##### 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 1934For the
Quarterly Period Ended June 30, 2005.
 or
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934For the Transition Period From __________ to __________.
 Commission
File Number 1-13676
 CENTRUE FINANCIAL CORPORATION
  Delaware
    
    36-3846489(State or Other Jurisdiction of Incorporation
    
    (I.R.S. Employer Identification Number)or Organization)
 310 South Schuyler Avenue, Kankakee, Illinois
    
    60901(Address of Principal Executive Offices)
    
    (Zip Code)
 (815) 937-4440
 
   þ o
 o þ




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##### Table of Contents



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
    
    
    7-12Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12-25Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    25-27Item 4.Controls and Procedures
    
    
    27Part II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    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
    
    
    30CertificationCertificationCertificationCertificationCertificationCertification
 2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Consolidated Financial Statements (Unaudited)
 
   June 30,
    
    December 31,2005
    
    2004(dollars in thousands)AssetsCash and due from banks
    
    $
    16,628
    
    
    $
    10,760Interest bearing due from banks and other
    
    
    6,299
    
    
    
    2,526Federal funds sold
    
    
    2,667
    
    
    
    Cash and cash equivalents
    
    
    25,594
    
    
    
    13,286Certificates of Deposit
    
    
    50
    
    
    
    149Investment Securities available-for-sale, at fair value
    
    
    124,052
    
    
    
    124,763Loans, net of allowance for loan losses of $5,740 and $5,475
    
    
    425,099
    
    
    
    418,963Loans held for sale
    
    
    5,754
    
    
    
    416Premises and equipment
    
    
    21,750
    
    
    
    18,267Goodwill
    
    
    13,480
    
    
    
    12,446Life insurance contracts
    
    
    9,288
    
    
    
    9,110Non-marketable equity securities
    
    
    4,970
    
    
    
    4,211Accrued interest receivable
    
    
    2,876
    
    
    
    2,570Intangible assets
    
    
    2,065
    
    
    
    1,774Real estate held for sale
    
    
    1,734
    
    
    
    3,002Other assets
    
    
    2,890
    
    
    
    2,896Total Assets
    
    $
    639,602
    
    
    $
    611,853LiabilitiesDeposits:Noninterest bearing
    
    $
    62,614
    
    
    $
    53,919Interest bearing
    
    
    451,308
    
    
    
    441,858Total Deposits
    
    
    513,922
    
    
    
    495,777Short-term borrowings
    
    
    12,578
    
    
    
    14,188Long-term borrowings
    
    
    63,136
    
    
    
    55,473Other liabilities
    
    
    5,336
    
    
    
    3,239Total Liabilities
    
    
    594,972
    
    
    
    568,677Stockholders 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
    
    
    29,722
    
    
    
    28,998Retained income, partially restricted
    
    
    46,014
    
    
    
    43,925Accumulated other comprehensive income (loss)
    
    
    (427
    )
    
    
    27Unearned restricted stock (19,300 and 26,400 shares)
    
    
    (406
    )
    
    
    (512
    )Treasury stock, (1,833,361 and 1,819,634 shares), at cost
    
    
    (30,315
    )
    
    
    (29,304
    )Total Stockholders Equity
    
    
    44,630
    
    
    
    43,176Total Liabilities and Stockholders Equity
    
    $
    639,602
    
    
    $
    611,853
  3




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Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(dollars in thousands, except per share data)Interest and dividend income:Loans
    
    $
    6,687
    
    
    $
    6,144
    
    
    $
    12,872
    
    
    $
    12,438Investments
    
    
    1,229
    
    
    
    1,059
    
    
    
    2,396
    
    
    
    1,999Deposits with banks and other
    
    
    15
    
    
    
    18
    
    
    
    23
    
    
    
    94FHLB stock dividends
    
    
    56
    
    
    
    52
    
    
    
    105
    
    
    
    108Total interest and dividend income
    
    
    7,987
    
    
    
    7,273
    
    
    
    15,396
    
    
    
    14,639Interest expense:Deposits
    
    
    2,155
    
    
    
    1,918
    
    
    
    4,100
    
    
    
    4,017Long-term borrowings
    
    
    866
    
    
    
    467
    
    
    
    1,589
    
    
    
    1,048Short-term borrowings
    
    
    69
    
    
    
    218
    
    
    
    125
    
    
    
    331Total interest expense
    
    
    3,090
    
    
    
    2,603
    
    
    
    5,814
    
    
    
    5,396Net interest income
    
    
    4,897
    
    
    
    4,670
    
    
    
    9,582
    
    
    
