UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
City National Bancshares Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<page>
CITY NATIONAL BANCSHARES CORPORATION
900 Broad Street
Newark, New Jersey 07102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on Wednesday, May 16, 2007
Notice is hereby given that the Annual Meeting of Stockholders of City National
Bancshares Corporation (the "Corporation") will be held at City National Bank of
New Jersey located at 900 Broad Street, Newark, New Jersey, on Wednesday, May
16, 2007, at 6:00 p.m. for the following purposes:
1. To elect two (2) directors for terms of three (3) years or
until their successors are elected and qualified; and
2. To ratify the appointment of KPMG LLP as the Corporation's
registered independent public accountants for the fiscal year
ending December 31, 2007.
Stockholders of record at the close of business on April 10, 2007 are entitled
to notice of and to vote at the meeting.
The Corporation's Proxy Statement and its 2006 Annual Report to Stockholders
accompany this Notice.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IT IS IMPORTANT
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. ACCORDINGLY, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By order of the Board of Directors
/s/ Lemar C. Whigham
Lemar C. Whigham
Secretary
Newark, New Jersey
March 30, 2007
<page>
CITY NATIONAL BANCSHARES CORPORATION
900 Broad Street
Newark, New Jersey 07102
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2007
Introduction
The enclosed proxy is solicited by and on behalf of the Board of Directors of
City National Bancshares Corporation (the "Corporation") for use at the Annual
Meeting of Stockholders to be held on Wednesday, May 16, 2007, at 6:00 p.m., at
City National Bank of New Jersey located at 900 Broad Street, Newark, New Jersey
or at any adjournment thereof.
Voting and Revocability of Proxy
The enclosed proxy is for use at the meeting if you do not attend the meeting,
or if you wish to vote your shares by proxy even if you attend the meeting. You
may revoke your proxy anytime before its exercise by (i) giving written notice
to the Secretary of the Corporation, (ii) submitting a proxy having a later
date, or (iii) appearing at the meeting and requesting to vote in person. Where
a choice or abstention is specified in the form of proxy with respect to a
matter being voted upon, the shares represented by proxy will be voted in
accordance with such specification. If a proxy is signed but no specification is
given, the shares will be voted for the director nominees named herein and in
favor of the other proposal described below.
This Proxy Statement and the enclosed proxy and 2006 Annual Report to
Stockholders are being first mailed to our stockholders on or about April 27,
2007. The Corporation will bear the cost of preparing this Proxy Statement and
of soliciting proxies in the enclosed form. Proxies may be solicited by our
employees, either personally, by letter or by telephone. Such employees will not
be specifically compensated for soliciting said proxies.
Only holders of record of the Corporation's common stock at the close of
business on April 10, 2007 (the "Record Date"), are entitled to notice of, and
to vote at, the meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote, 133,615 shares of common stock, each of which
is entitled to one vote. The presence in person or by proxy of a majority of the
outstanding shares of common stock will constitute a quorum for the purposes of
the meeting.
For purposes of counting votes, abstentions and broker non-votes (i.e., shares
held by brokers that they can't vote because they haven't received voting
instructions from their customers with respect to matters voted on) will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the votes cast
on any matter at the meeting, only "FOR" and "AGAINST" votes are included.
The Corporation will reimburse brokerage firms and other custodians, nominees
and fiduciaries for their expense incurred in sending proxies and proxy
materials to beneficial owners of the Corporation's common stock.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes of
approximately equal size. Directors are elected for three-year terms on a
staggered basis, so that the term of office of one class will expire each year
at the annual meeting of stockholders when a successor is elected and qualified
and terms of office of the other classes will extend for additional periods of
one and two years, respectively.
Voting Procedures
Directors are elected by a plurality of votes cast. Shares cannot be voted for a
greater number of persons than the number of nominees named herein. Should any
nominee be unavailable for election by reason of death or other unexpected
occurrence, the enclosed proxy, to the extent permitted by applicable law, may
be voted with discretionary authority in connection with the nomination by the
Board and the election of any substitute nominee. PROXIES, UNLESS INDICATED TO
THE CONTRARY, WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW TO
SERVE FOR THREE (3) YEAR TERMS EXPIRING AT THE 2010 ANNUAL MEETING OF
STOCKHOLDERS.
Barbara Bell Coleman and Lemar C. Whigham, currently serving as directors of the
Corporation, are being nominated to serve as directors with terms expiring at
the 2010 Annual Meeting of Stockholders and until their respective successors
are duly elected and qualified.
Information is presented below relating to the principal occupation, the
business experience, the number of shares of the Corporation beneficially owned
and the period during which each director has served on the Board of Directors
of the Corporation and the Board of Directors of City National Bank of New
Jersey (the "Bank"), as well as the number of shares of such common stock
beneficially owned by all directors and executive officers as a group.
