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MainSource Financial Group Inc Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 10, 2011 05:24PM
MainSource Financial Group Inc (MSFG) filed Annual Report for the period ended 2010-12-31. Mainsource Financial Group Inc has a market cap of $201 million; its shares were traded at around $9.98 with a P/E ratio of 17.2 and P/S ratio of 1.1. The dividend yield of Mainsource Financial Group Inc stocks is 0.4%.
Highlight of Business Operations:
The principal source of revenues for the Company is interest and fees on loans, which accounted for 59.8% of total revenues in 2010, 63.2% in 2009 and 67.9% in 2008.
The Company's investment securities portfolio is primarily comprised of U. S. Treasuries, state and municipal bonds, U. S. government sponsored entity's mortgage-backed securities and corporate securities. The Company has classified its entire investment portfolio as available for sale, with fair value changes reported separately in shareholders' equity. Funds invested in the investment portfolio generally represent funds not immediately required to meet loan demand. Income related to the Company's investment portfolio accounted for 16.6% of total revenues in 2010, 14.8% in 2009 and 15.0% in 2008. As of December 31, 2010, the Company had not identified any securities as being "high risk" as defined by the FFIEC Supervisory Policy Statement on Securities Activities.
A "well capitalized" institution is one that has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%, a leverage ratio of at least 5% and is not subject to regulatory direction to maintain a specific level for any capital measure. An "adequately capitalized" institution is one that has ratios greater than 8%, 4% and 4%. An institution is "undercapitalized" if its respective ratios are less than 8%, 4% and 4%. "Significantly undercapitalized" institutions have ratios of
less than 6%, 3% and 3%. An institution is deemed to be "critically undercapitalized" if it has a ratio of tangible equity to total assets that is 2% or less.
As discussed above, the Company and the Bank must meet certain minimum capital requirements mandated by each of their state or federal regulators. These regulatory agencies require BHCs and banks to maintain certain minimum ratios of primary capital to total assets and total capital to total assets. The FRB requires BHCs to maintain a minimum Tier 1 leverage ratio of 3% capital to total assets; however, for all but the most highly rated institutions which do not anticipate significant growth, the minimum Tier 1 leverage ratio is 3% plus an additional cushion of 100 to 200 basis points. As of December 31, 2010, the Company's leverage ratio of capital to total assets was 9.7%. The FRB and FDIC each have approved the imposition of "risk-adjusted" capital ratios on BHCs and financial institutions. The Company's Tier 1 Capital to Risk-Weighted Assets Ratio was 15.5% and its Total Capital to Risk-Weighted Assets Ratio was 16.8% at December 31, 2010. The Bank had capital to asset ratios and risk- adjusted capital ratios at December 31, 2010, in excess of the applicable minimum regulatory requirements
The U.S. Department of the Treasury ("Treasury"), working with the Federal Reserve Board, established late in 2008 the TARP Capital Purchase Program ("CPP"), which was intended to stabilize the financial services industry. One of the components of the CPP included a $250 billion voluntary capital purchase program for certain qualified and healthy banking institutions. Pursuant to the CPP, Treasury purchased from the Company 57,000 shares of $1,000 par value senior perpetual preferred securities at a price of $57 million equal to approximately 3.0% of the Company's then risk-weighted assets. Such preferred shares pay a dividend of 5% for the first five years and will increase to 9% thereafter. In addition, subject to certain limited exceptions, as a participant in the CPP, the Company is prohibited from (a) increasing its dividend to common shareholders and (b) conducting share repurchases without prior approval of the Treasury. In connection with the Company's participation in the CPP, Treasury also received a warrant for the purchase of common stock in the amount of 571,906 shares at a strike price of $14.95 per share. The warrant expires on January 16, 2019.
Stocks Discussed: MSFG,