Centrue Financial Corporation Announces Second Quarter EarningsST. LOUIS, MO -- 07/29/2008 -- Centrue Financial Corporation (NASDAQ: TRUE) reported net income for the second quarter 2008 of $2.7 million or $0.44 per diluted share as compared to $2.5 million or $0.38 per diluted share earned in the second quarter 2007. This represents increases of 8.0% in net income and 15.8% in diluted earnings per share over second quarter 2007 results and 12.5% in net income and 12.8% in diluted earnings per share over first quarter 2008 results. For the six months ended June 30, 2008, net income equaled $5.2 million or $0.83 per diluted share as compared to $4.4 million or $0.66 per diluted share in the same period during 2007. This represents an increase of 18.2% in net income and 25.8% in diluted earnings per share.
"We are pleased to report financial results that are meaningfully above 2007 levels," remarked Thomas A. Daiber, President and Chief Executive Officer, on the announcement. "Our core earnings improved as a result of a stronger net interest margin and enhanced operating efficiency. The difficult economic climate did contribute to the increase in our non performing assets to $24.1 million, or 1.76% of total assets, largely due to the deterioration of two credit relationships that were discussed in our first quarter press release and Form 10-Q. We strive to proactively identify and aggressively remediate problem credits and we are currently in the process of entering into contracts to sell two of the parcels related to these relationships. We also anticipate liquidating or restructuring the majority of non performing assets prior to year-end."
"While we devote attention and resources to monitoring our existing loan portfolio and maintaining good asset quality, we also continue to enter into new customer relationships which we believe will build long term shareholder value. Our focus on sales and customer service along with competitive deposit products, strong loan underwriting and disciplined pricing resulted in strong core deposit and loan growth during the first six months of 2008 as both grew at annualized rates of 16%." Mr. Daiber continued, "Our capital levels continue to exceed minimum standards for a 'well-capitalized' institution. During the quarter, we also took several strategic steps to better position our organization for future growth and profitability, including the completion of two branch sales and one branch closing reducing our footprint to a total of 28 branches and entering into a contract to sell our asset management business line."
Second Quarter Highlights:
- -- Second quarter 2008 results included the following nonrecurring
activity:
-- Net gain on sale of branches of $629,000.
-- Write-down of $297,000 in goodwill related to the anticipated sale
of a Wealth Management business line.
-- Approximately $266,000 in costs associated with branch
sales/closings and employee separation costs.
- -- Excluding $563,000 in nonrecurring 2008 operating expense items noted
above and $716,000 in nonrecurring items taken in the second quarter
2007, noninterest expense levels decreased $472,000 or 5.2% in the
second quarter of 2008 compared to 2007.
- -- The efficiency ratio improved to 64.76%, a decrease from 70.80%
recorded in the second quarter 2007 and 73.06% reported in the first
quarter 2008.
- -- The net interest margin increased 4 basis points to 3.34% as compared
to 3.30% recorded in the second quarter 2007 and increased 9 basis
points from 3.25% reported in the first quarter 2008.
- -- The loan portfolio increased $46.7 million or 4.9% from year-end 2007.
Excluding $30.1 million in loans related to branch sales recorded in
the first and second quarters of 2008, loans grew $76.8 million or 8.0%
since year-end 2007.
- -- Total core deposits (checking, NOW, savings and money market) increased
$11.5 million or 2.5% from year-end 2007. Excluding $24.3 million
related to branch sales recorded in the first and second quarter 2008,
total core deposits increased $37.1 million or 8.0% since year-end.
- -- As discussed in more detail below, the Company did experience an
increase in nonperforming assets to $24.1 million versus $7.1 million
at December 31, 2007 and $5.2 million recorded at March 31, 2008.
- -- As part of an ongoing effort to redeploy capital to higher growth
markets, the Company closed its Ashkum branch and completed the sale of
its Manlius and Tampico branches. The transaction resulted in selling
$17.4 million in loans and $29.4 million in deposits and generated a
net gain on sale of $629,000.
