SOURCE: Centrue Financial Corporation

Centrue Financial Corporation

November 05, 2014 16:15 ET

Centrue Financial Corporation Announces 2014 Third Quarter Results

OTTAWA, IL--(Marketwired - Nov 5, 2014) - Centrue Financial Corporation (OTCQB: CFCB) (PINKSHEETS: CFCB)

Highlights

  • Third quarter of 2014 net income was $573 thousand, compared to net income of $374 thousand in the second quarter of 2014 and a net loss of $80 thousand for the third quarter of 2013.
  • The Company's principal subsidiary, Centrue Bank (the "Bank"), posted net income of $1.1 million for the third quarter of 2014 compared to net income of $674 thousand for the second quarter of 2014 and $225 thousand for the third quarter of 2013.
  • Substandard assets declined $6.7 million, or 11.5% from the second quarter of 2014 and $19.3 million, or 27.1% from September 30, 2013.
  • The Company's net interest margin for the third quarter of 2014 was 3.33%, which improved from 3.21% during the third quarter of 2013. The Bank's net interest margin for the third quarter of 2014 was 3.46%, which also improved from 3.34% during the third quarter of 2013.
  • Loans have increased $9.7 million since December 31, 2013 and $15.1 million since September 30, 2013.
  • Centrue Bank remains "well-capitalized" at the end of the third quarter of 2014 with total risk-based capital of 12.25% and tier 1 leverage capital of 7.79%.
  • During the third quarter, the Company amended its certificate of incorporation to increase its authorized shares, reduce the par value per share of its common stock and establish certain transfer and issuance restrictions designed to protect the Company's ability to utilize its tax assets.

Centrue Financial Corporation (the "Company" or "Centrue") (OTCQB: CFCB) (PINKSHEETS: CFCB), parent company of Centrue Bank, reported third quarter net income of $573 thousand, or ($0.05) per common diluted share, compared to net income of $374 thousand or ($0.10) per common diluted share for the second quarter 2014 and net loss of $80 thousand or ($0.10) per common diluted share for the third quarter of 2013. For the first nine months of 2014, the Company reported net income of $1.5 million, or ($0.19) per common diluted share, as compared to net income of $4.0 million, or $0.39 per common diluted share, for the same period in 2013. During the second quarter of 2013, the Company sold its pooled trust preferred securities which generated a gain of $4.7 million. Excluding this gain the Company would have produced a loss of $0.7 million for the nine month period ending September 30, 2013.

The Company's President & CEO, Kurt R. Stevenson, stated, "We continue to make meaningful progress in several core areas and are particularly pleased with the steady improvement made on key asset quality fronts," Mr. Stevenson continued, "Decreasing non-performing loans and charge-offs, coupled with the addition of new quality credits, are all extremely positive trends. While we still have much work ahead of us, our ongoing focus on strengthening our sales culture is evident in sustained improved earnings." Stevenson also stated that, "Management continues to make progress toward, and finalize details regarding, the previously announced recapitalization of the Company and Bank."

Securities

Total securities equaled $141.5 million at September 30, 2014, representing a decrease of $22.4 million, or 13.7%, from December 31, 2013 and a decrease of $0.6 million, or 0.4%, from the same quarter in 2013. The net decrease from fourth quarter 2013 was related to several factors which included strategic enhancement to the Company's liquidity position as public funds, brokered deposits and time deposits matured and were not replaced. Also during the period, some of the amortization from the securities portfolio was used to fund loan growth versus being reinvested.

Loans

Total loans equaled $575.9 million, representing an increase of $9.7 million, or 1.7%, from December 31, 2013 and an increase of $15.1 million, or 2.7%, from the third quarter 2013. The net increase from year-end 2013 was related to new loans being booked above the level of normal attrition, pay-downs, loan charge-offs and transfers to OREO. Economic conditions have stabilized from the prior year, with sluggish loan demand and very strong competition for new commercial loans continues.

