Exhibit 99.1
DATE: | | July 26, 2011 4:00 p.m. E.S.T. |
CONTACT: | | Archie M. Brown, Jr. President and CEO |
| | MainSource Financial Group, Inc. 812-663-6734 |
MAINSOURCE FINANCIAL GROUP—NASDAQ, MSFG —
Announces Earnings for the Second Quarter 2011
· Net Income Up 252% to $7.6 million
· EPS of $0.34 compared to $.07 a year ago
· Net Interest Margin of 4.25%
· Tangible Common Equity Ratio of 7.0%
· Return on Average Assets of 1.09%
· 22% Decrease in Non-accrual Loans
· 19% Decrease in Non-performing Assets (including Troubled Debt Restructurings)
Greensburg, Indiana (NASDAQ: MSFG) Archie M. Brown, Jr., President & Chief Executive Officer of MainSource Financial Group, announced today the unaudited financial results for the second quarter ended June 30, 2011. The Company reported net income of $7.6 million for the second quarter and earnings per common share of $0.34 compared to $2.2 million of net income and $0.07 per common share reported in the second quarter of 2010. The primary driver of the increase in net income was a decrease in the Company’s loan loss provision expense to $4.0 million in the second quarter of 2011 compared to $12.8 million in the same period a year ago.
Mr. Brown stated, “I am very pleased with the continued improvement in earnings. Our net income for the quarter of $7.6 million and $.34 per common share was at the highest level in three years. Improvement in loan quality was the primary driver of our improvement in earnings. Total nonperforming assets (including accruing troubled debt restructurings) of $73.2 million were down $32.9 million, or 31.0%, from the same period one year ago and were down $18.6 million, or 20.3%, from the first quarter of 2011. For the quarter we continued to experience lower levels of new nonperforming loans compared to a year ago and we saw accelerated resolution of existing problem loans and sales of assets out of our Other Real Estate Owned portfolio. The result was a provision expense of $4 million compared to $12.8 million in the quarter one year ago and $5.6 million in the prior quarter.”
Mr. Brown continued, “Our net revenue excluding securities gains and insurance commissions (we sold the property and casualty insurance lines in the fourth quarter of 2010) was 2% higher than the same quarter one year ago and was 3.7% higher than the first quarter of this year. A strong net interest margin combined with increased service charge income, interchange revenue and brokerage commissions offset lower mortgage revenue to account for the revenue increase. While we were pleased with the stability of our revenue, we continue to be concerned about tepid loan demand as it continues to place downward pressure on our loan balances.”
Mr. Brown concluded, “As our earnings have continued to improve throughout this economic cycle, so has our capital. Our Tangible Common Equity ratio has increased from 5.3% in the second quarter of 2009 to 7.0% this quarter. The economy remains in a
weakened state, although in our core markets, several major companies have announced significant new hiring plans. We are encouraged, yet remain focused on continuing to improve our loan quality and position our company for long term success.”
NET INTEREST INCOME
Net interest income was $25.4 million for the second quarter of 2011, which was flat compared to the second quarter of 2010. The Company’s net interest margin, on a fully-taxable equivalent basis, was 4.25% for the second quarter of 2011 versus 4.05% for the second quarter of 2010. This increase in the net interest margin was offset by a decrease in average earning assets of $66 million. On a linked quarter basis, the Company’s net interest margin decreased by 5 basis points.
NON-INTEREST INCOME
The Company’s non-interest income increased to $11.5 million for the second quarter of 2011 compared to $11.4 million for the same period in 2010. An increase in gains from the sale of investment securities was offset by a decrease in insurance commissions as the Company sold its property and casualty book of business in the fourth quarter of 2010. Management’s strategy has been to realize gains on its investment securities portfolio from time to time when the interest rate environment has presented opportunities to reposition the securities portfolio to maximize overall returns.
