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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
COMMISSION FILE NUMBER: 0-28846
CENTRUE FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 36-3145350
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
122 West Madison Street, Ottawa, Illinois 61350
(Address of principal executive offices including zip code)
(815) 431-2720
(Registrant's telephone number, including area code)
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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X].
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b of the Exchange Act). Yes [ ] No [X].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares outstanding at May 14, 2007
----------------------------- ----------------------------------
Common Stock, Par Value $1.00 6,422,488
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CENTRUE FINANCIAL CORPORATION
FORM 10-Q INDEX
MARCH 31, 2007
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
o Unaudited Consolidated Balance Sheets.................... 1
o Unaudited Consolidated Statements of Income and
Comprehensive Income .................................. 2
o Unaudited Consolidated Statements of Cash Flows.......... 4
o Notes to Unaudited Consolidated Financial Statements..... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk................................................ 27
Item 4. Controls and Procedures ........................................... 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 29
Item 1A. Risk Factors....................................................... 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........ 29
Item 3. Defaults Upon Senior Securities.................................... 29
Item 4. Submission of Matters to a Vote of Security Holders................ 29
Item 5. Other Information.................................................. 30
Item 6. Exhibits........................................................... 30
SIGNATURES.................................................................. 31
CENTRUE FINANCIAL CORPORATION
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2007 and December 31, 2006 (In Thousands, Except Share Data)
--------------------------------------------------------------------------------
March 31, December 31,
2007 2006
------------- -------------
ASSETS
Cash and cash equivalents $ 48,910 $ 40,195
Securities available-for-sale 289,288 298,692
Loans 868,529 836,944
Allowance for loan losses (10,607) (10,835)
------------- -------------
Net loans 857,922 826,109
Cash value of life insurance 26,145 25,904
Mortgage servicing rights 3,402 3,510
Premises and equipment, net 35,375 35,403
Goodwill 25,396 25,396
Intangible assets, net 12,112 12,733
Other real estate 4,262 2,136
Other assets 16,009 12,947
------------- -------------
Total assets $ 1,318,821 $ 1,283,025
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest-bearing $ 120,578 $ 125,585
Interest-bearing 936,719 901,025
------------- -------------
Total deposits 1,057,297 1,026,610
Federal funds purchased and securities sold
under agreements to repurchase 41,468 36,319
Federal Home Loan Bank advances 57,738 63,147
Notes payable 8,760 9,015
Series B mandatory redeemable preferred stock 831 831
Subordinated debentures 20,620 20,620
Other liabilities 12,440 8,292
------------- -------------
Total liabilities 1,199,154 1,164,834
------------- -------------
Stockholders' equity
Preferred stock; 200,000 shares authorized; none issued - -
Series A convertible preferred stock; 2,765 shares
authorized, 2,762 Shares outstanding (aggregate
liquidation preference of $2,762) 500 500
Common stock, $1 par value; 15,000,000 shares authorized;
7,430,110 shares issued at March 31, 2007 and
7,412,210 shares issued at December 31, 2006 7,430 7,412
Surplus 70,713 70,460
Retained earnings 53,543 52,469
Accumulated other comprehensive income 408 235
------------- -------------
132,594 131,076
Treasury stock, at cost; 959,270 shares at March 31, 2007
and 957,142 at December 31, 2006 (12,927) (12,885)
------------- -------------
Total stockholders' equity 119,667 118,191
------------- -------------
Total liabilities and stockholders' equity $ 1,318,821 $ 1,283,025
============= =============
See Accompanying Notes to Unaudited Financial Statements
1.
CENTRUE FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2007 and 2006 (In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Interest income
Loans $ 16,046 $ 7,155
Securities
Taxable 3,290 1,995
Exempt from federal income taxes 382 216
Federal funds sold and other 95 17
------------- -------------
Total interest income 19,813 9,383
Interest expense
Deposits 8,817 3,479
Federal funds purchased and securities sold
under agreements to repurchase 410 72
Federal Home Loan Bank advances 645 482
Series B mandatory redeemable preferred stock 12 12
Subordinated debentures 448 -
Notes payable and other 158 153
------------- -------------
Total interest expense 10,490 4,198
------------- -------------
Net interest income 9,323 5,185
Provision for loan losses - (800)
------------- -------------
Net interest income after provision for loan losses 9,323 5,985
Noninterest income
Service charges 1,583 440
Trust income 229 219
Mortgage banking income 434 246
Brokerage commissions and fees 126 84
Bank owned life insurance (BOLI) 241 140
Other income 641 336
------------- -------------
3,254 1,465
Noninterest expense
Salaries and employee benefits 5,148 3,046
Occupancy, net 941 539
Furniture and equipment 695 379
Marketing 192 110
Supplies and printing 181 95
Telephone 178 117
Other real estate owned 3 6
Amortization of intangible assets 621 29
Other expenses 1,989 672
------------- -------------
9,948 4,993
------------- -------------
Income from continuing operations before income taxes 2,629 2,457
Income taxes 730 783
------------- -------------
Income from continuing operations after income taxes 1,899 1,674
See Accompanying Notes to Unaudited Financial Statements
2.
CENTRUE FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2007 and 2006 (In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued insurance unit $ - $ (48)
Income tax benefit - (20)
------------- -------------
Loss on discontinued operations - (28)
------------- -------------
Net income $ 1,899 $ 1,646
============= =============
Preferred stock dividends 52 52
------------- -------------
Net income for common stockholders $ 1,847 $ 1,594
============= =============
Basic earnings per share from continuing operations $ 0.29 $ 0.43
============= =============
Basic earnings per share from discontinued operations $ - $ (0.01)
============= =============
Basic earnings per common share $ 0.29 $ 0.42
============= =============
Diluted earnings per share from continuing operations $ 0.28 $ 0.43
============= =============
Diluted earnings per share from discontinued operations $ - $ (0.01)
============= =============
Diluted earnings per common share $ 0.28 $ 0.42
============= =============
TOTAL COMPREHENSIVE INCOME:
Net income $ 1,899 $ 1,646
Change in unrealized gains (losses) on
available for sale securities 173 (356)
------------- -------------
Other comprehensive income $ 2,072 $ 1,290
============= =============
See Accompanying Notes to Unaudited Financial Statements
3.
