Centrue Financial Corporation Announces Third Quarter EarningsST. LOUIS, MO -- 10/29/2008 -- Centrue Financial Corporation (NASDAQ: TRUE) reported net income for the third quarter 2008 of $2.8 million or $0.46 per diluted share. Comparatively, net income was $2.7 million or $0.44 per diluted share for the second quarter 2008 and $3.8 million or $0.60 per diluted share earned in the third quarter 2007. This represents an increase of 4.5% in diluted earnings per share over second quarter 2008 results and a decrease of 23.3% in diluted earnings per share in comparison to third quarter 2007 results. The decrease, when compared to third quarter 2007, was primarily related to $591,000 ($362,000, net of tax) in nonrecurring income and no recorded provision to the allowance for loan losses in the third quarter 2007. For the nine months ended September 30, 2008, net income equaled $7.9 million or $1.29 per diluted share as compared to $8.2 million or $1.26 per diluted share in the same period during 2007. This represents an increase of 2.4% in diluted earnings per share.
"Despite the unprecedented challenges in the financial markets, Centrue maintained our credit quality, improved our allowance for loan loss coverage, enhanced our liquidity, posted earnings growth as third quarter 2008 earnings per share improved 4.5% over second quarter 2008 and improved our capital position which is well in excess of minimum standards for a 'well-capitalized' institution," remarked Thomas A. Daiber, President and Chief Executive Officer. "Management believes that recently enacted legislation and other initiatives by the United States Treasury are steps in the right direction to restore confidence in the financial system and we are carefully examining opportunities for Centrue to participate in the new programs. Educating our customers on the strength and stability of our organization during these challenging times will remain a primary objective. It has long been the mission of Centrue 'to help people achieve financial peace of mind' and that objective has never been more relevant or more critical than it is today. We will continue to focus on maintaining the strong foundation that has allowed Centrue to meet the banking needs of our communities for over 134 years."
Third Quarter Highlights:
- -- Risk-based capital and tier 1 leverage ratios were 11.80% and 8.30%,
respectively, an increase from 11.17% and 7.93% that was reported at June
30, 2008 and 10.23% and 7.69% that was reported at December 31, 2007.
- -- Nonperforming assets remained relatively stable from June 30 levels,
marginally increasing from $24.1 million or 1.76% of assets recorded at
June 30, 2008 to $24.9 million or 1.87% of assets at September 30, 2007.
- -- The net interest margin was 3.37%, a 3 basis point increase when
compared to 3.34% recorded in the second quarter 2008, a 12 basis point
increase when compared to 3.25% reported in the first quarter 2008, and a 3
basis point decrease when compared to 3.40% reported in the third quarter
2007.
- -- The efficiency ratio improved to 58.85%, a decrease from 64.76%
reported in the second quarter 2008 and 59.42% recorded in the third
quarter 2007.
- -- As part of an ongoing effort to redeploy capital to more profitable
business units, the Company completed the sale of asset management and
brokerage business units. We anticipate completing the sale of the Trust
product line during the fourth quarter.
Balance Sheet
The primary strategic objective related to the Company's $206.7 million investment securities portfolio is to assist with liquidity and interest rate risk management as well as to minimize any credit risk. Centrue does not hold any securities containing sub-prime mortgages or Fannie Mae or Freddie Mac equities.
As of September 30, 2008 the Company held trust preferred securities with a total book value of $28.0 million. Our investments in trust-preferred securities receive principal and interest payments from several pools of subordinated capital debentures with each pool containing issuance by a minimum of 23 banks, or in a few instances capital notes from insurance companies. Each of these securities carries an investment grade rating, and all have met their scheduled interest payments. We presently anticipate the full receipt of both principal and interest in accordance with our original purchase assumptions. The unrealized loss on these securities of $15.3 million reflects the market's temporary negative bias toward these credit instruments given the current interest rate and liquidity environment. We do not believe this loss is an other-than-temporary impairment and we have both the intent and ability to hold them until maturity or recovery. Should the economic climate continue to deteriorate from current levels, the underlying credits may experience difficulty and likely be further stressed.