Funding and Liquidity

Total deposits equaled $728.9 million, representing a decrease of $25.4 million, or 3.4%, from December 31, 2013 and a decrease of $25.7 million, or 3.4%, from September 30, 2013. The net decrease from year-end 2013 was largely related to maturing time deposits not being renewed. Core deposits (checking, savings, NOW, and money market) improved $11.1 million over year-end 2013 and were $21.0 million above the same quarter in 2013. This increase was recognized by interest bearing deposits being offset slightly by a decrease in non-interest bearing deposits.

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

Credit Quality

The key credit quality metrics are as follows:

  • The allowance for loan losses to total loans was 2.23% at September 30, 2014, compared to 2.06% at both year-end 2013 and September 30, 2013. Management evaluates the sufficiency of the allowance for loan losses based on the combined total of specific allocations, historical loss and qualitative components and believes that the allowance for loan losses represented probable incurred credit losses inherent in the loan portfolio at September 30, 2014.
  • The provision for loan losses for the third quarter of 2014 was $0.7 million, a decrease from the $1.1 million and $0.9 million recorded in the fourth and third quarters of 2013 respectively. The third quarter of 2014 decrease was driven by decreasing levels of nonperforming loans and stabilizing collateral values on troubled loans.
  • Net loan charge-offs for the third quarter of 2014 were $0.3 million, or 0.05% of average loans, compared with $1.0 million, or 0.17% of average loans, for the fourth quarter of 2013 and $4.8 million, or 0.85% of average loans, for the third quarter of 2013. Loan charge-offs during the third quarter of 2014 were largely influenced by the credit performance of the Company's commercial & industrial and commercial real estate portfolios. These charge-offs reflect management's continuing efforts to align the carrying value of these impaired assets with the value of underlying collateral based upon more aggressive disposition strategies. Management believes we are recognizing losses in our portfolio through provisions and charge-offs as credit developments warrant.
  • Nonperforming loans (nonaccrual, 90 days past due and troubled debt restructures) decreased to $23.7 million at September 30, 2014, from $29.1 million at December 31, 2013 and $26.5 million at September 30, 2013. The $5.4 million decrease from the fourth quarter of 2013 to the third quarter of 2014 was due to a combination of successful loan workout strategies, charge-offs referenced above and transfers to OREO. The $23.7 million recorded at September 30, 2014 included $11.5 million in nonaccrual loans and $12.2 million in troubled debt restructures. The level of nonperforming loans to end of period loans was 4.11% at September 30, 2014, compared to 5.13% at December 31, 2013 and 4.72% at September 30, 2013.
  • The coverage ratio (allowance for loan losses to nonperforming loans) was 54.32% at September 30, 2014, compared to 40.06% at December 31, 2013 and 43.63% at September 30, 2013.
  • Other real estate owned decreased to $20.2 million at September 30, 2014 from $23.3 million at December 31, 2013 and $24.1 million at September 30, 2013. Third quarter additions were more than offset by $1.0 million in dispositions and $0.4 million in additional valuation adjustments, reflective of existing market conditions and existing disposition strategies.
  • Nonperforming assets (nonaccrual, 90 days past due, troubled debt restructures and OREO) decreased to $43.9 million at September 30, 2014, a decrease of $8.5 million from December 31, 2013 and a decrease $6.6 million from the $50.5 million held at September 30, 2013. The ratio of nonperforming assets to total assets was 5.14% at September 30, 2014, 5.93% at December 31, 2013 and 5.72% at September 30, 2013.
  • The past due ratio was 2.55% at September 30, 2014 compared to 4.38% at December 31, 2013 and 5.05% at September 30, 2013. 
  • Action Listed Loans (classified and criticized loans) declined to $53.9 million at September 30, 2014 from $71.5 million at December 31, 2013 and $78.8 million at September 30, 2013.

