Unassociated Document
 
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, 2011
Commission File Number: 0-28846

Centrue Financial Corporation
(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)

7700 Bonhomme Avenue, St. Louis, Missouri 63105
(Address of principal executive offices including zip code)

(314) 505-5500
(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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer
o
Accelerated filer
o
  
 
Non-accelerated filer
o
Smaller reporting company
þ
  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ.

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 13, 2011
Common Stock, Par Value $1.00
  
6,048,405

 
 
 

Centrue Financial Corporation
Form 10-Q Index
March 31, 2011
 
         
Page
             
     
             
  Financial Statements      
             
   
§
  
1
  
             
   
§
  
2
  
             
   
§
  
4
  
             
   
§
  
5
  
             
  Management’s Discussion and Analysis of Financial Condition and Results of Operations  
28
  
             
  Quantitative and Qualitative Disclosures About Market Risk  
44
  
             
  Controls and Procedures  
45
  
             
     
             
  Legal Proceedings  
46
  
             
  Risk Factors  
46
  
             
  Unregistered Sales of Equity Securities and Use of Proceeds  
46
  
             
  Defaults Upon Senior Securities  
46
  
             
  [Reserved]  
46
  
             
  Other Information  
46
  
             
  Exhibits  
46
  
             
  47  
 
 
 
 
 
Centrue Financial Corporation
Part I Financial Information
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
March 31, 2011 and December 31, 2010 (In Thousands, Except Share and Per Share Data)
 
   
March 31,
    
December 31,
  
   
2011
    
2010
  
ASSETS
            
Cash and cash equivalents
  
$
44,445
    
$
82,945
  
Securities available-for-sale
    
234,775
      
219,475
  
Restricted securities
    
10,148
      
10,470
  
Loans
    
710,529
      
721,871
  
Allowance for loan losses
    
(29,089
)
    
(31,511
)
Net loans
    
681,440
      
690,360
  
Bank-owned life insurance
    
30,652
      
30,403
  
Mortgage servicing rights
    
2,383
      
2,425
  
Premises and equipment, net
    
25,267
      
25,687
  
Other real estate owned
    
28,581
      
25,564
  
Other assets
    
16,145
      
17,833
  
                 
Total assets
  
$
1,073,836
    
$
1,105,162
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Liabilities
                
Deposits
                
Non-interest-bearing
  
$
119,779
    
$
118,667
  
Interest-bearing
    
802,704
      
812,438
  
Total deposits
    
922,483
      
931,105
  
Federal funds purchased and securities sold under agreements to repurchase
    
15,931
      
16,188
  
Federal Home Loan Bank advances
    
51,059
      
71,059
  
Notes payable
    
10,623
      
10,623
  
Series B mandatory redeemable preferred stock
    
268
      
268
  
Subordinated debentures
    
20,620
      
20,620
  
Other liabilities
    
13,086
      
12,378
  
Total liabilities
    
1,034,070
      
1,062,241
  
                 
Commitments and contingent liabilities
    
—
      
—
  
                 
Stockholders’ equity
                
Series A convertible preferred stock (aggregate liquidation preference of $2,762)
    
500
      
500
  
Series C fixed rate, Cumulative Perpetual Preferred Stock (aggregate liquidation preference of $32,668)
    
30,965
      
30,810
  
Common stock, $1 par value, 15,000,000 shares authorized; 7,453,555 shares issued at March 31, 2011 and December 31, 2010
    
7,454
      
7,454
  
Surplus
    
74,751
      
74,721
  
Retained earnings (accumulated deficit)
    
(50,969
)
    
(46,861
)
Accumulated other comprehensive income (loss)
    
(821
)
    
(1,589
)
     
61,880
      
65,035
  
Treasury stock, at cost 1,405,150 shares at March 31, 2011 and December 31, 2010
    
(22,114
)
    
(22,114
)
Total stockholders’ equity
    
39,766
      
42,921
  
                 
Total liabilities and stockholders’ equity
  
$
1,073,836
    
$
1,105,162
  
 
See Accompanying Notes to Unaudited Financial Statements

 
1.
 

