Edgar Filing: CENTRUE FINANCIAL CORP

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2015

Commission File Number: 0-28846

Centrue Financial Corporation

(Exact name of Registrant as specified in its charter)



Delaware		36-3145350

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification number)

122 W. Madison Street, Ottawa, IL 61350

(Address of principal executive offices including zip code)

(815) 431-8400

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ü] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ü] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[ ü]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ü].

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Shares outstanding at November 13, 2015
Common Stock, Par Value $0.01		6,513,694

Centrue Financial Corporation

Form 10-Q Index

September 30, 2015



		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income and Comprehensive Income	2
	Consolidated Statements of Cash Flows	4
	Notes to the Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
SIGNATURES		44

CENTRUE FINANCIAL CORPORATION

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT FOR PAR VALUE AND SHARE DATA)



	September 30, 2015			December 31, 2014
ASSETS
Cash and cash equivalents	$	45,686		$	49,167
Securities available-for-sale	206,430			135,371
Restricted securities	8,271			6,102
Loans held for sale	214			364
Loans, net of allowance for loan loss: 2015 - $8,403;
2014 - $7,981	603,515			545,219
Bank-owned life insurance	34,877			34,194
Mortgage servicing rights	2,171			2,240
Premises and equipment, net	22,241			22,626
Intangible assets, net	1,117			1,831
Other real estate owned, net	9,755			10,256
Other assets	9,399			9,719
Total assets	$	943,676		$	817,089
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest-bearing	$	160,998		$	144,633
Interest-bearing	548,537			554,191
Total deposits	709,535			698,824
Federal funds purchased and securities sold under agreements to repurchase	18,869			26,691
Federal Home Loan Bank advances	105,000			20,000
Notes payable	—			10,250
Series B mandatory redeemable preferred stock	268			268
Subordinated debentures	20,620			20,620
Other liabilities	5,636			10,108
Total liabilities	859,928			786,761

Commitments and contingent liabilities	—			—

Stockholders' equity
Series C Fixed Rate, Cumulative Perpetual Preferred Stock, no shares authorized
in 2015; 32,668 shares authorized and issued 2014;
aggregate liquidation preference of $32,668	—			32,668
Series D Fixed Rate, Non-Cumulative Perpetual Preferred Stock,
2,636 shares authorized and issued 2015 and 2014;
aggregate liquidation preference of $2,636	2,636			2,636
Common stock, $0.01 par value;
215,000,000 shares authorized; 6,581,544 shares issued at 2015;
215,000,000 shares authorized; 248,452 shares issued at 2014	66			2
Surplus	147,626			78,955
Accumulated deficit	(41,469		)	(58,750		)
Accumulated other comprehensive loss	(2,218		)	(2,051		)
	106,641			53,460
Treasury stock, at cost, 96,326 shares at September 30, 2015
and 97,330 at December 31, 2014	(22,893		)	(23,132		)
Total stockholders' equity	83,748			30,328
Total liabilities and stockholders' equity	$	943,676		$	817,089

See Accompanying Notes to Consolidated Financial Statements

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Interest income
Loans	$	6,476	$	6,304	$	18,868	$	18,796
Securities
Taxable	794		543		2,020		1,766
Exempt from federal income taxes	46		62		122		188
Federal funds sold and other	20		38		67		98
Total interest income	7,336		6,947		21,077		20,848

Interest expense
Deposits	316		498		940		1,637
Federal funds purchased and securities sold under
agreements to repurchase	13		14		37		39
Federal Home Loan Bank advances	138		117		368		340
Series B mandatory redeemable preferred stock	4		4		12		12
Subordinated debentures	128		152		413		447
Notes payable	—		86		84		254
Total interest expense	599		871		1,854		2,729

Net interest income	6,737		6,076		19,223		18,119
Provision for loan losses	—		675		—		2,275
Net interest income after provision for loan losses	6,737		5,401		19,223		15,844

Noninterest income
Service charges	1,075		1,154		3,010		3,289
Mortgage banking income	315		377		972		1,164
Electronic banking services	651		644		1,895		1,868
Bank-owned life insurance	232		229		683		668
Securities gains, net	196		410		297		788
Income from real estate	114		141		434		462
Gain on sale of OREO	47		166		50		588
Gain on sale of other assets	—		—		—		750
Gain on extinguishment of debt	—		—		1,750		—
Other income	608		83		750		243
	3,238		3,204		9,841		9,820

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Noninterest expense
Salaries and employee benefits	4,086			3,796			12,394			11,490
Occupancy, net	706			677			2,142			2,139
Furniture and equipment	259			241			746			731
Marketing	105			61			263			174
Supplies and printing	50			59			170			180
Telephone	204			174			592			573
Data processing	442			476			1,258			1,282
FDIC insurance	281			473			925			1,428
Loan processing and collection costs	225			80			638			481
OREO carrying costs	187			277			655			801
OREO valuation adjustment	47			443			195			839
Amortization of intangible assets	238			238			714			714
Other expenses	2,012			1,037			4,286			3,327
	8,842			8,032			24,978			24,159

Income before income taxes	$	1,133		$	573		$	4,086		$	1,505
Income tax expense	45			—			78			—
Net income	$	1,088		$	573		$	4,008		$	1,505

Preferred stock dividends	395			808			1,401			2,585
Discount on redemption of preferred stock	—			—			(13,668		)	—
Net income (loss) for common stockholders	$	693		$	(235	)	$	16,275		$	(1,080	)

Basic earnings (loss) per common share	$	0.11		$	(1.41	)	$	3.68		$	(5.68	)
Diluted earnings (loss) per common share	$	0.11		$	(1.41	)	$	3.68		$	(5.68	)


Total comprehensive income (loss):
Net income	$	1,088		$	573		$	4,008		$	1,505

Change in unrealized gains (losses)
on securities available for sale	424			34			130			(24		)
Reclassification adjustment for gains
recognized in income	(196		)	(410		)	(297		)	(788		)
Net unrealized gains (loss)	228			(376		)	(167		)	(812		)
Tax effect
Other comprehensive income (loss)	228			(376		)	(167		)	(812		)
Total comprehensive income	$	1,316		$	197		$	3,841		$	693

See Accompanying Notes to Consolidated Financial Statements

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)



	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities
Net income	$	4,008		$	1,505
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation	868			883
Amortization of intangible assets	714			714
Amortization of mortgage servicing rights, net	257			216
Amortization of bond premiums, net	1,045			1,050
Provision for loan losses	—			2,275
Earnings on bank-owned life insurance	(683		)	(668		)
OREO valuation allowance	195			839
Securities gains, net	(297		)	(788		)
Gain on sale of OREO	(50		)	(588		)
Gain on extinguishment of debt	(1,750		)	—
Gain on sale of loans	(664		)	(782		)
Proceeds from sales of loans held for sale	26,561			28,977
Origination of loans held for sale	(21,901		)	(27,841		)
Change in assets and liabilities
(Increase) decrease in other assets	92			(1,332		)
Increase (decrease) in other liabilities	(4,449		)	238
Net cash provided by operating activities	3,946			4,698
Cash flows from investing activities
Proceeds from paydowns of securities available for sale	24,794			20,721
Proceeds from calls and maturities of securities available for sale	3,530			280
Proceeds from sales of securities available for sale	49,584			20,926
Purchases of securities available for sale	(149,842		)	(20,590		)
Redemption of Federal Reserve Bank stock	179			13
Purchase of Federal Home Loan Bank stock	(1,229		)	—
Purchase of Federal Reserve Bank stock	(1,119		)	(53		)
Net increase in loans	(62,434		)	(11,573		)
Purchase of premises and equipment	(483		)	(650		)
Proceeds from sale of OREO	639			3,260
Net cash (used in) provided by investing activities	(136,381		)	12,334

CENTRUE FINANCIAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)



	Nine Months Ended September 30,
	2015			2014
Cash flows from financing activities
Net increase (decrease) in deposits	10,711			(25,405		)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase	(7,822		)	753
Net proceeds of advances from the Federal Home Loan Bank	85,000			(5,000		)
Repayment of Notes Payable	(8,500		)	—
Net proceeds from the issuance of Common Stock	68,960			—
Purchase of Treasury Stock	—			(1,255		)
Redemption of Series A Convertible Preferred Stock	—			(500		)
Redemption of Series C Cumulative Perpetual Preferred Stock	(19,000		)	—
Issuance of Series D Non-Cumulative Perpetual Preferred Stock	—			2,636
Dividends paid on preferred stock	(395		)	(881		)
Net cash provided by (used in) financing activities	128,954			(29,652		)
Net (decrease) in cash and cash equivalents	(3,481		)	(12,620		)
Cash and cash equivalents
Beginning of period	49,167			70,748
End of period	$	45,686		$	58,128
Supplemental disclosures of cash flow information
Cash payments for
Interest	$	6,710		$	2,442
Income taxes	81			5
Transfers from loans to other real estate owned	292			481

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Note 1. Summary of Significant Accounting Policies

Centrue Financial Corporation is a bank holding company organized under the laws of the State of Delaware. When we use the terms “Centrue,” the “Company,” “we,” “us,” and “our,” we mean Centrue Financial Corporation, a Delaware Corporation, and its consolidated subsidiary. When we use the term the “Bank,” we are referring to our wholly owned banking subsidiary, Centrue Bank. The Company and the Bank provide a full range of banking services to individual and corporate customers located in markets extending from the far western and southern suburbs of the Chicago metropolitan area across Central Illinois down to the metropolitan St. Louis area. These services include demand, time, and savings deposits; business and consumer lending; and mortgage banking. The Company is subject to competition from other financial institutions and nonfinancial institutions providing financial services. Additionally, the Company and the Bank are subject to regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

Basis of presentation

The accounting and reporting policies of the Company and its subsidiaries conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities and other-than-temporary impairment of securities, the determination of the allowance for loan losses and valuation of other real estate owned.

