Mr. Saner stated, "MainSource is off to a good start in 2007 with our earnings per share being within $0.01 of our expectations. We were also pleased to see that our net interest margin remained unchanged compared to the last quarter of 2006. In addition, after factoring out the short-term spike in year-end deposits related to public fund tax deposits, our core deposits have grown during the first quarter at an annualized rate of 9.5%. Commercial loans also grew at an annualized rate of 6.5% during the first quarter and our pipeline has increased significantly. Unfortunately our mortgage loan portfolio decreased which has caused a small overall decrease in total loans."
Mr. Saner continued, "While our efficiency ratio increased during the first quarter compared to the prior year, we hope to improve in this area throughout 2007 as a result of two core systems' conversions scheduled for May and September of 2007. In addition, we are focused on reducing our non-performing assets and were successful in decreasing the non-performing assets to assets ratio by more than 18% during the first quarter to 0.76% of total assets. We are also hopeful this trend will continue throughout 2007. We continue to focus on our strategic initiatives for 2007 including organic loan and deposit growth, improved efficiencies and developing customer relationships."
NET INTEREST INCOME
Net interest income was $18.6 million for the first quarter of 2007, which represents an increase of 31.0% versus the first quarter of 2006. The increase was due primarily to the acquisition activity in 2006, which occurred primarily in the second quarter of 2006. Net interest margin, on a fully-taxable equivalent basis, was 3.70% for the first quarter of 2007 and remained flat on a linked quarter basis.
NON-INTEREST INCOME
The Company's non-interest income increased to $6.1 million for the first quarter of 2007 compared to $4.9 million for the same period in 2006. Service charges on deposit accounts increased $0.8 million due to the increase in the number of deposit accounts from the 2006 acquisition activity.
NON-INTEREST EXPENSE
The Company's non-interest expense was $16.9 million for the first quarter of 2007 compared to $12.4 million for the same period in 2006, an increase of 36.3%. Increases in employee costs, occupancy expenses, equipment expenses, and intangibles amortization were primarily attributable to the acquisitions in 2006. The Company's efficiency ratio was 63.9% for the first quarter of 2007 compared to 60.8% for the same period a year ago. It is anticipated that the Company's efficiency ratio will improve throughout 2007 as the Company integrates the core operating systems of the new acquisitions. The Company also plans to collapse the banking charters of MainSource Bank - Hobart and MainSource Bank - Crawfordsville into the charter of its lead bank, MainSource Bank, which is headquartered in Greensburg, Indiana. These charter consolidations are planned for May 2007 for MainSource Bank - Hobart and September 2007 for MainSource Bank - Crawfordsville, pending receipt of approval by federal and state regulatory authorities and other conditions customary for transactions of this nature.
ASSET QUALITY
Credit quality improved significantly during the quarter. Non-performing assets were $18.4 million as of March 31, 2007, which was a decrease of $2.6 million from the $21.0 million of non-performing assets as of December 31, 2006. Non-performing assets represented 0.76% of total assets as of March 31, 2007 compared to 0.87% as of December 31, 2006 and 0.93% as of March 31, 2006. Annualized net charge-offs for the first quarter of 2007 equaled 0.10% of average outstanding loans compared to 0.16% for the first quarter of 2006 and 0.25% for the full year 2006. The Company's allowance for loan losses as a percent of total outstanding loans was 0.84% as of March 31, 2007 compared to 0.81% as of December 31, 2006.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Summary Three months ended March 31
----------------------------
2007 2006
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Interest Income $ 35,100 $ 22,655
Interest Expense 16,493 8,421
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Net Interest Income 18,607 14,234
Provision for Loan Losses 696 360
Noninterest Income:
Insurance commissions 419 420
Trust and investment product fees 368 293
Mortgage banking 615 580
Service charges on deposit accounts 2,670 1,851
Gain on sales of securities 39 61
Interchange income 741 497
Other 1,239 1,197
------------- -------------
Total Noninterest Income 6,091 4,899
Noninterest Expense:
Employee 9,689 7,405
Occupancy 1,426 1,058
