##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2006.
 or
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period From  to .
 Commission File Number 1-15025
 CENTRUE FINANCIAL CORPORATION
  Delaware
    
    36-3846489(State or Other Jurisdiction of Incorporation
    
    (I.R.S. Employer Identification Number)or Organization)303 Fountains Parkway, Fairview Heights, Illinois
    
    62208(Address of Principal Executive Offices)
    
    (Zip Code)
 (618) 624-1323
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



INDEX
 PageNumberPart I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (Unaudited)Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income and Comprehensive Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    7 - 12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13 - 25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25 - 27Item 4. Controls and Procedures
    
    
    27Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1a. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28 - 29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Section 302 CertificationSection 1350 Certification
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Consolidated Financial Statements (Unaudited)
 
   June 30,
    
    
    December 31,2006
    
    
    2005(dollars in thousands)AssetsCash and due from banks
    
    $
    11,534
    
    
    $
    13,566Interest bearing due from banks and other
    
    
    3,322
    
    
    
    4,692Cash and cash equivalents
    
    
    14,856
    
    
    
    18,258Certificates of Deposit
    
    
    50
    
    
    
    50Investment Securities available-for-sale, at fair value
    
    
    121,175
    
    
    
    125,190Loans, net of allowance for loan losses of $4,294 and $4,486
    
    
    435,183
    
    
    
    428,468Loans held for sale
    
    
    3,132
    
    
    
    8,373Premises and equipment
    
    
    22,678
    
    
    
    22,579Goodwill
    
    
    14,362
    
    
    
    14,362Life insurance contracts
    
    
    9,647
    
    
    
    9,465Non-marketable equity securities
    
    
    5,065
    
    
    
    5,059Accrued interest receivable
    
    
    3,376
    
    
    
    3,248Intangible assets
    
    
    1,779
    
    
    
    1,922Real estate held for sale
    
    
    38
    
    
    
    1,709Other assets
    
    
    3,162
    
    
    
    2,840Total Assets
    
    $
    634,503
    
    
    $
    641,523LiabilitiesDeposits:Noninterest bearing
    
    $
    65,526
    
    
    $
    67,982Interest bearing
    
    
    396,752
    
    
    
    439,934Total Deposits
    
    
    462,278
    
    
    
    507,916Short-term borrowings
    
    
    65,112
    
    
    
    27,014Long-term borrowings
    
    
    60,053
    
    
    
    58,723Other liabilities
    
    
    3,790
    
    
    
    4,767Total Liabilities
    
    
    591,233
    
    
    
    598,420Stockholders EquityPreferred stock, $.01 par value  500,000 shares authorized
and unissued
    
    
    
    
    
    
    Common stock, $.01 par value  5,500,000 authorized;
4,200,300 shares issued and outstanding
    
    
    42
    
    
    
    42Additional paid-in capital
    
    
    30,895
    
    
    
    30,460Retained income, partially restricted
    
    
    49,023
    
    
    
    47,403Accumulated other comprehensive (loss)
    
    
    (2,586
    )
    
    
    (1,657
    )Treasury stock, (1,967,411 and 1,937,361 shares), at cost
    
    
    (34,104
    )
    
    
    (33,145
    )Total Stockholders Equity
    
    
    43,270
    
    
    
    43,103Total Liabilities and Stockholders Equity
    
    $
    634,503
    
    
    $
    641,523
  3




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Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302006
    
    
    2005
    
    
    2006
    
    
    2005(dollars in thousands, except per share data)Interest and dividend income:Loans
    
    $
    7,206
    
    
    $
    6,687
    
    
    $
    14,286
    
    
    $
    12,872Investments
    
    
    1,281
    
    
    
    1,229
    
    
    
    2,573
    
    
    
    2,396Deposits with banks and other
    
    
    8
    
    
    
    15
    
    
    
    15
    
    
    
    23FHLB stock dividends
    
    
    37
    
    
    
    56
    
    
    
    76
    
    
    
    105Total interest and dividend income
    
    
    8,532
    
    
    
    7,987
    
    
    
    16,950
    
    
    
    15,396Interest expense:Deposits
    
    
    2,771
    
    
    
    2,155
    
    
    
    5,543
    
    
    
    4,100Long-term borrowings
    
    
    979
    
    
    
    866
    
    
    
    1,699
    
    
    
    1,589Short-term borrowings
    
    
    438
    
    
    
    69
    
    
    
    670
    
    
    
    125Total interest expense
    
    
    4,188
    
    
    
    3,090
    
    
    
    7,912
    
    
    
    5,814Net interest income
    
    
    4,344
    
    
    
