##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION    FORM 10-Q (Mark One) [X]
    
    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended June 30,
2004.
 or [  
]
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period From __________ to __________.
 Commission File Number 1-13676 CENTRUE FINANCIAL CORPORATION 
  Delaware
    
    36-3846489(State or Other Jurisdiction of Incorporation
or Organization)
    
    (I.R.S. Employer Identification Number)
 310 South Schuyler Avenue, Kankakee, Illinois
    
    60901(Address of Principal Executive Offices)
    
    (Zip Code)
 (815) 937-4440 
  Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
[   ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes
[   ] No [X] As of August 11, 2004, there were 2,500,116 issued and outstanding shares of
the Issuers common stock.




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CENTRUE FINANCIAL CORPORATION 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
    
    
    5-6Notes to Consolidated Financial Statements
    
    
    7-10Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10-22Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23-25Item 4.
    
    Controls and Procedures
    
    
    25Part II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    26Item 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    26Item 3.
    
    Defaults Upon Senior Securities
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26-27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    27-28SIGNATURES
    
    
    29IndentureCertification of Principal Executive OfficerCertification of Chief Financial OfficerCertification of Corporate Controller906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer906 Certification of Corporate Controller
  2




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PART I. - FINANCIAL INFORMATION 
 ITEM 1. Consolidated Financial Statements (Unaudited) 
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)  June 30
    
    December 312004
    
    2003(dollars in thousands)AssetsCash and due from banks
    
    $
    10,536
    
    
    $
    13,558Interest bearing due from banks and other
    
    
    1,712
    
    
    
    14,831Federal funds sold
    
    
    
    
    
    
    17,216Cash and cash equivalents
    
    
    12,248
    
    
    
    45,605Certificates of Deposit
    
    
    248
    
    
    
    50Investment Securities:Available-for-sale, at fair value
    
    
    112,627
    
    
    
    87,712Held-to-maturity, (fair value: $681 and $912)
    
    
    681
    
    
    
    892Loans, net of allowance for loan losses of ($7,626 and $7,471)
    
    
    435,493
    
    
    
    425,840Loans held for sale
    
    
    724
    
    
    
    Premises and equipment
    
    
    16,975
    
    
    
    17,113Goodwill
    
    
    12,446
    
    
    
    11,433Life insurance contracts
    
    
    8,951
    
    
    
    8,752Non-marketable equity securities
    
    
    4,106
    
    
    
    3,298Accrued interest receivable
    
    
    2,710
    
    
    
    2,552Intangible assets
    
    
    1,896
    
    
    
    1,229Real estate held for sale
    
    
    681
    
    
    
    319Other assets
    
    
    4,136
    
    
    
    4,413Total Assets
    
    $
    613,922
    
    
    $
    609,208LiabilitiesDeposits:Noninterest bearing
    
    $
    50,864
    
    
    $
    42,400Interest bearing
    
    
    450,172
    
    
    
    451,952Total Deposits
    
    
    501,036
    
    
    
    494,352Borrowings
    
    
    43,562
    
    
    
    54,396Junior subordinated debt owed to unconsolidated trusts
    
    
    20,000
    
    
    
    10,000Other liabilities
    
    
    5,513
    
    
    
    4,817Total Liabilities
    
    
    570,111
    
    
    
    563,565Stockholders 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
    
    
    42
    
    
    
    42Additional paid-in capital
    
    
    28,952
    
    
    
    28,929Retained income, partially restricted
    
    
    41,064
    
    
    
    39,231Accumulated other comprehensive income (loss)
    
    
    (501
    )
    
    
    1,088Unearned restricted stock (26,400 and 27,800 shares)
    
    
    (673
    )
    
    
    (820
    )Treasury stock, (1,672,484 and 1,594,278 shares), at cost
    
    
    (25,073
    )
    
    
    (22,827
    )Total Stockholders Equity
    
    
    43,811
    
    
    
    45,643Total Liabilities and Stockholders Equity
    
    $
    613,922
    
    
    $
    609,208
 See the accompanying notes to consolidated financial statements. 3




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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302004
    
    2003
    
    2004
    
    2003(dollars in thousands, except per share data)Interest and dividend income:Loans
    
    $
    6,144
    
    
    $
    5,621
    
    
    $
    12,438
    
    
    $
    11,832Investments
    
    
    1,059
    
    
    
    806
    
    
    
    1,999
    
    
    
    1,781Deposits with banks and other
    
    
    18
    
    
    
    137
    
    
    
    94
    
    
    
    240FHLB stock dividends
    
    
    52
    
    
    
    77
    
    
    
    108
    
    
    
    121Total interest and dividend income
    
    
    7,273
    
    
    
    6,641
    
    
    
    14,639
    
    
    
    13,974Interest expense:Deposits
    
    
    1,918
    
    
    
    2,321
    
    
    
    4,017
    
    
    
    4,935Borrowings
    
    
    467
    
    
    
    522
    
    
    
    1,048
    
    
    
    1,110Junior subordinated debt owed to
unconsolidated trusts
    
    
    218
    
    
    
    136
    
    
    
    331
    
    
    
    276Total interest expense
    
    
    2,603
    
    
    
    2,979
    
    
    
    5,396
    
    
    
    6,321Net interest income
    
    
    4,670
    
    
    
    3,662
    
    
    
    9,243
    
    
    
    7,653Provision for loan losses
    
    
    300
    
    
    
    3,683
    
    
    
    600
    
    
    
    3,749Net interest income (loss) after
provision for loan losses
    
    
    4,370
    
    
    
    (21
    )
    
    
    8,643
    
    
    
    3,904Noninterest income:Fee income
    
    
    990
    
    
    
    392
    
    
    
    1,881
    
    
    
    1,024Net gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    Net gain on sale of real estate held for sale
    
    
    46
    
    
    
    6
    
    
    
    39
    
    
    
    32Net gain on sale of loans
    
    
    317
    
    
    
    480
    
    
    
    423
    
    
    
    862Gain on sale of branch
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478Increase in cash surrender value of life
Insurance contracts
    
    
    99
    
    
    
    116
    
    
    
    199
    
    
    
    228Other
    
    
    51
    
    
    
    122
    
    
    
    121
    
    
    
    233Total noninterest income
    
    
    1,503
    
    
    
    1,116
    
    
    
    2,752
    
    
    
    2,857Noninterest expense:Compensation and benefits
    
    
    2,134
    
    
    
    1,894
    
    
    
    4,397
    
    
    
    3,803Occupancy, net
    
    
    325
    
    
    
    312
    
    
    
    720
    
    
    
    651Furniture and equipment
    
    
    354
    
    
    
    208
    
    
    
    689
    
    
    
    384Advertising
    
    
    57
    
    
    
    89
    
    
    
    121
    
    
    
    195Data processing
    
    
    137
    
    
    
    105
    
    
    
    300
    
    
    
    237Telephone and postage
    
    
    152
    
    
    
    132
    
    
    
    281
    
    
    
    270Amortization of intangibles
    
    
    61
    
    
    
    34
    
    
    
    107
    
    
    
    72Legal and professional fees
    
    
    166
    
    
    
    204
    
    
    
    402
    
    
    
    420Other
    
    
    761
    
    
    
    623
    
    
    
    1,439
    
    
    
    1,238Total noninterest expense
    
    
    4,147
    
    
    
    3,601
    
    
    
    8,456
    
    
    
    7,270Income (loss) before income taxes
    
    
    1,726
    
    
    
    (2,506
    )
    
    
    2,939
    
    
    
    (509
    )Income tax expense (benefit)
    
    
    544
    
    
    
    (1,003
    )
    
    
    911
    
    
    
    (377
    )Net income (loss)
    
    $
    1,182
    
    
    $
    (1,503
    )
    
    $
    2,028
    
    
    $
    (132
    )Other comprehensive loss:Change in unrealized gains or losses on
available for sale securities, net of
related income taxes
    
    
    (1,843
    )
    
    
    (95
    )
    
    
    (1,530
    )
    
    
    (264
    )Less: reclassification adjustment for gains
included in net income net of related
income taxes
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    Other comprehensive loss
    
    
    (1,843
    )
    
    
    (95
    )
    
    
    (1,589
    )
    
    
    (264
    )Comprehensive income (loss)
    
    $
    (661
    )
    
    $
    (1,598
    )
    
    $
    439
    
    
    $
    (396
    )Basic earnings (loss) per share
    
    $
    0.47
    
    
    $
    (0.81
    )
    
    $
    0.79
    
    
    $
    (0.06
    )Diluted earnings (loss) per share
    
    $
    0.46
    
    
    $
    (0.80
    )
    
    $
    0.79
    
    
    $
    (0.06
    )Dividends per share
    
    
    
    
    
