Business & Finance
Business and FinanceBusiness and Finance 
Tue, November 10, 2009
Mon, November 9, 2009
Centrue Financial Corporation Announces Third Quarter Results
ST. LOUIS, MO--(Marketwire - November 9, 2009) - Centrue Financial Corporation (the "Company" or "Centrue") (
Highlights
-- Earnings: Third quarter net loss of $8.4 million compared to $16.2 million net loss for second quarter 2009 and $2.8 million net income for third quarter 2008. Results were adversely impacted by $14.5 million provision for loan losses and $3.1 million impairment on collateralized debt obligations ("CDO") securities. -- Risk-Based Capital Ratios: All regulatory capital ratios to be considered "well-capitalized" were exceeded as of September 30, 2009. Total risk-based capital ratio was 13.16% as compared to 12.18% at year-end 2008. -- Credit Quality: Increased the allowance for loan losses to 3.04% of total loans; nonperforming assets increased $9.3 million from second quarter 2009 to 6.8% of total assets; provision levels exceeded net charge- offs by $1.1 million. -- Balance Sheet: Total loans decreased $83.1 million since year-end 2008 on strategic reduction initiatives to reduce balance sheet risks. Total deposits increased $12.3 million since year-end 2008. In-market deposits increased $47.1 million, FHLB advances decreased $64.0 million and brokered deposits decreased $34.8 million during the same period. -- Net Interest Margin: Net interest margin compressed 6 basis points from the prior quarter to 3.21% mainly due to increased levels of nonaccrual loans and surplus liquidity initiatives. -- Liquidity: In-market deposits, cash and securities grew while wholesale funding and loans decreased. Centrue Financial Corporation (the "Company" or "Centrue") (
For the first nine months of 2009, Centrue reported a net loss of $23.6 million, or $(4.13) per common diluted share, compared to net income of $7.9 million, or $1.29 per common diluted share, for the same period in 2008. Results for full year 2009 were adversely impacted by a $29.8 million provision for loans losses, a $8.5 million goodwill impairment charge taken in the second quarter 2009, and $9.1 million impairment on CDO securities.
"We experienced an increase in our nonperforming loans as several of our borrowers continued to struggle in this economic environment," remarked President & CEO Thomas A. Daiber. "The majority of our problem credits remain concentrated in land development, construction and commercial real estate portfolios, all areas stressed with persistent downward pressure on valuations. Our core earnings remain strong but have been negatively impacted as we increased our allowance for loan losses to 3.04% of total loans, reduced our balance sheet risk by shrinking our loan portfolio and reinvested these dollars in lower yielding investment securities, incurred impairments in our investment portfolio and absorbed higher FDIC premiums. Our capital levels remain above well capitalized and provide significant protection for us as we navigate through this volatile and challenging business cycle."
Securities
Investment securities at September 30, 2009 increased $20.5 million, or 8.1%, to $273.1 million largely due to surplus liquidity initiatives. The Company holds nine pooled trust preferred CDOs with a total book value of $16.5 million (after third quarter 2009 impairment). During third quarter 2009, the Company concluded that five CDOs were other than temporarily impaired, resulting in a $3.1 million before-tax reduction in earnings.
Loans
During the first nine months of 2009, gross loans decreased $83.1 million, or 8.3%, to $921.3 million through a combination of normal attrition, pay-downs, loan charge-offs and strategic initiatives to reduce lending exposure. Due to economic conditions, we have also experienced a decrease in the number of loan applications as many borrowers are trying to reduce their amount of debt.
As of September 30, 2009, the Company had 16.4% of its total loan portfolio invested in land development and construction loans and 48.3% invested in commercial real estate (excluding construction and development).
The Company does not have any material direct exposure to sub-prime loan products as it has focused its real estate lending activities on providing traditional loan products to relationship borrowers in locally known markets.
