United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File number 000-49699

Centra Financial Holdings, Inc.

(Exact name of registrant as specified in its charter)

West Virginia (State or other jurisdiction of incorporation or organization)		55-0770610 (I.R.S. Employer Identification No)

990 Elmer Prince Drive
P. O. Box 656
Morgantown, West Virginia 26507-0656
(Address of principal executive offices, zip code)

304-598-2000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, address, and fiscal year, if changed since last report)

     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 þ     No o

     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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

     Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Check one:

     

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

     Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes o     No þ

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

     As of October 31, 2009, the number of shares outstanding of the registrant’s only class of common stock was 7,039,882.

 

 

Centra Financial Holdings, Inc.

Table of Contents

		Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets: September 30, 2009 and December 31, 2008			1
Consolidated Statements of Income Nine and Three Months ended September 30, 2009 and September 30, 2008			2
Consolidated Statements of Stockholders’ Equity Nine Months ended September 30, 2009 and September 30, 2008			3
Consolidated Statements of Cash Flows Nine Months ended September 30, 2009 and September 30, 2008			4
Notes to Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations			12
Item 3. Quantitative and Qualitative Disclosure of Market Risk			27
Item 4. Controls and Procedures			27
Part II. Other Information			28
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Submission of Matters to a Vote of Security Holders			28
Item 5. Other Information			28
Item 6. Exhibits			28
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Part I. Financial Information

Item 1. Financial Statements

Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets

		September 30				December 31
		2009				2008
(Dollars in Thousands, Except Per Share Data)		(Unaudited)				(Note B)
Assets
Cash and due from banks		$	6,457			$	18,646
Interest-bearing deposits in other banks			5,235				1,650
Federal funds sold			47,220				—
Total cash and cash equivalents			58,912				20,296
Available-for-sale securities, at fair value (amortized cost of $126,346 at September 30, 2009 and $117,740 at December 31, 2008)			129,267				119,550
Other investment securities, at cost			2,922				1,993
Loans, net of unearned income			1,030,869				1,025,212
Allowance for loan losses			(16,482	)			(16,367	)
Net loans			1,014,387				1,008,845
Premises and equipment, net			22,803				21,446
Loans held for sale			2,724				1,961
Goodwill and other intangible assets			15,742				16,297
Other assets			27,251				23,169
Total assets		$	1,274,008			$	1,213,557
Liabilities
Deposits
Non-interest bearing		$	151,260			$	132,229
Interest bearing			952,748				880,164
Total deposits			1,104,008				1,012,393
Short-term borrowings			34,230				75,285
Long-term debt			20,000				20,000
Other liabilities			12,539				10,637
Total liabilities			1,170,777				1,118,315
Stockholders’ equity
Preferred stock, $1 par value, 1,000,000 authorized, none issued			—				—
Common stock, $1 par value, 50,000,000 authorized, 6,994,921 and 6,804,084 issued and outstanding on September 30, 2009 and December 31, 2008, respectively			6,995				6,804
Additional paid-in capital			95,901				93,887
Retained earnings (deficit)			(1,418	)			(6,535	)
Accumulated other comprehensive gain			1,753				1,086
Total stockholders’ equity			103,231				95,242
Total liabilities and stockholders’ equity		$	1,274,008			$	1,213,557

Notes to consolidated financial statements are an integral part of these statements.

Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Income

		Nine Months Ended								Three Months Ended
		September 30								September 30
(Unaudited) (Dollars in Thousands Except Per Share Data)		2009				2008				2009				2008
Interest income
Loans, including fees		$	45,652			$	47,692			$	15,223			$	16,069
Loans held for sale			126				135				27				41
Securities available-for-sale			3,066				4,102				977				1,215
Interest bearing bank balances			1				22				—				3
Federal funds sold			10				313				6				49
Total interest income			48,855				52,264				16,233				17,377
Interest expense
Deposits			16,103				21,377				5,082				6,835
Short-term borrowings			242				704				58				317
Long-term debt			459				802				130				243
Total interest expense			16,804				22,883				5,270				7,395
Net interest income			32,051				29,381				10,963				9,982
Provision for credit losses			2,506				1,971				1,186				813
Net interest income after provision for credit losses			29,545				27,410				9,777				9,169
Other income
Service charges on deposit accounts			2,712				2,071				952				877
Other service charges and fees			1,858				1,818				644				614
Secondary market income			1,067				995				281				276
Security (losses) gains			(336	)			212				—				17
Other			540				687				153				236
Total other income			5,841				5,783				2,030				2,020
Other expense
Salary and employee benefits			11,501				12,430				4,019				4,020
Occupancy expense			2,025				1,901				745				631
Equipment expense			1,741				1,596				578				560
Advertising			1,122				1,014				431				344
Professional fees			669				902				188				381
Data processing			1,880				1,620				617				587
Other outside services			761				667				246				251
Regulatory assessment			1,526				536				389				188
Other			3,370				3,826				1,217				1,253
Total other expense			24,595				24,492				8,430				8,215
Net income before income tax			10,791				8,701				3,377				2,974
Income tax expense			3,709				2,917				1,223				945
Net income			7,082				5,784				2,154				2,029
Dividends and accretion on preferred stock (TARP)			923				—				—				—
Net income available to common shareholders		$	6,159			$	5,784			$	2,154			$	2,029
Basic earnings per share		$	0.89			$	0.88			$	0.31			$	0.31
Diluted earnings per share		$	0.85			$	0.81			$	0.29			$	0.28
Basic weighted-average shares outstanding			6,912,570				6,578,798				6,970,533				6,587,614
Diluted weighted-average shares outstanding			7,284,451				7,127,680				7,327,725				7,120,929
Cash dividends declared per share		$	0.15			$	0.15			$	0.05			$	0.05

Notes to consolidated financial statements are an integral part of these statements.

Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Nine Months Ended September 30, 2009 and 2008

																		Accumulated
										Additional				Retained				Other
		Preferred				Common				Paid-in				Earnings				Comprehensive
(Unaudited) (Dollars in Thousands)		Stock				Stock				Capital				(Deficit)				Income				Total
Balance, January 1, 2008		$	—			$	5,971			$	81,580			$	(547	)		$	916			$	87,920
Issuance of common stock			—				18				99				—				—				117
Stock Based Compensation			—				—				168				—				—				168
Adoption of Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements			—				—				—				(171	)			—				(171	)
Cash dividend declared on common stock, $0.15 per share			—				—				—				(898	)			—				(898	)
Comprehensive income:
Net income			—				—				—				5,784				—				5,784
Other comprehensive income:
Change in net unrealized gain (loss) on available-for-sale securities, net of income tax benefit of $(128)			—				—				—				—				(192	)			(192	)
Reclassification adjustment for gains on securities included in net income, net of taxes of $85			—				—				—				—				127				127
Net unrealized gain on available-for-sale securities, net of income tax of $(43)			—				—				—				—				—				(65	)
Total comprehensive income																							5,719
Balance, September 30, 2008		$	—			$	5,989			$	81,847			$	4,168			$	851			$	92,855
Balance, January 1, 2009		$	—			$	6,804			$	93,887			$	(6,535	)		$	1,086			$	95,242
Issuance of Series A Preferred Stock			15				—				14,235				—				—				14,250
Issuance of Series B Preferred Stock			1				—				749				—				—				750
Accretion of discount on Series A Preferred Stock			—				—				43				(43	)			—				—
Redemption of Series A Preferred Stock			(15	)			—				(14,278	)			(707	)			—				(15,000	)
Redemption of Series B Preferred Stock			(1	)			—				(749	)			—				—				(750	)
Exercise of 126,217 stock options			—				126				859				—				—				985
Stock Based Compensation			—				—				218				—				—				218
Cash dividend declared on common stock, $0.15 per share			—				—				—				(1,042	)			—				(1,042	)
Cash dividends on Series A and B Preferred Stock			—				—				—				(173	)			—				(173	)
Sale of shares issued through dividend reinvestment plan			—				65				937				—				—				1,002
Comprehensive income:
Net income			—				—				—				7,082				—				7,082
Other comprehensive income:
Change in unrealized gain on available-for-sale securities, net of income taxes of $265			—				—				—				—				465				465
Reclassification adjustment for net losses included in net income, net of income tax of $135			—				—				—				—				202				202
Net unrealized gain on available-for-sale securities, net of income tax of $130			—				—				—				—								667
Total comprehensive income			—				—				—				—				—				7,749
Balance, September 30, 2009		$	—			$	6,995			$	95,901			$	(1,418	)		$	1,753			$	103,231

Notes to consolidated financial statements are an integral part of these statements.

Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

		Nine Months Ended
		September 30
(Unaudited) (Dollars in Thousands)		2009				2008
Operating activities
Net income		$	7,082			$	5,784
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discounts on securities			(194	)			(534	)
Amortization of premiums on securities			815				397
Loss on impairment/ (gain) on calls of investment securities			336				(212	)
Amortization of purchase accounting adjustments			598				1,047
Provision for credit losses			2,506				1,971
Deferred income tax (benefit) expense			(484	)			1,514
Loss on disposal of fixed assets			50				—
Depreciation			1,563				1,371
Loans originated for sale			(74,756	)			(65,289	)
Proceeds of loans sold			75,058				65,132
Gain on sale of loans			(1,065	)			(995	)
Stock based compensation expense			218				168
Increase in cash surrender value of life insurance			(340	)			(236	)
Increase in other liabilities			1,902				2,055
Increase in other assets			(2,157	)			(3,177	)
Net cash provided by operating activities			11,132				8,996
Investing activities
Purchases of life insurance			(1,380	)			(5,509	)
Purchases of premises and equipment			(2,974	)			(3,883	)
Purchases of available-for-sale securities			(53,209	)			(52,995	)
Proceeds from maturities, calls and prepayments of available-for-sale securities			42,717				56,078
Net increase in loans made to customers			(8,087	)			(136,068	)
Net cash used in investing activities			(22,933	)			(142,377	)
Financing activities
Net increase in deposits			91,615				93,691
Net (decrease) increase in securities sold under agreement to repurchase			(41,055	)			17,625
Cash received from exercise of stock options			985				117
Cash received from dividend reinvestment plan			736				—
Cash payment in lieu of fractional shares			(8	)			—
Cash dividends paid on common stock			(933	)			(600	)
Net proceeds from issuance of Series A and B Preferred Stock			15,000				—
Repayment of Series A and B Preferred Stock			(15,750	)			—
Cash dividends paid on preferred stock			(173	)			—
Net cash provided by financing activities			50,417				110,833
Increase (decrease) in cash and cash equivalents			38,616				(22,548	)
Cash and cash equivalents — beginning of period			20,296				43,396
Cash and cash equivalents — end of period		$	58,912			$	20,848

Notes to consolidated financial statements are an integral part of these statements.