CENTRUE FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2007 and 2006 (In Thousands)
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Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Cash flows from operating activities
Net income $ 1,899 $ 1,646
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 845 464
Amortization of intangible assets 621 44
Amortization of mortgage servicing rights 108 79
Amortization of bond premiums, net 55 132
Stock Option Expense 6 35
Federal Home Loan Bank stock dividend (29) (46)
Provision for loan losses - (800)
Tax benefit related to exercised options 103 42
Net change in BOLI (241) (140)
Net change in OREO (117) (380)
Gain (loss) on sale of loans (291) (154)
(Gain)/loss on sale of real estate acquired in
settlement of loans (82) 1
Proceeds from sales of loans held for sale 10,248 11,158
Origination of loans held for sale (10,699) (11,352)
Change in assets and liabilities
Decrease (increase) in other assets (3,127) 746
Increase (decrease) in other liabilities 3,839 (240)
------------- -------------
Net cash provided by operating activities 3,138 1,235
Cash flows from investing activities
Securities available-for-sale
Proceeds from maturities and paydowns 13,461 9,687
Purchases (3,638) (15,103)
Net (increase) / decrease in loans (33,197) 11,202
Purchase of premises and equipment (817) (265)
Sale of branch - (6,054)
Proceeds from sale of real estate acquired in settlement
of loans 199 46
------------- -------------
Net cash provided by (used in) investing
activities (23,992) (487)
Cash flows from financing activities
Net increase (decrease) in deposits 30,687 (6,905)
Net increase in federal funds purchased
and securities sold under agreements to repurchase 5,149 903
Payments on notes payable (255) (22)
Proceeds from notes payable - 1,400
Net increase (decrease) in advances from the Federal
Home Loan Bank (5,409) (2,700)
Dividends on common stock (775) (449)
Dividends on preferred stock (52) (52)
Proceeds from exercise of stock options 266 108
Purchase of treasury stock (42) (1,638)
------------- -------------
Net cash provided by / (used in) financing activities 29,569 (9,355)
------------- -------------
Net increase (decrease) in cash and cash equivalents 8,715 (8,607)
Cash and cash equivalents
Beginning of period 40,195 24,358
------------- -------------
End of period $ 48,910 $ 15,751
============= =============
Supplemental disclosures of cash flow information
Cash payments for
Interest $ 9,947 $ 4,575
Income taxes - -
Transfers from loans to other real estate owned 2,242 380
See Accompanying Notes to Unaudited Financial Statements
4.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Centrue Financial Corporation (the "Company") is a bank holding company for
Centrue Bank. During the 4th quarter of 2006, the former UnionBancorp completed
its merger with Centrue Financial Corporation. Upon completion of this,
UnionBancorp changed its name to Centrue Financial Corporation. The accompanying
unaudited interim consolidated financial statements of Centrue Financial
Corporation (the "Company") have been prepared in accordance with U.S. generally
accepted accounting principles and with the rules and regulations of the
Securities and Exchange Commission for interim financial reporting. Accordingly,
they do not include all of the information and footnotes required for complete
financial statements. In the opinion of management, all normal and recurring
adjustments which are necessary to fairly present the results for the interim
periods presented have been included. The preparation of financial statements
requires management to make estimates and assumptions that affect the recorded
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
For further information with respect to significant accounting policies followed
by the Company in the preparation of its consolidated financial statements,
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 2006. The annualized results of operations during the three months ended
March 31, 2007 are not necessarily indicative of the results expected for the
year ending December 31, 2007. All financial information is in thousands
(000's), except shares and per share data. The consolidated financial statements
reflect the results of the Company's insurance unit of the Wealth Management
segment as a discontinued operation as described in Note 8.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share for the three months ended March 31, 2007 and 2006 were
computed by dividing net income by the weighted average number of shares
outstanding. Diluted earnings per share for the three months ended March 31,
2007 and 2006 were computed by dividing net income by the weighted average
number of shares outstanding, adjusted for the dilutive effect of the stock
options. Computations for basic and diluted earnings per share are provided
below:
BASIC EARNINGS PER COMMON SHARE
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Net income from continuing operations
available to common shareholders $ 1,847 $ 1,622
Net loss from discontinued operations
available to common shareholders $ - $ (28)
------------- -------------
Net income available to common shareholders $ 1,847 $ 1,594
Weighted average common shares outstanding 6,462,000 3,787,000
------------- -------------
Basic earnings per common share from continuing operations $ 0.29 $ 0.43
============= =============
Basic earnings per common share from discontinued operations $ - $ (0.01)
============= =============
Basic earnings per common share $ 0.29 $ 0.42
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5.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 2. EARNINGS PER SHARE (continued)
DILUTED EARNINGS PER COMMON SHARE
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Weighted average common shares outstanding 6,462,000 3,787,000
Add: dilutive effect of assumed exercised stock options 35,000 51,000
------------- -------------
Weighted average common and dilutive potential shares outstanding 6,497,000 3,838,000
============= =============
Diluted earnings per common share from continuing operations $ 0.28 $ 0.43
============= =============
Diluted earnings per common share from discontinued operations $ - $ (0.01)
============= =============
Diluted earnings per common share $ 0.28 $ 0.42
============= =============
There were approximately 276,200 and 60,000 options outstanding at March 31,
2007 and 2006, respectively that were not included in the computation of diluted
earnings per share. These options were antidilutive since the exercise prices
were greater than the average market price of the common stock.
NOTE 3. SECURITIES
The Company's consolidated securities portfolio, which represented 25.9% of the
Company's 2007 first quarter average earning asset base, is managed to minimize
interest rate risk, maintain sufficient liquidity, and maximize return. All of
the Company's securities are classified as available-for-sale and are carried at
fair value. The Company does not have any securities classified as trading or
held-to-maturity.
The following table describes the fair value, gross unrealized gains and losses
of securities available-for-sale at March 31, 2007 and December 31, 2006,
respectively:
March 31, 2007
----------------------------------------------------------------
Gross Gross %
Fair Unrealized Unrealized of
Value Gains Losses Portfolio
------------- ------------- ------------- -------------
U.S. government agencies $ 123,375 $ 396 $ (181) 42.6
States and political subdivisions 41,987 316 (57) 14.5
U.S. government mortgage-backed securities 63,856 228 (282) 22.1
Collateralized mortgage obligations 26,768 73 (17) 9.3
Equity securities 27,544 151 - 9.5
Corporate 5,758 12 (9) 2.0
------------- ------------- ------------- -------------
$ 289,288 $ 1,176 $ (546) 100.0%
============= ============= ============= =============
6.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 3. SECURITIES (continued)
December 31, 2006
----------------------------------------------------------------
Gross Gross %
Fair Unrealized Unrealized of
Value Gains Losses Portfolio
------------- ------------- ------------- -------------
U.S. government agencies $ 126,039 $ 308 $ (245) 42.2
States and political subdivisions 41,471 329 (9) 13.9
U.S. government mortgage-backed securities 69,579 253 (393) 23.3
Collateralized mortgage obligations 27,237 44 (77) 9.1
Equity securities 25,602 171 - 8.6
Corporate 8,764 16 (13) 2.9
------------- ------------- ------------- -------------
$ 298,692 $ 1,121 $ (737) 100.0%
============= ============= ============= =============
Management does not believe any individual unrealized losses as of March 31,
2007, identified in the preceding tables represent other-than-temporary
impairment. These unrealized losses are primarily attributable to changes in the
interest rates. The Company has both the intent and ability to hold each of the
securities shown in the table for the time necessary to recover its amortized
cost. The unrealized loss on the available for sale securities is included, net
of tax, in other comprehensive income.
There were no security sales during the quarters ended March 31, 2007 and 2006.
NOTE 4. LOANS
The following table describes the composition of loans by major categories
outstanding as of March 31, 2007 and December 31, 2006, respectively:
March 31, 2007 December 31, 2006
----------------------------- -------------------------------
$ % $ %
------------- ------------- ------------- -------------
Commercial $ 158,385 18.24% $ 154,829 18.50%
Agricultural 20,204 2.33 23,118 2.76
Real estate:
Commercial mortgages 306,065 35.24 274,909 32.85
Construction 129,041 14.86 116,608 13.93
Agricultural 26,591 3.06 27,624 3.30
1-4 family mortgages 217,259 25.01 226,884 27.11
Installment 10,027 1.15 11,998 1.43
Other 957 0.11 974 0.12
------------- ------------- ------------- -------------
Total loans 868,529 100.00% 836,944 100.00%
============= =============
Allowance for loan losses (10,607) (10,835)
------------- -------------
Loans, net $ 857,922 $ 826,109
============= =============
7.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 4. LOANS (continued)
The following table presents data on impaired loans:
March 31, December 31,
2007 2006
------------- -------------
Impaired loans for which an allowance has been provided $ 7,816 $ 4,915
Impaired loans for which no allowance has been provided 10,255 16,450
------------- -------------
Total loans determined to be impaired $ 18,071 $ 21,365
============= =============
Allowance for loan loss for impaired loans included
in the allowance for loan losses $ 1,639 $ 1,562
============= =============
In originating loans, the Company recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, current
economic conditions; the type of loan being made; the creditworthiness of the
borrower over the term of the loan; and in the case of a collateralized loan,
the quality of the collateral for such loan. The allowance for loan losses
represents the Company's estimate of the allowance necessary to provide for
probable incurred losses in the loan portfolio. In making this determination,
the Company analyzes the ultimate collectibility of the loans in its portfolio;
incorporating feedback provided by internal loan staff; the independent loan
review function; and information provided by regulatory agencies.