NON-INTEREST EXPENSE
The Company’s non-interest expense was $23.4 million for the second quarter of 2011 compared to $22.6 million for the same period in 2010, an increase of $0.8 million or 3.6%. Marketing expenses increased by $422 thousand year over year as the Company has made investments in a checking account acquisition program and a customer/employee engagement survey and improvement program. Other expenses increased by $385 thousand year over year driven primarily by consulting fees as the Company has engaged firms to identify and eliminate inefficiencies throughout the organization. We hope to begin seeing cost savings from improvements gained through this process starting in the second half of 2011.
BALANCE SHEET AND CAPITAL
Total assets were $2.82 billion as of June 30, 2011, a decrease of $31 million from the same period a year ago. The decrease was primarily related to a decrease in loan balances. Loans decreased $140 million year over year and were partially offset by a $90 million increase in investment securities. Charge-offs of non-performing loans and overall weak loan demand continue to drive loan balances down. The Company’s regulatory capital ratios remain strong and as of June 30, 2011 were as follows: leverage ratio of 10.3%, tier one capital to risk-weighted assets of 16.8%, and total capital to risk-weighted assets of 18.0%. In addition, as of June 30, 2011 the Company’s tangible common equity ratio was 7.0%.
ASSET QUALITY
Non-performing assets (including accruing troubled debt restructurings) were $73.2 million as of June 30, 2011 compared to $106.2 million as of June 30, 2010, and represented 2.60% of total assets at June 30, 2011 compared to 3.72% at June 30, 2010. On a linked-quarter basis, non-performing assets decreased by $18.6 million. Non-accrual loans decreased by $12.0 million and OREO decreased by $6.3 million. Net charge-offs for the second quarter of 2011 were $5.8 million and represented 1.40% of average loans. Loan loss provision expense was $4.0 million for the second quarter of 2011. Provision expense did not exceed charge-offs for the quarter as the level of specific allocations required on impaired loans declined quarter over quarter. Additionally, the Company had identified losses and specifically provided for $3.54 million in previous quarters for the five largest charge-offs taken during the second quarter totaling approximately $3.56 million. The Company’s allowance for loan losses was $41.5 million and represented 2.57% of total outstanding loans at June 30, 2011. This compares to $41.4 million as of June 30, 2010, or 2.36% as a percent of loans and $43.3 million as of March 31, 2011, or 2.63% of total loans.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Summary
| | Three months ended June 30 | | Six months ended June 30 | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Interest Income | | $ | 31,122 | | $ | 34,039 | | $ | 62,299 | | $ | 68,310 | |
Interest Expense | | 5,732 | | 8,675 | | 11,959 | | 17,715 | |
Net Interest Income | | 25,390 | | 25,364 | | 50,340 | | 50,595 | |
Provision for Loan Losses | | 4,000 | | 12,750 | | 9,600 | | 22,250 | |
Noninterest Income: | | | | | | | | | |
Insurance commissions | | — | | 599 | | — | | 1,117 | |
Trust and investment product fees | | 813 | | 617 | | 1,753 | | 1,182 | |