For further information with respect to significant accounting policies followed by the Company in the preparation of its consolidated financial statements, refer to the Company’s registration statement filed with the SEC on October 15, 2015 which includes the audited financial statements and notes for the year ended December 31, 2014. The consolidated financial statements include the accounts of the Company and Centrue Bank. Intercompany balances and transactions have been eliminated in consolidation and certain 2014 amounts have been reclassified to conform to the 2015 presentation. The annualized results of operations during the three and nine months ended September 30, 2015 are not necessarily indicative of the results expected for the year ending December 31, 2015. All financial information in the following tables is in thousands (000s), except share and per share data. In the opinion of management, all normal and recurring adjustments which are necessary to fairly present the results for the interim periods presented have been included.

Reverse Stock Split

Common shares and per share amounts for all periods shown have been restated to reflect the impact of the 1:30 reverse stock split the Company completed effective May 29, 2015.

Capital Event

On March 31, 2015, the Company completed the issuance of $76.0 million of new common stock in a private placement offering. A total of 6.3 million shares were sold in the offering at a price of $12.00 per share. In conjunction with the stock offering the Company used the proceeds in part to pay $4.9 million in accrued but unpaid interest on its subordinated debentures, redeemed all $32.7 million of Series C Preferred Stock for $19.0 million, settled $10.3 million in notes payable with MB Financial for $8.5 million and made a $36.0 million capital contribution into Centrue Bank. The remaining proceeds have been and will be used for general corporate purposes.

Recent Accounting Pronouncements

In April 2015, the FASB issued an update, ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. This amendment is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is permitted. The amendment may be adopted either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. The Company intends to adopt the accounting standard during 2016, as required, with no material impact.

In June of 2014, the FASB issued an update, ASU No. 2014-11 Transfers and Servicing (Topic 860), guidance that requires repurchase-to-maturity transactions to be accounted for as secured borrowings and with additional disclosures. The guidance also requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. If the derecognition criteria are met as outlined in the guidance, the initial transfer will generally be accounted for as a sale and the repurchase agreement will generally be accounted for as a secured borrowing. The guidance is effective for annual reporting periods beginning after December 15, 2014 and interim reporting periods after December 15, 2015. Management

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

is evaluating the new guidance, but does not expect the adoption of this guidance will materially impact the Company's financial condition, results of operations, or liquidity.

In May 2014, the FASB issued an update (ASU No. 2014-09, Revenue from Contracts with Customers) creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update will become effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

Note 2. Earnings Per Share

A reconciliation of the numerators and denominators for earnings per common share computations for the three and nine months ended September 30, 2015 and 2014 is presented below (shares in thousands). Common shares, options, and per share amounts for all periods shown have been restated to reflect the impact of the thirty for one stock split the Company completed effective May 29, 2015. Options to purchase 3,488 and 6,083 shares of common stock were outstanding for September 30, 2015 and 2014, respectively; but were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price and, therefore, were anti-dilutive.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Basic Earnings (Loss) Per Common Share
Net income	$	1,088		$	573		$	4,008		$	1,505
Preferred stock dividends	(395		)	(808		)	(1,401		)	(2,585		)
Discount on redemption of preferred stock	—			—			13,668			—
Net income (loss) for common shareholders	$	693		$	(235	)	$	16,275		(1,080		)
Weighted average common shares outstanding	6,485,218			166,641			4,420,000			190,160
Basic earnings per common share	$	0.11		$	(1.41	)	$	3.68		$	(5.68	)
Diluted Earnings Per Common Share
Weighted average common shares outstanding	6,485,218			166,641			4,420,000			190,160
Weighted average common and dilutive
potential shares outstanding	6,485,218			166,641			4,420,000			190,160
Diluted earnings (loss) per common share	$	0.11		$	(1.41	)	$	3.68		$	(5.68	)

On November 4, 2015 restricted stock awards totaling 28,476 shares of common stock were granted and issued. These additional shares are excluded from the above weighted average common and dilutive potential shares outstanding.

Note 3. Securities

The primary strategic objective related to the Company's securities portfolio is to assist with liquidity and interest rate risk management. The fair value of the securities classified as available-for-sale was $206.4 million at September 30, 2015 compared to $135.4 million at December 31, 2014. The carrying value of securities classified as restricted (Federal Reserve and Federal Home Loan Bank stock) was $8.3 million at September 30, 2015 compared to $6.1 million at December 31, 2014. The Company does not have any securities classified as trading or held-to-maturity.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following table summarizes the fair value of available-for-sale securities, the related gross unrealized gains and losses recognized in accumulated other comprehensive income, and the amortized cost at September 30, 2015 and December 31, 2014:



	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agencies	$	40,727	$	205	$	(8	)	$	40,924
States and political subdivisions	14,894		60		(64		)	14,890
U.S. government agency residential
mortgage-backed securities	129,055		179		(270		)	128,964
Collateralized residential mortgage obligations:
Agency	18,876		22		(22		)	18,876
Equity securities	2,619		157		—			2,776
Corporate	—		—		—			—
	$	206,171	$	623	$	(364	)	$	206,430



	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agencies	$	21,274	$	6	$	(171	)	$	21,109
States and political subdivisions	8,951		78		(1		)	9,028
U.S. government agency residential
mortgage-backed securities	99,338		551		(221		)	99,668
Collateralized residential mortgage obligations:
Agency	38		—		—			38
Equity securities	2,579		157		—			2,736
Collateralized debt obligations:
Single issue	765		—		(3		)	762
Corporate	2,000		30		—			2,030
	$	134,945	$	822	$	(396	)	$	135,371

The amounts below include the activity for available-for-sale securities related to sales, maturities and calls:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014
Proceeds from calls and maturities	$	2,000		$	—	$	3,530		$	280
Proceeds from sales	34,959			9,471		49,584			20,926
Realized gains	272			410		397			839
Realized losses	(76		)	—		(100		)	(51		)
Net impairment loss recognized in earnings	—			—		—			—

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The amortized cost and fair value of the investment securities portfolio are shown below by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date and equity securities are shown separately.



	September 30, 2015
	Amortized Cost		Fair Value
Due in one year or less	$	2,108	$	2,113
Due after one year through five years	29,998		30,080
Due after five years through ten years	23,332		23,436
Due after ten years	183		185
U.S. government agency residential mortgage-backed securities	129,055		128,964
Collateralized residential mortgage obligations	18,876		18,876
Equity	2,619		2,776
	$	206,171	$	206,430

Securities with unrealized losses not recognized in income are as follows presented by length of time individual securities have been in a continuous unrealized loss position:



	September 30, 2015
	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agencies	$	4,692	$	(8	)	$	—	$	—	$	4,692	$	(8	)
States and political subdivisions	$	3,620	$	(64	)	$	—	$	—	$	3,620	$	(64	)
U.S. government agency residential
mortgage-backed securities	73,623		(270		)	—		—		73,623		(270		)
Collateralized residential mortgage
obligations: Agency	11,765		(22		)	—		—		11,765		(22		)
Corporate	—		—			—		—		—		—
Total temporarily impaired	$	93,700	$	(364	)	$	—	$	—	$	93,700	$	(364	)



	December 31, 2014
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. government agencies	$	18,212	$	(157	)	$	1,986	$	(14	)	$	20,198	$	(171	)
States and political subdivisions	386		(1		)	—		—			386		(1		)
U.S. government agency residential
mortgage-backed securities	34,809		(211		)	2,148		(10		)	36,957		(221		)
Collateralized debt obligations: Single issue	—		—			762		(3		)	762		(3		)
Total temporarily impaired	$	53,407	$	(369	)	$	4,896	$	(27	)	$	58,303	$	(396	)

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Note 4. Loans

The major classifications of loans follow:



	Aggregate Principal Amount
	September 30, 2015			December 31, 2014

Commercial	$	66,110		61,561
Agricultural & AG RE	46,323			53,193
Construction, land & development	24,844			13,860
Commercial RE	372,654			315,213
1-4 family mortgages	98,732			106,472
Consumer	3,255			2,901
Total Loans	$	611,918		553,200
Allowance for loan losses	(8,403		)	(7,981	)
Loans, net	$	603,515		545,219

The credit quality indicator utilized by the Company to internally analyze the loan portfolio is the internal risk rating. Internal risk ratings of 0 to 5 are considered pass credits, a risk rating of a 6 is special mention, a risk rating of a 7 is substandard, and a risk rating of an 8 is doubtful. Loans classified as pass credits have no material weaknesses and are performing as agreed. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the commercial loan portfolio by internal risk rating:



September 30, 2015
	Commercial								Commercial Real Estate
Internal Risk Rating	Closed-end		Lines of Credit		Agriculture & AG RE		Construction, Land & Development		Owner- Occupied		Non-Owner Occupied		Total
Pass	$	23,369	$	42,002	$	46,323	$	24,627	$	151,251	$	197,354	$	484,926
Special Mention	329		250		—		—		7,870		7,760		16,209
Substandard	160		—		—		217		475		7,944		8,796
Doubtful	—		—		—		—		—		—		—
Total	$	23,858	$	42,252	$	46,323	$	24,844	$	159,596	$	213,058	$	509,931