Funding and Liquidity
The Company remains focused on growing deposits by leveraging opportunities to deepen existing customer relationships and develop new long-term relationships. During the first nine months of 2009, total deposits increased $12.3 million, or 1.2%, to $1.062 billion. In-market deposits increased $47.1 million, or 5.0%, primarily as the result of an increase in certificates of deposit and savings accounts. Wholesale funding (brokered deposits and FHLB advances) decreased $98.8 million, or 38.9%, as maturing brokered certificates of deposit and FHLB advances were not replaced. Our liquidity increased as deposits, cash and investment securities grew while wholesale funding and loans decreased.
Credit Quality and Allowance for Loan Loss
The provision for loan losses for third quarter 2009 was $14.5 million, compared to $13.1 million and $1.2 million for second quarter 2009 and third quarter 2008, respectively. The third quarter 2009 provision for loan loss was driven by higher levels of nonperforming loans and related specific allocations due to declining real estate values on collateral for certain impaired credits.
Total nonperforming assets were $90.6 million, or 6.77% of total assets, at September 30, 2009. This included $0.6 million in troubled debt restructures, $14.0 million of foreclosed assets and repossessed real estate, and $76.0 million of nonaccrual loans. Approximately 67.1% of total nonaccrual loans at September 30, 2009 were concentrated in land development, construction and commercial real estate credits. Additionally, 80.5% of total nonaccrual loans represented loans to 15 borrowers.
As a result of the deterioration of general economic conditions, the ongoing implementation of action plans on previously identified relationships, and the identification of additional deteriorating relationships, nonperforming loans (nonaccrual, 90 days past due, and troubled debt restructures) increased $8.9 million from June 30, 2009 and $66.3 million from December 31, 2008. The level of nonperforming loans to end of period loans was 8.32% as of September 30, 2009 as compared to 7.10% as of June 30, 2009 and 1.03% as of December 31, 2008.
As of September 30, 2009, the Company increased its allowance for loan losses to $28.0 million, up $1.1 million from June 30, 2009 and $12.9 million from December 31, 2008. The allowance for loan losses represented 3.04% of total loans outstanding at September 30, 2009, compared to 2.82% at June 30, 2009 and 1.50% at December 31, 2008. Quarterly net charge offs totaled $13.4 million during third quarter 2009, compared to $2.2 million in second quarter 2009 and $1.7 million in fourth quarter 2008. As a result of the increase in nonperforming loans, the allowance to nonperforming loan coverage ratio decreased to 36.5% in the third quarter from 39.7% during the second quarter 2009 and 145.6% during the fourth quarter 2008.
Management continues to diligently monitor the loan portfolio, paying particular attention to borrowers with residential and commercial real estate exposure. The economic outlook for this industry will likely remain extremely challenging for the remainder of 2009 and into 2010. Should the economic climate continue to deteriorate from current levels, more borrowers may experience repayment difficulty, and the level of nonperforming loans, charge-offs and delinquencies will rise requiring further increases in the provision for loan losses.
Net Interest Margin
The net interest margin was 3.21% for the third quarter 2009, representing decreases of 6 basis points from 3.27% recorded in the second quarter 2009 and 16 basis points from 3.37% reported in the third quarter 2008. Downward pressure placed on interest income due to higher nonaccrual loans and a decline in loan yields continued to outpace the decline in funding costs during the period, which led to a reduction in the net interest spread and margin compared with the third quarter 2008. Due largely to the protracted economic downturn, the increase of nonaccrual loans, and the Company's interest rate sensitivity and liquidity position, the margin will likely remain under pressure through the remainder of 2009 and into 2010.
Noninterest Income and Expense
Total noninterest income for the third quarter of 2009 was $0.1 million, a decline of $3.5 million, compared to $3.6 million reported in the same period in 2008. Excluding the $3.1 million impairment charge taken on securities, noninterest income decreased $0.4 million, or 11.1%. This decrease largely stems from reduced consumer spending and the impact on overdraft fees. Further, trust and brokerage fees declined resulting from the impact of selling the wealth management product lines in late 2008 and second quarter 2009. The decrease in year to date income from 2008 reflects the gain realized on the sale of four branches in northwestern Illinois.