The Company conducts a quarterly evaluation as to the adequacy of the allowance
for loan losses. Transactions in the allowance for loan losses for the three
months ended March 31, 2007 and 2006 are summarized below:
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Beginning balance $ 10,835 $ 8,362
Charge-offs (498) (127)
Recoveries 270 71
Provision for loan losses - (800)
------------- -------------
Ending balance $ 10,607 $ 7,506
============= =============
Period end total loans, net of
unearned interest $ 868,529 $ 406,617
============= =============
Average loans $ 856,962 $ 414,237
============= =============
8.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 4. LOAN (continued)
Three Months Ended
March 31,
------------------------------
2007 2006
------------- -------------
Ratio of net charge-offs to average loans 0.03% 0.01%
Ratio of provision for loan losses to average loans 0.00% (0.19)%
Ratio of allowance for loan losses to ending total loans 1.22% 1.85%
Ratio of allowance for loan losses to total nonperforming loans 112.65% 223.93%
Ratio of allowance at end of period to average loans 1.24% 1.81%
NOTE 5. STOCK OPTION PLANS
In 1999, the Company adopted the 1999 Option Plan. Under the 1999 Option Plan,
nonqualified options may be granted to employees and eligible directors of the
Company and its subsidiaries to purchase the Company's common stock at 100% of
the fair market value on the date the option is granted. The Company has
authorized 50,000 shares for issuance under the 1999 Option Plan. During 1999,
40,750 of these shares were granted and are 100% fully vested. The options have
an exercise period of ten years from the date of grant. There are 9,250 shares
available for grant under this plan.
In April 2003, the Company adopted the 2003 Option Plan. Under the 2003 Option
Plan, nonqualified options, incentive stock options, and/or stock appreciation
rights may be granted to employees and outside directors of the Company and its
subsidiaries to purchase the Company's common stock at an exercise price to be
determined by the 2003 Option Plan's administrative committee. Pursuant to the
2003 Option Plan, 200,000 shares of the Company's unissued common stock have
been reserved and are available for issuance upon the exercise of options and
rights granted under the 2003 Option Plan. The options have an exercise period
of ten years from the date of grant. There are 85,000 shares available for grant
under this plan.
In addition to the Company plans described above, in conjunction with the
merger, all outstanding options of the former Centrue Financial were converted
into options to acquire Company common stock, as adjusted for the exchange
ratio. Following the merger, no additional options are issuable under any of the
former Centrue plans.
The fair value of each option award is estimated on the date of grant using a
closed option valuation (Black-Scholes) model that uses the assumptions noted in
the table below. Expected volatilities are based on historic volatilities of the
Company's common stock. The Company uses historical data to estimate option
exercise and post-vesting termination behavior. (Employee and management options
are tracked separately.) The expected term of options granted is based on
historical data and represents the period of time that options granted are
expected to be outstanding, which takes into account that the options are not
transferable. The risk-free interest rate for the expected term of the option is
based on the U.S. Treasury yield curve in effect at the time of the grant. The
fair value of options granted was determined using the following
weighted-average assumptions as of the grant date:
March 31, December 31,
2007 2006
------------- -------------
Fair value $ 4.69 $ 4.81
Risk-free interest rate 4.80% 4.95%
Expected option life (years) 6 6
Expected stock price volatility 23.67% 23.45%
Dividend yield 2.68% 2.47%
9.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 5. STOCK OPTION PLANS (continued)
A summary of the status of the option plans as of March 31, 2007, and changes
during the quarter ended on those dates is presented below:
March 31, 2007
---------------------------------------------------------------
Weighted-
Weighted- Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Shares Price Life Value
------------- ------------- ------------- -------------
Outstanding at beginning of quarter 494,424 $ 18.47
Granted 13,000 19.03
Exercised (17,900) 12.12
Forfeited (1,500) 9.75
------------- -------------
Outstanding at end of quarter 488,024 $ 18.73 4.9 years $ 987
============= ============= ============= =============
Options exercisable at quarter end 449,874 $ 18.61 4.8 years $ 986
============= ============= ============= =============
Options outstanding at March 31, 2007 and December 31, 2006 were as follows:
Outstanding Exercisable
----------------------------- -------------------------------
Weighted
Average Weighted
Remaining Average
Range of Contractual Exercise
Exercise Prices Number Life Number Price
--------------------------------------- ------------- ------------- ------------- -------------
MARCH 31, 2007:
$ 11.25 - 13.00 48,381 3.25 years 48,381 11.58
13.88 - 18.50 150,443 3.81 years 157,293 15.50
20.30 - 23.29 289,200 5.66 years 244,200 22.00
------------- ------------- ------------- -------------
488,024 4.85 years 449,874 $ 18.61
============= ============= ============= =============
DECEMBER 31, 2006:
$ 7.25 - $ 9.75 7,000 0.2 years 7,000 $ 9.75
11.25 - 13.00 53,931 3.4 years 53,931 11.64
13.88 - 18.50 157,293 4.1 years 157,293 15.50
20.30 - 23.29 276,200 6.1 years 244,200 22.00
------------- ------------- ------------- -------------
494,424 5.1 years 462,424 $ 18.39
============= ============= ============= =============
10.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 5. STOCK OPTION PLANS (continued)
Information related to the stock option plan during the quarter ended March 31,
2007 and March 31, 2006 is as follows:
March 31, March 31,
2007 2006
--------- ---------
Intrinsic value of options exercised $ 124 $ 173
Cash received from option exercises 266 108
Tax benefit realized from option exercises 103 42
Weighted average of fair value of options granted 19.03 -
The Company recorded $6 and $34 in salaries and employee benefits stock
compensation expense during the three months ended March 31, 2007 and 2006.
Unrecognized stock option compensation expense related to unvested awards (net
of estimated forfeitures) for the remainder of 2007 and beyond is estimated as
follows:
Period Amount
--------------------------------- ---------
April, 2007 - December, 2007 $ 29
2008 35
2009 35
2010 35
2011 35
2012 25
2013 1
---------
Total $ 195
=========
NOTE 6. CONTINGENT LIABILITIES AND OTHER MATTERS
Neither the Company nor its subsidiary is involved in any pending legal
proceedings other than routine legal proceedings occurring in the normal course
of business, which, in the opinion of management, in the aggregate, are not
material to the Company's consolidated financial condition.
NOTE 7. SEGMENT INFORMATION
The Company's reporting was enhanced so that a line of business (LOB) reporting
structure was implemented as of January 1, 2005. The reportable segments are
determined by the products and services offered, primarily distinguished between
retail, commercial, treasury, wealth management, and operations & other. Loans,
and deposits generate the revenues in the commercial segments; deposits, loans,
secondary mortgage sales and servicing generates the revenue in the retail
segment; investment income generates the revenue in the treasury segment;
brokerage, and trust services generate the revenue in the wealth management
segment (formerly known as the financial services segment); and holding company
services and discontinued operations associated with the sale of the insurance
unit generate revenue in the Other Operations segment. The "net allocations"
line represents the allocation of the costs that are overhead being spread to
the specific segments. With the sale of the insurance unit, the results for
insurance were classified into the Other Operations segment from the Wealth
Management segment.
11.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 7. SEGMENT INFORMATION (continued)
The merger with the former Centrue became effective on November 13, 2006, and as
such, the results for the former Centrue Bank are presented as a stand alone
segment ("Other Banking") since its operations were not yet integrated at the
end of March 31, 2007. Comparable discrete financial information is not
available for the results of this segment on the same reporting basis as the
rest of the Company.
The accounting policies used with respect to segment reporting are the same as
those described in the summary of significant accounting policies set forth in
Note 1. Segment performance is evaluated using net income. Information reported
internally for performance assessment follows.
Three Months Ended,
March 31, 2007
-------------------------------------------------------------------------------------------
Retail Commercial Treasury Wealth Other Other Continuing
Segment Segment Segment Management Operations Banking Operations
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income (loss) $ 1,778 $ 3,184 $ 124 $ 66 $ (474) $ 4,645 $ 9,323
Other revenue 884 104 - 384 168 1,714 3,254
Other expense 1,412 610 63 401 2,247 3,756 8,490
Noncash items
Depreciation 216 3 - 5 244 369 837
Provision for loan losses - - - - - - -
Other intangibles - - - 1 - 621 621
Net allocations 843 1,431 174 184 (2,632) - -
Income tax expense 60 406 (101) (47) (87) 499 730
Segment profit (loss) 131 838 (12) (94) (78) 1,114 1,899
Goodwill 2,521 2,622 - 1,166 - 19,087 25,396
Segment assets 97,598 339,118 192,191 2,270 21,138 666,506 1,318,821
Three Months Ended,
March 31, 2006
-------------------------------------------------------------------------------------------
Retail Commercial Treasury Wealth Other Other Continuing
Segment Segment Segment Management Operations Banking Operations
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income (loss) $ 1,982 $ 3,263 $ 130 $ 56 $ (248) $ - $ 5,183
Other revenue 850 111 1 633 165 - 1,760
Other expense 1,450 644 68 664 1,993 - 4,819
Noncash items
Depreciation 232 3 - 38 199 - 472
Provision for loan losses 125 (925) - - - - (800)
Other intangibles - - - 15 28 - 43
Net allocations 847 1,213 160 233 (2,453) - -
Income tax expense 57 849 (106) (87) 50 - 763
Segment profit (loss) 121 1,590 9 (174) 100 - 1,646
Goodwill 2,521 2,622 - 1,820 - - 6,963
Segment assets 97,648 327,122 213,003 3,792 20,142 - 661,707
NOTE 8. DISCONTINUED OPERATIONS
During the third quarter of 2006, the Company sold the insurance unit from the
Wealth Management segment for $1,200. In accordance with FASB Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144") the
results of operations of the insurance unit are reflected in the Company's
statements of income for the three months ended March 31, 2006 as "discontinued
operations." Approximately $1,030 of goodwill and intangibles attributed to the
insurance unit on the Company's balance sheet were written off as a result of
this transaction and factored into the loss on the sale of the discontinued
operations.