Loans and Funding
Gross loans at June 30, 2008 totaled $1.004 billion, a modest decrease from the $1.016 billion recorded at March 31, 2008 and a $46.7 million increase from the $957.3 million recorded at December 31, 2007. The growth experienced for the first six months of 2008 was largely generated in the St. Louis market and concentrated in commercial real estate and commercial and industrial lending activities. Excluding $30.1 million in loans related to branch sales recorded in the first and second quarters of 2008, loans grew $76.8 million or 8.0% since year-end 2007. The Company has no direct exposure to sub prime mortgages.
Deposits at June 30, 2008 totaled $1.011 billion as compared to $1.049 billion recorded at March 31, 2008 and $1.033 billion recorded at December 31, 2007. This represents a decrease of $22.0 million or 2.1% since December 31, 2007. The significant portion of the decrease was in higher costing time deposits. Excluding $54.7 million in deposits related to branch sales recorded in the first and second quarters of 2008, total deposits increased $32.4 million or 3.1% since year-end 2007. Non-interest bearing deposits were 11.5% of total deposits at June 30, 2008 as compared to 11.1% recorded at December 31, 2007. Our deposits remain primarily core with brokered deposits totaling 6.0% of total deposits.
Asset Quality and Allowance for Loan Loss
As previously disclosed in its quarterly report on Form 10-Q for the first quarter 2008 filed on May 9, 2008, the Company is engaging in an ongoing review of its commercial real estate loan portfolio. This review prompted the identification of two large problem relationships aggregating $28.0 million in late March and early April. Based on further analysis and deterioration of these two relationships, action plans were implemented which resulted in $20.0 million related to these loans being classified as nonperforming assets in the second quarter 2008.
One relationship, totaling $16.3 million, is currently in foreclosure which is expected to be completed in the third quarter. The Company's exposure was reduced by extinguishing an unfunded commitment of $100,000 and a $500,000 write down during the second quarter. Marketing efforts are underway, and management is negotiating a contract to sell one parcel of the collateral for $6.8 million and anticipates selling all of the remaining underlying collateral prior to year-end.
The second relationship, totaling $11.1 million, included a $7.3 million loan which is currently being restructured and is expected to continue as a performing relationship. Relative to the remaining balance, the Company successfully foreclosed on the underlying collateral and anticipates selling this property prior to year-end.
Due largely to the deterioration of these two loan relationships during the second quarter 2008, the Company recorded an $866,000 provision for loan losses versus $226,000 reported in the second quarter 2007. The allowance was 1.15% of total loans outstanding at June 30, 2008 compared to 1.10% reported at March 31, 2008 and 1.12% as of December 31, 2007. Net charge-offs for the second quarter 2008 were $545,000 or 0.05% of average loans as compared to $300,000 or 0.03% reported in the first quarter 2008 and $5,000 in net recoveries reported in the second quarter 2007. The second quarter 2008 reserve coverage ratio (allowance to nonperforming loans) was reported at 58.27% as compared to 276.52% for the first quarter of 2008 and 262.96% reported at year-end 2007.
Due primarily to the two relationships mentioned above, nonperforming loans increased to $19.8 million as compared to $4.1 million reported in the first quarter 2008 and fourth quarter 2007 respectively. The level of nonperforming loans to end of period loans was 1.97% as of June 30, 2008 compared to 0.40% as of March 31, 2008 and 0.43% as of December 31, 2007. In light of current market conditions, the Company is continuing to review its commercial real estate loan portfolio.
Net Interest Margin
The net interest margin for the second quarter 2008 was 3.34% as compared to 3.30% for the same period in 2007. The improvement in the net interest margin was due to several factors, including growth in higher spread assets, an increase in yield-related loan fees and decreases in time deposit and other wholesale funding rates due to current market conditions.
Tax-equivalent net interest income increased to $10.3 million for the second quarter 2008 as compared to $9.7 million earned in the same period of 2007. The improvement in net interest income was due to growth in average earning assets, an improving net interest margin, and decreases in rates paid on interest-bearing funding which dropped in response to rate environment changes that occurred in the first quarter 2008. It is likely that the net interest margin will remain under pressure throughout 2008 due to ongoing competitive and market pressures in pricing loans and deposits.