Gross loans at September 30, 2008 totaled $973.9 million as compared to $1.004 billion recorded at June 30, 2008 and $957.3 million recorded at December 31, 2007. The growth experienced for the first nine 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 $46.7 million or 5.0% since year-end 2007. The Company has no direct exposure to sub-prime mortgages.
Deposits at September 30, 2008 totaled $1.009 billion as compared to $1.011 billion recorded at June 30, 2008 and $1.033 billion recorded at December 31, 2007. Excluding $54.7 million in deposits related to branch sales recorded in the first and second quarters of 2008, total deposits increased $30.7 million or 3.1% since year-end 2007. Non-interest bearing deposits were 10.6% of total deposits at September 30, 2008 as compared to 11.1% recorded at December 31, 2007. The deposit composition remains primarily core with brokered deposits only totaling 11.1% of total deposits. The Company plans to voluntarily participate in the FDIC's fee-based expanded insurance program.
Credit Quality and Allowance for Loan Loss
Credit quality performance in the third quarter was generally consistent with our expectations, reflecting the negative impact from the continuing economic weakness. These economic factors contributed to $1.3 million or 0.13% of average loans in net charge-offs for the quarter as well as a commensurate increase in the provision for loan losses.
As previously disclosed in its quarterly report on Form 10-Q for the first quarter 2008 filed on May 9, 2008, the Company as part of an ongoing review of its commercial real estate loan portfolio identified two large loan relationships with a material deterioration in their financial condition. Action plans were implemented which ultimately resulted in $20.0 million related to these loans being classified as nonperforming assets in the second quarter 2008.
The outstanding loan balance for one relationship, totaling $16.3 million, was moved into other real estate through a consent foreclosure at a carrying value of $15.1 million with a $1.2 million write-down being taken. Since then, part of the property was sold for $6.8 million in net proceeds, reducing the other real estate owned carrying value to $8.3 million. Marketing efforts continue for the remaining parcel.
The second relationship has one parcel that was transferred to other real estate owned with a carrying value of $3.7 million. A contract has been accepted to sell this parcel and a closing is anticipated to be completed in the fourth quarter resulting in no loss. The remaining portion of the relationship is a $7.3 million loan which is currently being restructured.
Due largely to the deterioration of the overall economic conditions and workout activities on previously identified relationships, the Company recorded a $1.2 million provision for loan losses versus no provision recorded in the third quarter 2007. The allowance was 1.18% of total loans outstanding at September 30, 2008 compared to 1.15% reported at June 30, 2008 and 1.12% as of December 31, 2007. Net charge-offs for the third quarter 2008 were $1.3 million or 0.13% of average loans as compared to $545,000 or 0.05% reported in the second quarter 2008 and $24,000 in net recoveries reported in the third quarter 2007. The third quarter 2008 reserve coverage ratio (allowance to nonperforming loans) was reported at 91.78% as compared to 58.27% for the second quarter of 2008 and 262.96% reported at year-end 2007.
Nonperforming loans decreased to $12.5 million as compared to $19.8 million reported in the second quarter 2008 and $4.1 million in the fourth quarter 2007. The decrease from second quarter 2008 was primarily related to the two previously discussed commercial real estate loans that were transferred to other real estate. The level of nonperforming loans to end of period loans was 1.28% as of September 30, 2008 compared to 1.97% as of June 30, 2008 and 0.43% as of December 31, 2007.
We will continue diligently monitoring our loan portfolio, paying particular attention to borrowers with residential real estate exposure. While virtually all of these relationships are performing, the economic outlook for this industry projects to remain extremely challenging well in to 2009. Should the economic climate deteriorate from current levels, borrowers may experience difficulty, and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for loan losses.
Net Interest Margin
The net interest margin was 3.37%, a 3 basis point increase when compared to 3.34% recorded in the second quarter 2008, a 12 basis point increase when compared to 3.25% reported in the first quarter 2008, and a 3 basis point decrease when compared to 3.40% reported in the third quarter 2007. The decrease, when compared to the third quarter 2007, reflected the Company's asset-sensitivity and the market interest rate environment.
Between late September 2007 and May 2008, the Federal Open Market Committee (FOMC) reduced rates seven times for a total reduction of 325 basis points. With most of the Company's floating rate loans repricing within 30 days of a rate change, loan yields began to reflect the downward pricing adjustments in the 2007 fourth quarter and continued in the first half of 2008.
