Mr. Saner stated, "We are pleased with our third quarter operating performance given the environment of fierce competition for deposit and loan growth. While our net interest margin decreased 17 basis points from the previous quarter, our loans have increased more than 5% from a year ago despite a decrease of approximately $50 million in residential real estate mortgages. In terms of deposit growth, we have experienced a very solid increase of more than 3% over the same period a year ago. In addition, our non-interest income continues to grow significantly, increasing more than 22% from a year ago."
Mr. Saner continued, "Our credit quality has also remained very solid with decreases in non-performing assets, delinquencies, and net charge-offs as a percent of average loans when compared to the same period a year ago. While our efficiency ratio has increased slightly from last year, I am optimistic that this ratio will improve as we were negatively impacted in the quarter by the conversion costs related to our Crawfordsville affiliate. We now have all of the Company's affiliates on the same core operating system which should decrease our ongoing overhead costs and improve the efficiency of the Company. Overall, our third quarter was very solid and we believe that we have formed a strong basis for our continued success."
NET INTEREST INCOME
Net interest income was $18.2 million for the third quarter of 2007, which represents a decrease of 3.1% versus the third quarter of 2006. Net interest margin, on a fully-taxable equivalent basis, was 3.48% for the third quarter of 2007, down seventeen basis points on a linked quarter basis. The Company's cost of funds increased during the quarter by ten basis points while the yield on earning assets was negatively impacted by a decrease in loan fees and the reversal of interest income related to a loan moved to non-accrual status during the quarter as well as the decrease in the prime rate.
NON-INTEREST INCOME
The Company's non-interest income increased to $7.5 million for the third quarter of 2007 compared to $6.4 million for the same period in 2006. Service charges on deposit accounts increased $900 thousand as the Company was able to expand its products and services through the newly-acquired geographic areas of the recent acquisitions.
NON-INTEREST EXPENSE
The Company's non-interest expense was $17.3 million for the third quarter of 2007 compared to $16.7 million for the same period in 2006, an increase of 3.6%. The main area of increase was in employee costs and is primarily related to normal merit increases. The aforementioned conversion costs of $600,000 also contributed to the overall increase in non-interest expense. Excluding these costs, total non-interest expense would have been flat year over year.
ASSET QUALITY
Although credit quality declined slightly during the third quarter of 2007, the Company's non-performing assets remain lower than the beginning of the year. Non-performing assets were $19.2 million as of September 30, 2007, an increase of $2.0 million on a linked quarter basis, but down $1.8 million from December 31, 2006. Non-performing assets represented 0.76% of total assets as of September 30, 2007 compared to 0.70% as of June 30, 2007 and 0.87% as of December 31, 2006. Annualized net charge-offs for the first nine months of 2007 equaled 0.20% of average outstanding loans. The Company's allowance for loan losses as a percent of total outstanding loans was 0.79% as of September 30, 2007.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Three months ended Nine months ended
Summary September 30 September 30
------------------------ ------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Interest Income $ 36,783 $ 34,431 $ 107,944 $ 85,668
Interest Expense 18,537 15,606 52,341 36,201
----------- ----------- ----------- -----------
Net Interest Income 18,246 18,825 55,603 49,467
Provision for Loan
Losses 1,184 570 2,779 1,293
Noninterest Income:
Insurance
commissions 474 455 1,405 1,396
Trust and
investment
product fees 472 312 1,287 901
Mortgage banking 761 577 2,125 1,721
Service charges
on deposit
accounts 3,606 2,732 9,682 6,886
Gain/(losses) on
sales of
securities - (10) 229 51
Interchange
income 783 747 2,370 1,883
Other 1,439 1,629 3,995 4,398
----------- ----------- ----------- -----------
Total
Noninterest
Income 7,535 6,442 21,093 17,236
Noninterest Expense:
Employee 9,621 9,173 28,785 24,887
Occupancy 1,308 1,258 4,046 3,480
Equipment 1,399 1,369 4,382 3,748
Intangible
amortization 666 664 1,999 1,554
Telecommunications 452 528 1,464 1,415
Stationery,
printing, and
supplies 382 468 1,144 992
Other 3,465 3,246 9,440 7,633
----------- ----------- ----------- -----------
Total
Noninterest
Expense 17,293 16,706 51,260 43,709
Earnings Before
Income Taxes 7,304 7,991 22,657 21,701
Provision for
Income Taxes 1,701 2,057 5,636 5,499
----------- ----------- ----------- -----------
Net Income $ 5,603 $ 5,934 $ 17,021 $ 16,202
=========== =========== =========== ===========
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
Average Balance Sheet
Data 2007 2006 2007 2006
----------- ----------- ----------- -----------
Gross Loans $ 1,639,410 $ 1,564,755 $ 1,597,886 $ 1,279,904
Earning Assets 2,172,394 2,085,270 2,129,514 1,789,212
Total Assets 2,465,673 2,362,697 2,423,109 2,007,523
Noninterest Bearing
Deposits 190,263 189,735 188,409 168,477
Interest Bearing
Deposits 1,637,352 1,566,593 1,630,086 1,381,820
Total Interest
Bearing
Liabilities 1,996,270 1,909,253 1,954,716 1,620,752
Shareholders'
Equity 255,425 243,383 256,206 201,788
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
Per Share Data 2007 2006 2007 2006
----------- ----------- ----------- -----------
Diluted Earnings
Per Share $ 0.30 $ 0.31 $ 0.91 $ 0.97
Cash Dividends Per
Share 0.140 0.133 0.415 0.395
Market Value - High 19.01 16.93 19.01 18.52
Market Value - Low 15.03 15.30 15.03 15.30
Average Outstanding
Shares (diluted) 18,688,359 18,868,966 18,731,780 16,638,341
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
Key Ratios 2007 2006 2007 2006
----------- ----------- ----------- -----------
Return on Average
Assets 0.91% 1.00% 0.94% 1.08%
Return on Average
Equity 8.77% 9.67% 8.88% 10.73%
Net Interest Margin 3.48% 3.74% 3.61% 3.83%
Efficiency Ratio 65.04% 64.06% 64.81% 63.77%
Net Overhead to
Average Assets 1.58% 1.72% 1.66% 1.77%
Balance Sheet Highlights
As of September 30 2007 2006
----------- -----------
Total Loans (Excluding Loans
Held for Sale) $ 1,665,661 1,580,074
Allowance for Loan Losses 13,169 13,855
Total Securities 502,900 481,622
Goodwill and Intangible Assets 135,991 133,037
Total Assets 2,513,930 2,389,125
Noninterest Bearing Deposits 196,570 189,098
Interest Bearing Deposits
(excluding Public Funds) 1,414,008 1,413,302
Public Fund Deposits 230,633 175,722
Repurchase Agreements 29,506 17,101
Other Borrowings 359,010 323,119
Shareholders' Equity 258,847 249,577
Other Balance Sheet Data
As of September 30 2007 2006
----------- -----------
Book Value Per Share $ 13.89 $ 13.25
Loan Loss Reserve to Loans 0.79% 0.88%
Nonperforming Assets to
Total Assets 0.76% 0.90%
Outstanding Shares 18,636,429 18,840,997
Asset Quality
As of September 30 2007 2006
----------- -----------
Loans Past Due 90 Days or
More and Still Accruing $ 1,708 $ 1,483
Non-accrual Loans 15,867 15,455
Other Real Estate Owned 1,618 4,541
----------- -----------
Total Nonperforming Assets $ 19,193 $ 21,479
Net Charge-offs - YTD $ 2,402 $ 2,216
Net Charge-offs as a % of
average loans 0.20% 0.23%
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 three banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, 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
