Edgar Filing: CENTRUE FINANCIAL CORP

SEC 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, 2016

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 incorporation or organization)		(I.R.S. Employer Identification number)

122 W. Madison Street, Ottawa, IL 61350

(Address of principal executive offices including zip code)

(815) 431-8400

(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 [ü] No [ ]

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 [ü] No [ ]

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	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[ ü]

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

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 11, 2016
Common Stock, Par Value $0.01		6,513,694

Centrue Financial Corporation

Form 10-Q Index

March 31, 2016



		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income and Comprehensive Income	2
	Consolidated Statements of Cash Flows	4
	Notes to the Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
SIGNATURES		39

CENTRUE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT FOR PAR VALUE AND SHARE DATA)



	March 31, 2016			December 31, 2015
ASSETS
Cash and cash equivalents	$	23,379		$	27,655
Securities available-for-sale	169,782			171,440
Restricted securities	10,099			9,116
Loans held for sale	182			735
Loans, net of allowance for loan loss: 2016 - $8,974; 2015 - $8,591	641,005			624,956
Branch assets held for sale	16,034			16,673
Bank-owned life insurance	35,326			35,103
Mortgage servicing rights	2,091			2,129
Premises and equipment, net	16,671			16,852
Intangible assets, net	642			880
Other real estate owned, net	7,377			8,401
Deferred tax assets, net	37,367			38,180
Other assets	9,062			9,098
Total assets	$	969,017		$	961,218
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest-bearing	$	156,627		$	164,137
Interest-bearing	572,642			554,367
Total deposits	729,269			718,504
Federal funds purchased and securities sold under agreements to repurchase	15,573			18,730
Federal Home Loan Bank advances	75,000			76,000
Series B mandatory redeemable preferred stock	268			268
Subordinated debentures	20,620			20,620
Other liabilities	5,462			5,815
Total liabilities	846,192			839,937

Commitments and contingent liabilities	—			—

Stockholders' equity
Series D Fixed Rate, Non-Cumulative Perpetual Preferred Stock,
2,363 shares authorized and issued at March 31, 2016 and
December 31, 2015; aggregate liquidation preference of $2,636	2,636			2,636
Common stock, $0.01 par value; 215,000,000 shares authorized;
6,581,544 shares issued at March 31, 2016 and December 31, 2015	66			66
Surplus	140,610			140,609
Accumulated deficit	(2,122		)	(2,958		)
Accumulated other comprehensive loss	(2,239		)	(2,946		)
	138,951			137,407
Treasury stock, at cost, 67,850 shares at March 31, 2016
and December 31, 2015	(16,126		)	(16,126		)
Total stockholders' equity	122,825			121,281
Total liabilities and stockholders' equity	$	969,017		$	961,218

See Accompanying Notes to Consolidated Financial Statements

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)



	Three Months Ended March 31,
	2016		2015
Interest income
Loans	$	7,029	$	6,087
Securities
Taxable	829		594
Exempt from federal income taxes	23		33
Federal funds sold and other	32		20
Total interest income	7,913		6,734

Interest expense
Deposits	263		320
Federal funds purchased and securities sold under
agreements to repurchase	12		13
Federal Home Loan Bank advances	230		117
Series B mandatory redeemable preferred stock	4		4
Subordinated debentures	142		156
Notes payable	—		84
Total interest expense	651		694

Net interest income	7,262		6,040
Provision for loan losses	300		—
Net interest income after provision for loan losses	6,962		6,040

Noninterest income
Service charges	945		928
Mortgage banking income	200		280
Electronic banking services	633		591
Bank-owned life insurance	223		223
Securities gains, net	37		27
Income from real estate	110		153
Gain on sale of OREO	48		2
Gain on extinguishment of debt	—		1,750
Other income	67		73
	2,263		4,027

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)



	Three Months Ended March 31,
	2016			2015
Noninterest expense
Salaries and employee benefits	4,304			4,242
Occupancy, net	680			768
Furniture and equipment	256			241
Marketing	35			35
Supplies and printing	58			68
Telephone	204			184
Data processing	423			406
FDIC insurance	157			397
Loan processing and collection costs	58			171
OREO carrying costs	91			292
OREO valuation adjustment	16			61
Amortization of intangible assets	238			238
Other expenses	1,346			1,080
	7,866			8,183

Income before income taxes	$	1,359		$	1,884
Income tax expense	441			17
Net income	$	918		$	1,867

Preferred stock dividends	82			1,006
Discount on redemption of preferred stock	—			(13,668		)
Net income for common stockholders	$	836		$	14,529

Basic earnings per common share⁽¹⁾	$	0.13		$	65.60
Diluted earnings per common share⁽¹⁾	$	0.13		$	65.60


Total comprehensive income:
Net income	$	918		$	1,867

Change in unrealized gains
on securities available for sale	1,195			818
Reclassification adjustment for gains
recognized in income	(37		)	(27		)
Net unrealized gains	1,158			791
Tax effect	451			—
Other comprehensive income	707			791
Total comprehensive income	$	1,625		$	2,658

⁽¹⁾ Share and per share amounts have been adjusted to reflect the Company's 1:30 reverse stock split effective May 29, 2015

See Accompanying Notes to Consolidated Financial Statements

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)



	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities
Net income	$	918		$	1,867
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation	295			280
Amortization of intangible assets	238			238
Amortization of mortgage servicing rights, net	66			92
Amortization of bond premiums, net	304			293
Provision for loan losses	300			—
Provision for deferred income taxes	441			—
Earnings on bank-owned life insurance	(223		)	(223		)
OREO valuation adjustment	16			61
Securities gains, net	(37		)	(27		)
Gain on sale of OREO	(48		)	(2		)
Gain on extinguishment of debt	—			(1,750		)
Gain on sale of loans	(92		)	(182		)
Proceeds from sales of loans held for sale	3,729			5,659
Origination of loans held for sale	(3,084		)	(5,119		)
Change in assets and liabilities
(Increase) decrease in other assets	(84		)	1,415
Decrease in other liabilities	(463		)	(5,013		)
Net cash (used in) provided by operating activities	2,276			(2,411		)
Cash flows from investing activities
Proceeds from paydowns of securities available for sale	7,112			6,145
Proceeds from calls and maturities of securities available for sale	115			110
Proceeds from sales of securities available for sale	5,016			4,985
Purchases of securities available for sale	(9,680		)	(35,748		)
Redemption of Federal Reserve Bank stock	—			179
Purchase of Federal Reserve Bank stock	(983		)	—
Net increase in loans	(15,746		)	(16,562		)
Purchase of premises and equipment	(78		)	(45		)
Proceeds from sale of OREO	1,166			234
Net cash used in investing activities	(13,078		)	(40,702		)

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)



	Three Months Ended March 31,
	2016			2015
Cash flows from financing activities
Net increase in deposits	10,765			13,849
Net decrease in federal funds purchased
and securities sold under agreements to repurchase	(3,157		)	(9,728		)
Net proceeds (repayments) of advances from the Federal Home Loan Bank	(1,000		)	15,000
Repayment of Notes Payable	—			(8,500		)
Net proceeds from the issuance of Common Stock	—			68,964
Redemption of Series C Cumulative Perpetual Preferred Stock	—			(19,000		)
Dividends paid on preferred stock	(82		)	—
Net cash provided by financing activities	6,526			60,585
Net increase (decrease) in cash and cash equivalents	(4,276		)	17,472
Cash and cash equivalents
Beginning of period	27,655			49,167
End of period	$	23,379		$	66,639
Supplemental disclosures of cash flow information
Cash payments for
Interest	$	692		$	5,401
Income taxes	57			2
Transfers from loans to other real estate owned	—			34
Transfers from loan portfolio and sold in secondary market	—			315
Loan transfers from branch assets held for sale	(603		)	—
Premises and equipment transferred from branch assets held for sale	(36		)	—

CENTRUE FINANCIAL CORPORATION

NOTES 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 subsidiary. 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. 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, 2015. The consolidated financial statements include the accounts of the Company and Centrue Bank. Intercompany balances and transactions have been eliminated in consolidation and certain 2015 amounts have been reclassified to conform to the 2016 presentation. The annualized results of operations during the three months ended March 31, 2016 are not necessarily indicative of the results expected for the year ending December 31, 2016. All financial information in the following tables is in thousands (000s), except share 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.

