Centrue Financial Corporation Earnings Presentation December 31, 2016 NASDAQ: CFCB 1
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Corporate Profile – Dec 31, 2016 Platform Headquarters: Ottawa, IL Product Lines: Commercial, Retail, Mortgage, Treasury Management Branches: 20 Employees (FTE): 217.0 Market Data* NASDAQ Ticker: CFCB Market Cap: $149.7 million Price: $22.98 Tangible Book Value: $19.08 Price/ TBV: 120.4% 52 Week Range: $15.26 - $22.98 Shares Outstanding: 6,513,694 Market Makers: Boenning & Skattergood Keefe, Bruyette & Woods Sandler O'Neill + Partners *Market Data as of 1/25/2017 Balance Sheet Assets: $978 million Loans: $686 million Deposits: $740 million Profitability (YTD) Net Income: $6.3 million Return on Average Assets: 0.64% Return on Average Equity: 5.09% Net interest Margin: 3.43% (FTE) Efficiency Ratio: 78.27% Capital Ratios Risk-based Capital Ratio: 14.95% Leverage Ratio: 11.49% Texas Ratio: 5.01% Asset Quality NPA’s/ Assets: 0.68% Delinquency Ratio: 0.48% Allowance / Gross Loans: 1.30% Allowance / NPL’s: 545.59% 3
Franchise Value • One hundred forty-two year-old community bank offering commercial, retail, and mortgage banking services • Attractive branch network with solid market share in its core markets and a foothold in two large markets – Top 4 deposit market share in its three core markets (Grundy, Kankakee and LaSalle County) – The Company has a portion of its branches in Chicago (6) and St. Louis (1) MSAs • Desirable deposit franchise with 18 bps cost of total deposits during 2016 – Core deposits (checking, savings, NOW, and money markets) account for 72.8% of deposits – Weighted average life of core deposits is 7.3 years • Scalable bank platform – $978 million in assets and 20 total branches (6 branches in Chicago MSA) – Potential to further capitalize on attractive Chicago market • Experienced management team with proven track record • Historically profitable core franchise • Strong credit underwriting and asset quality metrics • Diverse loan portfolio 4
Fourth Quarter Highlights Assets Assets increased $16.6MM from year-end 2015 Earning assets increased $35.6MM or 4.3% from year-end 2015 Loan portfolio (including held for sale loans): o Grew $40.0MM, or 6.2%, from year-end 2015, net of $13.1 million in branch sales o Three year compound annual growth rate of 10.1% OREO decreased $3.4MM or 40.5% from year-end 2015 Liabilities & Capital Deposit portfolio: o Grew $21.5MM, or 3.0%, from year-end 2015, net of $51.7 million in branch sales o Total cost of deposits equals 18 bps for the full year 2016 Core deposit portfolio (checking, savings, NOW, money market): o Weighted average life totals 7.3 years o Totals 72.8% of deposits Borrowings decreased $8.9MM Asset Quality Nonperforming assets: o Decreased $7.7MM, or 53.5%, from year-end 2015 o NPA ratio fell to 0.68% from 1.50% from year-end 2015 Allowance to nonperforming loans improved to 545.59% Nonperforming loans decreased $0.7MM during the quarter 5
Fourth Quarter Highlights Income Statement Comparing fourth quarter 2016 to fourth quarter 2015: o Net income was $2.2MM compared to $38.6MM in 2015 when the Company reversed $38.2MM deferred tax asset (“DTA”) valuation allowance o Income before income taxes increased $2.2MM or 220.0% o Net interest income increased $0.2MM, or 2.8% o Loan portfolio yield increased 4 basis points o Noninterest income increased $1.1MM, or 42.3% o Noninterest expense decreased $0.5MM, or 6.0% Ratios & Per Share Data Comparing fourth quarter 2016 to fourth quarter 2015: o Earnings per share decreased to $0.33 from $5.92 o Tangible book value per share was $19.08 compared to $18.08 o Return on average assets decreased to 0.89% o Return on average equity decreased to 6.97% o Efficiency ratio decreased to 75.29% Other Gain on debt extinguishment was $1.0MM during the quarter as the Company redeemed a $10.3MM trust preferred issuance OREO related costs in the fourth quarter of 2016 were reduced by $113.5M from the fourth quarter of 2015 6
