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
September 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: (973) 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 November 12, 1997 was approximately $1,630,000.
There were 114,141 shares of common stock outstanding at November 12, 1997.
<PAGE>
2
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
September 30, December 31,
Dollars in thousands, except per share data 1997 1996
================================================================================
Assets
Cash and due from banks ............................ $ 3,578 $ 2,767
Federal funds sold ................................. 7,300 8,900
Interest bearing deposits
with banks ....................................... 97 74
Investment securities available
for sale ......................................... 39,651 30,997
Investment securities held to
maturity (Market value of $30,091
at September 30, 1996 and $24,434
at December 31,1995) ............................. 30,146 29,866
Loans held for sale ................................ 756 291
Loans .............................................. 57,908 57,128
Less: Reserve for possible loan
losses ........................................... 825 750
-------- --------
Net loans .......................................... 57,083 56,378
-------- --------
Premises and equipment ............................. 3,243 3,331
Accrued interest receivable ........................ 955 1,078
Other real estate owned ............................ 627 672
Other assets ....................................... 1,654 597
-------- --------
Total assets ....................................... $145,090 $134,951
======== ========
Liabilities and Stockholders' Equity
Deposits:
Demand ...................................... $ 13,818 $ 13,699
Savings ..................................... 31,251 37,527
Time ........................................ 77,418 64,628
-------- --------
Total deposits ..................................... 122,487 115,854
Short-term borrowings .............................. 7,779 5,175
Accrued expenses and other
liabilities ...................................... 1,326 3,886
Long-term debt ..................................... 3,749 1,749
-------- --------
Total liabilities .................................. 135,341 126,664
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;
Issued 114,980 shares in 1997 and
1996, outstanding 114,141 shares
in 1997 and 1996 ............................... 1,150 1,150
Surplus .......................................... 901 901
Retained earnings ................................ 6,188 5,645
Less:
Net unrealized loss on investment
securities available for sale ................ 12 111
Treasury stock, at cost - 839 shares ......... 25 25
-------- --------
Total stockholders' equity ......................... 9,749 8,287
-------- --------
Total liabilities and stockholders' equity ......... $145,090 $134,951
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
3
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Income (Unaudited)
Nine months ended Three months ended
September 30, September 30,
Dollars in thousands, ------------------------------------------
except per share data 1997 1996 1997 1996
================================================================================
Interest income
Interest and fees on loans ..... $ 3,891 $ 3,524 $ 1,356 $ 1,278
Interest on Federal funds
sold and securities
purchased under agreements
to resell .................... 351 206 108 90
Interest on other short-term
investments .................. 39 185 0 41
Interest on deposits with
banks ........................ 2 5 1 1
Interest and dividends on
investment securities:
Taxable ...................... 2,787 2,621 930 905
Tax-exempt ................... 87 87 29 31
--------- --------- --------- ---------
Total interest income .......... 7,157 6,628 2,424 2,346
--------- --------- --------- ---------
Interest expense
Interest on deposits ........... 2,948 2,452 1,024 929
Interest on short-term
borrowings ................... 157 154 41 52
Interest on long-term debt ..... 146 74 55 25
--------- --------- --------- ---------
Total interest expense ......... 3,251 2,680 1,120 1,006
--------- --------- --------- ---------
Net interest income ............ 3,906 3,948 1,304 1,340
Provision (credit) for
possible loan losses ......... 43 65 (7) 32
--------- --------- --------- ---------
Net interest income after
provision (credit) for
possible loan losses ......... 3,863 3,883 1311 1308
--------- --------- --------- ---------
Other operating income
Service charges on deposit
accounts ..................... 420 419 135 140
Other income ................... 442 433 138 100
Net gain (loss) on sales of
investment securities ........ 19 8 (21) (1)
--------- --------- --------- ---------
Total other operating income ... 881 860 252 239
--------- --------- --------- ---------
Other operating expenses
Salaries and other employee
benefits ..................... 1,979 1,982 672 672
Occupancy expense .............. 245 251 80 117
Equipment expense .............. 280 254 90 77
Other expenses ................. 1,048 1,161 321 454
--------- --------- --------- ---------
Total other operating expenses . 3,552 3,648 1,163 1,320
--------- --------- --------- ---------
Income before income tax expense 1,192 1,095 400 227
Income tax expense ............. 432 385 145 82
========= ========= ========= =========
Net income ..................... $ 760 $ 710 $ 255 $ 145
========= ========= ========= =========
Net income per common share
Primary ........................ $ 6.27 $ 6.27 $ 2.22 $ 1.25