Reverse Stock Split

Common shares and per share amounts for all periods shown have been restated to reflect the impact of the 1:30 reverse stock split the Company completed effective May 29, 2015.

Capital Event

On March 31, 2015, the Company completed the issuance of $76.0 million of new common stock in a private placement offering, $68.2 million of net proceeds after issuance and registration costs of $7.8 million. A total of 6.3 million shares were sold in the offering at a price of $12.00 per share. In conjunction with the stock offering the Company used the proceeds in part to pay $4.9 million in accrued but unpaid interest on its subordinated debentures, redeemed all $32.7 million of Series C Preferred Stock for $19.0 million, settled $10.3 million in notes payable with a financial institution for $8.5 million and made a $36.0 million capital contribution into Centrue Bank. The remaining proceeds have been and will be used for general corporate purposes.

Recent Accounting Pronouncements

In March 2016, the FASB issued an update (ASU No. 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting.) The guidance in this update affects any entity that issues share-based payment awards to its employees and is intended to simplify several aspects of the accounting for share-based payment awards including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. Management is currently evaluating the impact on the consolidated financial statements and related disclosures.

In February 2016, the FASB issued an update (ASU No. 2016-02, Leases) creating FASB Topic 842, Leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Management is currently evaluating the impact on the consolidated financial statements and related disclosures.

In January 2016, the FASB issued an update, ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance in this update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently determining the impact of this new guidance on the consolidated financial statements.

In May 2014, the FASB issued an update (ASU No. 2014-09, Revenue from Contracts with Customers) creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update will become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. Management is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

Note 2. Earnings Per Share

A reconciliation of the numerators and denominators for earnings per common share computations for the three months ended March 31, 2016 and 2015 is presented below (shares in thousands). Common shares, options, and per share amounts for all periods shown have been restated to reflect the impact of the one for thirty reverse stock split the Company completed effective May 29, 2015. Options to purchase 1,992 and 4,982 shares of common stock were outstanding for March 31, 2016 and 2015, respectively; but 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.



	Three Months Ended March 31,
	2016			2015
Basic Earnings Per Common Share
Net income	$	918		$	1,867
Preferred stock dividends	(82		)	(1,006		)
Discount on redemption of preferred stock	—			13,668
Net income for common shareholders	$	836		$	14,529
Weighted average common shares outstanding	6,513,694			221,492
Basic earnings per common share	$	0.13		$	65.60
Diluted Earnings Per Common Share
Weighted average common shares outstanding	6,513,694			221,492
Weighted average common and dilutive
potential shares outstanding	6,513,694			221,492
Diluted earnings per common share	$	0.13		$	65.60

Note 3. Securities

The primary strategic objective related to the Company's securities portfolio is to assist with liquidity and interest rate risk management. The fair value of the securities classified as available-for-sale was $169.8 million at March 31, 2016 compared to $171.4 million at December 31, 2015. The carrying value of securities classified as restricted (Federal Reserve and Federal Home Loan Bank stock) was $10.1 million at March 31, 2016 compared to $9.1 million at December 31, 2015. The Company does not have any securities classified as trading or held-to-maturity.

The following table summarizes the fair value of available-for-sale securities, the related gross unrealized gains and losses recognized in accumulated other comprehensive income, and the amortized cost at March 31, 2016 and December 31, 2015:

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



	March 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agencies	$	9,650	$	13	$	—		$	9,663
States and political subdivisions	13,085		36		(26		)	13,095
U.S. government agency residential
mortgage-backed securities	127,087		184		(372		)	126,899
Collateralized residential mortgage obligations:
Agency	17,196		33		(3		)	17,226
Equity securities	2,646		253		—			2,899
	$	169,664	$	519	$	(401	)	$	169,782



	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agencies	$	14,629	$	13	$	(35	)	$	14,607
States and political subdivisions	10,190		16		(25		)	10,181
U.S. government agency residential
mortgage-backed securities	127,039		7		(1,017		)	126,029
Collateralized residential mortgage obligations:
Agency	17,990		—		(157		)	17,833
Equity securities	2,632		158		—			2,790
	$	172,480	$	194	$	(1,234	)	$	171,440

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



	Three Months Ended March 31,
	2016		2015
Proceeds from calls and maturities	$	115	$	110
Proceeds from sales	5,016		4,985
Realized gains	37		46
Realized losses	—		(19		)
Net impairment loss recognized in earnings	—		—

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The amortized cost and fair value of the investment securities portfolio are shown below by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date and equity securities are shown separately.



	March 31, 2016
	Amortized Cost		Fair Value
Due in one year or less	$	3,939	$	3,947
Due after one year through five years	10,625		10,614
Due after five years through ten years	8,171		8,197
Due after ten years	—		—
U.S. government agency residential mortgage-backed securities	127,087		126,899
Collateralized residential mortgage obligations	17,196		17,226
Equity	2,646		2,899
	$	169,664	$	169,782

Securities with unrealized losses not recognized in income are as follows presented by length of time individual securities have been in a continuous unrealized loss position:



	March 31, 2016
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
States and political subdivisions	$	6,449	$	(26	)	$	—	$	—		$	6,449	$	(26	)
U.S. government agency residential
mortgage-backed securities	72,170		(314		)	6,104		(58		)	78,274		(372		)
Collateralized residential mortgage
obligations: Agency	2,247		(3		)	—		—			2,247		(3		)
Total temporarily impaired	$	80,866	$	(343	)	$	6,104	$	(58	)	$	86,970	$	(401	)



	December 31, 2015
	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agencies	$	10,394	$	(35	)	$	—	$	—	$	10,394	$	(35	)
States and political subdivisions	6,057		(25		)	—		—		6,057		(25		)
U.S. government agency residential
mortgage-backed securities	124,411		(1,017		)	—		—		124,411		(1,017		)
Collateralized residential mortgage
obligations: Agency	17,833		(157		)	—		—		17,833		(157		)
Total temporarily impaired	$	158,695	$	(1,234	)	$	—	$	—	$	158,695	$	(1,234	)

CENTRUE FINANCIAL CORPORATION

NOTES 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, 2016			December 31, 2015

Commercial	$	70,033		67,360
Agricultural & AG RE	47,705			50,121
Construction, land & development	27,042			26,016
Commercial RE	408,074			391,918
1-4 family mortgages	94,218			95,227
Consumer	2,907			2,905
Total Loans	$	649,979		633,547
Allowance for loan losses	(8,974		)	(8,591	)
Loans, net	$	641,005		624,956

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 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:



March 31, 2016
	Commercial								Commercial Real Estate
Internal Risk Rating	Closed-end		Lines of Credit		Agriculture & AG RE		Construction, Land & Development		Owner- Occupied		Non-Owner Occupied		Total
Pass	$	24,399	$	44,840	$	47,705	$	26,852	$	177,881	$	207,211	$	528,888
Special Mention	296		250		—		63		7,629		11,382		19,620
Substandard	198		50		—		127		405		3,566		4,346
Doubtful	—		—		—		—		—		—		—
Total	$	24,893	$	45,140	$	47,705	$	27,042	$	185,915	$	222,159	$	552,854

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2015
	Commercial								Commercial Real Estate
Internal Risk Rating	Closed-end		Lines of Credit		Agriculture & AG RE		Construction, Land & Development		Owner- Occupied		Non-Owner Occupied		Total
Pass	$	24,303	$	42,374	$	50,121	$	25,825	$	164,538	$	203,679	$	510,840
Special Mention	304		250		—		64		7,701		11,512		19,831
Substandard	129		—		—		127		412		4,076		4,744
Doubtful	—		—		—		—		—		—		—
Total	$	24,736	$	42,624	$	50,121	$	26,016	$	172,651	$	219,267	$	535,415

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
March 31, 2016
Unrated	$	48,616	$	39,700	$	88,316
Special mention	3,839		195		4,034
Substandard	1,448		420		1,868
Doubtful	—		—		—
Total	$	53,903	$	40,315	$	94,218



	Residential -- 1-4 family
	Senior Lien		Jr. Lien & Lines of Credit		Total
December 31, 2015
Unrated	$	48,319	$	41,380	$	89,699
Special mention	4,011		168		4,179
Substandard	1,036		313		1,349
Doubtful	—		—		—
Total	$	53,366	$	41,861	$	95,227