    4,897
    
    
    
    9,038
    
    
    
    9,582Provision for loan losses
    
    
    75
    
    
    
    251
    
    
    
    150
    
    
    
    501Net interest income after provision for loan
losses
    
    
    4,269
    
    
    
    4,646
    
    
    
    8,888
    
    
    
    9,081Noninterest income:Fee income
    
    
    1,632
    
    
    
    1,330
    
    
    
    2,799
    
    
    
    2,429Net gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    183Net gain (loss) on sale of real estate held for sale
    
    
    181
    
    
    
    (8
    )
    
    
    157
    
    
    
    (6
    )Net gain on sale of loans
    
    
    324
    
    
    
    158
    
    
    
    431
    
    
    
    289Increase in cash surrender value of life
Insurance contracts
    
    
    90
    
    
    
    87
    
    
    
    182
    
    
    
    178Other
    
    
    100
    
    
    
    140
    
    
    
    397
    
    
    
    198Total noninterest income
    
    
    2,327
    
    
    
    1,707
    
    
    
    3,970
    
    
    
    3,271Noninterest expense:Compensation and benefits
    
    
    2,736
    
    
    
    2,688
    
    
    
    5,868
    
    
    
    5,024Occupancy, net
    
    
    483
    
    
    
    391
    
    
    
    946
    
    
    
    778Furniture and equipment
    
    
    262
    
    
    
    803
    
    
    
    544
    
    
    
    1,133Advertising
    
    
    110
    
    
    
    80
    
    
    
    200
    
    
    
    160Data processing
    
    
    462
    
    
    
    160
    
    
    
    806
    
    
    
    318Telephone and postage
    
    
    220
    
    
    
    153
    
    
    
    372
    
    
    
    324Amortization of intangibles
    
    
    71
    
    
    
    72
    
    
    
    143
    
    
    
    133Legal and professional fees
    
    
    191
    
    
    
    319
    
    
    
    353
    
    
    
    461Other
    
    
    773
    
    
    
    791
    
    
    
    1,436
    
    
    
    1,450Total noninterest expense
    
    
    5,308
    
    
    
    5,457
    
    
    
    10,668
    
    
    
    9,781Income before income taxes
    
    
    1,288
    
    
    
    896
    
    
    
    2,190
    
    
    
    2,571Income tax expense
    
    
    350
    
    
    
    176
    
    
    
    570
    
    
    
    664Net income
    
    $
    938
    
    
    $
    720
    
    
    $
    1,620
    
    
    $
    1,907Other comprehensive income:Change in unrealized gains or losses on
available for sale securities, net of related
income taxes
    
    $
    (688
    )
    
    $
    577
    
    
    $
    (927
    )
    
    $
    (323
    )Less: reclassification adjustment for gains
included in net income net of related
income taxes
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    131Other comprehensive income (loss)
    
    
    (688
    )
    
    
    577
    
    
    
    (929
    )
    
    
    (454
    )Comprehensive income
    
    $
    250
    
    
    $
    1,297
    
    
    $
    691
    
    
    $
    1,453Basic earnings per share
    
    $
    0.42
    
    
    $
    0.30
    
    
    $
    0.73
    
    
    $
    0.80Diluted earnings per share
    
    
    0.42
    
    
    
    0.30
    
    
    
    0.72
    
    
    
    0.80Dividends per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  4




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Page 1 of 2
 Six Months EndedJune 302006
    
    
    2005(dollars in thousands)Operating activities:Net income
    
    $
    1,620
    
    
    $
    1,907Adjustments to reconcile net income to net cash provided
by operating activities:Provision for loan losses
    
    
    150
    
    
    
    501Depreciation and amortization
    
    
    374
    
    
    
    1,145Net amortization on investments
    
    
    80
    
    
    
    111Amortization of intangibles
    
    
    143
    
    
    
    133Deferred income taxes
    
    
    (160
    )
    
    
    2,159Origination of loans held for sale
    
    
    (18,428
    )
    
    
    (14,017
    )Proceeds from sales of loans held for sale
    
    
    19,308
    
    
    
    14,015Gain on sale of loans
    
    
    (431
    )
    
    
    (289
    )(Gain) on sale of securities
    
    
    (4
    )
    
    
    (183
    )(Gain) loss on sale of real estate held for sale
    
    
    (157
    )
    
    
    6Compensation expense for restricted stock
    
    
    386
    
    
    
    103Increase in cash surrender value of life insurance
Contracts
    
    
    (182
    )
    
    
    (178
    )Federal Home Loan Bank stock dividends
    
    
    (6
    )
    