Centrue Financial Corporation
Unaudited Consolidated Statements Of Income (Loss)
And Comprehensive Income (Loss)
Three Months Ended March 31, 2011 and 2010
(In Thousands, Except Per Share Data)

   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
Interest income
            
Loans
   $ 9,281     $ 11,248  
Securities
                
Taxable
     997       1,733  
Exempt from federal income taxes
     215       278  
Federal funds sold and other
     31       27  
Total interest income
     10,524       13,286  
                 
Interest expense
                
Deposits
     2,487       4,371  
Federal funds purchased and securities sold under agreements to repurchase
     11       18  
Federal Home Loan Bank advances
     412       581  
Series B mandatory redeemable preferred stock
     4       4  
Subordinated debentures
     270       254  
Notes payable
     90       88  
Total interest expense
     3,274       5,316  
                 
Net interest income
     7,250       7,970  
Provision for loan losses
     4,250       9,350  
Net interest income (loss) after provision for loan losses
     3,000       (1,380 )
                 
Noninterest income
                
Service charges
     1,062       1,420  
Mortgage banking income
     407       319  
Bank-owned life insurance
     249       255  
Electronic banking services
     527       484  
Securities gains
     —       2  
Total other-than-temporary impairment losses
     (393 )     (4,516 )
Portion of loss recognized in other comprehensive income (before taxes)
     1       2,909  
Net impairment on securities
     (392 )     (1,607 )
Gain on sale of OREO
     44       9  
Gain on sale of other assets
     63       202  
Other income
     164       238  
      2,124       1,322  
 
See Accompanying Notes to Unaudited Financial Statements
 
 
2.
 
 
Centrue Financial Corporation
Unaudited Consolidated Statements Of Income (Loss)
And Comprehensive Income (Loss)
Three Months Ended March 31, 2011 and 2010
(In Thousands, Except Per Share Data)
 
   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
Noninterest expenses
                
Salaries and employee benefits
     3,633       3,771  
Occupancy, net
     720       788  
Furniture and equipment
     439       524  
Marketing
     60       107  
Supplies and printing
     64       98  
Telephone
     204       179  
Data processing
     364       382  
FDIC insurance
     850       854  
Loan processing and collection costs
     591       512  
OREO valuation adjustment
     200       1,657  
Amortization of intangible assets
     276       339  
Other expenses
     1,399       1,275  
      8,800       10,486  
                 
Income (loss) before income taxes
   $ (3,676 )   $ (10,544 )
Income tax expense (benefit)
     (218 )     (4,284 )
Net income (loss)
   $ (3,458 )   $ (6,260 )
                 
Preferred stock dividends
     494       473  
Net income (loss) for common stockholders
   $ (3,952 )   $ (6,733 )
                 
Basic earnings (loss) per common share
   $ (0.65 )   $ (1.11 )
Diluted earnings (loss) per common share
   $ (0.65 )   $ (1.11 )
                 
Total comprehensive income (loss):
                
Net income (loss)
   $ (3,458 )   $ (6,260 )
Change in unrealized gains (losses) on available for sale securities for which a portion of an other-than-temporary impairment has been recognized in earnings, net of reclassifications and tax effect
     (123 )     (1,784 )
Change in unrealized gains (losses) on other securities available for sale, net of reclassifications and tax effect
     984       478  
Reclassification adjustment:
                
Net impairment loss recognized in earnings
     392       1,607  
(Gains) recognized in earnings
     —       (2 )
Net unrealized gains (loss)
     1,253       299  
Tax expense (benefit)
     485       116  
Other comprehensive income (loss)
     768       183  
Total comprehensive income (loss)
   $ (2,690 )   $ (6,077 )
 
See Accompanying Notes to Unaudited Financial Statements
 
 
3.
 