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.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

An analysis of activity in the allowance for loan losses for the three months ended March 31, 2016 and 2015 follows:



	Commercial		Agriculture & AG RE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
March 31, 2016
Beginning Balance	$	648	$	97		$	523		$	5,681		$	1,628		$	14		$	8,591
Charge-offs	—		—			—			(503		)	(9		)	(3		)	(515		)
Recoveries	44		54			19			445			36			—			598
Provision	60		(32		)	(26		)	(82		)	387			(7		)	300
Ending Balance	$	752	$	119		$	516		$	5,541		$	2,042		$	4		$	8,974



	Commercial			Agriculture & AG RE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
March 31, 2015
Beginning Balance	$	1,117		$	69		$	711		$	3,999		$	2,075		$	10		$	7,981
Charge-offs	—			—			(3		)	(1		)	(67		)	(1		)	(72		)
Recoveries	26			—			21			22			9			8			86
Provision	(4		)	(19		)	(292		)	(2		)	325			(8		)	—
Ending Balance	$	1,139		$	50		$	437		$	4,018		$	2,342		$	9		$	7,995

The following is an analysis on the balance in the allowance for loan losses and the recorded investment in impaired loans by portfolio segment based on impairment method as of March 31, 2016 and December 31, 2015:



March 31, 2016	Commercial		Agriculture & AG RE		Construction, Land & Development		Commercial RE		1-4 Family Residential		Consumer		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	179	$	—	$	10	$	614	$	432	$	—	$	1,235
Loans collectively evaluated for impairment	573		119		506		4,927		1,610		4		7,739
Total allowance balance:	$	752	$	119	$	516	$	5,541	$	2,042	$	4	$	8,974

Loan balances:
Loans individually evaluated for impairment	$	248	$	—	$	127	$	3,971	$	1,867	$	—	$	6,213
Loans collectively evaluated for impairment	69,785		47,705		26,915		404,103		92,351		2,907		643,766
Total loans balance:	$	70,033	$	47,705	$	27,042	$	408,074	$	94,218	$	2,907	$	649,979

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2015	Commercial		Agriculture & AG RE		Construction, Land & Development		Commercial RE		1-4 Family Residential		Consumer		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	80	$	—	$	10	$	1,178	$	325	$	1	$	1,594
Loans collectively evaluated for impairment	568		97		513		4,503		1,303		13		6,997
Total allowance balance:	$	648	$	97	$	523	$	5,681	$	1,628	$	14	$	8,591

Loan balances:
Loans individually evaluated for impairment	$	129	$	—	$	127	$	4,488	$	1,348	$	1	$	6,093
Loans collectively evaluated for impairment	67,231		50,121		25,889		387,430		93,879		2,904		627,454
Total loans balance:	$	67,360	$	50,121	$	26,016	$	391,918	$	95,227	$	2,905	$	633,547

Troubled Debt Restructurings:

The Company had troubled debt restructurings (“TDRs”) of $0.23 million and $0.24 million as of March 31, 2016 and December 31, 2015, respectively. Specific reserves were immaterial at March 31, 2016 and December 31, 2015. At March 31, 2016 nonaccrual TDR loans were $0.23 million and $0.24 million at December 31, 2015. There were no TDRs on accrual at March 31, 2016 and December 31, 2015. The Company had no commitments to lend additional amounts to a customer with an outstanding loan that is classified as TDR as of March 31, 2016 and December 31, 2015.

Over the course of a period, the terms of certain loans may be modified as troubled debt restructurings. The modification of the terms of such loans may include one or a combination of the following: a reduction of the stated interest rate of the loan to a below market rate or the payment modification to interest only. A modification involving a reduction of the stated interest rate of the loan would be for periods ranging from 6 months to 16 months. During the three months ended March 31, 2016, there were no loans modified as troubled debt restructurings compared to the same three month period ended March 31, 2015 when there was one Senior lien 1-4 family residential loan modified as troubled debt restructurings with a pre-modification and post-modification recorded investment of $0.03 million.

The troubled debt restructurings described above did not have a material impact to the allowance for loan losses and did not result in any additional charge-offs during the three months ended March 31, 2015.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In the three months ended March 31, 2016 and the three months ended March 31, 2015 there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification.

The Company evaluates loan modifications to determine if the modification constitutes a troubled debt restructure. A loan modification constitutes a troubled debt restructure if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its loans with the Company’s debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting guidelines. 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.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following tables present data on impaired loans:



March 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Loans with no related allowance recorded:
Commercial
Closed-end	$	—	$	—	$	—	$	15	$	—	$	—
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	—		—		—		113		—		—
CRE - all other
Owner occupied	3		3		—		70		—		—
Non-owner occupied	—		—		—		—		—		—
1-4 family residential
Senior lien	167		167		—		253		—		—
Jr. lien & lines of credit	69		69		—		79		1		1
Consumer	—		—		—		—		—		—
Subtotal	239		239		—		530		1		1

Loans with an allowance recorded:
Commercial
Closed-end	$	198	$	198	$	129	$	119	$	—	$	—
Line of credit	50		50		50		12		1		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	127		419		10		134		—		—
CRE - all other
Owner occupied	402		402		97		420		—		3
Non-owner occupied	3,566		4,948		517		3,768		—		—
1-4 family residential
Senior lien	1,280		1,316		316		1,006		5		2
Jr. lien & lines of credit	351		351		116		257		—		—
Consumer	—		—		—		—		—		—
Subtotal	5,974		7,684		1,235		5,716		6		5
Total	$	6,213	$	7,923	$	1,235	$	6,246	$	7	$	6

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Loans with no related allowance recorded:
Commercial
Closed-end	$	2	$	2	$	—	$	15	$	1	$	1
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	—		—		—		299		—		—
CRE - all other
Owner occupied	6		6		—		78		—		—
Non-owner occupied	—		—		—		—		—		—
1-4 family residential
Senior lien	176		176		—		277		—		—
Jr. lien & lines of credit	71		71		—		88		3		3
Consumer	—		—		—		—		—		—
Subtotal	255		255		—		757		4		4

Loans with an allowance recorded:
Commercial
Closed-end	$	127	$	127	$	80	$	199	$	2	$	2
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	127		419		10		120		—		—
CRE - all other
Owner occupied	406		541		100		586		11		9
Non-owner occupied	4,076		4,955		1,078		4,101		17		17
1-4 family residential
Senior lien	859		984		215		1,003		14		10
Jr. lien & lines of credit	242		242		110		230		5		5
Consumer	1		—		1		—		—		—
Subtotal	5,838		7,268		1,594		6,239		49		43
Total	$	6,093	$	7,523	$	1,594	$	6,996	$	53	$	47

The Company determined that there were $0.6 million of loans that were classified as impaired but were considered to be performing (i.e., loans which are accruing interest) loans at March 31, 2016 compared to $0.1 million at December 31, 2015.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following table represents information related to loan portfolio aging:



March 31, 2016	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due or Nonaccrual		Total Past Due		Current		Total Loans
Commercial
Closed-end	$	33	$	—	$	159	$	192	$	24,701	$	24,893
Line of credit	—		88		—		88		45,052		45,140
Agricultural & AG RE	—		—		—		—		47,705		47,705
Construction, land & development	76		—		127		203		26,839		27,042
CRE - all other
Owner occupied	365		5		405		775		185,140		185,915
Non-owner occupied	—		—		3,566		3,566		218,593		222,159
1-4 family residential
Senior lien	1,014		—		1,013		2,027		51,876		53,903
Jr. lien & lines of credit	386		127		375		888		39,427		40,315
Consumer	—		—		—		—		2,907		2,907
Total	$	1,874	$	220	$	5,645	$	7,739	$	642,240	$	649,979



December 31, 2015	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due or Nonaccrual		Total Past Due		Current		Total Loans
Commercial
Closed-end	$	58	$	—	$	130	$	188	$	24,548	$	24,736
Line of credit	—		—		—		—		42,624		42,624
Agricultural & AG RE	—		—		—		—		50,121		50,121
Construction, land & development	—		—		127		127		25,889		26,016
CRE - all other
Owner occupied	985		—		412		1,397		171,254		172,651
Non-owner occupied	—		—		4,076		4,076		215,191		219,267
1-4 family residential
Senior lien	1,481		21		994		2,496		50,870		53,366
Jr. lien & lines of credit	230		258		268		756		41,105		41,861
Consumer	1		1		—		2		2,903		2,905
Total	$	2,755	$	280	$	6,007	$	9,042	$	624,505	$	633,547

Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans past due over 90 days and still accruing interest at March 31, 2016 or at December 31, 2015.

