACE - 10% on excess up to 15% ROACE Over 15% ROACE - 10% on the first
5% plus 20% on excess over 15%
In any year, the Board has the discretion to increase the Bonus award
over the level indicated above .
(b) Payment of Performance Bonus. The Performance Bonus shall be paid
in cash, the Corporation's common stock, or any combination thereof, as the
Executive shall decide, as follows:
(i) if all or any, portion of the Performance Bonus is to be paid in
cash, such cash payment shall be made within thirty (30) days after the
Corporation has received the final year-end audit report for the
Corporation and the Bank prepared and certified by the Corporation's
independent auditors'
(ii) if all or any portion of the Performance Bonus is to be paid in
the Corporation's common stock, the purchase of such shares will be limited
to the number of shares specified under Stock Options (5a) and the value of
each share of such stock shall be equal to the price as quoted under Stock
Options (5b).
(c) Pro Rate Share on Termination. Except as provided in Sections
8(b), 11(b) or otherwise herein, in the event the Executive's employment
shall be terminated (other than pursuant to Section 5 hereof), either
voluntary or involuntary or by death, prior to the expiration of the term
hereof the Executive shall nonetheless be entitled to receive a bonus
payable in accordance with the terms hereof equal to (i) the Performance
Bonus to which the Executive would otherwise be entitled as calculated in
accordance with Section 4(a) hereof, multiplied by (ii) a fraction the
numerator of which is the number of days employed by the Executive during
the year in which the Executive's employment was terminated and the
denominator of which is 365.
(d) Certification of Bonus. If executive and Employer shall disagree
as to the amount of the Performance Bonus, the Employer shall request the
Employer's independent auditors to prepare a certificate showing the amount
of Net Operating Profit, Common Stockholders Equity and the Performance
Bonus. Such certificate shall be binding upon the parties, absent manifest
error.
5. STOCK OPTIONS. (a) The Corporation hereby grants to Executive an
option to purchase 5,700 shares of the Corporation's common stock (such
shares being the "Option Shares") at the price set forth below. The option
granted by this paragraph 5(a) can be exercised as follows:
Year 1 - May 1, 1997 to April 30, 1998 - 1900 shares Year 2 - May
1,1998 to April 30, 1999 - 3800 shares less any shares executed in Year 1
Year 3 - May 1, 1999 to April 30, 2000 - 5700 shares less any shares
executed in Years 1 & 2
(b) The price to be paid by Executive for each Option Share (The "
Option Price") shall be $20.00. All payments of purchase price must be made
in cash in full at the time of delivery of the Option Shares to Executive.
Executive may exercise the option granted hereunder and purchase Option
Shares by giving written notice of his election to exercise his option
hereunder. The notice shall comply with Section 22 hereof, and shall state
the number of Option Shares which Executive desires to purchase.
(c) The options and the accompanying terms set forth in this Section 5
shall be deemed to be the sole and exclusive property of Executive and can
not be sold, assigned, transferred, pledged or otherwise disposed of in any
manner whatsoever by Executive. Any attempt by Executive to sell, assign,
transfer, pledge or otherwise dispose of the options granted him hereunder
shall be absolutely void, and shall not be binding upon the Corporation or
its successors and assigns.
(d) The existence of the options hereunder shall not affect in any way
the right or power of the Corporation or its stockholders to make or
authorize any or all adjustments recapitalizations, reorganizations or
other changes in its capital structure or its business, or any merger or
consolidation, of the corporation, or any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the common stock
or the rights thereof, or the dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(e) If after the date hereof while the option is outstanding, the
Corporation shall effect a subdivision or combination of shares or other
capital readjustment, the payment of a stock dividend, or other increase or
reduction of the number of shares of common stock outstanding (other than
the issuance or repurchase of shares for fair consideration, then (i) in
the event of an increase in the number of such shares outstanding, the
number of Option Shares then subject to the option shall be proportionately
increased and the Option Price shall be proportionately reducedand (ii) in
the event of a reduction in the number of such shares outstanding, the
number or Option Shares then subject to the option shall be proportionately
reduced and the Option Price shall be proportionately increased.
(f) Executive acknowledges that the Option Shares may be "restricted
stock" within the meaning of Rule 144 of the Securities Act of 1533. and
may be disposed of only in accordance with Rule 144.
6. TERMINATION UPON DISABILITY
(a) Employer may terminate Executive's employment hereunder upon the
occurrence of Executive's Disability. As used herein, the terms
"Disability" or "Disabled" shall mean the inability of the Executive, by
reason of injury, illness or other similar cause, to perform major part of
his duties and responsibilities in connection with the conduct of the
business and affairs of the Employer for a period of six (6) consecutive
months. The determination of whether the Executive is Disabled shall be
made by the majority vote of the Board, whose decision on this matter shall
be final. Executive hereby authorizes any physician, hospital or health
care professional to furnish to the Employer medical records covering his
health or physical condition, but only in the event that Executive is
unable to perform a major part of his duties or responsibilities for one
(1) month.