<page>
<table>
<caption>
- --------------------- ---- --------- ---------- ------------------------------------------------------------------------------------
Director Principal Occupations During Past Five Years; Other Public Company
Name of Director Age Since Term Ends Directorships
- --------------------- ---- --------- ---------- ------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Douglas E. Anderson 57 1989 2008 Retired Executive Vice President, JPMorgan Chase Bank
Barbara Bell Coleman 56 1995 2007 President, BBC Associates, L.L.C. (consulting services); director, Hilton
Hotels Corp.
Eugene Giscombe 66 1991 2008 President, Giscombe Henderson, Inc. (property management firm); President, 103
East 125th Street Corporation (property holding company)
Louis E. Prezeau 64 1989 2008 President and Chief Executive Officer, City National Bank of New Jersey and City
National Bancshares Corporation
Lemar C. Whigham 63 1989 2007 President, L & W Enterprises (vending machine operations)
</table>
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The Board has nominated and recommends a vote "FOR" the election of the
nominated slate of directors.
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PROPOSAL 2
APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The accounting firm of KPMG LLP served as the independent public accountants for
the Corporation for the year ended December 31, 2006. Services provided included
the examination of the consolidated financial statements and preparation of the
tax returns.
The Board has appointed KPMG LLP as the independent public accountants for the
Corporation and the Bank for 2007. Stockholder ratification of the appointment
is not required under the laws of the State of New Jersey, but the Board has
decided to ascertain the position of the stockholders on the appointment. The
Board may reconsider the appointment if it is not ratified. The affirmative vote
of a majority of the shares voted at the meeting is required for ratification.
Representatives of KPMG LLP are expected to be present at the meeting and will
be allowed to make a statement if they so desire. Additionally, they will be
available to respond to appropriate questions from stockholders during the
meeting.
The Corporation incurred the following fees for services provided by KPMG LLP:
2006 2005
-------- --------
Audit fees $110,000 $119,500
Tax service fees 21,500 39,300
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$131,500 $158,800
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All audit, as well as non-audit, services to be performed by the independent
accountants to the Corporation must be pre-approved by the Audit Committee in
order to assure that the provision of such services does not impair the
auditor's independence. During 2006, the Audit Committee pre-approved all of the
services provided by KPMG LLP. The Audit Committee has considered the provisions
of these services by KPMG LLP and has determined that the services are
compatible with maintaining KPMG LLP's independence.
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The Board recommends a vote "FOR" ratification of the selection of KPMG LLP as
independent registered public accountants for 2007.
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CORPORATE GOVERNANCE
General
The business and affairs of the Corporation are managed under the direction of
the Board of Directors. Board members are kept informed of the Corporation's
business by participating in meetings of the Board and its committees and
through discussions with corporate officers. All members also served as members
of the Corporation's subsidiary bank, City National Bank of New Jersey, during
2006. It is the Corporation's policy that all directors attend the annual
meeting, absent extenuating circumstances.
Director Independence
The Board has determined that all the directors with the exception of Louis E.
Prezeau are "independent" within the meaning of the NASDAQ listing standards. In
reviewing the independence of these directors, the Board considered that
<page>
transactions with the Bank were made in the ordinary course of business,
including loans that were made in accordance with Federal Reserve Regulation O.
Stockholder Communications with Directors
Stockholders and other interested parties may send written communications to the
Board of Directors, an individual director or the non-management directors as a
group by mailing them to the aforementioned individuals, c/o Assistant
Secretary, City National Bank of New Jersey, 900 Broad Street, Newark, New
Jersey, 07102. All communications will be forwarded to the appropriate party,
unless the communication is a personal or similar grievance, an abusive or
inappropriate communication or a communication not related to the duties or
responsibilities of the aforementioned parties, in which case the Assistant
Secretary has the authority to disregard the communication.
Meetings of the Board of Directors and Committees
During 2006, the Board of Directors held thirteen meetings. A quorum was present
at all meetings. No director attended fewer than 75% of the meetings held by the
Board and committees of which such director was a member.
All directors of the Corporation are also directors of the Bank. Regular
meetings of the Corporation's and the Bank's Boards of Directors are held
monthly. Additional meetings are held when deemed necessary. In addition to
meeting as a group to review the Corporation's business, certain members of the
Board also serve on certain standing committees of the Bank's Board of
Directors. These committees, which are described below, serve similar functions
for the Corporation.