    9,243Provision for loan losses
    
    
    251
    
    
    
    300
    
    
    
    501
    
    
    
    600Net interest income after provision
for loan losses
    
    
    4,646
    
    
    
    4,370
    
    
    
    9,081
    
    
    
    8,643Noninterest income:Fee income
    
    
    1,330
    
    
    
    990
    
    
    
    2,429
    
    
    
    1,881Net gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    89Net gain (loss) on sale of real estate
held for sale
    
    
    (8
    )
    
    
    46
    
    
    
    (6
    )
    
    
    39Net gain on sale of loans
    
    
    158
    
    
    
    317
    
    
    
    289
    
    
    
    423Increase in cash surrender value of life
Insurance contracts
    
    
    87
    
    
    
    99
    
    
    
    178
    
    
    
    199Other
    
    
    140
    
    
    
    51
    
    
    
    198
    
    
    
    121Total noninterest income
    
    
    1,707
    
    
    
    1,503
    
    
    
    3,271
    
    
    
    2,752Noninterest expense:Compensation and benefits
    
    
    2,503
    
    
    
    2,134
    
    
    
    4,790
    
    
    
    4,397Occupancy, net
    
    
    391
    
    
    
    325
    
    
    
    778
    
    
    
    720Furniture and equipment
    
    
    803
    
    
    
    354
    
    
    
    1,133
    
    
    
    689Advertising
    
    
    80
    
    
    
    57
    
    
    
    160
    
    
    
    121Data processing
    
    
    160
    
    
    
    137
    
    
    
    318
    
    
    
    300Telephone and postage
    
    
    153
    
    
    
    152
    
    
    
    324
    
    
    
    281Amortization of intangibles
    
    
    72
    
    
    
    61
    
    
    
    133
    
    
    
    107Legal and professional fees
    
    
    319
    
    
    
    166
    
    
    
    461
    
    
    
    402Other
    
    
    791
    
    
    
    761
    
    
    
    1,450
    
    
    
    1,439Total noninterest expense
    
    
    5,272
    
    
    
    4,147
    
    
    
    9,547
    
    
    
    8,456Income before income taxes
    
    
    1,081
    
    
    
    1,726
    
    
    
    2,805
    
    
    
    2,939Income tax expense
    
    
    228
    
    
    
    544
    
    
    
    716
    
    
    
    911Net income
    
    $
    853
    
    
    $
    1,182
    
    
    $
    2,089
    
    
    $
    2,028Other comprehensive income (loss):Change in unrealized gains or losses on
available for sale securities, net
of related income taxes
    
    
    577
    
    
    
    (1,843
    )
    
    
    (323
    )
    
    
    (1,530
    )Less: reclassification adjustment for gains
included in net income net of related
income taxes
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    59Other comprehensive income (loss)
    
    
    577
    
    
    
    (1,843
    )
    
    
    (454
    )
    
    
    (1,589
    )Comprehensive income (loss)
    
    $
    1,430
    
    
    $
    (661
    )
    
    $
    1,635
    
    
    $
    439Basic earnings per share
    
    $
    0.36
    
    
    $
    0.47
    
    
    $
    0.88
    
    
    $
    0.79Diluted earnings per share
    
    $
    0.36
    
    
    $
    0.46
    
    
    $
    0.88
    
    
    $
    0.79Dividends per share
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    0.075
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Six Months EndedJune 302005
    
    2004(dollars in thousands)Operating activitiesNet income
    
    $
    2,089
    
    
    $
    2,028Adjustments to reconcile net income to net cash provided
by operating activities:Provision for loan losses
    
    
    501
    
    
    
    600Depreciation and amortization
    
    
    1,145
    
    
    
    850Net amortization on investments
    
    
    111
    
    
    
    (171
    )Amortization of intangibles
    
    
    133
    
    
    
    107Deferred income taxes
    
    
    1,977
    
    
    
    818Origination of loans held for sale
    
    
    (14,017
    )
    
    
    (14,923
    )Proceeds from sales of loans held for sale
    
    
    14,015
    
    
    
    14,622Gain on sale of loans
    
    
    (289
    )
    
    
    (423
    )Gain on sale of securities
    
    
    (183
    )
    
    
    (89
    )(Gain) loss on sale of real estate held for sale
    
    
    6
    
    
    
    (39
    )Compensation expense for restricted stock
    
    
    103
    
    
    
    147Increase in cash surrender value of life insurance
contracts
    
    
    (178
    )
    
    
    (199
    )Federal Home Loan Bank stock dividends
    
    
    (120
    )
    