Fully diluted .................. 5.66 5.66 2.00 1.12
========= ========= ========= =========
Primary average common shares
outstanding .................. 114,111 112,855 114,141 114,141
Fully diluted average common
shares outstanding ........... 127,991 126,705 127,991 127,991
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
4
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Changes
in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on Invest-
Dollars in thousands, Common Preferred Retained ment Securities Treasury
except per share data Stock Surplus Stock Earnings Available for Sale Stock Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 .......... $ 1,120 $ 886 $ 200 $ 4,856 $ (141) $ (25) $ 6,896
Net income .......................... -- -- -- 710 -- -- 710
Proceeds from
issuance of
common stock ....................... 30 15 -- -- -- -- 45
Proceeds from
issuance of
preferred stock .................... -- -- 527 -- -- -- 527
Change in net
unrealized loss
on investment
securities available
for sale ........................... -- -- -- -- 33 -- 33
Dividends paid on
common stock ....................... -- -- -- (154) -- -- (154)
Dividends paid on
preferred stock .................... -- -- -- (2) -- -- (2)
------- ------- ------- ------- ------- ------- -------
Balance,
September 30, 1996 ................. $ 1,150 $ 901 $ 727 $ 5,410 $ (108) $ (25) $ 8,055
======= ======= ======= ======= ======= ======= =======
Balance,
December 31, 1996 .................. $ 1,150 $ 901 $ 727 $ 5,645 $ (111) $ (25) $ 8,287
Net income .......................... -- -- -- 760 -- -- 760
Proceeds from issuance
of preferred stock ................. -- -- 820 -- -- -- 820
Change in net unrealized
loss on investment
securities available for
sale ............................... -- -- -- -- 99 -- 99
Dividends paid on common
stock .............................. -- -- -- (173) -- -- (173)
Dividends paid on
preferred stock .................... -- -- -- (44) -- -- (44)
------- ------- ------- ------- ------- ------- -------
Balance,
September 30, 1997 ................. $ 1,150 $ 901 $ 1,547 $ 6,188 $ (12) $ (25) $ 9,749
======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
5
CITY NATIONAL BANCSHARES CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended
September 30,
---------------------
In thousands 1997 1996
===============================================================================
Operating activities
Net income ......................................... $ 760 $ 710
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization .................... 274 260
Provision for possible loan losses ............... 43 65
Accretion of discount, net of premium
amortization on investment securities ............ (1) 46
Gains on sales and calls of investment
securities ..................................... (19) (8)
Gains and commissions on loans held
for sale ....................................... (28) (84)
Decrease in accrued interest receivable ............ 123 30
Deferred income tax expense ........................ 100 140
(Increase) decrease in other assets ................ (1,224) 247
(Decrease) increase in accrued expenses
and other liabilities ............................ (2,560) 67
-------- --------
Net cash (used in) provided by operating
activities ....................................... (2,532) 1,473
-------- --------
Investing activities
Loans originated for sale .......................... (1,393) (3,191)
Proceeds from sales of loans held for sale ......... 956 2,253
Increase in loans .................................. (703) (6,464)
Purchase of loans in conjunction with
branch acquisitions .............................. -- (4,035)
(Increase) decrease in interest bearing
deposits with banks .............................. (23) 255
Proceeds from maturities of investment
securities available for sale,
including principal payments and calls ........... 28,922 5,749
Proceeds from maturities of investment
securities held to maturity, including
principal payments and calls ..................... 2,237 4,311
Purchases of investment securities
available for sale ............................... (37,379) (14,583)
Purchases of investment securities
held to maturity ................................. (2,528) (10,025)
Purchases of premises and equipment ................ (186) (1,257)
-------- --------
Net cash used in investing activities .............. (10,097) (26,987)
-------- --------
Financing activities
Deposits acquired in branch
acquisition ...................................... -- 7,661
Issuance of long term debt ......................... 2,000 --
Increase in deposits ............................... 6,633 16,957
Increase in short-term borrowings .................. 2,604 4,339
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 provided by financing
activities ....................................... 11,840 29,373
-------- --------
Net (decrease) increase in cash
and cash equivalents ............................. (789) 3,859
Cash and cash equivalents at
beginning of period .............................. 11,667 10,294
-------- --------
Cash and cash equivalents at
end of period .................................... $ 10,878 $ 14,153
======== ========
Cash paid during the year:
Interest ........................................... $ 3,146 $ 2,602
Income taxes ....................................... 385 199
Noncash investing activities:
Transfer of loans to other real
estate owned ..................................... 49 94
See accompanying notes to consolidated financial statements.