    $
    0.075
    
    
    $
    0.075
    
    
    $
    0.15
 See the accompanying notes to consolidated financial statements. 4




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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  Six Months EndedJune 302004
    
    2003(dollars in thousands)Operating activitiesNet income
    
    $
    2,028
    
    
    $
    (132
    )Adjustments to reconcile net income to net cash provided
by operating activities:Provision for loan losses
    
    
    600
    
    
    
    3,749Depreciation and amortization
    
    
    850
    
    

    
    515Net amortization on investments
    
    
    (171
    )
    
    
    64Amortization of intangibles
    
    
    107
    
    
    
    72Deferred income taxes
    
    
    818
    
    
    
    Origination of loans held for sale
    
    
    (14,923
    )
    
    
    (31,969
    )Proceeds from sales of loans held for sale
    
    
    14,622
    
    
    
    32,475Gain on sale of loans
    
    
    (423
    )
    
    
    (862
    )Gain on sale of securities
    
    
    (89
    )
    
    
    Gain on sale of real estate held for sale
    
    
    (39
    )
    
    
    (32
    )Gain on sale of branch
    
    
    
    
    
    
    (478
    )Compensation expense for restricted stock
    
    
    147
    
    
    
    Increase in cash surrender value of life insurance
contracts
    
    
    (199
    )
    
    
    (228
    )Federal Home Loan Bank stock dividends
    
    
    (108
    )
    
    
    (121
    )Changes in:Accrued interest receivable
    
    
    (54
    )
    
    
    604Other assets and other liabilities, net
    
    
    584
    
    
    
    (2,146
    )Net cash provided by operating activities
    
    
    3,750
    
    
    
    1,511Investing activitiesProceeds from maturities of certificates of deposit
    
    
    100
    
    
    
    Purchases of available for sale securities
    
    
    (40,460
    )
    
    
    (10,666
    )Proceeds from sales of available for sale securities
    
    
    3,948
    
    
    
    Proceeds from maturities of available for sale securities
    
    
    18,132
    
    
    
    27,860Proceeds from maturities of held-to-maturity securities
    
    
    211
    
    
    
    175Proceeds from sales of real estate held for sale
    
    
    196
    
    
    
    241Cash paid for branch sale
    
    
    
    
    
    
    (12,315
    )Purchase of Parish Bank and Trust Company, net
    
    
    38
    
    
    
    Net (increase) decrease in loans
    
    
    (3,430
    )
    
    
    30,483Purchases of bank premises and equipment
    
    
    (443
    )
    
    
    (4,038
    )Net cash (used in) provided by investing activities
    
    
    (21,709
    )
    
    
    31,740Financing activitiesNet increase (decrease) in deposits
    
    
    (11,840
    )
    
    
    12,968Proceeds from borrowings
    
    
    2,100
    
    
    
    800Repayments of borrowings
    
    
    (12,934
    )
    
    
    (11,800
    )Proceeds from issuance of junior subordinated debt owed to
unconsolidated trusts
    
    
    9,695
    
    
    
    Proceeds from exercise of stock options
    
    
    94
    
    
    
    Dividends paid
    
    
    (195
    )
    
    
    (315
    )Purchase of treasury stock
    
    
    (2,317
    )
    
    
    (9,308
    )Net cash used in financing activities
    
    
    (15,398
    )
    
    
    (7,655
    )Net increase (decrease) in cash and cash equivalents
    
    
    (33,357
    )
    
    
    25,596Cash and cash equivalents  beginning of year
    
    
    45,605
    
    
    
    47,426Cash and cash equivalents  end of period
    
    $
    12,248
    
    
    $
    73,022
 5




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Six Months EndedJune 302004
    
    2003(dollars in thousands)Supplemental disclosure of cash flow informationInterest paid
    
    $
    5,513
    
    
    $
    6,483Income taxes paid
    
    
    1,290
    
    
    
    1,254Real estate acquired in settlement of loans
    
    
    519
    
    
    
    106Sale of branch:Assets disposed:Loans
    
    
    
    
    
    $
    (6,370
    )Interest receivable
    
    
    
    
    
    
    (24
    )Premises and equipment
    
    
    
    
    
    
    (165
    )Other assets
    
    
    
    
    
    
    (197
    )Liabilities assumed by buyer:Demand deposits
    
    
    
    
    
    
    2,162Certificates of deposit
    
    
    
    
    
    
    17,243Other liabilities
    
    
    
    
    
    
    144Gain on sale of branch
    
    
    
    
    
    
    (478
    )Cash paid
    
    
    
    
    
    $
    12,315Acquisition of Parish Bank and Trust Company:Assets acquired:Certificates of Deposit
    
    $
    (298
    )Investments
    
    
    (8,616
    )Loans, net
    
    
    (7,342
    )Interest receivable
    
    
    (104
    )Premises and equipment
    
    
    (269
    )Goodwill
    
    
    (1,013
    )Intangibles
    
    
    (774
    )Other assets
    
    
    (157
    )Liabilities assumed:Non-interest bearing deposits
    
    
    5,462Interest-bearing deposits
    
    
    13,062Other liabilities
    
    
    87Cash received, net of cash paid
    
    $
    38
 See the accompanying notes to consolidated financial statements. 6




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CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 2004 Note 1 - Basis of Presentation The consolidated financial statements of Centrue Financial Corporation
(the Company) have been prepared in accordance with accounting principles
generally accepted in the United States of America and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. The December 31, 2003 balance sheet has been derived from the
audited financial statements at that date, but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. Operating
results for the three and six-month periods ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report for
the Company on Form 10-K for the year ended December 31, 2003. The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary Centrue Bank (the Bank), an Illinois
chartered commercial bank. All material intercompany transactions and balances
are eliminated. The Company is a financial holding company that engages in its
business through its sole subsidiary, in a single significant business segment. In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the consolidated balance sheet and revenues
and expenses for the period. Actual results could differ significantly from
those estimates. Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, valuation of
mortgage servicing rights, goodwill, and real estate acquired in connection
with foreclosures or in satisfaction of loans. In connection with the
determination of the allowance for loan losses and the valuation of real estate
acquired by foreclosure, management obtains independent appraisals for
significant properties. Certain 2003 amounts have been reclassified where appropriate to conform
to the consolidated financial statement presentation used in 2004 with no
effect on previously reported net income or stockholders equity. The Company has a stock-based employee compensation plan, which is
described more fully in the Companys annual report on Form 10-K for the year
ended December 31, 2003. The Company accounts for this plan under the
recognition and measurement principles of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the grant date. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair 7




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value recognition provisions of Statement of Financial Accounting Standard
(SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation: Three Months Ended
    
    Six Months EndedJune 30
    
    June 302004
    
    2003
    
    2004
    
    2003(dollars in thousands, except per share data)Net income (loss), as reported
    
    $
    1,182
    
    
    $
    (1,503
    )
    
    $
    2,028
    
    
    $
    (132
    )Less: Total stock-based employee
compensation cost determined under
the fair value based method, net of
income taxes
    
    
    185
    
    
    
    157
    
    
    
    224
    
    
    
    157Pro forma net income (loss)
    
    $
    997
    
    
    $
    (1,660
    )
    
    $
    1,804
    
    
    $
    (289
    )Earnings (loss) per share:Basic  as reported
    
    $
    0.47
    
    
    $
    (0.81
    )
    
    
    0.79
    
    
    $
    (0.06
    )Basic  pro forma
    
    
    0.39
    
    
    
    (0.89
    )
    
    
    0.70
    
    
    
    (0.15
    )Diluted  as reported
    
    
    0.46
    
    
    
    (0.80
    )
    
    
    0.79
    
    
    
    (0.06
    )Diluted  pro forma
    
    
    0.39
    
    
    
    (0.88
    )
    
    
    0.70
    
    
    
    (0.15
    )
 Note 2  Common Stock Split On October 30, 2003, the Company issued 1,282,761 additional shares to
affect a 2-for-1 common stock split. All share and per share amounts have been
retroactively adjusted for this split as if it occurred on January 1, 2003. Note 3  Earnings (Loss) Per Share Basic earnings (loss) per share of common stock have been determined by
dividing net income (loss) for the period by the average number of shares of
common stock outstanding. Diluted earnings (loss) per share of common stock
have been determined by dividing net income (loss) for the period by the
average number of shares of common stock and common stock equivalents
outstanding. Average unearned restricted stock shares have been excluded from
common shares outstanding for both basic and diluted earnings per share.
Common stock equivalents assume exercise of stock options, and the purchase of
treasury stock with the option proceeds at the average market price for the
period (when dilutive). The Company has an incentive stock option plan for the
benefit of directors, officers and employees. Diluted earnings per share have
been determined considering the stock options granted, net of stock options
which have been exercised. 8




