GREENSBURG, Ind.--(BUSINESS WIRE)--Archie M. Brown, Jr., President and Chief Executive Officer of MainSource Financial Group, Inc. (NASDAQ: MSFG), announced today the unaudited financial results for the second quarter of 2013. For the three months ended June 30, 2013, the Company recorded net income of $7.3 million, or $0.35 per common share, compared to net income of $7.0 million, or $0.32 per common share, in the second quarter of 2012. The Company also announced that its third quarter common dividend will be $0.08 per share, which represents an increase of $0.02 per share. The dividend is payable on September 16, 2013 to common shareholders of record as of September 6, 2013. Finally, the Company announced that it received approval from its primary regulator to redeem the remaining outstanding shares of preferred stock that were originally issued under the U.S. Treasury’s Capital Purchase Program. The Company provided notice to the preferred shareholders and anticipates the redemption to take place in mid-August.
CEO Comments
Mr. Brown stated, “I am very pleased with our second quarter results. Our earnings per share of $0.35 were nine percent higher than the same quarter a year ago and significantly higher than the first quarter 2013. The increase in earnings was driven by broad-based improvement in almost all areas of the company. Net revenue was $33.9 million, which was slightly lower than a year ago due to a continued decline in the net interest margin, but an increase from the first quarter of this year due to an increase in non-interest income. We are very happy with the progress we made in growing the loan portfolio. Total loans grew by $30 million during the quarter which represents an annualized growth rate of 8%. We believe our recent strategies of entering nearby, higher-growth markets and building quality local teams in those markets, along with continued improvement in our legacy markets, has begun to make an impact on our ability to grow loans on a more sustainable basis.”
Mr. Brown continued, “We are very pleased with the rebound in our non-interest income, our ability to control expenses and our continued improvement in credit quality. With the exception of mortgage banking income, virtually all major areas of fee income have increased year over year and on a linked quarter basis. In addition, we continue to rationalize and control our expense base as evidenced by the linked-quarter decrease in operating expenses. And finally, our trends in credit quality continue to improve. Non-performing assets declined 13% from the linked quarter and our inflow of new problem loans has subsided.”
Mr. Brown concluded, “In early July, we received approval to repurchase the remaining preferred shares outstanding, which have a redemption value of $15.1 million. We have given notice to the holders and anticipate completing the redemption in mid-August. On July 16, our Board of Directors approved a $.02 per share increase to the common dividend payable in September 2013. This increase raises the quarterly common dividend to $.08 per share. We are very pleased to increase the dividend for the second time this year. The decision to increase the dividend reflects our continued confidence in the strength of our capital levels and earnings as well as our general outlook.”
Second Quarter Results
NET INTEREST INCOME
Net interest income was $22.5 million for the second quarter of 2013 compared to $23.8 million a year ago. The decrease in net interest income was primarily due to lower asset yields. Net interest margin, on a fully-taxable equivalent basis, was 3.91% for the second quarter of 2013, which was fourteen basis points below the second quarter of 2012 and nine points lower than the first quarter of 2013.
NON-INTEREST INCOME
The Company’s non-interest income was $11.4 million for the second quarter of 2013 compared to $10.7 million for the same period in 2012 and $10.3 million in the first quarter of 2013. With the exception of gains on the sale of investment securities and mortgage banking income, every other major category of fee income increased. Mortgage banking income of $1.9 million declined by 8.8% year over year and by 5.7% from the first quarter of this year due to the recent increase in interest rates which has slowed mortgage refinancing activity. On a linked quarter basis, trust and investment product fees increased 23%, interchange income increased 18% and service charges on deposit accounts increased by 14%. Seasonal fluctuations and the increase in the number of checking accounts were the primary drivers of the increase in fee income.
NON-INTEREST EXPENSE
The Company’s non-interest expense was $23.9 million for the second quarter of 2013 compared to $23.4 million for the same period in 2012. The increase year over year was primarily due to employee and occupancy costs related to the Company’s recent investments in new markets (i.e. Columbus, Seymour and Indianapolis, Indiana and Shelbyville, Kentucky). On a linked-quarter basis, non-interest expense decreased by $3.3 million. During the first quarter of 2013, the Company incurred $2.2 million in expenses related to the prepayment of a FHLB advance. In addition, employee costs decreased on a linked-quarter basis by approximately $700 thousand. The decrease was primarily due to the closing of eight branches and a decrease in unemployment costs.
