SOURCE: MainSource Financial Group

July 20, 2005 13:49 ET

MainSource Financial Group - NASDAQ, MSFG - Announces Earnings for the Second Quarter 2005

Net Income of $4.3 million; Return on Average Equity of 13.66%; Return on Average Assets of 1.15%; Net Interest Margin of 4.04%

GREENSBURG, IN -- (MARKET WIRE) -- July 20, 2005 -- James L. Saner, Sr., President & CEO of MainSource Financial Group, Inc. (NASDAQ: MSFG), announced today the unaudited results for the second quarter ended June 30, 2005. Total net income for the second quarter was $4,326,000 compared to $4,319,000 for the same period in 2004. The Company reported earnings per share of $0.37, which represents a 2.6% decrease compared to the $0.38 per share reported in the second quarter of 2004. In June 2005, the Company completed a public offering of approximately 1.7 million shares of common stock. As previously announced, the majority of the proceeds from this offering will be used in the acquisition of The Madison Bank and Trust Company, which is expected to close in the third quarter of 2005. Excluding the effect of the additional shares issued in the offering, the Company's earnings per share would have been $0.38. For the six months ended June 30, 2005, the Company reported earnings per share of $0.70, which represents a 1.4% decrease over the $0.71 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 13.66% for the second quarter of 2005 and the return on average assets was 1.15% for the second quarter of 2005. For the six months ended June 30, 2005, the Company's return on average shareholders' equity was 12.96% and the return on average assets was 1.08%.

Mr. Saner stated, "We are pleased with our performance in the second quarter given the fact that we will not be able to fully utilize the proceeds from our recent stock offering until the third quarter. Although our numbers are down slightly from the second quarter of 2004, we showed a significant improvement over the first quarter of this year. On a linked quarter basis, earnings per share, return on average assets, return on average equity, and net interest margin all increased substantially."

NET INTEREST INCOME

Net interest income was $13.2 million for the second quarter of 2005, which represents an increase of 7.3% versus the second quarter of 2004. Average earning assets increased 4.6% while net interest margin, on a fully taxable equivalent basis, was 4.04% for the second quarter of 2005 compared to 3.85% for the same period a year ago. For the six months ended June 30, 2005, the Company's net interest margin was 3.95% versus 3.79% a year ago.

NON-INTEREST INCOME

Non-interest income was $4.8 million for the second quarter of 2005 compared to $5.3 million for the same period a year ago. This decrease was primarily due to a decrease in mortgage banking income and lower gains on sales of investment securities. In addition, insurance commission income decreased as the Company disposed of the Kentucky division of its insurance subsidiary in March 2005. The Company's Indiana insurance division realized an increase in commission income of 9% compared to the same period a year ago.

NON-INTEREST EXPENSE

Non-interest expense for the second quarter of 2005 was $11.9 million and was relatively flat compared to $11.7 million for the second quarter of 2004. The Company was able to keep expenses flat year over year despite the full quarter effect of Peoples Trust Company in 2005, which was acquired in mid-June 2004. The Company is beginning to realize the cost savings anticipated with the consolidation of its Indiana bank charters.

ASSET QUALITY

As expected, the Company's asset quality improved during the second quarter of 2005. Non-performing assets totaled $14.3 million, or 0.93% of total assets, as of June 30, 2005. The Company had $17.6 million of non-performing assets, or 1.18% of total assets as of March 31, 2005, and $15.7 million, or 1.02% of total assets at year-end 2004. The allowance for loan losses was $11.3 million as of June 30, 2005, which represented 1.23% of total outstanding loans.

Mr. Saner stated, "Our efforts to reduce our non-performing assets have been successful over the last quarter as we continue to improve the asset quality of the Company. This continues to be a major focus for our Company in 2005."

