Safe and Sound

MainSource Bank

Greensburg, IN
4
Star Rating
Greensburg, IN-based MainSource Bank is an FDIC-insured bank started in 1904. Regulatory filings show the bank having equity of $572.6 million on assets of $4.59 billion, as of June 30, 2017.

U.S. bank customers have $3.53 billion on deposit at 102 offices in multiple states run by 867 full-time employees. With that footprint, the bank holds loans and leases worth $3.01 billion, $2.41 billion of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, MainSource Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three major criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It works as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, more capital is preferred.
MainSource Bank fell below the national average of 13.38 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. MainSource Bank's Tier 1 capital ratio was 12.84 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather financial difficulties.

Overall, MainSource Bank held equity amounting to 12.46 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as unpaid loans.

A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

MainSource Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.62.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.64 percent of MainSource Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on MainSource Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

On Bankrate's earnings test, MainSource Bank scored 18 out of a possible 30, better than the national average of 16.52.

One important way to measure a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. The most recent annualized quarterly return on equity for MainSource Bank was 9.52 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $24.7 million on total equity of $572.6 million. The bank had an annualized return on average assets, or ROA, of 1.17 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.