Safe and Sound

MainSource Bank

Greensburg, IN
5
Star Rating
MainSource Bank is an FDIC-insured bank started in 1904 and currently headquartered in Greensburg, IN. The bank holds equity of $579.1 million on $4.65 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 803 full-time employees in 102 offices in multiple states, the bank currently holds loans and leases worth $3.05 billion, including $2.43 billion worth of real estate loans. U.S. bank customers currently have $3.53 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, MainSource Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and as protection for depositors when a bank is experiencing financial instability. Therefore, a bank's level of capital is a key measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, MainSource Bank received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. MainSource Bank's Tier 1 capital ratio was 12.88 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, MainSource Bank held equity amounting to 12.44 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with extensive holdings of these types of assets could eventually be required to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

MainSource Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.53 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 1.01 percent.

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

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to address problematic loans, potentially making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

MainSource Bank did above-average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for MainSource Bank was 10.72 percent, above the national average of 8.10 percent.

The bank recorded net income of $58.2 million on total equity of $579.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.32 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 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.