Note 5. Fair Value

The Company measures, monitors, and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Fair value guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels based on the reliability of the input assumptions. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements and the categorization of where an asset or liability falls within the hierarchy is based on the

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are defined as follows:

Level 1 - Unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level 2 - Observable inputs other than level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Securities

Available for Sale Securities. The fair value of securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). If the securities could not be priced using quoted market prices, observable market activity or comparable trades, the financial market was considered not active and the assets were classified as Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes, by measurement hierarchy, the various assets and liabilities of the Company that are measured at fair value on a recurring basis:



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2016
U.S. government agencies	$	9,663	$	—	$	9,663	$	—
State and political subdivisions	13,095		—		8,077		5,018
U.S. government agency residential
mortgage-backed securities	126,899		—		126,899		—
Collateralized mortgage obligations:
Agency	17,226		—		17,226		—
Equities	2,899		—		2,899		—
Available-for-sale securities	$	169,782	$	—	$	164,764	$	5,018

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)




	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2015
U.S. government agencies	$	14,607	$	—	$	14,607	$	—
State and political subdivisions	10,181		—		5,160		5,021
U.S. government agency residential
mortgage-backed securities	126,029		—		126,029		—
Collateralized mortgage obligations:
Agency	17,833		—		17,833		—
Equities	2,790		—		2,790		—
Available-for-sale securities	$	171,440	$	—	$	166,419	$	5,021

There were no transfers between Level 1 and Level 2 during the first three months of 2016 and all of 2015.

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

The following table reconciles the beginning and ending balances of the assets of the Company that are measured at fair value on a recurring basis using significant unobservable inputs.



	Securities Available for Sale
	2016
Beginning balance, January 1	$	5,021
Transfers into Level 3	—
Total gains or losses (realized/unrealized) included in earnings
Sales	—
Security impairment	—
Payment received	—
Other changes in fair value	(3		)
Included in other comprehensive income	—
Ending Balance, March 31	$	5,018

For the period ended March 31, 2016, the Company had $5.0 million of local school district bonds that are measured at fair value on a recurring basis using unobservable inputs. The fair value was obtained from third party sources, and was not adjusted by management.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Assets Measured at Fair Value on a Non-Recurring Basis

The following table summarizes, by measurement hierarchy, financial assets of the Company that are measured at fair value on a non-recurring basis.



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2016
Impaired loans
Commercial
Closed-end	$	36	$	—	$	—	$	36
Line of credit	—		—		—		—
1-4 family residential
Senior lien	732		—		—		732
OREO property
CRE - construction, land & development	873		—		—		873
CRE - all other
Owner occupied	450		—		—		450
Non-owner occupied	130		—		—		130
1-4 family residential
Senior lien	149		—		—		149



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2015
Impaired loans
1-4 family residential
Senior lien	$	572	$	—	$	—	$	572
OREO property
CRE - construction, land & development	1,140		—		—		1,140
CRE - all other
Non-owner occupied	468		—		—		468
1-4 family residential
Senior lien	131		—		—		131

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Impaired loans carried at fair value had a carrying amount of $0.8 million at March 31, 2016, with $0.2 million specific loan loss allocation and $0.01 million effect on the provision for loan losses for the three month period. In 2015 impaired loans carried at fair value had a carrying amount of $0.6 million with a specific loan loss allocation of $0.3 million during 2015, resulting in an additional provision for loan losses of $0.1 million for the year ended December 31, 2015. The majority of the Bank's impaired loans are collateralized by real estate.

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Any write-downs in the carrying value of a property at the time of acquisition are charged against the allowance for loan losses. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Management periodically reviews the carrying value of other real estate owned. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

OREO properties measured at fair value, less costs to sell, had a net carrying amount of $1.6 million which is made up of the outstanding balance of $3.1 million, net of a valuation allowance of $1.5 million at March 31, 2016. This compares to 2015 when OREO properties with an outstanding balance of $2.9 million was written down to a fair value of $1.7 million.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2016 and December 31, 2015:



March 31, 2016	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)

Impaired loans			Sales comparison approach	Adjustment for differences between comparable sales
Commercial
Closed-end	$	36			20% - 100% (36%)
1-4 family residential
Senior lien	732				10% - 60% (33%)
OREO property
CRE - construction, land & development	873				5% - 70% (29%)
CRE - all other
Owner occupied	450				5% - 50% (15%)
Non-owner occupied	130				5% - 50% (15%)
1-4 family residential
Senior lien	149				6% - 55% (26%)

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)

Impaired loans			Sales comparison approach	Adjustment for differences between comparable sales
1-4 family residential
Senior lien	$	572			10% - 60% (17%)
OREO property
CRE - construction, land & development	1,140				5% - 70% (27%)
CRE - all other
Non-owner occupied	468				5% - 50% (16%)
1-4 family residential
Senior lien	131				6% - 55% (30%)

The estimated fair values of the Company’s financial instruments are as follows:



			Fair Value measurements at March 31, 2016 Using
	Carrying Value		Level 1		Level 2		Level 3		Total

Financial assets
Cash and cash equivalents	$	23,379	$	23,379	$	—	$	—	$	23,379
Securities	169,782		—		164,764		5,018		169,782
Restricted securities	10,099		—		—		—		NA
Loans held for sale	182		—		192		—		192
Net loans	641,005		—		—		647,401		647,401
Accrued interest receivable	3,022		—		549		2,473		3,022
Financial liabilities
Deposits	$	729,269	$	—	$	729,566	$	—	$	729,566
Federal funds purchased and
securities sold under
agreements to repurchase	15,573		—		15,573		—		15,573
Federal Home Loan Bank advances	75,000		—		74,735		—		74,735
Subordinated debentures	20,620		—		—		14,474		14,474
Series B mandatory redeemable
preferred stock	268		—		274		—		274
Accrued interest payable	194		—		180		14		194

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



			Fair Value measurements at December 31, 2015 Using
	Carrying Value		Level 1		Level 2		Level 3		Total

Financial assets
Cash and cash equivalents	$	27,655	$	27,655	$	—	$	—	$	27,655
Securities	171,440		—		166,419		5,021		171,440
Restricted securities	9,116		—		—		—		NA
Loans held for sale	735		—		760		—		760
Net loans	624,956		—		—		629,017		629,017
Accrued interest receivable	3,012		—		402		2,610		3,012
Financial liabilities
Deposits	$	718,504	$	—	$	718,689	$	—	$	718,689
Federal funds purchased and
securities sold under
agreements to repurchase	18,730		—		18,730		—		18,730
Federal Home Loan Bank advances	76,000		—		76,271		—		76,271
Notes payable	—		—		—		—		—
Subordinated debentures	20,620		—		—		13,933		13,933
Series B mandatory redeemable
preferred stock	268		—		273		—		273
Accrued interest payable	235		—		169		66		235

Other assets and liabilities of the Company that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. In addition, nonfinancial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earning potential of core deposit accounts, the earnings potential of loan servicing rights, the earnings potential of the trust operations, customer goodwill and similar items.

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. As of March 31, 2016 and December 31, 2015; $23.4 million and $27.7 million was classified as Level 1.

(b) Restricted securities

It is not practical to determine the fair value of restricted securities due to the restrictions placed on its transferability.

Fair values of loans, excluding loans held for sale, are estimated as follows: Fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(d) Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 2. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

(e) Short-term Borrowings

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

(f) Other Borrowings

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(g) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification which is consistent with the underlying asset/liability they are associated with.

(h) Off-balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

Note 6. Borrowed Funds and Debt Obligations

The scheduled maturities of advances from the FHLB at March 31, 2016 and December 31, 2015 are as follows:



	March 31, 2016				December 31, 2015
Year	Average Interest Rate		Amount		Average Interest Rate		Amount

2016	—	%	—		0.70	%	60,000
2017	1.14		11,000		1.14		11,000
2018	0.71		54,000		3.64		5,000
2019	1.41		10,000		—		—
2020	—		—		—		—
Thereafter	—		—		—		—
	0.87		$	75,000	0.96		$	76,000

At March 31, 2016 and December 31, 2015 no FHLB advances had any call provisions. The Company had two variable rate advances at March 31, 2016, both at 0.25%, and none at year-end 2015. The remaining advances are at fixed rates ranging from 1.14% to 3.64% at March 31, 2016 and 0.21% to 3.64% at year-end 2015.