Centrue Financial Corporation
Unaudited Consolidated Statements Of Cash Flows
Three Months Ended March 31, 2011 and 2010 (In Thousands)
 
   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
Cash flows from operating activities
            
Net Income (Loss)
  
$
(3,458
)
  
$
(6,260
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
                
Depreciation
    
479
      
575
  
Amortization of intangible assets
    
276
      
339
  
Amortization of mortgage servicing rights, net
    
107
      
106
  
Amortization of bond premiums, net
    
642
      
554
  
Income tax valuation adjustment
    
1,141
      
—
  
Share based compensation
    
29
      
24
  
Provision for loan losses
    
4,250
      
9,350
  
Provision for deferred income taxes
    
(1,141
)
    
(189
)
Earnings on bank-owned life insurance
    
(249
)
    
(255
)
Other than temporary impairment, securities
    
392
      
1,607
  
OREO valuation allowance
    
200
      
1,657
  
Securities sale losses (gains), net
    
—
      
(2
)
(Gain) on sale of other assets, net
    
(63
)
    
(202
)
(Gain) on sale of OREO
    
(44
)
    
(9
)
(Gain) loss on sale of loans
    
(266
)
    
(190
)
Proceeds from sales of loans held for sale
    
12,172
      
10,886
  
Origination of loans held for sale
    
(11,931
)
    
(9,699
)
Change in assets and liabilities
                
(Increase) decrease in other assets
    
1,395
      
(3,899
)
Increase (decrease) in other liabilities
    
(294
)
    
(37
)
Net cash provided by operating activities
    
3,637
      
4,356
  
Cash flows from investing activities
                
Proceeds paydowns of securities available for sale
    
12,538
      
15,943
  
Proceeds from calls and maturities of securities available for sale
    
4,660
      
2,310
  
Proceeds from sales of securities available for sale
    
322
      
51
  
Purchases of securities available for sale
    
(32,240
)
    
(30,012
)
Net decrease (increase) in loans
    
209
      
36,203
  
(Purchase) disposal of premises and equipment
    
(59
)
    
265
  
Proceeds from sale of OREO
    
1,312
      
127
  
Net cash provided by (used in) investing activities
    
(13,258
)
    
24,887
  
Cash flows from financing activities
                
Net increase (decrease) in deposits
    
(8,622
)
    
(8,456
)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase
    
(257
)
    
(1,554
)
Repayment of advances from the Federal Home Loan Bank
    
(20,000
)
    
(25,201
)
Proceeds from advances from the Federal Home Loan Bank
    
—
      
15,000
  
Dividends on preferred stock
    
—
      
—
  
Net cash provided by (used in) financing activities
    
(28,879
)
    
(20,211
)
Net increase (decrease) in cash and cash equivalents
    
(38,500
)
    
9,032
  
Cash and cash equivalents
                
Beginning of period
    
82,945
      
56,452
  
End of period
  
$
44,445
    
$
65,484
  
Supplemental disclosures of cash flow information
                
Cash payments for
                
Interest
  
$
3,254
    
$
4,885
  
Income taxes
    
—
      
—
  
Transfers from loans to other real estate owned
    
4,486
      
781
  
 
See Accompanying Notes to Unaudited Financial Statements
 
 
4.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 1. Summary of Significant Accounting Policies

Centrue Financial Corporation is a bank holding company organized under the laws of the State of Delaware. When we use the terms “Centrue,” the “Company,” “we,” “us,” and “our,” we mean Centrue Financial Corporation, a Delaware Corporation, and its consolidated subsidiaries. When we use the term the “Bank,” we are referring to our wholly owned banking subsidiary, Centrue Bank. The Company and the Bank provide a full range of banking services to individual and corporate customers located in markets extending from the far western and southern suburbs of the Chicago metropolitan area across Central Illinois down to the metropolitan St. Louis area. These services include demand, time, and savings deposits; business and consumer lending; and mortgage banking. Additionally, brokerage, asset management, and trust services are provided to our customers on a referral basis to third party providers. The Company is subject to competition from other financial institutions and 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.

Basis of presentation

The accounting and reporting policies of the Company and its subsidiaries conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities and other-than-temporary impairment of securities, the determination of the allowance for loan losses and valuation of other real estate owned.

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, 2010. The consolidated financial statements include the accounts of the Company and Centrue Bank. Intercompany balances and transactions have been eliminated in consolidation and certain 2010 amounts have been reclassified to conform to the 2011 presentation. The annualized results of operations during the three months ended March 31, 2011 are not necessarily indicative of the results expected for the year ending December 31, 2011. All financial information in the following tables is in thousands (000s), except shares and per share data. 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.