    
    (108
    )Changes in:Accrued interest receivable
    
    
    (197
    )
    
    
    (54
    )Other assets and other liabilities, net
    
    
    456
    
    
    
    584Net cash provided by operating activities
    
    
    5,552
    
    
    
    3,750Investing activitiesProceeds from maturities of certificates of deposit
    
    
    99
    
    
    
    100Purchases of available for sale securities
    
    
    (9,786
    )
    
    
    (40,460
    )Proceeds from sales of available for sale securities
    
    
    9,015
    
    
    
    3,948Proceeds from maturities of available for sale securities
    
    
    7,383
    
    
    
    18,132Proceeds from maturities of held-to-maturity securities
    
    
    
    
    
    
    211Proceeds from sales of real estate held for sale
    
    
    1,612
    
    
    
    196Acquisitions, net
    
    
    357
    
    
    
    38Net (increase) decrease in loans
    
    
    5,776
    
    
    
    (3,430
    )Purchases of bank premises and equipment
    
    
    (2,200
    )
    
    
    (443
    )Net cash (used in) provided by investing activities
    
    
    12,256
    
    
    
    (21,709
    )Financing activitiesNet increase (decrease) in deposits
    
    
    (9,612
    )
    
    
    (11,840
    )Net change in short-term borrowings
    
    
    (1,610
    )Proceeds from long-term borrowings
    
    
    21,405
    
    
    
    11,795Repayments of long-term borrowings
    
    
    (13,742
    )
    
    
    (12,934
    )Proceeds from exercise of stock options
    
    
    62
    
    
    
    94Dividends paid
    
    
    
    
    
    
    (195
    )Purchase of treasury stock
    
    
    (2,003
    )
    
    
    (2,317
    )Net cash used in financing activities
    
    
    (5,500
    )
    
    
    (15,398
    )Net increase (decrease) in cash and cash equivalents
    
    
    12,308
    
    
    
    (33,357
    )Cash and cash equivalents  beginning of year
    
    
    13,286
    
    
    
    45,605Cash and cash equivalents  end of period
    
    $
    25,594
    
    
    $
    12,248
 5




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Six Months EndedJune 302005
    
    2004(dollars in thousands)Supplemental disclosure of cash flow informationInterest paid
    
    $
    4,787
    
    
    $
    5,513Income taxes paid
    
    
    525
    
    
    
    1,290Real estate acquired in settlement of loans
    
    
    195
    
    
    
    519Acquisitions, net:Assets acquired:Certificates of Deposit
    
    $
    
    
    
    $
    (298
    )Investments
    
    
    (6,561
    )
    
    
    (8,616
    )Loans, net
    
    
    (12,608
    )
    
    
    (7,342
    )Loans held for sale
    
    
    (5,047
    )
    
    
    Interest receivable
    
    
    (109
    )
    
    
    (104
    )Premises and equipment
    
    
    (2,428
    )
    
    
    (269
    )Goodwill
    
    
    (1,034
    )
    
    
    (1,013
    )Intangibles
    
    
    (424
    )
    
    
    (774
    )Real Estate held for sale
    
    
    (155
    )
    
    
    Non-marketable securities
    
    
    (639
    )
    
    
    Other assets
    
    
    (108
    )
    
    
    (157
    )Liabilities assumed:Deposits
    
    
    27,757
    
    
    
    18,524Other liabilities
    
    
    56
    
    
    
    87Treasury Stock issued
    
    
    1,657
    
    
    
    Cash received, net of cash paid
    
    $
    357
    
    
    $
    38
  6




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7




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Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(dollars in thousands, except per share data)Net income, as reported
    
    $
    853
    
    
    $
    1,182
    
    
    $
    2,089
    
    
    $
    2,028Less: Total stock-based employee
compensation cost determined under
the fair value based method, net of
income taxes
    
    
    142
    
    
    
    185
    
    
    
    191
    
    
    
    224Pro forma net income
    
    $
    711
    
    
    $
    997
    
    
    $
    1,898
    
    
    $
    1,804Earnings per share:Basic  as reported
    
    $
    0.36
    
    
    $
    0.47
    
    
    
    0.88
    
    
    
    0.79Basic  pro forma
    
    
    0.30
    
    
    
    0.39
    
    
    
    0.80
    
    
    
    0.70Diluted  as reported
    
    
    0.36
    
    
    
    0.46
    
    
    
    0.88
    
    
    
    0.79Diluted  pro forma
    
    
    0.30
    
    
    
    0.39
    
    
    
    0.80
    
    
    
    0.70
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Number of options granted
    
    
    25,000
    
    
    