Centra Financial Holdings, Inc.
Notes to Consolidated Financial Statements

Note A — Organization

Centra Bank, Inc. (Centra Bank or the Company) is a full service commercial bank that was chartered on September 27, 1999, under the laws of the State of West Virginia and commenced operations on February 14, 2000. Centra Financial Holdings, Inc. (Centra) was formed on October 25, 1999, for the purpose of becoming a one-bank holding company to own all of the outstanding stock of Centra Bank.

Management has evaluated all significant events and transactions that occurred after September 30, 2009, but prior to November 9, 2009, the date these financial statements were issued, for potential recognition or disclosure in these financial statements.

Note B — Basis of Presentation

Centra’s consolidated financial statements have been prepared in accordance with Centra’s accounting and reporting policies, which are in conformity with U. S. generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Such policies require management to make estimates and develop assumptions that affect the amounts reported in the consolidated financial statements and related footnotes. Actual results could differ from management’s estimates. Also, they do not include all the information and footnotes required by U. S. generally accepted accounting principles for annual year-end financial statements. In the opinion of management, all material adjustments considered necessary for a fair presentation, have been included and are of a normal, recurring nature. The balance sheet as of December 31, 2008, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U. S. generally accepted accounting principles. Operating results for the three and nine months ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in Centra’s December 31, 2008, Form 10-K filed with the Securities and Exchange Commission.

Note C — Net Income Per Common Share

Centra determines basic earnings per share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income available to common shareholders by the weighted average number of common shares outstanding increased by the number of shares that would be issued assuming the exercise of stock options. At September 30, 2009 and 2008, stock options outstanding were 1,352,611 and 1,471,272 shares at an average price of $10.77 and $9.18, respectively. For the three months ended September 30, 2009 and 2008, the dilutive effect of stock options was 357,192 and 533,315 shares, respectively. For the nine months ended September 30, 2009 and 2008, the dilutive effect of stock options was 371,881 and 548,882 shares, respectively.

Note D — Fair Value Measurements

Fair Value Measurements (ASC Topic 820), was issued by the FASB on January 1, 2008, and clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Effective January 1, 2009, Centra implemented, “Fair Value Measurements,” for our nonfinancial assets and liabilities that are re-measured at fair value on a non-recurring basis. In October, 2008, the FASB issued “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active,” which clarifies the treatment for assets in a market that is not active and provides an example to illustrate key consideration in determining the fair value of a financial asset.

Fair Value Measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Centra’s market assumptions. The three levels of the fair value hierarchy under Fair Value Measurements based on these two types of inputs are as follows:

•

Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.

	•		Level 2 — Valuation is based on observable inputs other than quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in nonactive markets, and model-based valuation techniques for which all significant assumptions are observable in the market.
	•		Level 3 — Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

When determining the fair value measurements for assets and liabilities, Centra looks to active and observable markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, Centra looks to market observable data for similar assets and liabilities and classifies such items as Level 2. Nevertheless, when certain assets and liabilities are not actively traded in observable markets and Centra must use alternative valuation techniques using unobservable inputs to determine a fair value and classifies such items as Level 3. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2009:

						Fair Value Measurements at September 30, 2009
						Using:
						Quoted Prices
						in Active				Significant
						Markets for				Other				Significant
						Identical				Observable				Unobservable
(Unaudited) (Dollars in Thousands)		Balance as of				Assets				Inputs				Inputs
Description		September 30, 2009				(Level 1)				(Level 2)				(Level 3)
Assets
Available-for-sale securities:
Debt securities:
U.S. Government sponsored agencies		$	91,326							$	91,326			$	—
State and municipal			34,418								34,418				—
Corporate			3,100								3,100				—
Equity securities:
Financial institution stock			423			$	423				—				—
Total		$	129,267			$	423			$	128,844			$	—

Available for sale securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities. Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar securities (Level 2). Any securities available for sale not valued based upon the methods above are considered Level 3.

Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

Loans held for sale: Loans held for sale are carried at the lower of cost or market value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans which is not materially different than cost due

to the short duration between origination and sale (Level 2). As such, Centra records any fair value adjustments on a nonrecurring basis. Gains and losses on the sale of loans are recorded within secondary market income on the Consolidated Statements of Income. For the three and nine months ended September 30, 2009 and 2008, no fair value adjustment was recognized in earnings related to loans held for sale.