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2014
	Commercial								Commercial Real Estate
Internal Risk Rating	Closed-end		Lines of Credit		Agriculture & AG RE		Construction, Land & Development		Owner- Occupied		Non-Owner Occupied		Total
Pass	$	18,379	$	42,076	$	53,193	$	13,038	$	139,617	$	157,340	$	423,643
Special Mention	392		250		—		—		1,225		6,620		8,487
Substandard	464		—		—		822		1,480		8,931		11,697
Doubtful	—		—		—		—		—		—		—
Total	$	19,235	$	42,326	$	53,193	$	13,860	$	142,322	$	172,891	$	443,827

The following table presents the Retail Residential Loan Portfolio by Internal Risk Rating:



	Residential -- 1-4 family
	Senior Lien		Jr. Lien & Lines of Credit		Total
September 30, 2015
Unrated	$	49,015	$	43,979	$	92,994
Special mention	3,961		157		4,118
Substandard	1,322		298		1,620
Doubtful	—		—		—
Total	$	54,298	$	44,434	$	98,732



	Residential -- 1-4 family
	Senior Lien		Jr. Lien & Lines of Credit		Total
December 31, 2014
Unrated	$	55,142	$	45,299	$	100,441
Special mention	3,807		120		3,927
Substandard	1,719		385		2,104
Doubtful	—		—		—
Total	$	60,668	$	45,804	$	106,472

The retail residential loan portfolio is generally unrated. Delinquency is a typical factor in adversely risk rating a credit to a special mention or substandard.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

An analysis of activity in the allowance for loan losses for the three months ended September 30, 2015 and 2014 follows:



	Commercial			Agriculture & AG RE			Construction, Land & Development		Commercial RE			1-4 Family Residential			Consumer			Total
September 30, 2015
Beginning Balance	$	1,036		$	65		$	396	$	5,185		$	1,951		$	12		$	8,645
Charge-offs	—			—			—		(24		)	(325		)	(1		)	(350		)
Recoveries	54			2			16		9			24			3			108
Provision	(121		)	(1		)	66		35			25			(4		)	—
Ending Balance	$	969		$	66		$	478	$	5,205		$	1,675		$	10		$	8,403



	Commercial			Agriculture & AG RE		Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
September 30, 2014
Beginning Balance	$	2,432		$	60	$	924		$	6,936		$	2,080		$	29		$	12,461
Charge-offs	(431		)	—		(5		)	(283		)	(88		)	(1		)	(808		)
Recoveries	68			1		—			410			53			3			535
Provision	15			3		96			416			149			(4		)	675
Ending Balance	$	2,084		$	64	$	1,015		$	7,479		$	2,194		$	27		$	12,863

An analysis of activity in the allowance for loan losses for the nine months ended September 30, 2015 and 2014 follows:



	Commercial			Agriculture & AG RE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
September 30, 2015
Beginning Balance	$	1,117		$	69		$	711		$	3,999		$	2,075		$	10		$	7,981
Charge-offs	(357		)	—			(3		)	(639		)	(455		)	(4		)	(1,458		)
Recoveries	144			2			43			1,616			45			30			1,880
Provision	65			(5		)	(273		)	229			10			(26		)	—
Ending Balance	$	969		$	66		$	478		$	5,205		$	1,675		$	10		$	8,403



	Commercial			Agriculture & AG RE			Construction, Land & Development			Commercial RE			1-4 Family Residential			Consumer			Total
September 30, 2014
Beginning Balance	$	1,413		$	70		$	1,127		$	6,834		$	2,162		$	31		$	11,637
Charge-offs	(920		)	—			(118		)	(559		)	(308		)	(6		)	(1,911		)
Recoveries	288			1			34			473			61			5			862
Provision	1,303			(7		)	(28		)	731			279			(3		)	2,275
Ending Balance	$	2,084		$	64		$	1,015		$	7,479		$	2,194		$	27		$	12,863

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following is an analysis on the balance in the allowance for loan losses and the recorded investment in

impaired loans by portfolio segment based on impairment method as of September 30, 2015 and December 31, 2014:



September 30, 2015	Commercial		Agriculture & AG RE		Construction, Land & Development		Commercial RE		1-4 Family Residential		Consumer		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	86	$	—	$	65	$	675	$	365	$	—	$	1,191
Loans collectively evaluated for impairment	883		66		413		4,530		1,310		10		7,212
Total allowance balance:	$	969	$	66	$	478	$	5,205	$	1,675	$	10	$	8,403

Loan balances:
Loans individually evaluated for impairment	$	160	$	—	$	217	$	4,106	$	1,620	$	—	$	6,103
Loans collectively evaluated for impairment	65,950		46,323		24,627		368,548		97,112		3,255		605,815
Total loans balance:	$	66,110	$	46,323	$	24,844	$	372,654	$	98,732	$	3,255	$	611,918



December 31, 2014	Commercial		Agriculture & AG RE		Construction, Land & Development		Commercial RE		1-4 Family Residential		Consumer		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	430	$	—	$	126	$	216	$	783	$	—	$	1,555
Loans collectively evaluated for impairment	687		69		585		3,783		1,292		10		6,426
Total allowance balance:	$	1,117	$	69	$	711	$	3,999	$	2,075	$	10	$	7,981

Loan balances:
Loans individually evaluated for impairment	$	464	$	—	$	822	$	5,961	$	2,056	$	—	$	9,303
Loans collectively evaluated for impairment	61,097		53,193		13,038		309,252		104,416		2,901		543,897
Total loans balance:	$	61,561	$	53,193	$	13,860	$	315,213	$	106,472	$	2,901	$	553,200

Troubled Debt Restructurings:

The Company had troubled debt restructurings (“TDRs”) of $0.15 million and $0.02 million as of September 30, 2015 and December 31, 2014, respectively. Specific reserves were immaterial at September 30, 2015 and December 31, 2014. At September 30, 2015 nonaccrual TDR loans were $0.13 million and $0.02 million at December 31, 2014. There were $0.03 million TDRs on accrual at September 30, 2015 compared to none at December 31, 2014. The Company had no commitments to lend additional amounts to a customer with an outstanding loan that is classified as TDR as of September 30, 2015 and December 31, 2014.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

During the nine month period ended September 30, 2015, the terms of a certain loans were modified as troubled debt restructurings. The modification of the terms of such loans may include one or a combination of the following: a reduction of the stated interest rate of the loan to a below market rate or the payment modification to interest only. A modification involving a reduction of the stated interest rate of the loan would be for periods ranging from 6 months to 16 months. During the nine month period ended September 30, 2015, there were two TDR added in a total amount of $0.1 million compared to the year ended December 31, 2014 in which two loans were added as TDRs in the amount of $5.0 million. The $5.0 million of TDRs added in 2014 were subsequently sold in the fourth quarter of 2014.

During the three months ending September 30, 2015 there was one 1-4 family residential loan modified as a troubled debt restructuring with a recorded investment of $0.1 million; compared to the same three month period ended September 30, 2014 when there were no loans modified as troubled debt restructurings. The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2015 and 2014:



	For the Nine Months Ended September 30, 2015
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
1-4 family residential
Senior lien	2	127		127
Total	2	$	127	$	127

The troubled debt restructurings described above did not have a material impact to the allowance for loan losses and did not result in any additional charge-offs during the nine months ending September 30, 2015.



	For the Nine Months Ended September 30, 2014
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Construction, land & development	1	$	5,013	$	5,013
1-4 family residential
Jr. lien & lines of credit	1	34		34
Total	2	$	5,047	$	5,047

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In the nine months ending September 30, 2015 and the nine months ending September 30, 2014 there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification.

The Company evaluates loan modifications to determine if the modification constitutes a troubled debt restructure. A loan modification constitutes a troubled debt restructure if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its loans with the Company’s debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting guidelines. TDRs are separately identified for impairment disclosures. If a loan is considered to be collateral dependent loan, the TDR is reported, net, at the fair value of the collateral.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following tables present data on impaired loans:



September 30, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Loans with no related allowance recorded:
Commercial
Closed-end	$	24	$	24	$	—	$	16	$	1	$	1
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	—		—		—		461		—		—
CRE - all other
Owner occupied	9		9		—		131		—		—
Non-owner occupied	—		—		—		1,089		—		—
1-4 family residential
Senior lien	305		305		—		319		1		1
Jr. lien & lines of credit	111		111		—		114		4		4
Consumer	—		—		—		—		—		—
Subtotal	449		449		—		2,130		6		6

Loans with an allowance recorded:
Commercial
Closed-end	$	136	$	136	$	86	$	282	$	2	$	2
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	217		508		65		132		1		1
CRE - all other
Owner occupied	467		735		186		676		11		7
Non-owner occupied	3,630		4,509		489		3,236		9		9
1-4 family residential
Senior lien	1,017		1,342		332		1,120		12		11
Jr. lien & lines of credit	187		187		33		222		2		2
Consumer	—		—		—		—		—		—
Subtotal	5,654		7,417		1,191		5,668		37		32
Total	$	6,103	$	7,866	$	1,191	$	7,798	$	43	$	38

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Loans with no related allowance recorded:
Commercial
Closed-end	$	5	$	5	$	—	$	15	$	—	$	—
Line of credit	—		—		—		—		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	648		1,122		—		221		11		11
CRE - all other
Owner occupied	221		261		—		3,337		10		9
Non-owner occupied	4,354		4,753		—		4,084		74		74
1-4 family residential
Senior lien	319		319		—		1,931		5		4
Jr. lien & lines of credit	120		120		—		142		6		6
Consumer	—		—		—		—		—		—
Subtotal	5,667		6,580		—		9,730		106		104