    20,000
    
    
    
    25,000
    
    
    
    25,500Risk-free interest rate
    
    
    4.27
    %
    
    
    4.45
    %
    
    
    4.27
    %
    
    
    4.37
    %Expected life, in years
    
    
    5
    
    
    
    10
    
    
    
    5
    
    
    
    10Expected volatility
    
    
    16
    %
    
    
    23
    %
    
    
    16
    %
    
    
    23
    %Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.27
    %Estimated weighted
average fair value per option
    
    
    6.74
    
    
    
    11.97
    
    
    
    6.74
    
    
    
    11.41
   8




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Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(dollars in thousands, except share and per share data)BasicNet income
    
    $
    853
    
    
    $
    1,182
    
    
    $
    2,089
    
    
    $
    2,028Average common shares outstanding
    
    
    2,379,121
    
    
    
    2,536,965
    
    
    
    2,369,233
    
    
    
    2,558,500Net income per common share 
basic
    
    $
    0.36
    
    
    $
    0.47
    
    
    $
    0.88
    
    
    $
    0.79DilutedNet income
    
    $
    853
    
    
    $
    1,182
    
    
    $
    2,089
    
    
    $
    2,028Average common shares outstanding
    
    
    2,379,121
    
    
    
    2,536,965
    
    
    
    2,369,233
    
    
    
    2,558,500Dilutive potential due to stock options
    
    
    5,784
    
    
    
    8,240
    
    
    
    7,414
    
    
    
    8,968Average common shares outstanding
    
    
    2,384,905
    
    
    
    2,545,205
    
    
    
    2,376,647
    
    
    
    2,567,468Net income per common share 
diluted
    
    $
    0.36
    
    
    $
    0.46
    
    
    $
    0.88
    
    
    $
    0.79
   Time
    
    Long-termYears Ended December 31,
    
    Deposits
    
    Borrowings (1)
    
    Total2005
    
    $
    114,726
    
    
    $
    2,668
    
    
    $
    117,3942006
    
    
    94,681
    
    
    
    31,041
    
    
    
    125,7222007
    
    
    33,180
    
    
    
    11,449
    
    
    
    44,6292008
    
    
    11,828
    
    
    
    5,156
    
    
    
    16,9842009
    
    
    4,533
    
    
    
    10,165
    
    
    
    14,698thereafter
    
    
    2,752
    
    
    
    2,657
    
    
    
    5,409Total
    
    $
    261,700
    
    
    $
    63,136
    
    
    $
    324,836Financial instruments whose
contract amounts represent credit
risk:Commitment to originate loans
    
    
    
    
    
    
    
    
    
    $
    15,356Commitments to extend credit
    
    
    
    
    
    
    
    
    
    
    22,845Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    7,641Total
    
    
    
    
    
    
    
    
    
    $
    370,678
 
 (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 million and $2 million maturing in years 2008 and 2011 which are callable in
2005 and variable rate prepayable advances of $20 million maturing in 2006. Trust preferred
debentures of $10 million mature in both 2032 and 2034, but are callable in 2007 and 2009. 9




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Continuous unrealized losses
    
    Continuous unrealizedexisting for less than 12
    
    losses existing greatermonths
    
    than 12 months
    
    TotalDescription of
    
    
    
    
    
    Unrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedSecurities
    
    Fair Value
    
    losses
    
    Fair Value
    
    losses
    
    Fair Value
    
    lossesU.S. government
agencies
    
    $
    52,018
    
    
    $
    278
    
    
    $
    
    
    
    $
    
    
    
    $
    52,018
    
    
    $
    278Municipals
    
    
    4,726
    
    
    
    30
    
    
    
    16,721
    
    
    
    440
    
    
    
    21,447
    
    
    
    470Mortgage backed
securities
    
    
    1,954
    
    
    
    12
    
    
    
    6,183
    
    
    
    139
    
    
    
    8,137
    
    
    
    151Corporate
    
    
    
    
    
    
    
    
    
    
    1,988
    
    
    
    80
    
    
    
    1,988
    
    
    
    80Total temporarily
impaired securities
    
    $
    58,698
    
    
    $
    320
    
    
    $
    24,892
    
    
    $
    659
    
    
    $
    83,590
    
    
    $
    979
      10




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11




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Managements Discussion and Analysis of Financial Condition and Results of Operations
      12




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June 30
    
    December 312005
    
    2004
    
    Change(dollars in thousands)Non-accruing loans
    
    $
    5,266
    
    
    $
    6,769
    
    
    $
    (1,503
    )Accruing loans delinquent 90
days or more
    
    
    389
    
    
    
