EX-99.1 2 a15-16041_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

News Release

 

Date:                  July 22, 2015 4:00pm EST

From:               Archie M. Brown, Jr. President and CEO

MainSource Financial Group, Inc.  |  812-663-6734

 

MainSource Financial Group - NASDAQ, MSFG -
Announces Record Earnings for the Second Quarter of 2015

 

·                  Net income of $9.7 million

·                  Earnings Per Share of $0.44

·                  ROA of 1.21%

·                  Tangible Common Equity Ratio of 9.2%

 

Greensburg, Indiana, 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 2015.  For the three months ended June 30, 2015, the Company recorded net income of $9.7 million, or $0.44 per common share, compared to net income of $7.8 million, or $0.38 per common share, in the second quarter of 2014.  The $9.7 million of net income in the current quarter represents record quarterly earnings.

 

CEO Comments

 

Mr. Brown stated, “I am very pleased with our second quarter results.  Net income was 25% higher than the same period one year ago and was at the highest level in our Company’s history.  Earnings per share increased by 16% compared to one year ago.  The primary drivers of our improvement were the acquisition of MBT Bancorp in October of last year and our improved credit quality, which resulted in zero provision expense for the quarter.  This marked the fourth consecutive quarter that provision expense was at zero, a result of very low loan charge-offs.  Additionally, steady loan growth and “across the board” increases in non-interest income contributed to our strong performance.  Loan originations were very good for the quarter.  While our loan balances did not increase significantly, we were able to offset large payoffs of former problem loans and still grow.  We were especially pleased with our momentum in mortgage banking, which resulted in a 57% increase in mortgage banking income over the second quarter of 2014.”

 

Mr. Brown continued, “The economy continues to improve in our region with unemployment rates declining to below 4% in some local areas.  We have observed an increase in general business activity and have experienced a very competitive banking market for good quality loan opportunities.  In this competitive environment, we remain optimistic about the second half of 2015.”

 

Mr. Brown concluded, “I am very excited about our recently announced intention to purchase 5 branch offices from Old National Bank. The additional branches will strengthen our market share in existing markets.  The initial response from prospective employees and customers has been very positive.  The closing is anticipated to occur in mid-August subject to customary closing conditions.”

 


 

NET INTEREST INCOME

 

Net interest income was $25.3 million for the second quarter of 2015 compared to $23.2 million a year ago.  The increase in net interest income was primarily due to an increase in earning assets from the Merchants acquisition in the fourth quarter of 2014.  Net interest margin, on a fully-taxable equivalent basis, was 3.75% for the second quarter of 2015, which was nine basis points below the second quarter of 2014 and a decrease of five basis points compared to the first quarter of 2015.  The decline in the net interest margin on a linked quarter basis was primarily driven by a decrease in the discount accretion related to the Merchants acquisition as well as the seasonal inflow of short-term deposits from public fund entities.

 

NON-INTEREST INCOME

 

The Company’s non-interest income was $12.9 million for the second quarter of 2015 compared to $11.1 million for the same period in 2014.  Mortgage banking income increased by $947 thousand primarily due to the low interest rate environment and the addition of mortgage loan originators in the Company’s footprint.  Other categories of non-interest income increased modestly and were in line with the additional accounts and assets acquired in the MBT Bancorp acquisition in the fourth quarter of 2014.

 

NON-INTEREST EXPENSE

 

The Company’s non-interest expense was $25.7 million for the second quarter of 2015 compared to $23.8 million for the same period in 2014.  The $1.9 million year over year increase in total expenses were primarily driven by an $835 thousand increase in employee costs and a $692 thousand increase in occupancy and equipment expenses.  The increase in employee costs was due to the acquisition of MBT Bancorp in the fourth quarter of 2014, higher commissions related to the increase in mortgage banking activity, and additional incentive compensation.  The increase in occupancy and equipment expenses was due to the MBT Bancorp acquisition and the Company’s investment in newer growth markets over the past year.

 

BALANCE SHEET AND CAPITAL

 

Total assets were $3.24 billion at June 30, 2015, which represents a $379 million increase from a year ago.  The increase in the balance sheet was primarily related to the acquisition of MBT Bancorp in the fourth quarter of 2014 as well as organic loan growth.  Loan balances (including loans that are classified as held for sale) grew $13 million on a linked-quarter basis.  As discussed in its first quarter 2015 earnings release, the Company had a reduction of $15.8 million in loan balances related to the disposition/payoff of two relationships during the first week of the second quarter.  The Company’s regulatory capital ratios remain strong and as of June 30, 2015 were as follows: leverage ratio of 10.2%, tier one capital to risk-weighted assets of 14.6%, and total capital to risk-weighted assets of 15.7%.  In addition, as of June 30, 2015, the Company’s tangible common equity ratio was 9.2%.