    
    (120
    )Changes in:Accrued interest receivable
    
    
    (128
    )
    
    
    (197
    )Other assets and other liabilities, net
    
    
    (659
    )
    
    
    456Net cash provided by operating activities
    
    
    1,906
    
    
    
    5,552Investing activities:Proceeds from maturities of certificates of deposit
    
    
    
    
    
    
    99Purchases of available for sale securities
    
    
    (2,012
    )
    
    
    (9,786
    )Proceeds from sales of available for sale securities
    
    
    2,475
    
    
    
    9,015Proceeds from maturities of available for sale securities
    
    
    2,067
    
    
    
    7,383Proceeds from sales of real estate held for sale
    
    
    1,828
    
    
    
    1,612Acquisitions, net
    
    
    
    
    
    
    357Net (increase) decrease in loans
    
    
    (2,073
    )
    
    
    5,776Purchases of bank premises and equipment
    
    
    (473
    )
    
    
    (2,200
    )Net cash provided by investing activities
    
    
    1,812
    
    
    
    12,256Financing activities:Net (decrease) in deposits
    
    
    (45,638
    )
    
    
    (9,612
    )Net change in short-term borrowings
    
    
    38,098
    
    
    
    (1,610
    )Proceeds from long-term borrowings
    
    
    5,000
    
    
    
    21,405Repayments of long-term borrowings
    
    
    (3,670
    )
    
    
    (13,742
    )Proceeds from exercise of stock options
    
    
    357
    
    
    
    62Dividends paid
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (1,267
    )
    
    
    (2,003
    )Net cash used in financing activities
    
    
    (7,120
    )
    
    
    (5,500
    )Net increase (decrease) in cash and cash equivalents
    
    
    (3,402
    )
    
    
    12,308Cash and cash equivalents  beginning of period
    
    
    18,258
    
    
    
    13,286Cash and cash equivalents  end of period
    
    $
    14,856
    
    
    $
    25,594
  5




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Page 2 of 2
 Six Months EndedJune 302006
    
    
    2005Supplemental disclosure of cash flow informationInterest paid
    
    $
    8,734
    
    
    $
    4,787Income taxes paid
    
    
    290
    
    
    
    525Real estate acquired in settlement of loans
    
    
    
    
    
    
    195Loans held for sale, transferred to loan portfolio at fair
market value
    
    
    4,792
    
    
    
    Acquisitions, net:Assets acquired:Investments
    
    
    
    
    
    $
    (6,561
    )Loans, net
    
    
    
    
    
    
    (12,608
    )Loans held for sale
    
    
    
    
    
    
    (5,047
    )Interest receivable
    
    
    
    
    
    
    (109
    )Premises and equipment
    
    
    
    
    
    
    (2,428
    )Goodwill
    
    
    
    
    
    
    (1,034
    )Intangibles
    
    
    
    
    
    
    (424
    )Real Estate held for sale
    
    
    
    
    
    
    (155
    )Non-marketable securities
    
    
    
    
    
    
    (639
    )Other assets
    
    
    
    
    
    
    (108
    )Liabilities assumed:Deposits
    
    
    
    
    
    
    27,757Other liabilities
    
    
    
    
    
    
    56Treasury Stock issued
    
    
    
    
    
    
    1,657Cash received, net of cash paid
    
    
    
    
    
    $
    357
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7




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Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302006
    
    
    2005
    
    
    2006
    
    
    2005(dollars in thousands, except share and per share data)Basic:Net income
    
    $
    938
    
    
    $
    720
    
    
    $
    1,620
    
    
    $
    1,907Average common shares outstanding
    
    
    2,222,405
    
    
    
    2,379,121
    
    
    
    2,227,133
    
    
    
    2,369,233Net income per common share 
basic
    
    $
    .42
    
    
    $
    0.30
    
    
    $
    0.73
    
    
    $
    0.80Diluted:Net income
    
    $
    938
    
    
    $
    720
    
    
    $
    1,620
    
    
    $
    1,907Average common shares outstanding
    
    
    2,222,405
    
    
    
    2,379,121
    
    
    
    2,227,133
    
    
    
    2,369,233Dilutive potential due to stock options
    
    
    7,297
    
    
    
    5,784
    
    
    
    8,407
    
    
    
    7,414Average common shares outstanding
    
    
    2,229,702
    
    
    
    2,384,905
    
    
    
    2,235,540
    
    
    
    2,376,647Net income per common share 
Diluted
    
    $
    0.42
    
    
    $
    0.30
    
    
    $
    0.72
    
    
    $
    0.80
 8




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Certificates of
    
    
    Long-termYears Ending June 30,
    
    Deposit
    
    
    Borrowings (1)
    