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302004
    
    2003
    
    2004
    
    2003(dollars in thousands, except share and per share data)BasicNet Income (loss)
    
    $
    1,182
    
    
    $
    (1,503
    )
    
    $
    2,028
    
    
    $
    (132
    )Average common shares outstanding
    
    
    2,536,965
    
    
    
    1,865,222
    
    
    
    2,558,500
    
    
    
    1,999,032Net income (loss) per common share 
basic
    
    $
    0.47
    
    
    $
    (0.81
    )
    
    $
    0.79
    
    
    $
    (0.06
    )DilutedNet Income (loss)
    
    $
    1,182
    
    
    $
    (1,503
    )
    
    $
    2,028
    
    
    $
    (132
    )Average common shares outstanding
    
    
    2,536,965
    
    
    
    1,865,222
    
    
    
    2,558,500
    
    
    
    1,999,032Dilutive potential due to stock options
    
    
    8,240
    
    
    
    4,328
    
    
    
    8,968
    
    
    
    2,704Average common shares outstanding
    
    
    2,545,205
    
    
    
    1,869,550
    
    
    
    2,567,468
    
    
    
    2,001,736Net income (loss) per common share 
diluted
    
    $
    0.46
    
    
    $
    (0.80
    )
    
    $
    0.79
    
    
    $
    (0.06
    )
 Note 4  Acquisition of Parish Bank and Trust Company On March 5, 2004, the Company acquired for cash all of the outstanding
shares of Parish Bank and Trust Company (Parish Bank) for a total cost of
$4.5 million. The acquisition was accounted for using the purchase method of
accounting. As such, the results of operations of the acquired entity are
excluded from the consolidated financial statements of income for the periods
prior to the acquisition date. The purchase price has been allocated based on
the fair values at the date of acquisition. This allocation resulted in
intangible assets of $774,000 and goodwill of $1.0 million. The intangible
assets are being amortized over ten years. At closing, Parish Bank had assets
of $21.5 million, including $7.3 million of loans, deposits of $18.5 million
and stockholders equity of $2.9 million. This acquisition was not considered
material to the Company as a whole and therefore, proforma information is not
included. Note 5  Adoption of FASB Interpretation No. 46 The Company adopted FASB Interpretation (FIN) No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51 (Revised December 2003)in connection with its consolidated financial
statements for the quarter and six-months ended June 30, 2004. FIN 46
establishes accounting guidance for consolidation of variable interest entities
(VIE) that function to support the activities of the primary beneficiary. The
primary beneficiary of a VIE entity is the entity that absorbs a majority of
the VIEs expected losses, receives a majority of the VIEs expected residual
returns, or both, as a result of ownership, controlling interest, contractual
relationship or other business relationship with a VIE. Prior to the
implementation of FIN 46, VIEs were generally consolidated by an enterprise
when the enterprise had a controlling financial interest through ownership of a
majority of voting interest in the entity. The implementation of FIN 46, as
revised, required the Company to de-consolidate its investment in Kankakee
Capital Trust I as of January 1, 2004, because the Company is not the primary
beneficiary. The Companys prior financial statements were not reclassified to
de- 9




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consolidate the Companys investment in the Trust. There was no impact on
shareholders equity or net income upon adoption of the standard. Note 6  Junior Subordinated Debt Owed to Unconsolidated Trusts The Company issued $10.0 million each in April 2002 and April 2004 of
cumulative trust preferred securities through newly formed special-purpose
trusts, Kankakee Capital Trust I (Trust I) and Centrue Statutory Trust II
(Trust II). The proceeds of the offerings were invested by the trusts in
junior subordinated deferrable interest debentures of Trust I and Trust II.
Trust I and Trust II are wholly-owned unconsolidated subsidiaries of the
Company, and their sole assets are the junior subordinated deferrable interest
debentures. Distributions are cumulative and are payable quarterly at a
variable rate of 3.70% and 2.65% over the LIBOR rate, respectively, (at a rate
of 5.07% and 4.20% at June 30, 2004) per annum of the stated liquidation amount
of $1,000 per preferred security. Interest expense on the trust preferred
securities was $218,000 and $136,000 for the three months ended June 30, 2004
and 2003, and $331,000 and $276,000 for the six months ended June 30, 2004 and
2003, respectively. The obligations of the trusts are fully and unconditionally
guaranteed, on a subordinated basis, by the Company. The trust preferred
securities for Trust I are mandatorily redeemable upon the maturity of the
debentures on April 7, 2032, or to the extent of any earlier redemption of any
debentures by the Company, and are callable beginning April 7, 2007. The trust
preferred securities for Trust II are mandatorily redeemable upon the maturity
of the debentures on April 22, 2034, or to the extent of any earlier redemption
of any debentures by the Company, and are callable beginning April 22, 2009.
Holders of the capital securities have no voting rights, are unsecured, and
rank junior in priority of payment to all of the Companys indebtedness and
senior to the Companys capital stock. For regulatory purposes, the trust
preferred securities qualify as Tier I capital subject to certain provisions. On May 6, 2004, the Board of Governors of the Federal Reserve System issued a
Notice of Proposed Rulemaking in which it proposed to allow the continued
inclusion of trust preferred securities in the Tier 1 capital of bank holding
companies, subject to stricter standards. The Federal Reserve is proposing to
limit the aggregate amount of a bank holding companys cumulative perpetual
preferred stock, trust preferred securities and other minority interests to 25%
of a companys core capital elements, net of goodwill. Current regulations do
not require the deduction of goodwill. The proposal also provides that amounts
of qualifying trust preferred securities and certain minority interests in
excess of the 25% limit may be included in Tier 2 capital but would be limited,
together with subordinated debt and limited-life preferred stock, to 50% of
Tier 1 capital. The proposal provides a three-year transition period for bank
holding companies to meet these quantitative limitations. At this time, it is
not possible to predict the impact that this proposal would have on the
Company. 
  ITEM 2.
    Managements Discussion and Analysis of Financial Condition and Results of
Operations GENERAL The Company serves the financial needs of families and local businesses in
its primary market areas through its main banking office at 310 South Schuyler
Avenue, Kankakee, Illinois and nineteen branch offices. The Companys market
areas include central and southern Illinois, western Indiana and the
metropolitan St. Louis, Missouri markets. The Companys business involves
attracting deposits from the general public and using such deposits to
originate commercial business, commercial real estate, consumer, multi-family,
construction and 10




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residential mortgage loans in its market areas. The Company also invests in
investment securities and various types of short term liquid assets. On October 9, 2003, the Company merged with Aviston Financial Corporation.
At the time of the merger, Aviston Financial had approximately $98.0 million
in total assets and operated three locations in southwestern Illinois,
including its newest office in Fairview Heights, which is 10 miles from
downtown St. Louis. Subsequent to the merger, the remaining corporation
changed its name to Centrue Financial Corporation. On October 17, 2003, the
subsidiary banks were merged to form Centrue Bank, a state-chartered commercial
bank. On March 5, 2004, the Company acquired Parish Bank and Trust Company in
Momence, Illinois, which was merged into Centrue Bank. At the time of the
acquisition, Parish Bank had approximately $21.5 million in total assets. The
Company has approximately 168 full time equivalent employees. FINANCIAL CONDITION The Companys total assets were $613.9 million at June 30, 2004, an
increase of $4.7 million or 0.8%, from $609.2 million at December 31, 2003.
Fluctuations in asset accounts were represented by an increase in investment
securities of $24.7 million, net loans and loans held for sale of $10.4
million, goodwill of $1.0 million, nonmarketable equity securities of $808,000
and intangible assets of $667,000. These increases were partially offset by a
decrease in cash and cash equivalents of $33.4 million. Cash and cash equivalents decreased $33.4 million or 73.1% to $12.2
million from $45.6 million. Investment securities increased $24.7 million or
27.9% to $113.3 million from $88.6 million. The increase in investment
securities and decrease in cash and cash equivalents was primarily as a result
of the Company repositioning lower yielding liquid investments such as federal
funds sold to higher yielding investment securities. This repositioning has
had a positive impact on the Companys net interest margin. Net loans, including loans held for sale increased $10.4 million or 2.4%
to $436.2 million from $425.8 million. The increase in loans was primarily due
to the Company adding several experienced commercial loan officers in the
latter part of 2003 and first part of 2004. The addition of these officers and
the Companys concentration of efforts on growing the commercial loan portfolio
has contributed to our increase in loans. Goodwill increased $1.0 million or 8.9% to $12.4 million from $11.4
million. Intangible assets increased $667,000 or 54.3% to $1.9 million from
$1.2 million. The increase in goodwill and intangible assets was a result of
the acquisition of Parish Bank. Nonmarketable equity securities increased $808,000 or 24.5% to $4.1
million from $3.3 million. The increase in nonmarketable equity securities was
primarily due to the deconsolidation of the Companys trust preferred
securities which resulted in an increase of other assets of $620,000. Deposits increased $6.6 million or 1.4% to $501.0 million from $494.4
million. The net increase in deposits was primarily attributable to the
acquisition of Parish Bank and was partially offset by a reduction in
certificates of deposit as a result of our more disciplined pricing strategy on
deposits. The Company used a portion of the funds from the Parish Bank
deposits to repay higher rate borrowings and reduce high rate certificates of
deposit. Borrowings decreased $10.8 million or 19.9% to $43.6 million from
$54.4 million. The decrease in borrowings was due to borrowings (which had a
rate of 4%) that matured late in March, 2004. 11