Noninterest Income and Expense
Total noninterest income for the second quarter 2008 was $4.3 million as compared to $4.2 million reported in the same period in 2007. Excluding $771,000 in gains on sale of assets and OREO properties from the second quarter 2008 and $491,000 in OREO gains from the second quarter 2007, noninterest income decreased $182,000 or 4.9%. The decrease was primarily the result of a reduction in service charges on deposit accounts, fees received on items drawn on customer accounts with insufficient funds and revenue generated from the mortgage banking and wealth management business units.
Total noninterest expense levels were $9.2 million, down from $9.8 million recorded during the same period in 2007. Excluding nonrecurring charges of $563,000 in 2008 and $716,000 in 2007, noninterest expense levels decreased $472,000 or 5.2%. The decrease was reported across most categories and was predominantly due to a reduction in the number of full-time equivalent employees which yielded lower salary and benefits costs.
Capital Management
At June 30, 2008, the Company's total risk-based capital ratio and leverage ratio were 11.17% and 7.93%, respectively. The Company's capital position continues to exceed the minimum ratios of 10.0% and 5.0% required by the Federal Reserve for a bank holding company to be considered "well capitalized."
Other capital management activity for the quarter included the following:
- -- The Board of Directors approved the payment of a $0.14 common stock
dividend, marking the 92nd consecutive quarter of dividends paid to
stockholders.
- -- The Company did not repurchase any common shares during the quarter.
The current stock repurchase program expires on January 24, 2009.
About the Company
Centrue Financial Corporation is a regional financial services company headquartered in St. Louis, Missouri and devotes special attention to personal service and offers bank, trust and investment services. The combined 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 will be 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
Accompanying this press release is the following unaudited financial information:
- -- Unaudited Quarterly Highlights
- -- Unaudited Consolidated Balance Sheets
- -- Unaudited Consolidated Statements of Income
Centrue Financial Corporation
Unaudited Highlights
(In Thousands, Except Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating Highlights
Net income $ 2,705 $ 2,506 $ 5,150 $ 4,405
Return on average total
assets 0.80 % 0.76 % 0.76 % 0.68 %
Return on average
stockholders' equity 9.26 8.51 8.74 7.51
Net interest margin 3.34 3.30 3.29 3.32
Efficiency ratio 64.76 70.80 68.85 73.15
Per Share Data
Diluted earnings per common
share $ 0.44 $ 0.38 $ 0.83 $ 0.66
Book value per common share $ 19.26 $ 18.48 $ 19.26 $ 18.48
Diluted weighted average
common shares outstanding 6,048,920 6,449,777 6,068,612 6,472,272
Period end common shares
outstanding 6,028,491 6,363,922 6,028,491 6,363,922
Stock Performance Data
Market price:
Quarter end $ 11.04 $ 20.05 $ 11.04 $ 20.05
High $ 19.90 $ 20.55 $ 22.94 $ 20.55
Low $ 11.03 $ 18.50 $ 11.03 $ 18.50
Period end price to book value 57.32% 108.50% 57.32% 108.50%
Centrue Financial Corporation
Unaudited Consolidated Balance Sheets
(In Thousands, Except Share Data)
June 30, December 31,
2008 2007
----------- -----------
ASSETS
Cash and cash equivalents $ 48,238 $ 51,628
Securities available-for-sale 203,864 238,661
Restricted securities 10,670 10,670
Loans 1,003,689 957,285
Allowance for loan losses (11,542) (10,755)
----------- -----------
Net loans 992,147 946,530