Loans with an allowance recorded:
Commercial
Closed-end	$	459	$	459	$	430	$	1,228	$	4	$	4
Line of credit	—		—		—		940		—		—
Agricultural & AG RE	—		—		—		—		—		—
Construction, land & development	174		332		126		3,833		—		—
CRE - all other
Owner occupied	766		901		138		3,305		2		—
Non-owner occupied	620		620		78		7,737		2		—
1-4 family residential
Senior lien	1,352		1,352		660		2,032		36		32
Jr. lien & lines of credit	265		276		123		268		10		9
Consumer	—		—		—		—		—		—
Subtotal	3,636		3,940		1,555		19,343		54		45
Total	$	9,303	$	10,520	$	1,555	$	29,073	$	160	$	149

The Company determined that there were $0.1 million of loans that were classified as impaired but were considered to be performing (i.e., loans which are accruing interest) loans at September 30, 2015 compared to $1.6 million at December 31, 2014.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following table represents information related to loan portfolio aging:



September 30, 2015	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due or Nonaccrual		Total Past Due		Current		Total Loans
Commercial
Closed-end	$	373	$	49	$	160	$	582	$	23,276	$	23,858
Line of credit	—		—		—		—		42,252		42,252
Agricultural & AG RE	33		—		—		33		46,290		46,323
Construction, land & development	—		—		217		217		24,627		24,844
CRE - all other
Owner occupied	—		371		475		846		158,750		159,596
Non-owner occupied	—		461		3,629		4,090		208,968		213,058
1-4 family residential
Senior lien	1,480		48		1,298		2,826		51,472		54,298
Jr. lien & lines of credit	416		—		231		647		43,787		44,434
Consumer	2		—		—		2		3,253		3,255
Total	$	2,304	$	929	$	6,010	$	9,243	$	602,675	$	611,918



December 31, 2014	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due or Nonaccrual		Total Past Due		Current		Total Loans
Commercial
Closed-end	$	38	$	—	$	450	$	488	$	18,747	$	19,235
Line of credit	—		—		—		—		42,326		42,326
Agricultural & AG RE	150		—		—		150		53,043		53,193
Construction, land & development	231		—		822		1,053		12,807		13,860
CRE - all other
Owner occupied	319		175		739		1,233		141,089		142,322
Non-owner occupied	153		—		4,354		4,507		168,384		172,891
1-4 family residential
Senior lien	1,172		277		1,068		2,517		58,151		60,668
Jr. lien & lines of credit	423		64		316		803		45,001		45,804
Consumer	—		—		—		—		2,901		2,901
Total	$	2,486	$	516	$	7,749	$	10,751	$	542,449	$	553,200

Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans past due over 90 days and still accruing interest at September 30, 2015 or for the year ending December 31, 2014.

Note 5. Fair Value

The Company measures, monitors, and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Fair value guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

based on the reliability of the input assumptions. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements and the categorization of where an asset or liability falls within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are defined as follows:

Level 1 - Unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level 2 - Observable inputs other than level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Securities

Available for Sale Securities. The fair value of securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). If the securities could not be priced using quoted market prices, observable market activity or comparable trades, the financial market was considered not active and the assets were classified as Level 3.

Single Issue Trust Preferred. In 2010 the Company purchased single-issue trust preferred securities that are classified as available for sale. With respect to these securities, the Company looks at rating agency actions, payment history, the capital levels of the banks and the financial performance as filed in regulatory reports. At December 31, 2014, the Company still held $0.8 million of these securities. During 2015, the last of the Company’s single-issue trust preferred securities were called and at September 30, 2015 none were held in the securities portfolio.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes, by measurement hierarchy, the various assets and liabilities of the Company that are measured at fair value on a recurring basis:



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2015
U.S. government agencies	$	40,924	$	—	$	40,924	$	—
State and political subdivisions	14,890		—		14,890		—
U.S. government agency residential
mortgage-backed securities	128,964		—		128,964		—
Collateralized mortgage obligations:
Agency	18,876		—		18,876		—
Equities	2,776		—		2,776		—
Available-for-sale securities	$	206,430	$	—	$	206,430	$	—

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)




	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2014
U.S. government agencies	$	21,109	$	—	$	21,109	$	—
State and political subdivisions	9,028		—		9,028		—
U.S. government agency residential
mortgage-backed securities	99,668		—		99,668		—
Collateralized mortgage obligations:
Agency	38		—		38		—
Equities	2,736		—		2,736		—
Collateralized debt obligations:
Single Issue	762		—		762		—
Corporate	2,030		—		2,030		—
Available-for-sale securities	$	135,371	$	—	$	135,371	$	—

There were no transfers between Level 1 and Level 2 during the first nine months of 2015 and all of 2014.

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

The following table reconciles the beginning and ending balances of the assets of the Company that are measured at fair value on a recurring basis using significant unobservable inputs. There currently are no liabilities of the Company that are measured at fair value on a recurring basis using significant unobservable inputs.



	Securities Available for Sale
	CDOs
	2015		2014
Beginning balance, January 1	$	—	$	169
Transfers into Level 3	—		—
Total gains or losses (realized/unrealized) included in earnings
Sales	—		(169		)
Security impairment	—		—
Payment received	—		—
Other changes in fair value	—		—
Included in other comprehensive income	—		—
Ending Balance, September 30	$	—	$	—

For the period ended September 30, 2015, the Company did not have any assets measured at fair value on a recurring basis using significant unobservable inputs.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Assets Measured at Fair Value on a Non-Recurring Basis

The following table summarizes, by measurement hierarchy, financial assets of the Company that are measured at fair value on a non-recurring basis.



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2015
Impaired loans
CRE - construction, land & development	$	151	$	—	$	—	$	151
OREO property
CRE - construction, land & development	3,585		—		—		3,585
CRE - all other
Owner occupied	455		—		—		455
Non-owner occupied	1,461		—		—		1,461
1-4 family residential
Senior lien	169		—		—		169



	Carrying Amount		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2014
Impaired loans
CRE - all other
Owner occupied	$	184	$	—	$	—	$	184
Non-owner occupied	542		—		—		542
1-4 family residential
Senior lien	201		—		—		201
OREO property
CRE - construction, land & development	2,823		—		—		2,823
CRE - all other
Owner occupied	488		—		—		488
Non-owner occupied	1,111		—		—		1,111
1-4 family residential
Senior lien	47		—		—		47

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Impaired loans had a carrying amount of $0.2 million at September 30, 2015, with no specific loan loss allocation and no effect on the provision for loan losses for the nine month period. In 2014 impaired loans had a carrying amount of $0.9 million with a specific loan loss allocation of $0.5 million during 2014, resulting in an additional provision for loan losses of $0.5 million for the year ended December 31, 2014. The majority of the Bank's impaired loans are collateralized by real estate.

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Any write-downs in the carrying value of a property at the time of acquisition are charged against the allowance for loan losses. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Management periodically reviews the carrying value of other real estate owned. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

OREO properties measured at fair value, less costs to sell, had a net carrying amount of $5.7 million which is made up of the outstanding balance of $7.5 million, net of a valuation allowance of $1.8 million at September 30, 2015. This compares to 2014 when OREO properties with an outstanding balance of $6.0 million was written down to a fair value of $4.5 million.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014:



September 30, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)

Impaired loans			Sales comparison approach	Adjustment for differences between comparable sales
CRE - construction, land & development	$	151			10% - 55% (49%)
OREO property
CRE - construction, land & development	3,585				5% - 70% (22%)
CRE - all other
Owner occupied	455				5% - 50% (15%)
Non-owner occupied	1,461				5% - 50% (17%)
1-4 family residential
Senior lien	169				6% - 55% (39%)

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



December 31, 2014	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)

Impaired loans			Sales comparison approach	Adjustment for differences between comparable sales
CRE - all other
Owner occupied	$	184			10% - 55% (19%)
Non-owner occupied	542				10% - 55% (11%)
1-4 family residential
Senior lien	201				10% - 60% (57%)
OREO property
CRE - construction, land & development	$	2,823			5% - 70% (25%)
CRE - all other
Owner occupied	488				15% - 55% (21%)
Non-owner occupied	1,111				5% - 50% (20%)
1-4 family residential
Senior lien	47				6% - 55% (38%)

The estimated fair values of the Company’s financial instruments are as follows:



			Fair Value measurements at September 30, 2015 Using
	Carrying Value		Level 1		Level 2		Level 3		Total

Financial assets
Cash and cash equivalents	$	45,686	$	45,686	$	—	$	—	$	45,686
Securities	206,430		—		206,430		—		206,430
Restricted securities	8,271		—		—		—		NA
Loans held for sale	214		—		230		—		230
Net loans	603,515		—		—		610,593		610,593
Accrued interest receivable	2,796		—		742		2,054		2,796
Financial liabilities
Deposits	$	709,535	$	—	$	709,884	$	—	$	709,884
Federal funds purchased and
securities sold under
agreements to repurchase	18,869		—		18,869		—		18,869
Federal Home Loan Bank advances	105,000		—		105,421		—		105,421
Subordinated debentures	20,620		—		—		12,655		12,655
Series B mandatory redeemable
preferred stock	268		—		274		—		274
Accrued interest payable	286		—		274		12		286

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



			Fair Value measurements at December 31, 2014 Using
	Carrying Value		Level 1		Level 2		Level 3		Total

Financial assets
Cash and cash equivalents	$	49,167	$	44,167	$	5,000	$	—	$	49,167
Securities	135,371		—		135,371		—		135,371
Restricted securities	6,102		—		—		—		NA
Loans held for sale	364		—		379		—		379
Net loans	545,219		—		—		553,447		553,447
Accrued interest receivable	2,417		—		336		2,081		2,417
Financial liabilities
Deposits	$	698,824	$	—	$	699,471	$	—	$	699,471
Federal funds purchased and
securities sold under
agreements to repurchase	26,691		—		26,691		—		26,691
Federal Home Loan Bank advances	20,000		—		20,546		—		20,546
Notes payable	10,250		—		—		10,264		10,264
Subordinated debentures	20,620		—		—		13,851		13,851
Series B mandatory redeemable
preferred stock	268		—		268		—		268
Accrued interest payable	5,142		—		369		4,773		5,142

Other assets and liabilities of the Company that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. In addition, nonfinancial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earning potential of core deposit accounts, the earnings potential of loan servicing rights, the earnings potential of the trust operations, customer goodwill and similar items.