<PAGE>
6
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 September 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 Standards Board ("FASB") 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.
FASB issued Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No. 131 changes
the way public companies report information about segments of their business in
their annual financial statements and require them to report selected segment
information in their quarterly reports issued to shareholders. It also requires
entity-wide disclosures about the products and services an entity provides, the
foreign countries in which it holds assets and reports revenues, and its major
customers. SFAS No. 131 is effective for fiscal year beginning after December
15, 1997, but does not apply to nonpublic business enterprises or to
not-for-profit organizations.
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Results of operations
Net income for the first nine months of 1997 was $760,000 compared to $710,000
for the similar 1996 period, an increase of 7%. Returns on average stockholders'
equity and average assets were 12.37% and .69% for the 1997 first nine months
and 14.94% and .88% for the corresponding 1996 period. Related earnings per
common share on a fully diluted basis were $5.66, unchanged from 1996.
1997 third quarter net income rose to $255,000 from $145,000 a year earlier.
Returns on average stockholders' equity and average assets were 12.80% and .74%
for the 1997 third quarter, while the corresponding 1996 returns were 15.34% and
.88%. Related fully diluted per common share earnings were $2.00 compared to
$1.12.
<PAGE>
7
Both year-to -date and third quarter 1996 results included an assessment of
$96,000 by the FDIC to replenish the Savings Association Insurance Fund.
Excluding this assessment from both periods, net income would have been $744,000
and $180,000, respectively.
Lower other operating expenses, primarily the aforementioned assessment, was the
primary reason for the improved earnings in both periods.
Net interest income
For the first nine months of 1997, net interest income was relatively unchanged
from the same 1996 period, although the related net interest margin declined to
4.02% from to 4.36%. The decreased margin resulted primarily from a higher cost
of funds. Average interest earning assets for the first half of 1997 grew to
$138.6 million from $122.1 million in 1996. Most of this growth occurred within
the loan portfolio, which averaged $57.6 million compared to $52.4 million , a
9.9 % 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 the
increase in loan volume contributed to an increase in the average rate earned on
earning assets to 7.46% from 7.30%. Interest expense rose as well, due primarily
to the higher cost of time deposits, which rose from 4.06% to 4.55%.
Net interest income for the third quarter of 1997 was also relatively unchanged
from a year earlier, decreasing slightly, by 2.7%, due primarily to higher
deposit costs.
Provision and reserve for possible loan losses
Changes in the reserve for possible loan losses are set forth below.
Nine Months Three Months
Ended Sept. 30, Ended Sept. 30,
(Dollars in thousands) .......................... 1997 1996 1997 1996
----- ---- ---- ----
Balance at beginning
of period ..................................... $ 750 $ 650 $ 800 $ 700
Provision for possible
loan losses .................................... 43 65 (7) 32
Recoveries of previous
charge-offs ................................... 63 94 34 10
- ------------------------------------------------- ----- ----- ----- -----
856 809 827 742
Less: Charge-offs ............................... 31 84 2 17
- ------------------------------------------------- ----- ----- ----- -----
Balance at end of period ........................ $ 825 $ 725 $ 825 $ 725
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.
