CFF Centrue Financial Corp

Centrue Financial Corporation Announces Fourth Quarter and Year End Earnings KANKAKEE, Ill., March 12 /PRNewswire-FirstCall/ -- Centrue Financial Corporation , today announced net income of $672,000 ($0.26 per diluted share) for the fourth quarter of 2003 compared to net income of $1.19 million ($0.51 per diluted share) for the comparable 2002 period. For the year ended December 31, 2003, the Company reported net income of $1.36 million ($0.65 per diluted share) compared to net income of $2.23 million ($0.93 per diluted share) in 2002. During the fourth quarter of 2003, the Company completed the acquisition of Aviston Financial Corporation, which had total assets of $98 million. The transaction was completed on October 9, 2003, at which time the Company changed its name to Centrue Financial Corporation. Thomas A. Daiber, who became President and CEO of Centrue Financial in October of 2003 stated, "The merger allowed us to combine the management talent of two long-standing and respected financial institutions and it also allowed us to recruit other experienced bankers to supplement and enhance our management team. Most of our senior officer positions have been filled with new executives during the last twelve months including the Chief Executive Officer, the Chief Financial Officer, the Chief Lending Officer, new Regional Presidents for three of our four Banking regions (each of these Presidents is also a commercial lender with more than 15 years of experience), a new Corporate Controller and two other seasoned commercial lenders. We now have a results-oriented team of bankers with the experience and track record to help us fulfill our mission to be the premier bank in the communities we serve and to improve the operating performance of our company. "The operating results for the past two years have been negatively impacted by large loan loss provisions. The provisions equaled approximately one percent of total loans in each of the past two years and represent the recognition of losses on a group of loans made in previous years. We have now recruited and employed an experienced commercial lending team that will allow us to clean up the asset quality issues we inherited and that has given us the capacity to prudently expand our commercial loan portfolio." Daiber continued, "During the latter part of 2003, we worked hard to implement several initiatives that we believe will improve our efficiency and the delivery of our banking service: -- Completed a reduction in our operational and administrative work force and restructured our employee benefit programs. -- Implemented a cost accounting based budgeting system for each branch and department. -- Empowered our managers with the authority to make decisions affecting their branch and customers and reassigned several operating duties to the regional bank level when those functions involved customer service. -- Consolidated our financial, operations and information technology departments to achieve improved communication and efficiency. -- Strengthened our asset and liability management system to better manage our net interest margin. -- Adopted a new loan policy and implemented new loan approval, documentation and monitoring procedures. The implementation of these and other changes are expected to assist Centrue Financial as we strive to fulfill our mission statement of improving our return on our shareholders' investment." Fourth Quarter Results For the fourth quarter of 2003 the Company reported net income of $672,000 ($0.26 per diluted share) compared to net income of $1.19 million ($0.51 per diluted share) in 2002, a decrease of $518,000 (43.5%). The decrease was primarily due to a $1.15 million (33.2%) increase in other expenses. Net interest income increased to $4.2 million, or $137,000 (3.4%) more than in 2002. Interest income decreased by $735,000 (9.3%) and interest expense decreased by $872,000 (22.6%). Net interest margin decreased to 3.09% compared to 3.13% for 2002. The provision for loan losses declined to $101,000 compared to $234,000 for 2002. Other income of $1.3 million decreased by $82,000, or 5.9% from the comparable 2002 period. Fee income was $782,000, or $35,000 (4.7%) higher than in 2002. This increase was offset by a decrease of $36,000 (8.7%) in net gain on sales of assets and a decrease of $81,000 (34.6%) in other income. Fee income was reduced by $100,000 ($0.03 per share, after tax) due to an additional valuation allowance for mortgage servicing rights. Total other expenses were $4.6 million, or $1.15 million (33.2%) higher than those in 2002. In 2003, other expenses increased $538,000 (44.6%), compensation and benefits increased $422,000 (23.9%)and furniture and equipment increased $162,000 (98.8%). Other expenses included non-recurring expenses of $368,000 ($0.12 per share, after-tax) during the fourth quarter. These expenses included $199,000 ($0.06 per share, after tax) due to expenses related to the merger of the Company with Aviston Financial and the Company's name change, and $169,000 ($0.05 per share, after tax) in other miscellaneous non-recurring expenses. Compensation and benefits increased primarily due to the addition of Aviston Financial personnel during the fourth quarter. The annualized return on stockholders' equity was 6.72% compared to 11.63% for the comparable 2002 period. The annualized return on assets was 0.43% compared to 0.85% for the fourth quarter of 2002. Year End Results For the year ended December 31, 2003 net income decreased by 39.0% to $1.36 million ($0.65 per diluted share) compared to earnings of $2.23 million ($0.93 per diluted share) for 2002. Net interest income declined to $15.5 million, or $547,000 (3.4%) less than in 2002. Net interest margin declined slightly to 3.16% compared to 3.22% in 2002. Interest income decreased by $4.6 million (14.4%) to $27.5 million, and interest expense decreased by $4.1 million (25.4%) to $12.0 million. The decrease in net interest income resulted from a decline in the average balance of interest- earning assets. The provision for loan losses was $4.1 million compared to $4.0 million in 2002. Other income increased by $1.2 million, or 26.5%, from $4.5 million to $5.7 million. Net gain on sale of loans increased by $155,000 (13.9%) to $1.3 million. Other income in 2003 included a gain of $478,000 from the sale of a branch office. Fee income increased by $339,000 (13.4%) to $2.9 million from $2.5 million in 2002. The increase in fee income was primarily the result of an overall restructuring of fees to be more competitive with other local banks. Other expenses were $15.4 million, or $2.0 million (14.7%), higher than those for the same period of 2002. There were increases of $862,000 (19.5%) in other expenses, $635,000 (8.9%) in compensation and benefits, $333,000 (54.4%) in furniture and equipment expense and $149,000 (11.9%) in occupancy expense. The increase in compensation and benefits was partially the result of $297,000 ($0.09 per share after-tax) of severance payments associated with the departure of three executive officers and severance payments associated with reorganizational reductions of workforce. Additional personnel resulting from the Aviston Financial merger also contributed to the increase in compensation and benefits. The increase in other miscellaneous expenses to $5.3 million from $4.4 million in 2002 was primarily due to the $368,000 of non-recurring expenses previously mentioned in the fourth quarter results. The return on stockholders' equity was 4.00% compared to 5.42% in 2002. The return for 2003 included the profit from the branch sale that was finalized in the first quarter of 2003. The return on assetswas 0.25% in 2003 compared to 0.42% in 2002. Financial Condition at December 31, 2003 The Company's total assets were $609.2 million, an increase of $62.8 million, or 11.5%, from $546.4 million at December 31, 2002. Net loans increased $41.5 million(10.8%), office properties and equipment increased $6.7 million (64.9%), goodwill increased $8.4 million (272.9%) and investment securities increased $4.9 million (5.8%). These increases were partially offset by a decrease in cash and cash equivalentsof $1.8 million. The increase in total assets was primarily due to the merger with Aviston Financial, partially offset by the sale of the Company's Hoopeston, Illinois office. Deposits increased by $62.5 million (14.5%) to $494.4 million. The sale of the Company's Hoopeston, Illinois office in the first quarter of 2003 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 were at a high rate during 2003, due to the low interest rate environment which made refinancing attractive for borrowers. Stockholders' equity totaled $45.6 million, reflecting an increase of $4.5 million (11.0%) compared to December31, 2002. The increase was due mainly to stock issued in the Aviston Financial merger and to net income, which was partially offset by common stock repurchases, dividend payments and a decrease in unrealized gains on securities available-for-sale. There were 2,606,022 shares of common stock outstanding at December 31, 2003, compared to 2,331,762 shares of common stock outstanding at December 31, 2002. Equity per share of common stock decreased by $0.12 to $17.51 at December 31, 2003 from $17.63 at December 31, 2002. The capital ratios of the Company, as well as of Centrue Bank, the Company's wholly-owned subsidiary, continued to be in excess of regulatory requirements. Parish Bank Acquisition During the first quarter of 2004, we completed theacquisition of Parish Bank, an institution with $20 million in assets