EXHIBIT 99.1
News Release
BW Account Number: 1079001
For Immediate Release: January 20,2004 3:30 P.M., EST
Contact: JAMES L. SANER, SR., PRESIDENT & CEO
MAINSOURCE FINANCIAL GROUP (812) 663-0157
MAINSOURCE FINANCIAL GROUP-NASDAQ, MSFG -
Announces Earnings for the Fourth Quarter and Full Year 2003
o Stock Price Up 34.1% in 2003
o Full Year Net Income of $15.3 Million
o Full Year Earnings Per Share Up 10.2%
o Full Year ROE of 15.07%
o Full Year ROA of 1.14%
Greensburg, Indiana (NASDAQ: MSFG) James L. Saner, Sr., President & Chief
Executive Officer of MainSource Financial Group, announced today the unaudited
results for the fourth quarter and twelve months ended December 31, 2003. The
Company reported fourth quarter earnings per share of $0.60, which represents a
9.1% increase over the $0.55 per share reported in the fourth quarter of 2002.
During the fourth quarter of 2002, the Company adopted FAS 147, which eliminated
the amortization of goodwill retroactive to January 1, 2002. The impact of FAS
147 resulted in a reversal of approximately $900,000 of goodwill amortization,
on a pre-tax basis, and increased earnings per share in the fourth quarter of
2002 by approximately $0.06. If FAS 147 had been adopted on January 1, 2002, the
Company's earnings per share in the fourth quarter of 2002 would have been
$0.49. During the fourth quarter of 2003, the Company reversed $225,000 of loan
loss provision. This reversal was a result of the Company's quarterly analysis
of loan quality and the upgrade of several credits to a more favorable risk
rating.
For the year ended December 31, 2003, the Company reported earnings per share of
$2.16 compared to $1.96 for 2002, which represents a 10.2% increase. Net income
for the year ended December 31, 2003 was $15,305,000, or 9.2% over the
$14,011,000 of net income in 2002.
During 2003, the Company realized significant appreciation in its stock price.
After accounting for the five percent stock dividend declared in December 2003,
the Company's stock price rose 34.1% from a price of $22.87 at December 31, 2002
to $30.67 at December 31, 2003. For the full year 2003, the Company paid cash
dividends of $0.686 per share, which was an increase of 9.6% over 2002.
Including cash dividends, shareholders received a total return of 37.1% in 2003.
Mr. Saner stated, "MainSource Financial has finished the year on a great note.
Our return on equity in excess of 15% and our continued double-digit growth in
earnings per share year over year represents the consistency and predictability
our Company provides to the investor. 2003 represented the fourth consecutive
year that the Company has achieved double digit increases in earnings per share.
Over the last four years, earnings per share have increased at a compounded
annual rate of 17.3% and over the last five years the growth has been 14.7%."
Mr. Saner added, "Our primary goal is to reward shareholders while providing top
quality service to our customers. Our strategic plan for 2004 calls for a
continued emphasis on developing and enhancing customer relationships. With the
implementation of our strategic plan and the Company's vigorous efforts to
improve its non-performing assets, I feel confident that we have positioned the
Company well for 2004 to build upon its record of success."
4TH QUARTER RESULTS
NET INTEREST INCOME
Net interest income was $11.5 million for the fourth quarter of 2003, which
represents an increase of 3.3% versus the fourth quarter of 2002. The increase
was due primarily to the acquisition of First Community in June 2003. Net
interest margin, on a fully-taxable equivalent basis, was 3.64% for the fourth
quarter of 2003 versus 3.90% for the fourth quarter of 2002. As interest rates
remained low, the Company's yield on earnings assets declined by approximately
70 basis points. The Company's cost of funds also decreased, but to a lesser
extent. Net interest margin was 3.61% for the third quarter of 2003, increasing
to 3.64% in the fourth quarter. Management believes that not only has the net
interest margin stabilized but is poised to improve in 2004.
NON-INTEREST INCOME
The Company's non-interest income increased to $4.7 million for the fourth
quarter of 2003 compared to $4.1 million for the same period in 2002, an
increase of 14.3%. In addition to the acquisition of First Community, the
increase of $0.6 million was due to an increase in annuity income, gains on
sales of OREO, and income from bank-owned life insurance. Offsetting the
increases in these areas was a decrease in mortgage banking activity as mortgage
rates rose slightly during the fourth quarter of 2003.