    
    Total2007
    
    $
    146,588
    
    
    $
    28,041
    
    
    $
    174,6292008
    
    
    48,496
    
    
    
    21,149
    
    
    
    69,6452009
    
    
    7,292
    
    
    
    10,156
    
    
    
    17,4482010
    
    
    5,341
    
    
    
    165
    
    
    
    5,5062011
    
    
    4,563
    
    
    
    174
    
    
    
    4,737thereafter
    
    
    
    
    
    
    368
    
    
    
    368Total
    
    $
    212,280
    
    
    $
    60,053
    
    
    $
    272,333Financial instruments whose
contract amounts represent credit
risk:Commitment to extend credit
    
    
    
    
    
    
    
    
    
    $
    56,528Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    1,372Total
    
    
    
    
    
    
    
    
    
    $
    330,233
 
 (1)
    
    Fixed rate callable borrowings are included in the period of their modified duration
rather than in the period in which they are due. Borrowings include two fixed rate callable
advances of $5 million each that mature in years 2008 and 2016 which are callable within the
next 12 months and a variable rate, pre-payable advance of $20 million maturing in fiscal year
2008. Trust preferred debentures of $10 million mature in both 2032 and 2034, but are callable
in 2007 and 2009.   Continuous unrealized
    
    
    Continuous unrealizedlosses existing for less than
    
    
    losses existing greater12 months
    
    
    than 12 months
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    losses
    
    
    Fair Value
    
    
    losses
    
    
    Fair Value
    
    
    lossesDescription of
Securities
U.S. government
agencies
    
    $
    16,415
    
    
    $
    471
    
    
    $
    57,748
    
    
    $
    2,079
    
    
    $
    74,163
    
    
    $
    2,550Municipals
    
    
    2,857
    
    
    
    63
    
    
    
    19,017
    
    
    
    772
    
    
    
    21,874
    
    
    
    835Mortgage backed
securities
    
    
    7,741
    
    
    
    164
    
    
    
    6,766
    
    
    
    355
    
    
    
    14,508
    
    
    
    518Corporate
    
    
    
    
    
    
    
    
    
    
    1,920
    
    
    
    132
    
    
    
    1,920
    
    
    
    132Total temporarily
impaired securities
    
    $
    27,013
    
    
    $
    698
    
    
    $
    85,451
    
    
    $
    3,338
    
    
    $
    112,464
    
    
    $
    4,037
  9




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Weighted-AverageWeighted-
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Term
    
    
    Intrinsic ValueOutstanding at January 1, 2006
    
    
    223,800
    
    
    $
    25.41Granted
    
    
    20,000
    
    
    
    25.05Exercised
    
    
    (15,000
    )
    
    
    23.19Forfeited
    
    
    (24,000
    )
    
    
    27.29Outstanding at June 30, 2006
    
    
    204,800
    
    
    $
    25.28
    
    
    
    6.99
    
    
    $
    1,607,239Exercisable at June 30, 2006
    
    
    116,900
    
    
    $
    24.21
    
    
    
    5.69
    
    
    $
    853.201
  Six Months EndedJune 302006
    
    2005Expected volatility
    
    10% - 25%
    
    10% - 25%Weighted-average volatility
    
    17.5%
    
    16%Expected dividend rate
    
    0%
    
    0%Expected term
    
    5 years
    
    5 yearsRisk-free rate
    
    4.92%
    
    4.27%
  Weighted-AverageGrant DateShares
    
    
    Fair ValueNonvested at January 1, 2006
    
    
    120,000
    
    
    $
    26.58Granted
    
    
    20,000
    
    
    
    25.05Vested
    
    
    (30,900
    )
    
    
    24.65Forfeited
    
    
    (21,200
    )
    
    
    27.26Nonvested at June 30, 2006
    
    
    87,900
    
    
    $
    26.69
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12




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Managements Discussion and Analysis of Financial Condition and Results of Operations
        13




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Table 1
 June 30
    
    
    December 312006
    
    
    2005
    
    
    Change(dollars in thousands)Non-accruing loans
    
    $
    3,048
    
    
    $
    3,823
    
    
    $
    (775
    )Accruing loans delinquent 90
days or more
    
    
    
    
    
    
    
    
    
    
    Total nonperforming loans
    
    
    3,048
    
    
    
    3,823
    
    
    
    (775
    )Foreclosed assets
    
    
    38
    
    
    
    1,709
    
    
    