Most of the corresponding decreases in funding costs did not begin until the 2008 first quarter and funding costs decreases continued to lag loan repricing for most of the second quarter. In the third quarter, as market interest rates remained stable, the disparity between the repricing of loans and the repricing of funding costs narrowed substantially. Management anticipates that the FOMC's 50-basis-point rate reduction on October 8, and potential further rate cuts, will likely compress the margin at least in the near term.
Tax-equivalent net interest income decreased to $10.2 million for the third quarter 2008 as compared to $10.3 million earned in the same period of 2007. The slight decline in net interest income was largely due to the reduction in the net interest margin partially offset by a modest increase in average-earning assets.
Noninterest Income and Expense
Total noninterest income for the third quarter 2008 was $3.6 million as compared to $4.4 million reported in the same period in 2007. Excluding $89,000 in gains on sale of assets and other real estate owned properties from the third quarter 2008 and $774,000 in other real estate owned gains and gross fees generated from nonrecurring fees in the wealth management line of business during the third quarter 2007, noninterest income decreased $88,000 or 2.5%. The decrease was primarily the result of a volume related reduction in revenue generated from the mortgage banking business line and the sale of the trust and brokerage business lines. These decreases were partially offset by an improvement in overdraft fees received on customer accounts with insufficient funds.
Total noninterest expense levels were $8.1 million, down from $8.6 million recorded during the same period in 2007. Excluding nonrecurring reductions of $376,000 in 2008, noninterest expense levels decreased $133,000 or 1.5%. The decrease was reported across many categories and was predominantly due to the impact of selling four branches during 2008 which led to reductions in the number of full-time equivalent employees, occupancy, and telephone and data line expense.
Capital Management
Regulatory risk-based capital and tier-1 leverage ratios were 11.80% and 8.30%, respectively, an increase from 11.17% and 7.93% reported at June 30, 2008 and 10.23% and 7.69% that was reported at December 31, 2007. Both ratios continue to exceed the regulatory "well-capitalized" thresholds of 10.0% and 5.0%. Centrue maintains nearly $112.6 million in capital and holds $19.8 million in excess capital over the regulatory "well capitalized" requirement.
The Company has solid liquidity and capital but is currently evaluating whether to participate in the U.S. Treasury Department's capital purchase program. Management believes that the opportunity to access capital at more attractive rates than what is available in the current market is appealing and would further strengthen capital and liquidity.
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 93rd 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 and is
anticipated to be informally suspended throughout the balance of 2008.
About the Company
Centrue Financial Corporation is a regional financial services company headquartered in St. Louis, Missouri 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 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
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating Highlights
Net income $ 2,799 $ 3,838 $ 7,949 $ 8,243
Return on average total assets 0.83% 1.13% 0.78% 0.83%
Return on average
stockholders' equity 9.64 12.78 9.04 9.29
Net interest margin 3.37 3.40 3.32 3.35
Efficiency ratio 58.85 59.42 65.49 68.36
Per Share Data
Diluted earnings per common
share $ 0.46 $ 0.60 $ 1.29 $ 1.26
Book value per common share $ 18.59 $ 19.12 $ 18.59 $ 19.12
Diluted weighted average
common shares outstanding 6,030,147 6,357,605 6,051,418 6,433,243
Period end common shares
