MainSource Financial Group - NASDAQ, MSFG - Announces Earnings for the Second Quarter 2008

GREENSBURG, IN, Jul 23 (MARKET WIRE) --
Robert E. Hoptry, Chairman, President & Chief Executive Officer of
MainSource Financial Group, Inc. (NASDAQ: MSFG), announced today the
unaudited results for the quarter ended June 30, 2008. Net income was
$6.2 million in the second quarter of 2008, which equates to $0.33 per
share, compared to $6.0 million for the same period a year ago, or $0.32
per share.

Mr. Hoptry stated, "We are pleased with the solid growth in net interest
margin, commercial loan balances, and fee income in the second quarter of
2008. Net loan losses remained in check and we believe the increase in our
loan loss provision expense responsibly balanced the increase in
non-performing loans. Overall, our results were very positive in this
challenging environment."

NET INTEREST INCOME

Net interest income was $21.2 million for the second quarter of 2008,
which represents an increase of 13.3% from the second quarter of 2007. Net
interest margin, on a fully-taxable equivalent basis, was 3.92% for the
second quarter of 2008, an increase of 28 basis points on a linked quarter
basis. This increase was primarily due to the rate cuts that occurred
during the fourth quarter of 2007 and the first quarter of 2008 which
caused the Company's cost of funds to decrease at a faster rate than the
yield on earning assets.

NON-INTEREST INCOME

The Company's non-interest income increased to $7.7 million for the second
quarter of 2008 compared to $7.5 million for the same period in 2007. An
increase in mortgage banking income of $466 thousand was the primary
driver for this increase.

NON-INTEREST EXPENSE

The Company's non-interest expense was $17.3 million for the second
quarter of 2008 compared to $17.1 million for the same period in 2007,
which represents an increase of approximately 1% over the same period a
year ago. The Company's efficiency ratio was 58.32% for the second
quarter of 2008, which was a significant reduction compared to an
efficiency ratio of 63.90% for the same period a year ago.

ASSET QUALITY

Non-performing assets were $29.9 million as of June 30, 2008, which was an
increase of approximately $6.7 million on a linked-quarter basis. This
increase was primarily due to two commercial credits that were classified
as non-accrual in the second quarter of 2008. These two credits had
previously been identified by the Company as problem credits and specific
reserves had been allocated for the potential loss exposure. However,
these credits experienced further deterioration during the second quarter
and were downgraded to non-accrual status. Non-performing assets
represented 1.18% of total assets as of June 30, 2008. Annualized net
charge-offs for the second quarter of 2008 equaled 0.30% of average loans
which is a slight increase from the first quarter's charge-off level of
0.26% of average loans. The Company's allowance for loan losses as a
percent of total outstanding loans was 1.04% as of June 30, 2008 compared
to 0.85% as of December 31, 2007 and 0.81% a year ago. Total loan loss
provision expense was $3.5 million in the second quarter of 2008 compared
to $899 thousand for the same period a year ago. The additional provision
expense was primarily due to the increase in the level of non-performing
loans, an increase in specific allocations related to certain commercial
real estate loans which exhibited credit deterioration during the second
quarter, and the continued weakening in the real estate markets.

MAINSOURCE FINANCIAL GROUP
(unaudited)
(Dollars in thousands except per share data)

Income Statement
Summary Three months ended June 30 Six months ended June 30
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Interest Income $ 34,839 $ 36,061 $ 70,894 $ 71,161
Interest Expense 13,595 17,311 29,975 33,804
----------- ----------- ----------- -----------
Net Interest Income 21,244 18,750 40,919 37,357
Provision for Loan
Losses 3,471 899 5,667 1,595
Noninterest Income:
Insurance commissions 562 512 1,074 931
Trust and investment
product fees 403 447 820 815
Mortgage banking 1,215 749 2,182 1,364
Service charges on
deposit accounts 3,522 3,406 6,763 6,076
Gain on sales of
securities 87 190 429 229
Interchange income 927 846 1,737 1,587
Other 1,030 1,317 2,584 2,556
----------- ----------- ----------- -----------
Total Noninterest
Income 7,746 7,467 15,589 13,558
Noninterest
Expense:
Employee 9,984 9,475 20,656 19,164
Occupancy 1,382 1,312 2,885 2,738
Equipment 1,499 1,525 2,980 2,983
Intangible
amortization 634 667 1,269 1,333
Telecommunications 457 520 888 1,012
Stationary,
printing, and
supplies 319 379 629 762
Other 3,001 3,219 5,780 5,975
----------- ----------- ----------- -----------
Total Noninterest
Expense 17,276 17,097 35,087 33,967
Earnings Before
Income Taxes 8,243 8,221 15,754 15,353
Provision for
Income Taxes 2,069 2,218 3,329 3,935
----------- ----------- ----------- -----------
Net Income $ 6,174 $ 6,003 $ 12,425 $ 11,418
=========== =========== =========== ===========

