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Centrue Financial Corporation Announces 2014 Second Quarter Results

OTTAWA, IL -- (Marketwired) -- 08/01/14 -- Centrue Financial Corporation (OTCQB: CFCB) (PINKSHEETS: CFCB)

Highlights

  • Second quarter of 2014 net income was $374 thousand, compared to net income of $558 thousand in the first quarter of 2014 and a net loss of $309 thousand for the fourth quarter of 2013. The Company sold a financial asset for $750 thousand in the first quarter of 2014.
  • The Company's principal subsidiary, Centrue Bank (the "Bank"), posted net income of $674 thousand for the second quarter of 2014 compared to net income of $112 thousand for the first quarter of 2014
  • Substandard assets declined $7.5 million, or 11.4% from the first quarter of 2014 and $18.5 million, or 24.0% from June 30, 2013.
  • The Bank's net interest margin for the second quarter of 2014 was 3.42%, which also improved from 3.24% during the second quarter of 2013. Loans increased $3.5 million during the second quarter compared to the first quarter 2014 and $11.8 million from the second quarter 2013.
  • Centrue Bank remains "well-capitalized" at the end of the second quarter of 2014 with total risk-based capital of 11.97% and tier 1 leverage capital of 7.75%.

Centrue Financial Corporation (the "Company" or "Centrue") (OTCQB: CFCB) (PINKSHEETS: CFCB), parent company of Centrue Bank, reported second quarter net income of $374 thousand, or ($0.10) per common diluted share, compared to net income of $558 thousand or ($0.04) per common diluted share for the first quarter 2014. For the first six months of 2014, the Company reported net income of $932 thousand, or ($0.14) per common diluted share, as compared to net income of $4.1 million, or $0.49 per common diluted share, for the same period in 2013. During the second quarter of 2013, the Company sold its pooled trust preferred securities which generated a gain of $4.7 million. Excluding this gain the Company would have produced a loss of $646 thousand for the six month period ending June 30, 2013.

The Company's President & CEO, Kurt R. Stevenson stated, "the second quarter built onto our success from the first quarter as loans continued to grow while seeing meaningful improvement in the Company's asset quality. Quality earnings also were strengthened as core noninterest income items were improved during the quarter and noninterest expenses were well controlled."

Securities

Total securities equaled $148.9 million at June 30, 2014, representing a decrease of $15.0 million, or 9.2%, from December 31, 2013 and a decrease of $37.8 million, or 20.2%, from the same quarter in 2013. The net decrease from second quarter 2013 was related to several factors which included strategic enhancement to the Company's liquidity position as public funds, brokered deposits and time deposits matured and were not replaced. Also during the period, some of the amortization from the securities portfolio was used to fund loan growth versus being reinvested.

Loans

Total loans equaled $579.6 million, representing an increase of $13.4 million, or 2.4%, from December 31, 2013 and an increase of $11.8 million, or 2.1%, from the second quarter 2013. The net increase from year-end 2013 was related to new loans being booked above the level of normal attrition, pay-downs, loan charge-offs and transfers to OREO. Economic conditions remain about the same as prior year, with decreased loan demand and very strong competition for new commercial loans.

Funding and Liquidity

Total deposits equaled $742.7 million, representing a decrease of $11.6 million, or 1.5%, from December 31, 2013 and a decrease of $5.8 million, or 0.8%, from June 30, 2013. The net decrease from year-end 2013 was largely related to maturing time deposits not being renewed and public funds being drawn down as municipalities draw down their fund balances before property tax revenue replenishes these balances. Core deposits (checking, savings, NOW, and money market) improved $16.4 million over year-end 2013 and were $30.8 million above the same quarter in 2013. This increase was split fairly evenly between non-interest bearing and interest bearing deposits.

The Bank's overall liquidity position remains strong with funding available for new loan opportunities.