In connection with the Company completing a $76.0 million recapitalization event on March 31, 2015, a settlement of obligations involving a financial institution was reached in which the Company recognized a gain of $1.8 million representing the difference between the fair value of the consideration issued in the settlement transaction and the carrying value of the amounts due to a financial institution. As a result, the gain has been included as ‘‘Gain on extinguishment of debt’’ within income from continuing operations in the accompanying Consolidated Statements of Income for the period ended March 31, 2015 and year ended December 31, 2015. See Note 1 for additional disclosure related to the recapitalization event.

As of March 31, 2016 and December 31, 2015, the Company had no outstanding loan agreements.

Note 7. Income Taxes

In accordance with current income tax accounting guidance, the Company assessed whether a valuation allowance should be established against their deferred tax assets (DTAs) based on consideration of all available evidence using a “more likely than not” standard. The most significant portions of the deductible temporary differences relate to (1) net operating loss carryforwards and (2) the allowance for loan losses.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

In assessing the need for a valuation allowance, both the positive and negative evidence about the realization of DTAs were evaluated. The ultimate realization of DTAs is based on the Company’s ability to carryback net operating losses to prior tax periods, tax planning strategies that are prudent and feasible, the reversal of deductible temporary differences that can be offset by taxable temporary differences and future taxable income.

After evaluating all of the factors previously summarized and considering the weight of the positive evidence compared to the negative evidence, the Company has determined that no valuation allowance was necessary as of March 31, 2016 and December 31, 2015.

Below is a summary of items included in the deferred tax inventory as of March 31, 2016 and December 31, 2015:



	March 31, 2016			December 31, 2015
Deferred tax assets
Allowance for loan losses	$	3,490		$	3,342
Deferred compensation, other	196			74
Stock based expense	87			87
Net operating loss carryforwards	33,427			34,180
Securities available-for-sale	—			405
Deferred tax credits	854			823
OREO valuation allowance	1,032			1,059
Other	249			255
Total deferred tax assets	39,335			40,225
Deferred tax liabilities
Depreciation	$	(67	)	$	(58	)
Adjustments arising from acquisitions	(55		)	(146		)
Mortgage servicing rights	(813		)	(828		)
Securities available-for-sale	(46		)	—
Federal Home Loan Bank dividend received in stock	(450		)	(450		)
Deferred loan fees & costs	(399		)	(399		)
Prepaid expenses	(163		)	(164		)
Total deferred tax liabilities	(1,993		)	(2,045		)
Valuation allowance	—			—
Net deferred tax assets	$	37,342		$	38,180

Note 8. Share Based Compensation

In April 2003, the Company adopted the 2003 Option Plan. Under the 2003 Option Plan, as amended on April 24, 2007, nonqualified options, incentive stock options, restricted stock 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 executive and compensation committee. Pursuant to the 2003 Option Plan, 19,000 shares of the Company's unissued common stock had been reserved and were available for issuance upon the exercise of options and rights granted under the 2003 Option Plan. The granted options have an exercise period of seven to ten years from the date of grant.

In May 2015, the Company adopted the 2015 Stock Compensation Plan. Under the 2015 Stock Compensation Plan nonqualified options, incentive stock options, restricted stock 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 compensation committee. A total of 430,000 shares have been made available under the 2015 Stock Compensation Plan. There are currently 389,557 shares available to grant.

No options or restricted stock were granted or exercised for the three months ended March 31, 2016. There were 40,443 shares of restricted stock granted for the year ended December 31, 2015.

There was no compensation cost charged against income for the stock options portion of the equity incentive plans for the three months ended March 31, 2016 and for the year ended December 31, 2015. There was no compensation cost charged against

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

income for the restricted stock portion of the equity incentive plan for the three months ended March 31, 2016 and $0.5 million charged for the year ended December 31, 2015.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock prior to its deregistration. 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. There were no options granted for the three months ended March 31, 2016 and the year ended December 31, 2015.

A status summary of the option plan as of March 31, 2016 and changes during the period ended on that date are presented below:



	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1, 2016	3,156		$	338.72
Granted	—		—
Exercised	—		—
Forfeited	(1,164	)	289.20
Outstanding at end of period	1,992		$	367.65	0.3 years	$	—
Vested or expected to vest	1,992		$	367.65	0.3 years	$	—
Options exercisable at period end	1,992		$	367.65	0.3 years	$	—

Options outstanding at March 31, 2016 and year-end 2015 were as follows:



	Outstanding		Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Life	Number	Weighted Average Exercise Price
March 31, 2016
$157.20 - $390.00	996	0.1 years	996	$	157.20
390.01 - 578.10	996	0.6 years	996	578.10
	1,992	0.3 years	1,992	$	367.65

December 31, 2015:
$157.20 - $390.00	2,160	0.2 years	2,160	$	228.33
390.01 - 578.10	996	0.9 years	996	578.10
	3,156	0.4 years	3,156	$	338.72

As of March 31, 2016 and December 31, 2015, there was no unrecognized compensation cost related to non-vested stock options granted under the 2003 Option Plan.

Note 9. Regulatory Matters

The Company and Centrue Bank are subject to regulatory capital requirements administered by federal and state banking agencies that involve the quantitative measure of their assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. Quantitative measures established by regulations to ensure capital adequacy require the Company and Centrue Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 capital and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and, for the Bank, Tier 1 capital (as defined in the regulations) to average assets (as defined in the regulations). Failure to meet minimum capital requirements may cause regulatory bodies to initiate certain discretionary and/or mandatory actions that, if undertaken, may have a direct material effect on our financial statements. The Company, as a financial holding company, is required to be “adequately capitalized” in

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

the capital categories shown in the table below. As of March 31, 2016, Centrue Bank met all capital adequacy requirements to which they were subject, including the guidelines to be considered “well capitalized.”

On July 2, 2013, the Federal Reserve Board and the FDIC approved rules that implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act. The rules include a common equity Tier 1 capital ratio and conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Tier 2 risk-based capital requirements. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. Capital ratios shown for March 31, 2016 are in excess of the Basel III 2016 phase-in level for the capital conservation buffer.

On February 16, 2016 the Company received a formal order terminating the written agreement between the Company, the Bank, and the Federal Reserve Bank of Chicago and the Illinois Department of Financial and Professional Regulation.



	Actual				To Be Adequately Capitalized		To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount	Ratio	Amount	Ratio
As of March 31, 2016
Total capital (to risk-weighted assets)
Centrue Financial	$	120,273	15.6	%	N/A	N/A	N/A	N/A
Centrue Bank	115,881		15.1		61,504	8.0	76,879	10.0
Common equity tier I (to risk-weighted assets)
Centrue Financial	$	102,075	13.3		N/A	N/A	N/A	N/A
Centrue Bank	106,907		13.9		34,596	4.5	49,972	6.5
Tier I capital (to risk-weighted assets)
Centrue Financial	$	111,299	14.5		N/A	N/A	N/A	N/A
Centrue Bank	106,907		13.9		46,128	6.0	61,504	8.0
Tier I leverage ratio (to average assets)
Centrue Financial	$	111,299	11.7		N/A	N/A	N/A	N/A
Centrue Bank	106,907		11.4		42,120	4.0	46,801	5.0



	Actual				To Be Adequately Capitalized				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of December 31, 2015
Total capital (to risk-weighted assets)
Centrue Financial	$	118,359	15.6	%	$	60,525	8.0	%	N/A	N/A
Centrue Bank	117,807		15.6		60,463		8.0		75,579	10.0
Common equity tier I (to risk-weighted assets)
Centrue Financial	$	107,678	14.2		$	34,045	4.5		N/A	N/A
Centrue Bank	109,216		14.5		34,011		4.5		49,126	6.5
Tier I capital (to risk-weighted assets)
Centrue Financial	$	109,768	14.5		$	45,394	6.0		N/A	N/A
Centrue Bank	109,216		14.5		45,347		6.0		60,463	8.0
Tier I leverage ratio (to average assets)
Centrue Financial	$	109,768	12.1		$	40,819	4.0		N/A	N/A
Centrue Bank	109,216		12.0		41,068		4.0		45,631	5.0

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following management discussion and analysis (“MD&A”) is intended to address the significant factors affecting the Company’s results of operations and financial condition for the three months ended March 31, 2016 as compared to the same period in 2015. 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. 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 MD&A should be read in conjunction with the consolidated financial statements of the Company, and the accompanying notes thereto. Actual results could differ from those estimates. All financial information in the following tables is displayed in thousands (000s), except per share data.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP 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 2015 Annual Report on Form 10-K.