Because of the relatively small size of the Corporation's Board, there is no
standing Nominating Committee or nominating committee charter. The individual
members of the entire Board, exclusive of interested directors, make the
specific recommendations for Board nominees, including the director nominees
herein. Qualifications for prospective directors are reviewed by the entire
Board.
The Board has not formulated specific criteria for nominees, but it considers
qualifications that include, but are not limited to, ability to serve, conflicts
of interest, and other relevant factors. In consideration of the fiduciary
requirements of a Board member, and the relationship of the Corporation and its
subsidiaries to the communities it serves, the Committee places emphasis on
character, ethics, financial stability, business acumen, and community
involvement among other criteria it may consider. In addition, as a bank holding
company, the Corporation is regulated by the Federal Reserve Board ("FRB") and
the Bank, as a national banking association, is regulated by the Office of the
Comptroller of the Currency ("OCC"). Directors and director-nominees are subject
to various laws and regulations pertaining to bank holding companies and
national banks, including a minimum stock ownership requirement.
The Board may consider recommendations from shareholders nominated in accordance
with the Corporation's Bylaws by submitting such nominations to the President of
the Corporation and the Bank, the Office of the Comptroller of the Currency and
the Federal Reserve. For additional information regarding the requirements for
shareholder nominations of director nominees, see the Corporation's By-laws,
copies of which are available upon request. The Corporation has not paid a third
party to assist in identifying, evaluating, or otherwise assisting in the
nomination process.
The Audit and Examining Committee reviews significant auditing and accounting
matters, the adequacy of the system of internal controls and examination reports
of the internal auditor, regulatory agencies and independent public accountants.
Messrs. Anderson, Giscombe and Whigham currently serve as members of the
Committee. Mr. Lemar Whigham serves as Chairperson of the Committee. The
Committee met four times during 2006. All directors on the Audit and Examining
Committee are considered independent under Securities and Exchange Commission
rules applicable to audit committees. Mr. H. O'Neil Williams, who was considered
the Committee's "financial expert" as defined in Item 401(h) of Securities and
Exchange Commission Regulation S-K, resigned during 2006 and has not yet been
replaced.
The Audit and Examining Committee operates pursuant to a charter, which gives
the Committee the authority and responsibility for the appointment, retention,
compensation and oversight of the Corporation's independent registered public
accounting firm, including pre-approval of all audit and non-audit services to
be performed by the Corporation's independent registered public accounting firm
(see "Proposal 2 Appointment of Independent Registered Public Accounting Firm"
elsewhere in this Proxy). The Audit and Examining Committee acts as an
intermediary between the Corporation and the independent auditor and reviews the
reports of the independent auditor. A copy of the charter was attached as an
exhibit to the Corporation's Proxy Statement for the 2002 Annual Meeting and is
available to any stockholder upon request in accordance with the request
procedures set forth in the section titled "Stockholder Communications with
Directors" set forth elsewhere in this Proxy.
The Loan and Discount Committee reviews all loan policy changes and requests for
policy exceptions and loans approved by management. Messrs. Anderson, Giscombe,
Prezeau and Whigham and Ms. Coleman currently serve as
<page>
members of the Committee. Mr. Anderson serves as Chairperson of the Committee.
The Committee met 12 times during 2006.
The Investment Committee reviews overall interest rate risk management and all
investment policy changes, along with purchases and sales of investments.
Messrs. Anderson, Giscombe, Prezeau and Whigham currently serve as members of
the Committee. Mr. Prezeau serves as Chairperson of the Committee. The Committee
met four times during 2006.
The Personnel/Director and Management Review Committee deals in broad terms with
personnel matters and reviews director and executive officer compensation.
Messrs. Giscombe, Prezeau (the chairman and chief executive officer of the
Corporation), Whigham and Ms. Coleman currently serve as members of the
Committee. Ms. Coleman serves as Chairperson of the Committee. All of these
individuals deal daily with issues related to attracting, retaining, and
measuring employee performance. The Committee recommends to the Board of
Directors the annual salary levels and any bonuses to be paid to any Corporation
or Bank executive officers. The Committee also makes recommendations regarding
other compensation related matters. The Committee has not delegated this
authority. The Committee does not engage consultants. The Committee does not
have a charter although it will evaluate whether a charter will be useful in the
conduct of its duties in future deliberations. The executive officers do not
play a role in the compensation process, except for the chief executive officer,
Mr. Prezeau, who presents information regarding the other executive officers to
the Committee for their consideration. Mr. Prezeau is not present while the
Committee deliberates on his compensation package. The Committee met three times
during 2006. See the "Compensation Discussion and Analysis" section for more
information regarding the role of the Committee.