12.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NOTE 8. DISCONTINUED OPERATIONS (continued)
Three Months Ended
March 31, 2006
------------------
Net interest income $ (2)
Noninterest income 295
Noninterest expense 341
------------------
Loss from discontinued operations
before income taxes (48)
Benefit for taxes (20)
------------------
Net loss from discontinued operations (28)
==================
NOTE 9. RECENT ACCOUNTING DEVELOPMENTS
In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements".
This Statement defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. This Statement
establishes a fair value hierarchy about the assumptions used to measure fair
value and clarifies assumptions about risk and the effect of a restriction on
the sale or use of an asset. The standard is effective for fiscal years
beginning after November 15, 2007. The Company has not completed its evaluation
of the impact of the adoption of this standard.
In February 2006, the FASB issued Statement No. 155, "Accounting for Certain
Hybrid Financial Instruments-an amendment to FASB Statements No. 133 and 140".
This Statement permits fair value re-measurement for any hybrid financial
instruments, clarifies which instruments are subject to the requirements of
Statement No. 133, and establishes a requirement to evaluate interests in
securitized financial assets and other items. The new standard is effective for
financial assets acquired or issued after the beginning of the entity's first
fiscal year that begins after September 15, 2006. Adoption of this statement on
January 1, 2007 did not have a material impact on the Company's consolidated
financial position or results of operations.
In March 2006, the FASB issued Statement No. 156, "Accounting for Servicing of
Financial Assets - an amendment of FASB Statement No. 140". This statement
provides the following: 1) revised guidance on when a servicing asset and
servicing liability should be recognized; 2) requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, if practicable; 3) permits an entity to elect to measure servicing assets
and servicing liabilities at fair value each reporting date and report changes
in fair value in earnings in the period in which the changes occur; 4) upon
initial adoption, permits a one-time reclassification of available-for-sale
securities to trading securities for securities which are identified as
offsetting the entity's exposure to changes in the fair value of servicing
assets or liabilities that a servicer elects to subsequently measure at fair
value; and 5) requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of financial
position and additional footnote disclosure. This standard is effective as of
the beginning of an entity's first fiscal year that begins after September 15,
2006, with the effects of initial adoption being reported as a cumulative-effect
adjustment to retained earnings. We will continue to carry the mortgage
servicing asset at lower of cost or market, reviewing it quarterly for
impairment.
In February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value. The objective of SFAS 159 is to improve financial reporting by
providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting principles. It is effective as of the
beginning of an entity's first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS 157. The Company has decided not to early adopt SFAS159 and
is currently evaluating the impact of the adoption with respect to its current
practice of measuring fair value and disclosure of it in its financial
statements.
13.
CENTRUE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
The Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - An Interpretation of FASB No. 109" ("FIN 48") as of January 1,
2007. FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. A tax position is recognized as a benefit
only if it is "more likely than not" that the tax position would be sustained in
a tax examination, with a tax examination being presumed to follow. The amount
recognized is the largest amount of tax benefit that is greater then 50% likely
of being realized on examination. For tax positions not meeting the "more than
likely than not" test, no benefit is recorded. The adoption had no effect on the
Company's financial statements.
The Company is subject to U. S. federal income tax as well as income tax for the
states of Illinois and Missouri. The Company is no longer subject to examination
by taxing authorities for years before 2002. The Company does not expect the
total amount of unrecognized tax benefits to significantly increase in the next
twelve months.
14.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Centrue Financial Corporation (the "Company") is a bank holding company for
Centrue Bank. During the 4th quarter of 2006, the former UnionBancorp completed
its merger with Centrue Financial Corporation. Upon completion of this,
UnionBancorp changed its name to Centrue Financial Corporation. The following
discussion provides an analysis of the Company's results of operations and
financial condition for the three months ended March 31, 2007 as compared to the
same period in 2006. Management's discussion and analysis (MD&A) should be read
in conjunction with the consolidated financial statements and accompanying notes
presented elsewhere in this report as well as the Company's 2006 Annual Report
on Form 10-K. Annualized results of operations during the three months ended
March 31, 2007 are not necessarily indicative of results to be expected for the
full year of 2007. Unless otherwise stated, all earnings per share data included
in this section and throughout the remainder of this discussion are presented on
a diluted basis. All financial information is in thousands (000's), except
shares and per share data.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. By their nature, changes in these assumptions and estimates
could significantly affect the Company's financial position or results of
operations. Actual results could differ from those estimates. Those critical
accounting policies that are of particular significance to the Company are
discussed in Note 1 of the Company's 2006 Annual Report on Form 10-K.
Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required based on past loan loss experience, the nature
and volume of the portfolio, information about specific borrower situations and
estimated collateral values, current economic conditions, and other factors.
Allocations of the allowance may be made for specific loans, but the entire
allowance is available for any loan that, in management's judgment, should be
charged off. Loan losses are charged against the allowance when management
believes that the uncollectibility of a loan balance is confirmed.
Goodwill and other intangible assets: Goodwill results from business
acquisitions and represents the excess of the purchase price over the fair value
of acquired tangible assets and liabilities and identifiable intangible assets.
Goodwill is assessed at least annually for impairment and any such impairment
will be recognized in the period identified. Other intangible assets consist of
core deposit and acquired customer relationship intangible assets arising from
whole bank, and branch company acquisitions. They are initially measured at fair
value and then are amortized over their estimated useful lives, which is ten
years.
Income taxes: Deferred tax assets and liabilities are recognized for
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities. Deferred taxes are recognized for the
estimated taxes ultimately payable or recoverable based on enacted tax laws.
Changes in enacted tax rates and laws are reflected in the financial statements
in the periods they occur.
15.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
GENERAL
Centrue Financial Corporation is a bank holding company organized under the laws
of the state of Delaware. The Company derives most of its revenues and income
from the operations of its bank subsidiary, Centrue Bank (the "Bank"), but also
derives revenue from the Wealth Management Division of its bank subsidiary. The
Company provides a full range of services to individual and corporate customers
located in the north central, east central, south central, suburban west area of
Chicago, suburban metro east of St. Louis and northwest Illinois areas. These
products and services include demand, time, and savings deposits; lending;
mortgage banking; brokerage services; asset management; and trust services. The
Company is subject to competition from other financial institutions, including
banks, thrifts and credits unions, as well as nonfinancial institutions
providing financial services. Additionally, the Company and the Bank are subject
to regulations of certain regulatory agencies and undergo periodic examinations
by those regulatory agencies.
FIRST QUARTER HIGHLIGHTS
o Income from continuing operations for the first quarter of 2007 was
$1,899, an increase of 13.6% when compared to $1,674 for the same
period in 2006;
o Net interest income increased 55.8% to $9,323 in the first quarter
ended March 31, 2007 as compared to $5,985 for the same period in 2006.