 

ASSET QUALITY

 

Non-performing assets (NPA’s) were $22.1 million as of June 30, 2015, an increase of $2.3 million on a linked-quarter basis.  NPA’s represented 0.68% of total assets as of June 30, 2015 compared to 0.63% as of March 31, 2015 and 1.29% as of June 30, 2014.  Net charge-offs were $165 thousand for the second quarter of 2015 and represented 0.03% of average loans on an annualized basis.  The Company recorded no loan loss provision expense for the second quarter of 2015.  This was primarily due to the low level of charge-offs for the quarter.  The Company’s allowance for loan losses as a percent of total outstanding loans was 1.12% as of June 30, 2015 compared to 1.14% as of March 31, 2015 and 1.40% as of June 30, 2014.

 


 

MAINSOURCE FINANCIAL GROUP

(unaudited)

(Dollars in thousands except per share data)

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2015

 

2014

 

2015

 

2014

 

Income Statement Summary

 

 

 

 

 

 

 

 

 

Interest Income

 

$

27,293

 

$

25,320

 

$

54,560

 

$

50,804

 

Interest Expense

 

1,949

 

2,103

 

4,162

 

4,322

 

Net Interest Income

 

25,344

 

23,217

 

50,398

 

46,482

 

Provision for Loan Losses

 

—

 

750

 

—

 

1,500

 

Noninterest Income:

 

 

 

 

 

 

 

 

 

Trust and investment product fees

 

1,254

 

1,146

 

2,460

 

2,416

 

Mortgage banking

 

2,609

 

1,662

 

4,464

 

2,978

 

Service charges on deposit accounts

 

5,498

 

5,307

 

10,119

 

9,892

 

Securities gains/(losses)

 

63

 

(4

)

315

 

(4

)

Interchange income

 

2,228

 

2,024

 

4,189

 

3,759

 

OREO gains/(losses)

 

(33

)

39

 

(44

)

(38

)

Other

 

1,250

 

958

 

2,757

 

1,358

 

Total Noninterest Income

 

12,869

 

11,132

 

24,260

 

20,361

 

Noninterest Expense:

 

 

 

 

 

 

 

 

 

Employee

 

14,534

 

13,699

 

28,511

 

27,272

 

Occupancy & equipment

 

4,856

 

4,164

 

9,770

 

8,811

 

Intangible amortization

 

419

 

432

 

839

 

864

 

Marketing

 

903

 

760

 

1,465

 

1,358

 

Collection expenses

 

250

 

394

 

506

 

831

 

FDIC assessment

 

435

 

365

 

810

 

800

 

FHLB advance prepayment penalty

 

—

 

—

 

2,364

 

—

 

Other

 

4,323

 

3,980

 

8,482

 

8,072

 

Total Noninterest Expense

 

25,720

 

23,794

 

52,747

 

48,008

 

Earnings Before Income Taxes

 

12,493

 

9,805

 

21,911

 

17,335

 

Provision for Income Taxes

 

2,833

 

2,051

 

4,588

 

3,356

 

Net Income Available to Common Shareholders

 

$

9,660

 

$

7,754

 

$

17,323

 

$

13,979

 

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2015

 

2014

 

2015

 

2014

 

Average Balance Sheet Data

 

 

 

 

 

 

 

 

 

Gross Loans

 

$

1,985,496

 

$

1,698,761

 

$

1,974,173

 

$

1,691,545

 

Earning Assets

 

2,898,081

 

2,600,795

 

2,870,341

 

2,599,497

 

Total Assets

 

3,204,581

 

2,870,357

 

3,174,947

 

2,866,822

 

Noninterest Bearing Deposits

 

557,212

 

447,674

 

546,923

 

446,925

 

Interest Bearing Deposits

 

2,005,297

 

1,812,009

 

1,971,105

 

1,790,094

 

Total Interest Bearing Liabilities

 

2,245,678

 

2,075,966

 

2,225,314

 

2,078,325

 

Shareholders’ Equity

 

369,551

 

322,033

 

367,985

 

317,344

 

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2015

 

2014

 

2015

 

2014

 

Per Share Data

 

 

 

 

 

 

 

 

 

Diluted Earnings Per CommonShare

 

$

0.44

 

$

0.38

 

$

0.79

 

$

0.68

 

Cash Dividends Per Common Share

 

0.13

 

0.10

 

0.26

 

0.20

 

Market Value - High

 

22.40

 

17.89

 

22.40

 

18.03

 

Market Value - Low

 

19.04

 

16.12

 

18.71

 

15.78

 

Average Outstanding Shares (diluted)

 

21,922,293

 

20,578,282

 

21,920,142

 

20,571,614

 

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2015

 

2014

 

2015

 

2014

 

Key Ratios (annualized)

 

 

 

 

 

 

 

 

 

Return on Average Assets

 

1.21

%

1.08

%

1.10

%

0.98

%

Return on Average Equity

 

10.48

%

9.66

%

9.49

%

8.88

%

Net Interest Margin

 

3.75

%

3.84

%

3.78

%

3.87

%

Efficiency Ratio

 

64.38

%

66.04

%

67.59

%

68.34

%

Net Overhead to Average Assets

 

1.61

%

1.77

%

1.81

%

1.94

%

 


 

 

 

June 30

 

March 31

 

December 31

 

September 30

 

June 30

 

 

 