The Building and Grounds Committee considers branch expansion and matters
concerning Bank premises. Messrs. Giscombe, Prezeau and Whigham currently serve
as members of the Committee. Mr. Giscombe serves as Chairperson of the
Committee. The Committee did not meet during 2006.
The Marketing Committee oversees the Bank's marketing plan and strategies. Ms.
Coleman and Messrs. Anderson, Giscombe, Prezeau and Whigham currently serve as
members of the Committee. Ms. Coleman serves as Chairperson of the Committee.
The Committee held three meetings during 2006.
Code of Ethics and Conduct
The Corporation has adopted a Code of Ethics and Conduct which applies to all
the Corporation's officers and employees. Interested parties may obtain a copy
of such Code of Ethics and Conduct, without charge, by written request in the
same manner as provided in the section "Stockholder Communications with
Directors" set forth elsewhere in this Proxy.
DIRECTOR COMPENSATION
Each director of the Corporation receives an annual retainer of $4,000 and a
$600 fee for each board meeting attended except for the chairperson, who
receives $700, and the secretary, who receives $650. Committee chairpersons
receive $350 for each meeting attended other than the chairperson of the Loan
and Discount Committee, who receives $400 per meeting. Other committee members
receive $300 for each meeting attended, except for Audit Committee members, who
receive $400 for each meeting attended. Directors are eligible to receive
bonuses based on the overall earnings performance of the Corporation for the
previous fiscal year as determined by the chief executive officer of the
Corporation.
Compensation Table
Annual compensation paid to directors in 2006 is presented in the table below
and includes the annual retainer and meeting and committee fees. In addition,
there is a Directors Retirement Plan.
<table>
<caption>
- --------------------------------------------------------------------------------------------------------------
Change in Pension Value
and Non-Qualified
Fees Earned or Paid in Deferred Compensation All Other
Name Cash (1) Earnings (2) Compensation (3) Total
- --------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Douglas Anderson** $19,200 $4,626 $2,500 $26,326
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Barbara Bell Coleman 17,550 2,996 2,500 23,046
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Eugene Giscombe* 21,225 8,669 2,500 32,394
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Louis E. Prezeau 18,600 11,015 2,500 32,115
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Lemar C. Whigham 21,250 9,975 2,500 33,725
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</table>
*Chairman
**Vice Chairman
(1) Includes committee fees and fees for chairing Board Committees.
(2) Represents the change in the net present value of pension and director
retirement plan benefits between 2005 and 2006 taking into account the
age of each director, a present value factor, an interest discount
factor and time remaining until retirement.
(3) Represents bonuses paid for achieving overall earnings targets.
<page>
Director Retirement Plan
Effective January 1, 1997, the Corporation instituted a director retirement
plan. Under this plan, a director who attains the age of at least 65 and has
completed five years of service on the Board, shall receive an annual benefit
equal to 50% of the aggregate amount of the director's fees paid to such
director during the then last full fiscal year of the Corporation (the "normal
retirement benefit"). This annual benefit is to be paid each year for ten years
beginning on the date the director retires from service on the Board. If the
director ceases service on the Board prior to attaining the age of 65 but after
completing at least five years of service on the Board, the director shall
receive an annual benefit equal to the normal retirement benefit payable over
the same period of time multiplied by a fraction the numerator of which is the
director's years of service prior to termination of employment and the
denominator of which is the years of service the director would have had the
director remained employed until age 65. By way of example, if Mr. Prezeau were
to have ceased service on the Board as of December 31, 2006, he would have been
entitled to receive a lump sum payment of $9,790.
Upon a change in control of the Corporation (which is defined in the director
retirement plan as the acquisition by a non-affiliate of the Corporation of 30%
or more of the Corporation's outstanding common stock which is followed by (a)
the termination of a director for any reason, or (b) the failure of such
director to be elected, for whatever reason, for an immediately succeeding term
upon the natural expiration of his/her term) followed by a termination of the
director's status as a member of the Board for any reason or a failure for
whatever reason for the director to be nominated and elected to an immediately
succeeding term, the director shall receive a benefit equal to the present value
(discounted at the rate of 4%) of a theoretical series of 120 monthly payments,
with each payment equal to 1/12 of the normal retirement benefit without regard
as to whether the director otherwise qualified for the normal retirement
benefit. By way of example, if a change of control had occurred and Mr. Prezeau
was not re-elected or was terminated following such change of control at
December 31, 2006, he would have received a lump sum payment of $72,535.
If a director dies while in active service on the Board, the designated
beneficiary of such director shall receive the greater of (a) that part of the
normal retirement benefit accrued by the Corporation for such director as of the
date of such director's death (determined based on the formula described above),
and (b) a projected retirement benefit calculated in January 1997 based on the
director's age and assumed increases in director's fees prior to such director
attaining the age of 65. This death benefit is payable to the beneficiary in
monthly installments over ten years. By way of example, if Mr. Prezeau were to
have become deceased in fiscal year 2006, his estate would have been entitled to
receive a $9,790 death benefit.
