SOURCE: MainSource Financial Group

October 24, 2007 16:30 ET

MainSource Financial Group Announces Earnings for the Third Quarter 2007

GREENSBURG, IN--(Marketwire - October 24, 2007) - James L. Saner, Sr., President & Chief Executive Officer of MainSource Financial Group (NASDAQ: MSFG), announced today the unaudited results for the quarter ended September 30, 2007. Net income was $5.6 million in the third quarter of 2007, which equates to $0.30 per share, compared to $5.9 million for the same period a year ago, or $0.31 for the same period a year ago. During the third quarter, the Company incurred approximately $600,000 of pre-tax expenses primarily related to the data processing system conversion of its Crawfordsville, Indiana affiliate. Excluding these expenses, earnings per share would have been $0.32 for the quarter. Key measures of the financial performance of the Company are return on average shareholders' equity and return on average assets. Return on average shareholders' equity was 8.77% for the third quarter of 2007 while return on average assets was 0.91% for the same period.

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 Information

  • 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