This increase is the result of the merger with the former Centrue
Financial;
o The loan portfolio increased $31,585 or 3.8% since December 31, 2006
largely due to growth experienced in the St. Louis loan production
office;
o Deposits increased $30,687 or 3.0% since December 31, 2006 largely due
to growth in interest bearing deposit accounts;
o The Company did not record a provision for loan losses due to higher
than anticipated recoveries, loans that were charged off which had
previously established specific allocations, and a decrease in action
list loans since year-end;
o The net interest margin decreased 17 basis points to 3.35% as compared
to the same period in 2006 largely due to the inverted yield curve and
competitive pressures in pricing loans and deposits;
o Noninterest expense for the first quarter of 2007 was $9,948. This was
a $746 or 7.0% decrease in comparison to the same period 2006 pro forma
combined companies. In the first quarter of 2006, the former
UnionBancorp, Inc. reported $5,334 (adjusted for discontinued
operations) while the former Centrue Financial reported $5,360 for a
combined total of $10,694;
o The Company opened a full service branch in Belleville, Illinois
expanding its geographic footprint in the St Louis Metro East market;
o The Company paid a $0.12 quarterly cash dividend on common stock. This
marks the 86th consecutive quarter of dividends paid to stockholders.
RESULTS OF OPERATIONS
NET INCOME
Income from continuing operations for the first quarter 2007 equaled $1,899 or
$0.28 per diluted share as compared to income from continuing operations of
$1,674 or $0.43 per diluted share for 2006. This represents an increase of 13.6%
in net income and a decrease of 34.9% in diluted per share earnings. First
quarter 2006 results included a net loss of ($28) or ($0.01) per diluted share
for discontinued operations related to the September 2006 sale of the Company's
insurance unit.
First quarter 2006 results included a negative provision of $800 to the
allowance for loan losses. This action was largely based on the pay-off of one
$4,400 loan relationship that was classified as impaired as of 2005 with a
specific reserve allocation of $1,500. Excluding the reversal to the provision
for loan losses, net of taxes, net income for the first quarter of 2006 would
have equaled $1,156 or $0.29 per diluted share.
16.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Return on average assets was 0.59% for the first quarter of 2007 compared to
1.00% for the same period in 2006. Return on average stockholders' equity was
6.42% for the first quarter of 2007 compared to 10.16% for the same period in
2006.
NET INTEREST INCOME/ MARGIN
Fully tax equivalent net interest income increased 80.2% to $9,574 for the first
quarter 2007 compared with $5,314 in 2006. The increase was largely attributable
to the growth in average earning assets, including the impact of the Centrue
merger, partially offset by a reduction in the net interest margin.
The Company's net interest margin declined 17 basis points to 3.35% in the first
quarter 2007 as compared with 3.52% for the same period in 2006. During 2007,
the net interest margin compressed as the cost of funds increased more than the
earning asset yield. The primary drivers of the decrease were compressed loan
spreads, heightened competition for deposits and fixed rate term loans that
repriced at similar or lower rates during the last twelve months due to the flat
to inverted yield curve. The expectation of a flat to inverted yield curve is
likely to maintain pressure on margins for the remainder of 2007.
The Company's net interest income is affected by changes in the amount and mix
of interest-earning assets and interest-bearing liabilities, referred to as
"volume change." It is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and other
borrowed funds referred to as "rate change." The following table details each
category of average amounts outstanding for interest-earning assets and
interest-bearing liabilities, average rate earned on all interest-earning
assets, average rate paid on all interest-bearing liabilities, and the net yield
on average interest-earning assets. In addition, the table reflects the changes
in net interest income stemming from changes in interest rates and from asset
and liability volume, including mix. The change in interest attributable to both
rate and volume has been allocated to the changes in the rate and the volume on
a pro rata basis.
17.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
For the Three Months Ended March 31,
------------------------------------------------------------
2007 2006
------------------------------ ----------------------------
Interest Interest Change Due To:
Average Income/ Average Average Income/ Average -------------------------
Balance Expense Rate Balance Expense Rate Volume Rate Net
----------- -------- ------- --------- -------- ------- ------- ------ --------
ASSETS
Interest-earning assets
Interest-earning deposits $ 3,554 $ 13 1.48% $ 251 $ 4 6.46% $ 14 $ (5) $ 9
Securities (1)
Taxable 252,872 3,305 5.62 181,272 1,991 4.45 908 605 1,513
Non-taxable (2) 41,037 564 5.57 18,026 327 7.36 307 (269) 38
----------- -------- ------- --------- -------- ------- ------- ------ --------
Total securities (tax
equivalent) 293,909 3,869 5.34 199,298 2,318 4.72 1,215 336 1,551
----------- -------- ------- --------- -------- ------- ------- ------ --------
Federal funds sold Loans (3)(4) 6,103 82 5.45 1,560 17 4.43 60 5 65
----------- -------- ------- --------- -------- ------- ------- ------ --------
Commercial 182,131 3,721 8.29 118,069 2,061 7.08 1,262 398 1,660
Real estate 663,174 11,858 7.25 284,177 4,834 6.90 6,767 257 7,024
Installment and other 11,656 520 18.09 11,992 280 9.46 (8) 248 240
----------- -------- ------- --------- -------- ------- ------- ------ --------
Gross loans (tax equivalent) 856,962 16,099 7.62 414,238 7,175 7.02 8,021 903 8,924
----------- -------- ------- --------- -------- ------- ------- ------ --------
Total interest-earning
assets 1,160,528 20,063 7.01 615,347 9,514 6.27 9,310 1,239 10,549
----------- -------- ------- --------- -------- ------- ------- ------ --------
Noninterest-earning assets
Cash and cash equivalents 26,676 18,521
Premises and equipment, net 35,509 13,842
Other assets 71,295 23,752
----------- ---------
Total nonearning assets 133,481 56,115
----------- ---------
Total assets $ 1,294,008 $ 671,462
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities
NOW accounts $ 102,601 $ 420 1.66% $ 69,997 $ 282 1.63% $ 133 $ 5 $ 138
Money market accounts 119,940 1,058 3.58 55,792 349 2.54 521 188 709
Savings deposits 102,559 181 0.72 38,538 54 0.57 108 19 127
Time deposits 587,319 7,157 4.94 308,207 2,794 3.68 3,166 1,197 4,363
Federal funds purchased and
repurchase agreements 36,372 410 4.57 6,010 72 4.86 343 (5) 338
Advances from FHLB 61,226 645 4.27 49,340 482 3.96 123 40 163
Notes payable 30,378 618 8.25 11,061 167 6.13 377 74 451
----------- -------- ------- --------- -------- ------- ------- ------ --------
Total interest-bearing
liabilities 1,040,395 10,489 4.09 538,945 4,200 3.16 4,771 1,518 6,289
----------- -------- ------- --------- -------- ------- ------- ------ --------
Noninterest-bearing liabilities
Noninterest-bearing deposits 125,507 61,730
Other liabilities 9,700 4,966
----------- ---------
Total noninterest-bearing
liabilities 135,207 66,696
----------- ---------
Stockholders' equity 118,406 65,821
----------- ---------
Total liabilities and
stockholders' equity $ 1,294,008 $ 671,462
=========== =========
Net interest income (tax
equivalent) $ 9,574 $ 5,314 $ 4,539 $ (279) $ 4,260
======== ======== ======= ====== ========
Net interest income (tax
equivalent) to total earning
assets 3.35% 3.52%
======= =======
Interest-bearing liabilities
to earning assets 89.65% 87.58%
=========== =========
----------
(1) Average balance and average rate on securities classified as
available-for-sale is based on historical amortized cost balances.
(2) Interest income and average rate on non-taxable securities are reflected on
a tax equivalent basis based upon a statutory federal income tax rate of
34%.
(3) Nonaccrual loans are included in the average balances.
(4) Overdraft loans are excluded in the average balances.
18.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
PROVISION FOR LOAN LOSSES
The Company did not record a provision for loan losses for the first quarter of
2007. This represents an increase of $800 as compared to the same period a year
ago. First quarter 2006 results included a negative provision of $800 to the
allowance for loan losses. This action was largely based on the pay-off of one
$4,400 loan relationship that was classified as impaired as of 2005 with a
specific reserve allocation of $1,500. Also impacting provision levels included
the following:
o decrease in action list loans since year-end;
o higher than anticipated recoveries;
o loans that were charged off during the first quarter of 2007 had
previously established specific allocations.