    (1,671
    )Troubled debt restructuring
    
    
    44
    
    
    
    35
    
    
    
    (2
    )Total nonperforming assets
    
    $
    3,130
    
    
    $
    5,567
    
    
    $
    (2,448
    )Allowance for loan losses to total loans
    
    
    .97
    %
    
    
    1.02
    %Allowance for loan losses to
nonperforming loans
    
    
    140.88
    %
    
    
    117.33
    %Nonperforming loans to total loans
    
    
    .69
    %
    
    
    0.88
    %Nonperforming assets to total loans
and foreclosed property
    
    
    .71
    %
    
    
    1.28
    %Nonperforming assets to total assets
    
    
    .49
    %
    
    
    0.87
    %
 14




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th
      15




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Allowance
for Loan Losses
 Goodwill
 16




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Real Estate Held for Sale
 Mortgage Servicing Rights
 Deferred Income Taxes
 Stock
Compensation Plans
  
  17




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18




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Table 2
 NET INTEREST INCOME ANALYSIS (UNAUDITED)CENTRUE FINANCIAL CORPORATION AND SUBSIDIARIESThree Months Ended June 30,2006
    
    
    2005Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/(Dollars in Thousands)
    
    Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable (1) (3)
    
    $
    435,355
    
    
    $
    7,239
    
    
    
    6.67
    %
    
    $
    441,340
    
    
    $
    6,703
    
    
    
    6.09
    %Investments securities (2) (3)
    
    
    121,969
    
    
    
    1,344
    
    
    
    4.42
    %
    
    
    123,754
    
    
    
    1,297
    
    
    
    4.20
    %Other interest-earning assets
    
    
    2,677
    
    
    
    8
    
    
    
    1.10
    %
    
    
    3,641
    
    
    
    15
    
    
    
    1.65
    %FHLB stock
    
    
    4,445
    
    
    
    37
    
    
    
    3.37
    %
    
    
    4,322
    
    
    
    56
    
    
    
    5.20
    %Total interest-earning assets
    
    
    564,446
    
    
    
    8,628
    
    
    
    6.13
    %
    
    
    573,057
    
    
    
    8,071
    
    
    
    5.65
    %Other assets
    
    
    62,890
    
    
    
    
    
    
    
    
    
    
    
    64,184Total assets
    
    $
    627,336
    
    
    
    
    
    
    
    
    
    
    $
    637,241Interest-bearing liabilities:Certificate accounts
    
    $
    225,987
    
    
    
    2,007
    
    
    
    3.56
    %
    
    $
    246,650
    
    
    
    1,728
    
    
    
    2.81
    %Savings deposits
    
    
    81,738
    
    
    
    136
    
    
    
    0.67
    %
    
    
    101,424
    
    
    
    182
    
    
    
    0.72
    %Demand and NOW deposits
    
    
    103,467
    
    
    
    628
    
    
    
    2.43
    %
    
    
    89,597
    
    
    
    263
    
    
    
    1.18
    %Borrowings
    
    
    102,374
    
    
    
    1,417
    
    
    
    5.53
    %
    
    
    86,009
    
    
    
    917
    
    
    
    4.28
    %Total interest-bearing liabilities
    
    
    513,566
    
    
    
    4,188
    
    
    
    3.27
    %
    
    
    523,680
    
    
    
    3,090
    
    
    
    2.37
    %Non-interest bearing demand deposits
    
    
    66,777
    
    
    
    
    
    
    
    
    
    
    
    65,453Other liabilities
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    5,258Total liabilities
    
    
    584,343
    
    
    
    
    
    
    
    
    
    
    
    594,391Stockholders equity
    
    
    42,993
    
    
    
    
    
    
    
    
    
    
    
    42,850Total liabilities and stockholders equity
    
    $
    627,336
    
    
    
    
    
    
    
    
    
    
    $
    637,241Net interest income (3)
    
    
    
    
    
    $
    4,440
    
    
    
    
    
    
    
    
    
    
    $
    4,981Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %Net earning assets
    
    $
    50,880
    
    
    
    
    
    
    
    
    
    
    $
    49,377Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.49
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    109.91
    %
    
    
    
    
    
    
    
    
    
    
    109.43
    %
 
 (1)
    
    Calculated including loans held for sale, and net of deferred loan fees, loan discounts,
loans in process and the allowance for loan losses.(2)
    
    Calculated including investment securities available-for-sale and certificates of deposit.(3)
    
    Presented on a fully tax-equivalent basis, assuming a combined Federal and State tax rate of 38.7%. 19