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. As of September 30, 2015 and December 31, 2014; $45.7 million and $44.2 million was classified as Level 1.

(b) Restricted securities

It is not practical to determine the fair value of restricted securities due to the restrictions placed on its transferability.

Fair values of loans, excluding loans held for sale, are estimated as follows: Fair values for loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(d) Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 2. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

(e) Short-term Borrowings

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.

(f) Other Borrowings

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(g) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification which is consistent with the underlying asset/liability they are associated with.

(h) Off-balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

Note 6. Borrowed Funds and Debt Obligations

The scheduled maturities of advances from the FHLB at September 30, 2015 and December 31, 2014 are as follows:



	September 30, 2015				December 31, 2014
Year	Average Interest Rate		Amount		Average Interest Rate		Amount

2015	0.18	%	85,000		—	%	—
2016	1.66		15,000		1.66		15,000
2017	—		—		—		—
2018	3.64		5,000		3.64		5,000
	0.56		$	105,000	2.16		$	20,000

At September 30, 2015 and December 31, 2014 no FHLB advances had any call provisions. The Company had no variable rate advances at September 30, 2015 and year-end 2014. The advances are at fixed rates ranging from 0.18% to 3.64% for the month ended September 30, 2015 and 1.66% to 3.64% at year-end 2014.

Notes payable consisted of the following for the periods ending at September 30, 2015 and December 31, 2014:



	September 30, 2015		December 31, 2014
Term note ($250) from MB Financial; interest due quarterly at the 90-day LIBOR plus 2.95% with a floor of 6.50% at year-end 2014; secured by 100% of the stock of Centrue Bank. The balance was settled on March 31, 2015.	$	—	$	250
Subordinated debt note ($10,000) from MB Financial; interest due quarterly at the 90-day LIBOR plus 2.95%, which was 3.19% at December 31, 2014. The balance was settled on March 31, 2015.	$	—	$	10,000
	$	—	$	10,250

During the nine month period ended September 30, 2015, in connection with the Company completing a $76.0 million recapitalization event on March 31, 2015, a settlement of obligations involving MB Financial was reached in which the Company recognized a gain of $1.8 million representing the difference between the fair value of the consideration issued in the settlement transaction and the carrying value of the amounts due MB Financial. As a result, the gain has been included as ‘‘Gain on

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

extinguishment of debt’’ within income from continuing operations in the accompanying Consolidated Statements of Income (Loss) for the period ended September 30, 2015. See Note 1 for additional disclosure related to the recapitalization event.

As of December 31, 2014, the Company had $10.3 million outstanding per a loan agreement dated March 31, 2008.

Note 7. Income Taxes

In accordance with current income tax accounting guidance, the Company assessed whether a valuation allowance should be established against their deferred tax assets (DTAs) based on consideration of all available evidence using a “more likely than not” standard. The most significant portions of the deductible temporary differences relate to (1) net operating loss carryforwards and (2) the allowance for loan losses.

In assessing the need for a valuation allowance, both the positive and negative evidence about the realization of DTAs were evaluated. The ultimate realization of DTAs is based on the Company’s ability to carryback net operating losses to prior tax periods, tax planning strategies that are prudent and feasible, the reversal of deductible temporary differences that can be offset by taxable temporary differences and future taxable income.

After evaluating all of the factors previously summarized and considering the weight of the positive evidence compared to the negative evidence, the Company has determined a full valuation adjustment was necessary as of September 30, 2015 and December 31, 2014.

Below is a summary of items included in the deferred tax inventory as of September 30, 2015 and December 31, 2014:



	September 30, 2015			December 31, 2014
Deferred tax assets
Allowance for loan losses	$	3,268		$	3,107
Deferred compensation, other	77			104
Stock based expense	130			130
Net operating loss carryforwards	35,204			36,955
Deferred tax credits	696			697
OREO valuation allowance	1,102			1,080
Donation carryforward	232			232
Capital loss carryforward	—			4
Other	45			45
Total deferred tax assets	40,754			42,354
Deferred tax liabilities
Depreciation	$	(50	)	$	(41	)
Adjustments arising from acquisitions	(227		)	(502		)
Mortgage servicing rights	(844		)	(872		)
Securities available-for-sale	(101		)	(166		)
Federal Home Loan Bank dividend received in stock	(450		)	(451		)
Deferred loan fees & costs	(397		)	(373		)
Prepaid expenses	(190		)	(190		)
Total deferred tax liabilities	(2,259		)	(2,595		)
Valuation allowance	(38,495		)	(39,759		)
Net deferred tax assets	$	—		$	—

Note 8. Share Based Compensation

In April 2003, the Company adopted the 2003 Option Plan. Under the 2003 Option Plan, as amended on April 24, 2007, nonqualified options, incentive stock options, restricted stock and/or stock appreciation rights may be granted to employees and outside directors of the Company and its subsidiaries to purchase the Company's common stock at an exercise price to be determined by the executive and compensation committee. Pursuant to the 2003 Option Plan, 19,000 shares of the Company's unissued common stock had been reserved and were available for issuance upon the exercise of options and rights granted under the 2003 Option Plan. The granted options have an exercise period of seven to ten years from the date of grant.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

In May 2015, the Company adopted the 2015 Stock Compensation Plan. Under the 2015 Stock Compensation Plan nonqualified options, incentive stock options, restricted stock and/or stock appreciation rights may be granted to employees and outside directors of the Company and its subsidiaries to purchase the Company's common stock at an exercise price to be determined by the compensation committee. A total of 430,000 shares have been made available under this plan.

No options or restricted stock were granted or exercised for the nine months ended September 30, 2015 and none were granted or exercised for the year ended December 31, 2014.

There was no compensation cost charged against income for the stock options portion of the equity incentive plans for the nine months ended September 30, 2015 and for the year ended December 31, 2014.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock prior to its deregistration. The Company uses historical data to estimate option exercise and post-vesting termination behavior. (Employee and management options are tracked separately.) The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. There were no options granted for the nine months ended September 30, 2015 and the year ended December 31, 2014.

A status summary of the option plan as of September 30, 2015 and changes during the period ended on that date are presented below:



	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1, 2015	6,063		$	447.19
Granted	—		—
Exercised	—		—
Forfeited	(2,575	)	556.00
Outstanding at end of period	3,488		$	366.87	0.6 years	$	—
Vested or expected to vest	3,488		$	366.87	0.6 years	$	—
Options exercisable at period end	3,488		$	366.87	0.6 years	$	—

Options outstanding at September 30, 2015 and year-end 2014 were as follows:



	Outstanding		Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Life	Number	Weighted Average Exercise Price
September 30, 2015
$157.20 - $390.00	2,160	0.4 years	2,160	$	228.33
416.40 - 558.90	—	0.0 years	—	—
570.90 - 699.30	1,328	0.9 years	1,328	592.20
	3,488	0.6 years	3,488	$	366.87

December 31, 2014:
$157.20 - $390.00	2,160	1.2 years	2,160	$	228.33
416.40 - 558.90	2,077	0.2 years	2,077	543.29
570.90 - 699.30	1,826	1.6 years	1,826	596.78
	6,063	1.0 year	6,063	$	447.19

As of September 30, 2015 and December 31, 2014, there was no unrecognized compensation cost related to non-vested stock options granted under the 2003 Option Plan.

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Note 9. Regulatory Matters

The Company and Centrue Bank are subject to regulatory capital requirements administered by federal and state banking agencies that involve the quantitative measure of their assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. Quantitative measures established by regulations to ensure capital adequacy require the Company and Centrue Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 capital and Common Equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and, for the Bank, Tier 1 capital (as defined in the regulations) to average assets (as defined in the regulations). Failure to meet minimum capital requirements may cause regulatory bodies to initiate certain discretionary and/or mandatory actions that, if undertaken, may have a direct material effect on our financial statements. The Company, as a financial holding company, is required to be “adequately capitalized” in the capital categories shown in the table below. As of September 30, 2015, the Company is "adequately capitalized." As of September 30, 2015, Centrue Bank met all capital adequacy requirements to which they were subject, including the guidelines to be considered “well capitalized.”

On July 2, 2013, the Federal Reserve Board and the FDIC approved rules that implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act. The rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Tier 2 risk-based capital requirements. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.