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 $1.5 billion. The Company operates 54 offices in 22 Indiana counties and six offices in three Illinois counties through its three banking subsidiaries, MainSource Bank, Greensburg, Indiana; Peoples Trust Company, Linton, 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 June 30   Six months ended June 30
                        2005          2004          2005          2004
                    ------------  ------------  ------------  ------------
  Interest Income   $     19,533  $     17,474  $     38,226  $     34,238
  Interest Expense         6,348         5,190        12,336        10,482
                    ------------  ------------  ------------  ------------
  Net Interest
   Income                 13,185        12,284        25,890        23,756
  Provision for Loan
   Losses                    340            60           460            60
  Noninterest Income:
    Insurance
     commissions             523           691         1,110         1,389
    Mortgage banking         679           919         1,225         1,718
    Service charges
     on deposit
     accounts              1,805         1,720         3,471         3,258
    Gain on sales
     of securities           213           437           224           773
    Other                  1,619         1,495         3,388         2,771
                    ------------  ------------  ------------  ------------
      Total
       Noninterest
       Income              4,839         5,262         9,418         9,909
  Noninterest
   Expense:
    Employee               6,886         6,639        13,762        13,080
    Occupancy                824           762         1,723         1,520
    Equipment                985           932         2,015         1,864
    Intangible
     amortization            295           232           590           466
    Other                  2,873         3,131         5,867         5,730
                    ------------  ------------  ------------  ------------
     Total
      Noninterest
      Expense             11,863        11,696        23,957        22,660
  Earnings Before
   Income Taxes            5,821         5,790        10,891        10,945
  Provision for
   Income Taxes            1,495         1,471         2,775         2,991
                    ------------  ------------  ------------  ------------
  Net Income        $      4,326  $      4,319  $      8,116  $      7,954
                    ============  ============  ============  ============


Average Balance     Three months ended June 30   Six months ended June 30
 Sheet Data             2005          2004          2005          2004
                    ------------  ------------  ------------  ------------
  Gross Loans       $    911,109  $    872,244  $    915,978  $    861,891
  Earning Assets       1,370,550     1,310,468     1,367,062     1,295,518
  Total Assets         1,519,903     1,450,647     1,516,225     1,434,213
  Noninterest
   Bearing Deposits      140,007       125,800       137,831       121,069
  Interest Bearing
   Deposits            1,062,596     1,051,637     1,064,552     1,043,566
  Total Interest
   Bearing
   Liabilities         1,241,673     1,204,154     1,241,324     1,193,604
  Shareholders'
   Equity                128,394       109,408       126,290       108,310

                    Three months ended June 30   Six months ended June 30
Per Share Data          2005          2004          2005          2004
                    ------------  ------------  ------------  ------------
  Diluted Earnings
   Per Share        $       0.37  $       0.38  $       0.70  $       0.71
  Cash Dividends
   Per Share               0.130         0.119         0.260         0.233
  Market Value
   - High                  21.62         23.96         22.92         23.07
  Market Value
   - Low                   17.30         17.30         17.81         17.81
  Average
   Outstanding
   Shares (diluted)   11,751,831    11,230,427    11,649,538    11,182,721

                    Three months ended June 30   Six months ended June 30
Key Ratios              2005          2004          2005         2004
                    ------------  ------------  ------------  ------------
  Return on Average
   Assets                   1.15%         1.20%         1.08%         1.12%
  Return on Average
   Equity                  13.66%        15.85%        12.96%        14.73%
  Net Interest
   Margin                   4.04%         3.85%         3.95%         3.79%
  Efficiency Ratio         64.20%        65.74%        66.24%        66.04%
  Net Overhead to
   Average Assets           1.87%         1.78%         1.93%         1.79%

Balance Sheet Highlights
As of June 30           2005          2004
                    ------------  ------------
  Total Loans
   (Excluding Loans
   Held for Sale)   $    913,326  $    946,204
  Allowance for
   Loan Losses            11,275        12,254
  Total Securities       446,400       432,494
  Goodwill and
   Intangible Assets      45,150        47,193
  Total Assets         1,540,386     1,552,494
  Noninterest
   Bearing Deposits      146,398       138,509
  Interest Bearing
   Deposits            1,104,036     1,079,488
  Other Borrowings       123,308       209,513
  Shareholders'
   Equity                155,047       114,242

Other Balance Sheet Data
As of June 30           2005         2004
                    ------------  ------------
  Book Value Per
   Share            $      11.74  $       9.89
  Loan Loss Reserve
   to Loans                 1.23%         1.30%
  Nonperforming
   Assets to Total
   Assets                   0.93%         0.84%
  Outstanding
   Shares             13,210,268    11,551,357

Asset Quality
As of June 30           2005          2004
                    ------------  ------------
  Loans Past Due
   90 Days or More
   and Still
   Accruing         $        257  $        225
  Non-accrual Loans       12,894        10,525
  Other Real Estate
   Owned                   1,175         2,282
                    ------------  ------------
  Total
   Nonperforming
   Assets           $     14,326  $     13,032

Contact Information

  • CONTACT:

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