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Table 3
 NET INTEREST INCOME ANALYSIS (UNAUDITED)CENTRUE FINANCIAL CORPORATION AND SUBSIDIARIESSix Months Ended June 30,2006
    
    
    2005Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/(Dollars in Thousands)
    
    Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    RateInterest-earning assets:Loans receivable (1) (3)
    
    $
    436,646
    
    
    $
    14,353
    
    
    
    6.63
    %
    
    $
    430,025
    
    
    $
    12,908
    
    
    
    6.05
    %Investments securities (2) (3)
    
    
    122,806
    
    
    
    2,700
    
    
    
    4.43
    %
    
    
    121,271
    
    
    
    2,534
    
    
    
    4.21
    %Other interest-earning assets
    
    
    2,540
    
    
    
    15
    
    
    
    1.19
    %
    
    
    3,009
    
    
    
    23
    
    
    
    1.54
    %FHLB stock
    
    
    4,442
    
    
    
    76
    
    
    
    3.45
    %
    
    
    3,969
    
    
    
    105
    
    
    
    5.34
    %Total interest-earning assets
    
    
    566,434
    
    
    
    17,144
    
    
    
    6.10
    %
    
    
    558,274
    
    
    
    15,570
    
    
    
    5.62
    %Other assets
    
    
    63,534
    
    
    
    
    
    
    
    
    
    
    
    60,995Total assets
    
    $
    629,968
    
    
    
    
    
    
    
    
    
    
    $
    619,269Interest-bearing liabilities:Certificate accounts
    
    $
    236,917
    
    
    
    4,105
    
    
    
    3.49
    %
    
    $
    245,209
    
    
    
    3,304
    
    
    
    2.72
    %Savings deposits
    
    
    83,334
    
    
    
    276
    
    
    
    0.67
    %
    
    
    95,107
    
    
    
    315
    
    
    
    0.67
    %Demand and NOW deposits
    
    
    101,947
    
    
    
    1,162
    
    
    
    2.30
    %
    
    
    89,040
    
    
    
    481
    
    
    
    1.09
    %Borrowings
    
    
    93,821
    
    
    
    2,369
    
    
    
    5.09
    %
    
    
    81,013
    
    
    
    1,714
    
    
    
    4.27
    %Total interest-bearing liabilities
    
    
    516,019
    
    
    
    7,912
    
    
    
    3.09
    %
    
    
    510,369
    
    
    
    5,814
    
    
    
    2.30
    %Non-interest bearing demand deposits
    
    
    66,788
    
    
    
    
    
    
    
    
    
    
    
    61,756Other liabilities
    
    
    4,246
    
    
    
    
    
    
    
    
    
    
    
    3,856Total liabilities
    
    
    587,053
    
    
    
    
    
    
    
    
    
    
    
    575,981Stockholders equity
    
    
    42,915
    
    
    
    
    
    
    
    
    
    
    
    43,288Total liabilities and stockholders equity
    
    $
    629,968
    
    
    
    
    
    
    
    
    
    
    $
    619,269Net interest income (3)
    
    
    
    
    
    $
    9,232
    
    
    
    
    
    
    
    
    
    
    $
    9,756Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.01
    %
    
    
    
    
    
    
    
    
    
    
    3.32
    %Net earning assets
    
    $
    50,415
    
    
    
    
    
    
    
    
    
    
    $
    47,905Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.52
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    109.77
    %
    
    
    
    
    
    
    
    
    
    
    109.39
    %
 
 (1)
    
    Calculated including loans held for sale, and net of deferred loan fees, loan discounts,
loans in process and the allowance for loan losses.(2)
    
    Calculated including investment securities available-for-sale and certificates of deposit.(3)
    
    Presented on a fully tax-equivalent basis, assuming a combined Federal and State tax rate of 38.7%. 20




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Table 4
 Three Months EndedJune 30
    
    
    Change(Dollars in Thousands)
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentNoninterest income:Fee income
    
    $
    1,632
    
    
    $
    1,330
    
    
    $
    302
    
    
    
    22.7
    %Net gain (loss) on sale
of real estate held
for sale
    
    
    181
    
    
    
    (8
    )
    
    
    189
    
    
    
    n/mNet gain on sale of loans
    
    
    324
    
    
    
    158
    
    
    
    166
    
    
    
    105.1Increase in cash
surrender value of life
insurance contracts
    
    
    90
    
    
    
    87
    
    
    
    3
    
    
    
    3.4Other
    
    
    100
    
    
    
    140
    
    
    
    (40
    )
    
    
    (28.6
    )Total
    
    $
    2,327
    
    
    $
    1,707
    
    
    $
    620
    
    
    