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##### Table of Contents



Junior subordinated debt owed to unconsolidated trusts (trust preferred
securities) increased $10.0 million or 100.0% to $20.0 million from $10.0
million. In April, 2004, the Company issued $10.0 million in trust preferred
securities which have been used for repurchases of common stock and other
corporate purposes. Stockholders equity decreased $1.8 million or 4.0% to $43.8 million from
$45.6 million at December 31, 2003. Equity per share of common stock decreased
by $0.18 to $17.33 at June 30, 2004 from $17.51 at December 31, 2003. The
decrease in stockholders equity and equity per share was due to the Company
repurchasing 80,000 shares of common stock in the second quarter of 2004, at a
total cost of $2.2 million. ASSET QUALITY The Companys asset quality management program, particularly with regard
to loans, is designed to analyze potential risk elements and to support the
growth of a high quality loan portfolio. The existing loan portfolio is
monitored via the Companys loan rating system. The loan rating system is used
to assist in determining the adequacy of the allowance for loan losses. The
Companys loan analysis process allows us to proactively identify, monitor and
work with borrowers for whom there are indications of future repayment
difficulties. The Companys lending philosophy is to invest in the communities
served by its banking centers so that it can effectively monitor and control
credit risk. During the second quarter, total nonperforming loans increased $5.6
million due to an increase of non-accrual loans. The increase was primarily
due to two large commercial borrowers. The loans to one of these borrowers
totaling $2.9 million matured at year end 2003. During the first quarter of
2004, the Company had ongoing negotiations to resolve and extend the maturity
but was unable to achieve a satisfactory agreement. During the second quarter
of 2004, when negotiations indicated that full collection of principal and
interest was questionable, the Company decided to place the loans on nonaccrual
status until final resolution. The Company expects a resolution in the second
half of 2004 and does not anticipate a material loss. The second borrower has
a $2.0 million commercial loan that was previously on the Companys watch list,
although the borrower continued to make payments as agreed. This borrower
filed bankruptcy and ceased making loan payments during the second quarter of
2004. Management is in various stages of workout or liquidation with the
remaining nonperforming loans. June 30
    
    December 312004
    
    2003
    
    Change(dollars in thousands)Non-accruing loans
    
    $
    9,129
    
    
    $
    3,248
    
    
    $
    5,881Accruing loans delinquent 90
days or more
    
    
    2,000
    
    
    
    2,232
    
    
    
    (232
    )Total nonperforming loans
    
    
    11,129
    
    
    
    5,480
    
    
    
    5,649Foreclosed assets
    
    
    681
    
    
    
    319
    
    
    
    362Troubled debt restructuring
    
    
    46
    
    
    
    281
    
    
    
    (235
    )Total nonperforming assets
    
    $
    11,856
    
    
    $
    6,080
    
    
    $
    5,776Allowance for loan losses to total loans
    
    
    1.72
    %
    
    
    1.72
    %Allowance for loan losses to
nonperforming loans
    
    
    68.52
    %
    
    
    136.34
    %Nonperforming loans to total loans
    
    
    2.51
    %
    
    
    1.26
    %Nonperforming assets to total loans
and foreclosed property
    
    
    2.67
    %
    
    
    1.40
    %Nonperforming assets to total assets
    
    
    1.93
    %
    
    
    1.00
    %
 12




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One measure of the adequacy of the allowance for loan losses is the ratio
of the allowance for loan losses to total loans. The ratio of the allowance
for loan losses to total loans was 1.72% at both June 30, 2004 and December 31,
2003. The ratio of the allowance for loan losses to non-performing loans
decreased to 68.5% as of June 30, 2004 compared to 136.3% at December 31, 2003.
The decrease in this ratio, which excludes foreclosed assets and restructured
troubled debt, was the result of the increase of $5.6 million of nonperforming
loans. Total classified loans at June 30, 2004 decreased to $21.7 million
compared to $25.1 million at December 31, 2003. During 2003, the Company
adopted a new loan policy and implemented new loan approval, documentation and
monitoring processes. The Company also recruited and employed an experienced
commercial lending team including three new regional presidents, each of whom
is an experienced commercial lender, as well as three other seasoned commercial
lenders. These initiatives have had a positive impact on the monitoring of the
loan portfolio. The Company will continue to attempt to improve the loan
monitoring processes. The Company recognized charge offs in the amount of $508,000 and $707,000
during the second quarter and first six-months of 2004 and $3.1 million for the
second quarter and first six-months of 2003. The Company had recoveries of
$106,000 for the second quarter and first six-months of 2004 and no recoveries
for 2003. The provision for loan losses was $300,000 and $600,000 for the
second quarter and first six months of 2004, compared to $3.7 million for the
second quarter and first six months of 2003. The provision for loan losses
represents managements judgment of the cost associated with credit risk
inherent in the loan portfolio. Factors which influence managements
determination of the provision for loan losses include, among other things,
size and quality of the loan portfolio measured against prevailing economic
conditions, regulatory guidelines, a review of individual loans and historical
loan loss experience. The decreases in the provision for loan losses for the
quarter and six-month period ending June 30, 2004 compared to the same periods
of 2003 were primarily reflective of lower net charge-offs. In addition, the
Company acquired $156,000 of allowance for loan losses with the Parish
acquisition in the first quarter of 2004. The allowance for loan losses is maintained at a level believed adequate
by management to absorb probable losses in the loan portfolio. Managements
methodology to determine the adequacy of the allowance for loan losses
considers specific credit reviews, past loan loss experience, current economic
conditions and trends, and the volume, growth and composition of the loan
portfolio. Based upon the Companys quarterly analysis of the adequacy of the
allowance for loan losses, considering remaining collateral of loans with more
than a normal degree of risk, historical loan loss percentages and economic
conditions, it is managements belief that the allowance for loan losses at
June 30, 2004 was adequate. However, there can be no assurance that the
allowance for loan losses will be adequate to cover all losses. Each credit on the Companys internal loan watch list is evaluated
periodically to estimate potential losses. In addition, minimum loss estimates
for each category of watch list credits are provided for based on managements
judgment which considers past loan loss experience and other factors. For
installment and real estate mortgage loans, specific allocations are based on
past loss experience adjusted for recent portfolio growth and economic trends.
The total of the estimated loss exposure resulting from the analysis is
considered the allocated portion of the allowance for loan losses. The amounts
specifically provided for individual loans and pools of loans are supplemented
by an unallocated portion of the allowance for loan losses. This unallocated
amount is determined based on managements judgment which considers, among
other things, the risk of error in the specific allocations, other potential
exposure in the loan portfolio, economic conditions and trends, and other
factors. 13




