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MainSource Financial Group -- NASDAQ, MSFG -- Announces Earnings for the Third Quarter 2008 GREENSBURG, IN--(MARKET WIRE)--Oct 22, 2008 -- Archie M. Brown, Jr., President & Chief
Executive Officer of MainSource Financial Group, Inc. (NasdaqGS:MSFG - News),
announced today the unaudited results for the quarter ended
September 30,
2008. Net income was $5.4 million in the third quarter of
2008, which
equates to $0.28 per share, compared to $5.6 million for
the same period a
year ago, or $0.30 per share. A significant increase in
the Company's net
interest margin was offset by an increase in loan loss provision
expense.
Total loan loss provision expense was $5.3 million in the
third quarter of
2008 compared to $1.2 million for the same period a year
ago.
Mr. Brown stated, "We are pleased with our results for the third quarter given the challenging economic environment. Our earnings were solid even with the significant increase in our loan loss provision expense. We continue to experience growth in our low-cost deposits and consumer and commercial loans. Our net interest margin remains strong and was stable from the second quarter. Our net interest income and non interest income were up significantly and our non-interest expenses were in check. Asset quality continues to be an area of focus for our company. Our non-performing loans and net charge-offs increased for the quarter reflecting the deterioration in the economy. However, net charge-offs on a year to date basis are in line with our expectations. While our non-performing loans have increased, we believe we have responsibly balanced this increase with the additional loan loss provision expense." Mr. Brown continued, "In August, we completed the acquisition of 1st Independence Financial Group. I want to welcome employees from 1st Independence to the MainSource family. We are very excited about our combined future. We are especially pleased with the strengthened market position we now have in Southern Indiana as well as our entry into Kentucky. I am extremely proud of our employees who continue to provide great service to our customers and have enabled our company to report a solid quarter." NET INTEREST INCOME Net interest income was $22.5 million for the third quarter of 2008, which represents an increase of 23.6% from the third quarter of 2007. Net interest margin, on a fully-taxable equivalent basis, was 3.92% for the third quarter of 2008, which was flat on a linked quarter basis and an increase of 44 basis points from the third quarter of 2007. This increase was primarily due to the rate cuts that occurred during the fourth quarter of 2007 and the first quarter of 2008 as the Company's cost of funds decreased at a faster rate than the yield on earning assets. NON-INTEREST INCOME The Company's non-interest income increased to $7.8 million for the third quarter of 2008 compared to $7.5 million for the same period in 2007. Increases in service charges on deposit accounts and interchange income were offset by a slight decrease in other income. NON-INTEREST EXPENSE The Company's non-interest expense was $18.1 million for the third quarter of 2008 compared to $17.3 million for the same period in 2007, which represents an increase of approximately 4.6% over the same period a year ago. The increase was primarily related to an increase in employee-related costs and represents normal merit increases and the current period effect of the acquisition of 1st Independence. The Company's efficiency ratio was 58.34% for the third quarter of 2008, which was a significant reduction compared to an efficiency ratio of 65.04% for the same period a year ago. The improvement in the Company's efficiency ratio was primarily due to the significant increase in the net interest margin. ASSET QUALITY Non-performing assets were $47.3 million as of September 30, 2008, which represents an increase of approximately $17.4 million from the $29.9 million reported as of June 30, 2008. This increase was primarily due to the acquisition of 1st Independence. As of September 30, 2008, 1st Independence had $12.9 million of non-performing assets. Non-performing assets represented 1.65% of total assets as of September 30, 2008. Annualized net charge-offs for the third quarter of 2008 equaled 0.42% of average loans. For the nine months ended September 30, 2008, annualized net charge-offs equated to 0.33% of average loans. The Company's allowance for loan losses as a percent of total outstanding loans was 1.36% as of September 30, 2008 compared to 0.85% as of December 31, 2007 and 0.79% a year ago. As mentioned above, total loan loss provision expense was $5.3 million in the third quarter of 2008 compared to $1.2 million for the same period a year ago. The additional provision expense was primarily due to the increase in the level of non-performing loans, an increase in specific allocations related to certain commercial real estate loans which exhibited credit deterioration during the third quarter, and the continued weakening in the real estate markets. ACQUISITION COMPLETED In August 2008, the Company completed its acquisition of 1st Independence Financial Group, Inc. As a result of the merger, 1st Independence's wholly owned subsidiary, 1st Independence Bank, Inc., became the wholly owned subsidiary of MainSource. At the time of acquisition, 1st Independence Bank operated eight offices in southern Indiana and Kentucky and had total assets of approximately $325 million, total deposits of $261 million, and total loans of $245 million.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Three months ended Nine months ended
