Mr. Saner stated, "The fourth quarter and the entire year of 2007 presented many challenges. We were extremely pleased with the organic growth in our core deposits throughout 2007 in spite of the fierce competition that existed. In addition, we increased our loan portfolio by more than $119 million which represented almost an 8% growth over 2006. We also had significant gains in mortgage banking, wealth management and service fee revenues over last year. We were able to complete all of the data processing conversions of the 2006 bank acquisitions by the end of the year. We believe that the completion of these conversions will position the company to lower its operational efficiency ratio in 2008."
Mr. Saner continued, "Our credit quality has remained relatively stable with non-performing assets at .92% of total assets and overall net charge offs of 26 basis points of average loans for 2007 compared to charge offs of 25 basis points for 2006. We have provided additional loan loss reserve dollars for our Company's exposure to development loans and since we do not have any exposure to sub-prime mortgages, we remain cautiously optimistic about 2008. Unfortunately, with the additional provision expense to the allowance and the continued net interest margin compression that was experienced throughout the year, we were not able to achieve our profit plan for 2007. The earnings of $1.17 per share, however, represent a solid foundation for us to build on in 2008. While it is impossible to predict the future, we are optimistic about 2008."
4TH QUARTER RESULTS
NET INTEREST INCOME
Net interest income was $18.8 million for the fourth quarter of 2007, which was flat when compared to the fourth quarter of 2006. The increase in average earning assets was offset by the decrease in the Company's net interest margin. Net interest margin, on a fully-taxable equivalent basis, was 3.49% for the fourth quarter of 2007 versus 3.70% for the fourth quarter of 2006. On a linked quarter basis, the Company's net interest margin increased by one basis point.
NON-INTEREST INCOME
The Company's non-interest income was $7.0 million for the fourth quarter of 2007 compared to $5.8 million for the same period in 2006. The increase was driven primarily by the increase in the Company's service charges on deposit accounts 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 $16.8 million for the fourth quarter of 2007 compared to $15.9 million for the same period in 2006, an increase of 5.7%. The primary driver of the increase was due to the increase in employee costs and represents a combination of normal merit increases as well as an increase in revenue-producing staff in the commercial lending and wealth management areas. The Company's efficiency ratio was 62.8% compared to 63.1% for the same period a year ago.
FULL YEAR RESULTS
BALANCE SHEET
Total assets were $2.5 billion as of December 31, 2007, an increase of approximately $107 million compared to year-end 2006. The increase in assets is a direct result of the organic growth in the Company's loan portfolio in 2007. Total loans were $1.7 billion as of December 31, 2007, an increase of $119 million compared to year-end 2006. This represents an increase of 7.6%. Total deposits grew by 2.3% year-over-year and were $1.9 billion as of December 31, 2007.
NET INTEREST INCOME
Net interest income was $74.4 million for the full year 2007, which represents an increase of 9.0% versus 2006. Net interest margin, on a fully-taxable equivalent basis, was 3.57% for 2007 compared to 3.81% for the same period a year ago. Due to the relatively flat nature of the yield curve for most of 2007, the Company's cost of funds increased steadily throughout the year and outpaced the increase in the yield on earning assets. Partially offsetting this trend was a favorable shift in the Company's volume and mix of earning assets as lower-yielding residential real estate loans were replaced by higher-yielding commercial loans.
NON-INTEREST INCOME
Non-interest income was $28.1 million for 2007 compared to $23.0 million for the same period in 2006. The acquisitions closed in 2006 were the primary driver of this increase as the Company realized the full-year effect in 2007. Non-interest income as a percent of non-interest expense was 41.3% for 2007 compared to 38.6% for 2006.
NON-INTEREST EXPENSE
Non-interest expense was $68.0 million compared to $59.6 million in 2006. As mentioned above, the acquisitions closed in 2006 were the primary driver of this increase as the Company realized the full-year effect in 2007. The Company's efficiency ratio was 64.4% for 2007 compared to 63.6% 2006.