(b) Upon termination for Disability, Executive shall be entitled to
receive the amount of any unpaid Performance Bonus calculated in accordance
with Section 4(d) hereof. In addition, the Executive shall be entitled to
Long term disability benefits which shall be provided pursuant to (i) any
group disability insurance policy in which Executive is a participant and
(ii) an additional long-term disability policy providing such amount of
disability benefit as is necessary to cause the total amounts of disability
benefits under this paragraph (b) to equal two-thirds of the Executive's
annual Base Salary in effect at the time of termination for Disability.
Premiums on the additional policy referred to in the preceding clause (ii)
shall be paid by Employer so long as Executive shall be employed hereunder.
7. TERMINATION UPON DEATH. Executive's employment hereunder shall be
immediately terminated upon his death, in which case Employer shall pay
Executive's beneficiaries or his estate, the amount of any accrued but
unpaid salary pursuant to Section 3(a) and the amount of any unpaid
Performance bonus calculate In accordance with Section 4(d) hereof. In
addition, the Employer shall continue all health insurance benefits for
Executives family member (which his family members were receiving on the
date of death) for one year after the date of death. at the Employer's
expense. Thereafter, the Employer shall have no further obligation
hereunder.
8. TERMINATION FOR CAUSE.
(a) Termination by the Employer of Executive's (i) breach of fiduciary
duty involving personal dishonesty (ii) commission of a felony or of a
misdemeanor involving dishonesty or moral turpitude, (iii) commission of
embezzlement or fraud against Employer or any of its affiliates, (iv)
continuous or habitual alcohol or drug abuse, (v) habitual unexcused
absence, or (vi) continuous gross negligence or willful disregard for his
duties hereunder. For purposes of this Section, no act, or the failure to
act, on Executive's part shall be considered "willful" unless done, or
omitted to be done, not in good faith and without reasonable belief that
the action or omission was in the best interest of the Employer.
(b) Employer may, at any time, terminate the Executive's employment
for "cause" in which case Executive shall be entitled to receive only the
amount of any accrued but unpaid salary pursuant to Section 3(a) but shall
be entitled to no further compensation or benefits hereunder.
9. TERMINATION WITHOUT CAUSE: FAILURE TO RENEWSEVERANCE.
(a) Except as otherwise provided herein, if the termination of
Executive's employment by the Employer without "Cause", the Employer shall
pay to Executive in one lump sum (in addition to the amount of any accrued
but unpaid salary pursuant to Section 3(a) and any unpaid Performance Bonus
calculated in Executive's employment by the Employer without "Cause
accordance with Section 4(d) hereof:
(i)an amount equal to Executive's then annual Base Salary if Executive
is terminated without cause any time.
(b) Upon the expiration of this Agreement, if the Employer shall fail
to offer to renew this Agreement on substantially the same terms then in
effect or such other terms as shall be acceptable to Executive, the
Employer shall pay to the Executive in one lump sum an amount equal to
Executive's then current annual Base Salary
10. CONTINUATION OF BENEFITS FOLLOWING TERMINATION. In the event
Executive's Employment is terminate without "Cause" or pursuant to Section
5, 6 or 11(a) hereof, the Employer shall cause to be continued for one year
following the date on which Executive's employment is terminated, life and
health coverage substantially identical to any group coverage in which
Executive participated prior to termination, provided, however, that the
Employer's obligation under this Section 10 shall cease prior to expiration
of such one year period upon (i) Executive's full-time employment by
another employer. (ii) executive's normal retirement as defined in any
qualified retirement plan of the Employeror (iii) the Executive's death.
11. TERMINATION BY EXECUTIVE.
(a) Executive may at any time for "Good Reason" voluntarily terminate
his employment hereunder by giving Notice of Termination in accordance with
Section 12 hereof, in which case Executive shall be entitled to receive
liquidated damages and full satisfaction of any claims Executive may
otherwise have hereunder (in addition to the amount of any accrued but
unpaid salary pursuant to Section 3(a) and any unpaid Performance Bonus
calculated in accordance with Section 4(d) hereof).