Securities: Securities are classified as available-for-sale when the Company may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income. All of the Company’s securities are classified as available-for-sale. For most securities, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Due to the limited nature of the market for certain securities, the fair value and potential sale proceeds could be materially different in the event of a sale.

Realized securities gains or losses are reported in securities gains (losses), net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. Declines in the fair value of available for sale securities below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary. If the Company (a) has the intent to sell a debt security or (b) is more likely than not will be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss. If neither of these conditions are met, the Company evaluates whether a credit loss exists. The impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of total impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income.

The Company also evaluates whether the decline in fair value of an equity security is temporary or other-than-temporary. In determining whether an unrealized loss on an equity security is temporary or other-than-temporary, management considers various factors including the magnitude and duration of the impairment, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the equity security to forecasted recovery.

Allowance for Loan Losses: The allowance for loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s estimate of probable credit losses inherent in the loan portfolio. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for loan losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

The allowance for loan losses is based on an estimation computed pursuant to the requirements of Financial Accounting Standards Board guidance and rules stating that the analysis of the allowance for loan losses consists of three components:

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

•

Specific Component. The specific credit allocation component is based on an analysis of individual impaired loans over a fixed-dollar amount where the internal credit rating is at or below a predetermined classification for which the recorded investment in the loan exceeds its fair value. 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. These analyses involve a high degree of judgment in estimating the amount of loss associated with specific loans, including estimating the amount and timing of future cash flows and collateral values;

•

Historical Loss Component. The Company calculates the Historical Loss for thirteen defined portfolio segments (primarily by Call Report codes) looking back over the past twelve quarters (three years). For the non-consumer loan types, the Bank utilizes a migration analysis whereby losses incurred are allocated by the assigned risk rating at the start of each twelve month period analyzed. As the level of charge offs has stabilized/improved, the analysis of the consumer and residential loans has returned to the traditional historical loss analysis. This is being done based on the relatively homogeneous nature of these loans, as well as the fact that consumer and residential loans generally do not have assigned risk ratings; and

•

Qualitative Component. The qualitative component requires qualitative judgment and estimates reserves based on general economic conditions as well as specific economic factors believed to be relevant to the markets in which the Company operates. The process for determining the allowance (which management believes adequately considers all of the potential factors which might possibly result in credit losses) includes subjective elements and, therefore, may be susceptible to significant change.

To the extent actual outcomes differs from management estimates, additional provision for credit losses could be required that could adversely affect the Company’s earnings or financial position in future periods.

Other Real Estate Owned: Other real estate owned includes properties acquired in partial or total satisfaction of certain loans. Properties are recorded at fair value less costs to sell when acquired, establishing a new cost basis. Any write-downs in the carrying value of a property at the time of acquisition are charged against the allowance for loan losses. Management periodically reviews the carrying value of other real estate owned. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized.

General

Centrue Financial Corporation is a bank holding company organized under the laws of the State of Delaware. The Company provides a full range of products and services to individual and corporate customers extending from the far western and southern suburbs of the Chicago metropolitan area across Central Illinois down to the metropolitan St. Louis area. These products and services include demand, time, and savings deposits; lending; mortgage banking, brokerage, asset management, and trust services. 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, including banks, thrifts and credit unions, as well as nonfinancial institutions providing financial services. Additionally, the Company and its subsidiary, Centrue Bank, are subject to regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

On January 27, 2016, the Company announced that the Bank had entered into an agreement to sell its Fairview Heights branch to Town and Country Bank, a subsidiary of Town and Country Financial Corporation. The Company also announced that the Bank had entered into an agreement to sell its Aviston and St. Rose branches to First National Bank in Carlyle, a subsidiary of First National Bancorporation in Carlyle, Inc. These branch sales are expected to close during June 2016.

Results of Operations

Net Income

Net income for the three months ended March 31, 2016 equaled $0.9 million or $0.13 per common diluted share as compared to net income of $1.9 million or $65.60 per common diluted share for the same period in 2015. The results for the first three months of 2015 were positively impacted by a $1.8 million gain on extinguishment of debt, representing the difference between the fair value of the consideration issued in the settlement transaction and the carrying value of the amounts due to a financial institution in connection with the settlement of obligations.

Net Interest Income/ Margin

Net interest income is the difference between income earned on interest-earning assets and the interest expense incurred for the funding sources used to finance these assets. Changes in net interest income generally occur due to fluctuations in the volume of

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

earning assets and paying liabilities and rates earned and paid, respectively, on those assets and liabilities. The net yield on total interest-earning assets, also referred to as net interest margin, represents net interest income divided by average interest-earning assets. Net interest margin measures how efficiently the Company uses its earning assets and underlying capital. The Company’s long-term objective is to manage those assets and liabilities to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risks. For purposes of this discussion, both net interest income and margin have been adjusted to a fully tax equivalent basis for certain tax-exempt securities and loans.

Fully tax equivalent net interest income for the first quarter 2016 totaled $7.3 million, representing an increase of $1.2 million or 19.67% compared to $6.1 million for the same period in 2015. This increase in income is primarily due to an increase in interest earning assets and a reduction in the cost of funds.

The net interest margin was 3.48% for the first quarter of 2016, representing an increase of 4 basis point from the 3.44% recorded at the first quarter of 2015. The improvement in the net interest margin is being driven by the addition of new earnings assets and improving yields on securities.



AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
	Three Months Ended March 31,
	2016						2015
	Average Balance		Interest/Income Expense		Average Rate		Average Balance		Interest/Income Expense		Average Rate		Change due to:
													Volume			Rate			Net
ASSETS
Interest-earning assets
Interest-earning deposits	$	5,023	$	28	2.24	%	$	3,536	$	13	1.49	%	$	6		$	9		$	15
Securities
Taxable⁽¹⁾	178,041		829		1.87		144,727		594		1.66		153			82			235
Exempt from federal income taxes⁽¹⁾⁽²⁾	4,064		34		3.36		4,022		49		4.94		1			(16		)	(15		)
Total securities (tax equivalent)	182,105		863		1.91		148,749		643		1.75		154			66			220
Federal funds sold and other	620		4		2.59		5,620		7		0.51		(12		)	9			(3		)
Loans^(3)(4)(5)
Commercial	108,582		1,122		4.16		100,177		1,006		4.07		96			20			116
Real estate	541,800		5,866		4.35		454,139		5,048		4.51		1,003			(185		)	818
Installment and other	3,101		44		5.71		3,041		38		5.07		(3		)	9			6
Gross loans (tax equivalent)	653,483		7,032		4.33		557,357		6,092		4.43		1,096			(156		)	940
Total interest-earnings assets	841,231		7,927		3.79		715,262		6,755		3.83		1,244			(72		)	1,172
Noninterest-earning assets
Cash and cash equivalents	38,519						44,781
Premises and equipment, net	21,864						22,521
Other assets	82,927						50,354
Total nonearning assets	143,310						117,656
Total assets	$	984,541					$	832,918

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



LIABILITIES & STOCKHOLDERS’
EQUITY
Interest-bearing liabilities
NOW accounts	128,741		25		0.08		109,972		17		0.06		2			6			8
Money market accounts	109,932		52		0.19		121,530		54		0.18		(6		)	4			(2		)
Savings deposits	128,320		4		0.01		119,592		3		0.01		—			1			1
Time deposits	192,506		182		0.38		199,722		246		0.50		(12		)	(52		)	(64		)
Federal funds purchased and repurchase
Agreements	17,290		12		0.28		19,092		13		0.28		(1		)	—			(1		)
Advances from FHLB	101,516		230		0.91		41,536		117		1.14		134			(21		)	113
Notes payable	20,888		146		2.81		31,024		244		3.19		(54		)	(44		)	(98		)
Total interest-bearing liabilities	699,193		651		0.37		642,468		694		0.44		63			(106		)	(43		)
Noninterest-bearing liabilities
Noninterest-bearing deposits	157,520						149,074
Other liabilities	5,781						10,033
Total noninterest-bearing liabilities	163,301						159,107
Stockholders’ equity	122,047						31,343
Total liabilities and stockholders’ equity	$	984,541					$	832,918
Net interest income (tax equivalent)			$	7,276					$	6,061			$	1,181		$	34		$	1,215
Net interest income (tax equivalent)
to total earning assets					3.48	%					3.44	%
Interest-bearing liabilities to earning assets					83.12	%					89.82	%

⁽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 tax exempt securities and loans are reflected on a tax equivalent basis based upon a statutory federal income tax

rate of 34%.