2014-2016 Quarterly Financial Summary (Unaudited) Quarterly Financial Summary Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Balance Sheet ($000) Total Assets 817,089$ 873,568$ 891,015$ 943,676$ 961,218$ 969,017$ 952,657$ 1,000,083$ 977,779$ Total Loans (1) 553,564 569,748 586,978 612,132 645,806 661,082 657,941 666,795 685,775 Total Deposits 698,824 712,673 700,118 709,535 718,504 729,269 716,424 760,951 740,046 Profitability (%) (2) Net Income ($000) (6,016)$ 1,867$ 1,053$ 1,088$ 38,594$ 918$ 2,128$ 1,055$ 2,215$ ROAA (2.85) 0.91 0.49 0.47 16.25 0.38 0.88 0.42 0.89 ROAE (65.13) 24.16 5.08 5.17 182.21 3.03 6.96 3.35 6.97 Net Interest Margin 3.37 3.44 3.48 3.34 3.37 3.48 3.49 3.38 3.38 Efficiency Ratio 92.15 92.20 83.83 80.16 82.77 79.96 80.57 77.43 75.29 Capital Ratios (%) Risk-based Capital Ratio 9.64 16.84 16.41 15.71 15.64 15.63 16.46 16.16 14.95 Leverage Ratio 4.93 12.45 12.14 11.49 12.10 11.72 12.17 12.22 11.49 Texas Ratio 1,532.34 20.00 18.28 17.86 11.40 10.13 7.10 5.95 5.01 Asset Quality (%) (2) NPA's/ Assets 2.20 1.99 1.80 1.67 1.50 1.34 0.98 0.79 0.68 NPL's/ Loans 1.40 1.29 1.06 0.99 0.93 0.85 0.38 0.35 0.24 Delinquency Ratio 0.94 1.66 1.24 1.47 1.37 1.04 0.37 0.38 0.48 NCO's/ Avg. Loans 1.22 - (0.11) 0.04 0.03 (0.01) 0.01 (0.01) 0.02 Allowance/ Gross Loans 1.44 1.40 1.47 1.37 1.33 1.36 1.36 1.35 1.30 Allowance/ NPL's 102.99 108.85 139.01 139.24 143.02 158.97 353.33 388.50 545.59 Source: Internal Management Reporting 2014 2015 2016 1. Includes loans held for sale. 2. In Q4 ’14, a bulk asset sale was completed in which a combined $35.2 million of problem assets were sold resulting in a charge against earnings of $3.9 million. In Q4 ’15, net income was impacted by a DTA reversal benefit of $38.2 million. 7
2016 Versus 2015 Results (Unaudited) Financial Comparisons 2016 2015 $ % 2016 2015 $ % Balance Sheet ($000) Total Assets 977,779$ $961,218 16,561$ 1.72 $977,779 $961,218 $16,561 1.72 Total Loans (1) 685,775 645,806 39,969 6.19 685,775 645,806 39,969 6.19 Total Deposits 740,046 718,504 21,542 3.00 740,046 718,504 21,542 3.00 Profitability (%) (2) Net Income ($000) 2,215$ $38,594 (36,379)$ (94.26) $6,316 $42,602 -$36,286 (85.17) ROAA 0.89 16.25 (15.36) (94.52) 0.64 4.79 -4.15 (86.64) ROAE 6.97 182.21 (175.24) (96.17) 5.09 60.29 -55.20 (91.56) Net Interest Margin 3.38 3.37 0.01 0.30 3.43 3.40 0.03 0.88 Efficiency Ratio 75.29 82.77 (7.48) (9.04) 78.27 84.53 -6.26 (7.41) Capital Ratios (%) Risk-based Capital Ratio 14.95 15.64 (0.69) (4.41) 14.95 15.64 -0.69 (4.41) Leverage Ratio 11.49 12.10 (0.61) (5.04) 11.49 12.10 -0.61 (5.04) Texas Ratio 5.01 11.40 (6.39) (56.05) 5.01 11.40 -6.39 (56.05) Asset Quality (%) NPA's/ Assets 0.68 1.50 (0.82) (54.67) 0.68 1.50 -0.82 (54.67) NPL's/ Loans 0.24 0.93 (0.69) (74.19) 0.24 0.93 -0.69 (74.19) Delinquency Ratio 0.48 1.37 (0.89) (64.96) 0.48 1.37 -0.89 (64.96) NCO's/ Avg. Loans 0.02 0.03 (0.01) (33.33) 0.00 -0.04 0.04 (100.00) Allowance/ Gross Loans 1.30 1.33 (0.03) (2.26) 1.30 1.33 -0.03 (2.26) Allowance/ NPL's 545.59 143.02 402.57 281.48 545.59 143.02 402.57 281.48 Source: Internal Management Reporting Quarter Ended December 31 Year to Date Ended December 31 1. Includes loans held for sale. 2. In Q4 ’15, the Company reversed $38.2 million DTA valuation allowance. 8
