CFF Centrue Financial Corp

Centrue Financial Corporation Announces Third Quarter Net Income KANKAKEE, Ill., Oct. 31 /PRNewswire-FirstCall/ -- Centrue Financial Corporation , today announced third quarter net income of $823,000 ($0.87 per diluted share) compared to a net loss of $789,000 ($0.67 per diluted share) for the comparable 2002 period. For the first nine months of 2003, the Company reported net income of $691,000 ($0.70 per diluted share) compared to net income of $1.04 million ($0.86 per diluted share) for the comparable period in 2002. Financial results exclude the merger with Aviston Financial Corporation which closed on October 9, 2003. Third Quarter Results The Company reported net income of $823,000 ($0.87 per diluted share) for the quarter, compared to a net loss of $789,000 ($0.67 per diluted share) for the comparable 2002 period, an increase of $1.6 million. Net interest income before provision for losses on loans was $3.6 million, or $413,000 (10.2%) less than for the same period in 2002. Net interest margin was 3.08% compared to 3.16% for the same period in 2002. Net interest income was impacted by average earning assets declining more significantly than average interest bearing liabilities and due to declining rates of earning assets in the continued low interest rate environment. The provision for losses on loans was $272,000 compared to $3.1 million for the same period in 2002. Other income of $1.5 million increased by $453,000, or 41.9%. Net gain on loans held for sale decreased by $47,000 (15.6%) from $301,000 for the same period of 2002. The unprecedented volume of mortgage originations realized in the first six months of 2003 slowed during the third quarter of 2003. Since mortgage rates have begun to rise, we anticipate that mortgage sales gains will decrease throughout the remainder of the year. The decrease was partially offset by an increase of $541,000 (102.7%) in fee income, which included income of $373,000 from the revaluation of the carrying value of mortgage servicing rights. General and administrative expenses were $3.5 million, or $270,000 (8.3%) higher than those in 2002. There were increases of $121,000 (20.5%) in other general and administrative expense, $81,000 (52.7%) in furniture and equipment expense, $55,000 (17.5%) in occupancy expense and $39,000 (38.3%) in data processing expense. During the third quarter, the Company's subsidiary, Centrue Bank, completed an organizational restructuring and eliminated 20 positions in order to operate more efficiently and to better position the Company to pursue management's growth strategy. As a result of the restructuring, the Company incurred severance expense of $72,000. The annualized return on stockholders' equity was 10.54% compared to (7.62)% for the comparable 2002 period. The annualized return on assets was 0.64% compared to (0.57)% for the third quarter of 2002. Nine Month Results Net income decreased by 33.7% to $691,000 ($0.70 per diluted shares) compared to earnings of $1.04 million ($0.86 per diluted share) for the first nine months of 2002. Net interest income before provision for losses on loans was $11.3 million or $685,000 (5.7%) less than for the same period in 2002. Net interest margin was 3.14% compared to 3.25% for the same period in 2002. Net interest income was impacted by average earning assets declining more significantly than average interest bearing liabilities and due to declining rates of earning assets in the continued low interest rate environment. The provision for losses on loans was $4.0 million compared to $3.8 million for the same period in 2002. Other income increased by $1.2 million, or 39.2%, from $3.2 million to $4.4 million. Net gain on loans held for sale increased by $404,000 (56.6%) to $1.1 million from $713,000 for the same period of 2002. The year to date income also included a gain of $478,000 from the sale of a branch office. Fee income increased by $304,000 (17.0%) to $2.1 million from $1.8 million from the same period of 2002. The increase in fee income included $63,000 of income from the revaluation of mortgage servicing rights. General and administrative expenses were $10.8 million, or $784,000 (7.8%), higher than those for the same period of 2002. There were increases of $213,000 (3.9%) in compensation and benefits, $200,000 (9.4%) in other general and administrative, $171,000 (38.3%) in furniture and equipment expense, $117,000 (12.9%) in occupancy expense, $63,000 (18.7%) in telephone and postage and $62,000 (20.1%) in data processing charges. These increases were partially offset by a decrease of $44,000 (76.2%) in the provision for losses on foreclosed assets. The increase in compensation and benefits was primarily due to $297,000 of severance for three senior officers of the Company, in addition to the organizational restructuring during the third quarter. Those increases were partially offset by savings realization from the prior quarter's employment terminations. Increases in furniture and equipment expenses and telephone and postage expenses were due to increased depreciation and a new communications system, respectively. The annualized return on stockholders' equity was 2.72% compared to 3.37% for the comparable 2002 period. The return for 2003 included the profit from the branch sale that was finalized in the first quarter of 2003. The annualized return on assets was 0.18% compared to 0.26% for the first nine months of 2002. Financial Condition at September 30, 2003 The Company's total assets were $509.4 million, a decrease of $37.0 million, or 6.8%, from total assets of $546.4 million at December 31, 2002. Decreases of $7.3 million in mortgage-backed securities available-for-sale, $44.5 million in loans and $9.3 million in investment securities available-for-sale were partially offset by an increase of $19.4 million in cash and cash equivalents, $3.3 million in office properties and equipment and $2.2 million in prepaid expenses and other assets. The decrease in total assets during the first nine months was the result of several factors. The sale of the Hoopeston, Illinois office reduced deposits by $19.4 million, loans by $6.4 million and cash and cash equivalents by $12.3 million. In addition, principal payments and prepayments on both loans and mortgage-backed securities