Note 2. Earnings Per Share

Basic earnings per share for the three months ended March 31, 2011 and 2010 were computed by dividing net income by the weighted average number of shares outstanding. Diluted earnings per share for the same periods were computed by dividing net income by the weighted average number of shares outstanding, adjusted for the dilutive effect of the stock options and warrants. Computations for basic and diluted earnings per share are provided as follows:
 
 
5.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data) 
Note 2. Earnings Per Share (Continued)
 
   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
Basic Earnings (Loss) Per Common Share
            
Net income (loss) for common shareholders
   $ (3,952 )   $ (6,733 )
Weighted average common shares outstanding
     6,048       6,043  
                 
Basic earnings (loss) per common share
   $ (0.65 )   $ (1.11 )
                 
Diluted Earnings (Loss) Per Common Share
                
Weighted average common shares outstanding
     6,048       6,043  
Add: dilutive effect of assumed exercised stock options
     —       —  
Add: dilutive effect of assumed exercised common stock warrants
     —       —  
Weighted average common and dilutive potential shares outstanding
     6,048       6,043  
                 
Diluted earnings (loss) per common share
   $ (0.65 )   $ (1.11 )

There were 496,738 options and 508,320 warrants outstanding for the three months ended March 31, 2011 and 670,769 options and 508,320 warrants outstanding for the three months ended March 31, 2010 that were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price and therefore, were anti-dilutive. In addition, the Company’s convertible preferred stock was not included in the computation of diluted earnings per share as it was anti-dilutive.

Note 3. Securities

The primary strategic objective related to the Company’s $244.9 million investment securities portfolio is to assist with liquidity and interest rate risk management. Securities classified as available-for-sale, carried at fair value, were $234.8 million at March 31, 2011 compared to $219.5 million at December 31, 2010. The Company also holds $10.1 million and $10.5 million as of March 31, 2011 and December 31, 2010, respectively, Federal Reserve and Federal Home Loan Bank stock which are classified as restricted securities. The Company does not have any securities classified as trading or held-to-maturity.

The following tables represent the fair value of available-for-sale securities and the related, gross unrealized gains and losses recognized in accumulated other comprehensive income(loss) at March 31, 2011 and December 31, 2010:

   
March 31, 2011
  
         
Gross
    
Gross
        
   
Fair
    
Unrealized
    
Unrealized
    
Amortized
  
   
Value
    
Gains
    
Losses
    
Cost
  
U.S. government agencies
   $ 10,669     $ 96     $ (10 )   $ 10,583  
States and political subdivisions
     26,694       513       (1 )     26,182  
U.S. government agency residential mortgage-backed securities
     163,144       2,586       (200 )     160,758  
Collateralized residential mortgage obligations:
                                
Agency
     19,299       140       —       19,159  
Private label
     3,878       35       (12 )     3,855  
Equity securities
     2,305       75       —       2,230  
Collateralized debt obligations:
                                
Single issue
     3,872       26       —       3,846  
Pooled
     4,914       60       (3,367 )     8,221  
                                 
    $ 234,775     $ 3,531     $ (3,590 )   $ 234,834  
 
 
6.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data) 
Note 3. Securities (Continued)

   
December 31, 2010
  
         
Gross
    
Gross
        
   
Fair
    
Unrealized
    
Unrealized
    
Amortized
  
   
Value
    
Gains
    
Losses
    
Cost
  
U.S. government agencies
   $ 7,085     $ 168     $ —     $ 6,917  
States and political subdivisions
     28,348       531       (8 )     27,825  
U.S. government agency residential mortgage-backed securities
     147,846       2,070       (131 )     145,907  
Collateralized residential mortgage obligations:
                                
Agency
     20,735       192       —       20,543  
Private label
     4,936       70       (77 )     4,943  
Equity securities
     2,254       41       —       2,213  
Collateralized debt obligations:
                                
Single issue
     3,849       3       —       3,846  
Pooled
     4,422       42       (4,213 )     8,593  
                                 