The Corporation may amend or terminate this plan at any time prior to
termination of service by the director, provided that all benefits accrued by
the Corporation as of the date of such termination or amendment shall be fully
vested; and, provided further, that the plan may not be amended or terminated
after a change of control (as defined) unless the director consents thereto.
STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table presents information about the beneficial ownership of the
Corporation's common stock at March 31, 2007 by each person who is known by the
Corporation to beneficially own more than five percent (5%) of the issued and
outstanding common stock, each director and each of the Corporation's executive
officers for whom individual information is required to be set forth in this
proxy statement under rules of the Securities and Exchange Commission, and by
directors and all executive officers as a group.
<page>
<table>
<caption>
- -----------------------------------------------------------------------------------------------
COMMON STOCK
Number of
Shares
Beneficially Percent of
Name of Beneficial Owner Owned Class
------------------------ ----- -----
- -----------------------------------------------------------------------------------------------
<s> <c> <c>
Douglas Anderson, Director 929 (1) *
- -----------------------------------------------------------------------------------------------
Barbara Bell Coleman, Director 1,177 *
- -----------------------------------------------------------------------------------------------
Eugene Giscombe, Director 10,580 (2) 7.98%
- -----------------------------------------------------------------------------------------------
Louis E. Prezeau, Director, President and CEO 23,218 (3) 17.51%
- -----------------------------------------------------------------------------------------------
Lemar C. Whigham, Director 9,624 (4) 7.26%
- -----------------------------------------------------------------------------------------------
Veronica T. Gilbert, Senior Vice President 115 *
- -----------------------------------------------------------------------------------------------
Raul Oseguera, Senior Vice President 750 *
- -----------------------------------------------------------------------------------------------
Stanley M. Weeks, Executive Vice President 408 *
- -----------------------------------------------------------------------------------------------
Edward R. Wright, Senior Vice President 5,002 3.77%
- -----------------------------------------------------------------------------------------------
Directors and named executive officers as a group (9 persons) 51,803 39.06%
- -----------------------------------------------------------------------------------------------
Carolyn M. Whigham, 5% stockholder 8,495 6.40%
- -----------------------------------------------------------------------------------------------
</table>
(1) Includes 664 shares held by his sons.
(2) Includes 780 shares held by his wife.
(3) Includes 2,375 shares held by his sons, 110 shares held by his daughter
and 1,402 shares held by his wife.
(4) Includes 1,064 shares held by his wife.
* Less than 1%
THE EXECUTIVE OFFICERS
Listed below is certain information concerning the current executive officers of
the Corporation.
<table>
<caption>
- -----------------------------------------------------------------------------------------------------------------------
In Office
Name Age Since Office and Business Experience
---- --- ----- ------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Louis E. Prezeau 64 1989 President and Chief Executive Officer, City National Bancshares Corporation
and City National Bank of New Jersey
- -----------------------------------------------------------------------------------------------------------------------
Stanley Weeks 50 1994 Senior Vice President and Chief Credit Officer, City National Bank of
New Jersey; 1984-1994, Vice President, First Fidelity Bank, N.A.
- -----------------------------------------------------------------------------------------------------------------------
Edward R. Wright 61 1994 Senior Vice President and Chief Financial Officer, City National Bancshares
Corporation and City National Bank of New Jersey; 1978-1994, Executive Vice
President and Chief Financial Officer, Rock Financial Corporation
- -----------------------------------------------------------------------------------------------------------------------
Veronica T. Gilbert 47 1999 Senior Vice President, City National Bank of New Jersey; 1987-1999 National
Bank Examiner and Field Officer Analyst, Office of the Comptroller of the
Currency
- -----------------------------------------------------------------------------------------------------------------------
Raul Oseguera 41 1990 Senior Vice President, City National Bank of New Jersey, Vice President,
City National Bank of New Jersey
- -----------------------------------------------------------------------------------------------------------------------
</table>
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Board of Directors, through its Personnel/Director and Management Review
Committee, is responsible for establishing and monitoring compensation levels.
The primary factors that affect compensation are the Corporation's operating
results, the individual's job performance and peer group compensation
comparisons. The key components of executive compensation are base salary and
annual bonuses, which are performance based, and retirement and welfare
benefits, which are non-performance based.
<page>
Salary
In setting base salaries, the Board takes into account the responsibilities of
the position. Salary levels are reviewed annually and adjustments are made in
the year following the year being reviewed, based on individual job performance,
overall Corporation performance, peer group analysis and cost-of-living
considerations. The only employment contract is with the President and CEO.