    36.3
    %
 
 (n/m = not meaningful)
  21




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Table 5
 Three Months EndedJune 30
    
    
    Change(Dollars in Thousands)
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentNoninterest expense:Compensation and benefits
    
    $
    2,736
    
    
    $
    2,688
    
    
    $
    48
    
    
    
    1.8
    %Occupancy, net
    
    
    483
    
    
    
    391
    
    
    
    92
    
    
    
    23.5Furniture and equipment
    
    
    262
    
    
    
    803
    
    
    
    (541
    )
    
    
    (67.4
    )Advertising
    
    
    110
    
    
    
    80
    
    
    
    30
    
    
    
    37.5Data processing
    
    
    462
    
    
    
    160
    
    
    
    302
    
    
    
    188.8Telephone and postage
    
    
    220
    
    
    
    153
    
    
    
    67
    
    
    
    43.8Amortization of Intangibles
    
    
    71
    
    
    
    72
    
    
    
    (1
    )
    
    
    (1.4
    )Legal and professional fees
    
    
    191
    
    
    
    319
    
    
    
    (128
    )
    
    
    (40.1
    )Other
    
    
    773
    
    
    
    791
    
    
    
    (18
    )
    
    
    (2.3
    )Total
    
    $
    5,308
    
    
    $
    5,457
    
    
    $
    (149
    )
    
    
    (2.7
    )%
  Table 6
 Six Months EndedJune 30
    
    
    Change(Dollars in Thousands)
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentNoninterest income:Fee income
    
    $
    2,799
    
    
    $
    2,429
    
    
    $
    370
    
    
    
    15.2
    %Net gain on sale of securities
    
    
    4
    
    
    
    183
    
    
    
    (179
    )
    
    
    (97.8
    )Net gain (loss) on sale of
real estate held for sale
    
    
    157
    
    
    
    (6
    )
    
    
    163
    
    
    
    n/mNet gain on sale of loans
    
    
    431
    
    
    
    289
    
    
    
    142
    
    
    
    49.1Increase in cash surrender
value of life insurance
contracts
    
    
    182
    
    
    
    178
    
    
    
    4
    
    
    
    2.2Other
    
    
    397
    
    
    
    198
    
    
    
    199
    
    
    
    100.5Total
    
    $
    3,970
    
    
    $
    3,271
    
    
    $
    699
    
    
    
    21.4
    %
  22




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Table 7
 Six Months EndedJune 30
    
    
    Change(Dollars in Thousands)
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentNoninterest expense:Compensation and benefits
    
    $
    5,868
    
    
    $
    5,024
    
    
    $
    844
    
    
    
    16.8
    %Occupancy, net
    
    
    946
    
    
    
    778
    
    
    
    168
    
    
    
    21.6Furniture and equipment
    
    
    544
    
    
    
    1,133
    
    
    
    (589
    )
    
    
    (52.0
    )Advertising
    
    
    200
    
    
    
    160
    
    
    
    40
    
    
    
    25.0Data processing
    
    
    806
    
    
    
    318
    
    
    
    488
    
    
    
    153.5Telephone and postage
    
    
    372
    
    
    
    324
    
    
    
    48
    
    
    
    14.8Amortization of Intangibles
    
    
    143
    
    
    
    133
    
    
    
    10
    
    
    
    7.5Legal and professional fees
    
    
    353
    
    
    
    461
    
    
    
    (108
    )
    
    
    (23.4
    )Other
    
    
    1,436
    
    
    
    1,450
    
    
    
    (14
    )
    
    
    (1.0
    )Total
    
    $
    10,668
    
    
    $
    9,781
    
    
    $
    887
    
    
    
    9.1
    %
      23




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##### Table of Contents



Table 8
 To be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action Provisions(Dollars in Thousands)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of June 30, 2006:Tier 1 Capital to Average AssetsCentrue Financial
    
    
    45,001
    
    
    
    7.37
    %
    
    
    24,411
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    45,291
    
    
    
    7.49
    %
    
    
    24,196
    
    
    
    4.00
    %
    
    
    30,245
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    45,001
    
    
    
    10.64
    %
    
    
    16,919
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    45,291
    
    
    
    10.85
    %
    
    
    16,703
    
    
    
    4.00
    %
    
    
    25,055
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    54,010
    
    
    
    12.77
    %
    
    
    33,837
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    49,585
    
    
    
    11.87
    %
    
    
    33,406
    
    
    
    8.00
    %
    
    
    41,758
    
    
    
    10.00
    %As of December 31, 2005:Tier 1 Capital to Average AssetsCentrue Financial
    