Three months ended June 30 Six months ended June 30
Average Balance ------------------------ ------------------------
Sheet Data 2008 2007 2008 2007
----------- ----------- ----------- -----------
Gross Loans $ 1,693,710 $ 1,584,554 $ 1,695,932 $ 1,577,108
Earning Assets 2,225,786 2,121,908 2,221,213 2,107,781
Total Assets 2,522,944 2,414,111 2,519,026 2,401,734
Noninterest Bearing
Deposits 199,324 191,940 195,219 187,483
Interest Bearing
Deposits 1,701,958 1,625,573 1,689,615 1,626,453
Total Interest
Bearing Liabilities 2,024,516 1,938,576 2,027,950 1,933,940
Shareholders'
Equity 274,083 259,610 271,572 256,519

Three months ended June 30 Six months ended June 30
------------------------ ------------------------
Per Share Data 2008 2007 2008 2007
----------- ----------- ----------- -----------
Diluted Earnings
Per Share $ 0.33 $ 0.32 $ 0.67 $ 0.61
Cash Dividends Per
Share 0.145 0.140 0.285 0.275
Market Value - High 17.59 17.50 17.59 17.53
Market Value - Low 13.45 16.15 12.15 15.42
Average Outstanding
Shares (diluted) 18,577,832 18,750,172 18,575,515 18,753,555

Three months ended June 30 Six months ended June 30
------------------------ ------------------------
Key Ratios 2008 2007 2008 2007
----------- ----------- ----------- -----------
Return on Average
Assets 0.98% 0.98% 0.99% 0.96%
Return on Average
Equity 9.06% 9.14% 9.20% 8.97%
Net Interest Margin 3.92% 3.65% 3.78% 3.68%
Efficiency Ratio 58.32% 63.90% 60.79% 65.33%
Net Overhead to
Average Assets 1.52% 1.60% 1.56% 1.71%

Balance Sheet Highlights
As of June 30 2008 2007
----------- -----------
Total Loans
(Excluding Loans
Held for Sale) $ 1,700,532 $ 1,612,204
Allowance for Loan
Losses 17,611 13,112
Total Securities 500,293 489,805
Goodwill and
Intangible Assets 134,055 136,657
Total Assets 2,538,736 2,452,571
Noninterest Bearing
Deposits 218,756 203,638
Interest Bearing
Deposits (excluding
Public Funds) 1,480,818 1,429,836
Public Fund Deposits 221,227 206,738
Repurchase Agreements 33,586 43,086
Other Borrowings 293,121 290,599
Shareholders'
Equity 268,075 252,626

Other Balance Sheet Data
As of June 30 2008 2007
----------- -----------
Book Value Per
Share $ 14.43 $ 13.49
Loan Loss Reserve
to Loans 1.04% 0.81%
Nonperforming
Assets to Total
Assets 1.18% 0.70%
Outstanding Shares 18,573,885 18,732,395

Asset Quality
As of June 30 2008 2007
----------- -----------
Loans Past Due 90
Days or More and
Still Accruing $ 1,977 $ 1,425
Non-accrual Loans 24,895 14,432
Other Real Estate
Owned 3,053 1,312
----------- -----------
Total Nonperforming
Assets $ 29,925 $ 17,169

Net Charge-offs-YTD $ 2,387 $ 1,275
Net Charge-offs as
a % of average loans 0.28% 0.16%

MainSource Financial Group, Inc. is a community-focused, financial
services holding company with assets exceeding $2.5 billion. The Company
operates 77 banking offices through its three banking subsidiaries,
MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois,
Kankakee, Illinois, and MainSource Bank-Ohio, Troy, Ohio. The Company's
non-banking subsidiaries, MainSource Insurance, LLC and MainSource Title,
LLC, provide related financial services.

Forward-Looking Statements

Except for historical information contained herein, the discussion in this
press release may include certain forward-looking statements based upon
management expectations. Actual results and experience could differ
materially from the anticipated results or other expectations expressed in
the Company's forward-looking statements. Factors which could cause future
results to differ from these expectations include the following: general
economic conditions; legislative and regulatory initiatives; monetary and
fiscal policies of the federal government; deposit flows; the costs of
funds; general market rates of interest; interest rates on competing
investments; demand for loan products; demand for financial services;
changes in accounting policies or guidelines; changes in the quality or
composition of the Company's loan and investment portfolios; the Company's
ability to integrate acquisitions; the impact of our continuing
acquisition strategy; and other factors, including various "risk factors"
as set forth in our most recent Annual Report on Form 10-K and in other
reports we file from time to time with the Securities and Exchange
Commission. These reports are available publicly on the SEC website,
www.sec.gov, and on the Company's website, www.mainsourcefinancial.com.

CONTACT:
Robert E. Hoptry
Chairman, President and CEO
MainSource Financial Group, Inc.
812-663-6734

MainSource Financial Group, Inc.
2105 N. State Road 3 Bypass
Greensburg, IN 47240

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