Nonperforming loans decreased 19.9% to $9,416 as of March 31, 2007 from $11,759
reported at December 31, 2006. Net charge-offs for the first quarter of 2007
were $228 compared with $56 for the comparable period in 2006. Annualized net
charge-offs for the period were 0.03% of average loans compared with 0.01% of
average loans for same period in 2006. See "Nonperforming Assets" and "Other
Potential Problem Loans" for further information.
The amount of the provision for loan losses is based on management's evaluations
of the loan portfolio, with particular attention directed toward nonperforming,
impaired and other potential problem loans. During these evaluations,
consideration is also given to such factors as management's evaluation of
specific loans, the level and composition of impaired loans, other nonperforming
loans, other identified potential problem loans, historical loss experience,
results of examinations by regulatory agencies, results of the independent asset
quality review process, the market value of collateral, the estimate of
discounted cash flows, the strength and availability of guarantees,
concentrations of credits, and various other factors, including concentration of
credit risk in various industries and current economic conditions.
Management remains watchful of credit quality issues. Should the economic
climate deteriorate from current levels, borrowers may experience difficulty,
and the level of nonperforming loans, charge-offs and delinquencies could rise
and require further increases in the provision.
19.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
NONINTEREST INCOME
The following table summarizes the Company's noninterest income:
Three Months Ended
March 31,
---------------------
2007 2006
--------- ---------
Service charges $ 1,583 $ 440
Wealth management fees 355 303
Mortgage banking income 434 246
Bank owned life insurance 241 140
Electronic bank card fees 231 95
Other income 410 241
--------- ---------
Total noninterest income from continuing operations $ 3,254 $ 1,465
Amounts reclassed to discontinued operations - 295
--------- ---------
Previously reported noninterest income levels $ 3,254 $ 1,760
========= =========
Noninterest income from continuing operations increased $1,789 to $3,254 as
compared to $1,465 for the same period in 2006. The growth experienced was
primarily the result of improvements in service charges on deposit accounts,
fees received on items drawn on customer accounts with insufficient funds,
revenue generated from the mortgage banking division, and electronic banking
card based fees (included in other income). Nearly all of the increase was
related to revenue generated from deposit growth associated with the merger.
NONINTEREST EXPENSE
The following table summarizes the Company's noninterest expense:
Three Months Ended
March 31,
---------------------
2007 2006
--------- ---------
Salaries and employee benefits $ 5,148 $ 3,046
Occupancy expense, net 941 539
Furniture and equipment expense 695 379
Marketing 192 110
Supplies and printing 181 95
Telephone 178 117
Other real estate owned expense 3 6
Amortization of intangible assets 621 29
Other expenses 1,989 672
--------- ---------
Total noninterest expense from continuing operations $ 9,948 $ 4,993
Amounts reclassed to discontinued operations - 342
--------- ---------
Previously reported noninterest expense levels $ 9,948 $ 5,335
========= =========
Noninterest expense for continuing operations increased $4,955 to $9,948 as
compared to $4,993 for the same period in 2006. The increase was reported across
all categories and predominantly due to higher costs associated with operating
21 additional branches and general operating expenses resulting from the merger.
Also adversely impacting expense levels were increases in amortization of
intangible assets related to the Centrue merger which occurred in November of
2006 and accelerated depreciation expense for assets being phased out.
20.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
APPLICABLE INCOME TAXES
Income tax expense for the periods included benefits for tax-exempt income,
tax-advantaged investments and general business tax credits offset by the effect
of nondeductible expenses. The following table shows the Company's income before
income taxes, as well as applicable income taxes and the effective tax rate for
the three months ended March 31, 2007 and 2006.
Three Months Ended
March 31,
---------------------
2007 2006
--------- ---------
Income from continuing operations before income taxes $ 2,629 $ 2,457
Applicable income taxes 730 783
Effective tax rates 27.8% 31.9%
The Company recorded an income tax expense of $730 and $783 for the three months
ended March 31, 2007 and 2006, respectively. Income tax expense for the periods
included benefits for tax-exempt income, tax-advantaged investments and general
business tax credits offset by the effect of nondeductible expenses. The
Company's effective tax rate was lower than statutory rates due to the Company
deriving interest income from municipal securities and loans, which are exempt
from federal tax and certain U. S. government agency securities, which are
exempt from Illinois State tax. Additionally, the Company has reduced tax
expense through various tax planning initiatives.
FINANCIAL CONDITION
GENERAL
As of March 31, 2007, the following are the highlights of the balance sheet when
compared to December 31, 2006:
o gross loans grew $31,585 or 3.8% due predominantly to growth experienced
in the St. Louis loan production office;
o deposits grew 3.0% to $1,057,297 from $1,026,610 largely concentrated in
time deposits;
o the average loan to deposit ratio increased to 82.6% as of March 31,
2007 from 78.8% at December 31, 2006. This is the highest it has been in
sixteen quarters;
o non-interest bearing deposits fell to 11.4% of total deposits at the end
of first quarter from 12.2% at December 31, 2006.
NONPERFORMING ASSETS
If a loan is placed on nonaccrual status, the loan does not generate income for
the Company. Loans are placed on nonaccrual status when there are serious doubts
regarding the collectibility of all principal and interest due under the terms
of the loans. Amounts received on nonaccrual loans generally are applied first
to principal and then to interest after all principal has been collected. A loan
is generally transferred to nonaccrual status if it is not in the process of
collection and is delinquent in payment of either principal or interest beyond
90 days. Loans that are 90 days delinquent but are well secured and in the
process of collection are not included in nonperforming assets. Other
nonperforming assets consist of real estate acquired through loan foreclosures
or other workout situations and other assets acquired through repossessions.
21.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
The classification of a loan as nonaccrual does not necessarily indicate that
the principal is uncollectible, in whole or in part. The Bank makes a
determination as to collectibility on a case-by-case basis. The Bank considers
both the adequacy of the collateral and the other resources of the borrower in
determining the steps to be taken to collect nonaccrual loans. The final
determination as to the steps taken is made based upon the specific facts of
each situation. Alternatives that are typically considered to collect nonaccrual
loans are foreclosure, collection under guarantees, loan restructuring, or
judicial collection actions.
Each of the Company's loans is assigned a rating based upon an internally
developed grading system. A separate credit administration department also
reviews grade assignments on an ongoing basis. Management continuously monitors
nonperforming, impaired, and past due loans to prevent further deterioration of
these loans. The Company has an independent loan review function which is
separate from the lending function and is responsible for the review of new and
existing loans.
The following table summarizes nonperforming assets and loans past due 90 days
or more and still accruing for the previous five quarters.
2007 2006
-------- --------------------------------------------
Mar 31, Dec 31, Sept 30, Jun 30, Mar 31
-------- -------- -------- -------- --------
Non-accrual loans $ 9,416 $ 11,759 $ 3,053 $ 2,289 $ 2,785
Loans 90 days past due and still accruing interest - - 168 517 567
-------- -------- -------- -------- --------
Total nonperforming loans 9,416 11,759 3,221 2,806 3,352
Other real estate owned 4,262 2,136 859 1,390 536
-------- -------- -------- -------- --------
Total nonperforming assets $ 13,678 $ 13,895 $ 4,080 $ 4,196 $ 3,888
======== ======== ======== ======== ========
Nonperforming loans to total end of period loans 1.08% 1.40% 0.79% 0.70% 0.82%
Nonperforming assets to total end of period loans 1.57 1.66 1.00 1.04 0.96
Nonperforming assets to total end of period assets 1.04 1.08 0.63 0.64 0.59
The level of nonperforming loans at March 31, 2006 decreased to $9,416 versus
the $11,759 that existed as of December 31, 2006. The decrease was largely
related to the transfer of one nonperforming commercial real estate loan with a
carrying value of $1,995 to other real estate owned. The $8,538 increase in
nonperforming loans from September 30, 2006 to December 31, 2006 was largely
related to $10,230 that was added to nonaccrual loans as part of the Centrue
merger offset by a decrease of $1,692 related to resolutions of nonbankable
loans or through successful workout strategies executed throughout 2006.
The level of nonperforming loans to total end of period loans was 1.08% at March
31, 2007, as compared to 1.40% at December 31, 2006. The reserve coverage ratio
(allowance to nonperforming loans) was reported at 112.65% as of March 31, 2007
as compared to 92.14% as of December 31, 2006 and 223.93% as of March 31, 2006.