BALANCE SHEET AND CAPITAL
Total assets were $2.77 billion at June 30, 2013, relatively flat from a year ago and a $38 million increase from the balance at March 31, 2013. The increase was primarily due to an increase in loan balances of $30 million on a linked-quarter basis. The Company’s regulatory capital ratios remain strong and as of June 30, 2013 were as follows: leverage ratio of 10.6%, tier one capital to risk-weighted assets of 16.7%, and total capital to risk-weighted assets of 17.9%. In addition, as of June 30, 2013, the Company’s tangible common equity ratio was 8.5%.
ASSET QUALITY
Non-performing assets (NPAs) were $40.3 million as of June 30, 2013, a decrease of approximately $6.0 million on a linked-quarter basis. NPAs represented 1.45% of total assets as of June 30, 2013 compared to 1.69% as of March 31, 2013 and 2.34% as of June 30, 2012. A primary driver of the improvement in credit quality is the significant decline in the inflow of new problem loans. During the second quarter of 2013 approximately $2.7 million of loans were transferred to non-accrual status representing the lowest quarter of inflows since the beginning of 2009 and compares to an average of $8.2 million for the four previous quarters. Net charge-offs were $4.7 million for the second quarter of 2013 and represented 1.20% of average loans on an annualized basis. Approximately $2.1 million of the charge-offs during the quarter were related to previously-identified and allocated losses. The Company’s allowance for loan losses as a percent of total outstanding loans was 1.77% as of June 30, 2013 compared to 2.04% as of March 31, 2013 and 2.48% as of June 30, 2012.
|
MAINSOURCE FINANCIAL GROUP |
||||||||||||||
|
(unaudited) |
||||||||||||||
| (Dollars in thousands except per share data) | ||||||||||||||
| Three months ended June 30 | Six months ended June 30 | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Income Statement Summary | ||||||||||||||
| Interest Income | $ | 25,036 | $ | 27,678 | $ | 50,352 | $ | 55,587 | ||||||
| Interest Expense | 2,501 | 3,928 | 5,219 | 8,059 | ||||||||||
| Net Interest Income | 22,535 | 23,750 | 45,133 | 47,528 | ||||||||||
| Provision for Loan Losses | 1,000 | 2,500 | 2,734 | 5,600 | ||||||||||
| Noninterest Income: | ||||||||||||||
| Trust and investment product fees | 1,269 | 908 | 2,304 | 1,736 | ||||||||||
| Mortgage banking | 1,914 | 2,099 | 3,943 | 4,214 | ||||||||||
| Service charges on deposit accounts | 5,124 | 4,910 | 9,610 | 9,286 | ||||||||||
| Gain/(loss) on sales of securities | (11 | ) | 48 | 833 | 535 | |||||||||
| Interchange income | 1,902 | 1,732 | 3,513 | 3,382 | ||||||||||
| OREO gains/(losses) | (22 | ) | 39 | (318 | ) | (213 | ) | |||||||
| Other | 1,185 | 1,007 | 1,741 | 1,625 | ||||||||||
| Total Noninterest Income | 11,361 | 10,743 | 21,626 | 20,565 | ||||||||||
| Noninterest Expense: | ||||||||||||||
| Employee | 12,799 | 12,535 | 26,317 | 24,791 | ||||||||||
| Occupancy & equipment | 4,158 | 3,843 | 8,373 | 7,589 | ||||||||||
| Intangible amortization | 478 | 448 | 958 | 900 | ||||||||||
| Marketing | 964 | 994 | 2,009 | 1,942 | ||||||||||
| Collection expenses | 859 | 968 | 1,809 | 2,017 | ||||||||||
| FDIC assessment | 467 | 512 | 904 | 1,420 | ||||||||||
| FHLB advance prepayment penalty | — | — | 2,239 | — | ||||||||||
| Consultant expenses | 375 | 200 | 750 | 250 | ||||||||||
| Other | 3,755 | 3,942 | 7,624 | 7,814 | ||||||||||
| Total Noninterest Expense | 23,855 | 23,442 | 50,983 | 46,723 | ||||||||||