	Actual				To Be Adequately Capitalized				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of September 30, 2015
Total capital (to risk-weighted assets)
Centrue Financial	$	113,922	15.7	%	$	58,027	8.0	%	N/A	N/A
Centrue Bank	112,249		15.5		57,929		8.0		72,411	10.0
Common equity tier I (to risk-weighted assets)
Centrue Financial	$	82,883	11.4		$	32,640	4.5		N/A	N/A
Centrue Bank	103,846		14.3		32,585		4.5		47,067	6.5
Tier I capital (to risk-weighted assets)
Centrue Financial	$	105,519	14.6		$	43,521	6.0		N/A	N/A
Centrue Bank	103,846		14.3		43,447		6.0		57,929	8.0
Tier I leverage ratio (to average assets)
Centrue Financial	$	105,519	11.5		$	41,334	4.5		N/A	N/A
Centrue Bank	103,846		11.3		41,305		4.5		45,894	5.0



	Actual				To Be Adequately Capitalized				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of December 31, 2014
Total capital (to risk-weighted assets)
Centrue Financial	$	57,829	9.6	%	$	47,991	8.0	%	N/A	N/A
Centrue Bank	70,717		11.8		47,792		8.0		59,740	10.0
Tier I capital (to risk-weighted assets)
Centrue Financial	$	41,118	6.9		$	23,995	4.0		N/A	N/A
Centrue Bank	63,243		10.6		23,896		4.0		35,844	6.0
Tier I leverage ratio (to average assets)
Centrue Financial	$	41,118	4.9		$	33,345	4.0		N/A	N/A
Centrue Bank	63,243		7.6		33,231		4.0		41,539	5.0

CENTRUE FINANCIAL CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

In December 2009, the Company and the Bank entered into a written agreement (the “Agreement”) with the Federal Reserve-Chicago and the Illinois Department of Financial and Professional Regulation (“IDFPR”). The Agreement is based on the findings of the Federal Reserve-Chicago and the IDFPR during an examination that commenced in June 2009 (the “Examination”). Since the completion of the Examination, the boards of directors of the Company and the Bank have aggressively taken steps to address the findings of the Examination. The Company and the Bank have taken an active role in working with the Federal Reserve Board and the IDFPR to improve the condition of the Bank and have addressed the items included in the Agreement.

Under the terms of the Agreement, the Bank must prepare and submit written plans and/or reports to the regulators that address the following items: strengthening the Bank’s credit risk management practices; improving loan underwriting and loan administration; improving asset quality by enhancing the Bank’s position on problem loans through repayment, additional collateral or other means; reviewing and revising as necessary the Bank’s allowance for loan and lease losses policy; maintaining sufficient capital at the Bank; implementing an earnings plan and comprehensive budget to improve and sustain the Bank’s earnings; and improving the Bank’s liquidity position and funds management practices. While the Agreement remains in place, the Company and the Bank may not pay dividends and the Company may not increase debt or redeem any shares of its stock without the prior written consent of the regulators. Further, the Bank will comply with applicable laws and regulations. The Company and the Bank are in compliance with all the requirements specified in the Agreement.

The Company and the Bank believe that the proactive steps that have been taken by the board of directors and by management will help the Company and the Bank address the Agreement and the concerns leading to the Agreement.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following management discussion and analysis (“MD&A”) is intended to address the significant factors affecting the Company’s results of operations and financial condition for the nine months ended September 30, 2015 as compared to the same period in 2014. In the opinion of management, all normal and recurring adjustments which are necessary to fairly present the results for the interim periods presented have been included. The preparation of financial statements requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. When we use the terms “Centrue,” the “Company,” “we,” “us,” and “our,” we mean Centrue Financial Corporation, a Delaware corporation, and its consolidated subsidiaries. When we use the term the “Bank,” we are referring to our wholly owned banking subsidiary, Centrue Bank.

The MD&A should be read in conjunction with the consolidated financial statements of the Company, and the accompanying notes thereto. Actual results could differ from those estimates. All financial information in the following tables is displayed in thousands (000s), except per share data.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, changes in these assumptions and estimates could significantly affect the Company's financial position or results of operations. Actual results could differ from those estimates. Those critical accounting policies that are of particular significance to the Company are discussed in Note 1 of the Company’s registration statement filed with the SEC on October 15, 2015.

Securities: Securities are classified as available-for-sale when the Company may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income. All of the Company’s securities are classified as available-for-sale. For all securities, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Due to the limited nature of the market for certain securities, the fair value and potential sale proceeds could be materially different in the event of a sale.

Realized securities gains or losses are reported in securities gains (losses), net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. Declines in the fair value of available for sale securities below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary. If the Company (a) has the intent to sell a debt security or (b) is more likely than not will be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss. If neither of these conditions are met, the Company evaluates whether a credit loss exists. The impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of total impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income.

The Company also evaluates whether the decline in fair value of an equity security is temporary or other-than-temporary. In determining whether an unrealized loss on an equity security is temporary or other-than-temporary, management considers various factors including the magnitude and duration of the impairment, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the equity security to forecasted recovery.

Allowance for Loan Losses: The allowance for loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s estimate of probable credit losses inherent in the loan portfolio. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for loan losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

The allowance for loan losses is based on an estimation computed pursuant to the requirements of Financial Accounting Standards Board guidance and rules stating that the analysis of the allowance for loan losses consists of three components:

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

•

Specific Component. The specific credit allocation component is based on an analysis of individual impaired loans over a fixed-dollar amount where the internal credit rating is at or below a predetermined classification for which the recorded investment in the loan exceeds its fair value. The fair value of the loan is determined based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less cost of sale. These analyses involve a high degree of judgment in estimating the amount of loss associated with specific loans, including estimating the amount and timing of future cash flows and collateral values;

•

Historical Loss Component. The historical loss component is mathematically based using a modified loss migration analysis that examines historical loan loss experience for each loan category. The loss migration is performed quarterly and loss factors are updated regularly based on actual experience. The general portfolio allocation element of the allowance for loan losses also includes consideration of the amounts necessary for concentrations and changes in portfolio mix and volume. The methodology utilized by management to calculate the historical loss portion of the allowance adequacy analysis is based on historical losses. This historical loss period is based on a weighted twelve-quarter average (3 years); and

•

Qualitative Component. The qualitative component requires qualitative judgment and estimates reserves based on general economic conditions as well as specific economic factors believed to be relevant to the markets in which the Company operates. The process for determining the allowance (which management believes adequately considers all of the potential factors which might possibly result in credit losses) includes subjective elements and, therefore, may be susceptible to significant change.

To the extent actual outcomes differs from management estimates, additional provision for credit losses could be required that could adversely affect the Company’s earnings or financial position in future periods.

Other Real Estate Owned: Other real estate owned includes properties acquired in partial or total satisfaction of certain loans. Properties are recorded at fair value less costs to sell when acquired, establishing a new cost basis. Any write-downs in the carrying value of a property at the time of acquisition are charged against the allowance for loan losses. Management periodically reviews the carrying value of other real estate owned. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized.

General

Centrue Financial Corporation is a bank holding company organized under the laws of the State of Delaware. The Company provides a full range of products and services to individual and corporate customers extending from the far western and southern suburbs of the Chicago metropolitan area across Central Illinois down to the metropolitan St. Louis area. These products and services include demand, time, and savings deposits; lending; mortgage banking, brokerage, asset management, and trust services. Brokerage, asset management, and trust services are provided to our customers on a referral basis to third party providers. The Company is subject to competition from other financial institutions, including banks, thrifts and credit unions, as well as nonfinancial institutions providing financial services. Additionally, the Company and its subsidiary, Centrue Bank, are subject to regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Results of Operations

Net Income (Loss)

Net income for the three months ended September 30, 2015 equaled $1.1 million or $0.11 per common diluted share as compared to net income of $0.6 million or $(1.41) per common diluted share in the third quarter of 2014. For the first nine months of 2015, the Company had net income of $4.0 million or $3.68 per common diluted share as compared to net income of $1.5 million or $(5.68) per common diluted share for the same period in 2014.

The results for the first nine months of 2015 were positively impacted by a $1.8 million gain on extinguishment of debt, representing the difference between the fair value of the consideration issued in the settlement transaction and the carrying value of the amounts due MB Financial in connection with the settlement of obligations. During the first nine months of 2014, the Company recorded a $2.3 million provision for loan losses offset by a $0.8 million gain on sale of other assets.

Net Interest Income/ Margin

Net interest income is the difference between income earned on interest-earning assets and the interest expense incurred for the funding sources used to finance these assets. Changes in net interest income generally occur due to fluctuations in the volume of earning assets and paying liabilities and rates earned and paid, respectively, on those assets and liabilities. The net yield on total interest-earning assets, also referred to as net interest margin, represents net interest income divided by average interest-earning assets. Net interest margin measures how efficiently the Company uses its earning assets and underlying capital. The Company’s long-term objective is to manage those assets and liabilities to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risks. For purposes of this discussion, both net interest income and margin have been adjusted to a fully tax equivalent basis for certain tax-exempt securities and loans.

Fully tax equivalent net interest income for the third quarter 2015 totaled $6.8 million, representing an increase of $0.7 million or 10.63% compared to $6.1 million for the same period in 2014. This increase in income is primarily due to an increase in interest earning assets and a reduction in the cost of funds.

The net interest margin was 3.34% for the third quarter of 2015, representing an increase of 1 basis point from the 3.33% recorded at the third quarter of 2014. The improvement in the net interest margin is being driven by the addition of new earnings assets, decreasing cost of funds and the reduction in nonperforming loans.