available-for-sale were at a high rate during 2003 due to the low interest rate environment which made refinancing attractive for borrowers. Management continued to reduce total commercial loan exposure and improve credit quality through aggressive management of existing loans. Management also wrote off $4.9 million of commercial loans during the third quarter for which provisions for loan losses were previously made. Stockholders' equity totaled $31.4 million, reflecting a decrease of $9.7 million compared to December 31, 2002. The decrease was the result of $9.3 million of common stock repurchases, along with dividend payments and a decrease in the unrealized gains on securities available-for-sale, which were partially offset by net income. There were 932,611 shares of common stock outstanding at September 30, 2003, compared to 1,165,881 shares of common stock outstanding at December 31, 2002. Equity per share of common stock decreased by $1.58 to $33.68 at September 30, 2003 from $35.26 at December 31, 2002. The capital ratios of Centrue Bank, the Company's wholly-owned subsidiary, continued to be in excess of regulatory requirements. Centrue Financial Corporation and Centrue Bank are headquartered in Kankakee, Illinois, which is 60 miles south of downtown Chicago. In addition to its main office, the Bank operates seventeen branches in eight counties. Centrue Financial was formed through the merger of Kankakee Bancorp, Inc. and Aviston Financial Corporation on October 9, 2003. Subsequent to the merger, Centrue Bank has total assets of more than $600 million and 192 employees. Financial Highlights Condensed Consolidated Statements of Income Attached SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon belies, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. These factors include, among others, the following: (I) the strength of the local and national economy; (ii) the economic impact of September 11th; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company's general business; (iv) changes in interest rates and prepayment rates of the Company's assets: (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of acquisitions; (x) unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission. CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (Unaudited) Three Months Ended September 30, 2003 2002 Total interest income $6,339 $8,119 Total interest expense 2,696 4,063 Net interest income 3,643 4,056 Provision for losses on loans 272 3,144 Net interest income after provision for losses on loans 3,371 912 Other income: Net gain on sales of assets 259 309 Fee income 1,068 527 Other 207 246 Total other income 1,534 1,082 Other expenses: General and administrative 3,508 3,239 Income (loss) before income taxes 1,397 (1,245) Income tax expense (credit) 574 (456) Net income (loss) $823 $(789) Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net of related income taxes (355) 680 Comprehensive income (loss) $468 $(109) Basic earnings (loss)per share $0.88 $(0.67) Diluted earnings (loss)per share $0.87 $(0.67) Selected operating ratios (annualized): Net interest margin (ratio of net interest income to average interest-earning assets) 3.08% 3.16% Return on assets (ratio of net income (loss) to average total assets) 0.64% (0.57)% Return on equity (ratio of net income (loss) to average equity) 10.54% (7.62)% CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (Unaudited) Nine months ended September 30, 2003 2002 Total interest income $20,313 $24,215 Total interest expense 9,017 12,234 Net interest income 11,296 11,981 Provision for losses on loans 4,022 3,756 Net interest income after provision for losses on loans 7,274 8,225 Other income: Net gain on sales of assets 1,154 755 Net gain on sales of branch office 478 - Fee income 2,092 1,788 Other 668 612 Total other income 4,392 3,155 Other expenses: General and administrative 10,779 9,995 Income before income taxes 887 1,385 Income tax expense 196 342 Net income $691 $1,043 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net of related income taxes (620) 1,045 Comprehensive income $71 $2,088 Basic earnings per share $0.71 $0.87 Diluted earnings per share $0.70 $0.86 Selected operating ratios (annualized): Net interest margin (ratio of net interest income to average interest-earning assets) 3.14% 3.25% Return on assets (ratio of net income to average total assets) 0.18% 0.26% Return on equity (ratio of net income to average equity) 2.72% 3.37% CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY FINANCIAL HIGHLIGHTS (Dollars in Thousands, Except Per Share Data) (Unaudited) September 30, December 31, 2003 2002 Selected Financial Condition Data: Total assets $509,409 $546,404 Net loans, including loans held for sale 340,034 384,367 Allowance for losses on loans 4,408 6,524 Mortgage-backed securities 20 26 Mortgage-backed securities - available-for-sale 30,863 38,179 Investment securities, including certificates of deposit 942 1,117 Investment securities-available-for-sale 35,124 44,459 Deposits 418,705 432,032 Total borrowings 58,400 69,700 Unrealized gains on securities available- for-sale, net of related income taxes 1,011 1,631 Stockholders' equity 31,415 41,107 Shares outstanding 932,611 1,165,881 Stockholders' equity per share $33.68 $35.26 Selected asset quality ratios: Non-performing assets to total assets 1.71% 2.03% Allowance for losses on loans to non-performing loans 54.53% 63.51% Classified assets to total assets 1.88% 2.93% Allowance for losses on loans to classified assets 45.98% 40.76% Non-performing asset analysis: Non-accrual loans $3,857 $6,834 Loans past due 90 days and accruing 4,227 3,439 Real estate owned and repossessed assets 387 316 Restructured troubled debt 255 480 Total $8,726 $11,069 Net charge-offs for quarter $4,850 Three Months Ended 9/30/03 (Unaudited) Financial condition averages: Total assets $512,703 Earning assets 468,886 Net loans, including loans held for sale 345,217 Stockholders' equity 30,969 Deposits 422,040 Borrowings 58,550 Average outstanding shares, including equivalents 980,907 DATASOURCE: Centrue Financial Corporation CONTACT: James M. Lindstrom, Chief Financial Officer of Centrue Financial Corporation, +1-815-937-4440, fax, +1-815-937-3674 Web site: http://www.kfs-bank.com/

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