Credit Quality

The key credit quality metrics are as follows:

  • The allowance for loan losses to total loans was 2.15% at June 30, 2014, compared to 2.06% at year-end 2013 and 2.72% at June 30, 2013. Management evaluates the sufficiency of the allowance for loan losses based on the combined total of specific allocations, historical loss and qualitative components and believes that the allowance for loan losses represented probable incurred credit losses inherent in the loan portfolio at June 30, 2014.
  • The provision for loan losses for the second quarter of 2014 was $0.7 million, a decrease from the $1.1 million and $0.9 million recorded in the fourth and second quarters of 2013 respectively. The second quarter of 2014 provision level decrease was driven by decreasing levels of nonperforming loans and stabilizing collateral values on troubled loans.
  • Net loan charge-offs for the second quarter of 2014 were $0.6 million, or 0.11% of average loans, compared with $1.0 million, or 0.17% of average loans, for the fourth quarter of 2013 and $1.9 million, or 0.34% of average loans, for the second quarter of 2013. Loan charge-offs during the second quarter of 2014 were largely influenced by the credit performance of the Company's commercial & industrial and commercial real estate portfolios. These charge-offs reflect management's continuing efforts to align the carrying value of these impaired assets with the value of underlying collateral based upon more aggressive disposition strategies. Management believes we are recognizing losses in our portfolio through provisions and charge-offs as credit developments warrant.
  • Nonperforming loans (nonaccrual, 90 days past due and troubled debt restructures) decreased to $28.8 million at June 30, 2014, from $29.1 million at December 31, 2013 and $33.7 million at June 30, 2013. The $4.9 million decrease from the second quarter of 2013 to the second quarter of 2014 was due to a combination of successful loan workout strategies, charge-offs referenced above and transfers to OREO. The $28.8 million recorded at June 30, 2014 included $11.6 million in nonaccrual loans and $17.2 million in troubled debt restructures. The level of nonperforming loans to end of period loans was 4.97% at June 30, 2014, compared to 5.13% at December 31, 2013 and 5.93% at June 30, 2013.
  • The coverage ratio (allowance for loan losses to nonperforming loans) was 43.24% at June 30, 2014, compared to 40.06% at December 31, 2013 and 45.92% at June 30, 2013.
  • Other real estate owned decreased to $21.3 million at June 30, 2014, a decrease from $23.3 million at December 31, 2013 and $26.0 million at June 30, 2013. Second quarter additions were more than offset by $0.8 million in dispositions and $0.3 million in additional valuation adjustments, reflective of existing market conditions and more aggressive disposition strategies.
  • Nonperforming assets (nonaccrual, 90 days past due, troubled debt restructures and OREO) decreased to $50.1 million at June 30, 2014, a decrease of $2.3 million from December 31, 2013 and a decrease $9.5 million from the $59.6 million held at June 30, 2013. The ratio of nonperforming assets to total assets was 5.76% at June 30, 2014, 5.93% at December 31, 2013 and 6.72% at June 30, 2013.
  • The past due ratio was 3.61% at June 30, 2014 compared to 4.38% at December 31, 2013 and 5.92% at June 30, 2013. Action Listed Loans (classified and criticized loans) declined to $60.5 million at June 30, 2014 from $71.5 million at December 31, 2013 and $76.7 million at June 30, 2013.

Net Interest Margin

The net interest margin for the second quarter of 2014 was 3.29%, which was down 3 basis points from the 3.32% margin in first quarter 2014 and significantly improved from the 3.11% in the second quarter of 2013. The Bank's net interest margin was 3.42% for the second quarter of 2014, an 18 basis point increase to the second quarter 2013 net interest margin of 3.24%. The volatility of the net interest margin is being affected by falling yields in the loan portfolio, an increase in earning assets, decreasing cost of funds and the removal of nonperforming loans out of earning assets and replaced with performing loans.

