NEWARK, N.J. - City National Bank of New Jersey is a community bank - literally.

New Jersey's only minority-owned bank, City National was on the brink of failure four years ago. It came back largely because the community rallied behind it.

"Virtually no one withdrew their money," said Louis E. Prezeau, president and chief executive.

Today, the bank is well on its way to a third consecutive profitable year, its recovery apparently assured. Assets grew by 22% last year, to $62 million, and have grown by another 10%, or $6 million, so far this year.

"We have basically solved all of our problems," said Mr. Prezeau, "and the bank is now focused on the future - on how to do better, and where do we go from here."

A Long Road

As he sees it, City National is a shining example of African-American enterprise and a potential participant in the community development banking program proposed by the Clinton administration.

"I feel were already a community development bank," he said.

Mr. Prezeau traveled a long road to the point of thinking about City National's future.

At the height of the crisis, "I was very up-front in making sure everyone knew the condition of the bank, and we didn't have a run on deposits," said Mr. Prezeau, whose communications skills clearly had something to do with the customers' confidence level.

"Right now we are seeing a lot more customers coming into the bank," he said. "When you are successful, things seem to happen and the news spreads."

Message of Success

Mr. Prezeau became CEO of the bank and its parent, City National Bancshares, in 1989, when the Office of the Comptroller of the Currency had clamped a cease-and-desist order on the bank.

Before that, Mr. Prezeau was chief operating officer of Freedom National Bank of New York, a pioneering black-owned institution.

He was acting president in 1987, Freedom's peak earnings year. But when that $ 100 million bank failed in 1990 - after Mr. Prezeau had left for New Jersey - it dealt a high-profile setback to the minority banking community.

Mr. Prezeau, 50, sees an important message in City National's ability to succeed by being community-focused.

"We need need to be a strong and viable financial institution, an example for African-Americans to build better businesses," he said. "It doesn't work by failing."

Fresh Approach

The Newark bank's founder, Charles L. Whigham, a businessman and community leader, turned to Mr. Prezeau for a fresh approach to management and a strategy to overcome the problems cited by the Comptroller's office.

The regulator's cease-and-desist order identified major problems in record keeping, asset quality, capital, and various loans.

Losses from 1988 through 1990 had reduced capital to $2 million from $4.7 million.

Part of the regulatory order called for meeting the 5% Tier 1 capital-to-assets ratio, which City National achieved on in April 1992. City National closed last year at 5.42%. On March 31, capital was up to 5.78%.

Managed Growth

At $68 million of assets, the 20-year-old bank is moving back from its capital-enforced shrinkage toward the $73 million it had at yearend 1990, the year in which it lost $174,000. Excluding extraordinary items, City National earned $75,000 in 1991 and $ 361,000 last year. The 1992 returns on assets and equity were 0.64% and 12.48%, respectively.

"The bank's ability to grow has been tremendous, and I have been managing my growth because I want to make sure my capital ratio improves," Mr. Prezeau said. "Our objective is to get to a 6% Tier I ratio."

He said City National benefited from support of Newark's mayor, business leadership, board of education, and major corporations, including Prudential Insurance Co.

Strong Presence

"City National Bank is really a community bank," said Mr. Prezeau. "The fact we have 1,903 shareholders speaks for itself."

The bank has a large share of the African-American market and some of the Hispanic market, Mr. Prezeau said. Customer relationships total 12,000 to 13,000. Major customers include churches, small businesses, senior citizens, and blue-collar workers.

In a move to attract new business, City National has brought in Corby R. Ellis-Mare, a consultant and former Freedom National official, to head marketing and public relations.

Among current initiatives is Residential Express, a mortgage program offered jointly with a GE Capital Corp. unit that broadens City National's offerings and provides a channel into the secondary mortgage market.

|We're Here'

Other plans include renovation of City National's headquarters and potential branch acquisitions in the near future.

"Hopefully, with the Clinton administration's plans for community development banks, City National Bank will be able to benefit," said Mr. Prezeau.

"The Resolution Trust Corp. has branches in minority communities, which tend to close when a major institution acquires the bank. We're saying, |We're here and we'll take those branches.' We understand and are committed to the minority communities."

Working Together

City National's impact on Newark is seen in its assistance to minority-owned start-up businesses and in $10 million of financing for African-American churches, which have been able to build new churches, provide day care, feed the homeless, and help individuals get credit.

"When we're not financing anyone, we educate them in where to go for financing," Mr. Prezeau said. "Some projects might be too big, and so we refer them to another institution - one institution working with another in the community to help provide financing for a customer."

The bank currently has some 200 commercial loans in its portfolio. It also Provides Small Business Administration loans between $30,000 and $100,000.

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