Robert E. Hoptry, Chairman, President, and CEO of MainSource Financial Group, Inc., announced today the unaudited results for the quarter ended March 31, 2008. Net income was $6.3 million in the first quarter of 2008, which equates to $0.34 per share, compared to $5.4 million for the same period a year ago, or $0.29 per share. During the first quarter, the Company reversed a tax reserve in the amount of $595,000 due to developments resulting from a recent favorable ruling in a tax court case. This reversal was partially offset by a $600,000 pre-tax severance accrual related to the departure of the Company's former Chief Executive Officer in February.
Mr. Hoptry stated, "We are very pleased with our performance in the first quarter of 2008 as earnings exceeded expectations. While we saw significant improvements in our net interest margin and non-interest income, credit quality remained in check and our core non-interest expense items saw only marginal increases."
NET INTEREST INCOME
Net interest income was $19.7 million for the first quarter of 2008, which represents an increase of 5.7% from the first quarter of 2007. Net interest margin, on a fully-taxable equivalent basis, was 3.64% for the first quarter of 2008, an increase of fifteen basis points on a linked quarter basis. 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.
The Company's non-interest income was increased to $7.8 million for the first quarter of 2008 compared to $6.1 million for the same period in 2007. Increases were realized across the board with service charges on deposit accounts increasing $0.6 million and mortgage banking income increasing $0.4 million.
The Company's non-interest expense was $17.8 million for the first quarter of 2008 compared to $16.9 million for the same period in 2007. Excluding the aforementioned severance costs, the Company's non-interest expense would have been $17.2 million, an increase of approximately 2% over the same period a year ago. The Company's efficiency ratio was 63.8% for the first quarter of 2008, which was relatively flat compared to the same period a year ago.
Non-performing assets were $23.3 million as of March 31, 2008, which was flat compared to December 31, 2007. Non-performing assets represented 0.92% of total assets as of March 31, 2008. Annualized net charge-offs for the first quarter of 2008 equaled 0.26% which is consistent with the level of charge-offs for all of 2007. The Company's allowance for loan losses as a percent of total outstanding loans was 0.92% as of March 31, 2008 compared to 0.85% as of December 31, 2007. Total loan loss provision expense was $2.2 million in the first quarter of 2008 compared to $700 thousand for the same period a year ago. The additional provision expense was primarily due to an increase in specific allocations related to certain commercial real estate loans which exhibited credit deterioration during the first quarter due to the continued weakening in the real estate markets.
MainSource Financial Group, Inc., headquartered in Greensburg, Indiana, is listed on the NASDAQ Global Select Market (under the symbol:"MSFG") and is a community-focused, financial holding company with assets of approximately $2.5 billion. The Company operated 65 offices in 30 Indiana counties, six offices in three Illinois counties, and five offices in two Ohio counties through its three banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, and MainSource Bank - Ohio, Troy, Ohio. Through its non-banking subsidiaries, MainSource Insurance LLC, and MainSource Title LLC, the Company and its banking subsidiaries provide various relted financial services.