    222
    
    
    
    167Total nonperforming loans
    
    
    5,655
    
    
    
    6,991
    
    
    
    (1,336
    )Foreclosed assets
    
    
    1,734
    
    
    
    3,002
    
    
    
    (1,268
    )
 13




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June 30
    
    December 312005
    
    2004
    
    Change(dollars in thousands)Troubled debt restructuring
    
    
    39
    
    
    
    42
    
    
    
    (3
    )Total nonperforming assets
    
    $
    7,428
    
    
    $
    10,035
    
    
    $
    (2,607
    )Allowance for loan losses to total loans
    
    
    1.32
    %
    
    
    1.29
    %Allowance for loan losses to
nonperforming loans
    
    
    101.51
    %
    
    
    78.32
    %Nonperforming loans to total loans
    
    
    1.31
    %
    
    
    1.65
    %Nonperforming assets to total loans
and foreclosed property
    
    
    1.72
    %
    
    
    2.35
    %Nonperforming assets to total assets
    
    
    1.16
    %
    
    
    1.64
    %
    14




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Allowance for Loan Losses
 15




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Goodwill
 Mortgage Servicing Rights
  
   16




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17




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TABLE INET INTEREST INCOME ANALYSIS (UNAUDITED)CENTRUE FINANCIAL CORPORATION AND SUBSIDIARIESThree Months Ended June 30,2005
    
    2004Average
    
    Interest
    
    
    
    
    
    Average
    
    InterestOutstanding
    
    Earned/
    
    Yield/
    
    Outstanding
    
    Earned/
    
    Yield/Balance
    
    Paid
    
    Rate
    
    Balance
    
    Paid
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable (1) (3)
    
    $
    441,340
    
    
    $
    6,703
    
    
    
    6.09
    %
    
    $
    438,137
    
    
    $
    6,154
    
    
    
    5.65
    %Investments securities (2) (3)
    
    
    123,754
    
    
    
    1,297
    
    
    
    4.20
    %
    
    
    113,591
    
    
    
    1,123
    
    
    
    3.98
    %Other interest-earning assets
    
    
    3,641
    
    
    
    15
    
    
    
    1.65
    %
    
    
    6,352
    
    
    
    18
    
    
    
    1.14
    %FHLB stock
    
    
    4,322
    
    
    
    56
    
    
    
    5.20
    %
    
    
    3,455
    
    
    
    52
    
    
    
    6.03
    %Total interest-earning assets
    
    
    573,057
    
    
    
    8,071
    
    
    
    5.65
    %
    
    
    561,535
    
    
    
    7,347
    
    
    
    5.26
    %Other assets
    
    
    64,184
    
    
    
    
    
    
    
    
    
    
    
    52,869Total assets
    
    $
    637,241
    
    
    
    
    
    
    
    
    
    
    $
    614,404Interest-bearing liabilities:Certificate accounts
    
    $
    246,650
    
    
    
    1,728
    
    
    
    2.81
    %
    
    $
    262,945
    
    
    
    1,600
    
    
    
    2.45
    %Savings deposits
    
    
    101,424
    
    
    
    182
    
    
    
    0.72
    %
    
    
    93,725
    
    
    
    136
    
    
    
    0.58
    %Demand and NOW deposits
    
    
    89,597
    
    
    
    263
    
    
    
    1.18
    %
    
    
    95,362
    
    
    
    182
    
    
    
    0.77
    %Borrowings
    
    
    86,009
    
    
    
    917
    
    
    
    4.28
    %
    
    
    59,332
    
    
    
    685
    
    
    
    4.64
    %Total interest-bearing liabilities
    
    
    523,680
    
    
    
    3,090
    
    
    
    2.37
    %
    
    
    511,364
    
    
    
    2,603
    
    
    
    2.05
    %Non-interest bearing demand deposits
    
    
    65,453
    
    
    
    
    
    
    
    
    
    
    
    52,751Other liabilities
    
    
    5,258
    
    
    
    
    
    
    
    
    
    
    
    5,357Total liabilities
    
    
    594,391
    
    
    
    
    
    
    
    
    
    
    
    569,472Stockholders equity
    
    
    42,850
    
    
    
    
    
    
    
    
    
    
    
    44,932Total liabilities and stockholders equity
    
    $
    637,241
    
    
    
    
    
    
    
    
    
    
    $
    614,404Net interest income (3)
    
    
    
    
    
    $
    4,981
    
    
    
    
    
    
    
    
    
    
    $
    4,744Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.28
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Net earning assets
    
    $
    49,377
    
    
    
