German American Bancorp, Inc. (GABC) Posts Strong 4th Quarter and Annual 2024 Earnings; Declares 7.4% Cash Dividend Increase

German American Bancorp, Inc. (NASDAQ:GABC) reported strong fourth quarter 2024 earnings of $23.2 million, or $0.78 per share, reflecting a linked quarter increase of $2.2 million, or approximately 10% on a per share basis, from 2024 third quarter earnings of $21.0 million, or $0.71 per share. The Company also reported strong annual earnings of $83.8 million, or $2.83 per share, for the year ended December 31, 2024. This level of reported annual earnings resulted in a 12.2% return on average shareholders' equity, marking the 20^th consecutive fiscal year in which the Company has delivered a double-digit return on shareholders' equity. The Company also announced a 7.4% increase to its quarterly cash dividend, marking the 13^th consecutive year of increased cash dividends, reflecting the Company's strong operations and healthy capital position.

The Company's fourth quarter of 2024 operating performance was driven by a continued expansion of its net interest margin and broad-based loan and deposit growth. The quarter was also highlighted by continued strong credit metrics, growing non-interest income, and controlled non-interest expense.

Net interest income for the fourth quarter 2024 increased $2.4 million, or 5%, over linked third quarter 2024 net interest income. Net interest margin for the fourth quarter of 2024 of 3.54% reflects a 7 basis point expansion over linked third quarter net interest margin of 3.47%, driven largely by lower deposit costs resulting from a decline in the federal funds rate and, to a lesser extent, a relatively stable yield on earning assets.

Fourth quarter 2024 end of period total deposits increased $57.8 million, or 4% on an annualized linked quarter basis, compared to the third quarter of 2024, mostly as a result of the seasonal inflow of public fund deposits. Non-interest bearing accounts remained sequentially stable at just over 26% of total deposits.

During the fourth quarter of 2024, total loans increased $63.9 million, or 6% on an annualized linked quarter basis, with all categories of loans showing growth with the exception of residential mortgage. The Company's loan portfolio composition remained diverse and its credit metrics strong, as non-performing assets were 0.18% of period end assets and non-performing loans totaled 0.27% of period end loans.

Both non-interest income and expenses trended favorably in the fourth quarter of 2024 over linked third quarter 2024. Non-interest income was up 2%, driven mostly by a 3% increase in wealth management fees as a result of increased assets under management due to continued strong new business and healthy capital markets. Non-interest expense declined $287,000, or 1%, compared to the third quarter of 2024.

The Company's 2024 reported annual earnings represented a decrease of only $2.1 million, or approximately 3% on a per share basis, from the Company's prior year 2023 earnings level of $85.9 million, or $2.91 per share.

The 2024 operating performance was highlighted by the sale of the Company's existing insurance division, a partial restructuring of its securities portfolio, and the announcement of its proposed acquisition of Columbus, Ohio-based Heartland BancCorp. These transactions, coupled with a strong operating performance in the back half of 2024, should provide momentum for solid balance sheet and earnings per share growth into 2025.

In 2024, the Company was named to Piper Sandler's Sm-All Stars, Raymond James Community Bankers Cup, S&P Global's Top Performing Community Bank list, Bank Director Top Banks list, Forbes America's Best Bank list, and Newsweek's Best Regional Bank list, all of which recognize top tier performance in banking. "The consistent profitability, growth and operational efficiency that led to these honors is a testament to the dedication of our team of professionals diligently serving our customers and communities each and every day," stated D. Neil Dauby, German American's Chairman and CEO.

The Company also announced a 7.4% increase in the level of its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.29 per share, which will be payable on February 20, 2025 to shareholders of record as of February 10, 2025.

Dauby stated, "We are extremely pleased to deliver yet another quarter and year of solid operating performance as German American positions itself for future continued growth. We are extremely excited about the long-term growth potential in connection with a normalizing yield curve, a strong organic growth footprint and the Company's pending merger with Heartland BancCorp, which has now received all necessary shareholder and regulatory approvals. This acquisition is a strategically compelling and financially attractive opportunity that should drive long-term shareholder value. Thanks to the dedicated efforts of our relationship-focused team of professionals, we are confident that our strong community presence, healthy financial condition and disciplined approach to risk management and earnings growth will continue to drive future profitability. We remain excited and committed to the vitality and future growth of our Indiana, Kentucky and now Ohio communities."

Balance Sheet Highlights

Total assets for the Company totaled $6.296 billion at December 31, 2024, representing an increase of $35.0 million compared with September 30, 2024 and an increase of $143.7 million compared with December 31, 2023. The increase in total assets at December 31, 2024 compared with September 30, 2024 was largely related to an increase in total loans, partially offset by a reduction in securities available-for-sale resulting from a decline in the fair value of the securities portfolio. The increase at December 31, 2024 compared to December 31, 2023 was largely attributable to increases in total loans and federal funds sold and other short-term investments, partially mitigated by a reduction of the securities portfolio.