    $ 219,475     $ 3,117     $ (4,429 )   $ 220,787  

The amounts below include the activity for available-for-sale securities related to sales, maturities and calls:

   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
Proceeds from calls and maturities
   $ 4,660     $ 2,310  
Proceeds from sales
     322       51  
Realized gains
     —       2  
Realized losses
     —       —  
Net impairment loss recognized in earnings
     (392 )     (1,607 )
Tax benefit (provision) related to net realized gains and losses
     151       620  

The following table represents securities with unrealized losses not recognized in income presented by the length of time individual securities have been in a continuous unrealized loss position:
 
   
March 31, 2011
  
   
Less than 12 Months
    
12 Months or More
    
Total
  
   
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
   
Value
    
Loss
    
Value
    
Loss
    
Value
    
Loss
  
                                     
U.S. government agencies
   $ 1,990     $ (10 )   $ —     $ —     $ 1,990     $ (10 )
State and political subdivisions
     492       (1 )     —       —       492       (1 )
U.S. government agency residential mortgage-backed securities
     23,451       (200 )     —       —       23,451       (200 )
Collateralized residential mortgage obligations: private label
     950       (1 )     1,770       (11 )     2,720       (12 )
Collateralized debt obligations: pooled
     —       —       4,804       (3,367 )     4,804       (3,367 )
                                                 
Total temporarily impaired
   $ 26,883     $ (212 )   $ 6,574     $ (3,378 )   $ 33,457     $ ( 3,590 )
 
 
7.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data) 
Note 3. Securities (Continued)

   
December 31, 2010
  
   
Less than 12 Months
    
12 Months or More
    
Total
  
   
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
   
Value
    
Loss
    
Value
    
Loss
    
Value
    
Loss
  
                                     
State and political subdivisions
   $ 664     $ (3 )   $ 350     $ (5 )   $ 1,014     $ (8 )
U.S. government agency residential mortgage-backed securities
     17,216       (131 )     —       —       17,216       (131 )
Collateralized residential mortgage obligations: private label
     —       —       2,559       (77 )     2,559       (77 )
Collateralized debt obligations: pooled
     —       —       4,330       (4,213 )     4,330       (4,213 )
                                                 
Total temporarily impaired
   $ 17,880     $ (134 )   $ 7,239     $ (4,295 )   $ 25,119     $ (4,429 )

The fair values of securities classified as available-for-sale at March 31, 2011, by contractual maturity, are shown as follows. Securities not due at a single maturity date, including mortgage-backed securities, collateralized mortgage obligations, and equity securities are shown separately.

   
Amortized
        
   
Cost
    
Fair Value
  
Due in one year or less
   $ 9,730     $ 9,830  
Due after one year through five years
     16,054       16,303  
Due after five years through ten years
     7,697       7,835  
Due after ten years
     15,351       12,181  
U.S. government agency residential mortgage-backed securities
     160,758       163,144  
Collateralized residential mortgage obligations
     23,014       23,177  
Equity
     2,230       2,305  
    $ 234,834     $ 234,775  
 
The following table presents a rollforward of the credit losses recognized in earnings for the three month period ended March 31, 2011 and 2010:


   
2011
    
2010
  
Beginning balance, January 1,
   $ 20,362     $ 15,341  
Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized
     —       —  
Additions/Subtractions
                
Amounts realized for securities sold during the period
     —       —  
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis
     —       —  
Reduction for increase in cash flows expected to be collected that are recognized over the remaining life of the security
     —       —  
Increases to the amount related to the credit loss for which other-than-temporary was previously recognized
     392       1,607  
                 
Ending balance, March 31,
   $ 20,754     $ 16,948  

See Note 9 on Fair Value for additional information about our analysis on the security portfolio related to the fair value and other-than-temporary impairment disclosures of these instruments.
 