Cash Bonus
Cash bonuses are part of an incentive program and are tied to the performance of
the Corporation against approved budgeted projections and the executives'
performance against personal goals and objectives. The Corporation's performance
is measured by budgeted net income.
Non-performance Based Compensation Elements
Certain executive officers participate in a supplemental employee retirement
plan (the "Plan"). Executive officers are eligible to participate in the plan
after one year of service with the Corporation. Upon reaching "normal retirement
age" as defined, executives will receive an annual benefit equal to 40% of the
annual base salary received by the executive during the last complete fiscal
year of his or her service as an employee (the "normal retirement benefit")
except in the case of Mr. Prezeau, who will receive 60%. If the executive dies
while in active service to the Corporation, the beneficiary of the executive
will receive an amount equal to the greater of that part of the normal
retirement benefit accrued by the Corporation for the executive as of the date
of the executive's death or the projected retirement benefit calculated based on
the executive's age and other assumptions regarding increases in base salary.
This death benefit is payable to the beneficiary in equal monthly installments
over 15 years.
If the executive's employment with the Corporation is terminated for any reason
(other than death) prior to the executive attaining the age of 65, the executive
shall receive the same benefit payable over the same period of time multiplied
by a fraction the numerator of which is the executive's years of service prior
to termination of employment and the denominator of which is the years of
service the executive would have had had the executive's employment terminated
when he was 65.
Upon a change of control of the Corporation (which is defined in the Plan as a
change in the ownership or effective control of the Corporation, as defined in
Internal Revenue Code Section 409A) followed at any time during the succeeding
12 months by a cessation in the executive's employment for reasons other than
death, disability or retirement, the executive shall receive a lump sum payment
equal to the present value of the stream of payments the executive would have
received had he qualified for the normal retirement benefit. If a change of
control had occurred at December 31, 2006, the executive officers would have
received the following lump sum payments: Mr. Prezeau - $1,605,028; Ms. Gilbert
- - $518,486; Mr. Weeks - $612,437; Mr. Wright - $562,042; and Mr. Oseguera -
$446,717.
The following table provides information related to the Plan for the executive
officers as of the year ended December 31, 2006.
<table>
<caption>
Pension Benefits Table
- ------------------------------------------------------------------------------------------
Present Value of
Number of Years of Accumulated Benefits Payments During Last
Name Credited Service (Accrued 12-31-06) Fiscal Year
---- ---------------- ------------------ -----------
- ------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Louis E. Prezeau 17 $995,469 $--
- ------------------------------------------------------------------------------------------
Louis E. Prezeau(1) 17 $54,062 $--
- ------------------------------------------------------------------------------------------
Stanley M. Weeks 12 $89,839 $--
- ------------------------------------------------------------------------------------------
Edward R. Wright 12 $239,178 $--
- ------------------------------------------------------------------------------------------
Veronica T. Gilbert 7 $47,933 $--
- ------------------------------------------------------------------------------------------
Raul Oseguera 16 $3,696 $--
- ------------------------------------------------------------------------------------------
</table>
(1) This item relates to Mr. Prezeau's benefits under the Directors Retirement
Plan.
Other Benefits
Executive officers are eligible to participate (as are all officers and
employees who meet service requirements under the several plans) in other
components of the benefit package described below.
>> 401(k) plan
>> Medical and dental health insurance plans
>> Life insurance plans.
<page>
Summary Compensation Table
The following table summarizes compensation in 2006 for services to the
Corporation and the Bank paid to the Chief Executive Officer, Chief Financial
Officer and to the three other executive officers of the Corporation.
<table>
<caption>
- ----------------------------------------------------------------------------------------------------------------
Change in
Pension Value
and Non-
Qualified
Deferred
Name and Compensation All Other
Principal Position Salary Bonus Earnings (1) Compensation Total
- ----------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Louis E. Prezeau $244,000 $70,000 $176,438 $39,704 (2) $541,157
President and Chief Executive
Officer, City National Bancshares
Corporation and City National Bank
of New Jersey
- ----------------------------------------------------------------------------------------------------------------
Stanley M. Weeks $136,000 $19,400 $16,231 $ 8,200 (3) $179,831
Executive Vice President and Chief
Credit Officer, City National Bank of
New Jersey
- ----------------------------------------------------------------------------------------------------------------
Edward R. Wright $121,500 $14,038 $42,354 $9,645 (4) $187,537
Senior Vice President and Chief
Financial Officer, City National
Bancshares Corporation and City
National Bank of New Jersey
- ----------------------------------------------------------------------------------------------------------------
Veronica T. Gilbert $115,000 $10,785 $11,123 $8,205 (5) $145,113
Senior Vice President, City National
Bank of New Jersey
- ----------------------------------------------------------------------------------------------------------------
Raul Oseguera $98,000 $10,000 $3,696 $5,940 (6) $117,586
Senior Vice President, City National
of Bank New Jersey
- ----------------------------------------------------------------------------------------------------------------
</table>
(1) Represents the change in the net present value of benefits between 2005
and 2006 taking into consideration each executive's age, an interest rate
discount factor and their remaining time until retirement.