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The allowance for loan losses is charged when management determines that
the prospects of recovery of the principal of a loan have significantly
diminished. Subsequent recoveries, if any, are credited to the allowance for
loan losses. All installment loans that are 90 to 120 days past due are
charged off monthly unless the loans are insured for credit loss or where
scheduled payments are being received. Real estate mortgage loans are written
down to fair value upon foreclosure. Commercial and other loan charge-offs are
made based on managements on-going evaluation of non-performing loans. CRITICAL ACCOUNTING POLICIES In the ordinary course of business, the Company has made a number of
estimates and assumptions relating to the reporting of results of operations
and financial condition in preparing its financial statements in conformity
with accounting principles generally accepted in the United States of America.
Actual results could differ significantly from those estimates under different
assumptions and conditions. The Company believes the following discussion,
including the allowance for loan losses, goodwill, and mortgage servicing
rights, addresses the Companys most critical accounting policies, which are
those that are most important to the portrayal of the Companys financial
condition and results and require managements most difficult, subjective and
complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. Allowance
for Loan Losses - The allowance for loan losses is a material
estimate that is particularly susceptible to significant changes in the near
term and is established through a provision for loan losses. The allowance is
based upon past loan experience and other factors which, in managements
judgment, deserve current recognition in estimating loan losses. The
evaluation includes a review of all loans on which full collectibility may not
be reasonably assured. Other factors considered by management include the size
and character of the loan portfolio, concentrations of loans to specific
borrowers or industries, existing economic conditions and historical losses on
each portfolio category. In connection with the determination of the allowance
for loan losses, management obtains independent appraisals for significant
properties, which collateralize loans. Management believes it uses the best
information available to make such determinations. If circumstances differ
substantially from the assumptions used in making determinations, future
adjustments to the allowance for loan losses may be necessary and results of
operations could be affected. While the Company believes it has established
its existing allowance for loan losses in conformity with accounting principles
generally accepted in the United States of America, there can be no assurance
that regulators, in reviewing the Banks loan portfolio, will not request an
increase in the allowance for loan losses. Because future events affecting
borrowers and collateral cannot be predicted with certainty, there can be no
assurance that increases to the allowance will not be necessary if loan quality
deteriorates. Goodwill  Costs in excess of the estimated fair value of identified net
assets acquired through purchase transactions are recorded as an asset by the
Company. The Company performs an annual impairment assessment as of September
30. No impairment of goodwill has been identified as a result of these tests.
In making these impairment assessments, management must make subjective
assumptions regarding the fair value of the Companys assets and liabilities.
It is possible that these judgments may change over time as market conditions
or Company strategies change, and these changes may cause the Company to record
impairment charges to adjust the goodwill to its estimated fair value. Mortgage Servicing Rights  The Company recognizes as a separate asset the
rights to service mortgage loans for others. The value of mortgage servicing
rights is amortized in 14




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##### Table of Contents



relation to the servicing revenue expected to be earned. Mortgage
servicing rights are periodically evaluated for impairment based upon the fair
value of those rights. Estimating the fair value of the mortgage servicing
rights involves judgment, particularly of estimated prepayments speeds of the
underlying mortgages serviced. Net income could be affected if managements
assumptions and estimates differ from actual prepayments. The above listing is not intended to be a comprehensive list of all the
Companys accounting policies. In many cases, the accounting treatment of a
particular transaction is specifically dictated by accounting principles
generally accepted in the United States of America, with no need for
managements judgment in their application. There are also areas in which
managements judgment in selecting any available alternative would not produce
a materially different result. RESULTS OF OPERATIONS
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 For the second quarter ended June 30, 2004, net income increased to $1.2
million from a net loss of $1.5 million for the same period in 2003. Net
income for the six-months ended June 30, 2004 increased to $2.0 million from a
net loss of $132,000 for the same period in 2003. Return on average assets for
the second quarter and first six months of 2004 was 0.77% and 0.67%. Return on
average equity for the second quarter and first six months of 2004 was 10.55%
and 8.96%, compared to (18.53)% and (0.76)% for 2003. The Companys results for the second quarter of 2004 reflected the impact
of a partial reversal of a valuation allowance for mortgage servicing rights of
$50,000. The reversal is consistent with internal policies and past practice.
The Company also recognized a gain of $127,000 from the sale of its credit card
portfolio during the second quarter of 2004. The Companys results for the quarter and six-months ended June 30, 2003,
included loan loss provisions in the amount of $3.7 million compared to
provisions of $300,000 and $600,000 for the three and six-month periods in
2004. The three months ended June 30, 2003 also included a charge of $281,000,
which reflected a decrease in the value of mortgage servicing rights and
$225,000 for severance and expenses associated with the termination of
employment of three senior executives. Net interest income for the three month and six month periods increased
$1.0 million and $1.6 million or 27.5% and 20.8% from 2003. Interest income
increased by $632,000 and $665,000 for the three month and six month periods.
The net interest margin for the second quarter increased to 3.40% compared to
3.09% for 2003. For the six-month periods, the net interest margin increased
to 3.36% compared to 3.18% for 2003. The increase in the net interest margin
was primarily a result of initiatives that were implemented throughout the
first quarter of 2004 and have continued through the second quarter of 2004.
Lower earning assets, such as federal funds sold, were replaced with higher
yielding loans and tax-advantaged investments. In addition, the Company
decreased rates on deposit accounts to be more in line with local competition
and repaid some high rate borrowings. With this decrease in interest rates
during the quarter, the Company lowered its cost of funds for deposits and
borrowings. 15




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##### Table of Contents



TABLE I
NET INTEREST INCOME ANALYSIS (UNAUDITED)
CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY Three Months Ended June 30,2004
    
    2003Average
    
    Interest
    
    
    
    
    
    Average
    
    InterestOutstanding
    
    Earned/
    
    Yield/
    
    Outstanding
    
    Earned/
    
    Yield/Balance
    
    Paid
    
    Rate
    
    Balance
    
    Paid
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable (1) (3)
    
    $
    438,137
    
    
    $
    6,154
    
    
    
    5.65
    %
    
    $
    354,284
    
    
    $
    5,621
    
    
    
    6.36
    %Investments securities (2) (3)
    
    
    113,591
    
    
    
    1,123
    
    
    
    3.98
    %
    
    
    71,645
    
    
    
    806
    
    
    
    4.51
    %Other interest-earning assets
    
    
    6,352
    
    
    
    18
    
    
    
    1.14
    %
    
    
    46,921
    
    
    
    137
    
    
    
    1.17
    %FHLB stock
    
    
    3,455
    
    
    
    52
    
    
    
    6.03
    %
    
    
    2,839
    
    
    
    77
    
    
    
    10.88
    %Total interest-earning assets
    
    
    561,535
    
    
    
    7,347
    
    
    
    5.26
    %
    
    
    475,689
    
    
    
    6,641
    
    
    
    5.60
    %Other assets
    
    
    52,869
    
    
    
    
    
    
    
    
    
    
    
    42,465Total assets
    
    $
    614,404
    
    
    
    
    
    
    
    
    
    
    $
    518,154Interest-bearing liabilities:Certificate accounts
    
    $
    262,945
    
    
    
    1,600
    
    
    
    2.45
    %
    
    $
    232,301
    
    
    
    1,772
    
    
    
    3.06
    %Savings deposits
    
    
    93,725
    
    
    
    136
    
    
    
    0.58
    %
    
    
    76,587
    
    
    
    244
    
    
    
    1.28
    %Demand and NOW deposits
    
    
    95,362
    
    
    
    182
    
    
    
    0.77
    %
    
    
    81,539
    
    
    
    305
    
    
    
    1.50
    %Borrowings
    
    
    59,332
    
    
    
    685
    
    
    
    4.64
    %
    
    
    58,850
    
    
    
    658
    
    
    
    4.48
    %Total interest-bearing liabilities
    
    
    511,364
    
    
    
    2,603
    
    
    
    2.05
    %
    
    
    449,277
    
    
    
    2,979
    
    
    
    2.66
    %Non-interest bearing demand deposits
    
    
    52,751
    
    
    
    
    
    
    
    
    
    
    
    32,319Other liabilities
    
    
    5,357
    
    
    
    
    
    
    
    
    
    
    
    4,021Total liabilities
    
    
    569,472
    
    
    
    
    
    
    
    
    
    
    
    485,617Stockholders equity
    
    
    44,932
    
    
    
    
    
    
    
    
    
    
    
    32,537Total liabilities and stockholders equity
    
    $
    614,404
    
    
    
    
    
    
    
    
    
    
    $
    518,154Net interest income
    
    
    
    
    
    $
    4,744
    
    
    
    
    
    
    
    
    
    
    $
    3,662Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.21
    %
    
    
    
    
    
    
    
    
    
    
    2.94
    %Net earning assets
    
    $
    50,171
    
    
    
    
    
    
    
    
    
    
    $
    26,412Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    3.09
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    109.81
    %
    
    
    
    
    
    
    
    
    
    
    105.88
    %
  (1)
    
    Calculated including loans held for sale, and net of deferred loan fees,
loan discounts,
loans in process and the allowance for losses on loans.(2)
    
    Calculated including investment securities available-for-sale and held to
maturity and certificates of deposit.(3)
    
    Presented on a fully tax-equivalent basis, assuming a tax rate of 34%. For the second quarter ended June 30, 2004, tax equivalent interest income
increased $707,000, to $7.3 million. The increase was primarily attributable
to an increase in average earning assets, partially offset by a decrease in
interest rates. Average earning assets increased $85.8 million to $561.5
million from $475.7 million in 2003. The average tax equivalent rate earned on
earning assets decreased 34 basis points to 5.26% from 5.60%. The
increase in the average balance of interest-earning assets was primarily due to
earning assets 16