2015

 

2015

 

2014

 

2014

 

2014

 

Balance Sheet Highlights

 

 

 

 

 

 

 

 

 

 

 

Total Loans (Including Loans Held for Sale)

 

$

2,002,979

 

$

1,990,169

 

$

1,966,047

 

$

1,758,003

 

$

1,706,144

 

Allowance for Loan Losses

 

22,473

 

22,638

 

23,250

 

24,549

 

23,867

 

Total Securities

 

859,736

 

871,080

 

867,760

 

840,101

 

852,374

 

Goodwill and Intangible Assets

 

77,707

 

78,126

 

78,546

 

68,772

 

69,161

 

Total Assets

 

3,240,194

 

3,152,830

 

3,122,516

 

2,899,952

 

2,861,017

 

Noninterest Bearing Deposits

 

568,365

 

550,497

 

513,393

 

464,058

 

455,496

 

Interest Bearing Deposits

 

1,966,702

 

1,924,737

 

1,954,928

 

1,757,641

 

1,800,849

 

Other Borrowings

 

195,745

 

276,719

 

255,652

 

281,582

 

220,663

 

Shareholders’ Equity

 

367,991

 

368,931

 

360,662

 

332,790

 

327,381

 

 

 

 

June 30

 

March 31

 

December 31

 

September 30

 

June 30

 

 

 

2015

 

2015

 

2014

 

2014

 

2014

 

Other Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value Per Common Share

 

$

13.42

 

$

13.40

 

$

13.01

 

$

12.90

 

$

12.62

 

Loan Loss Reserve to Loans

 

1.12

%

1.14

%

1.18

%

1.40

%

1.40

%

Loan Loss Reserve to Non-performing Loans

 

141.59

%

161.97

%

171.01

%

151.80

%

141.86

%

Nonperforming Assets to Total Assets

 

0.55

%

0.51

%

0.52

%

0.67

%

0.72

%

NPA’s (w/ TDR’s) to Total Assets

 

0.68

%

0.63

%

1.01

%

1.23

%

1.29

%

Tangible Common Equity/Tangible Assets

 

9.18

%

9.46

%

9.27

%

9.33

%

9.25

%

Outstanding Shares

 

21,624,684

 

21,694,815

 

21,687,525

 

20,460,763

 

20,458,763

 

 

 

 

June 30

 

March 31

 

December 31

 

September 30

 

June 30

 

 

 

2015

 

2015

 

2014

 

2014

 

2014

 

Asset Quality

 

 

 

 

 

 

 

 

 

 

 

Special Mention Loans

 

$

21,975

 

$

30,823

 

$

34,922

 

$

25,319

 

$

37,917

 

Substandard Loans (Accruing)

 

10,992

 

13,069

 

22,926

 

22,647

 

24,344

 

New Non-accrual Loans (for the 3 months ended)

 

4,987

 

3,068

 

3,707

 

4,251

 

1,626

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Past Due 90 Days or More and Still Accruing

 

$

40

 

$

—

 

$

—

 

$

59

 

$

—

 

Non-accrual Loans

 

15,832

 

13,977

 

13,596

 

16,113

 

16,824

 

Other Real Estate Owned

 

2,065

 

2,201

 

2,688

 

3,190

 

3,723

 

Total Nonperforming Assets (NPA’s)

 

$

17,937

 

$

16,178

 

$

16,284

 

$

19,362

 

$

20,547

 

Troubled Debt Restructurings (Accruing)

 

4,160

 

3,603

 

15,243

 

16,274

 

16,408

 

Total NPA’s with Troubled Debt Restructurings

 

$

22,097

 

$

19,781

 

$

31,527

 

$

35,636

 

$

36,955

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Charge-offs - QTD

 

$

165

 

$

612

 

$

1,299

 

$

(682

)

$

4,130

 

Net Charge-offs as a % of average loans (annualized)

 

0.03

%

0.13

%

0.27

%

-0.16

%

0.98

%

 

(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

 

 

 

2015

 

2015

 

2014

 

2014

 

2014

 

Shareholders’ Equity

 

$

367,991

 

368,931

 

360,662

 

332,790

 

327,381

 

Less: Intangible Assets

 

77,707

 

78,126

 

78,546

 

68,772

 

69,161

 

Tangible Common Equity

 

290,284

 

290,805

 

282,116

 

264,018

 

258,220

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

3,240,194

 

3,152,830

 

3,122,516

 

2,899,952

 

2,861,017

 

Less: Intangible Assets

 

77,707

 

78,126

 

78,546

 

68,772

 

69,161

 

Tangible Assets

 

3,162,487

 

3,074,704

 

3,043,970

 

2,831,180

 

2,791,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Shares Outstanding

 

21,624,684

 

21,694,815

 

21,687,525

 

20,460,763

 

20,458,763

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value Per Common Share

 

$

13.42

 

$

13.40

 

$

13.01

 

$

12.90

 

$

12.62

 

Tangible Common Equity/Tangible Assets

 

9.18

%

9.46

%

9.27

%

9.33

%

9.25

%

 


 

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.