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 accrued.
Non-accrual 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.
<PAGE>
8
(Dollars in thousands) Sept. 30, December 31, Sept. 30,
1997 1996 1996
- --------------------------------------------------------------------------------
Non-accrual loans
Commercial .................................... $ 654 $ 423 $ 350
Installment ................................... 7 4 6
Real estate ................................... 616 598 738
- ----------------------------------------------- ------ ------ ------
Total ......................................... 1,277 1,025 1,094
- ----------------------------------------------- ------ ------ ------
Loans past due 90
days or more and
still accruing
Commercial .................................... -- 14 57
Installment ................................... -- -- --
Real estate ................................... 76 19 165
- ----------------------------------------------- ------ ------ ------
Total ......................................... 76 33 212
- ----------------------------------------------- ------ ------ ------
Total nonperforming
loans ....................................... $1,353 $1,058 $1,306
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 nine months and third quarter of
1997 compared to the similar 1996 periods, due primarily to a $26,000 award for
the Bank's community lending efforts received in the 1997 third quarter from the
U.S. Treasury Department under its Bank Enterprise Award program.
Other operating expenses
Other operating expenses declined for both the first nine months and third
quarter of 1997 compared to the similar 1996 periods. Both decreases resulted
primarily from the nonrecurrence of the $96,000 FDIC assessment recorded in the
1996 third quarter.
Income tax expense
Income tax expense as a percentage of pretax income rose from 35.2% in the first
three quarters of 1996 to 36.2% for the similar 1997 period as a result of
higher levels of income subject to state income tax. Third-quarter effective tax
rates were relatively unchanged between 1997 and 1996.
Short-term interest earning assets
Short-term interest earning assets declined slightly, averaging $9.7 million for
the first nine months of 1997 compared to $10 million for the similar 1996
period.
Investment securities
The available for sale portfolio rose $8.6 million, totalling $39.7 million at
September 30, 1997 compared to $31 million at the end of 1996, an increase of
27.9% due to the short-term investment of the proceeds from a large municipal
deposit received just prior to quarter-end. Related unrealized appreciation was
$37,000 compared to $108,000 of unrealized depreciation at 1996 year-end.
The held to maturity portfolio changed nominally, rising by .9%, from $29.9
million at December 31, 1996 to $30.1 million at September 30, 1997. Related
unrealized depreciation was down, declining from $349,000 to $55,000 at
September 30, 1997 due to the strong bond market down in the 1997 third quarter.
<PAGE>
9
At September 30, 1997, included in both the aforementioned portfolios were five
structured notes with a carrying value of $4,250,000 and a related market value
of $4,185,000, reflecting unrealized depreciation of $65,000, compared to
$143,000 of unrealized depreciation 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 $756,000 at
September 30, 1997 while loans originated for sale during the 1997 first nine
months of 1997 totalled $1.4 million compared to $3.2 million during the first
three quarters of 1996. This decline in originations resulted primarily from the
discontinuance by the Department of Housing and Urban Development of their
investor residential rehabilitation loan program. These loans represented a
significant part of the Bank's loan originations. Loans totalled $57.9 million
at September 30, 1997 compared to $57.1 million at December 31, 1996.
Deposits
Average deposits for the first nine months of 1997 rose 7.2 %, to $120.2 million
compared to $115.1 million for the first nine months of 1996, with the growth
occurring in certificates of deposits of $100,000 or more issued to local
municipalities. While these large time deposits represent a substantial part of
total deposits, they represent a relatively stable funding source as part of the
Bank's overall municipality deposit relationship. Short-term borrowings
Average short-term borrowings was virtually unchanged from the first nine months
of 1996 to the corresponding 1997 period.
Long-term debt
Long-term debt increased $2 million in the nine months of 1997 from December 31,
1996, as a result of $2 million in Federal Home Loan Bank advances incurred in
February, 1997.
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 three quarters of 1997 from operating
activities to the Corporation's liquidity came from higher net earnings, while a
decrease in accrued expenses and other liabilities represented the highest use
of cash.