Mortgage banking | | 1,197 | | 1,687 | | 2,515 | | 3,211 | |
Service charges on deposit accounts | | 4,517 | | 4,378 | | 8,415 | | 8,247 | |
Gain on sales of securities | | 2,521 | | 1,925 | | 3,654 | | 2,978 | |
Interchange income | | 1,564 | | 1,410 | | 2,980 | | 2,674 | |
OREO gains/(losses) | | (196 | ) | (39 | ) | (560 | ) | (16 | ) |
Other | | 1,104 | | 783 | | 2,082 | | 1,798 | |
Total Noninterest Income | | 11,520 | | 11,360 | | 20,839 | | 21,191 | |
Noninterest Expense: | | | | | | | | | |
Employee | | 12,580 | | 12,431 | | 25,413 | | 24,876 | |
Occupancy | | 1,648 | | 1,531 | | 3,415 | | 3,386 | |
Equipment | | 1,938 | | 1,990 | | 3,918 | | 3,888 | |
Intangible amortization | | 492 | | 517 | | 984 | | 1,033 | |
Marketing | | 1,126 | | 704 | | 2,207 | | 1,297 | |
Collection expenses | | 902 | | 904 | | 1,916 | | 1,479 | |
FDIC assessment | | 907 | | 1,095 | | 2,168 | | 2,358 | |
Other | | 3,790 | | 3,405 | | 7,182 | | 6,745 | |
Total Noninterest Expense | | 23,383 | | 22,577 | | 47,203 | | 45,062 | |
Earnings Before Income Taxes | | 9,527 | | 1,397 | | 14,376 | | 4,474 | |
Provision (benefit) for Income Taxes | | 1,901 | | (768 | ) | 2,204 | | (940 | ) |
Net Income | | $ | 7,626 | | $ | 2,165 | | $ | 12,172 | | $ | 5,414 | |
Preferred Dividends & Accretion | | $ | (764 | ) | $ | (764 | ) | $ | (1,527 | ) | $ | (1,527 | ) |
Net Income Available to Common Shareholders | | $ | 6,862 | | $ | 1,401 | | $ | 10,645 | | $ | 3,887 | |
Average Balance Sheet Data
| | Three months ended June 30 | | Six months ended June 30 | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Gross Loans | | $ | 1,634,776 | | $ | 1,797,297 | | $ | 1,652,758 | | $ | 1,831,020 | |
Earning Assets | | 2,562,123 | | 2,627,683 | | 2,538,295 | | 2,625,928 | |
Total Assets | | 2,824,862 | | 2,891,335 | | 2,795,348 | | 2,884,303 | |
Noninterest Bearing Deposits | | 283,767 | | 254,829 | | 278,320 | | 247,933 | |
Interest Bearing Deposits | | 1,973,164 | | 2,010,897 | | 1,953,076 | | 2,001,588 | |
Total Interest Bearing Liabilities | | 2,203,673 | | 2,310,300 | | 2,185,300 | | 2,312,247 | |
Shareholders’ Equity | | 313,723 | | 300,104 | | 309,306 | | 299,138 | |
| | | | | | | | | | | | | |
Per Share Data
| | Three months ended June 30 | | Six months ended June 30 | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Diluted Earnings Per CommonShare | | $ | 0.34 | | $ | 0.07 | | $ | 0.53 | | $ | 0.19 | |
Cash Dividends Per Common Share | | 0.01 | | 0.01 | | 0.02 | | 0.02 | |
Market Value - High | | 10.05 | | 9.00 | | 10.60 | | 9.00 | |
Market Value - Low | | 6.98 | | 6.70 | | 6.98 | | 4.40 | |
Average Outstanding Shares (diluted) | | 20,219,706 | | 20,161,976 | | 20,201,765 | | 20,150,499 | |
| | | | | | | | | | | | | |
Key Ratios (annualized)
| | Three months ended June 30 | | Six months ended June 30 | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Return on Average Assets | | 1.09 | % | 0.30 | % | 0.88 | % | 0.38 | % |
Return on Average Equity | | 9.86 | % | 2.89 | % | 7.94 | % | 3.65 | % |
Net Interest Margin | | 4.25 | % | 4.05 | % | 4.28 | % | 4.07 | % |
Efficiency Ratio | | 60.44 | % | 59.49 | % | 63.19 | % | 60.74 | % |
Net Overhead to Average Assets | | 1.68 | % | 1.56 | % | 1.90 | % | 1.67 | % |
Balance Sheet Highlights