December 31, 2024 total loans increased $63.9 million, or 6% on an annualized basis, compared with September 30, 2024 and increased $155.4 million, or 4%, compared with December 31, 2023. The increase during the fourth quarter of 2024 compared with September 30, 2024 was broad-based across most segments of the portfolio. Commercial and industrial loans increased $0.9 million, or just under 1% on an annualized basis, commercial real estate loans increased $44.9 million, or 8% on an annualized basis, while agricultural loans grew $13.6 million, or 13% on an annualized basis, and retail loans grew by $4.5 million, or 2% on an annualized basis.

The composition of the loan portfolio has remained relatively stable and diversified over the past several years, including 2024. The portfolio is most heavily weighted in commercial real estate loans at 54% of the portfolio, followed by commercial and industrial loans at 16% of the portfolio, and agricultural loans at 10% of the portfolio. The Company's commercial lending is extended to various industries, including multi-family housing and lodging, agribusiness and manufacturing, as well as health care, wholesale, and retail services. The Company's commercial real estate portfolio has limited exposure to office real estate, with office exposure totaling approximately 5% of the total loan portfolio.

The Company's allowance for credit losses totaled $44.4 million at December 31, 2024, $44.1 million at September 30, 2024 and $43.8 million at December 31, 2023. The allowance for credit losses represented 1.08% of period-end loans at December 31, 2024, 1.09% of period-end loans at September 30, 2024 and 1.10% of period-end loans at December 31, 2023.

Non-performing assets totaled $11.1 million at December 31, 2024, $9.7 million at September 30, 2024 and $9.2 million at December 31, 2023. Non-performing assets represented 0.18% of total assets at December 31, 2024, 0.15% at September 30, 2024 and 0.15% at December 31, 2023. Non-performing loans represented 0.27% of total loans at December 31, 2024, 0.24% at September 30, 2024 and 0.23% at December 31, 2023.

December 31, 2024 total deposits increased $57.8 million, or 4% on an annualized basis, compared to September 30, 2024 and increased $76.1 million, or 1%, compared with December 31, 2023. The increase at December 31, 2024 compared to September 30, 2024 was primarily attributable to seasonal inflows of public entity funds. The Company has continued to see some customer movement from both interest bearing and non-interest bearing transactional accounts to time deposits due primarily to a higher interest rate environment. Non-interest bearing deposits have remained relatively stable as a percent of total deposits with December 31, 2024 non-interest deposits totaling 26% of total deposits while non-interest deposits totaled 27% at September 30, 2024 and 28% at December 31, 2023.

At December 31, 2024, the capital levels for the Company and its subsidiary bank, German American Bank (the "Bank"), remained well in excess of the minimum amounts needed for capital adequacy purposes and the Bank's capital levels met the necessary requirements to be considered well-capitalized.

Results of Operations Highlights – Year ended December 31, 2024

Net income for the year ended December 31, 2024 totaled $83,811,000, or $2.83 per share, a decline of $2,077,000, or approximately 3% on a per share basis, from the year ended December 31, 2023 net income of $85,888,000, or $2.91 per share. Net income for the year ended December 31, 2024 included merger-related transaction costs associated with the Company's pending merger with Heartland BancCorp ("Heartland") that totaled approximately $1,370,000, $1,082,000 after-tax, or $0.04 per share.

Net income for the year end December 31, 2024 was impacted by the sale of substantially all of the assets of German American Insurance, Inc. ("GAI") during the second quarter of 2024. The all-cash sale price totaled $40.0 million and resulted in an after-tax gain, net of transaction costs, of approximately $27,476,000, or $0.93 per share. GAI net income, excluding the after-tax gain, contributed approximately $767,000, or $0.03 per share, during 2024 compared with net income of $1,639,000, or $0.06 per share, during the full year of 2023.

Net income for the year ended December 31, 2024 was also impacted by a securities portfolio restructuring transaction whereby available-for-sale securities totaling approximately $375 million in book value were sold. The approximate loss on these securities totaled $34,893,000, $27,189,000 after tax, or $0.92 per share, and was included in earnings for the second quarter of 2024. The proceeds from the securities sold were reinvested by the end of the third quarter of 2024.

During the year ended December 31, 2024, net interest income, on a non tax-equivalent basis, totaled $190,591,000, which was relatively stable compared to the year ended December 31, 2023 net interest income of $190,433,000.

The tax equivalent net interest margin for the year ended December 31, 2024 was 3.43% compared with 3.58% for the year ended December 31, 2023. The decline in the net interest margin in 2024 compared with 2023 was largely driven by an increased cost of funds and a lower level of accretion of loan discounts on acquired loans. The cost of funds increased 56 basis points year over year. Accretion of loan discounts on acquired loans contributed approximately 3 basis points to the net interest margin in 2024 and 5 basis points in 2023. Accretion of discounts on acquired loans totaled $1,507,000 during 2024 and $2,814,000 during 2023.