Net cash used in investing activities was primarily the result of the purchase
of investment securities available for sale, which totalled $37.4 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 $28.9 million.
The primary source of funds from financing activities resulted from an increase
in deposits of $6.6 million, while the highest use of cash in financing
activities resulted from the payment of dividends, which amounted to $217,000.
<PAGE>
10
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-sensitivity 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 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 September 30,1997, the Corporation had a cumulative one-year static gap of a
negative $14.4 million, representing 9.96% 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 private placement. Stockholders' equity amounted to $9.7 million at
September 30, 1997 compared to $8.3 million to December 31, 1996. Stockholders'
equity as a percentage of total assets was 6.72% at September 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 September 30,1997, the Corporation's core capital (Tier 1 ) and total (Tier 1
plus Tier 2) risked-based capital ratios were 15.22% and 19.21%, respectively.
Part II. Other information
Item 6(a). Exhibits
(11) Statement Regarding Calculation of Per Share Earnings
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)
November 12, 1997 ____________________
Edward R. Wright
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
<PAGE>
11
City National Bancshares Corporation
Computation of Earnings Per Common Share on a
Primary & Fully Diluted Basis
In thousands, except per share data
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------------------
1997 1996 1997 1996
Net income ......................... $ 760 $ 710 $ 255 $ 145
Dividends paid on
preferred stock .................. 44 2 -- 2
-------- -------- -------- --------
Net income applicable
to primary common shares .......... 716 708 255 143
Interest expense on
convertible subordinated
debentures, net of income
tax ............................... 9 9 3 3
-------- -------- -------- --------
Net income applicable to
fully diluted common
shares ............................ $ 725 $ 717 $ 258 $ 146
======== ======== ======== ========
Number of average common
shares
Primary ............................ 114,141 112,855 114,141 114,141
======== ======== ======== ========
Fully diluted:
Average common shares
outstanding ...................... 114,141 112,855 114,141 114,141
Average convertible
subordinated debentures
convertible to common
shares ........................... 13,850 13,850 13,850 13,850
--------
127,991 126,705 127,991 127,991
========
Net income per common share
Primary ........................ $ 6.27 $ 6.27 $ 2.22 $ 1.25
Fully diluted .................. 5.66 5.66 2.00 1.14
<PAGE>
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 3578 2767
<INT-BEARING-DEPOSITS> 97 74
<FED-FUNDS-SOLD> 7300 8900
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 39651 30997
<INVESTMENTS-CARRYING> 30091 29603
<INVESTMENTS-MARKET> 30146 29866
<LOANS> 58664 57419
<ALLOWANCE> 825 750
<TOTAL-ASSETS> 145090 134951
<DEPOSITS> 122487 115854
<SHORT-TERM> 7779 5175
<LIABILITIES-OTHER> 1326 3886
<LONG-TERM> 3749 1749
0 0
1547 727
<COMMON> 2051 2051
<OTHER-SE> 6188 5645
<TOTAL-LIABILITIES-AND-EQUITY> 145090 134951
<INTEREST-LOAN> 3891 3524
<INTEREST-INVEST> 3266 3104
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 7157 6628
<INTEREST-DEPOSIT> 2948 2452
<INTEREST-EXPENSE> 303 228
<INTEREST-INCOME-NET> 3906 3948
<LOAN-LOSSES> 43 65
<SECURITIES-GAINS> 19 9
<EXPENSE-OTHER> 3552 3648
<INCOME-PRETAX> 1192 1095
<INCOME-PRE-EXTRAORDINARY> 1192 1095
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 760 710
<EPS-PRIMARY> 6.27 6.27
<EPS-DILUTED> 5.66 5.66
<YIELD-ACTUAL> 4.09 4.36
<LOANS-NON> 1277 1094
<LOANS-PAST> 76 3460
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 750 725
<CHARGE-OFFS> 31 84
<RECOVERIES> 63 94
<ALLOWANCE-CLOSE> 825 725
<ALLOWANCE-DOMESTIC> 737 679
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 88 46
</TABLE>