Allowance for Credit Losses: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. For such loans, impairment is measured based on the present value of expected future cash flows to be received from the borrower, or alternatively, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. Impairment is typically measured based on the fair value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company (Level 2). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments from the underlying collateral on impaired loans are recorded in the period incurred as provision for credit losses expense on the Consolidated Statements of Income. For the three and nine months ended September 30, 2009 and 2008, no such fair value adjustment was recognized in earnings that related to the allowance for loan losses allocated to impaired loans.

Other real estate owned: Other real estate owned (OREO) is measured at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Income and expenses from operations and changes in valuation allowance are included in other expense from OREO. For the three and nine months ended September 30, 2009 and 2008, no fair value adjustment was recognized in earnings related to OREO.

Goodwill and Core Deposit Intangible: Goodwill is carried at cost basis and is reviewed annually or more frequently if necessary for impairment. Core Deposit Intangible is recorded at cost and amortized monthly and reviewed annually for impairment or earlier if indicators of impairment exist. If impairment exists, the measurement of loss is based on the fair value of the reporting unit (goodwill) and the core deposit intangible. For the three and nine months ended September 30, 2009 and 2008, no fair value adjustment was recognized in earnings related to goodwill and core deposit intangible.

Financial Instruments: The following methods and assumptions were used by Centra in estimating its fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amounts reported in the balance sheet approximate their fair values.

Investment Securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are estimated using quoted market prices of comparable securities.

Loans: The fair value of performing variable rate loans that reprice frequently and performing demand loans, with no significant change in credit risk, is based on carrying value. The fair value of certain mortgage loans is based on quoted market prices of similar loans sold adjusted for differences in loan characteristics. The fair value of other performing loans (e.g., commercial real estate, commercial, and consumer loans) is estimated using discounted cash flow analyses and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Loans Held for Sale: The estimated fair value of loans held for sale is based upon the market price of similar loans which is not materially different than cost due to the short time duration between origination and sale.

Deposits: The carrying amounts of demand deposits, savings accounts, and certain money market deposits approximate their fair values. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies current rates offered for deposits of similar remaining maturities.

Short-Term Borrowings: The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt: The carrying amounts of long-term debt approximate their fair value because the debt is a variable rate instrument repricing quarterly.

Off-Balance Sheet Financial Instruments: The fair value of loan commitments is estimated using the fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counter parties’ credit standing. The estimated fair value of these commitments approximates their carrying value.

The estimated fair value of Centra’s financial instruments are as follows:

		Financial Instruments
						Estimated
(Dollars in Thousands)		Carrying				Fair
At September 30, 2009:		Amount				Value
Financial assets:
Cash and cash equivalents		$	58,912			$	58,912
Investment securities			129,267				129,267
Loans			1,030,869				1,039,218
Loans Held for Sale			2,724				2,724
Financial liabilities:
Deposits			1,104,008				1,123,030
Short-term borrowings			34,230				34,230
Long-term debt			20,000				20,000

Note E — Investment Securities

Management determines the appropriate classification of investment securities at the time of purchase. Available-for-sale securities are those securities that would be available to be sold in the future in response to Centra’s liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available-for-sale securities are reported at fair value, with unrealized holding gains and losses reported in a separate component of other comprehensive income. The cost of securities sold is based on the specific-identification method.

		Securities Classified as Available-for-Sale
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
(Dollars in Thousands)		Cost				Gains				Losses				Value
At September 30, 2009:
Debt securities:
U.S. Government sponsored agencies		$	89,691			$	1,645			$	(10	)		$	91,326
State and municipal			33,096				1,340				(18	)			34,418
Corporate			3,031				69				—				3,100
Equity securities:
Financial institution stock			528				—				(105	)			423
Total available-for-sale securities		$	126,346			$	3,054			$	(133	)		$	129,267

		Securities Classified as Available-for-Sale
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
(Dollars in Thousands)		Cost				Gains				Losses				Value
At December 31, 2008:
Debt securities:
U.S. Government sponsored agencies		$	79,961			$	1,942			$	—			$	81,903
State and municipal			33,558				416				(252	)			33,722
Corporate			3,306				21				(45	)			3,282
Equity securities:
Financial institution stock			915				—				(272	)			643
Total available-for-sale securities		$	117,740			$	2,379			$	(569	)		$	119,550

At September 30, 2009 and December 31, 2008, investment securities having a carrying value of $108,130,000 and $112,070,000, respectively, were pledged to secure public deposits and repurchase agreements in accordance with federal and state requirements.

Provided below is a summary of securities available-for-sale which were in an unrealized loss position at September 30, 2009 and December 31, 2008. Centra held seven and thirty-nine securities, respectively, that were in an unrealized loss position at September 30, 2009 and December 31, 2008. Centra has the intent to hold these securities and it is more likely than not that Centra will not be required to sell the securities before the anticipated recovery in fair value or by the time these securities mature. Further, Centra believes the deterioration in fair value is attributable to changes in market interest rates and not credit quality of the issuer.