⁽³⁾ In 2016 there was $8 in tax equivalent interest included in gross loans and $17 in 2015.

⁽⁴⁾ Nonaccrual loans are included in the average balances; overdraft loans are excluded in the balances.

⁽⁵⁾ Loan fees are included in the specific loan category.

⁽⁶⁾ Average balances are derived from daily balances.

Provision for Loan Losses

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.

The provision for loan losses for the first quarter 2016 was $0.3 million, compared to no provision being taken for the first quarter 2015. The first quarter 2016 provision for loan loss was driven by the following factors:


•	Migration of a specific performing loan relationship to nonperforming status from year-end 2015 to March 31, 2016;


•	Charge-offs taken during the period;


•	Continued growth of the loan portfolio;

Management continues to update collateral values and evaluate the level of specific allocations for impaired loans. As impaired loans have moved through the liquidation process, many of the previously established specific allocations have been charged off.

Noninterest Income

Noninterest income consists of a wide variety of fee-based revenues, including bank-related service charges on deposits, mortgage revenues and increases in cash surrender value on bank-owned life insurance. Noninterest income totaled $2.3 million for the three months ended March 31, 2016, compared to $4.0 million for the same period in 2015. Excluding gains related to the sale of OREO, securities and other irregularly occurring income, noninterest income remained flat at $2.0 million.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Noninterest Expense

Noninterest expense is comprised primarily of compensation and employee benefits, occupancy and other operating expense. Total noninterest expense for the first quarter of 2016 was $7.9 million, compared to $8.2 million recorded during the same period in 2015. Excluding OREO valuation adjustments and other irregularly occurring items from both periods, noninterest expense levels decreased by $0.3 million, or 3.7%. This $0.3 million decrease was mainly driven by a reduction in FDIC premium expense and costs associated with OREO properties.

Applicable Income Taxes

The Company recorded $0.4 million in income tax expense for the three months ended March 31, 2016 on pre-tax income of $1.4 million, resulting in an effective tax rate of 32.4%. The Company’s effective tax rate was lower than the combined statutory rate of 38.9% due to several factors. First, the Company derives interest income from municipal securities and loans, which are exempt from federal tax and certain U.S. government agency securities, which are exempt from state tax. Second, the Company derives income from bank owned life insurance policies, which is exempt from federal and state tax. Finally, state income taxes are recorded net of the federal tax benefit, which lowers the combined effective tax rate.

The Company recorded an immaterial tax expense for the three months ended March 31, 2015 despite having a full valuation allowance on its deferred tax assets. This was due to estimated Alternative Minimum Tax due on taxable income that could not be offset with net operating loss carry-forwards or credits per IRS guidelines. Excluding this expense, no tax expense or benefit was recorded for the three months ended March 31, 2015.

Financial Condition

General

Following are highlights of the March 31, 2016 balance sheet when compared to December 31, 2015:

Securities. The primary strategic objective of the Company’s $169.8 million securities - available-for-sale from March 31, 2016, which excludes restricted securities, is to minimize interest rate risk, maintain sufficient liquidity, and maximize return. In managing the securities portfolio, the Company minimizes any credit risk and avoids investments in sophisticated and complex investment products. The portfolio includes several callable agency debentures, adjustable rate mortgage pass-throughs, municipal bonds and collateralized mortgage obligations. Collateralized mortgage obligations currently owned are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The Company does not have any securities classified as trading or held-to-maturity.

The Company’s financial planning anticipates income streams generated by the securities portfolio based on normal maturity and reinvestment. Securities classified as available-for-sale, carried at fair value, were $169.8 million at March 31, 2016 compared to $171.4 million at December 31, 2015. The Company also holds Federal Reserve Board and Federal Home Loan Bank stock which are classified as restricted securities of $10.1 million at March 31, 2016 and $9.1 million at December 31, 2015.

Loans. Total loans, including loans held for sale, equaled $650.2 million, representing an increase of $15.9 million, or 2.51% from December 31, 2015. The net increase from year-end 2015 was related to a combination of new organic loan growth and deeper lending relationships with existing customers. Competition for new commercial loan opportunities and loan renewals continues to be strong and pressures loan yields.

Deposits. Total deposits equaled $729.3 million at March 31, 2016 compared to $718.5 million recorded at December 31, 2015. The March 31, 2016 deposit balance represents an increase of $10.8 million or 1.50% from December 31, 2015. The net increase from year-end 2015 was largely related to an increase in public fund deposits.

Nonperforming Assets

The Company's financial statements are prepared on the accrual basis of accounting, including the recognition of interest income on its loan portfolio, unless a loan is placed on nonaccrual status. 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. If a loan is placed on nonaccrual status, the loan does not generate current period income for the Company and any amounts received are generally applied first to principal and then to interest. It is the policy of the Company not to renegotiate the terms of a loan because of a delinquent status. Rather, 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.

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 and considers both the adequacy of the collateral and the

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

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 commercial loans is assigned a rating based upon an internally developed grading system. A separate credit administration department also reviews selected grade assignments on a quarterly basis. Management continuously monitors nonperforming, impaired, and past due loans in an effort 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 sets forth a summary nonperforming assets:



	March 31,			December 31,
	2016			2015
Nonaccrual loans (including TDRs)	$	5,645		$	6,007
TDRs still accruing interest	—			—
Loans 90 days past due and still accruing interest	—			—
Total nonperforming loans	$	5,645		$	6,007
Other real estate owned	7,377			8,401
Total nonperforming assets	$	13,022		$	14,408

Nonperforming loans to total end of period loans	0.85		%	0.93		%
Nonperforming assets to total end of period loans	1.97			2.23
Nonperforming assets to total end of period assets	1.34			1.50

Total nonperforming assets declined $1.4 million to $13.0 million, or 1.34% of total assets, at March 31, 2016 from $14.4 million at December 31, 2015. Total nonperforming assets included $7.4 million of foreclosed assets and repossessed real estate, and $5.6 million of nonaccrual loans at March 31, 2016 compared to $8.4 million of foreclosed assets and $6.0 million of nonaccrual loans at December 31, 2015.

Nonperforming Loans

Nonperforming loans (nonaccrual, 90 days past due and troubled debt restructures) decreased $0.4 million from December 31, 2015 to March 31, 2016, largely due to charge-offs taken during the quarter.

The level of nonperforming loans to end of period loans was 0.85% as of March 31, 2016 as compared to 0.93% as of December 31, 2015. As a result of the decrease in the nonperforming loans, the allowance to nonperforming loan coverage ratio increased to 158.97% for the period ended March 31, 2016 from 143.02% for the year ended December 31, 2015.

Allowance for Loan Losses

At March 31, 2016, the allowance for loan losses was $9.0 million, or 1.36% of total loans, as compared to $8.6 million, or 1.33% of total loans, at December 31, 2015. The Company recorded $0.3 million provision to the allowance for loan losses for the three months ended March 31, 2016 largely due to charge-offs of specific reserves, additional specific reserves needed on a loan relationship that migrated to impaired status during the quarter and general growth in the loan portfolio. Management believes we are recognizing losses in our portfolio through provisions and charge-offs as credit developments warrant.

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.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

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 and financing activities offset by cash flows used in investing activities resulted in a net decrease in cash and cash equivalents of $4.3 million from December 31, 2015 to March 31, 2016.

