SOURCE: MainSource Financial Group

October 19, 2005 12:44 ET

MainSource Financial Group (NASDAQ: MSFG) Announces Earnings for the Third Quarter 2005

Net Income of $4.5 Million; Return on Average Assets of 1.13%; Net Interest Margin of 3.93%

GREENSBURG, IN -- (MARKET WIRE) -- October 19, 2005 -- James L. Saner, Sr., President & CEO of MainSource Financial Group, Inc. (NASDAQ: MSFG), announced today the unaudited results for the third quarter ended September 30, 2005. Total net income for the third quarter was $4,532,000 compared to $4,606,000 for the same period in 2004. The Company reported earnings per share of $0.34, which includes the effect of the Company's two million shares of common stock issued in a public offering in June and July of 2005. The Company was not able to fully utilize the new capital generated from the offering until the close of its acquisition of The Madison Bank and Trust Company, which occurred on August 26, 2005. Excluding the effect of the additional shares issued in the offering and the merger expenses related to the aforementioned acquisition, the Company's earnings per share would have been $0.38 for the third quarter of 2005 compared to $0.40 for the same period a year ago. For the nine months ended September 30, 2005, the Company reported earnings per share of $1.03, which represents a 7.2% decrease versus the $1.11 reported for the same period a year ago.

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 11.30% for the third quarter of 2005 and the return on average assets was 1.13% for the same period. For the nine months ended September 30, 2005, the Company's return on average shareholders' equity was 12.32% and the return on average assets was 1.10%.

Mr. Saner stated, "We are pleased with our performance in the third quarter given the fact that we were not able to fully utilize the proceeds from our recent stock offering until the Madison Bank and Trust transaction closed in late August. Although our numbers are down slightly from last year through the first nine months, we showed a significant overall improvement during the last month of the quarter which included the first full month of the new acquisition."

NET INTEREST INCOME

Net interest income was $13.6 million for the third quarter of 2005, relatively flat compared to the third quarter of 2004. Average earning assets increased 2.7% while net interest margin, on a fully taxable equivalent basis, was 3.93% for the third quarter of 2005 compared to 3.97% for the same period a year ago. For the nine months ended September 30, 2005, the Company's net interest margin was 3.93% versus 3.85% a year ago.

NON-INTEREST INCOME

Non-interest income was $4.9 million for the third quarter of 2005 and was relatively flat compared to the same period a year ago. An increase in mortgage banking income was offset by a decrease in insurance commission income as the Company disposed of the Kentucky division of its insurance subsidiary in March 2005.

NON-INTEREST EXPENSE

Non-interest expense for the third quarter of 2005 was $12.1 million, which was an increase of $0.3 million compared to the third quarter of 2004. The increase was primarily attributable to the merger costs associated with the acquisition of Madison, which totaled $0.3 million. Excluding these costs, the Company's non-interest expense would have been relatively flat. This expense control can be primarily attributed to the cost savings associated with the consolidation of the Company's Indiana bank charters.

ASSET QUALITY

The Company's asset quality remained relatively flat during the third quarter of 2005. Non-performing assets totaled $15.4 million, or 0.94% of total assets, as of September 30, 2005. The Company had $14.3 million of non-performing assets, or 0.93% of total assets as of June 30, 2005, and $17.6 million, or 1.18% of total assets at March 31, 2005. The allowance for loan losses was $12.5 million as of September 30, 2005 which represented 1.28% of total outstanding loans.

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 $1.6 billion. The Company operates 54 offices in 23 Indiana counties and six offices in three Illinois counties through its two banking subsidiaries, MainSource Bank, Greensburg, Indiana and MainSource Bank of Illinois, Kankakee, Illinois. 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. Factors which could cause future results to differ materially 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; and changes in the quality or composition of the Company's loan and investment portfolios.


                      MAINSOURCE FINANCIAL GROUP
                             (unaudited)
            (Dollars in thousands except per share data)