		Less Than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in Thousands)		Value				Losses				Value				Losses				Value				Losses
At September 30, 2009:
Debt securities:
U.S. Government sponsored agencies		$	5,062			$	(10	)		$	—			$	—			$	5,062			$	(10	)
State and municipal			942				(18	)			—				—				942				(18	)
Corporate			—				—				—				—				—				—
Equity securities:
Financial institution stock			423				(105	)			—				—				423				(105	)
Total		$	6,427			$	(133	)		$	—			$	—			$	6,427			$	(133	)

		Less Than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in Thousands)		Value				Losses				Value				Losses				Value				Losses
At December 31, 2008:
Debt securities:
U.S. Government sponsored agencies		$	—			$	—			$	—			$	—			$	—			$	—
State and municipal			12,355				(252	)			—				—				12,355				(252	)
Corporate			1,733				(45	)			—				—				1,733				(45	)
Equity securities:
Financial institution stock			—				—				643				(272	)			643				(272	)
Total		$	14,088			$	(297	)		$	643			$	(272	)		$	14,731			$	(569	)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of Centra to sell the security or whether it’s more likely than not that Centra would be required to sell the security before its anticipated recovery in fair value. During the first quarter of

2009, Centra determined that one equity security that had been in an unrealized loss position for more than twelve months was other-than-temporarily impaired. Centra recognized the loss and adjusted the investment’s cost basis by $387 thousand during the first quarter 2009, which is included in Security (losses) gains on the Consolidated Statement of Income. No further other-than-temporary impairment was recognized during the second or third quarters 2009.

The estimated maturities presented in the tables below may differ from the contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties. The portfolio contains no single issue (excluding U.S. government and U.S. agency securities) that exceeds 10% of stockholders’ equity.

The fair value of the available-for-sale securities portfolio as of September 30, 2009 and December 31, 2008 by contractual maturity, are shown below:

										Fair Value Due:
						After 1 year				After 5 years
(Dollars in Thousands)		Within 1 year				through 5 years				through 10 years				Over 10 years				Total
At September 30, 2009:
Debt securities:
U.S. Government sponsored agencies		$	26,723				64,603			$	—			$	—			$	91,326
State and municipal			656				26,474				7,288				—				34,418
Corporate			2,287				813				—				—				3,100
Equity securities:
Financial institution stock			—				—				—				423				423
Total		$	29,666			$	91,890			$	7,288			$	423			$	129,267

										Fair Value Due:
						After 1 year				After 5 years
(Dollars in Thousands)		Within 1 year				through 5 years				through 10 years				Over 10 years				Total
At December 31, 2008:
Debt securities:
U.S. Government sponsored agencies		$	29,068			$	52,835			$	—			$	—			$	81,903
State and municipal			581				18,696				14,445				—				33,722
Corporate			1,703				1,579				—				—				3,282
Equity securities:
Financial institution stock															643				643
Total		$	31,352			$	73,110			$	14,445			$	643			$	119,550

As of September 30, 2009 and December 31, 2008, other investments at cost were equal to $2.9 million and $2.0 million, respectively, and consisted of Federal Home Loan Bank stock.

Note F — Preferred Stock

On January 16, 2009, Centra entered into a Letter Agreement (the “Purchase Agreement”) with the United States Department of the Treasury (the “Treasury”) under the Troubled Asset Relief Program Capital Purchase Program (“TARP CPP”), pursuant to which Centra issued and sold (i) 15,000 shares of Preferred Stock as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 751 shares of Centra’s Fixed Rate Cumulative Perpetual Preferred Stock — Series B, par value $1.00 per share and liquidation value $1,000 per share (the “Series B Preferred Stock”), for an aggregate purchase price of $15,000,000 in cash (the transaction being referred to as the “Investment”). In accordance with the Purchase Agreement, the warrants were immediately exercised by the Treasury into the Series B Preferred Stock. Centra calculated the fair value of the Series A and B Preferred Stock and determined that a discount of approximately $750,000 existed at the time of purchase. The net proceeds were allocated between the Series A and B Preferred Stock based on their relative fair values.

Centra received approval from its primary bank regulators and the Treasury to the return of the Investment, and accordingly, on March 31, 2009, Centra returned to the Treasury a total of $15,095,833, which includes the original investment amount of $15,000,000 for the Series A Preferred Stock plus accrued but unpaid dividends of $95,833. Centra received in return, and cancelled, the share certificate for the Series A Preferred Stock. The difference between the amount paid to the Treasury and the carrying value of the Series A Preferred Stock was deducted from earnings available to common shareholders.

On April 15, 2009, Centra completed the redemption of the Series B Preferred Stock with the U.S. Department of Treasury. As instructed by the Treasury, Centra returned a total of $761,250, which included accrued but unpaid dividends of $11,250 and an additional premium of $750,000. Centra received in return the cancelled Series B Preferred Stock. The differences between the amount paid to the Treasury and the carrying value of the Series B Preferred Stock were deducted from earnings available to common shareholders.

Note G — Recent Accounting Pronouncements

On June 29, 2009, the FASB issued an accounting pronouncement establishing the FASB Accounting Standards Codification (the “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. This pronouncement was effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superseded. Centra adopted this new accounting pronouncement for the quarterly period ended September 30, 2009, as required, and adoption did not have a material impact on Centra’ financial statements taken as a whole.