    
    
    
    
    
    
    
    $
    50,171Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.49
    %
    
    
    
    
    
    
    
    
    
    
    3.40
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    109.43
    %
    
    
    
    
    
    
    
    
    
    
    109.81
    %
 
 (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 tax rate of 34%.  18




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19




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TABLE IINET INTEREST INCOME ANALYSIS (UNAUDITED)CENTRUE FINANCIAL CORPORATION AND SUBSIDIARIESSix Months Ended June 30,2005
    
    2004Average
    
    Interest
    
    
    
    
    
    Average
    
    InterestOutstanding
    
    Earned/
    
    Yield/
    
    Outstanding
    
    Earned/
    
    Yield/Balance
    
    Paid
    
    Rate
    
    Balance
    
    Paid
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable (1) (3)
    
    $
    430,025
    
    
    $
    12,908
    
    
    
    6.05
    %
    
    $
    434,175
    
    
    $
    12,466
    
    
    
    5.77
    %Investments securities (2) (3)
    
    
    121,271
    
    
    
    2,534
    
    
    
    4.21
    %
    
    
    104,022
    
    
    
    2,099
    
    
    
    4.06
    %Other interest-earning assets
    
    
    3,009
    
    
    
    23
    
    
    
    1.54
    %
    
    
    20,073
    
    
    
    94
    
    
    
    0.94
    %FHLB stock
    
    
    3,969
    
    
    
    105
    
    
    
    5.34
    %
    
    
    3,389
    
    
    
    108
    
    
    
    6.43
    %Total interest-earning assets
    
    
    558,274
    
    
    
    15,570
    
    
    
    5.62
    %
    
    
    561,659
    
    
    
    14,767
    
    
    
    5.29
    %Other assets
    
    
    60,995
    
    
    
    
    
    
    
    
    
    
    
    50,953Total assets
    
    $
    619,269
    
    
    
    
    
    
    
    
    
    
    $
    612,612Interest-bearing liabilities:Certificate accounts
    
    $
    245,209
    
    
    
    3,304
    
    
    
    2.72
    %
    
    $
    267,492
    
    
    
    3,358
    
    
    
    2.52
    %Savings deposits
    
    
    95,107
    
    
    
    315
    
    
    
    0.67
    %
    
    
    90,795
    
    
    
    284
    
    
    
    0.63
    %Demand and NOW deposits
    
    
    89,040
    
    
    
    481
    
    
    
    1.09
    %
    
    
    91,287
    
    
    
    375
    
    
    
    0.83
    %Borrowings
    
    
    81,013
    
    
    
    1,714
    
    
    
    4.27
    %
    
    
    60,960
    
    
    
    1,379
    
    
    
    4.55
    %Total interest-bearing liabilities
    
    
    510,369
    
    
    
    5,814
    
    
    
    2.30
    %
    
    
    510,534
    
    
    
    5,396
    
    
    
    2.13
    %Non-interest bearing demand deposits
    
    
    61,756
    
    
    
    
    
    
    
    
    
    
    
    51,560Other liabilities
    
    
    3,856
    
    
    
    
    
    
    
    
    
    
    
    5,008Total liabilities
    
    
    575,981
    
    
    
    
    
    
    
    
    
    
    
    567,102Stockholders equity
    
    
    43,288
    
    
    
    
    
    
    
    
    
    
    
    45,510Total liabilities and stockholders equity
    
    $
    619,269
    
    
    
    
    
    
    
    
    
    
    $
    612,612Net interest income (3)
    
    
    
    
    
    $
    9,756
    
    
    
    
    
    
    
    
    
    
    $
    9,371Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.32
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Net earning assets
    
    $
    47,905
    
    
    
    
    
    
    
    
    
    
    $
    51,125Net yield on average interest-earning
assets (net interest margin)
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    3.36
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    109.39
    %
    
    
    
    
    
    
    
    
    
    
    110.01
    %
 
 (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 tax rate of 34%.  20




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Three Months EndedJune 30
    
    Change2005
    
    2004
    
    Amount
    
    Percent(dollars in thousands)Noninterest income:Fee income
    
    $
    1,330
    
    
    $
    990
    
    
    $
    340
    
    
    
    34.3
    %Net gain (loss) on sale
of real estate held for
sale
    
    
    (8
    )
    
    
    46
    
    
    
    (54
    )
    
    
    (117.4
    )Net gain on sale of loans
    
    
    158
    
    
    
    317
    
    
    
    (159
    )
    
    
    (50.2
    )Increase in cash
surrender value of life
insurance contracts
    
    
    87
    
    
    