| | June 30 | | March 31 | | December 31 | | June 30 | |
| | 2011 | | 2011 | | 2010 | | 2010 | |
Total Loans (Excluding Loans Held for Sale) | | $ | 1,615,504 | | $ | 1,642,700 | | $ | 1,680,971 | | $ | 1,755,201 | |
Allowance for Loan Losses | | 41,462 | | 43,255 | | 42,605 | | 41,436 | |
Total Securities | | 831,887 | | 817,235 | | 806,071 | | 741,351 | |
Goodwill and Intangible Assets | | 70,037 | | 70,529 | | 71,021 | | 73,044 | |
Total Assets | | 2,820,400 | | 2,767,985 | | 2,769,312 | | 2,851,700 | |
Noninterest Bearing Deposits | | 304,995 | | 293,648 | | 268,390 | | 270,682 | |
Interest Bearing Deposits | | 1,938,651 | | 1,915,713 | | 1,943,174 | | 1,973,643 | |
Other Borrowings | | 191,884 | | 196,136 | | 202,182 | | 240,496 | |
Shareholders’ Equity | | 319,400 | | 309,058 | | 302,570 | | 303,592 | |
| | | | | | | | | | | | | |
Other Balance Sheet Data
| | June 30 | | March 31 | | December 31 | | June 30 | |
| | 2011 | | 2011 | | 2010 | | 2010 | |
Book Value Per Common Share | | $ | 13.02 | | $ | 12.56 | | $ | 12.24 | | $ | 12.29 | |
Loan Loss Reserve to Loans | | 2.57 | % | 2.63 | % | 2.53 | % | 2.36 | % |
Loan Loss Reserve to Non-performing Loans | | 97.16 | % | 72.36 | % | 61.51 | % | 48.28 | % |
Nonperforming Assets to Total Assets | | 2.02 | % | 2.90 | % | 2.92 | % | 3.27 | % |
Tangible Common Equity Ratio | | 7.02 | % | 6.76 | % | 6.50 | % | 6.28 | % |
Outstanding Shares | | 20,189,182 | | 20,136,188 | | 20,136,362 | | 20,136,362 | |
| | | | | | | | | | | | | |
Asset Quality
| | June 30 | | March 31 | | December 31 | | June 30 | |
| | 2011 | | 2011 | | 2010 | | 2010 | |
Loans Past Due 90 Days or More and Still Accruing | | $ | 104 | | $ | 5,237 | | $ | 990 | | $ | 421 | |
Non-accrual Loans | | 42,572 | | 54,537 | | 68,279 | | 85,399 | |
Other Real Estate Owned | | 14,324 | | 20,586 | | 11,479 | | 7,501 | |
Total Nonperforming Assets (NPA’s) | | $ | 57,000 | | $ | 80,360 | | $ | 80,748 | | $ | 93,321 | |
Troubled Debt Restructurings | | 16,243 | | 11,503 | | 22,250 | | 12,860 | |
Total NPA’s with Troubled Debt Restructurings | | $ | 73,243 | | $ | 91,863 | | $ | 102,998 | | $ | 106,181 | |
| | | | | | | | | |
Net Charge-offs - YTD | | $ | 10,743 | | $ | 4,950 | | $ | 39,293 | | $ | 27,462 | |
Net Charge-offs as a % of average loans (annualized) | | 1.31 | % | 1.20 | % | 2.21 | % | 3.02 | % |
MainSource Financial Group is listed on the NASDAQ National Market (under the symbol: “MSFG”) and is a community-focused, financial holding company with assets of approximately $2.8 billion. The Company operates 80 full-service offices throughout Indiana, Illinois, Kentucky and Ohio through its banking subsidiary, MainSource Bank, headquartered in Greensburg, Indiana. Through its non-banking subsidiary, MainSource Title LLC, the Company provides various related financial services.
Forward-Looking Statements
Except for historical information contained herein, the discussion in this press release includes certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are covered by the safe harbor provisions of such sections. These statements are based upon management expectations, goals and projections, which are subject to numerous assumptions, risks and uncertainties (many of which are beyond management’s control). 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.