Total noninterest expense for the third quarter of 2009 was $9.0 million, an increase of $0.9 million, compared to $8.1 million recorded during the same period in 2008. The increase in expenses was primarily related to salaries and benefits, FDIC insurance premiums, and loan remediation costs, including collection expenses on nonperforming loans and expenses associated with maintaining foreclosed real estate.
Capital Management
As reflected in the following table, all regulatory ratios to be considered "well-capitalized" were exceeded as of September 30, 2009:
Well- Dec 31, Sep 30, Capitalized 2008 2009 Thresholds ----------- ----------- ----------- Carrying costs ($millions): Total risk-based capital $ 128.8 $ 139.1 Tier 1 risk-based capital $ 105.6 $ 115.7 Tangible common equity $ 81.8 $ 70.1 Capital ratios: Total risk-based capital 12.18% 13.16% 10.0% Tier 1 risk-based capital 9.99% 10.95% 5.0% Leverage ratio 8.10% 8.87% 5.0% Tangible common equity 5.99% 5.34% NA
Based upon a regulatory accounting calculation standard that is not directly applicable under generally accepted accounting principles, the preceding ratios include a reduction of 70 basis points in the total risk-based and tier 1 risk-based capital ratios and 56 basis points in the leverage ratio related to a disallowance of $7.3 million, or approximately 49.4% of the Company's deferred tax assets.
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 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
Accompanying this press release is the following unaudited financial information:
-- Unaudited Highlights -- Unaudited Consolidated Balance Sheets -- Unaudited Consolidated Statements of Income -- Unaudited Selected Quarterly Consolidated Financial Data
Centrue Financial Corporation Unaudited Highlights (In Thousands, Except Share Data) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 --------- ---------- --------- ---------- Operating Highlights Net income $ (8,412) $ 2,799 $ (23,562) $ 7,949 Return on average total assets (2.51)% 0.83% (2.32)% 0.78% Return on average stockholders' equity (25.47) 9.64 (22.38) 9.04 Net interest margin 3.21 3.37 3.30 3.32 Efficiency ratio 71.74 58.85 69.77 65.49 Per Share Data Diluted earnings per common share $ (1.47) $ 0.46 $ (4.13) $ 1.29 Book value per common share $ 15.54 $ 19.53 $ 15.54 $ 19.53 Tangible book value per common share $ 11.60 $ 12.95 $ 11.60 $ 12.95 Diluted weighted average common shares outstanding 6,043,176 6,030,147 6,033,045 6,051,418 Period end common shares outstanding 6,043,176 6,028,491 6,043,176 6,028,491 Stock Performance Data Market price: Quarter end $ 3.79 $ 12.85 $ 3.79 $ 12.85 High $ 5.74 $ 16.00 $ 6.95 $ 22.94 Low $ 2.92 $ 9.12 $ 2.76 $ 9.12 Period end price to book value 24.39% 65.80% 24.39% 65.80% Period end price to tangible book value 32.67% 99.23% 32.67% 99.23% Centrue Financial Corporation Unaudited Consolidated Balance Sheets (In Thousands, Except Share Data) September 30, December 31, 2009 2008 ------------ ------------ ASSETS Cash and cash equivalents $ 46,025 $ 35,014 Securities available-for-sale 262,374 241,851 Restricted securities 10,711 10,711 Loans 921,340 1,004,390 Allowance for loan losses (27,965) (15,018) ------------ ------------ Net loans 893,375 989,372 Cash value of life insurance 29,081 27,917 Mortgage servicing rights 2,909 2,890 Premises and equipment, net 30,766 32,376 Goodwill 15,880 24,494 Intangible assets, net 7,906 9,088 Other real estate 13,961 12,723 Other assets 25,486 15,445 ------------ ------------ Total assets $ 1,338,474 $ 1,401,881 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Non-interest-bearing $ 108,013 $ 118,745 Interest-bearing 