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##### Table of Contents



acquired in the Aviston Financial and Parish Bank acquisitions.
The decrease in the yield earned on interest-earning assets was the result of
the gradual repricing of loans and investments to lower interest rates
throughout 2003 and the first two quarters of 2004. Interest expense in the second quarter decreased $376,000 to $2.6 million
from $3.0 million in 2003. The decrease was primarily attributable to a
decrease in the rate paid on average interest bearing liabilities, partially
offset by an increase in the average balance of interest bearing liabilities.
Average interest-bearing liabilities increased $62.1 million to $511.4 million
from $449.3 million. The rate paid on interest bearing liabilities decreased
61 basis points to 2.05% from 2.66% in 2003. The increase in average
interest-bearing liabilities was primarily attributable to interest-bearing
liabilities assumed in the Aviston Financial and Parish Bank acquisitions. The
decrease in the average yield on interest-bearing liabilities resulted from
decreasing market interest rates and continuing improvement in the deposit mix,
with a significant growth of noninterest deposits and a lower percentage of our
deposits consisting of certificate of deposit accounts. 17




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TABLE II
NET INTEREST INCOME ANALYSIS (UNAUDITED)
CENTRUE FINANCIAL CORPORATION AND SUBSIDIARY Six Months Ended June 30,2004
    
    2003Average
    
    Interest
    
    
    
    
    
    Average
    
    InterestOutstanding
    
    Earned/
    
    Yield/
    
    Outstanding
    
    Earned/
    
    Yield/Balance
    
    Paid
    
    Rate
    
    Balance
    
    Paid
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable (1) (3)
    
    $
    434,175
    
    
    $
    12,466
    
    
    
    5.77
    %
    
    $
    363,360
    
    
    $
    11,832
    
    
    
    6.57
    %Investments securities (2) (3)
    
    
    104,022
    
    
    
    2,099
    
    
    
    4.06
    %
    
    
    76,164
    
    
    
    1,781
    
    
    
    4.72
    %Other interest-earning assets
    
    
    20,073
    
    
    
    94
    
    
    
    0.94
    %
    
    
    43,347
    
    
    
    240
    
    
    
    1.12
    %FHLB stock
    
    
    3,389
    
    
    
    108
    
    
    
    6.43
    %
    
    
    2,813
    
    
    
    121
    
    
    
    8.67
    %Total interest-earning assets
    
    
    561,659
    
    
    
    14,767
    
    
    
    5.29
    %
    
    
    485,684
    
    
    
    13,974
    
    
    
    5.80
    %Other assets
    
    
    50,953
    
    
    
    
    
    
    
    
    
    
    
    42,114Total assets
    
    $
    612,612
    
    
    
    
    
    
    
    
    
    
    $
    527,798Interest-bearing liabilities:Certificate accounts
    
    $
    267,492
    
    
    
    3,358
    
    
    
    2.52
    %
    
    $
    239,745
    
    
    
    3,846
    
    
    
    3.23
    %Savings deposits
    
    
    90,795
    
    
    
    284
    
    
    
    0.63
    %
    
    
    75,127
    
    
    
    474
    
    
    
    1.27
    %Demand and NOW deposits
    
    
    91,287
    
    
    
    375
    
    
    
    0.83
    %
    
    
    77,797
    
    
    
    615
    
    
    
    1.59
    %Borrowings
    
    
    60,960
    
    
    
    1,379
    
    
    
    4.55
    %
    
    
    62,886
    
    
    
    1,386
    
    
    
    4.44
    %Total interest-bearing liabilities
    
    
    510,534
    
    
    
    5,396
    
    
    
    2.13
    %
    
    
    455,555
    
    
    
    6,321
    
    
    
    2.80
    %Non-interest bearing demand deposits
    
    
    51,560
    
    
    
    
    
    
    
    
    
    
    
    32,933Other liabilities
    
    
    5,008
    
    
    
    
    
    
    
    
    
    
    
    4,060Total liabilities
    
    
    567,102
    
    
    
    
    
    
    
    
    
    
    
    492,548Stockholders equity
    
    
    45,510
    
    
    
    
    
    
    
    
    
    
    
    35,250Total liabilities and stockholders equity
    
    $
    612,612
    
    
    
    
    
    
    
    
    
    
    $
    527,798Net interest income
    
    
    
    
    
    $
    9,371
    
    
    
    
    
    
    
    
    
    
    $
    7,653Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %Net earning assets
    
    $
    51,125
    
    
    
    
    
    
    
    
    
    
    $
    30,129Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    110.01
    %
    
    
    
    
    
    
    
    
    
    
    106.61
    %
  (1)
    
    Calculated including loans held for sale, and net of deferred loan fees,
loan discounts,
loans in process and the allowance for losses on loans.(2)
    
    Calculated including investment securities available-for-sale and held to
maturity and certificates of deposit.(3)
    
    Presented on a fully tax-equivalent basis, assuming a tax rate of 34%. For the six-months ended June 30, 2004, tax equivalent interest income
increased $797,000, to $14.8 million. The increase was primarily attributable
to an increase in average earning assets, partially offset by a decrease in
interest rates. Average earning assets increased $76.0 million to $561.7
million from $485.7 million in 2003. The average tax equivalent rate earned on
earning assets decreased 51 basis points to 5.29% from 5.80%. The 18




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increase in the average balance of interest-earning assets was primarily due to
earning assets acquired in the Aviston Financial and Parish Bank acquisitions.
The decrease in the yield earned on interest-earning assets was the result of
the gradual repricing of loans and investments to lower interest rates
throughout 2003 and the first six-months of 2004. Interest expense during the first half of the year decreased $925,000 to
$5.4 million from $6.3 million in 2003. The decrease was primarily
attributable to a decrease in the rate paid on average interest bearing
liabilities, partially offset by an increase in the average balance of interest
bearing liabilities. Average interest-bearing liabilities increased $54.9
million to $510.5 million from $455.6 million. The rate paid on interest
bearing liabilities decreased 67 basis points to 2.13% from 2.80% in 2003. The
increase in average interest-bearing liabilities was primarily attributable to
interest-bearing liabilities assumed in the Aviston Financial and Parish Bank
acquisitions. The decrease in the average yield on interest-bearing
liabilities resulted from decreasing market interest rates and continuing
improvement in the deposit mix, with a significant growth of noninterest
deposits and a lower percentage of our deposits consisting of certificate of
deposit accounts. The provision for loan losses was $300,000 and $600,000 for the second
quarter and first six months of 2004, compared to $3.7 million for the second
quarter and first six months of 2003. The decrease in the provision for loan
losses was primarily due to a decrease in net charge-offs . Several
initiatives to more effectively monitor the risk involved in the loan portfolio
were put in place during the latter part of 2003 and have continued in 2004.
The amount of the provision for losses on loans is determined through regular
review of the various elements of the loan portfolio, and by a review of
overall adequacy, based on circumstances and factors known at the time of the
review. Noninterest income was $1.5 million and $2.8 million for the quarter and
six-months ended June 30, 2004, compared to $1.1 million and $2.9 million for
the same periods in 2003. The increase in noninterest income for the quarter
was primarily due to an increase in fee income of $598,000, partially offset by
a decrease in net gain on sale of loans of $163,000. The decrease in
noninterest income for the six-months ended June 30, 2004 was primarily
attributable to the gain on the sale of the Hoopeston branch of $478,000 in
2003 and a decrease in gain on sale of loans of $439,000. The decreases for
the six-month period were partially offset by an increase in fee income of
$857,000, which included a $50,000 reduction in the valuation allowance for
mortgage servicing rights. The decrease in gain on sale of loans for both
periods was primarily due to a high volume of refinancings that occurred during
the second quarter and first six-months of 2003. Due to the rate structure
moving higher in early 2004 and the large amount of loans that refinanced
during 2002 and 2003, the amount of refinancings greatly decreased and the
majority of the gain on loans sold in the first quarter of 2004 was primarily
attributable to new loans. Additionally, during the second quarter of 2004,
the Company sold its credit card portfolio and recorded a gain in the amount of
$127,000. The decision to sell the credit card portfolio was made due to the
cost related to processing the credit card transactions, loan loss exposure to
these unsecured loans and the marginal profitability of carrying and servicing
the portfolio. The Company will continue to offer credit card services through
an affiliation with a third party. This new arrangement will allow the Company
to continue to offer credit card services without the risk and cost associated
with the credit card loans while sharing in future revenue. The increase in fee
income for both periods was partially due to an increase in fees assessed on
customer accounts and transactions to better reflect the competitive
environment. Noninterest expenses were $4.1 million and $8.5 million for the quarter
and six-months ended June 30, 2004, compared to $3.6 million and $7.3 million
for the same periods in 2003. Compensation and benefits increased $239,000 and
$594,000, furniture and equipment expenses increased $146,000 and $305,000, and
other expenses increased $135,000 and $201,000 for the second quarter and the
six-months ended June 30, 2004, respectively. 19