For the period ended March 31, 2016, the Company experienced a positive net cash flow of $6.5 million in financing activities primarily due to the net increase in deposits. In contrast, net cash outflows of $13.1 million were used by investing activities due to the overall increase in net loans. Net cash provided by operating activities was $2.3 million.

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, 2016:



	Payments Due by Period
	Within 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
Contractual Obligations
Certificates of deposit	$	152,908	$	46,280	$	5,724	$	—	$	204,912
Operating leases	262		397		56		—		715
Series B mandatory redeemable preferred stock	—		268		—		—		268
Subordinated debentures	—		—		—		20,620		20,620
FHLB advances	—		75,000		—		—		75,000
Total contractual cash obligations	$	153,170	$	121,945	$	5,780	$	20,620	$	301,515

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, often including obtaining collateral at exercise of the commitment. At March 31, 2016, the Company had $135.2 million in outstanding loan commitments including outstanding commitments for various lines of credit and $1.6 million of standby letters of credit.

Capital Resources

Stockholders' Equity

Stockholders' equity at March 31, 2016 was $122.8 million, an increase of $1.5 million from $121.3 million at December 31, 2015. The change in stockholders’ equity during 2016 was the result of total comprehensive income less preferred dividends incurred during the first three months of 2016.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Capital Measurements

As reflected in the following table, the Bank was considered “well-capitalized” under regulatory defined capital ratios as of March 31, 2016. Capital ratios shown for March 31, 2016 are in excess of the BASEL III 2016 phase-in level for the capital conservation buffer. See Note 9 to the Unaudited Consolidated Financial Statements for additional disclosure on the capital threshold levels:



	Actual				To Be Adequately Capitalized		To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount	Ratio	Amount	Ratio
As of March 31, 2016
Total capital (to risk-weighted assets)
Centrue Financial	$	120,273	15.6	%	N/A	N/A	N/A	N/A
Centrue Bank	115,881		15.1		61,504	8.0	76,879	10.0
Common equity tier I (to risk-weighted assets)
Centrue Financial	$	102,075	13.3		N/A	N/A	N/A	N/A
Centrue Bank	106,907		13.9		34,596	4.5	49,972	6.5
Tier I capital (to risk-weighted assets)
Centrue Financial	$	111,299	14.5		N/A	N/A	N/A	N/A
Centrue Bank	106,907		13.9		46,128	6.0	61,504	8.0
Tier I leverage ratio (to average assets)
Centrue Financial	$	111,299	11.7		N/A	N/A	N/A	N/A
Centrue Bank	106,907		11.4		42,120	4.0	46,801	5.0

Recent Accounting Developments

See Note 1 to the Unaudited Consolidated Financial Statements for information concerning recent accounting developments.

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.

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:


•	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;


•	fluctuations in the value of the Company’s investment securities;


•	the Company’s ability to ultimately collect on any downgraded loan relationships;


•	the Company’s ability to respond and adapt to economic conditions in our geographic market;


•	the Company’s ability to adapt successfully to technological changes to compete effectively in the marketplace;


•	credit risks and risks from concentrations (by geographic area and by industry) within the Company’s loan portfolio and individual large loans;


•	volatility of rate sensitive deposits;


•	operational risks, including data processing system failures, fraud or cyber attacks;

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)


•	asset/liability matching risks and liquidity risks;


•	the ability to successfully acquire low cost deposits or funding;


•	the ability to successfully execute strategies to increase noninterest income;


•	the ability to successfully grow non-commercial real estate loans;


•	the ability of the Company to continue to realize cost savings and revenue generation opportunities in connection with the synergies of centralizing operations;


•	the ability to adopt and implement new regulatory requirements as dictated by the SEC, FASB or other rule-making bodies which govern our industry;


•	changes in the general economic or industry conditions, nationally or in the communities in which the Company conducts business;


•	the Company’s ability to raise additional capital, if available, to sustain growth or operating results;


•	the Company’s ability to dispose of other real estate owned (“OREO”) at reasonable values;


•	the Company's reliance on third parties for information such as appraisal values, credit scores, and IT capabilities.

CENTRUE FINANCIAL CORPORATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

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, 200 and 300 basis point increase in market interest rates or a 100 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, 2016 and December 31, 2015, respectively:



	Change in Net Interest Income Over One Year Horizon
	March 31, 2016					December 31, 2015
	Change					Change
	$			%		$			%
+300 bp	$	2,759		9.67	%	$	1,966		6.89	%
+200 bp	1,866			6.54		1,264			4.43
+100 bp	1,026			3.60		649			2.27
Base	—			—		—			—
- 100 bp	(1,471		)	(5.16	)	(1,550		)	(5.43	)

As shown above, the effect of an immediate 200 basis point increase in interest rates as of March 31, 2016 would increase the Company’s net interest income by $1.9 million or 6.5%. The effect of an immediate 100 basis point decrease in rates would decrease the Company’s net interest income by $(1.5) million or (5.2)%.

CENTRUE FINANCIAL CORPORATION

ITEM 4. CONTROLS AND PROCEDURES

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.

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 affect 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 registration statement on Form S-1 filed with the SEC on October 15, 2015 and the Company Annual Report on Form 10-K filed March 15, 2016.

Item 2. Recent Sales of Unregistered Securities

On July 29, 2014, the Company issued to (i) Dennis McDonnell and Kathleen McDonnell, the Dennis J. McDonnell Trust dated as of May 9, 1991, and the Dennis J. McDonnell IRA (all related persons under Section 382(l)(3) constructive ownership rules); (ii) Jim Miller; and (iii) Wayne Whalen and Paul Wolff, and WPW Associates, L.P. (both related persons under Section 382(l)(3) constructive ownership rules) 2,635.5462 newly issued shares of Fixed Rate Non-Voting Perpetual Non-Cumulative Preferred Stock, Series D of the Company (the “Series D Preferred”), in exchange for 2,762.24 shares of 7.500% Series A Convertible Preferred Stock and 50,993 shares of Common Stock. The shares of Series D Preferred were issued in reliance on the exemption set forth in Section 3(a)(9) of the Securities Act of 1933, and in connection with this exchange (i) the Company was the issuer of both the shares surrendered and the Series D Preferred issued in the exchange; (ii) the only consideration from the security holders for the exchange was surrender of the Common Stock and 7.500% Series A Convertible Preferred Stock referenced above; (iii) all of the recipients of the Series D Preferred were existing stockholders of the Company; and (iv) the Company paid no fees or commissions to any third party in connection with the exchange or the solicitation of the exchange.

On March 31, 2015, 6,333,333 shares of Common Stock were issued to seventy-two (72) investors. Sandler O’Neil & Partners, L.P and Boenning & Scattergood, Inc. assisted the Company in completing the private placement and were paid commissions of $4,826,150. The proceeds of the offering were used to pay the expenses of the offering, to pay commissions to Sandler O’Neil & Partners, L.P and Boenning & Scattergood, Inc. the proceeds of the issuance were used to repay $4,925,000 of TRuPs preferred dividends; and $27,500,000 was used to retire and redeem senior debt, sub debt, preferred stock, dividends and warrants. The offers, sales and issuances of the securities issued on March 31, 2015 were exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder, and a Form D was filed for the issuance. The recipients represented to the Company that they acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, appropriate legends were affixed to the securities issued in these transactions and the recipients represented to us that they were accredited investors as defined in Rule 501 promulgated under the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits:



10.22		Centrue Financial Corporation 2015 Stock Compensation Plan Restricted Stock Units Agreement
31.1		Certification of Kurt R. Stevenson, President and Chief Executive Officer, required by Rule 13a - 14(a).
31.2		Certification of Daniel R. Kadolph, Executive Vice President and Chief Financial Officer required by Rule 13a - 14(a).
32.1		Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015; (ii) Consolidated Statements of Operations for the three months ended March 31, 2016 and March 31, 2015; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and March 31, 2015; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 31, 2015; and (v) Notes to Unaudited Consolidated Financial Statements.

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 11, 2016	By:	/s/ Kurt R. Stevenson
			Kurt R. Stevenson
			President and Chief Executive Officer



		CENTRUE FINANCIAL CORPORATION

Date:	May 11, 2016	By:	/s/ Daniel R. Kadolph
			Daniel R. Kadolph
			Executive Vice President and Chief Financial Officer