Equipment 1,458 1,134
Intangible amortization 666 421
Telecommunications 492 447
Stationary, printing, and supplies 383 235
Other 2,756 1,701
------------- -------------
Total Noninterest Expense 16,870 12,401
Earnings Before Income Taxes 7,132 6,372
Provision for Income Taxes 1,717 1,586
------------- -------------
Net Income $ 5,415 $ 4,786
============= =============
Three months ended March 31
----------------------------
Average Balance Sheet Data 2007 2006
------------- -------------
Gross Loans $ 1,569,694 $ 990,602
Earning Assets 2,093,755 1,484,692
Total Assets 2,389,542 1,654,013
Noninterest Bearing Deposits 183,025 153,493
Interest Bearing Deposits 1,627,333 1,174,357
Total Interest Bearing Liabilities 1,929,304 1,324,059
Shareholders' Equity 253,583 164,046
Three months ended March 31
----------------------------
Per Share Data 2007 2006
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Diluted Earnings Per Share $ 0.29 $ 0.33
Cash Dividends Per Share 0.135 0.129
Market Value - High 17.53 18.52
Market Value - Low 15.42 17.05
Average Outstanding Shares (diluted) 18,767,360 14,415,420
Three months ended March 31
----------------------------
Key Ratios 2007 2006
------------- -------------
Return on Average Assets 0.92% 1.17%
Return on Average Equity 8.66% 11.83%
Net Interest Margin 3.70% 4.04%
Efficiency Ratio 63.92% 60.83%
Net Overhead to Average Assets 1.81% 1.84%
Balance Sheet Highlights
As of March 31 2007 2006
------------- -------------
Total Loans (Excluding Loans Held
for Sale) $ 1,566,305 $ 1,169,961
Allowance for Loan Losses 13,119 11,804
Total Securities 489,690 464,016
Goodwill and Intangible Assets 136,971 85,583
Total Assets 2,410,081 1,878,259
Noninterest Bearing Deposits 192,131 159,542
Interest Bearing Deposits 1,632,989 1,305,201
Other Borrowings 302,516 206,950
Shareholders' Equity 256,283 191,684
Other Balance Sheet Data
As of March 31 2007 2006
------------- -------------
Book Value Per Share $ 13.69 $ 12.13
Loan Loss Reserve to Loans 0.84% 1.01%
Nonperforming Assets to Total Assets 0.76% 0.93%
Outstanding Shares 18,726,532 15,802,330
Asset Quality
As of March 31 2007 2006
------------- -------------
Loans Past Due 90 Days or More and
Still Accruing $ 1,081 $ 1,226
Non-accrual Loans 15,685 11,851
Other Real Estate Owned 1,585 4,356
------------- -------------
Total Nonperforming Assets $ 18,351 $ 17,433
Net Charge-offs - YTD $ 369 $ 407
Net Charge-offs as a % of average loans 0.10% 0.16%
MainSource Financial Group, Inc., headquartered in Greensburg, Indiana, is listed on the NASDAQ National Market (under the symbol: "MSFG") and is a community-focused, financial holding company with assets of approximately $2.4 billion. The Company operates 68 offices in 30 Indiana counties, six offices in three Illinois counties, and six offices in two Ohio counties through its five banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, MainSource Bank - Crawfordsville, Crawfordsville, Indiana, MainSource Bank - Hobart, Hobart, Indiana, and MainSource Bank - Ohio, Troy, Ohio. Through its non-banking subsidiaries, MainSource Insurance LLC, MainSource Title LLC, and MainSource Mortgage LLC, the Company and its banking subsidiaries provide various related financial services.
Forward-Looking Statements
Except for historical information contained herein, the discussion in this press release may include certain forward-looking statements based upon management expectations. Actual results and experience could differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. Factors which could cause future results to differ from these expectations include the following: general economic conditions; legislative and regulatory initiatives; monetary and fiscal policies of the federal government; deposit flows; the costs of funds; general market rates of interest; interest rates on competing investments; demand for loan products; demand for financial services; changes in accounting policies or guidelines; changes in the quality or composition of the Company's loan and investment portfolios; the Company's ability to integrate acquisitions; the impact of our continuing acquisition strategy; and other factors, including various "risk factors" as set forth in our most recent Annual Report on Form 10-K and in other reports we file from time to time with the Securities and Exchange Commission. These reports are available publicly on the SEC website, www.sec.gov, and on the Company's website, www.mainsourcefinancial.com.
CONTACT:
James L. Saner, Sr.
President and CEO
MainSource Financial Group, Inc.
812-663-0157
MainSource Financial Group, Inc.
201 N. Broadway, P.O. Box 87
Greensburg, IN 47240