953,530 930,475 ------------ ------------ Total deposits 1,061,543 1,049,220 Federal funds purchased and securities sold under agreements to repurchase 31,401 46,306 Federal Home Loan Bank advances 76,262 140,285 Notes payable 10,880 19,826 Series B mandatory redeemable preferred stock 268 268 Subordinated debentures 20,620 20,620 Other liabilities 10,434 9,448 ------------ ------------ Total liabilities 1,211,408 1,285,973 Stockholders' equity Series A convertible preferred stock 500 500 Series C preferred stock 30,036 - Common stock 7,454 7,454 Surplus 74,709 71,488 Retained earnings 36,625 62,476 Accumulated other comprehensive income (loss) (62) (3,590) ------------ ------------ 149,262 138,328 Treasury stock, at cost (22,196) (22,420) ------------ ------------ Total stockholders' equity 127,066 115,908 Total liabilities and stockholders' equity $ 1,338,474 $ 1,401,881 ============ ============ Centrue Financial Corporation Unaudited Consolidated Statements of Income (In Thousands, Except Share Data) Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 2009 2008 2009 2008 --------- --------- --------- ---------- Interest income Loans $ 12,958 $ 15,316 $ 40,720 $ 48,584 Securities Taxable 2,041 2,150 6,697 6,731 Exempt from federal income taxes 312 351 937 1,064 Federal funds sold and other 24 14 51 94 --------- --------- --------- ---------- Total interest income 15,335 17,831 48,405 56,473 Interest expense Deposits 4,931 6,225 15,869 21,591 Federal funds purchased and securities sold under agreements to repurchase 39 189 111 675 Federal Home Loan Bank advances 595 838 1,708 2,786 Series B mandatory redeemable preferred stock 4 12 12 37 Subordinated debentures 257 322 821 956 Notes payable 101 263 382 739 --------- --------- --------- ---------- Total interest expense 5,927 7,849 18,903 26,784 Net interest income 9,408 9,982 29,502 29,689 Provision for loan losses 14,500 1,225 29,799 2,857 --------- --------- --------- ---------- Net interest income (loss) after provision for loan losses (5,092) 8,757 (297) 26,832 Noninterest income Service charges 1,756 1,980 4,812 5,491 Mortgage banking income 351 349 1,860 1,184 Bank owned life insurance 248 260 763 767 Securities gains - - 246 848 Total other-than-temporary impairment losses (4,822) - (11,193) - Portion recognized in other comprehensive income (before taxes) 1,690 - 2,144 - --------- --------- --------- ---------- Net impairment on securities (3,132) - (9,049) - Gain on sale of OREO 130 122 166 360 Gain on sale of other assets 9 (33) 117 1,078 Other income 704 916 2,253 3,096 --------- --------- --------- ---------- 66 3,594 1,168 12,824 Noninterest expenses Salaries and employee benefits 3,931 3,554 12,379 12,876 Occupancy, net 777 761 2,547 2,718 Furniture and equipment 602 649 1,726 2,055 Marketing 191 355 579 906 Supplies and printing 108 101 344 331 Telephone 164 172 654 614 Data processing 374 378 1,136 912 FDIC insurance 538 63 1,877 138 Goodwill impairment - 30 8,451 724 Amortization of intangible assets 375 458 1,182 1,448 Other expenses 1,931 1,601 5,258 4,937 --------- --------- --------- ---------- 8,991 8,122 36,133 27,659 Income (loss) before income taxes (14,017) 4,229 (35,262) 11,997 Income taxes (benefit) (5,605) 1,430 (11,700) 4,048 --------- --------- --------- ---------- Net income (loss) $ (8,412) $ 2,799 $ (23,562) $ 7,949 ========= ========= ========= ========== Preferred stock dividends 467 52 1,342 156 --------- --------- --------- ---------- Net income (loss) for common stockholders $ (8,879) $ 2,747 $ (24,904) $ 7,793 ========= ========= ========= ========== Basic earnings (loss) per common share $ (1.47) $ 0.46 $ (4.13) $ 1.29 ========= ========= ========= ========== Diluted earnings (loss) per common share $ (1.47) $ 0.46 $ (4.13) $ 1.29 ========= ========= ========= ========== Centrue Financial Corporation Unaudited Selected Quarterly Consolidated Financial Data (In Thousands, Except Share Data) Quarters Ended -------------------------------------------------------- 09/30/09 06/30/09 03/31/09 12/31/08 09/30/08 --------- --------- --------- --------- --------- Statement of Income Interest income $ 15,335 $ 16,048 $ 17,022 $ 17,045 $ 17,831 Interest expense (5,927) (6,332) (6,644) (7,160) (7,849) --------- --------- --------- --------- --------- Net interest income 9,408 9,716 10,378 9,885 9,982 Provision for loan losses 14,500 13,064 2,235 5,225 1,225 --------- --------- --------- --------- --------- Net interest Income (loss) after provision for loan losses (5,092) (3,348) 8,143 4,660 8,757 Noninterest income 66 (941) 2,043 585 3,594 Noninterest expense 8,991 18,265 8,877 8,086 8,122 --------- --------- --------- --------- --------- Income (loss) before income taxes (14,017) (22,554) 1,309 (2,841) 4,229 Provision (benefit) for income taxes (5,605) (6,339) 244 (1,282) 1,430 --------- --------- --------- --------- --------- Net income (loss) $ (8,412) $ (16,215) $ 1,065 $ (1,559) $ 2,799 ========= ========= ========= ========= ========= Net income (loss) on common stock $ (8,879) $ (16,675) $ 650 $ (1,610) $ 2,747 ========= ========= ========= ========= ========= Per Share Basic earnings (loss) per common share $ (1.47) $ (2.77) $ 0.11 $ (0.27) $ 0.46 Diluted earnings (loss) per common share (1.47) (2.77) 0.11 (0.27) 0.46 Cash dividends on common stock NM 0.01 0.07 0.14 0.14 Dividend payout ratio for common stock NM NM 64.92% NM 30.72% Book value per common share $ 15.54 $ 16.25 $ 18.82 $ 19.14 $ 19.53 Tangible book value per common share $ 11.60 $ 12.25 $ 13.35 $ 13.57 $ 12.95 Basic weighted average common shares outstanding 6,043,176 6,027,306 6,028,491 6,028,491 6,028,491 Diluted weighted average common shares outstanding 6,043,176 6,028,471 6,028,491 6,028,491 6,030,147 Period-end common shares outstanding 6,043,176 6,043,176 6,028,491 6,028,491 6,028,491 Balance Sheet Securities $ 273,085 $ 225,805 $ 232,983 $ 252,562 $ 215,960 Loans 921,340 953,894 985,464 1,004,390 973,933 Allowance for loan losses 27,965 26,894 16,010 15,018 11,461 Assets 1,338,474 1,313,529 1,370,363 1,401,881 1,342,182 Deposits 1,061,543 1,034,116 1,068,453 1,049,220 1,008,725 Stockholders' equity 127,066 131,367 146,647 115,908 118,248 Earnings Performance Return on average total assets (2.51)% (4.82)% 0.31% (0.46)% 0.83% Return on average stockholders' equity (25.47) (45.09) 2.93 (5.26) 9.64 Net interest margin ratio 3.21 3.27 3.42 3.33 3.37 Efficiency ratio (1) 71.74 74.02 63.82 60.71 58.85 Asset Quality Nonperforming assets to total end of period assets 6.77% 6.19% 2.06% 1.64% 1.87% Nonperforming loans to total end of period loans 8.32 7.10 1.57 1.03 1.28 Net loan charge-offs to total average loans 1.43 0.22 0.12 0.17 0.13 Allowance for loan losses to total end of period loans 3.04 2.82 1.62 1.50 1.18 Allowance for loan losses to nonperforming loans 36.48 39.70 103.47 145.55 91.78 Nonperforming loans $ 76,657 $ 67,746 $ 15,473 $ 10,318 $ 12,487 Nonperforming assets 90,618 81,328 28,245 23,041 24,932 Net charge-offs 13,429 2,180 1,243 1,668 1,306 Capital Total risk-based capital ratio 13.16% 14.29% 13.99% 12.18% 11.70% Tier 1 risk-based capital 10.95 12.11 11.88 9.99 9.70 Tier 1 leverage ratio 8.87 9.93 10.26 8.10 8.30 Tangible common equity to tangible assets 5.34 5.75 6.01 5.99 6.00 (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.