Fully tax equivalent net interest income for the nine months ended September 30, 2015 totaled $19.3 million, representing an increase of $1.1 million or 5.87% compared to $18.2 million earned during the same period in 2014. The net interest margin was 3.42% for the nine months ended September 30, 2015, representing an increase of 11 basis points from 3.31% recorded in the same period of 2014. The increase of net interest income and the net interest margin was driven by the same factors impacting the third quarter.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
	Three Months Ended September 30,
	2015						2014
	Average Balance		Interest/Income Expense		Average Rate		Average Balance		Interest/Income Expense		Average Rate		Change due to:
													Volume			Rate			Net
ASSETS
Interest-earning assets
Interest-earning deposits	$	2,011	$	16	3.16	%	$	3,534	$	27	3.03	%	$	(9	)	$	(2	)	$	(11	)
Securities
Taxable⁽¹⁾	196,193		794		1.61		138,243		543		1.56		262			(11		)	251
Exempt from federal income taxes⁽¹⁾⁽²⁾	7,145		70		3.89		6,412		94		5.82		64			(88		)	(24		)
Total securities (tax equivalent)	203,338		864		1.69		144,655		637		1.75		326			(99		)	227
Federal funds sold	620		4		2.56		5,620		11		0.78		(1		)	(6		)	(7		)
Loans^(3)(4)(5)
Commercial	104,347		1,062		4.04		87,540		920		4.17		221			(79		)	142
Real estate	490,627		5,368		4.34		485,036		5,341		4.37		147			(120		)	27
Installment and other	2,911		48		6.54		2,908		48		6.55		7			(7		)	—
Gross loans (tax equivalent)	597,885		6,478		4.3		575,484		6,309		4.35		375			(206		)	169
Total interest-earnings assets	803,854		7,362		3.63		729,293		6,984		3.80		691			(313		)	378
Noninterest-earning assets
Cash and cash equivalents	46,200						71,664
Premises and equipment, net	22,341						22,939
Other assets	47,308						55,718
Total nonearning assets	115,849						150,321
Total assets	$	919,703					$	879,614



LIABILITIES & STOCKHOLDERS’
EQUITY
Interest-bearing liabilities
NOW accounts	131,685		30		0.09		130,939		35		0.11		1			(6		)	(5		)
Money market accounts	119,833		54		0.18		124,349		61		0.19		(2		)	(5		)	(7		)
Savings deposits	124,089		3		0.01		117,409		3		0.01		—			—			—
Time deposits	193,727		229		0.47		241,833		399		0.65		(78		)	(92		)	(170		)
Federal funds purchased and repurchase
Agreements	18,510		13		0.28		18,398		14		0.30		—			(1		)	(1		)
Advances from FHLB	75,000		138		0.73		33,913		117		1.37		99			(78		)	21
Notes payable	20,888		132		2.51		31,138		242		3.08		(38		)	(72		)	(110		)
Total interest-bearing liabilities	683,732		599		0.35		697,979		871		0.50		(18		)	(254		)	(272		)
Noninterest-bearing liabilities
Noninterest-bearing deposits	147,363						135,746
Other liabilities	5,114						9,471
Total noninterest-bearing liabilities	152,477						145,217
Stockholders’ equity	83,494						36,418
Total liabilities and stockholders’ equity	$	919,703					$	879,614
Net interest income (tax equivalent)			$	6,763					$	6,113			$	709		$	(59	)	$	650
Net interest income (tax equivalent)
to total earning assets					3.34	%					3.33	%
Interest-bearing liabilities to earning assets					85.06	%					95.71	%

⁽¹⁾ Average balance and average rate on securities classified as available-for-sale is based on historical amortized cost balances.

⁽²⁾ Interest income and average rate on tax exempt securities and loans are reflected on a tax equivalent basis based upon a statutory federal income tax

rate of 34%.

⁽³⁾ In 2015 there was $10 in tax equivalent interest included in gross loans and $12 in 2014.

⁽⁴⁾ Nonaccrual loans are included in the average balances; overdraft loans are excluded in the balances.

⁽⁵⁾ Loan fees are included in the specific loan category.

⁽⁶⁾ Average balances are derived from daily balances.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



AVERAGE BALANCE SHEET
AND ANALYSIS OF NET INTEREST INCOME
	Nine Months Ended September 30,
	2015						2014
	Average Balance		Interest/Income Expense		Average Rate		Average Balance		Interest/Income Expense		Average Rate		Change due to:
													Volume			Rate			Net
ASSETS
Interest-earning assets
Interest-earning deposits	$	2,983	$	51	2.29	%	$	3,490	$	66	2.53	%	$	(2	)	$	(13	)	$	(15	)
Securities
Taxable⁽¹⁾	168,089		2,020		1.61		145,564		1,766		1.62		291			(37		)	254
Exempt from federal income taxes⁽¹⁾⁽²⁾	5,905		185		4.19		6,505		284		5.84		67			(166		)	(99		)
Total securities (tax equivalent)	173,994		2,205		1.69		152,069		2,050		1.80		358			(203		)	155
Federal funds sold	2,543		16		0.84		5,620		32		0.76		(16		)	—			(16		)
Loans^(3)(4)(5)
Commercial	101,279		3,087		4.08		94,393		2,929		4.15		274			(116		)	158
Real estate	471,568		15,664		4.44		477,517		15,757		4.41		(73		)	(20		)	(93		)
Installment and other	2,932		132		6.02		2,714		125		6.16		8			(1		)	7
Gross loans (tax equivalent)	575,779		18,883		4.38		574,624		18,811		4.38		209			(137		)	72
Total interest-earnings assets	755,299		21,155		3.74		735,803		20,959		3.81		549			(353		)	196
Noninterest-earning assets
Cash and cash equivalents	46,262						61,487
Premises and equipment, net	22,446						23,018
Other assets	48,528						56,834
Total nonearning assets	117,236						141,339
Total assets	$	872,535					$	877,142



LIABILITIES & STOCKHOLDERS’
EQUITY
Interest-bearing liabilities
NOW accounts	118,842		67		0.08		117,505	75		0.09		4			(12		)	(8		)
Money market accounts	119,721		159		0.18		122,584	178		0.19		1			(20		)	(19		)
Savings deposits	122,587		10		0.01		118,267	9		0.01		—			1			1
Time deposits	197,760		704		0.48		256,457	1,375		0.72		(239		)	(432		)	(671		)
Federal funds purchased and repurchase
Agreements	17,856		37		0.28		17,515	39		0.30		2			(4		)	(2		)
Advances from FHLB	49,737		368		0.99		28,407	340		1.60		238			(210		)	28
Notes payable	24,230		509		2.81		31,138	713		3.06		(160		)	(44		)	(204		)
Total interest-bearing liabilities	650,733		1,854		0.38		691,873	2,729		0.53		(154		)	(721		)	(875		)
Noninterest-bearing liabilities
Noninterest-bearing deposits	148,838						139,395
Other liabilities	6,804						9,673
Total noninterest-bearing liabilities	155,642						149,068
Stockholders’ equity	66,160						36,201
Total liabilities and stockholders’ equity	$	872,535					877,142
Net interest income (tax equivalent)			$	19,301				$	18,230			$	(2,023	)	$	(247	)	$	(2,270	)
Net interest income (tax equivalent)
to total earning assets					3.42	%				3.31	%
Interest-bearing liabilities to earning assets					86.16	%				94.03	%

⁽¹⁾ Average balance and average rate on securities classified as available-for-sale is based on historical amortized cost balances.

⁽²⁾ Interest income and average rate on tax exempt securities and loans are reflected on a tax equivalent basis based upon a statutory federal income tax

rate of 34%.

⁽³⁾ In 2015 there was $46 in tax equivalent interest included in gross loans and $44 in 2014.

⁽⁴⁾ Nonaccrual loans are included in the average balances; overdraft loans are excluded in the balances.

⁽⁵⁾ Loan fees are included in the specific loan category.

⁽⁶⁾ Average balances are derived from daily balances.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Provision for Loan Losses

The amount of the provision for loan losses is based on management’s evaluations of the loan portfolio, with particular attention directed toward nonperforming, impaired and other potential problem loans. During these evaluations, consideration is also given to such factors as management's evaluation of specific loans, the level and composition of impaired loans, other nonperforming loans, other identified potential problem loans, historical loss experience, results of examinations by regulatory agencies, results of the independent asset quality review process, the market value of collateral, the estimate of discounted cash flows, the strength and availability of guarantees, concentrations of credits and various other factors, including concentration of credit risk in various industries and current economic conditions.

There was no provision for loan losses for the third quarter 2015 compared to $0.7 million for the third quarter 2014. As for the first nine months of 2015, the Company did not record a provision for loans losses in comparison to $2.3 million for the first nine months of 2014. The lack of need for a provision charge during the period was driven by the following factors:


•	No material migrations of performing loans to nonperforming status from year-end 2014 to September 30, 2015;


•	Charge-offs during the period were offset by recoveries, resulting in net recoveries for the first nine months;


•	Asset quality significantly improved from the prior year as a result of bulk asset sale and successful troubled loan workout strategies;


•	Continued stabilization of collateral values.

Management continues to update collateral values and evaluate the level of specific allocations for impaired loans. As impaired loans have moved through the liquidation process, many of the previously established specific allocations have been charged off.

Noninterest Income

Noninterest income consists of a wide variety of fee-based revenues, including bank-related service charges on deposits, mortgage revenues and increases in cash surrender value on bank-owned life insurance. Noninterest income totaled $3.2 million for the three months ended September 30, 2015, compared to $3.2 million for the same period in 2014. Excluding gains related to the sale of OREO, securities and other irregularly occurring income, noninterest income decreased by $0.1 million or 3.9%. This $0.1 million decrease was primarily due to a decline in service charge income and mortgage banking income.