On June 12, 2009, the FASB issued two related accounting pronouncements changing the accounting principles and disclosures requirements related to securitizations and special-purpose entities. Specifically, these pronouncements eliminate the concept of a “qualifying special-purpose entity”, change the requirements for derecognizing financial assets and change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. These pronouncements also expand existing disclosure requirements to include more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. These pronouncements will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions regarding transfers of financial assets shall be applied to transfers that occur on or after the effective date. Centra will adopt these new pronouncements on January 1, 2010, as required. Management has not yet determined the impact adoption may have on Centra’ consolidated financial statements.

On May 28, 2009, the FASB issued an accounting pronouncement establishing general standards of accounting for and disclosure of subsequent events, which are events occurring after the balance sheet date but before the date the financial statements are issued or available to be issued. In particular, the pronouncement requires entities to recognize in the financial statements the effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation

process. Entities may not recognize the impact of subsequent events that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. This pronouncement also requires entities to disclose the date through which subsequent events have been evaluated. This pronouncement was effective for interim and annual reporting periods ending after June 15, 2009. Centra adopted the provisions of this pronouncement for the quarter ended June 30, 2009, as required, and adoption did not have a material impact on Centra’ financial statements taken as a whole.

On April 9, 2009, the FASB issued three related accounting pronouncements intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. In particular, these pronouncements: (1) provide guidelines for making fair value measurements more consistent with the existing accounting principles when the volume and level of activity for the asset or liability have decreased significantly; (2) enhance consistency in financial reporting by increasing the frequency of fair value disclosures and (3) modify existing general standards of accounting for and disclosure of other-than-temporary impairment (“OTTI”) losses for impaired debt securities.

The fair value measurement guidance of these pronouncements reaffirms the need for entities to use judgment in determining if a formerly active market has become inactive and in determining fair values when markets have become inactive. The changes to fair value disclosures relate to financial instruments that are not currently reflected on the balance sheet at fair value. Prior to these pronouncements, fair value disclosures for these instruments were required for annual statements only. These disclosures now are required to be included in interim financial statements. The general standards of accounting for OTTI losses were changed to require the recognition of an OTTI loss in earnings only when an entity (1) intends to sell the debt security; (2) more likely than not will be required to sell the security before recovery of its amortized cost basis or (3) does not expect to recover the entire amortized cost basis of the security. In situations when an entity intends to sell or more likely than not will be required to sell the security, the entire OTTI loss must be recognized in earnings. In all other situations, only the portion of the OTTI losses representing the credit loss must be recognized in earnings, with the remaining portion being recognized in other comprehensive income, net of deferred taxes.

All three pronouncements were effective for interim and annual periods ending after June 15, 2009. Entities were permitted to early adopt the provisions of these pronouncements for interim and annual periods ending after March 15, 2009, but had to adopt all three concurrently. Centra adopted these provisions of these pronouncements for the quarterly period ending June 30, 2009, as required. The adoption of these pronouncements did not have any material impact on Centra’s financial statements taken as a whole.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements that involve risk and uncertainty. All statements other than statements of historical fact included in this Form 10-Q including statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. When considering forward-looking statements, you should keep in mind cautionary statements in this document and other SEC filings including the “Risk Factors” section of item 1A of our 2008 Annual Report on Form 10-K. In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors, (e.g., changes in the national and local economies, changes in the interest rate environment, competition, changes in governmental regulation, etc.) could cause Centra’s actual results and experience to differ materially from the anticipated results or other expectations expressed in those forward-looking statements.

The following data should be read in conjunction with the unaudited consolidated financial statements and the management’s discussion and analysis that follows.

At September 30, 2009 and 2008, or for the nine and three months ended September 30, 2009 and 2008:

		Nine Months Ended								Three Months Ended
		September 30								September 30
		2009				2008				2009				2008
Net income to:
Average assets			0.77	%			0.67	%			0.69	%			0.68	%
Average stockholders’ equity			9.14				8.54				8.38				8.81
Net interest margin			3.83				3.74				3.83				3.65
Average stockholders’ equity to average assets			8.41				7.87				8.19				7.68
Total loans to total deposits (end of period)			93.38				97.48				93.38				97.48
Allowance for loan losses to total loans (end of period)			1.60				1.50				1.60				1.50
Allowance for credit losses to total loans (end of period)			1.75				1.66				1.75				1.66
Efficiency ratio*			62.18				69.29				63.39				67.77
Capital ratios:
Tier 1 capital ratio			10.71				9.95				10.71				9.95
Risk-based capital ratio			11.97				11.21				11.97				11.21
Leverage ratio			8.59				8.11				8.59				8.11
Cash dividends as a percentage of net income			14.69				15.52				16.22				14.79
Per share data:
Book value per share (end of period)		$	14.76			$	15.50			$	14.76			$	15.50
Market value per share (end of period)**			17.00				16.59				17.00			$	16.59
Basic earnings per share			0.89				0.88				0.31				0.31
Diluted earnings per share			0.85				0.81				0.29				0.28
Cash dividends per share			0.15				0.15				0.05				0.05

Introduction

The following discussion and analysis of the consolidated financial statements of Centra is presented to provide insight into management’s assessment of the financial results. Centra’s wholly-owned banking subsidiary, Centra Bank, is the primary financial entity in this discussion. Unless otherwise noted, this discussion will be in reference to the bank.