| Earnings Before Income Taxes | 9,041 | 8,551 | 13,042 | 15,770 | ||||||||||
| Provision for Income Taxes | 1,717 | 1,569 | 1,727 | 2,777 | ||||||||||
| Net Income | $ | 7,324 | $ | 6,982 | $ | 11,315 | $ | 12,993 | ||||||
| Preferred Dividends & Accretion | (203 | ) | (473 | ) | (405 | ) | (1,236 | ) | ||||||
| Redemption of preferred shares | — | 60 | — | 1,302 | ||||||||||
| Net Income Available to Common Shareholders | $ | 7,121 | $ | 6,569 | $ | 10,910 | $ | 13,059 | ||||||
| Three months ended June 30 | Six months ended June 30 | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Average Balance Sheet Data | ||||||||||||||
| Gross Loans | $ | 1,576,275 | $ | 1,559,521 | $ | 1,570,354 | $ | 1,554,804 | ||||||
| Earning Assets | 2,490,313 | 2,530,358 | 2,478,255 | 2,498,056 | ||||||||||
| Total Assets | 2,783,649 | 2,805,955 | 2,771,977 | 2,773,796 | ||||||||||
| Noninterest Bearing Deposits | 411,794 | 347,229 | 408,585 | 334,514 | ||||||||||
| Interest Bearing Deposits | 1,806,116 | 1,869,975 | 1,791,748 | 1,843,518 | ||||||||||
| Total Interest Bearing Liabilities | 2,017,196 | 2,100,048 | 2,006,658 | 2,073,001 | ||||||||||
| Shareholders’ Equity | 323,963 | 323,739 | 324,081 | 333,666 | ||||||||||
| Three months ended June 30 | Six months ended June 30 | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Per Share Data | ||||||||||||||
|
Diluted Earnings Per Common Share |
$ | 0.35 | $ | 0.32 | $ | 0.53 | $ | 0.64 | ||||||
| Cash Dividends Per Common Share | 0.06 | 0.01 | 0.12 | 0.02 | ||||||||||
| Market Value - High | 14.12 | 12.05 | 15.10 | 12.12 | ||||||||||
| Market Value - Low | 12.02 | 10.80 | 12.02 | 8.84 | ||||||||||
| Average Outstanding Shares (diluted) | 20,428,118 | 20,319,810 | 20,403,469 | 20,292,960 | ||||||||||
| Three months ended June 30 | Six months ended June 30 | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Key Ratios (annualized) | ||||||||||||||
| Return on Average Assets | 1.06 | % | 1.00 | % | 0.82 | % | 0.94 | % | ||||||
| Return on Average Equity | 9.07 | % | 8.67 | % | 7.04 | % | 7.83 | % | ||||||
| Net Interest Margin | 3.91 | % | 4.05 | % | 3.95 | % | 4.11 | % | ||||||
| Efficiency Ratio | 66.94 | % | 64.72 | % | 72.59 | % | 65.25 | % | ||||||
| Net Overhead to Average Assets | 1.80 | % | 1.82 | % | 2.14 | % | 1.90 | % | ||||||
| June 30 | March 31 | December 31 | September 30 | June 30 | ||||||||||||
| 2013 | 2013 | 2012 | 2012 | 2012 | ||||||||||||
| Balance Sheet Highlights | ||||||||||||||||
| Total Loans (Excluding Loans Held for Sale) | $ | 1,583,281 | $ | 1,553,320 | $ | 1,553,383 | $ | 1,531,525 | $ | 1,546,510 | ||||||
| Allowance for Loan Losses | 28,002 | 31,728 | 32,227 | 35,246 | 38,289 | |||||||||||
| Total Securities | 886,908 | 906,396 | 902,341 | 902,178 | 896,037 | |||||||||||
| Goodwill and Intangible Assets | 70,414 | 70,892 | 70,940 | 69,337 | 68,182 | |||||||||||
| Total Assets | 2,771,055 | 2,732,609 | 2,769,288 | 2,755,006 | 2,766,633 | |||||||||||
| Noninterest Bearing Deposits | 421,950 | 418,916 | 405,167 | 350,790 | 364,030 | |||||||||||
| Interest Bearing Deposits | 1,761,767 | 1,763,781 | 1,779,887 | 1,732,228 | 1,821,066 | |||||||||||
| Other Borrowings | 216,858 | 154,859 | 191,470 | 251,499 | 196,492 | |||||||||||
| Shareholders’ Equity | 314,566 | 322,673 | 323,751 | 338,524 | 329,858 | |||||||||||
| June 30 | March 31 | December 31 | September 30 | June 30 | ||||||||||||
| 2013 | 2013 | 2012 | 2012 | 2012 | ||||||||||||
| Other Balance Sheet Data | ||||||||||||||||