Cash value of life insurance 27,402 26,895
Mortgage servicing rights 2,993 3,161
Premises and equipment, net 33,750 35,615
Goodwill 24,804 25,498
Intangible assets, net 10,013 11,007
Other real estate 4,317 2,937
Other assets 15,350 12,397
----------- -----------
Total assets $ 1,373,548 $ 1,364,999
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest-bearing $ 116,470 $ 114,360
Interest-bearing 894,253 918,662
----------- -----------
Total deposits 1,010,723 1,033,022
Federal funds purchased and securities sold
under agreements to repurchase 64,301 44,937
Federal Home Loan Bank advances 128,300 121,615
Notes payable 21,933 13,802
Series B mandatory redeemable preferred stock 831 831
Subordinated debentures 20,620 20,620
Other liabilities 10,233 11,296
----------- -----------
Total liabilities 1,256,941 1,246,123
Stockholders' equity
Series A convertible preferred stock 500 500
Common stock 7,454 7,438
Surplus 71,383 70,901
Retained earnings 63,028 60,344
Accumulated other comprehensive income (3,338) 939
----------- -----------
139,027 140,122
Treasury stock, at cost (22,420) (21,246)
----------- -----------
Total stockholders' equity 116,607 118,876
Total liabilities and stockholders'
equity $ 1,373,548 $ 1,364,999
=========== ===========
Centrue Financial Corporation
Unaudited Consolidated Statements of Income
(In Thousands, Except Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- -------- --------- --------
Interest income
Loans $ 15,974 $ 16,917 $ 33,268 $ 32,963
Securities
Taxable 2,106 3,182 4,581 6,472
Exempt from federal income
taxes 355 381 713 763
Federal funds sold and other 25 173 80 268
--------- -------- --------- --------
Total interest income 18,460 20,653 38,642 40,466
Interest expense
Deposits 7,026 9,443 15,366 18,260
Federal funds purchased and
securities sold under agreements
to repurchase 153 463 486 873
Federal Home Loan Bank advances 776 628 1,948 1,273
Series B mandatory redeemable
preferred 13 13 25 25
Subordinated debentures 250 450 634 898
Notes payable 238 165 476 323
--------- -------- --------- --------
Total interest expense 8,456 11,162 18,935 21,652
Net interest income 10,004 9,491 19,707 18,814
Provision for loan losses 866 226 1,632 226
--------- -------- --------- --------
Net interest income after provision
for loan losses 9,138 9,265 18,075 18,588
Noninterest income
Service charges 1,875 1,969 3,511 3,552
Trust income 232 232 485 461
Mortgage banking income 389 449 835 883
Brokerage commissions and fees 66 104 168 230
Bank owned life insurance 254 247 506 488
Securities gains - (33) 848 (33)
Gain on sale of OREO 142 491 238 588
Gain on sale of other assets 629 - 1,111 -
Other income 705 735 1,528 1,279
--------- -------- --------- --------
4,292 4,194 9,230 7,448
Noninterest expenses
Salaries and employee benefits 4,493 5,144 9,322 10,292
Occupancy 919 1,019 1,957 1,960
Furniture and equipment 624 627 1,406 1,322
Marketing 315 221 551 413
Supplies and printing 99 156 230 337
Telephone 201 210 442 388
Data processing 231 276 534 859
Amortization of intangible assets 775 591 1,684 1,212
Other expenses 1,564 1,602 3,411 3,011
--------- -------- --------- --------
9,221 9,846 19,537 19,794
Income before income taxes 4,209 3,613 7,768 6,242
Income taxes 1,504 1,107 2,618 1,837
--------- -------- --------- --------
Net income $ 2,705 $ 2,506 $ 5,150 $ 4,405
========= ======== ========= ========
Preferred stock dividends 52 52 104 104
--------- -------- --------- --------
Net income for common stockholders $ 2,653 $ 2,454 $ 5,046 $ 4,301
========= ======== ========= ========