    
    43,396
    
    
    
    6.95
    %
    
    
    24,967
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    43,773
    
    
    
    7.08
    %
    
    
    24,733
    
    
    
    4.00
    %
    
    
    30,917
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    43,396
    
    
    
    10.33
    %
    
    
    16,796
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    43,773
    
    
    
    10.49
    %
    
    
    16,696
    
    
    
    4.00
    %
    
    
    25,044
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    52,962
    
    
    
    12.61
    %
    
    
    33,593
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    48,259
    
    
    
    11.56
    %
    
    
    33,391
    
    
    
    8.00
    %
    
    
    41,739
    
    
    
    10.00
    %
 24




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##### Table of Contents



Quantitative and Qualitative Disclosures About Market Risk
     25




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##### Table of Contents



EVE
RatiosJune 30,
    
    December 31,Changes in Interest Ratesm
    
    2006
    
    2005300 basis point rise
    
    
    7.92
    %
    
    
    7.60
    %200 basis point rise
    
    
    8.07
    %
    
    
    7.43
    %100 basis point rise
    
    
    7.99
    %
    
    
    7.33
    %Base rate scenario
    
    
    7.41
    %
    
    
    6.86
    %100 basis point decline
    
    
    6.04
    %
    
    
    5.24
    %200 basis point decline
    
    
    4.48
    %
    
    
    3.60
    %
   26




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##### Table of Contents



Controls and Procedures
   27




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##### Table of Contents



PART
II - OTHER INFORMATION
 
 Legal Proceedings
  
 Risk Factors
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number
    
    
    Maximumof Shares
    
    
    Number ofPurchased as
    
    
    Shares that MayPart of Publicly
    
    
    Yet BeTotal Number of
    
    
    
    
    
    
    Announced
    
    
    Purchased UnderThree Months Ended
    
    Shares
    
    
    Average Price
    
    
    Plans or
    
    
    the Plans orJune 30, 2006
    
    Purchased
    
    
    Paid per Share
    
    
    Programs (1)
    
    
    Programs (1)April 1 - April 30
    
    
    1,500
    
    
    $
    25.52
    
    
    
    1,500
    
    
    
    247,548May 1 - May 31
    
    
    1,500
    
    
    
    23.90
    
    
    
    1,500
    
    
    
    246,048June 1 - June 30
    
    
    1,500
    
    
    
    24.10
    
    
    
    1,500
    
    
    
    244,548Total
    
    
    4,500
    
    
    $
    24.50
    
    
    
    4,500
    
    
    
    244,548
 
 (1)
    
    The Company announced its original stock repurchase program on October 21, 2004,
which authorized the Company to purchase up to 20% of the shares outstanding, or 484,663.
The plan would have expired on December 31, 2005 but was extended through December 31, 2006.
The Company purchased all of the shares listed above under the repurchase program. 
 Defaults Upon Senior Securities
  
 Submission of Matters to a Vote of Security Holders
   28




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##### Table of Contents



1.
    
    For the election of three (3) directors of the Company:NOMINEE: Thomas A. Daiber
 FOR
    
    ABSTAIN1,989,373
    
    29,605
 NOMINEE: Randall E. Ganim
 FOR
    
    ABSTAIN1,982,528
    
    36,450
 NOMINEE: Mark L. Smith
 FOR
    
    ABSTAIN1,992,679
    
    26,299
 2.
    
    To approve the appointment of McGladrey & Pullen LLP as the Companys
auditors for the year ending December 31, 2006.
 BROKER NON-FOR
    
    AGAINST
    
    ABSTAIN
    
    VOTES2,004,933
    
    8,461
    
    5,584
    
    
 
 Other Information
  
 Exhibits
 Exhibits
 10.1
    
    Agreement and Plan of Merger among UnionBancorp, Inc. and the
Company dated June 30, 2006 (incorporated by reference to Form 8-K filed by the
Company on July 7, 2006)10.1
    
    Amendment No. 2 to Rights Agreement between LaSalle Bank National
Association and the Company date as of June 20, 2006 (incorporated by reference
to Form 8-K filed by the Company on July 7, 2006)31.1
    
    Certification of Thomas A. Daiber, Principal Executive Officer and
Interim Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    Certification of Thomas A. Daiber, Principal Executive Officer and
Interim Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 29




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##### Table of Contents



SIGNATURES
  CENTRUE FINANCIAL CORPORATIONRegistrantDate: August 11, 2006
    
    /s/ THOMAS A. DAIBERPresident and Chief Executive Officerand Interim Principal Financial Officer
 30