| Tangible Book Value Per Common Share | $ | 11.24 | $ | 11.65 | $ | 11.72 | $ | 11.59 | $ | 11.23 | ||||||
| Loan Loss Reserve to Loans | 1.77 | % | 2.04 | % | 2.07 | % | 2.30 | % | 2.48 | % | ||||||
| Loan Loss Reserve to Non-performing Loans | 90.68 | % | 87.70 | % | 89.48 | % | 78.08 | % | 81.48 | % | ||||||
| Nonperforming Assets to Total Assets | 1.30 | % | 1.54 | % | 1.54 | % | 1.99 | % | 2.05 | % | ||||||
| NPAs (w/ TDRs) to Total Assets | 1.45 | % | 1.69 | % | 2.09 | % | 2.19 | % | 2.34 | % | ||||||
| Tangible Common Equity Ratio | 8.49 | % | 8.90 | % | 8.82 | % | 8.76 | % | 8.44 | % | ||||||
| Outstanding Shares | 20,391,433 | 20,326,725 | 20,304,525 | 20,297,325 | 20,280,225 | |||||||||||
| June 30 | March 31 | December 31 | September 30 | June 30 | ||||||||||||
| 2013 | 2013 | 2012 | 2012 | 2012 | ||||||||||||
| Asset Quality | ||||||||||||||||
| Special Mention Loans | $ | 85,763 | $ | 85,613 | $ | 88,039 | $ | 89,289 | $ | 76,118 | ||||||
| Substandard Loans (Accruing) | 15,235 | 22,313 | 28,775 | 33,255 | 61,991 | |||||||||||
| New Non-accrual Loans (for the 3 months ended) | 2,687 | 7,778 | 5,681 | 8,592 | 10,825 | |||||||||||
| Loans Past Due 90 Days or More and Still Accruing | $ | 372 | $ | 100 | $ | 565 | $ | 379 | $ | 34 | ||||||
| Non-accrual Loans | 30,508 | 36,078 | 35,451 | 44,763 | 46,959 | |||||||||||
| Other Real Estate Owned | 5,182 | 5,842 | 6,677 | 9,677 | 9,737 | |||||||||||
| Total Nonperforming Assets (NPAs) | $ | 36,062 | $ | 42,020 | $ | 42,693 | $ | 54,819 | $ | 56,730 | ||||||
| Troubled Debt Restructurings (Accruing) | 4,207 | 4,276 | 15,102 | 5,556 | 7,951 | |||||||||||
| Total NPAs with Troubled Debt Restructurings | $ | 40,269 | $ | 46,296 | $ | 57,795 | $ | 60,375 | $ | 64,681 | ||||||
| Net Charge-offs - QTD | $ | 4,726 | $ | 2,233 | $ | 5,269 | $ | 5,043 | $ | 2,752 | ||||||
| Net Charge-offs as a % of average loans (annualized) | 1.20 | % | 0.58 | % | 1.35 | % | 1.31 | % | 0.71 | % | ||||||
(1) Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of preferred stock, goodwill and other intangible assets from the calculation of stockholders’ equity. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. The Company believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).
| June 30 | March 31 | December 31 | September 30 | June 30 | |||||||||||||
| 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||||||
| Shareholders’ Equity | 314,566 | 322,673 | 323,751 | 338,524 | 329,858 | ||||||||||||
|
Less: |
Intangible Assets |
70,414 | 70,892 | 70,940 | 69,337 | 68,182 | |||||||||||
| Preferred Stock | 14,945 | 14,932 | 14,918 | 33,874 | 33,843 | ||||||||||||
| Tangible Common Equity | 229,207 | 236,849 | 237,893 | 235,313 | 227,833 | ||||||||||||
| Total Assets | 2,771,055 | 2,732,609 | 2,769,288 | 2,755,006 | 2,766,633 | ||||||||||||
|
Less: |
Intangible Assets |
70,414 | 70,892 | 70,940 | 69,337 | 68,182 | |||||||||||
| Tangible Assets | 2,700,641 | 2,661,717 | 2,698,348 | 2,685,669 | 2,698,451 | ||||||||||||
| Ending Shares Outstanding | 20,391,433 | 20,326,725 | 20,304,525 | 20,297,325 | 20,280,225 | ||||||||||||
| Tangible Book Value Per Share | $ | 11.24 | $ | 11.65 | $ | 11.72 | $ | 11.59 | $ | 11.23 | |||||||
| Tangible Common Equity/Tangible Assets | 8.49 | % | 8.90 | % | 8.82 | % | 8.76 | % | 8.44 | % | |||||||
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 72 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; 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.