 
8.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 4. Loans

The major classifications of loans follow:
 
   
Aggregate Principal Amount
  
   
March 31,
    
December 31,
  
   
2011
    
2010
  
             
Commercial
   $ 86,914     $ 87,226  
Agricultural & AGRE
     45,931       44,289  
Construction, land & development
     63,645       72,078  
Commercial RE
     343,472       342,208  
1-4 family mortgages
     167,612       172,666  
Consumer
     2,955       3,404  
Total loans
   $ 710,529     $ 721,871  
Allowance for loan losses
     (29,089 )     (31,511 )
Loans, net
   $ 681,440     $ 690,360  

There were $1.7 million of loans held for sale at both March 31, 2011 and December 31, 2010.

The credit quality indicator utilized by the Company to internally analyze the loan portfolio is the internal risk rating. Internal risk ratings of 0 to 5 are considered pass credits, a risk rating of a 6 is special mention, a risk rating of a 7 is substandard, and a risk rating of an 8 is doubtful. Loans classified as pass credits have no identified material weaknesses and are performing as agreed. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the commercial loan portfolio by internal risk rating:
 
Mar. 31, 2011
  
Commercial
          
Construction
    
Commercial Real Estate
        
Internal Risk Rating
  
Closed end
    
Lines of Credit
    
Agriculture & AG RE
    
Land & Development
    
Owner-Occupied
    
Non-Owner Occupied
    
Total
  
1-2
    
$
2,129
    
$
362
    
$
7,688
    
$
4,319
    
$
7,197
    
$
1,051
    
$
22,746
  
3
      
3,903
      
4,317
      
14,228
      
1,195
      
13,664
      
21,396
      
58,703
  
4
      
20,026
      
27,804
      
14,858
      
1,477
      
88,370
      
49,025
      
201,560
  
5
      
10,564
      
4,402
      
4,654
      
8,226
      
24,786
      
53,376
      
106,008
  
6
      
1,337
      
5,554
      
—
      
7,615
      
7,126
      
21,152
      
42,784
  
7
      
1,895
      
4,222
      
4,503
      
40,813
      
22,773
      
32,954
      
107,160
  
8
      
91
      
308
      
—
      
—
      
602
      
—
      
1,001
  
Total
  
$
39,945
    
$
46,969
    
$
45,931
    
$
63,645
    
$
164,518
    
$
178,954
    
$
539,962
  
 
Dec. 31, 2010
  
Commercial
          
Construction
    
Commercial Real Estate
        
Internal Risk Rating
  
Closed end
    
Lines of Credit
    
Agriculture & AG RE
    
Land & Development
    
Owner-Occupied
    
Non-Owner Occupied
    
Total
  
1-2
    
$
2,294
    
$
331
    
$
8,527
    
$
4,700
    
$
8,559
    
$
1,479
    
$
25,890
  
3
      
3,935
      
7,333
      
10,873
      
1,237
      
17,673
      
23,045
      
64,096
  
4
      
21,225
      
24,042
      
16,742
      
1,500
      
76,491
      
61,468
      
201,468
  
5
      
10,483
      
4,768
      
3,588
      
8,720
      
21,389
      
42,495
      
91,443
  
6
      
1,217
      
4,506
      
42
      
7,232
      
3,206
      
20,821
      
37,024
  
7
      
2,149
      
4,898
      
4,517
      
48,689
      
25,075
      
40,507
      
125,835
  
8
      
—
      
45
      
—
      
—
      
—
      
—
      
45
  
Total
  
$
41,303
    
$
45,923
    
$
44,289
    
$
72,078
    
$
152,393
    
$
189,815
    
$
545,801
  
 
 
9.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 4. Loans (Continued)

The retail residential loan portfolio is generally unrated. Delinquency is a typical factor in adversely risk rating a credit to a special mention or substandard. The following table presents the retail residential loan portfolio by internal risk rating:

   
Residential – 1-4 family
  
   
Senior Lien
    
JR Lien & Lines of Credit
    
Total
  
Mar. 31, 2011
            
Unrated
   $ 96,892     $ 53,046     $ 149,938  
Special mention
     1,312       1,897       3,209  
Substandard
     13,421       1,044       14,465  
Total
   $ 111,625     $ 55,987     $ 167,612  