Noninterest Income and Expense

Noninterest income totaled $3.1 million for the second quarter June 30, 2014, compared to $7.6 million for the second quarter of 2013. Excluding gains related to the sale of OREO, securities and other non-recurring gains, noninterest income was $0.2 million improved from the second quarter of 2013. The improvement was led by service charge income, mortgage banking and electronic banking revenue. For the six months ended June 30, 2014, noninterest income was $6.6 million compared to $10.5 million for the same period in 2013. When excluding the same items from above, year-to-date noninterest income for 2014 was flat to the same period in 2013. In the year-to-date period comparable service charge improvement was offset by mortgage banking income.

Total noninterest expense for the second quarter of 2014 was $8.1 million, which was $0.5 million below the second quarter of 2013. Excluding OREO valuation adjustments taken in both periods, noninterest expense levels decreased by $0.4 million, or 4.9%. This $0.4 million decrease in expenses was concentrated in salary and loan-related expenses. For the six months ended June 30, 2014, noninterest expense was $16.1 million which was $0.7 million lower than the same period in 2013. When excluding the OREO valuation adjustments, year-to-date noninterest expense was $0.4 million below the comparable amount for 2013 driven by the same categories as above.

Capital Management

As reflected in the following table, unit Centrue Bank was considered "well-capitalized" and the Company was considered "adequately-capitalized" under regulatory defined capital ratios as of June 30, 2014.


                                Centrue Financial         Centrue Bank
                             ----------------------  ----------------------
                               Jun 30,     Dec 31,     Jun 30,     Dec 31,
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
Capital ratios:
  Total risk-based capital        10.01%      10.22%      11.97%      11.91%
  Tier 1 risk-based capital        7.57%       7.39%      10.71%      10.65%
  Tier 1 leverage ratio            5.48%       5.22%       7.75%       7.52%

About the Company

Centrue Financial Corporation is a regional financial services company headquartered in Ottawa, Illinois and devotes special attention to personal service. The Company serves a market area which extends from the far western and southern suburbs of the Chicago metropolitan area across Central Illinois down to the metropolitan St. Louis area.

Further information about the Company is available at its website at http://www.centrue.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934 as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by the use of words such as "believe," "expect," "intend," "anticipate," "estimate," or "project" or similar expressions. The Company's ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and the subsidiaries include, but are not limited to, changes in: interest rates; general economic conditions; legislative/regulatory changes; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality and composition of the loan or securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market areas; the Company's implementation of new technologies; the Company's ability to develop and maintain secure and reliable electronic systems; and accounting principles, policies, and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Accompanying Financial Statements and Tables

  • Unaudited Selected Quarterly Consolidated Financial Data



Centrue Financial Corporation
Unaudited Selected Quarterly Consolidated Financial Data
(In Thousands, Except Per Share Data)