ASSET QUALITY
Non-performing assets were $23.3 million as of December 31, 2007 compared to $21.0 million as of December 31, 2006 and represented 0.92% of total assets at December 31, 2007 compared to 0.87% at year-end 2006. Net charge-offs for 2007 equaled 0.26% of average outstanding loans, which was relatively flat compared to 0.25% for 2006. The Company's allowance for loan losses as a percent of total outstanding loans was 0.85% as of December 31, 2007 compared to 0.81% as of December 31, 2006.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Three months ended Twelve months ended
Income Statement Summary December 31 December 31
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Interest Income $ 36,885 $ 35,063 $ 144,829 $ 120,731
Interest Expense 18,091 16,262 70,432 52,463
---------- ---------- ---------- ----------
Net Interest Income 18,794 18,801 74,397 68,268
Provision for Loan Losses 2,966 526 5,745 1,819
Noninterest Income:
Insurance commissions 459 425 1,864 1,821
Trust and investment
product fees 282 286 1,569 1,187
Mortgage banking 796 558 2,921 2,279
Service charges on
deposit accounts 3,630 2,543 13,312 9,429
Gain/(losses) on sales
of securities (115) 94 114 145
Interchange income 789 734 3,159 2,617
Other 1,192 1,163 5,187 5,561
---------- ---------- ---------- ----------
Total Noninterest
Income 7,033 5,803 28,126 23,039
Noninterest Expense:
Employee 9,278 8,186 38,063 33,073
Occupancy 1,301 1,275 5,347 4,755
Equipment 1,406 1,613 5,788 5,361
Intangible amortization 667 682 2,666 2,236
Telecommunications 460 501 1,924 1,916
Stationary, printing, and
supplies 331 416 1,475 1,408
Other 3,317 3,260 12,757 10,893
---------- ---------- ---------- ----------
Total Noninterest
Expense 16,760 15,933 68,020 59,642
Earnings Before Income
Taxes 6,101 8,145 28,758 29,846
Provision for Income
Taxes 1,252 2,106 6,888 7,605
---------- ---------- ---------- ----------
Net Income $ 4,849 $ 6,039 $ 21,870 $ 22,241
========== ========== ========== ==========
Three months ended Twelve months ended
December 31 December 31
---------------------- ----------------------
Average Balance Sheet Data 2007 2006 2007 2006
---------- ---------- ---------- ----------
Gross Loans $1,675,682 $1,574,915 $1,617,334 $1,353,656
Earning Assets 2,196,943 2,097,493 2,144,010 1,870,284
Total Assets 2,484,733 2,389,634 2,438,515 2,103,050
Noninterest Bearing
Deposits 195,418 191,441 190,162 174,218
Interest Bearing Deposits 1,672,821 1,625,402 1,640,770 1,442,714
Total Interest Bearing
Liabilities 2,006,480 1,926,632 1,967,657 1,697,221
Shareholders' Equity 261,915 250,588 257,633 213,989
Three months ended Twelve months ended
December 31 December 31
---------------------- ----------------------
Per Share Data 2007 2006 2007 2006
---------- ---------- ---------- ----------
Diluted Earnings Per
Share $ 0.26 $ 0.32 $ 1.17 $ 1.29
Cash Dividends Per Share 0.140 0.133 0.555 0.529
Market Value - High 18.09 17.88 19.01 18.52
Market Value - Low 14.36 16.05 14.36 15.30
Average Outstanding
Shares (diluted) 18,606,398 18,836,789 18,699,394 17,188,241
Three months ended Twelve months ended
December 31 December 31
---------------------- ----------------------
Key Ratios 2007 2006 2007 2006
---------- ---------- ---------- ----------
Return on Average Assets 0.78% 1.00% 0.90% 1.06%
Return on Average Equity 7.41% 9.56% 8.49% 10.39%
Net Interest Margin 3.49% 3.70% 3.57% 3.81%
Efficiency Ratio 62.83% 63.07% 64.37% 63.57%
Net Overhead to Average
Assets 1.57% 1.68% 1.64% 1.74%
Balance Sheet Highlights
As of December 31 2007 2006
---------- ----------
Total Loans (Excluding
Loans Held for Sale) $1,693,678 1,574,384
Allowance for Loan Losses 14,331 12,792
Total Securities 489,739 485,259
Goodwill and Intangible
Assets 135,324 136,553
Total Assets 2,536,437 2,429,773
Noninterest Bearing
Deposits 200,753 193,513
Interest Bearing Deposits
(excluding Public Funds) 1,431,035 1,404,594
Public Fund Deposits 270,041 261,582
Repurchase Agreements 30,006 29,306
Other Borrowings 318,488 262,682
Shareholders' Equity 264,102 253,247
Other Balance Sheet Data
As of December 31 2007 2006
---------- ----------
Book Value Per Share $ 14.22 $ 13.50
Loan Loss Reserve to Loans 0.85% 0.81%
Nonperforming Assets to
Total Assets 0.92% 0.87%
Outstanding Shares 18,570,139 18,771,641
Asset Quality
As of December 31 2007 2006
---------- ----------
Loans Past Due 90 Days or
More and Still Accruing $ 1,693 $ 1,460
Non-accrual Loans 18,800 16,021
Other Real Estate Owned 2,769 3,567
---------- ----------
Total Nonperforming
Assets $ 23,262 $ 21,048
Net Charge-offs - YTD $ 4,206 $ 3,363
Net Charge-offs as a %
of average loans 0.26% 0.25%
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 - 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, goals and projections, which are subject to numerous assumptions, risks and uncertainties. Factors which could cause future results to differ materially from these expectations include, but are not limited to, 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.
812-663-6734