   
Residential – 1-4 family
  
   
Senior Lien
    
JR Lien & Lines of Credit
    
Total
  
Dec. 31, 2010
            
Unrated
   $ 99,852     $ 55,147     $ 154,999  
Special mention
     1,034       1,769       2,803  
Substandard
     13,707       1,157       14,864  
Total
   $ 114,593     $ 58,073     $ 172,666  

An analysis of the March 31, 2011 and March 31, 2010 activity in the allowance for loan losses follows:

   
Commercial
    
Agriculture & AGRE
    
Construction, Land & Development
    
Commercial RE
    
1-4 Family Residential
    
Consumer
    
Total
  
March 31, 2011
                                          
Beginning Balance
   $ 1,634     $ 337     $ 12,500     $ 13,721     $ 3,273     $ 46     $ 31,511  
Charge-offs
     (65 )     —       (4,501 )     (1,718 )     (626 )     (20 )     (6,930 )
Recoveries
     6       1       1       217       28       5       258  
Provision
     184       (23 )     655       3,049       380       5       4,250  
Ending Balance
   $ 1,759     $ 315     $ 8,655     $ 15,269     $ 3,055     $ 36     $ 29,089  

March 31, 2010
      
Beginning Balance
   $ 40,909  
Charge-offs
     (8,356 )
Recoveries
     122  
Provision
     9,350  
Ending Balance
   $ 41,845  
 
 
10.
 

Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 4. Loans (Continued)

The following is an analysis on the balance and allowance for loan loss for impaired loans as of March 31, 2011 and December 31, 2010:

Mar. 31, 2011
  
Commercial
  
Agriculture & AG RE
  
Construction, Land & Development
  
Commercial RE
  
1-4 Family Residential
  
Consumer
  
Total
  
Allowance for loan losses:
                              
Loans individually evaluated for impairment
   $ 1,326   $ 311   $ 4,404   $ 8,738   $ 1,242   $ 1   $ 16,022  
Loans collectively evaluated for impairment
     433     4     4,251     6,531     1,813     35     13,067  
Total ending allowance balance
   $ 1,759   $ 315   $ 8,655   $ 15,269   $ 3,055   $ 36   $ 29,089  
                                             
Loan balances:
                                            
Loans individually evaluated for impairment
   $ 6,293   $ 4,503   $ 40,634   $ 52,474   $ 14,054   $ 1   $ 117,959  
Loans collectively evaluated for impairment
     80,621     41,428     23,011     290,998     153,558     2,954     592,570  
Loans with an allowance recorded:
   $ 86,914   $ 45,931   $ 63,645   $ 343,472   $ 167,612   $ 2,955   $ 710,529  

Dec. 31, 2010
  
Commercial
  
Agriculture & AG RE
  
Construction, Land & Development
  
Commercial RE
  
1-4 Family Residential
  
Consumer
  
Total
  
Allowance for loan losses:
                              
Loans individually evaluated for impairment
   $ 1,175   $ 328   $ 8,174   $ 6,487   $ 1,500   $ —   $ 17,664  
Loans collectively evaluated for impairment
     459     9     4,326     7,234     1,773     46     13,847  
Total ending allowance balance
   $ 1,634   $ 337   $ 12,500   $ 13,721   $ 3,273   $ 46   $ 31,511  
                                             
Loan balances:
                                            
Loans individually evaluated for impairment
   $ 6,858   $ 4,516   $ 48,535   $ 51,652   $ 14,602   $ 1   $ 126,164  
Loans collectively evaluated for impairment
     80,368     39,773     23,543     290,556     158,064     3,403     595,707  
Loans with an allowance recorded:
   $ 87,226   $ 44,289   $ 72,078   $ 342,208   $ 172,666   $ 3,404   $ 721,871  
 
Troubled debt restructurings (“TDRs”) are separately identified for impairment disclosures. If a loan is considered to be collateral dependent loan, the TDR is reported, net, at the fair value of the collateral. The company had TDRs of $5.1 million and $5.3 million as of March 31, 2011 and December 31, 2010, respectively. Specific reserves of $0.4 million were allocated to TDRs as of March 31, 2011 and December 31, 2010, respectively. At March 31, 2011, nonaccrual TDR loans were $4.9 million, as compared to $5.0 million at December 31, 2010. At March 31, 2011 and December 31, 2010, $0.2 million and $0.3 million of TDRs were on accrual status. The Company has not committed to lend any additional amounts to customers with outstanding loans that are classified as TDRs as of March 31, 2011.
 