During the year ended December 31, 2024, the Company recorded a provision for credit losses of $2,775,000, as compared to the provision for credit losses of $2,550,000 recorded for the year ended December 31, 2023.

During the year ended December 31, 2024, non-interest income increased $2,399,000, or 4%, compared with the year ended December 31, 2023. The year ended December 31, 2024 non-interest income was positively impacted by the net proceeds of the sale of the GAI assets that totaled approximately $38,323,000 and was negatively impacted by $34,893,000 related to the net loss recognized on the securities restructuring transaction.

Wealth management fees increased $2,705,000, or 23%, during 2024 compared with 2023. The increase during 2024 was largely attributable to continued increases in assets under management due to healthy capital markets and strong new business results, as compared to the year ended December 31, 2023.

Insurance revenues declined $5,212,000, or 54%, during 2024 compared with 2023, as a result of the sale of the assets of GAI effective June 1, 2024, with only five months of revenue being recognized by the Company during 2024. The year ended December 31, 2024 included $38,323,000 in net proceeds for the sale of the GAI assets.

Net gains on sales of loans increased $691,000, or 29%, during the year ended December 31, 2024 compared with the year ended December 31, 2023. The increase during 2024 compared with 2023 was related to both a higher volume of loans sold and improved pricing levels. Loan sales totaled $130.7 million during 2024 compared with $109.0 million during 2023.

The net loss on securities during the year ended December 31, 2024 totaled $34,788,000 and was primarily related to the net loss recognized on the securities restructuring transaction previously discussed.

During the year ended December 31, 2024, non-interest expense totaled $146,377,000, an increase of $1,880,000, or 1%, compared to the year ended December 31, 2023. The increase in non-interest expenses during the year ended 2024 was in large part the result of professional fees related to the previously mentioned GAI asset sale and the pending merger transaction with Heartland, which totaled approximately $2,759,000.

Salaries and benefits declined $987,000, or 1%, during the year ended December 31, 2024 compared with the year ended December 31, 2023. The decline in salaries and benefits during 2024 compared with 2023 was largely related to the GAI asset sale.

Data processing fees increased $1,131,000, or 10%, during the year ended December 31, 2024 compared with the year ended December 31, 2023. The increase during 2024 compared with 2023 was largely driven by costs associated with enhancements to the Company's digital banking and data systems.

Professional fees increased $2,572,000, or 46%, during the year ended December 31, 2024 compared with 2023. The increase during 2024 compared with 2023 was attributable to the professional fees associated with the sale of assets of GAI and the pending merger with Heartland, which totaled $2,759,000 for the two transactions.

Advertising and promotion expense declined $918,000, or 19%, during 2024 compared with 2023 as the Company employed a more targeted focus for sponsorships and contributions during 2024.

Intangible amortization expense consists primarily of amortization associated with the core deposit intangible of acquired deposit portfolios. Intangible amortization decreased $808,000, or 28%, during 2024 compared with 2023 and was largely related to the accelerated method for which the intangible assets are amortized.

Results of Operations Highlights – Quarter ended December 31, 2024

Net income for the fourth quarter of 2024 totaled $23,211,000, or $0.78 per share, an increase of 10% on a per share basis, compared with the third quarter of 2024 net income of $21,048,000, or $0.71 per share, and an increase of 7% on a per share basis compared with the fourth quarter of 2023 net income of $21,507,000, or $0.73 per share.

During the fourth quarter of 2024, net interest income, on a non tax-equivalent basis, totaled $51,032,000, an increase of $2,438,000, or 5%, compared to the third quarter of 2024 net interest income of $48,594,000 and an increase of $5,425,000, or 12%, compared to the fourth quarter of 2023 net interest income of $45,607,000.

The increase in net interest income during the fourth quarter of 2024 compared with both the third quarter of 2024 and the fourth quarter of 2023 was primarily driven by an improved net interest margin and a higher level of average earning assets.

The tax-equivalent net interest margin for the quarter ended December 31, 2024 was 3.54% compared with 3.47% in the third quarter of 2024 and 3.43% in the fourth quarter of 2023. The improvement in the net interest margin during the fourth quarter of 2024 compared with the third quarter of 2024 was largely driven by an overall lower cost of funds while the yield on earning assets remained relatively stable. The improvement in cost of funds was driven by the lower short-term market interest rates and the Company's ability to correspondingly lower deposit costs. The increase in the net interest margin during the fourth quarter of 2024 compared with the same period of 2023 was largely driven by an increased yield on earning assets, partially mitigated by an in increased cost of funds.