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Compensation and benefits, furniture and equipment and other expenses increased
primarily due to the addition of personnel and branches that were added due to
the merger with Aviston Financial in the fourth quarter of 2003, Parish Bank in
March 2004 and the opening of three new offices within the last three quarters. Income tax expense increased $1.5 million and $1.3 million for the second
quarter and six-months ended June 30, 2004 from the same periods in 2003. The
increase in income tax expense was due to an increase in income before income
taxes from 2003 to 2004. LIQUIDITY AND CAPITAL RESOURCES The Company maintains a certain level of cash and other liquid assets to
fund normal volumes of loan commitments, deposit withdrawals and other
obligations. The following table summarizes significant contractual
obligations and other commitments at June 30, 2004 (in thousands): Junior (1)SubordinatedDebt Owed toTime
    
    
    
    
    
    UnconsolidatedYears Ended December 31,
    
    Deposits
    
    Borrowings (1)
    
    Trusts
    
    Total2004
    
    $
    83,172
    
    
    $
    19,142
    
    
    
    
    
    
    $
    102,3142005
    
    
    139,563
    
    
    
    14,723
    
    
    
    
    
    
    
    154,2862006
    
    
    11,872
    
    
    
    8,342
    
    
    
    
    
    
    
    20,2142007
    
    
    9,779
    
    
    
    450
    
    
    $
    10,000
    
    
    
    20,2292008 and thereafter
    
    
    11,687
    
    
    
    905
    
    
    
    10,000
    
    
    
    22,592Total
    
    $
    256,073
    
    
    $
    43,562
    
    
    $
    20,000
    
    
    $
    319,635Financial instruments whose
contract amounts represent credit
risk:Commitment to originate loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,478Commitments to extend credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,624Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,210Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    64,312
   (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 fixed rate callable advances of $5.0 million maturing
in 2008 and $4.0 million maturing in 2011. Junior subordinated debt owed
to unconsolidated trusts matures in 2032 and 2034 but is callable in 2007
and 2009. The Companys most liquid assets are cash, cash in banks and highly
liquid, short-term investments. The levels of these assets are dependent on the
Companys operating, financing, lending and investing activities during any
given period. At June 30, 2004 and December 31, 2003, these liquid assets
totaled $12.2 million and $45.6 million. Securities available-for-sale may also
be utilized to meet liquidity needs. The level of liquid assets at December 31,
2003 was higher than usual due to a number of factors, including sales of loans
and higher than expected prepayments on loans and investment securities. Liquidity management for the Company is both a daily and long-term
function of the Companys management strategy. Excess funds are generally
invested in short-term investments such as federal funds. In the event that the
Company should require funds beyond its ability to generate them internally,
additional sources of funds are available, including FHLB advances. At June 30,
2004, the Company had outstanding borrowings totaling $43.6 million, of which
$31.6 were advances from the FHLB, $9.2 were funds from securities sold under
agreement to repurchase, and $2.8 million were funds from notes payable. 20




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At June 30, 2004, the Company had outstanding commitments to originate
mortgage loans of $17.5 million, of which 91% were at fixed interest rates.
These commitments provided that the loans would be secured by properties
located, for the most part, in the Companys primary market areas. The Company
anticipates that it will have sufficient funds available to meet its current
loan commitments. Certificates of deposit that were scheduled to mature by
December 31, 2004, totaled $83.2 million. Based upon the historically stable
nature of the Companys deposit base, management believes that a significant
portion of such deposits will remain with the Company. The Company had unused
lines of credit provided to customers of $44.6 million at June 30, 2004. The
Company also had a signed contract to construct a facility in Fairview Heights,
Illinois for a total cost of approximately $4.3 million. The Company and the Bank are subject to various regulatory capital
requirements administered by the federal and state banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory  and
possibly additional discretionary  actions by regulators that, if undertaken,
could have a direct material effect on the Company and the Banks financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company and the Banks capital amounts and classifications are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of Tier 1 capital (as defined by the regulations) to
average assets (as defined) and Total and Tier I capital (as defined) to
risk-weighted assets (as defined). Management believes, as of June 30, 2004,
that the Company and the Bank meet all capital adequacy requirements to which
it is subject. As of June 30, 2004, the most recent notification from the Banks primary
regulators, categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the Banks
category. 21




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To be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)As of June 30, 2004Tier 1 Capital to Average AssetsCentrue Financial
    
    $
    44,573
    
    
    
    7.42
    %
    
    $
    24,030
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    44,484
    
    
    
    7.47
    %
    
    
    23,822
    
    
    
    4.00
    %
    
    $
    29,777
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    44,573
    
    
    
    11.10
    %
    
    
    16,058
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    44,484
    
    
    
    11.32
    %
    
    
    15,724
    
    
    
    4.00
    %
    
    
    23,585
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    54,917
    
    
    
    13.68
    %
    
    
    32,115
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    49,431
    
    
    
    12.58
    %
    
    
    31,447
    
    
    
    8.00
    %
    
    
    39,309
    
    
    
    10.00
    %As of December 31, 2003Tier 1 Capital to Average AssetsCentrue Financial
    
    $
    41,893
    
    
    
    7.26
    %
    
    $
    23,090
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    43,944
    
    
    
    7.63
    %
    
    
    23,038
    
    
    
    4.00
    %
    
    $
    28,797
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    41,893
    
    
    
    9.90
    %
    
    
    16,925
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    43,944
    
    
    
    10.46
    %
    
    
    16,802
    
    
    
    4.00
    %
    
    
    25,203
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    47,173
    
    
    
    11.14
    %
    
    
    33,850
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    49,201
    
    
    
    11.71
    %
    
    
    33,604
    
    
    
    8.00
    %
    
    
    42,006
    
    
    
    10.00
    %
 SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS This document contains, and future oral and written statements of the
Company and its management may contain, forward-looking statements, within the
meaning of such term in 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. 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 its subsidiaries include, but are not limited to, the following:  
    
    The strength of the United States economy in general and the
strength of the local economies in which the Company conducts its
operations which may be less favorable than expected and may result
in, among other things, a deterioration in the credit quality and
value of the Companys assets.  
    
    The economic impact of past and any future terrorist threats
and attacks, acts of war or threats thereof, and the response of the
United States to any such threats and attacks.  
    
    The effects of, and changes in, federal, state and local
laws, regulations and policies affecting banking, securities,
insurance and monetary and financial matters. 22




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
    
    The effects of changes in interest rates (including the
effects of changes in the rate of prepayments of the Companys
assets) and the policies of the Board of Governors of the Federal
Reserve System.  
    
    The ability of the Company to compete with other financial
institutions as effectively as the Company currently intends due to
increases in competitive pressures in the financial services sector.  
    
    The inability of the Company to obtain new customers and to
retain existing customers.  
    
    The timely development and acceptance of products and
services, including products and services offered through
alternative delivery channels such as the Internet.  
    
    Technological changes implemented by the Company and by other
parties, including third party vendors, which may be more difficult
or more expensive than anticipated or which may have unforeseen
consequences to the Company and its customers.  
    
    The ability of the Company to develop and maintain secure and
reliable electronic systems.  
    
    The ability of the Company to retain key executives and
employees and the difficulty that the Company may experience in
replacing key executives and employees in an effective manner.  
    
    Consumer spending and saving habits which may change in a
manner that affects the Companys business adversely.  
    
    Business combinations and the integration of acquired
businesses which may be more difficult or expensive than expected.  
    
    The costs, effects and outcomes of existing or future
litigation.  
    
    Changes in accounting policies and practices, as may be
adopted by state and federal regulatory agencies and the Financial
Accounting Standards Board.  The ability of the Company to manage the risks associated with the foregoing
as well as anticipated. 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 other factors that could materially affect the
Companys financial results, is included in the Companys filings with the
Securities and Exchange Commission. 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ASSET/LIABILITY MANAGEMENT In an attempt to manage its exposure to changes in interest rates,
management closely monitors the Companys interest rate risk. The Bank has a
funds management committee, which meets monthly and reviews the Banks interest
rate risk position and evaluates its current asset/liability pricing and
strategies. This committee adjusts pricing and strategies as needed and makes
recommendations to the Banks board of directors regarding significant changes
in strategy. In addition, on a quarterly basis the board reviews the Banks
asset/liability position, including simulations of the effect on the Banks
capital of various interest rate scenarios. In managing its asset/liability mix, the Company, at times, depending on
the relationship between long-term and short-term interest rates, market
conditions and consumer preferences, may place somewhat greater emphasis on
maximizing its net interest margin than on better matching the interest rate
sensitivity of its assets and liabilities in an effort to improve its net
income. While the Company does have some exposure to changing interest rates,
management believes that the Company is positioned to protect earnings
throughout changing interest rate environments. 23