 
11.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 4. Loans (Continued)

The following tables present data on impaired loans:

March 31, 2011
  
Recorded Investment
    
Unpaid Principal Balance
    
Related Allowance
    
Average Recorded Investment
    
Interest Income Recognized
  
Loans with no related allowance recorded:
                              
Commercial
   $ 817     $ 2,331     $ —     $ 1,515     $ 2  
Agricultural & AGRE
     55       671       —       145       3  
Construction, land & development
     16,193       39,316       —       10,322       (39 )
Commercial RE
     19,557       29,174       —       19,290       170  
1-4 family residential
     3,471       5,123       —       3,311       27  
Consumer
     —       —       —       —       —  
Subtotal
     40,093       76,615       —       34,583       163  
                                         
Loans with an allowance recorded:
                                        
Commercial
     5,476       5,476       1,326       3,355       38  
Agricultural & AGRE
     4,449       4,449       311       3,996       36  
Construction, land & development
     24,440       38,159       4,404       33,415       2  
Commercial RE
     32,917       32,918       8,738       26,034       432  
1-4 family residential
     10,583       10,604       1,242       10,304       217  
Consumer
     1       1       1       —       —  
Subtotal
     77,866       91,607       16,022       77,104       725  
Total
   $ 117,959     $ 168,222     $ 16,022     $ 111,687     $ 888  
                                         
Commercial
   $ 103,904     $ 152,494     $ 14,779     $ 98,072     $ 644  
Residential
   $ 14,054     $ 15,727     $ 1,242     $ 13,615     $ 244  
Consumer
   $ 1     $ 1     $ 1     $ —     $ —  

December 31, 2010
  
Recorded Investment
    
Unpaid Principal Balance
    
Related Allowance
    
Average Recorded Investment
    
Interest Income Recognized
  
Loans with no related allowance recorded:
                              
Commercial
   $ 3,968     $ 5,805     $ —     $ 1,638     $ 133  
Agricultural & AGRE
     68       685       —       143       86  
Construction, land & development
     8,695       23,949       —       8,188       (395 )
Commercial RE
     22,129       26,581       —       15,795       313  
1-4 family residential
     2,838       2,953       —       3,069       104  
Consumer
     1       1       —       —       —  
Subtotal
     37,699       59,974       —       28,833       241  
Loans with an allowance recorded:
                                        
Commercial
     2,890       2,890       1,175       4,228       140  
Agricultural & AGRE
     4,448       4,448       328       3,849       155  
Construction, land & development
     39,840       51,001       8,174       40,972       914  
Commercial RE
     29,523       34,695       6,487       28,443       635  
1-4 family residential
     11,764       12,812       1,500       11,481       856  
Consumer
     —       —       —       11       —  
Subtotal
     88,465       105,846       17,664       88,984       2,700  
Total
   $ 126,164     $ 165,820     $ 17,664     $ 117,817     $ 2,941  
                                         
Commercial
   $ 111,561     $ 150,055     $ 16,164     $ 103,256     $ 1,981  
Residential
   $ 14,602     $ 15,765     $ 1,500     $ 14,550     $ 960  
Consumer
   $ 1     $ 1     $ —     $ 11     $ —  

Due to the economic conditions facing many of its customers, the Company determined that there were $54.4 million and $56.5 million of loans that were classified as impaired but were considered to be performing loans at March 31, 2011 and December 31, 2010, respectively.
 
 
12.
 
 
Centrue Financial Corporation
Note to Unaudited Consolidated Financial Statements
(Table Amounts In Thousands, Except Share Data)
Note 4. Loans (Continued)

The following tables represent activity related to loan portfolio aging:

March 31, 2011
  
30 – 59 days past due
  
60 -89 days past due
  
90 days past due or nonaccrual
  
Total Past Due
  
Current
  
Total Loans
  
Recorded Investment 90 days Accruing
  
Commercial