Basic earnings per common share $ 0.44 $ 0.38 $ 0.84 $ 0.67
========= ======== ========= ========
Diluted earnings per common share $ 0.44 $ 0.38 $ 0.83 $ 0.66
========= ======== ========= ========
Centrue Financial Corporation
Unaudited Selected Quarterly Consolidated Financial Data
(In Thousands, Except Share Data)
Quarters Ended
-------------------------------------------------
06/30/08 03/31/08 12/31/07 09/30/07 06/30/07
--------- --------- --------- --------- ---------
Statement of Income Data
Interest income $ 18,460 $ 20,182 $ 21,549 $ 21,561 $ 20,653
Interest expense (8,456) (10,479) (11,606) (11,477) (11,162)
--------- --------- --------- --------- ---------
Net interest income 10,004 9,703 9,943 10,084 9,491
Provision for loan
losses 866 766 449 - 226
--------- --------- --------- --------- ---------
Net interest income
after provision for
loan losses 9,138 8,937 9,494 10,084 9,265
Noninterest income 4,292 4,938 3,850 4,367 4,194
Noninterest expense 9,221 10,316 8,908 8,631 9,846
--------- --------- --------- --------- ---------
Income before income
taxes 4,209 3,559 4,436 5,820 3,613
Provision (benefit) for
income taxes 1,504 1,114 1,356 1,982 1,107
--------- --------- --------- --------- ---------
Net income $ 2,705 $ 2,445 $ 3,080 $ 3,838 $ 2,506
========= ========= ========= ========= =========
Net income on common
stock $ 2,653 $ 2,393 $ 3,029 $ 3,786 $ 2,454
========= ========= ========= ========= =========
Per Share Data
Basic earnings per
common share $ 0.44 $ 0.40 $ 0.49 $ 0.60 $ 0.38
Diluted earnings per
common share 0.44 0.39 0.49 0.60 0.38
Cash dividends on
common stock 0.14 0.13 0.13 0.13 0.13
Dividend payout ratio
for common stock 31.81 % 32.97 % 26.74 % 21.71 % 34.03%
Book value per common
share $ 19.26 $ 19.48 $ 19.50 $ 19.12 $ 18.48
Basic weighted average
common shares
outstanding 6,027,168 6,051,554 6,174,732 6,321,760 6,414,390
Diluted weighted
average common shares
outstanding 6,048,920 6,088,608 6,227,046 6,357,605 6,449,777
Period-end common
shares outstanding 6,028,491 6,026,146 6,071,546 6,261,128 6,363,922
Balance Sheet Data
Securities $ 214,534 $ 217,937 $ 249,331 $ 265,873 $ 276,710
Loans 1,003,689 1,016,097 957,285 933,903 912,168
Allowance for loan
losses 11,542 11,221 10,755 10,852 10,828
Assets 1,373,548 1,387,852 1,364,999 1,363,246 1,353,386
Deposits 1,010,723 1,049,049 1,033,022 1,063,805 1,088,122
Stockholders' equity 116,607 117,870 118,876 120,234 118,067
Earnings Performance Data
Return on average total
assets 0.80 % 0.71 % 0.90 % 1.13 % 0.76 %
Return on average
stockholders' equity 9.26 8.24 10.22 12.78 8.51
Net interest margin
ratio 3.34 3.25 3.35 3.40 3.30
Efficiency ratio (1) 64.76 73.06 61.72 59.42 70.80
Asset Quality Ratios
Nonperforming assets to
total end of period
assets 1.76 % 0.38 % 0.51 % 0.75 % 0.81 %
Nonperforming loans to
total end of period
loans 1.97 0.40 0.43 0.60 0.49
Net loan charge-offs to
total average loans 0.05 0.03 0.06 - -
Allowance for loan
losses to total end of
period loans 1.15 1.10 1.12 1.16 1.19
Allowance for loan
losses to
nonperforming loans 58.27 276.52 262.96 194.72 241.05
Capital Ratios
Average equity to
average assets 8.61 % 8.68 % 8.75 % 8.83 % 8.88 %
Total capital to risk
adjusted assets 11.17 10.79 10.23 11.06 11.09
Tier 1 leverage ratio 7.93 7.65 7.69 7.80 7.60
(1) 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:
Thomas A. Daiber
President and
Chief Executive Officer
Centrue Financial Corporation
tom.daiber@centrue.com
Kurt R. Stevenson
Senior Executive Vice President
and Chief Financial Officer
Centrue Financial Corporation
kurt.stevenson@centrue.com