(2) Includes payments made under the Corporation's profit sharing plan of
$5,773, insurance premiums paid on a life insurance policy on the life of
Mr. Prezeau of $3,200, reimbursement for nonaccountable expenses of
$18,000, and $12,731 representing Mr. Prezeau's personal use of a
bank-leased automobile, respectively.
(3) Includes payments made under the Corporation's profit sharing plan of
$3,400 and automobile allowance payments of $4,800.
(4) Includes payments made under the Corporation's profit sharing plan of
$3,645 and automobile allowance payments of $6,000.
(5) Includes payments made under the Corporation's profit sharing plan of
$3,405 and automobile allowance payments of $4,800.
(6) Includes payments made under the Corporation's profit sharing plan of
$2,940 and automobile allowance payments of $3,000.
Prezeau Employment Agreement
Effective as of May 2006, the Bank and the Corporation renewed an employment
agreement (the "Agreement") with Mr. Prezeau to serve as the President and Chief
Executive Officer of both entities. The Agreement is for a term of three years.
Under the Agreement, Mr. Prezeau is to receive an annual salary of $268,000,
which may be increased from time to time at the discretion of the Board.
Additionally, Mr. Prezeau is to receive an annual performance bonus at least
equal to:
>> 10% of the amount of earnings, as defined, of the Corporation for
each year that exceed 10% but are less than 15% of the amount of the
Corporation's common stockholders' equity, plus;
----
>> 20% of the amount of earnings, as defined, of the Corporation for
such year that exceeds 15% of the amount of the Corporation's common
stockholders' equity.
The performance bonus shall be paid in cash or common stock of the Corporation,
at the election of Mr. Prezeau.
Upon the completion of his annual performance review, Mr. Prezeau may be granted
shares of the Corporation's common stock or option to purchase such stock at a
price to be determined at the time the stock or option is granted. The agreement
further specifies that in the event Mr. Prezeau is terminated without cause
("cause" is defined as breach of fiduciary duty involving personal honesty,
commission of a felony or misdemeanor involving dishonesty or moral turpitude,
commission of embezzlement or fraud against the Corporation or its affiliates,
in each case which is material in amount or results
<page>
in an injury to the Corporation or its reputation, continuous or habitual
alcohol or drug abuse, habitual unexcused absence or continuous gross negligence
or willful disregard for his duties required under the Agreement), Mr. Prezeau
shall receive in one lump sum in addition to all other amounts accrued and
payable under this Agreement, an amount equal to two times his then applicable
base salary plus an amount equal to his most recently earned performance bonus.
If such a termination without cause were to have occurred at December 31, 2006,
he would have been entitled to a lump sum payment of $606,000.
If the Corporation and the Bank do not offer to renew the Agreement upon its
termination under terms satisfactory to Mr. Prezeau, then Mr. Prezeau shall
receive a lump sum amount equal to two times his then applicable base salary
plus an amount equal to his most recently earned performance bonus. If the
contract had not been renewed under terms satisfactory to Mr. Prezeau at
December 31, 2006, he would have been entitled to a lump sum payment of
$606,000.
If Mr. Prezeau terminates his employment due to a "change in control" (which is
defined as a change of control that requires approval under the Change in Bank
Control Act, 12 U.S.C. Section 1817(j), and which is not approved by the Board
of Directors prior to such change in control) of the Corporation, then Mr.
Prezeau shall receive a lump sum amount equal to two times his then applicable
base salary plus an amount equal to his most recently earned performance bonus.
Had a change of control occurred at December 31, 2006, and Mr. Prezeau's
agreement terminated, he would have been entitled to a lump sum payment of
$606,000.
Upon termination of the employment agreement in circumstances other than the
foregoing, Mr. Prezeau is entitled to receive accrued and unpaid salary, bonuses
and other vested compensation and benefits thereunder as of such termination
date.
Mr. Prezeau is also entitled to fringe, medical, health and life insurance
benefits, including life insurance for an amount of up to three times his base
salary then in effect and the use of an automobile. Upon termination of such
agreement, subject to certain exceptions, Mr. Prezeau is entitled to continued
life and health coverage for a period of two (2) years.
