MainSource Boosts Profits Despite Drop in Loans

Lower credit costs and higher mortgage banking revenue pushed MainSource Financial Group's (MSFG) third-quarter net income up 34.5% from a year earlier to $6.5 million.

The Greensburg, Ind., company reported a quarterly provision for loan losses of $2 million, down 60% from a year earlier. Its nonperforming assets continued a downward trend, falling to 2.19% of assets from 3.03% a year earlier and 2.34% in the second quarter.

Like scores of other banks that have reported this month, MainSource's third quarter income was lifted by mortgage revenues. It earned $2.1 million on mortgage banking, up nearly 50% from a year earlier. Overall, noninterest income rose 12.6%, to $11.6 million.

Expenses were up 2% to $24.4 million, and included a $1.3 million pre-payment penalty on Federal Home Loan bank advances.

Although profitability has improved, the $2.76 billion-asset company is struggling to find loans. Gross average loans were $1.55 billion, down 3% from a year earlier and down 1% from the second quarter.

"I am very pleased with the continued growth in operating earnings. Our core earnings were at their highest point in the history of the company," Chief Executive Archie Brown said in a press release. "Loan growth for the quarter remained a challenge. I expect loan balances to remain relatively flat for the remainder of the year. While loan trends are much better than the previous two years, we are not satisfied with our current progress."

To help aid loan growth, the company is eyeing expansion. It opened a temporary office in Seymour, Ind., in the third quarter and plans to finish new building there in the third quarter of 2013. Meanwhile, earlier this month it opened a downtown Indianapolis office. It also has a pending transaction to acquire a branch in Shelbyville, Ky., from American Founders Bancorp in Lexington, Ky. MainSource continues to look for ways to grow earnings, Brown said in the release.

"We are hopeful that recent investments in higher-growth markets will lead to loan growth within the next year," Brown said.