outstanding 6,028,491 6,261,128 6,028,491 6,261,128
Stock Performance Data
Market price:
Quarter end $ 12.85 $ 20.00 $ 12.85 $ 20.00
High $ 16.00 $ 20.31 $ 22.94 $ 20.55
Low $ 9.12 $ 18.95 $ 9.12 $ 18.50
Period end price to book value 69.12% 104.60% 69.12% 104.60%
Centrue Financial Corporation
Unaudited Consolidated Balance Sheets
(In Thousands, Except Share Data)
September 30, December 31,
2008 2007
------------- -------------
ASSETS
Cash and cash equivalents $ 40,642 $ 51,628
Securities available-for-sale 196,307 238,661
Restricted securities 10,411 10,670
Loans 973,933 957,285
Allowance for loan losses (11,461) (10,755)
------------- -------------
Net loans 962,472 946,530
Cash value of life insurance 27,662 26,895
Mortgage servicing rights 2,932 3,161
Premises and equipment, net 32,887 35,615
Goodwill 24,494 25,498
Intangible assets, net 9,524 11,007
Other real estate 12,445 2,937
Other assets 16,744 12,397
------------- -------------
Total assets $ 1,336,520 $ 1,364,999
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest-bearing $ 106,863 $ 114,360
Interest-bearing 901,862 918,662
------------- -------------
Total deposits 1,008,725 1,033,022
Federal funds purchased and securities
sold under agreements to repurchase 32,697 44,937
Federal Home Loan Bank advances 131,293 121,615
Notes payable 20,655 13,802
Series B mandatory redeemable preferred
stock 831 831
Subordinated debentures 20,620 20,620
Other liabilities 9,113 11,296
------------- -------------
Total liabilities 1,223,934 1,246,123
Stockholders' equity
Series A convertible preferred stock 500 500
Common stock 7,454 7,438
Surplus 71,435 70,901
Retained earnings 64,931 60,344
Accumulated other comprehensive income
(loss) (9,314) 939
------------- -------------
135,006 140,122
Treasury stock, at cost (22,420) (21,246)
------------- -------------
Total stockholders' equity 112,586 118,876
Total liabilities and stockholders'
equity $ 1,336,520 $ 1,364,999
============= =============
Centrue Financial Corporation
Unaudited Consolidated Statements of Income
(In Thousands, Except Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2008 2007 2008 2007
-------- -------- --------- --------
Interest income
Loans $ 15,316 $ 18,000 $ 48,584 $ 50,963
Securities
Taxable 2,150 3,071 6,731 9,543
Exempt from federal income
taxes 351 378 1,064 1,141
Federal funds sold and other 14 112 94 380
-------- -------- --------- --------
Total interest income 17,831 21,561 56,473 62,027
Interest expense
Deposits 6,225 9,734 21,591 27,994
Federal funds purchased and
securities sold under agreements
to repurchase 189 536 675 1,409
Federal Home Loan Bank advances 838 636 2,786 1,909
Series B mandatory redeemable
preferred 12 12 37 37
Subordinated debentures 322 395 956 1,293
Notes payable 263 164 739 487
-------- -------- --------- --------
Total interest expense 7,849 11,477 26,784 33,129
Net interest income 9,982 10,084 29,689 28,898
Provision for loan losses 1,225 - 2,857 226
-------- -------- --------- --------
Net interest income after
provision for loan losses 8,757 10,084 26,832 28,672
Noninterest income
Service charges 1,980 1,725 5,491 5,063
Trust income 176 243 661 704
Mortgage banking income 349 399 1,184 1,282
Brokerage commissions and fees 73 416 241 646
Bank owned life insurance 260 252 767 740
Securities gains - - 848 (33)
Gain on sale of OREO 122 459 360 1,047
Gain (loss) on sale of other
assets (33) (4) 1,078 (4)
Other income 667 877 2,194 2,370
-------- -------- --------- --------
3,594 4,367 12,824 11,815
Noninterest expenses
Salaries and employee benefits 3,554 3,891 12,876 14,183
Occupancy 761 1,028 2,718 2,988
Furniture and equipment 649 616 2,055 1,938
Marketing 355 325 906 738
Supplies and printing 101 137 331 474
Telephone 172 198 614 586
Data processing 378 308 912 1,167
Amortization of intangible assets 488 562 2,172 1,774
Other expenses 1,664 1,566 5,075 4,577
-------- -------- --------- --------
8,122 8,631 27,659 28,425