(b) If Executive terminates his employment other than for "Good
Reason", he shall be entitled to receive the amount of any accrued but
unpaid salary but shall be entitled to no further compensation or benefits
(c) As used herein, "Good Reason" shall mean:
(i)any change in control (A) of a nature that would require approval
under the Change in Bank Control Act, 12 U.S.C. ss 1817(j) and the
regulations promulgated thereunder, whether or not such change in control
is subject to that act, and (B) which is not approved by the Board prior to
such change in control,
(ii) a failure by the Employer to comply with a material provision of
this Agreement which is not cured within thirty (30) days after notice of
such noncompliance has been given by Executive to the Employeror
(iii) a failure of the stockholders of the Corporation to elect
Executive as a director of the Corporation at a stockholders meeting held
during the term of this Agreement at which the Executive is up for election
as a director of the Corporation .
12. NOTICE OF TERMINATION. Any purported termination by the Executive
or by the Employer shall be communicated by a Notice of Termination to the
other party thereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provisions in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Executive's employment under the provision so indicated.
Unless otherwise specified therein, a Notice of Termination shall be deemed
effective in accordance with Section 22.
13. NON-COMPETITIVE: NON-DISCLOSURE.
(a) Upon (i) voluntary termination by Executive of his employment
hereunder for any reason other than Good Reason, (ii) termination of
Executive's employment by the Employer for Cause, or (iii) expiration of
this Agreement, Executive agrees not to compete with the Employer or any of
its affiliates for a period of one (1) year following such termination
within a 60 miles radius of City National Bank. Executive agrees that
during such period and within said radius, Executive will not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Employer or any affiliate. The parties hereto,
recognizing that irreparable injury will result to the Employer, its
business and property in the event of Executive's breach of this
Subsection, agree that in the event of any such breach by Executive, the
Employer will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants. employers, employees and all
persons acting for or with the Executive.
(b) Executive agrees not to disclose, during or after the term of his
employment, any knowledge of the past, present, planned or considered
business activities of the Employer or affiliates thereof to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any
knowledge of banking, financial and/or economic principles, concepts or
ideas which are not solely and exclusively derived from the business plans
and activities of the Employer. In the event of a breach or threatened
breach by the Executive of the provisions of this Subsection, the Employer
shall be entitled to an injunction restraining Executive from disclosing,
in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Employer or affiliates thereof, or
from rendering any services to any person, firm, corporation, association
EXHIBIT 11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
City National Bancshares Corporation
Computation of Earnings Per Common Share on a
Primary & Fully Diluted Basis
<TABLE>
<CAPTION>
<S> <C> <C> <C>
In thousands, except per share data
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net income $252 $293 $505 $565
Dividends paid on preferred stock - - 44 2
Net income applicable to primary
common shares 252 293 461 563
Interest expense on convertible
subordinated debentures, net of
income tax 3 3 6 6
Net income applicable to fully
diluted common shares $255 $296 $467 $569
Number of average common shares
Primary 114,141 114,141 114,141 113,501
Fully diluted:
Average common shares outstanding 114,141 114,141 114,141 113,501
Average convertible subordinated
debentures convertible to common s 13,850 13,850 13,850 13,850
127,991 127,991 127,991 127,351
Net income per share
Primary $2.21 $2.57 $4.04 $4.96
Fully diluted 1.99 2.31 3.65 4.47
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 3510 2767
<INT-BEARING-DEPOSITS> 38 74
<FED-FUNDS-SOLD> 0 8900
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 31668 30997
<INVESTMENTS-CARRYING> 29252 29866
<INVESTMENTS-MARKET> 28772 29517
<LOANS> 57488 57419
<ALLOWANCE> 800 750
<TOTAL-ASSETS> 127785 134951
<DEPOSITS> 105497 115854
<SHORT-TERM> 8000 5175
<LIABILITIES-OTHER> 1103 3886
<LONG-TERM> 3749 1749
0 0
1547 727
<COMMON> 2051 2051
<OTHER-SE> 5835 5509
<TOTAL-LIABILITIES-AND-EQUITY> 127785 134951
<INTEREST-LOAN> 2535 2245
<INTEREST-INVEST> 2198 2037
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 4733 4282
<INTEREST-DEPOSIT> 1924 1523
<INTEREST-EXPENSE> 207 151
<INTEREST-INCOME-NET> 2602 2608
<LOAN-LOSSES> 50 33
<SECURITIES-GAINS> 40 9
<EXPENSE-OTHER> 2389 2328
<INCOME-PRETAX> 792 868
<INCOME-PRE-EXTRAORDINARY> 792 868
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 505 565
<EPS-PRIMARY> 4.04 4.96
<EPS-DILUTED> 3.65 4.47
<YIELD-ACTUAL> 4.09 4.47
<LOANS-NON> 711 536
<LOANS-PAST> 2371 3140
<LOANS-TROUBLED> 231 351
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 750 700
<CHARGE-OFFS> 29 84
<RECOVERIES> 29 67
<ALLOWANCE-CLOSE> 800 750
<ALLOWANCE-DOMESTIC> 683 570
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 117 130
</TABLE>