For the nine months ended September 30, 2015, noninterest income was flat at $9.8 million in comparison to the same time period in 2014. Excluding the above referenced irregularly occurring items, the 2015 period saw a decrease of $0.5 million or 6.5% in noninterest income compared to the same period in 2014.

Noninterest Expense

Noninterest expense is comprised primarily of compensation and employee benefits, occupancy and other operating expense. Total noninterest expense for the third quarter of 2015 was $8.8 million, compared to $8.0 million recorded during the same period in 2014. Excluding OREO valuation adjustments and other irregularly occurring items from both periods, noninterest expense levels increased by $0.2 million, or 2.6%. This $0.2 million increase was largely recognized in the salary and benefits category but was offset by a substantial decrease in the FDIC insurance costs.

For the nine month period ended September 30, 2015, noninterest income was $25.0 million, compared to $24.2 million during the same period in the prior year. Excluding OREO valuation adjustments and other irregularly occurring items, noninterest expense increased by $0.5 million or 2.2% . The primary reason for this $0.5 million increase was attributed to the same reasons as stated above.

Applicable Income Taxes

The Company recorded an immaterial tax expense for the nine months ended September 30, 2015 despite having a full valuation allowance on its deferred tax assets. This was due to estimated Alternative Minimum Tax due on taxable income that could not be offset with net operating loss carry-forwards or credits per IRS guidelines. Excluding this expense, no tax expense or benefit was recorded for the nine months ended September 30, 2015 and for the same period in 2014.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Financial Condition

General

Following are highlights of the September 30, 2015 balance sheet when compared to December 31, 2014:

Securities. The primary strategic objective of the Company’s $206.4 million securities - available-for-sale from September 30, 2015, which excludes restricted securities, is to minimize interest rate risk, maintain sufficient liquidity, and maximize return. In managing the securities portfolio, the Company minimizes any credit risk and avoids investments in sophisticated and complex investment products. The portfolio includes several callable agency debentures, adjustable rate mortgage pass-throughs, municipal bonds and collateralized mortgage obligations. Collateralized mortgage obligations currently owned are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The Company does not have any securities classified as trading or held-to-maturity.

The Company’s financial planning anticipates income streams generated by the securities portfolio based on normal maturity and reinvestment. Securities classified as available-for-sale, carried at fair value, were $206.4 million at September 30, 2015 compared to $135.4 million at December 31, 2014. The Company also holds Federal Reserve Board and Federal Home Loan Bank stock which are classified as restricted securities of $8.3 million at September 30, 2015 and $6.1 million at December 31, 2014.

Loans. Total loans, including loans held for sale, equaled $612.1 million, representing an increase of $58.5 million, or 10.57% from December 31, 2014. The net increase from year-end 2014 was related to a combination of new loan growth and normal seasonal line draws. Competition for new commercial loan opportunities and loan renewals continues to be strong and pressures loan yields.

Deposits. Total deposits equaled $709.5 million at September 30, 2015 compared to $698.8 million recorded at December 31, 2014. The September 30, 2015 deposit balance represents an increase of $10.7 million or 1.53% from December 31, 2014. The net increase from year-end 2014 was largely related to initiatives aimed at deepening deposit relationships with loan customers and a general increase in deposits from existing account holders as noncore and brokered time deposits matured and were not replaced.

Nonperforming Assets

The Company's financial statements are prepared on the accrual basis of accounting, including the recognition of interest income on its loan portfolio, unless a loan is placed on nonaccrual status. Loans are placed on nonaccrual status when there are serious doubts regarding the collectibility of all principal and interest due under the terms of the loans. If a loan is placed on nonaccrual status, the loan does not generate current period income for the Company and any amounts received are generally applied first to principal and then to interest. It is the policy of the Company not to renegotiate the terms of a loan because of a delinquent status. Rather, a loan is generally transferred to nonaccrual status if it is not in the process of collection and is delinquent in payment of either principal or interest beyond 90 days.

The classification of a loan as nonaccrual does not necessarily indicate that the principal is uncollectible, in whole or in part. The Bank makes a determination as to collectibility on a case-by-case basis and considers both the adequacy of the collateral and the other resources of the borrower in determining the steps to be taken to collect nonaccrual loans. The final determination as to the steps taken is made based upon the specific facts of each situation. Alternatives that are typically considered to collect nonaccrual loans are foreclosure, collection under guarantees, loan restructuring, or judicial collection actions.

Each of the Company's commercial loans is assigned a rating based upon an internally developed grading system. A separate credit administration department also reviews grade assignments on a quarterly basis. Management continuously monitors nonperforming, impaired, and past due loans in an effort to prevent further deterioration of these loans. The Company uses an independent third-party for loan review of new and existing loans.

CENTRUE FINANCIAL CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(TABLE AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The following table sets forth a summary nonperforming assets:



	September 30,			December 31,
	2015			2014
Nonaccrual loans (including TDRs)	$	6,010		$	7,749
TDRs still accruing interest	25			—
Loans 90 days past due and still accruing interest	—			—
Total nonperforming loans	$	6,035		$	7,749
Other real estate owned	9,755			10,256
Total nonperforming assets	$	15,790		$	18,005

Nonperforming loans to total end of period loans	0.99		%	1.40		%
Nonperforming assets to total end of period loans	2.58			3.25
Nonperforming assets to total end of period assets	1.67			2.20

The Company’s level of nonperforming assets has declined significantly over the past two years mainly due to the sale of $35.2 million of troubled assets through the bulk asset sale completed on December 5, 2014 which included the sale of $9.5 million in nonaccrual loans and $7.7 million in OREO. Total nonperforming assets declined $2.2 million to $15.8 million, or 1.67% of total assets, at September 30, 2015 from $18.0 million at December 31, 2014. Total nonperforming assets included $0.03 million in accruing troubled debt restructures, $9.8 million of foreclosed assets and repossessed real estate, and $6.0 million of nonaccrual loans compared to $10.3 million of foreclosed assets and $7.7 million of nonaccrual loans at December 31, 2014.

Nonperforming Loans

Nonperforming loans (nonaccrual, 90 days past due and troubled debt restructures) decreased $1.7 million from December 31, 2014 to September 30, 2015, largely due to successful workout asset sale strategies.

The level of nonperforming loans to end of period loans was 0.99% as of September 30, 2015 as compared to 1.40% as of December 31, 2014. As a result of the decrease in the nonperforming loans, the allowance to nonperforming loan coverage ratio increased to 139.24% for the period ended September 30, 2015 from 102.99% for the year ended December 31, 2014.



	Payments Due by Period
	Within 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
Contractual Obligations
Certificates of deposit	$	145,722	$	44,325	$	6,482	$	—	$	196,529
Operating leases	276		101		—		—		377
Series B mandatory redeemable preferred stock	—		268		—		—		268
Subordinated debentures	—		—		—		20,620		20,620
FHLB advances	100,000		5,000		—		—		105,000
Total contractual cash obligations	$	245,998	$	49,694	$	6,482	$	20,620	$	322,794


•	management’s ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of the Company’s net interest income;


•	fluctuations in the value of the Company’s investment securities;


•	the Company’s ability to ultimately collect on any downgraded loan relationships;


•	the Company’s ability to respond and adapt to economic conditions in our geographic market;


•	the Company’s ability to adapt successfully to technological changes to compete effectively in the marketplace;


•	credit risks and risks from concentrations (by geographic area and by industry) within the Company’s loan portfolio and individual large loans;


•	operational risks, including data processing system failures or fraud;


•	the ability to successfully acquire low cost deposits or funding;


•	the ability to successfully execute strategies to increase noninterest income;


•	the ability to successfully grow non-commercial real estate loans;


•	the ability of the Company to continue to realize cost savings and revenue generation opportunities in connection with the synergies of centralizing operations;


•	the ability to adopt and implement new regulatory requirements as dictated by the SEC, FASB or other rule-making bodies which govern our industry;


•	changes in the general economic or industry conditions, nationally or in the communities in which the Company conducts business;


•	the Company’s ability to raise additional capital, if available, to sustain growth or operating results;


•	the Company’s ability to dispose of other real estate owned (“OREO”) at reasonable values;


•	the Company's reliance on third parties for information such as appraisal values, credit scores, and IT capabilities.



	Change in Net Interest Income Over One Year Horizon
	September 30, 2015					December 31, 2014
	Change					Change
	$			%		$			%
+300 bp	$	62		0.23	%	$	1,561		6.53	%
+200 bp	17			0.06		978			4.09
+100 bp	52			0.19		499			2.09

Base	—			—		—			—

- 100 bp	(923		)	(3.43	)	(1,091		)	(4.56	)



31.1		Certification of Kurt R. Stevenson, President and Chief Executive Officer, required by Rule 13a - 14(a).
31.2		Certification of Daniel R. Kadolph, Executive Vice President and Chief Financial Officer required by Rule 13a - 14(a).
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Company’s President and Chief Executive Officer.
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Company’s Executive Vice President and Chief Financial Officer.
101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014; (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and September 30, 2014; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and September 30, 2014; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and September 30, 2014; and (v) Notes to Unaudited Consolidated Financial Statements.



		CENTRUE FINANCIAL CORPORATION

Date:	November 13, 2015	By:	/s/ Kurt R. Stevenson
			Kurt R. Stevenson
			President and Chief Executive Officer