Net Interest Margin

The net interest margin for the third quarter of 2014 was 3.33%, which was up 4 basis points from the 3.29% margin in second quarter 2014 and significantly improved from the 3.21% in the third quarter of 2013. The Bank's net interest margin was 3.46% for the third quarter of 2014, a 12 basis point increase to the third quarter 2013 net interest margin of 3.34%. The volatility of the net interest margin is being affected by falling yields in the loan portfolio, an increase in earning assets, decreasing cost of funds and the removal of nonperforming loans out of earning assets and replaced with performing loans. The performing loan portfolio has increased by $25.1 million since year-end.

Noninterest Income and Expense

Noninterest income totaled $3.2 million for the third quarter September 30, 2014, compared to $3.1 million for the third quarter of 2013. Excluding gains related to the sale of OREO, securities and other non-recurring gains, noninterest income decreased $0.1 million from the third quarter of 2013. This decrease was mainly due to a decrease in mortgage banking income. For the nine months ended September 30, 2014, noninterest income was $9.8 million compared to $13.6 million for the same period in 2013. When excluding the same items from above, year-to-date noninterest income decreased $0.1 million in comparison to the same period in 2013. The year-to-date decline can be attributed to a drop in mortgage banking income along with a decline in OREO rental income.

Total noninterest expense for the third quarter of 2014 was $8.0 million, which was $0.3 million below the third quarter of 2013. Excluding OREO valuation adjustments taken in both periods, noninterest expense levels decreased by $0.3 million, or 3.8%. This $0.3 million decrease in expenses was mainly from a reduction in loan-related expenses but was also realized in occupancy, marketing and telephone expenses. For the nine months ended September 30, 2014, noninterest expense was $24.2 million which was $0.9 million lower than the same period in 2013. When excluding the OREO valuation adjustments, year-to-date noninterest expense was $0.7 million below the comparable amount for 2013 driven by a reduction in salaries and loan-related expenses. 

Capital Management

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

             
             
    Centrue Financial     Centrue Bank  
    Sep 30, 2014     Dec 31, 2013     Sep 30, 2014     Dec 31, 2013  
Capital ratios:                        
  Total risk-based capital   10.18 %   10.22 %   12.25 %   11.91 %
  Tier 1 risk-based capital   7.77 %   7.39 %   10.99 %   10.65 %
  Tier 1 leverage ratio   5.52 %   5.22 %   7.79 %   7.52 %
                           

Stockholder Actions

At a special meeting of the Company's stockholders held on September 23, 2014, the Company's shareholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation. This amendment (i) increased the number of authorized shares of the Company's common stock from 15,000,000 to 215,000,000; (ii) reduced the par value per share of the Company's shares from $1.00 to $0.01; (iii) added to the Company's certificate of incorporation provisions designed to protect the Company's ability to fully utilize its net operating losses and tax credits. 

The purpose of this amendment was to provide the Company's board of directors with flexibility in raising capital for the Company by authorizing additional shares that could be issued to investors in a Company financing, and to protect the Company's ability to utilize its tax assets by limiting either the issuance of new shares of common stock or the transfer of outstanding shares of common stock if as a result of the issuance or transfer the acquirer would own five percent (5%) or more of the Company's common stock, or, for holders that already own five percent (5%) or more, the issuance or transfer would increase such holder's percentage ownership. 

About the Company

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

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

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

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

Accompanying Financial Statements and Tables

     
   Centrue Financial Corporation
   Unaudited Selected Quarterly Consolidated Financial Data
   (In Thousands, Except Per Share Data)
     