located in Momence, Illinois. The all cash acquisition allowed us to expand our banking presence in that community where we now have the #1 market share. We have consolidated our banking operations into Parish Bank's facilities and have retained several talented employees who have joined the Centrue Financial team. Centrue Financial Corporation and Centrue Bank are headquartered in Kankakee, Illinois, which is 60 miles south of downtown Chicago. The Bank operates eighteen branches in eight counties ranging from northeast Illinois to the metropolitan St. Louis area. Centrue Bank has total assets of more than $600 million and 195 employees. FinancialHighlights Condensed Consolidated Statements of Income Attached SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS This document (including information incorporated by reference) contains, and futureoral 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 beliefs, 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) changesin 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 ofacquisitions; (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 December 31, 2003 2002 Total interest income $7,164 $7,899 Total interest expense 2,980 3,852 Net interest income 4,184 4,047 Provision for loan losses 101 234 Net interest income after provision for loan losses 4,083 3,813 Other income: Net gain on sales of assets 377 413 Fee income 782 747 Other 156 237 Total other income 1,315 1,397 Other expenses: Compensation and benefits2,189 1,767 Occupancy 375 343 Furniture and equipment 326 164 Other 1,743 1,205 Total other expense 4,633 3,479 Income before income taxes 765 1,731 Income tax expense 93 541 Net income $672 $1,190 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net of taxes 77 (19) Comprehensive income $749 $1,171 Basic earnings per share $0.27 $0.51 Diluted earnings per share $0.26 $0.51 Selected operating ratios (annualized): Net interest margin (ratio of net interest income to average interest-earning assets) 3.09% 3.13% Return on assets (ratio of net income to average total assets) 0.43% 0.85% Return on equity (ratio of net income to average equity) 6.72% 11.63% CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (Unaudited) Year Ended December 31, 2003 2002 Total interest income $27,476 $32,114 Total interest expense 11,996 16,087 Net interest income 15,480 16,027 Provision for loan losses 4,122 3,990 Net interest income after provision for loan losses 11,358 12,037 Other income: Net gain on sales of assets 1,532 1,168 Net gain on sale of branch office 478 - Fee income 2,874 2,535 Other 822 808 Total other income 5,706 4,511 Other expenses: Compensation and benefits 7,786 7,151 Occupancy 1,398 1,249 Furniture and equipment 945 612 Other 5,282 4,420 Total other expense 15,411 13,432 Income before income taxes 1,653 3,116 Income tax expense 290 883 Net income $1,363 $2,233 Other comprehensive income: Unrealized gains (losses) on available-for-sale securities, net of taxes (543) 1,026 Comprehensive income $820 $3,259 Basic earnings per share $0.65 $0.94 Diluted earnings per share $0.65 $0.93 Selected operating ratios (annualized): Net interest margin (ratio of net interest income to average interest-earning assets) 3.16% 3.22% Return on assets (ratio of net income to average total assets) 0.25% 0.42% Return on equity (ratio of net income to average equity) 4.00% 5.42% CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY FINANCIAL HIGHLIGHTS (Dollars in Thousands, Except Per Share Data) (Unaudited) December 31, December 31, 2003 2002 Selected Financial Condition Data: Total assets $609,208 $546,404 Net loans, including loans held for sale 425,840 384,367 Allowance for loan losses 7,471 6,524 Investment securities - available-for-sale 87,712 82,638 Investment securities - held-to-maturity 892 1,093 Deposits 494,352 431,814 Total borrowings 64,396 69,700 Unrealized gains on securities available- for-sale, net of taxes 1,088 1,631 Stockholders' equity 45,643 41,107 Shares outstanding 2,606,022 2,331,762 Stockholders' equity per share $17.51 $17.63 Selected asset quality ratios: Non-performing assets to total assets 1.00% 2.03% Allowance for loan losses to non-performing loans 136.34% 63.51% Classified assets to total assets 4.12% 2.93% Allowance for loan losses to classified assets 29.76% 40.76% Non-performing asset analysis: Non-accrual loans $3,248 $6,834 Loans past due 90 days and accruing 2,232 3,439 Real estate owned and repossessed assets 319 316 Troubled Debt Restructurings 281 480 Total $6,080 $11,069 Net (recoveries) charge-offs for quarter $(528) $25 DATASOURCE: Centrue Financial Corporation CONTACT: James M. Lindstrom, Chief Financial Officer of Centrue Financial Corporation, +1-815-937-4440 Web site: http://www.kfs-bank.com/

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