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The Company currently does not enter into derivative financial
instruments, including futures, forwards, interest rate risk swaps, option
contracts, or other financial instruments with similar characteristics.
However, the Company is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers such as commitments to extend credit and letters of credit.
Commitments to extend credit and letters of credit are not recorded as an asset
by the Company until the commitment is accepted and funded or the letter of
credit is exercised. The Companys net income and economic value of equity (EVE), in the
normal course of business, are exposed to interest rate risk, and can vary
based on changes in the general level of interest rates. All financial
products carry some amount of interest rate risk, and substantial portions of
both the Companys assets and liabilities are financial products. These
include investment securities, loans, deposits and borrowed money. Off-balance
sheet items, such as loan commitments, letters of credit, commitments to buy or
sell loans or securities, and derivative financial instruments, also carry some
amount of interest rate risk. The Funds Management Committee generally uses three types of analysis in
measuring and reviewing the Companys interest rate sensitivity. These are
Static GAP analysis, Dynamic Gap Analysis and Economic Value of Equity. The
Static GAP analysis measures assets and liabilities as they reprice in various
time periods and is discussed under the heading of Asset/Liability Management
on page 17 of the 2003 Annual Report to Shareholders. The economic value of equity calculation uses information about the
Companys assets, liabilities and off-balance sheet items, market interest rate
levels and assumptions about the behavior of the assets and liabilities, to
calculate the Companys equity value. The economic value of equity is the
market value of assets minus the market value of liabilities, adjusted for
off-balance sheet items divided by the market value of assets. The economic
value of equity is then subjected to immediate and permanent upward changes of
300 basis points in market interest rate levels, in 100 basis point increments,
and a downward change of 100 basis points. The resulting changes in equity
value and net interest income at each increment are measured against
pre-determined, minimum EVE ratios for each incremental rate change, as
approved by the board in the interest rate risk policy. The following table presents the Banks EVE ratios for the various rate
change levels at June 30, 2004 and December 31, 2003: EVE RatiosJune 30,
    
    December 31,Changes in Interest Rates
    
    2004
    
    2003300 basis point rise
    
    
    7.35
    %
    
    
    7.87
    %200 basis point rise
    
    
    7.59
    %
    
    
    7.94
    %100 basis point rise
    
    
    7.76
    %
    
    
    8.13
    %Base rate scenario
    
    
    7.40
    %
    
    
    7.45
    %100 basis point decline
    
    
    5.86
    %
    
    
    6.08
    %
 The preceding table indicates that in the event of an immediate and
permanent increase in prevailing market interest rates, the Banks EVE ratio,
would be expected to increase in all scenarios other than a 300 basis point
rise. In the event of an immediate and permanent decrease in prevailing market
interest rates, the Banks EVE ratio would be expected to decrease. 24




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The EVE increases in a rising rate scenario because the Company is asset
sensitive and would have more interest earning assets repricing than
interest-bearing liabilities. This effect is increased by periodic and
lifetime limits on changes in rate on most adjustable-rate, interest-earning
assets. The EVE decreases in the 300 basis point rise scenario due to the
extension of the duration on the various loan products which increase the price
volatility. The EVE decreases in a falling rate scenario because of the limits
on the Companys ability to decrease rates on some of its deposit sources, such
as money market accounts and NOW accounts, and by the ability of borrowers to
repay loans ahead of schedule and refinance at lower rates. The EVE ratio is calculated by the Companys fixed income investment
advisor, and reviewed by management, on a quarterly basis utilizing information
about the Companys assets, liabilities and off-balance sheet items, which is
provided by the Company. The calculation is designed to estimate the effects
of hypothetical rate changes on the EVE, utilizing projected cash flows, and is
based on numerous assumptions, including relative levels of market interest
rates, loan prepayment speeds and deposit decay rates. Actual changes in the
EVE, in the event of market interest rate changes of the type and magnitude
used in the calculation, could differ significantly. Additionally, the
calculation does not account for possible actions taken by Funds Management to
mitigate the adverse effects of changes in market interest rates. 
 ITEM 4. Controls and Procedures An evaluation was performed under the supervision and with the
participation of the Companys management, including the Chief Executive
Officer, Chief Financial Officer and Corporate Controller, of the effectiveness
of the design and operation of the Companys disclosure controls and procedures
(as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act
of 1934, as amended) as of June 30, 2004. Based on that evaluation, the
Companys management, including the Chief Executive Officer, Chief Financial
Officer and Corporate Controller, concluded that the Companys disclosure
controls and procedures were effective. There have been no significant changes
in the Companys internal controls or in other factors that could significantly
affect internal controls. 25




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##### Table of Contents



CENTRUE FINANCIAL CORPORATION 
 PART II - OTHER INFORMATION 
  Item 1.
    Legal ProceedingsThere are no material pending legal proceedings to which the Company or the Bank is a party other than ordinary routine
litigation incidental to their respective businesses. 
  Item 2.
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity SecuritiesThe following table sets forth information about our stock repurchases for the three months ended June 30, 2004: Total Number
    
    Maximumof Shares
    
    Number ofPurchased as
    
    Shares that MayPart of Publicly
    
    Yet BeTotal Number of
    
    
    
    
    
    Announced
    
    Purchased UnderShares
    
    Average Price
    
    Plans or
    
    the Plans orPeriod
    
    Purchased
    
    Paid per Share
    
    Programs
    
    ProgramsApril 1 - April 30, 2004
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    513,104May 1 - May 31, 2004
    
    
    80,000
    
    
    
    27.86
    
    
    
    80,000
    
    
    
    433,104June 1 - June 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433,104Total
    
    
    80,000
    
    
    $
    27.86
    
    
    
    80,000
    
    
    
    433,104
 (1) The Company originally announced its current stock repurchase
program on October 9, 2003, and on April 28, 2004, announced that the
Company intended to begin initiating the repurchase of shares under the
program. Under the program, the board authorized the purchase of up to
20% of the shares outstanding, or [513,104], and is set to expire in
October, 2004. The Company purchased all of the shares listed above on
the open market and under the repurchase program. 
  Item 3.
    Defaults Upon Senior SecuritiesNone 
  Item 4.
    Submission of Matters to a Vote of Security HoldersThe annual meeting of stockholders of the Company was held on April 23,
2004. At the meeting, stockholders voted to approve the election of
Michael A. Griffith to serve as a director of the Company until 2007.
Michael J. Hejna will continue to serve as a director until 2005 and
Thomas A. Daiber, Mark L. Smith and Wesley E. Walker will continue to
serve as directors until 2006. An amendment to increase the number of
shares in the Companys 2003 Stock Incentive Plan was approved.
Stockholders also voted to approve the appointment of McGladrey & Pullen
LLP as the Companys auditors for the year ending December 31, 2004.The matters approved by stockholders at the meeting and the number of
votes cast for, against or withheld (as well as the number of
abstentions) as to each matter are set forth below:  1.
    
    For the election of one (1) director of the Company to serve
until 2007: 26




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##### Table of Contents



NOMINEE: Michael A. Griffith FOR
    
    WITHHELD2,105,906
    
    
    
    246,137
  2.
    
    To approve an amendment to Centrue Financial Corporations
2003 Stock Incentive Plan. FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES1,302,230
    
    
    
    231,925
    
    
    
    118,288
    
    
    
    699,600
  3.
    
    To approve the appointment of McGladrey & Pullen LLP as the
Companys auditors for the year ending December 31, 2004. FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES2,224,858
    
    
    
    26,240
    
    
    
    100,945
    
    
    
    0
 
  Item 5.
    Other InformationNone 
  Item 6.
    Exhibits and Reports on Form 8-K  a.
    
    Exhibits 10.1
    
    
    Indenture between Centrue Financial Corporation and
U.S. Bank National Association, dated April 22, 2004.31.1
    
    
    Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a)31.3
    
    
    Certification of Corporate Controller Pursuant to Rule
13a-14(a)/15d-14(a)32.1
    
    
    Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.3
    
    
    Certification of Corporate Controller Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 27




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##### Table of Contents



b.
    
    Reports on Form 8-KOn April 28, 2004, the Company filed a report on Form 8-K pursuant to
Item 12 disclosing its financial results for the quarter ended March
31, 2004.On July 23, 2004, the Company filed a report on Form 8-K pursuant to
Item 12 disclosing its financial results for the quarter ended June
30, 2004. 28




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##### Table of Contents



CENTRUE FINANCIAL CORPORATION 
 SIGNATURES In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. CENTRUE FINANCIAL CORPORATIONRegistrantDate: August 12, 2004
    
    /s/ THOMAS A. DAIBERPresident and Chief Executive OfficerDate: August 12, 2004
    
    /s/ JAMES M. LINDSTROMChief Financial Officer andSenior Vice PresidentDate: August 12, 2004
    
    /s/ JOHN A. BETTSVice President andCorporate Controller
 29