Commercial 11.7% AG and AGRE 7.2% Commercial RE 68.3% 1-4 Family 12.4% Consumer 0.5% Loans Loan and Deposit Portfolios Source: Internal Management Reporting Checking 20.6% NOW 17.4% Money Market 18.5% Savings 16.3% Time 27.2% Deposits 9
Loan Portfolio Source: Internal Management Reporting $553.6 $569.7 $587.0 $612.1 $645.8 $661.1 $657.9 $666.8 $685.8 79.2% 79.9% 83.8% 86.3% 89.9% 90.7% 91.8% 87.6% 92.7% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% $- $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 ($ in millions) Loans (including held for sale) Loan/ Deposit Ratio 10
Deposit Portfolio $492.1 $512.0 $503.6 $513.0 $531.2 $524.4 $512.3 $547.0 $538.9 0.22% 0.19% 0.17% 0.17% 0.16% 0.15% 0.17% 0.20% 0.21% 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% $- $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 ($ in millions) Core Deposits (Checking, Savings, NOW, Money Market) Time Rate Source: Internal Management Reporting 11
Asset Quality Source: Internal Management Reporting $7.7 $7.3 $6.2 $6.0 $6.0 $5.6 $2.5 $2.3 $1.6 $10.3 $10.0 $9.8 $9.8 $8.4 $7.4 $6.8 $5.5 $5.0 2.20% 1.99% 1.80% 1.67% 1.50% 1.34% 0.98% 0.79% 0.68% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 $20.0 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Nonperforming Assets ($ in millions) Nonperforming Loans OREO NPA Ratio $(14.0) $(650.0) $242.0 $185.0 $(83.0) $49.0 $(96.0) $117.0 1.22% 0.00% (0.11%) 0.04% 0.03% (0.01%) 0.01% (0.01%) 0.02% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% $(800) $(600) $(400) $(200) $- $200 $400 $600 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Net Charge-Off’s ($ in thousands) Net Charge-Off (Recovery) Ratio 1. In Q4 ’14, a bulk asset sale was completed in which a combined $35.2 million of problem assets were sold resulting in a charge against earnings of $3.9 million. 12
Capital 9.6% 16.8% 16.4% 15.7% 15.6% 15.6% 16.5% 16.2% 15.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 19.0% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Total Risk-Based Capital Ratio 4.9% 12.5% 12.1% 11.5% 12.1% 11.7% 12.2% 12.2% 11.5% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Tier 1 Leverage Ratio (0.84%) 9.03% 8.87% 8.49% 12.27% 12.35% 12.82% 12.32% 12.72% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Tangible Common Equity/ Tangible Assets 1532.3% 20.0% 18.3% 17.9% 11.4% 10.1% 7.1% 5.9% 5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Texas Ratio Note: A $76 million recapitalization occurred in March of 2015. 13 Source: Internal Management Reporting
Profitability (2.85%) 0.91% 0.49% 0.47% 16.25% 0.38% 0.88% 0.42% 0.89% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Return on Assets 92.2% 92.2% 83.8% 80.2% 82.8% 80.0% 80.6% 77.4% 75.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Efficiency Ratio $6.0 $6.0 $6.4 $6.7 $7.1 $7.3 $7.2 $7.2 $7.3 3.37% 3.44% 3.48% 3.34% 3.37% 3.48% 3.49% 3.38% 3.38% 3.3% 3.3% 3.4% 3.4% 3.5% 3.5% 3.6% $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Net Interest Income – Net Interest Margin (%) Net Interest Income ($ in millions) Net Interest Margin (%) (65.13%) 24.16% 5.08% 5.17% 182.21% 3.03% 6.96% 3.35% 6.97% -3.5% -1.5% 0.5% 2.5% 4.5% 6.5% 8.5% Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Return on Equity Source: Internal Management Reporting 14
