Mr. Saner stated, "We are pleased with our second quarter performance given the challenging environment that we are currently facing with the yield curve and the fierce competition for deposits and loans. Our net interest margin has appeared to stabilize, fee income is strong, and our balance sheet growth is solid. Despite a decrease in our mortgage loan portfolio, our total loans have grown at an annualized rate of 5% with the heaviest growth in commercial loans. In addition, our core deposits have grown at an annualized rate of 6% for the first six months of 2007 when excluding the short-term spike in year-end deposits related to public fund tax deposits."
Mr. Saner continued, "We were especially pleased with the improvement in credit quality as this has been a major focus for the Company over the past several quarters. We have been successful in decreasing the non-performing assets to assets ratio during the first two quarters of 2007 to 0.70% of total assets. We are also hopeful this trend will continue throughout 2007. Our focus remains 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 $18.8 million for the second quarter of 2007, which represents an increase of 14.6% versus the second quarter of 2006. The increase was due primarily to the acquisition activity in 2006, which occurred throughout the second quarter of 2006. Net interest margin, on a fully-taxable equivalent basis, was 3.65% for the second quarter of 2007, down five basis points on a linked quarter basis.
NON-INTEREST INCOME
The Company's non-interest income increased to $7.5 million for the second quarter of 2007 compared to $5.9 million for the same period in 2006. Service charges on deposit accounts increased $1.1 million due primarily to the increase in the number of deposit accounts from the 2006 acquisition activity.
NON-INTEREST EXPENSE
The Company's non-interest expense was $17.1 million for the second quarter of 2007 compared to $14.6 million for the same period in 2006, an increase of 17.1%. 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 second quarter of 2007, which was equal to the same period a year ago. It is anticipated that the Company's efficiency ratio will improve throughout 2007 as the Company benefits from the integrations of the data processing systems at its Hobart, Indiana affiliate, completed in May 2007, and at its Crawfordsville, Indiana affiliate, scheduled for September 2007. These integrations will allow the Company to better leverage its current operating infrastructure and decrease its data processing expenses in the second half of 2007 and beyond.
ASSET QUALITY
Credit quality improved for the second consecutive quarter. Non-performing assets were $17.2 million as of June 30, 2007, a decrease of $1.2 million from the $18.4 million as of March 31, 2007 and a $3.9 million decrease since the end of the year. Non-performing assets represented 0.70% of total assets as of June 30, 2007 compared to 0.76% as of March 31, 2007 and 0.87% as of December 31, 2006. Annualized net charge-offs for the first six months of 2007 equaled 0.16% of average outstanding loans. The Company's allowance for loan losses as a percent of total outstanding loans was 0.81% as of June 30, 2007.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Three months ended June 30 Six months ended June 30
Summary -------------------------- ------------------------
2007 2006 2007 2006
------------ ------------ ----------- -----------
Interest Income $ 36,061 $ 28,582 $ 71,161 $ 51,237
Interest Expense 17,311 12,174 33,804 20,595
------------ ------------ ----------- -----------
Net Interest Income 18,750 16,408 37,357 30,642
Provision for Loan
Losses 899 363 1,595 723
Noninterest Income:
Insurance commissions 512 521 931 941
Trust and investment
product fees 447 296 815 589