Income Statement Summary      Three months ended       Nine months ended
                                   Sept. 30                Sept. 30
                               2005        2004        2005        2004
                            ----------  ----------  ----------  ----------
  Interest Income           $   20,598  $   18,985  $   58,824  $   53,206
  Interest Expense               6,969       5,485      19,305      15,950
                            ----------  ----------  ----------  ----------
  Net Interest Income           13,629      13,500      39,519      37,256
  Provision for Loan Losses        480         270         940         330
  Noninterest Income:
    Insurance commissions          435         706       1,545       2,095
    Mortgage banking               805         701       2,030       2,419
    Service charges on
     deposit accounts            1,964       1,931       5,435       5,189
    Gain on sales of
     securities                     18          44         242         817
    Other                        1,723       1,522       5,111       4,530
                            ----------  ----------  ----------  ----------
      Total Noninterest
       Income                    4,945       4,904      14,363      15,050
  Noninterest Expense:
    Employee                     6,835       6,388      20,597      19,468
    Occupancy                      870         824       2,593       2,344
    Equipment                      952       1,047       2,967       2,911
    Intangible amortization        296         296         886         762
    Other                        3,120       3,213       8,987       9,180
                            ----------  ----------  ----------  ----------
      Total Noninterest
       Expense                  12,073      11,768      36,030      34,665
  Earnings Before Income
   Taxes                         6,021       6,366      16,912      17,311
  Provision for Income
   Taxes                         1,489       1,760       4,264       4,751
                            ----------  ----------  ----------  ----------
  Net Income                $    4,532  $    4,606  $   12,648  $   12,560
                            ==========  ==========  ==========  ==========

                              Three months ended       Nine months ended
                                   Sept. 30                Sept. 30
Average Balance Sheet Data     2005        2004        2005        2004
                            ----------  ----------  ----------  ----------
  Gross Loans               $  943,526  $  945,768  $  925,162  $  889,849
  Earning Assets             1,428,672   1,390,772   1,389,780   1,326,834
  Total Assets               1,587,399   1,543,682   1,539,949   1,470,715
  Noninterest Bearing
   Deposits                    145,475     137,521     140,379     126,553
  Interest Bearing Deposits  1,087,366   1,083,475   1,072,158   1,056,865
  Total Interest Bearing
   Liabilities               1,270,129   1,277,393   1,250,927   1,221,530
  Shareholders' Equity         159,165     117,599     137,248     111,407

                              Three months ended       Nine months ended
                                   Sept. 30                Sept. 30
Per Share Data                 2005        2004        2005        2004
                            ----------  ----------  ----------  ----------
  Diluted Earnings Per
   Share                    $     0.34  $     0.40  $     1.03  $     1.11
  Cash Dividends Per Share       0.130       0.119       0.390       0.352
  Market Value - High            19.55       20.50       23.96       23.07
  Market Value - Low             17.73       16.48       17.30       16.48
  Average Outstanding
   Shares (diluted)         13,443,491  11,559,956  12,254,174  11,309,429

                              Three months ended       Nine months ended
                                   Sept. 30                Sept. 30
Key Ratios                     2005        2004        2005        2004
                            ----------  ----------  ----------  ----------
  Return on Average Assets        1.13%       1.18%       1.10%       1.14%
  Return on Average Equity       11.30%      15.54%      12.32%      15.02%
  Net Interest Margin             3.93%       3.97%       3.93%       3.85%
  Efficiency Ratio               63.27%      62.52%      65.22%      64.91%
  Net Overhead to Average
   Assets                         1.78%       1.76%       1.88%       1.78%

Balance Sheet Highlights
As of September 30             2005        2004
                            ----------  ----------
  Total Loans (Excluding
   Loans Held for Sale)     $  977,400  $  945,519
  Allowance for Loan Losses     12,463      11,899
  Total Securities             472,363     432,922
  Goodwill and Intangible
   Assets                       61,104      46,632
  Total Assets               1,639,510   1,556,705
  Noninterest Bearing
   Deposits                    166,009     139,082
  Interest Bearing
   Deposits                  1,152,822   1,095,218
  Other Borrowings             146,409     186,172
  Shareholders' Equity         161,533     122,079

Other Balance Sheet Data
As of September 30             2005        2004
                            ----------  ----------
  Book Value Per Share      $    11.99  $    10.58
  Loan Loss Reserve to
   Loans                          1.28%       1.26%
  Nonperforming Assets
   to Total Assets                0.94%       0.83%
  Outstanding Shares        13,471,128  11,541,907

Asset Quality
As of September 30             2005        2004
                            ----------  ----------
  Loans Past Due 90 Days
   or More and Still
   Accruing                 $    1,731  $      261
  Non-accrual Loans             12,616      10,463
  Other Real Estate Owned        1,044       2,143
                            ----------  ----------
  Total Nonperforming
   Assets                   $   15,391  $   12,867

Contact Information

  • CONTACT:
    James L. Saner, Sr.
    President and CEO
    MainSource Financial Group
    812-663-0157