Noninterest Income Source: Internal Management Reporting $4,027 $2,576 $3,237 $2,587 $2,263 $4,242 $2,499 $3,742 $2,156 $2,395 $2,386 $2,279 $2,099 $2,217 $2,231 $2,235 1.96% 1.20% 1.40% 1.09% 0.92% 1.75% 1.00% 1.51% 1.05% 1.11% 1.03% 0.96% 0.85% 0.92% 0.90% 0.90% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Total NII Core NII NII/Avg Assets Core NII/Avg Assets 15
Noninterest Expense Source: Internal Management Reporting $8,183 $7,952 $8,842 $8,261 $7,866 $8,112 $7,741 $7,795 $7,485 $7,408 $7,276 $7,732 $7,672 $7,761 $7,415 $7,659 3.98% 3.69% 3.81% 3.48% 3.21% 3.34% 3.11% 3.14% 3.64% 3.44% 3.14% 3.26% 3.13% 3.19% 2.97% 3.08% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Total NIE Core NIE NIE/Avg Assets Core NIE/Avg Assets 16
Stock Price $11.40 $15.00 $14.55 $16.64 $17.40 $17.40 $18.80 $21.30 $12.14 $12.16 $12.33 $18.08 $18.35 $18.72 $18.90 $19.08 93.9% 123.6% 139.8% 134.9% 96.2% 92.9% 99.5% 111.6% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% 130.0% 140.0% 150.0% $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Closing Stock Price Tangible Book Value Price/ TBV Source: Internal Management Reporting 17
Review of Branch Footprint • Top 4 market share in Grundy, Kankakee and LaSalle counties • Top 10 market share in 5 of the 7 counties in which the Company operates • 14 branches in North-Central Illinois with strong market share • 6 branches in the southern suburbs of Chicago • 1 branch in St. Louis MSA Highlights 2016 Market Rank Company Brchs. Deposits ($) Share (%) 1 HomeStar Financial Group Inc. (IL) 4 303,683$ 16.10 2 Centrue Financial Corporation (IL) 6 250,621 13.29 3 Municipal Trust & SB (IL) 3 224,338 11.89 4 PNC Financial Services Group (PA) 3 206,822 10.97 5 First Trust Financial Corp. (IL) 4 178,666 9.47 6 First American Bank Corp. (IL) 2 175,409 9.30 7 Romy Hammes Inc. (IN) 2 158,603 8.41 8 Foresight Fnl Group Inc. (IL) 2 114,846 6.09 9 MainSource Financial Group (IN) 2 74,333 3.94 10 Illinois State Bancorp Inc. (IL) 1 65,974 3.50 Total For Institutions In Market 38 1,885,986$ 2016 Market Rank Company Brchs. Deposits ($) Share (%) 1 Tri-County Finl Group Inc. (IL) 5 443,150$ 17.41 2 Eureka Savings Bank (IL) 4 280,348 11.01 3 First Ottawa Bancshares (IL) 6 254,007 9.98 4 Centrue Financial Corporation (IL) 7 200,031 7.86 5 First FSB (IL) 6 185,915 7.30 6 Ottawa Bancorp Inc. (IL) 2 160,858 6.32 7 LaSalle Bancorp Inc. (IL) 2 142,803 5.61 8 Streator Home SB (IL) 1 127,813 5.02 9 Peru FSB (IL) 2 124,533 4.89 10 Heartland Bancorp Inc. (IL) 2 94,985 3.73 Total For Institutions In Market 59 2,545,264$ Kankakee County - Top 10 LaSalle County - Top 10 18 Source: SNL Financial, deposit market share data as of June 30, 2016
Branches: 19 Loans: $477 million Deposits: $724 million Branches: 1 Loans: $209 million Deposits: $16 million Total Branches: 20 Loans: $686 million Deposits: $740 million Branch Franchise 19
Scorecard – Previous Two Years Bulk Asset Sale $76 Million Recap Went Public on NASDAQ Recovery of DTA Termination of Joint Regulatory Agreement Sale of Branches Realized Gain on Trust Preferred Retirement Strengthened Balance Sheet Improvement in Core Run Rate Build Shareholder Value 20
Strategic Priorities Increase Core Earnings Strengthen Balance Sheet Through Quality Loan and Core Deposit Growth Maintain Credit Quality Create a Leaner, More Efficient Organization Utilize and Protect Deferred Tax Asset Explore Opportunities to Utilize Excess Capital Invest in Talent 21