Summary September 30 September 30
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Interest Income $ 36,242 $ 36,783 $ 107,136 $ 107,944
Interest Expense 13,693 18,537 43,668 52,341
----------- ----------- ----------- -----------
Net Interest Income 22,549 18,246 63,468 55,603
Provision for Loan
Losses 5,254 1,184 10,921 2,779
Noninterest Income:
Insurance commissions 517 474 1,591 1,405
Trust and investment
product fees 418 472 1,238 1,287
Mortgage banking 796 761 2,978 2,125
Service charges on
deposit accounts 3,875 3,606 10,638 9,682
Gain on sales of
securities 6 - 435 229
Interchange income 958 783 2,695 2,370
Other 1,232 1,439 3,816 3,995
----------- ----------- ----------- -----------
Total Noninterest
Income 7,802 7,535 23,391 21,093
Noninterest Expense:
Employee 10,400 9,621 31,056 28,785
Occupancy 1,470 1,308 4,355 4,046
Equipment 1,586 1,399 4,566 4,382
Intangible
amortization 634 666 1,903 1,999
Telecommunications 471 452 1,359 1,464
Stationery, printing,
and supplies 389 382 1,018 1,144
Other 3,154 3,465 8,934 9,440
----------- ----------- ----------- -----------
Total Noninterest
Expense 18,104 17,293 53,191 51,260
Earnings Before
Income Taxes 6,993 7,304 22,747 22,657
Provision for Income
Taxes 1,610 1,701 4,939 5,636
----------- ----------- ----------- -----------
Net Income $ 5,383 $ 5,603 $ 17,808 $ 17,021
=========== =========== =========== ===========
Three months ended Nine months ended
September 30 September 30
Average Balance Sheet ------------------------ ------------------------
Data 2008 2007 2008 2007
----------- ----------- ----------- -----------
Gross Loans $ 1,796,852 $ 1,639,410 $ 1,729,716 $ 1,597,886
Earning Assets 2,352,424 2,172,394 2,271,578 2,129,514
Total Assets 2,624,734 2,465,673 2,554,262 2,423,109
Noninterest Bearing
Deposits 207,137 190,263 199,192 188,409
Interest Bearing
Deposits 1,727,749 1,637,352 1,702,326 1,630,086
Total Interest
Bearing Liabilities 2,127,672 1,996,270 2,061,191 1,954,716
Shareholders' Equity 269,674 255,425 270,939 256,206
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
Per Share Data 2008 2007 2008 2007
----------- ----------- ----------- -----------
Diluted Earnings
Per Share $ 0.28 $ 0.30 $ 0.95 $ 0.91
Cash Dividends
Per Share 0.145 0.140 0.430 0.415
Market Value - High 21.27 19.01 21.27 19.01
Market Value - Low 13.98 15.03 12.15 15.03
Average Outstanding
Shares (diluted) 19,127,713 18,688,359 18,761,370 18,731,780
Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
Key Ratios 2008 2007 2008 2007
----------- ----------- ----------- -----------
Return on Average Assets 0.81% 0.91% 0.93% 0.94%
Return on Average Equity 7.92% 8.77% 8.78% 8.88%
Net Interest Margin 3.92% 3.48% 3.82% 3.61%
Efficiency Ratio 58.34% 65.04% 59.93% 64.81%
Net Overhead to Average
Assets 1.56% 1.58% 1.56% 1.66%
Balance Sheet Highlights
As of September 30 2008 2007
----------- -----------
Total Loans
(Excluding Loans
Held for Sale) $ 1,957,154 $ 1,665,661
Allowance for Loan
Losses 26,529 13,169
Total Securities 518,065 502,900
Goodwill and
Intangible Assets 147,746 135,991
Total Assets 2,867,189 2,513,930
Noninterest Bearing
Deposits 218,102 196,570
Interest Bearing
Deposits (excluding
Public Funds) 1,578,629 1,414,008
Public Fund Deposits 280,536 230,633
Repurchase Agreements 31,131 29,506
Other Borrowings 436,248 359,010
Shareholders' Equity 297,310 258,847
Other Balance Sheet Data
As of September 30 2008 2007
----------- -----------
Book Value Per
Share $ 14.76 $ 13.89
Loan Loss Reserve
to Loans 1.36% 0.79%
Nonperforming Assets
to Total Assets 1.65% 0.76%
Outstanding Shares 20,136,362 18,636,429
Asset Quality
As of September 30 2008 2007
----------- -----------
Loans Past Due 90 Days
or More and Still
Accruing $ 3,798 $ 1,708
Non-accrual Loans 39,673 15,867
Other Real Estate Owned 3,782 1,618
----------- -----------
Total Nonperforming
Assets $ 47,253 $ 19,193
Net Charge-offs -
YTD $ 4,287 $ 2,402
Net Charge-offs as
a % of average
loans 0.33% 0.20%MainSource Financial Group, Inc. is a community-focused, financial services holding company with assets exceeding $2.85 billion. The Company operates 85 banking offices through its four banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, MainSource Bank-Ohio, Troy, Ohio, and 1st Independence Bank, Inc., Louisville, Kentucky. The Company's non-banking subsidiaries, MainSource Insurance, LLC and MainSource Title, LLC, provide 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: CONTACT:
Archie M. Brown, Jr.
President and CEO
MainSource Financial Group, Inc.
812-663-6734
MainSource Financial Group, Inc.
2105 N. State Road 3 Bypass
Greensburg, IN 47240
Source: MainSource Financial Group
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