OTHER POTENTIAL PROBLEM LOANS
The Company has other potential problem loans that are currently performing, but
where some concerns exist as to the ability of the borrower to comply with
present loan repayment terms. Excluding nonperforming loans and loans that
management has classified as impaired, these other potential problem loans
totaled $2,202 at March 31, 2007 as compared to $858 at March 31, 2006 and
$1,757 at December 31, 2006. The classification of these loans, however, does
not imply that management expects losses on each of these loans, but believes
that a higher level of scrutiny and close monitoring is prudent under the
circumstances. Such classifications relate to specific concerns for each
individual borrower and do not relate to any concentration risk common to all
loans in this group.
22.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES
At March 31, 2007, the allowance for loan losses was $10,607 or 1.22% of total
loans as compared to $10,835 or 1.29% at December 31, 2006. In originating
loans, the Company recognizes that credit losses will be experienced and the
risk of loss will vary with, among other things, the following:
o general economic conditions;
o the type of loan being made;
o the creditworthiness of the borrower over the term of the loan;
o in the case of a collateralized loan, the quality of the collateral for
such a loan.
The allowance for loan losses represents the Company's estimate of the allowance
necessary to provide for probable incurred losses in the loan portfolio by
analyzing the following:
o ultimate collectibility of the loans in its portfolio;
o incorporating feedback provided by internal loan staff;
o the independent loan review function;
o results of examinations performed by regulatory agencies.
The Company regularly evaluates the adequacy of the allowance for loan losses.
Commercial credits are graded using a system that is in compliance with
regulatory classifications by the loan officers and the loan review function
validates the officers' grades. In the event that the loan review function
downgrades the loan, it is included in the allowance analysis at the lower
grade. To establish the appropriate level of the allowance, a sample of loans
(including impaired and nonperforming loans) are reviewed and classified as to
potential loss exposure.
Based on an estimation computed pursuant to the requirements of Financial
Accounting Standards Board ("FASB") Statement No. 5, "Accounting for
Contingencies," and FASB Statements Nos. 114 and 118, "Accounting by Creditors
for Impairment of a Loan," the analysis of the allowance for loan losses
consists of three components:
o specific credit allocation established for expected losses resulting
from analysis developed through specific credit allocations on
individual loans for which the recorded investment in the loan exceeds
its fair value;
o general portfolio allocation based on historical loan loss experience
for each loan category;
o subjective reserves based on general economic conditions as well as
specific economic factors in the markets in which the Company operates.
The specific credit allocation component of the allowance for loan losses is
based on a regular analysis of loans over a fixed-dollar amount where the
internal credit rating is at or below a predetermined classification. The fair
value of the loan is determined based on either the present value of expected
future cash flows discounted at the loan's effective interest rate, the market
price of the loan, or, if the loan is collateral dependent, the fair value of
the underlying collateral less cost of sale.
23.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
The general portfolio allocation component of the allowance for loan losses is
determined statistically using a loss migration analysis that examines
historical loan loss experience. The loss migration analysis is performed
quarterly and loss factors are updated regularly based on actual experience. The
general portfolio allocation element of the allowance for loan losses also
includes consideration of the amounts necessary for concentrations and changes
in portfolio mix and volume.
The allowance for loan losses is based on estimates, and ultimate losses will
vary from current estimates. These estimates are reviewed monthly, and as
adjustments, either positive or negative, become necessary, a corresponding
increase or decrease is made in the provision for loan losses. The composition
of the loan portfolio has not significantly changed since year-end 2004. The
methodology used to determine the adequacy of the allowance for loan losses is
consistent with prior years, and there were no reallocations.
Management remains watchful of credit quality issues. Should the economic
climate deteriorate from current levels, borrowers may experience difficulty,
and the level of nonperforming loans, charge-offs and delinquencies could rise
and require further increases in the provision.
LIQUIDITY
The Company manages its liquidity position with the objective of maintaining
sufficient funds to respond to the needs of depositors and borrowers and to take
advantage of earnings enhancement opportunities. In addition to the normal
inflow of funds from core-deposit growth together with repayments and maturities
of loans and investments, the Company utilizes other short-term funding sources
such as brokered time deposits, securities sold under agreements to repurchase,
overnight federal funds purchased from correspondent banks and the acceptance of
short-term deposits from public entities, and Federal Home Loan Bank advances.
The Company monitors and manages its liquidity position on several bases, which
vary depending upon the time period. As the time period is expanded, other data
is factored in, including estimated loan funding requirements, estimated loan
payoffs, investment portfolio maturities or calls, and anticipated depository
buildups or runoffs.
The Company classifies all of its securities as available-for-sale, thereby
maintaining significant liquidity. The Company's liquidity position is further
enhanced by structuring its loan portfolio interest payments as monthly and by
the significant representation of retail credit and residential mortgage loans
in the Company's loan portfolio, resulting in a steady stream of loan
repayments. In managing its investment portfolio, the Company provides for
staggered maturities so that cash flows are provided as such investments mature.
The Company's cash flows are comprised of three classifications: cash flows from
operating activities, cash flows from investing activities, and cash flows from
financing activities. Cash flows provided by operating activities and financing
activities offset by those used in investing activities, resulted in a net
increase in cash and cash equivalents of $8,715 from December 31, 2006 to March
31, 2007.
During the first three months of 2007, the Company experienced net cash inflows
of $29,569 in financing activities primarily due to an increase in deposits and
$3,138 was provided by operating activities due to primarily the net income for
the period. In contrast, net cash outflows of $23,992 were used in investing
activities due to the growth in loans.
24.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENCIES, AND OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS
The Company has entered into contractual obligations and commitments and
off-balance sheet financial instruments. The following tables summarize the
Company's contractual cash obligations and other commitments and off balance
sheet instruments as of March 31, 2007.
Payments Due by Period
--------------------------------------------------------------
Within 1 After
Year 1-3 Years 4-5 Years 5 Years Total
---------- ---------- ---------- ---------- ----------
CONTRACTUAL OBLIGATIONS
Short-term debt $ 7,615 $ - $ - $ - $ 7,615
Long-term debt - 129 - 1,016 1,145
Certificates of Deposit 450,814 142,173 7,752 1,904 602,643
Operating leases 322 891 949 480 2,642
Severance payments 130 - - - 130
Series B Mandatory redeemable
Preferred stock - 831 - - 831
Subordinated debentures - - - 20,620 20,620
FHLB Advances 26,374 18,300 8,000 5,064 57,738
---------- ---------- ---------- ---------- ----------
Total contractual cash obligations $ 485,255 $ 161,433 $ 15,752 $ 28,604 $ 691,173
========== ========== ========== ========== ==========
Amount of Commitment Expiration per Period
--------------------------------------------------------------
Within 1 After
Year 1-3 Years 4-5 Years 5 Years Total
---------- ---------- ---------- ---------- ----------
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Lines of credit $ 142,922 $ 54,933 $ 6,394 $ 16,842 $ 221,091
Standby letters of credit 5,937 9,025 - - 14,962
---------- ---------- ---------- ---------- ----------
Total commercial commitments $ 148,859 $ 63,958 $ 6,394 $ 16,842 $ 236,053
========== ========== ========== ========== ==========
CAPITAL RESOURCES
STOCKHOLDERS' EQUITY
The Company is committed to managing capital for maximum shareholder benefit and
maintaining strong protection for depositors and creditors. Stockholders' equity
at March 31, 2007 was $119,667, an increase of $1,476 or 1.25%, from December
31, 2006. The increase in stockholders' equity was largely the result of net
income for the period and an increase in accumulated other comprehensive income.
Average quarterly equity as a percentage of average quarterly assets was 9.15%
at March 31, 2007, compared to 10.35% at December 31, 2006. Book value per
common share equaled $18.42 at March 31, 2007 compared to $18.23 at December 31,
2006.
STOCK REPURCHASE
On November 13, 2006, the Board of Directors approved a stock repurchase plan
whereby the Company may repurchase from time to time up to 5% or 370,000 of its
outstanding shares of common stock in the open market or in private transactions
over an 18 month period. Purchases are dependent upon market conditions and the
availability of shares. The repurchase program enables the Company to optimize
its use of capital relative to other investment alternatives and benefits both
the Company and the shareholders by enhancing earnings per share and return on
equity. During the first quarter of 2007, 2,128 shares were repurchased at a
weighted cost of $19.60.