Centra Bank was chartered by the State of West Virginia and is subject to regulation, supervision, and examination by the Federal Deposit Insurance Corporation and the West Virginia Division of Banking. The bank is not a member of the Federal Reserve System. The bank is a member of the Federal Home Loan Bank of Pittsburgh.

The bank provides a full array of financial products and services to its customers, including traditional banking products such as deposit accounts, lending products, debit cards, automated teller machines, and safe deposit rental facilities.

This discussion and analysis should be read in conjunction with the prior year-end audited financial statements and footnotes thereto included in the Company’s filing on Form 10-K and the ratios, statistics, and discussions contained elsewhere in this Form 10-Q.

Application of Critical Accounting Policies

Centra’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and follow general practices within the banking industry. Application of these principles requires

management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Application of certain accounting policies inherently requires a greater reliance on the use of estimates, assumptions and judgments and as such, the probability of actual results being materially different from reported estimates is increased. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal forecasting techniques.

The most significant accounting policies followed by the bank are presented in Note 1 to the audited consolidated financial statements included in Centra’s 2008 Annual Report on Form 10-K. These policies, along with the disclosures presented in the other financial statement notes and in management’s discussion and analysis of operations, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statements amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses to be the accounting area that requires the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

Centra maintains an allowance for loan losses to absorb probable losses based on a quarterly analysis of the loan portfolio and estimation of the losses that have been incurred within the loan portfolio. This formal analysis determines an appropriate level and allocation of the allowance for loan losses among loan types and resulting provision for loan losses by considering factors affecting losses, including specific losses, levels and trends in impaired and nonperforming loans, historical loan loss experience, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance, and other relevant factors. Determining the amount of the allowance for loan losses requires significant judgment and the use of material estimates by management, which is inherently subjective. The loan portfolio also represents the largest asset in the consolidated balance sheet. Note 1 to the consolidated financial statements describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in the Allowance for Credit Losses section of Management’s Discussion and Analysis in this quarterly report on Form 10-Q.

Centra considers accounting for income taxes to also be a critical accounting policy. Deferred income taxes are recorded based on temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements at the anticipated statutory tax rate that will be in effect when the differences are expected to be recovered or settled. Further discussion of income taxes, including a reconciliation of the effective tax rate to the statutory rate, is included in Note 9 to the consolidated financial statements contained in the 2008 Form 10-K.

In Centra’s 2008 Annual Report on Form 10-K, investment securities and income recognition are also mentioned as critical accounting policies.

Any material effect on the financial statements related to these critical accounting areas is also discussed in this financial review.

Results of Operations

Overview of the Statement of Income

For the quarter ended September 30, 2009, Centra earned $2.2 million compared to $2.0 million in the third quarter of 2008. These earnings equated to a return on average assets of 0.69% and 0.68%, respectively, and a return on average equity of 8.38% and 8.81%, respectively. Core growth improved both net interest income and other income while increases in expenses were controlled resulting in an overall net income increase of 6.16%.

For the nine months ended September 30, 2009, Centra earned $7.1 million compared to $5.8 million for the first nine months of 2008. These earnings equated to a return on average assets of 0.77% and 0.67% for the nine months ended September 30, 2009 and 2008, respectively. Return on average equity was 9.14% and 8.54% for September 30, 2009 and 2008, respectively. Net income increased by $1.3 million or 22.44% for the nine month period ended September 30, 2009.

Interest Income and Expense

Net interest income is the amount by which interest income on earning assets exceeds interest expense on interest-bearing liabilities. Interest-earning assets include loans and investment securities while interest-bearing liabilities include interest-bearing deposits and short and long-term borrowed funds. Net interest income is the primary source of revenue for the bank. Net interest income is impacted by changes in market interest rates, as well as changes in the mix and volume of interest-earning assets and interest-bearing liabilities.

Net interest income increased to $11.0 million in the third quarter of 2009 from $10.0 million in the third quarter of 2008. Net interest income increased to $32.1 million in the first nine months of 2009 from $29.4 million in the first nine months of 2008. These similar increases were due to growth in interest earning assets coupled with an increase in net interest margin in the third quarter and first nine months of 2009 from 2008.

Centra’s average interest-earning assets and liabilities increased during the third quarter and first nine months of 2009 compared to the same time periods in 2008. The most significant areas of change were net loans, which increased to an average balance of $1.0 billion for the quarter ended September 30, 2009 from $977.8 million for the quarter ended September 30, 2008 and interest-bearing liabilities which grew to an average of $991.2 million from $960.4 for the respective periods. Net loans increased to an average balance of $1.0 billion for the nine months ended September 30, 2009 from $929.2 million for the nine months ended September 30, 2008 and interest-bearing liabilities which grew to an average of $980.8 million from $922.4 million for the respective periods. These trends reflect the continued growth of Centra in all of our operating markets.