    Quarters Ended
    9/30/14   6/30/14   3/31/14   12/31/13   9/30/13
Balance Sheet                              
  Assets                              
    Cash and cash equivalents   $ 58,128   $ 62,054   $ 80,509   $ 70,748   $ 97,982
    Securities     141,538     148,891     156,958     163,869     142,149
    Loans     575,860     579,611     576,145     566,171     560,774
    Allowance for loan losses     (12,863)     (12,461)     (12,389)     (11,637)     (11,540)
    Other real estate owned     20,220     21,285     22,385     23,318     24,092
    Other assets     71,207     69,970     70,136     70,409     70,175
      Total assets     854,090     869,350     893,744     882,878     883,632
Liabilities and stockholders' equity                              
  Deposits     728,940     742,677     772,195     754,345     754,583
  Non-deposit funding     79,162     81,085     76,232     83,409     84,791
  Other liabilities     9,423     9,221     9,424     9,253     17,872
    Total liabilities     817,525     832,983     857,851     847,007     857,246
  Stockholders' equity     36,565     36,367     35,893     35,871     26,386
    Total liabilities and stockholders' equity   $ 854,090   $ 869,350   $ 893,744   $ 882,878   $ 883,632
Statement of Income                              
  Interest income   $ 6,947   $ 6,928   $ 6,973   $ 7,109   $ 7,040
  Interest expense     871     911     947     1,002     1,030
  Net interest income     6,076     6,017     6,026     6,107     6,010
  Provision for loan losses     675     700     900     1,075     900
  Net interest income (loss) after provision for loan losses     5,401     5,317     5,126     5,032     5,110
  Noninterest income     3,204     3,144     3,472     3,105     3,067
  Noninterest expense     8,032     8,087     8,040     8,446     8,257
  Income (loss) before income taxes     573     374     558     (309)     (80)
  Income tax expense (benefit)     -     -     -     -     -
  Net income (loss)   $ 573   $ 374   $ 558   $ (309)   $ (80)
  Net income (loss) for common stockholders   $ (235)   $ (619)   $ (226)   $ (868)   $ (633)
Per Share                              
  Book value per common share   $ 0.28   $ 0.53   $ 0.45   $ 0.45   $ (1.12)
  Weighted average common shares outstanding (1)     4,999,241     6,063,441     6,063,441     6,063,441     6,063,441
  Common shares outstanding     4,533,653     6,063,441     6,063,441     6,063,441     6,063,441
Earnings Performance                              
  Return on average total assets     0.26%     0.17%     0.26%     (0.14)%     (0.04)%
  Return on average stockholders' equity     6.24     4.15     6.28     (4.60)     (1.15)
  Net interest margin     3.33     3.29     3.32     3.34     3.21
  Efficiency ratio (1)     82.31     84.51     90.38     85.01     84.41
  Bank net interest margin     3.46     3.42     3.45     3.47     3.34
Asset Quality                              
  Nonperforming assets to total end of period assets     5.14%     5.76%     5.67%     5.93%     5.72%
  Nonperforming loans to total end of period loans     4.11     4.97     4.91     5.13     4.72
  Net loan charge-offs to total average loans     0.05     0.11     0.03     0.17     0.85
  Allowance for loan losses to total end of period loans     2.23     2.15     2.15     2.06     2.06
  Allowance for loan losses to nonperforming loans     54.32     43.24     43.81     40.06     43.63
  Nonperforming loans   $ 23,678   $ 28,820   $ 28,276   $ 29,052   $ 26,452
  Nonperforming assets     43,898     50,105     50,661     52,370     50,544
  Net loan charge-offs     274     643     148     976     4,817
Capital                              
  Total risk-based capital ratio     10.18%     10.01%     10.25%     10.22%     8.78%
  Tier 1 risk-based capital ratio     7.77     7.57     7.47     7.39     5.50
  Tier 1 leverage ratio     5.52     5.48     5.29     5.22     3.86
                                 
(1) Weighted average common shares outstanding are the same amount for basic shares and diluted shares.
(2) Calculated as noninterest expense less amortization of intangibles and expenses related to other real estate owned divided by the sum of net interest income before provisions for loan losses and total noninterest income excluding securities gains and losses and gains on sale of assets.
   

Contact Information

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