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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowHonda Motor Co.’s decision to build a massive auto manufacturing plant near Greensburg has the small Decatur County town abuzz with excitement. But a company already entrenched there is making some noise of its own.
MainSource Financial Group Inc. has increased assets an impressive 50 percent during the past year largely due to four acquisitions made by the publicly traded bank holding company.
“We’re a little opportunistic,” admitted MainSource President and CEO James Saner. “We really want to grow, give or take 10 percent a year. But because the communities we’re in don’t afford us that type of growth, we need acquisitions.”
The origins of the Greensburg-based MainSource can be traced to the Old Union and Trust in Greensburg. In 1983, a group of investors renamed it Indiana United Bank Co. The bank went public the following year and became MainSource in 1998, following a merger between Indiana United and PTC Bank Co. in Brookville.
Saner arrived from PTC to lead Main-Source from its sleepy origins to a corporation now boasting 66 branches in Indiana, Illinois and Ohio. The locations mostly are in rural settings to remain consistent with the company’s smalltown roots.
Even so, Main-Source’s assets under Saner’s watch have nearly quadrupled, climbing from $650 million to $2.4 billion counting the contributions of the four acquisitions. The last one closed in June.
They are Union Community Bancorp of Crawfordsville; Peoples Ohio Financial Corporation of Troy, Ohio; HFS Bank in Hobart; and The Madison Bank and Trust Co. MainSource purchased five branches from First Financial Bancorp in Hamilton, Ohio, as well. Here’s what the new arrivals bring to the table: Union Community: $260 million in assets and six branches in four counties Peoples Ohio: $200 million in assets and five branches in the western part of the state HFS: $235 million in assets and six branches in Lake and Porter counties Madison Bank and Trust: $200 million in assets and five branches in Jefferson and Ohio counties. Despite the recent flurry of activity, Saner doubts MainSource will maintain the rapid pace. “We just happened to have those types of opportunities presented to us,” he said. “Normally, when we have two or three acquisitions lined up, we’re usually not looking. But when they come knocking on your door, they only happen so often.”
Three of the banks are thrifts that offer fewer financial products than MainSource. With its resources, though, the company can offer cash-management and insurance products to attract new customers and enhance revenue, said Brian Martin, an analyst at Howe Barnes Investments Inc. in Chicago.
Further, the acquisitions give Main-Source access to executives it might not attract otherwise, he said.
“Not everyone is going to want to come work in Greensburg,” Martin said. “It fortifies their management team and gives them some talent they may not be able to get there.”
Howe Barnes forecasts earnings per share of $1.50 this year, soundly beating 2005’s return of $1.30. Other analysts following MainSource have an equally bullish outlook, estimating the stock price will rise to $20 to $23.
Shares in mid-July were trading at $16.64, down sharply from their high of nearly $26 in late 2004. Martin attributed that to the slumbering performance of the community-banking sector in general more so than to anything MainSource might have done.
Smaller banks rely more heavily on interest-generated income to drive sales. A higher rate on loans dampens lending consumption and thus affects revenue. Main-Source had revenue in 2005 of $97.8 million, ranking it as Indiana’s 50th-largest public company, according to IBJ research.
Saner has an additional theory. He faults institutional shareholders who view the company as a risk due to its fondness for acquisitions, he said.
As for the future, MainSource is likely to stay true to its roots and has no plans to butt heads with larger banks in the big cities. The holding company, however, does have branches in the bedroom communities of Louisville, in Greenwood and Franklin near Indianapolis and in Kankakee, Ill., near Chicago.
While anything is possible, Saner said, the chances are slim that MainSource will ever sell to a larger suitor. That’s because the bank already has picked off branches that some of the big boys put on the block. MainSource is buying Madison Bank and Trust from Cleveland-based National City Bank, for instance.
“So I’m not sure they want to be in these smaller communities,” Saner said.
Even if acquisitions slow, Martin expects the $550 million Honda plant to provide a shot in the arm when vehicles begin rolling off the assembly line in 2008. The facility will employ 2,000 people from not only Greensburg but also surrounding communities in which Main-Source has bank branches, Saner said.
So while the Honda announcement is drawing much attention these days-and rightly so-Decatur County’s business advocates still realize the value Main-Source has to the region.
“They’re not real flashy, but they’re quietly growing and expanding,” said Jennifer Sturges, executive director of the Greensburg/Decatur County Chamber of Commerce. “It is a neat story about a homegrown company that is becoming a much larger player.”
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