    99
    
    
    
    (12
    )
    
    
    (12.1
    )Other
    
    
    139
    
    
    
    51
    
    
    
    88
    
    
    
    172.5Total
    
    $
    1,706
    
    
    $
    1,503
    
    
    $
    203
    
    
    
    13.5
    %
  Three Months EndedJune 30
    
    Change2005
    
    2004
    
    Amount
    
    Percent(dollars in thousands)Noninterest expense:Compensation and benefits
    
    $
    2,503
    
    
    $
    2,134
    
    
    $
    369
    
    
    
    17.3
    %Occupancy, net
    
    
    391
    
    
    
    325
    
    
    
    66
    
    
    
    20.3Furniture and equipment
    
    
    803
    
    
    
    354
    
    
    
    449
    
    
    
    126.8Advertising
    
    
    80
    
    
    
    57
    
    
    
    23
    
    
    
    40.4Data processing
    
    
    160
    
    
    
    137
    
    
    
    23
    
    
    
    16.8Telephone and postage
    
    
    153
    
    
    
    152
    
    
    
    1
    
    
    
    .7Amortization of Intangibles
    
    
    72
    
    
    
    61
    
    
    
    11
    
    
    
    18.0Legal and professional fees
    
    
    319
    
    
    
    166
    
    
    
    153
    
    
    
    92.2Other
    
    
    790
    
    
    
    761
    
    
    
    29
    
    
    
    3.8Total
    
    $
    5,271
    
    
    $
    4,147
    
    
    $
    1,124
    
    
    
    27.1
    %
 21




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Six Months EndedJune 30
    
    Change2005
    
    2004
    
    Amount
    
    Percent(dollars in thousands)Noninterest income:Fee income
    
    $
    2,429
    
    
    $
    1,881
    
    
    $
    548
    
    
    
    29.1
    %Net gain on sale of securities
    
    
    183
    
    
    
    89
    
    
    
    94
    
    
    
    105.6Net gain (loss) on sale of
real estate held for sale
    
    
    (6
    )
    
    
    39
    
    
    
    (45
    )
    
    
    (115.4
    )Net gain on sale of loans
    
    
    289
    
    
    
    423
    
    
    
    (134
    )
    
    
    (31.7
    )Increase in cash surrender
value of life insurance
contracts
    
    
    178
    
    
    
    199
    
    
    
    (21
    )
    
    
    (10.6
    )Other
    
    
    198
    
    
    
    121
    
    
    
    77
    
    
    
    63.6Total
    
    $
    3,271
    
    
    $
    2,752
    
    
    $
    519
    
    
    
    18.9
    %
  Six Months EndedJune 30
    
    Change2005
    
    2004
    
    Amount
    
    Percent(dollars in thousands)Noninterest expense:Compensation and benefits
    
    $
    4,790
    
    
    $
    4,397
    
    
    $
    393
    
    
    
    8.9
    %Occupancy, net
    
    
    778
    
    
    
    720
    
    
    
    58
    
    
    
    8.1Furniture and equipment
    
    
    1,133
    
    
    
    689
    
    
    
    444
    
    
    
    64.4Advertising
    
    
    160
    
    
    
    121
    
    
    
    39
    
    
    
    32.2Data processing
    
    
    318
    
    
    
    300
    
    
    
    18
    
    
    
    6.0Telephone and postage
    
    
    324
    
    
    
    281
    
    
    
    43
    
    
    
    15.3Amortization of Intangibles
    
    
    133
    
    
    
    107
    
    
    
    26
    
    
    
    24.3Legal and professional fees
    
    
    461
    
    
    
    402
    
    
    
    59
    
    
    
    14.7Other
    
    
    1,450
    
    
    
    1,439
    
    
    
    11
    
    
    
    0.8Total
    
    $
    9,547
    
    
    $
    8,456
    
    
    $
    1,091
    
    
    
    12.9
    %
  22




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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, 2005Tier 1 Capital to Average AssetsCentrue Financial
    
    $
    44,531
    
    
    
    7.23
    %
    
    $
    24,630
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    45,295
    
    
    
    7.72
    %
    
    
    23,459
    
    
    
    4.00
    %
    
    $
    29,324
    
    
    
    5.00
    %Illinois Community Bank
    
    
    2,825
    
    
    
    9.54
    %
    
    
    1,184
    
    
    
    4.00
    %
    
    
    1,481
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    44,531
    
    
    
    10.71
    %
    
    
    16,628
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    45,295
    
    
    
    11.25
    %
    
    
    16,110
    
    
    