                                         Quarters Ended
                     ------------------------------------------------------
                       6/30/14    3/31/14   12/31/13    9/30/13    6/30/13
                     ---------- ---------- ---------- ---------- ----------
Balance Sheet
  Assets
    Cash and cash
     equivalents     $   62,054 $   80,509 $   70,748 $   97,982 $   51,393
    Securities          148,891    156,958    163,869    142,149    186,734
    Loans               579,612    576,145    566,171    560,774    567,814
    Allowance for
     loan losses       (12,461)   (12,389)   (11,637)   (11,540)   (15,457)
    Other real
     estate owned        21,285     22,385     23,318     24,092     25,985
    Other assets         69,969     70,136     70,409     70,175     70,492
                     ---------- ---------- ---------- ---------- ----------
      Total assets      869,350    893,744    882,878    883,632    886,961
  Liabilities and
   stockholders'
   equity
    Deposits            742,677    772,195    754,345    754,583    748,507
    Non-deposit
     funding             81,085     76,232     83,409     84,791     92,054
    Other
     liabilities          9,221      9,424      9,253     17,872     17,499
                     ---------- ---------- ---------- ---------- ----------
      Total
       liabilities      832,983    857,851    847,007    857,246    858,060
    Stockholders'
     equity              36,367     35,893     35,871     26,386     28,901
                     ---------- ---------- ---------- ---------- ----------
      Total
       liabilities
       and
       stockholders'
       equity        $  869,350 $  893,744 $  882,878 $  883,632 $  886,961
                     ========== ========== ========== ========== ==========
Statement of Income
    Interest income  $    6,928 $    6,973 $    7,109 $    7,040 $    6,891
    Interest expense        911        947      1,002      1,030      1,072
                     ---------- ---------- ---------- ---------- ----------
    Net interest
     income               6,017      6,026      6,107      6,010      5,819
    Provision for
     loan losses            700        900      1,075        900        850
                     ---------- ---------- ---------- ---------- ----------
    Net interest
     income (loss)
     after provision
     for loan losses      5,317      5,126      5,032      5,110      4,969
    Noninterest
     income               3,144      3,472      3,105      3,067      7,649
    Noninterest
     expense              8,087      8,040      8,446      8,257      8,610
                     ---------- ---------- ---------- ---------- ----------
    Income (loss)
     before income
     taxes                  374        558      (309)       (80)      4,008
    Income tax
     expense
     (benefit)                -          -          -          -          -
                     ---------- ---------- ---------- ---------- ----------
    Net income
     (loss)          $      374 $      558 $    (309) $     (80) $    4,008
                     ========== ========== ========== ========== ==========
    Net income
     (loss) for
     common
     stockholders    $    (619) $    (226) $    (868) $    (633) $    3,461
                     ========== ========== ========== ========== ==========
Per Share
    Book value per
     common share    $     0.53 $     0.45 $     0.45 $   (1.12) $   (0.70)
    Tangible book
     value per
     common share          0.05     (0.07)     (0.11)     (1.71)     (1.34)
    Common shares
     outstanding(1)   6,063,441  6,063,441  6,063,441  6,063,441  6,063,441
Earnings Performance
    Return on
     average total
     assets                0.17%      0.26%    (0.14)%    (0.04)%      1.80%
    Return on
     average
     stockholders'
     equity                4.15       6.28     (4.60)     (1.15)      58.57
    Net interest
     margin                3.29       3.32       3.34       3.21       3.11
    Efficiency ratio
     (2)                  84.51      90.38      85.01      84.41      90.05
    Bank net
     interest margin       3.42       3.45       3.47       3.34       3.24
Asset Quality
    Nonperforming
     assets to total
     end of period
     assets                5.76%      5.67%      5.93%      5.72%      6.72%
    Nonperforming
     loans to total
     end of period
     loans                 4.97       4.91       5.13       4.72       5.93
    Net loan charge-
     offs to total
     average loans         0.11       0.03       0.17       0.85       0.34
    Allowance for
     loan losses to
     total end of
     period loans          2.15       2.15       2.06       2.06       2.72
    Allowance for
     loan losses to
     nonperforming
     loans                43.24      43.81      40.06      43.63      45.92
    Nonperforming
     loans           $   28,820 $   28,276 $   29,052 $   26,452 $   33,662
    Nonperforming
     assets              50,105     50,661     52,370     50,544     59,647
    Net loan charge-
     offs                   643        148        976      4,817      1,881
Capital
    Total risk-based
     capital ratio        10.01%     10.25%     10.22%      8.78%      8.76%
    Tier 1 risk-
     based capital
     ratio                 7.57       7.47       7.39       5.50       5.53
    Tier 1 leverage
     ratio                 5.48       5.29       5.22       3.86       3.90

(1) Common shares outstanding are the exact amount for period end, quarterly
    averages and diluted shares.

(2) Calculated as noninterest expense less amortization of intangibles and
    expenses related to other real estate owned divided by the sum of net
    interest income before provisions for loan losses and total noninterest
    income excluding securities gains and losses and gains on sale of
    assets.

Contact:
Daniel R. Kadolph
Chief Financial Officer
Centrue Financial Corporation
Email Contact
(815) 431-2838

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