Net interest margin is presented on a tax-equivalent basis to provide a comparison among all types of interest earning assets. The tax-equivalent basis adjusts for the tax-favored status of income from certain loans and investments. Although this is a non-GAAP measure, Centra’s management believes this measure is more widely used within the financial services industry and provides better comparability of net interest income arising from taxable and tax-exempt sources. Centra uses this measure to monitor net interest income performance and to manage its balance sheet composition.

Net interest margin is calculated by dividing net interest income by average interest-earning assets. This ratio serves as a performance measurement of the net interest revenue stream generated by the bank’s balance sheet. The net interest margin for the quarters ended September 30, 2009 and 2008 were 3.83% and 3.65%, respectively. Centra has experienced an increase in the margin despite significant interest rate drops over the past twelve months. Centra experienced a 65 basis points decline in the yield on interest earning assets which was substantially offset by a 95 basis points decrease in the cost of on interest bearing liabilities.

The net interest margin for the nine months ended September 30, 2009 and 2008 were 3.83% and 3.74%, respectively. Similar to the quarter, Centra has experienced an increase in the margin for the first nine months of the year. Year to date, Centra experienced a 80 basis point decline in the yield on interest earning assets which was substantially offset by a 102 basis points decrease in the cost of interest bearing liabilities.

The following tables reconcile the difference between net interest income and tax-equivalent net interest income for the three months ended September 30, 2009 and September 30, 2008 and the nine months ended September 30, 2009 and September 30, 2008.

		Three Months Ended
		September 30
(Unaudited)(Dollars in Thousands)		2009				2008
Net interest income, GAAP basis		$	10,963			$	9,982
Tax-equivalent adjustment			224				239
Tax-equivalent net interest income		$	11,187			$	10,221

		Nine Months Ended
		September 30
(Unaudited)(Dollars in Thousands)		2009				2008
Net interest income, GAAP basis		$	32,051			$	29,381
Tax-equivalent adjustment			691				692
Tax-equivalent net interest income		$	32,742			$	30,073

Management continuously monitors the effects of net interest margin on the performance of the bank. Loan growth, fluctuations in prime lending rates and mix of the balance sheet will continue to impact net interest margin in future periods. As competition for deposits and quality loans continues, management anticipates continued pressure on the net interest margin given the current interest rate environment.

Average Balances and Interest Rates
(Unaudited)(Dollars in Thousands)

		Three Months Ended												Three Months Ended
		September 30, 2009												September 30, 2008
						Interest												Interest
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Cost				Balance				Expense				Cost
Assets
Interest-bearing deposits in banks		$	5,230			$	—				0.00	%		$	1,025			$	3				1.06	%
Federal funds sold			14,516				6				0.16				11,641				49				1.67
Loans held for sale			2,107				27				5.10				2,538				40				6.32
Securities (1)(4):
Taxable			89,773				700				3.09				87,403				912				4.15
Tax exempt			33,068				434				5.20				34,910				462				5.27
Loans (2)(3)(4):
Commercial			751,593				10,729				5.66				701,370				11,451				6.50
Tax exempt			8,763				176				7.96				12,212				224				7.28
Consumer			80,375				1,485				7.33				88,749				1,569				7.04
Real estate			191,795				2,900				6.00				190,357				2,906				6.07
Allowance for loan losses			(17,095	)			—				—				(14,910	)			—				—
Net loans			1,015,431				15,290				5.97				977,778				16,150				6.57
Total earning assets			1,160,125				16,457				5.63				1,115,295				17,616				6.28
Cash and due from banks			17,380												17,192
Other assets			67,832												60,179
Total assets		$	1,245,337											$	1,192,666
Liabilities
Deposits:
Non-interest bearing demand		$	140,073				—							$	130,616				—
NOW			184,891				401				0.86				167,401				836				1.99
Money market checking			173,393				571				1.31				130,679				611				1.86
Savings			41,886				37				0.35				36,845				43				0.47
IRAs			46,978				370				3.13				45,652				456				3.98
CDs			484,457				3,704				3.03				493,011				4,889				3.94
Short-term borrowings			39,547				58				0.58				66,766				317				1.89
Long-term borrowings			20,000				129				2.56				20,000				243				4.83
Total interest bearing liabilities			991,152				5,270				2.11				960,354				7,395				3.06
Other liabilities			12,156												10,056
Total liabilities			1,143,381												1,101,026
Stockholders’ equity
Preferred stock			—												—
Common stock			6,970												5,989
Paid-in capital			96,573												82,779
Accumulated (deficit) earnings			(3,167	)											2,282
Unrealized gains			1,580												590
Total stockholders’ equity			101,956												91,640
Total liabilities and stockholders’ equity		$	1,245,337											$	1,192,666
Net interest spread											3.52												3.22
Impact of non-interest-bearing funds on margin											0.31												0.43
Net interest income-margin						$	11,187				3.83	%						$	10,221				3.65	%