Centrue Financial Corporation
Unaudited Consolidated Statements of Income
(In Thousands, Except Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2008 2007 2008 2007
-------- -------- --------- --------
Income before income taxes 4,229 5,820 11,997 12,062
Income taxes 1,430 1,982 4,048 3,819
-------- -------- --------- --------
Net income $ 2,799 $ 3,838 $ 7,949 $ 8,243
======== ======== ========= ========
Preferred stock dividends 52 52 156 156
-------- -------- --------- --------
Net income for common stockholders $ 2,747 $ 3,786 $ 7,793 $ 8,087
======== ======== ========= ========
Basic earnings per common share $ 0.46 $ 0.60 $ 1.29 $ 1.26
======== ======== ========= ========
Diluted earnings per common share $ 0.46 $ 0.60 $ 1.29 $ 1.26
======== ======== ========= ========
Centrue Financial Corporation
Unaudited Selected Quarterly Consolidated Financial Data
(In Thousands, Except Share Data)
Quarters Ended
-----------------------------------------------------
09/30/08 06/30/08 03/31/08 12/31/07 09/30/07
--------- --------- --------- --------- ---------
Statement of Income
Data
Interest income $ 17,831 $ 18,460 $ 20,182 $ 21,549 $ 21,561
Interest expense (7,849) (8,456) (10,479) (11,606) (11,477)
--------- --------- --------- --------- ---------
Net interest income 9,982 10,004 9,703 9,943 10,084
Provision for loan
losses 1,225 866 766 449 -
--------- --------- --------- --------- ---------
Net interest income
after provision
for loan losses 8,757 9,138 8,937 9,494 10,084
Noninterest income 3,594 4,292 4,938 3,850 4,367
Noninterest expense 8,122 9,221 10,316 8,908 8,631
--------- --------- --------- --------- ---------
Income before
income taxes 4,229 4,209 3,559 4,436 5,820
Provision (benefit)
for income taxes 1,430 1,504 1,114 1,356 1,982
--------- --------- --------- --------- ---------
Net income $ 2,799 $ 2,705 $ 2,445 $ 3,080 $ 3,838
========= ========= ========= ========= =========
Net income on
common stock $ 2,747 $ 2,653 $ 2,393 $ 3,029 $ 3,786
========= ========= ========= ========= =========
Per Share Data
Basic earnings per
common share $ 0.46 $ 0.44 $ 0.40 $ 0.49 $ 0.60
Diluted earnings
per common share 0.46 0.44 0.39 0.49 0.60
Cash dividends on
common stock 0.14 0.14 0.13 0.13 0.13
Dividend payout
ratio for common
stock 30.72% 31.81% 32.97% 26.74% 21.71%
Book value per
common share $ 18.59 $ 19.26 $ 19.48 $ 19.50 $ 19.12
Basic weighted
average common
shares
outstanding 6,028,491 6,027,168 6,051,554 6,174,732 6,321,760
Diluted weighted
average common
shares
outstanding 6,030,147 6,048,920 6,088,608 6,227,046 6,357,605
Period-end common
shares
outstanding 6,028,491 6,028,491 6,026,146 6,071,546 6,261,128
Balance Sheet Data
Securities $ 206,718 $ 214,534 $ 217,937 $ 249,331 $ 265,873
Loans 973,933 1,003,689 1,016,097 957,285 933,903
Allowance for loan
losses 11,461 11,542 11,221 10,755 10,852
Assets 1,336,520 1,373,548 1,387,852 1,364,999 1,363,246
Deposits 1,008,725 1,010,723 1,049,049 1,033,022 1,063,805
Stockholders'
equity 112,586 116,607 117,870 118,876 120,234
Earnings Performance
Data
Return on average
total assets 0.83% 0.80% 0.71% 0.90% 1.13%
Return on average
stockholders'
equity 9.64 9.26 8.24 10.22 12.78
Net interest margin
ratio 3.37 3.34 3.25 3.35 3.40
Efficiency ratio(1) 58.85 64.76 73.06 61.72 59.42
Asset Quality Ratios
Nonperforming
assets to total
end of period
assets 1.87% 1.76% 0.38% 0.51% 0.75%
Nonperforming loans
to total end of
period loans 1.28 1.97 0.40 0.43 0.60
Net loan
charge-offs to
total average
loans 0.13 0.05 0.03 0.06 -
Allowance for loan
losses to total
end of period
loans 1.18 1.15 1.10 1.12 1.16
Allowance for loan
losses to
nonperforming
loans 91.78 58.27 276.52 262.96 194.72
Capital Ratios
Average equity to
average assets 8.63% 8.61% 8.68% 8.75% 8.83%
Total capital to
risk adjusted
assets 11.80 11.17 10.79 10.23 11.06
Tier 1 leverage
ratio 8.30 7.93 7.65 7.69 7.80
(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