NON-INTEREST EXPENSE
Excluding goodwill amortization, non-interest expense for the fourth quarter of
2003 was $9.9 million compared to $8.9 million in 2002, an increase of 12.1%.
This increase was primarily due to the acquisition of First Community.
FULL YEAR RESULTS
ROE AND ROA
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 15.07% for 2003 compared to 14.90% in 2002. Return on
average assets was 1.14% for 2003 compared to 1.16% for 2002.
NET INTEREST INCOME
Net interest income was $44.2 million for 2003, which represents a decrease of
1.8% versus 2002. Net interest margin, on a fully-taxable equivalent basis, was
3.70% for 2003 compared to 4.16% for 2002.
NON-INTEREST INCOME
Non-interest income was $19.4 million for 2003 compared to $14.4 million for
2002, an increase of 34.7%. The large increase in non-interest income occurred
primarily in three areas: the acquisition of First Community, mortgage banking
activity and gains on sales of investment securities. Mortgage banking income
was $5.7 million in 2003 versus $4.8 million in 2002, an increase of 19.2%.
Through active management of its investment security portfolio, the Company
recognized net gains on sales of investment securities of $1.3 million in 2003
versus gains of $0.3 million in 2002.
NON-INTEREST EXPENSE
Non-interest expense for 2003 was $40.4 million and increased by 13.6% compared
to 2002. This increase was due primarily to the acquisition of First Community
and an $0.8 million charge related to the redemption of trust preferred
securities in February 2003.
BALANCE SHEET
As of December 31, 2003 the Company had total assets of $1.4 billion compared to
$1.3 billion at year-end 2002. Excluding the acquisition of First Community, the
Company's loan portfolio remained relatively flat year over year as the increase
in the commercial loan portfolio was primarily offset by the decrease in the
Company's in-house mortgage loan portfolio. Organic growth in commercial loans
equaled 6%. Despite the decline of in-house mortgage loans of approximately $23
million, the Company's serviced loan portfolio increased significantly. As of
December 31, 2003, the Company serviced $498 million of residential real estate
loans, a 26% increase over the $395 million of serviced loans at year-end 2002.
FIRST COMMUNITY ACQUISITION
In June 2003, the Company acquired First Community Bancshares for $24.2 million
in cash. At that time, management projected the acquisition to be marginally
accretive to earnings in 2003. After factoring in the financing costs related to
the transaction, the acquisition contributed $0.04 to the Company's 2003
earnings per share.
ASSET QUALITY
Non-performing assets were $17.3 million as of December 31, 2003 compared to
$10.9 million as of December 31, 2002 and represented 1.20% of total assets at
December 31, 2003 versus 0.87% one year ago. Approximately $4.0 million of
non-performing assets were obtained in the First Community acquisition.
Management believes that these assets were adequately provided for in First
Community's allowance for loan losses at the time of acquisition. Of the $17.3
million of non-performing assets at year-end 2003, approximately 52% are
collateralized by residential real estate properties, which have historically
resulted in low levels of charge-offs.
Net charge-offs for 2003 equaled 0.18% of average outstanding loans compared to
0.31% for 2002. As of December 31, 2003, the total percentage of loans 30 days
or more past due was 2.58% compared to 2.26% as of December 31, 2002. The
Company's allowance for loan losses as a percent of total outstanding loans was
1.35% at December 31, 2003, which is up from 1.29% at December 31, 2002.
MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)
Income Statement Summary Three months ended Dec. 31, Twelve months ended Dec. 31,
--------------------------- ----------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Interest Income $ 17,133 $ 17,519 $ 67,605 $ 72,303
Interest Expense 5,639 6,394 23,373 27,253
-------- -------- -------- --------
Net Interest Income 11,494 11,125 44,232 45,050
Provision for Loan Losses (225) 1,070 1,325 2,995
Noninterest Income:
Insurance commissions 538 514 2,400 2,156
Mortgage banking 851 1,881 5,671 4,757
Service charges on deposit accounts 1,612 1,063 5,092 4,011
Gain (loss) on sales of securities (1) (21) 1,300 319
Other 1,674 652 4,980 3,136
-------- -------- -------- --------
Total Noninterest Income 4,674 4,089 19,443 14,379
Noninterest Expense:
Employee 5,369 4,898 22,421 20,381
Occupancy 719 614 2,753 2,414
Equipment 891 856 3,488 2,873
Intangible amortization 234 (520) 909 828
Write-down of deferred debt acquisition costs 4 149 865 230
Other 2,965 2,357 10,012 8,884
-------- -------- -------- --------
Total Noninterest Expense 10,182 8,354 40,448 35,610
Earnings Before Income Taxes 6,211 5,790 21,902 20,824
Provision for Income Taxes 1,994 1,852 6,597 6,813
-------- -------- -------- --------
Net Income 4,217 3,938 15,305 14,011
======== ======== ======== ========
Three months ended Dec. 31, Twelve months ended Dec. 31,
--------------------------- ----------------------------
Average Balance Sheet Data 2003 2002 2003 2002
--------- ---------- --------- ---------
Gross Loans 846,850 $ 766,534 800,580 764,618
Earning Assets 1,284,988 1,160,360 1,223,642 1,115,194
Total Assets 1,423,045 1,257,487 1,342,117 1,210,745
Noninterest Bearing Deposits 121,990 98,328 111,480 94,054
Interest Bearing Deposits 1,059,790 951,260 1,002,932 922,327
Shareholders' Equity 103,325 99,040 101,579 94,057
Three months ended Dec. 31, Twelve months ended Dec. 31,
--------------------------- ----------------------------
Per Share Data 2003 2002 2003 2002
--------- ---------- --------- ---------
Diluted Earnings Per Share $0.60 $0.55 $2.16 $1.96
Cash Dividends Per Share 0.171 0.163 0.686 0.626
Market Value - High 31.76 23.76 31.76 23.76
Market Value - Low 25.47 20.83 21.43 15.51
Average Outstanding Shares 7,065,719 7,133,035 7,084,408 7,146,391
Three months ended Dec. 31, Twelve months ended Dec. 31,
--------------------------- ----------------------------
Key Ratios 2003 2002 2003 2002
--------- ---------- --------- ---------
Return on Average Assets 1.18% 1.24% 1.14% 1.16%
Return on Average Equity 16.19% 15.78% 15.07% 14.90%
Net Interest Margin 3.64% 3.90% 3.70% 4.16%
Efficiency Ratio 61.87% 53.95% 62.52% 58.80%
Net Charge-offs as a %
of Average Loans 0.20% 0.83% 0.18% 0.31%
Net Overhead to Average Assets 1.54% 1.35% 1.56% 1.73%
Balance Sheet Highlights
As of December 31 2003 2002
---------- ----------
Total Loans (Excluding Loans Held for Sale) $ 855,471 $ 740,167
Allowance for Loan Losses 11,509 9,517
Total Securities 425,542 351,143
Goodwill and Intangible Assets 41,828 25,713
Total Assets 1,441,831 1,251,760
Noninterest Bearing Deposits 127,100 104,282
Interest Bearing Deposits 1,065,154 930,025
Other Borrowings 131,759 102,589
Shareholders' Equity 105,424 99,771
Other Balance Sheet Data
As of December 31 2003 2002
---------- ----------
Book Value Per Share $ 14.92 $ 13.99
Loan Loss Reserve to Loans 1.35% 1.29%
Nonperforming Assets to Assets 1.20% 0.87%
Outstanding Shares 7,065,719 7,133,035
Asset Quality
As of December 31 2003 2002
---------- ----------
Loans Past Due 90 Days or More and Still Accruing 196 245
Non-accrual Loans 14,626 7,695
Other Real Estate Owned 2,428 2,917
---------- ----------
Total Nonperforming Assets 17,250 10,857
MainSource Financial Group, Inc., headquartered in Greensburg, Indiana, is
listed on the NASDAQ Stock Market (trading symbol: MSFG) and is a
community-focused, multi-bank, financial services oriented holding company with
assets of $1.4 billion. Through its four banking subsidiaries, First Community
Bank and Trust, Bargersville, Indiana; MainSource Bank, Greensburg, Indiana;
Regional Bank, New Albany, Indiana; and Capstone Bank, Watseka, Illinois, it
operates 51 offices in 21 Indiana counties and seven offices in three Illinois
counties. Through its insurance subsidiary, MainSource Insurance, it operates
five offices in Indiana as well as one in Owensboro, Kentucky.
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 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.
The forward-looking statements included in the press release relating to certain
matters involve risks and uncertainties, including anticipated financial
performance, business prospects, and other similar matters, which reflect
management's best judgment based on factors currently known. Actual results and
experience could differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements as a result
of a number of factors, including but not limited to, those discussed in the
press release.