    4.00
    %
    
    
    24,165
    
    
    
    6.00
    %Illinois Community Bank
    
    
    2,825
    
    
    
    16.74
    %
    
    
    675
    
    
    
    4.00
    %
    
    
    1,013
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    54,715
    
    
    
    13.16
    %
    
    
    33,256
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    50,336
    
    
    
    12.50
    %
    
    
    32,219
    
    
    
    8.00
    %
    
    
    40,274
    
    
    
    10.00
    %Illinois Community Bank
    
    
    3,037
    
    
    
    18.00
    %
    
    
    1,350
    
    
    
    8.00
    %
    
    
    1,688
    
    
    
    10.00
    %As of December 31, 2004Tier 1 Capital to Average AssetsCentrue Financial
    
    $
    43,312
    
    
    
    7.32
    %
    
    $
    23,674
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    45,656
    
    
    
    7.81
    %
    
    
    23,382
    
    
    
    4.00
    %
    
    $
    29,227
    
    
    
    5.00
    %Tier I Capital to Risk Weighted AssetsCentrue Financial
    
    
    43,312
    
    
    
    11.01
    %
    
    
    15,742
    
    
    
    4.00
    %
    
    
    N/ACentrue Bank
    
    
    46,656
    
    
    
    11.32
    %
    
    
    16,136
    
    
    
    4.00
    %
    
    
    24,204
    
    
    
    6.00
    %Total Capital to Risk Weighted AssetsCentrue Financial
    
    
    53,857
    
    
    
    13.69
    %
    
    
    31,483
    
    
    
    8.00
    %
    
    
    N/ACentrue Bank
    
    
    50,703
    
    
    
    12.57
    %
    
    
    32,272
    
    
    
    8.00
    %
    
    
    40,340
    
    
    
    10.00
    %
    
    
    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.
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
    
    The effects of, and changes in, federal, state and local laws, regulations and
policies affecting banking, securities, insurance and monetary and financial matters.
    
    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.
  
 Quantitative and Qualitative Disclosures About Market Risk
    25




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EVE RatiosJune 30,
    
    December 31,Changes in Interest Rates
    
    2005
    
    2004300 basis point rise
    
    
    8.17
    %
    
    
    7.54
    %200 basis point rise
    
    
    8.44
    %
    
    
    7.88
    %100 basis point rise
    
    
    8.47
    %
    
    
    8.06
    %Base rate scenario
    
    
    8.21
    %
    
    
    7.91
    %100 basis point decline
    
    
    6.86
    %
    
    
    6.60
    %
  26




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Controls and Procedures
  27




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PART II  OTHER INFORMATION
 
 Legal Proceedings
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  Total Numberof Shares
    
    MaximumPurchased as
    
    Number ofPart of
    
    Shares that MayPublicly
    
    Yet BeTotal Number of
    
    
    
    
    
    Announced
    
    PurchasedShares
    
    Average Price
    
    Plans or
    
    Under the PlansPeriod
    
    Purchased
    
    Paid per Share
    
    Programs (1)
    
    or Programs (1)April 1 - April 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    439,298May 1 - May 31, 2005
    
    
    70,000
    
    
    
    26.45
    
    
    
    70,000
    
    
    
    369,298June 1 - June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369,298Total
    
    
    70,000
    
    
    $
    26.45
    
    
    
    70,000
    
    
    
    369,298
 
 (1)
    
    The Company has a share repurchase plan which authorizes the Company to purchase
up to 20% of the shares outstanding, or 484,663. The plan will expire on December 31, 2005. 
 Defaults Upon Senior Securities
  
 Submission of Matters to a Vote of Security Holders
   1.
    
    For the election of one (1) director of the Company:
  28




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FOR
    
    WITHHELD2,255,303
    
    32,552
 2.
    
    To approve the appointment of McGladrey & Pullen LLP as the Companys
auditors for the year ending December 31, 2005.
 BROKER NON-FOR
    
    AGAINST
    
    ABSTAIN
    
    VOTES2,279,577
    
    4,862
    
    3,416
    
    
 
 Other Information
  
 Exhibits
 Exhibits
 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.
 29




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##### Table of Contents



SIGNATURES
  CENTRUE FINANCIAL CORPORATION
RegistrantDate: August 15, 2005
    
    /s/ THOMAS A. DAIBERPresident and Chief Executive OfficerDate: August 15, 2005
    
    /s/ JAMES M. LINDSTROMChief Financial Officer and
Senior Vice PresidentDate: August 15, 2005
    
    /s/ JOHN A. BETTSVice President and
Corporate Controller
 30