REPORT OF THE AUDIT COMMITTEE
In connection with the December 31, 2006 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent public accountants the matters
required by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants; and (3) received and discussed with
the independent auditors the matters required by Independence Standards Board
Statement No. 1, Independence Discussions with Audit Committee, as amended, by
the Independence Standards Board.
Based upon these reviews and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K filed with the Securities Exchange Committee.
Eugene Giscombe
Lemar Whigham
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the Personnel/Director and Management Review Committee (see
section titled "Meetings of the Board of Directors and Committees" elsewhere in
this Proxy), or their affiliates, engaged in loan transactions with the Bank
during 2006. All such loans were made in the ordinary course of business on
substantially the same terms including interest rates and collateral, as those
prevailing at the time for comparable loans with others and did not involve more
than the normal risk of collectibility or present other unfavorable features.
REPORT OF THE PERSONNEL/DIRECTOR AND MANAGEMENT REVIEW COMMITTEE
We have reviewed and discussed the Compensation Discussion and Analysis with
management and, based upon that discussion, we recommend that the section be
included in the Corporation's proxy materials.
Eugene Giscombe
Lemar Whigham
Barbara Bell Coleman
Louis E. Prezeau
<page>
TRANSACTIONS WITH MANAGEMENT
The Bank has made loans to its directors and executive officers and their
associates, and assuming continued compliance with generally applicable credit
standards, it expects to continue to make such loans. These loans were made in
the ordinary course of business on substantially the same terms including
interest rates and collateral, as those prevailing at the time for comparable
loans with others and did not involve more than the normal risk of
collectibility or present other unfavorable features.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's executive officers and directors, and any persons owning ten
percent or more of the Corporation's common stock, to file in their personal
capacities initial statements of beneficial ownership, statements of changes in
beneficial ownership and annual statements of beneficial ownership with the SEC.
The rules of the SEC regarding the filing of such statements require that late
filings of such statements be disclosed in the proxy statement. Based solely on
a review of the copies of Forms 3, 4 and 5, and amendments thereto furnished to
the Corporation during the year ended December 31, 2006, the Corporation
believes that no director, executive officer or greater than ten percent
shareholder failed to file on a timely basis the reports required by Section
16(a) of the Securities Exchange Act of 1934, as amended, during, or with
respect to the year ended December 31, 2006.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals at the 2008 Annual Meeting of
Stockholders must present a written proposal to the Corporation by December 21,
2007 (in accordance with the section titled "Stockholder Communications with
Directors" contained elsewhere in this Proxy), for inclusion in the
Corporation's proxy statement.
OTHER MATTERS
Management knows of no other business scheduled for consideration at the
meeting. Should any matter properly come before the meeting or any adjournment
thereof, it is intended that proxies will vote in accordance with their best
judgment.
By order of the Board of Directors
/s/ Lemar C. Whigham
Lemar C. Whigham
Secretary
April 17, 2007
<page>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
CITY NATIONAL BANCSHARES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS ON MAY 16, 2007
The undersigned hereby appoints Edward R. Wright and Stanley Weeks, and
each of them, as the undersigned's true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of CITY NATIONAL BANCSHARES CORPORATION to be held at
the Corporation's headquarters located at 900 Broad Street, Newark, New Jersey
on Wednesday, May 16, 2007 at 6:00 p.m., and at any adjournments thereof, on all
matters coming before such meeting.
With- For All
For hold Except
1. The election of two directors listed (except as [_] [_] [_]
marked to the contrary below):
Barbara Bell Coleman Lemar C. Whigham
INSTRUCTION:To withhold authority to vote for any individual nominee, mark "For
All Except"and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
For Against Abstain
2. The ratification of the appointment of KPMG LLP as [_] [_] [_]
the Corporation's indepenent registered auditors
for the fiscal year ending December 31, 2007.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponement or
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS APPEARING ON THIS CARD. IF A CHOICE
IS NOT INDICATED WITH RESPECT TO ITEMS 1 OR 2. THIS PROXY WILL BE VOTED "FOR"
SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY OTHER
MATTER PROPERLY BROUGHT BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT
THEREOF. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
Receipt herewith of the Company's Annual Report and notice of meeting and
proxy statement dated April 18, 2007 is hereby acknowledged.
Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s)
on this card. When signing as attorney, executor, administrator, trustee,
guardian, partner, or corporate officer please give FULL title.
------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
- --------------------------------------------------------------------------------
| |
| |
- -----------Stockholder sign above----------Co-holder (if any) sign above-------
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
CITY NATIONAL BANCSHARES CORPORATION
- --------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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