Mortgage banking 749 564 1,364 1,144
Service charges on
deposit accounts 3,406 2,303 6,076 4,154
Gain/(losses) on
sales of securities 190 - 229 61
Interchange income 846 639 1,587 1,136
Other 1,317 1,572 2,556 2,769
------------ ------------ ----------- -----------
Total Noninterest
Income 7,467 5,895 13,558 10,794
Noninterest Expense:
Employee 9,475 8,309 19,164 15,714
Occupancy 1,312 1,164 2,738 2,222
Equipment 1,525 1,245 2,983 2,379
Intangible
amortization 667 469 1,333 890
Telecommunications 520 440 1,012 887
Stationary, printing,
and supplies 379 289 762 524
Other 3,219 2,686 5,975 4,387
------------ ------------ ----------- -----------
Total Noninterest
Expense 17,097 14,602 33,967 27,003
Earnings Before
Income Taxes 8,221 7,338 15,353 13,710
Provision for Income
Taxes 2,218 1,856 3,935 3,442
------------ ------------ ----------- -----------
Net Income $ 6,003 $ 5,482 $ 11,418 $ 10,268
============ ============ =========== ===========
Average Balance Three months ended June 30 Six months ended June 30
Sheet Data -------------------------- ------------------------
2007 2006 2007 2006
------------ ------------ ----------- -----------
Gross Loans $ 1,584,554 $ 1,284,394 $ 1,577,124 $ 1,137,498
Earning Assets 2,121,908 1,779,892 2,107,832 1,637,452
Total Assets 2,414,111 2,006,436 2,401,827 1,830,224
Noninterest Bearing
Deposits 191,940 162,782 187,483 158,138
Interest Bearing
Deposits 1,625,573 1,404,511 1,626,453 1,289,434
Total Interest
Bearing Liabilities 1,938,576 1,628,947 1,933,940 1,476,503
Shareholders' Equity 259,610 197,938 256,597 180,992
Per Share Data Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
2007 2006 2007 2006
------------ ------------ ----------- -----------
Diluted Earnings Per
Share $ 0.32 $ 0.33 $ 0.61 $ 0.66
Cash Dividends Per
Share 0.140 0.133 0.275 0.262
Market Value - High 17.50 18.13 17.53 18.52
Market Value - Low 16.15 15.57 15.42 15.57
Average Outstanding
Shares (diluted) 18,750,172 16,574,992 18,753,555 15,501,240
Key Ratios Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
2007 2006 2007 2006
------------ ------------ ----------- -----------
Return on Average
Assets 0.98% 1.10% 0.96% 1.13%
Return on Average
Equity 9.14% 11.11% 8.97% 11.44%
Net Interest Margin 3.65% 3.82% 3.68% 3.92%
Efficiency Ratio 63.90% 63.86% 65.33% 63.42%
Net Overhead to
Average Assets 1.60% 1.74% 1.71% 1.79%
Balance Sheet Highlights
As of June 30 2007 2006
------------ ------------
Total Loans
(Excluding Loans
Held for Sale) $ 1,612,204 $ 1,551,661
Allowance for Loan
Losses 13,112 14,426
Total Securities 489,805 483,735
Goodwill and
Intangible Assets 136,657 122,246
Total Assets 2,452,571 2,375,548
Noninterest Bearing
Deposits 203,638 189,682
Interest Bearing
Deposits 1,636,574 1,567,387
Other Borrowings 333,685 358,734
Shareholders' Equity 252,626 239,897
Other Balance Sheet Data
As of June 30 2007 2006
------------ ------------
Book Value Per Share $ 13.49 $ 12.72
Loan Loss Reserve to
Loans 0.81% 0.93%
Nonperforming Assets
to Total Assets 0.70% 0.90%
Outstanding Shares 18,732,395 18,854,455
Asset Quality
As of June 30 2007 2006
------------ ------------
Loans Past Due 90
Days or More and
Still Accruing $ 1,425 $ 528
Non-accrual Loans 14,432 16,332
Other Real Estate
Owned 1,312 4,606
------------ ------------
Total Nonperforming
Assets $ 17,169 $ 21,466
Net Charge-offs -
YTD $ 1,275 $ 1,102
Net Charge-offs as a
% of average loans 0.16% 0.20%
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 $2.5 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 four banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, MainSource Bank - Crawfordsville, Crawfordsville, Indiana, and MainSource Bank - Ohio, Troy, Ohio. Through its non-banking subsidiaries, MainSource Insurance LLC, and MainSource Title 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