25.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
CAPITAL MEASUREMENTS
The Bank is expected to meet a minimum risk-based capital to risk-weighted
assets ratio of 8%, of which at least one-half (or 4%) must be in the form of
Tier 1 (core) capital. The remaining one-half (or 4%) may be in the form of Tier
1 (core) or Tier 2 (supplementary) capital. The amount of loan loss allowance
that may be included in capital is limited to 1.25% of risk-weighted assets. The
ratio of Tier 1 (core) and the combined amount of Tier 1 (core) and Tier 2
(supplementary) capital to risk-weighted assets for the Company was 10.6% and
11.7%, respectively, at March 31, 2007. The Company is currently, and expects to
continue to be, in compliance with these guidelines.
The following table sets forth an analysis of the Company's capital ratios:
December 31, Minimum Well
March 31, -------------------------- Capital Capitalized
2007 2006 2005 Ratios Ratios
----------- ----------- ----------- ----------- -----------
Tier 1 risk-based capital $ 102,412 $ 99,869 $ 60,546
Tier 2 risk-based capital 10,607 10,834 6,266
----------- ----------- -----------
Total capital 113,019 110,703 66,812
Risk-weighted assets 968,981 927,043 501,342
Capital ratios
Tier 1 risk-based capital 10.6% 10.8% 12.1% 4.00% 6.00%
Tier 2 risk-based capital 11.7 11.9 13.3 8.00 10.00
Leverage ratio 8.0 7.9 9.0 4.00 5.00
RECENT REGULATORY AND ACCOUNTING DEVELOPMENTS
See Note 9 for further discussion on this.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report 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," "project," "planned" or "potential" or similar
expressions.
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying important
factors that could effect the Company's financial performance and could cause
the Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any
forward-looking statements.
26.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
Among the factors that could have an impact on the Company's ability to achieve
operating results and the growth plan goals are as follows:
o management's ability to reduce and effectively manage interest rate risk
and the impact of interest rates in general on the volatility of the
Company's net interest income;
o fluctuations in the value of the Company's investment securities;
o the Company's ability to ultimately collect on any downgraded
long-standing loan relationships;
o the Company's ability to adapt successfully to technological changes to
compete effectively in the marketplace;
o credit risks and risks from concentrations (by geographic area and by
industry) within the Company's loan portfolio and individual large
loans;
o volatility of rate sensitive deposits;
o operational risks, including data processing system failures or fraud;
o asset/liability matching risks and liquidity risks;
o the ability to successfully acquire low cost deposits or funding;
o the ability to successfully execute strategies to increase noninterest
income;
o the ability to successfully grow non-commercial real estate loans;
o the ability of the Company to fully realize expected cost savings and
revenue generation opportunities in connection with the synergies of
merging with the former Centrue Bank;
o the ability to adopt and implement new regulatory requirements as
dictated by the SEC, FASB or other rule-making bodies which govern our
industry;
o changes in the general economic or industry conditions, nationally or in
the communities in which the Company conducts business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY MANAGEMENT
The Company performs a net interest income analysis as part of its
asset/liability management practices. The net interest income analysis measures
the change in net interest income in the event of hypothetical changes in
interest rates. This analysis assesses the risk of changes in net interest
income in the event of a sudden and sustained 100 to 200 basis point increase in
market interest rates or a 100 to 200 basis point decrease in market rates. The
interest rates scenarios are used for analytical purposes and do not necessarily
represent management's view of future market movements. The tables below present
the Company's projected changes in net interest income for the various rate
shock levels at March 31, 2007 and December 31, 2006, respectively:
Change in Net Interest Income Over
One Year Horizon
------------------------------------------
March 31, 2007 December 31, 2006
------------------- -------------------
Dollar % Dollar %
Change Change Change Change
-------- -------- -------- --------
(Dollars in Thousands)
+200 bp $ 2,369 5.90% $ 2,215 5.49%
+100 bp 1,238 3.09 1,157 2.87
Base - - - -
-100 bp (1,760) (4.39) (1,529) (3.79)
-200 bp (4,631) (11.54) (4,345) (10.77)
27.
CENTRUE FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(In Thousands, Except Per Share Data)
--------------------------------------------------------------------------------
As shown above, the Company's model at March 31, 2007, the effect of an
immediate 200 basis point increase in interest rates would increase the
Company's net interest income by $2,369 or 5.90%. The effect of an immediate 200
basis point decrease in rates would decrease the Company's net interest income
by $4,631 or 11.54%.
Computations of the prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments, and deposit decay rates and should not be relied upon
as indicative of actual results. Actual values may differ from those projections
set forth above, should market conditions vary from the assumptions used in
preparing the analysis. Further, the computations do not contemplate actions the
Company may undertake in response to changes in interest rates.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the Company's disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended). Based on this evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic
filings with the Securities and Exchange Commission. It should be noted that in
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company has designed its disclosure controls and procedures to reach a level
of reasonable assurance of achieving the desired control objectives and, based
on the evaluation described above, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective at reaching that level of reasonable assurance.
There was no change in the Company's internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934, as amended) during the Company's most recently completed fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
28.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of business the Company may be involved in various legal
proceedings from time to time. The Company does not believe it is currently
involved in any claim or action the ultimate disposition of which would have a
material adverse effect on the Company's financial statements.
ITEM 1A. RISK FACTORS
The Company did not experience any material changes in the Risk Factors during
the Company's most recently completed fiscal quarter. For specific information
about the risks facing the Company refer to the Company's Annual Report on Form
10-K for the year ended December 31, 2006.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about purchases of the Company's common
stock by the Company during the quarter ended March 31, 2007.
TOTAL NUMBER OF MAXIMUM
SHARES PURCHASED NUMBER OF SHARES
AS PART OF THAT MAY YET BE
PUBLICLY PURCHASED UNDER
TOTAL NUMBER OF AVERAGE PRICE ANNOUNCED PLANS THE PLANS OR
PERIOD SHARES PURCHASED PAID PER SHARE OR PROGRAMS PROGRAMS
-------------------- ---------------- ---------------- ---------------- ----------------
01/01/07 - 01/31/07 2,128 19.60 2,128 365,872
02/01/07 - 02/28/07 -- -- -- 365,872
03/01/07 - 03/31/07 -- -- -- 365,872
Total (1) 2,128 $ 19.60 2,128 365,872
(1) The Company repurchased 2,128 shares at an average price per share of
$19.60 of our common stock during the quarter ended March 31, 2007
pursuant to the Company's current repurchase program. The current
repurchase program approved on November 12, 2006 authorized us to
repurchase an additional 370,000 of the outstanding shares of our
common stock. The expiration date of this program is May 13, 2008.
Unless terminated earlier by resolution of our board of directors, the
program will expire on the earlier of such expiration date or when we
have repurchased all shares authorized for repurchase under the
program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
29.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits:
3.2 Bylaws
10.1 Centrue Financial Corporation amended and restated 2003 Stock
Option Plan (incorporated by reference from Schedule 14A filed
in connection with the 2007 Annual Meeting of Stockholders).
10.2 Form of Incentive Stock Option Agreement
10.3 Form of Nonqualified Stock Option Agreement
31.1 Certification of Thomas A. Daiber, President and Principal
Executive Officer, required by Rule 13a - 14(a).
31.2 Certification of Kurt R. Stevenson, Senior Executive Vice
President and Principal Financial and Accounting Officer
required by Rule 13a - 14(a).
32.1(1) Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
from the Company's President and Principal Executive Officer.
32.2(1) Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
from the Company's Senior Executive Vice President and
Principal Financial and Accounting Officer.
----------
(1) This certification is not "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, or
incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.
30.
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, thereunto duly authorized.
CENTRUE FINANCIAL CORPORATION
Date: May 14, 2007 By: /s/ Thomas A. Daiber
-----------------------------------
Thomas A. Daiber
President and
Principal Executive Officer
Date: May 14, 2007 By: /s/ Kurt R. Stevenson
-----------------------------------
Kurt R. Stevenson
Senior Executive Vice President and
Principal Financial and
Accounting Officer
31.