The Company's net interest margin and net interest income have been impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $617,000 during the fourth quarter of 2024, $237,000 during the third quarter of 2024 and $280,000 during the fourth quarter of 2023. Accretion of loan discounts on acquired loans contributed approximately 4 basis points to the net interest margin in the fourth quarter of 2024 and 2 basis points in both the third quarter of 2024 and the fourth quarter of 2023.

During both the third and fourth quarters of 2024, the Company recorded a provision for credit losses of $625,000. The Company recorded no provision in the fourth quarter of 2023. Net charge-offs totaled $313,000, or 3 basis points on an annualized basis, of average loans outstanding during the fourth quarter of 2024 compared with $447,000, or 4 basis points on an annualized basis, of average loans during the third quarter of 2024, and $881,000, or 9 basis points on an annualized basis, of average loans during the fourth quarter of 2023.

During the quarter ended December 31, 2024, non-interest income totaled $14,114,000, an increase of $313,000, or 2%, compared with the third quarter of 2024 and a decline of $1,480,000, or 9%, compared with the fourth quarter of 2023. The decline in the fourth quarter of 2024 compared to the same period of 2023 was the result of the sale of the GAI assets, with no insurance revenues recognized in the fourth quarter of 2024 and three months of revenue in the fourth quarter of 2023.

Wealth management fees increased $107,000, or 3%, during the fourth quarter of 2024 compared with the third quarter of 2024 and increased $489,000, or 15%, compared with the fourth quarter of 2023. The increase during the fourth quarter of 2024 compared with both the third quarter of 2024 and the fourth quarter of 2023 was driven by increased assets under management driven by healthy capital markets and continued strong new business results.

Service charges on deposit accounts increased $14,000, or less than 1%, during the quarter ended December 31, 2024 compared with the third quarter of 2024 and increased $459,000, or 16%, compared with the fourth quarter of 2023. The increase during the fourth quarter of 2024 compared with the fourth quarter of 2023 was largely related to increased customer utilization of deposit services.

No insurance revenues were recognized during the third or fourth quarters of 2024 as a result of the sale of the assets of GAI effective June 1, 2024. Insurance revenues declined $2,266,000 during the fourth quarter of 2024, compared with the fourth quarter of 2023, due to the sale.

Other operating income increased $342,000, or 27%, during the fourth quarter of 2024 compared with the third quarter of 2024 and declined $294,000, or 16%, compared with the fourth quarter of 2023. The increase during the fourth quarter of 2024 compared with the third quarter of 2024 was primarily attributable to fees associated with interest rate swap transactions with loan customers. The decline during the fourth quarter of 2024 compared with the fourth quarter of 2023 was largely attributable to the gain on sale of real estate related to the consolidation of various branch office facilities during the fourth quarter of 2023.

During the quarter ended December 31, 2024, non-interest expense totaled $35,839,000, a decline of $287,000, or 1%, compared with the third quarter of 2024, and an increase of $105,000, or less than 1%, compared with the fourth quarter of 2023. Non-interest expenses were impacted during both the third and fourth quarters of 2024 by the pending merger transaction with Heartland. Merger-related transaction costs totaled approximately $198,000 during the fourth quarter of 2024 and $747,000 during the third quarter of 2024.

Salaries and benefits increased $686,000, or 3%, during the quarter ended December 31, 2024 compared with the third quarter of 2024 and declined $544,000, or 3%, compared with the fourth quarter of 2023. The increase in salaries and benefits during the fourth quarter of 2024 compared with the third quarter of 2024 was primarily the result of increased health insurance benefit costs. The decline in salaries and benefits during the fourth quarter of 2024 compared with the fourth quarter of 2023 was due in large part to a lower level of full-time equivalent employees resulting from the sale of the assets of GAI during the second quarter of 2024.

Data processing fees increased $101,000, or 3%, during the fourth quarter of 2024 compared with the third quarter of 2024 and increased $422,000, or 15%, compared with the fourth quarter of 2023. The increase during the fourth quarter of 2024 compared with the fourth quarter of 2023 was largely driven by costs associated with enhancements to the Company's digital banking and data systems.

Professional fees declined $734,000, or 38%, in the fourth quarter of 2024 compared with the third quarter of 2024 and increased $8,000, or less than 1%, compared with the fourth quarter of 2023. The decline during the fourth quarter of 2024 compared with the third quarter of 2024 was primarily attributable to higher merger-related transaction fees in the third quarter of 2024.

About German American

German American Bancorp, Inc. is a Nasdaq-listed (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 74 banking offices in 20 contiguous southern Indiana counties and 14 counties in Kentucky.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that, by their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Forward-looking statements can often, but not always, be identified by the use of words like "believe", "continue", "pattern", "estimate", "project", "intend", "anticipate", "expect" and similar expressions or future or conditional verbs such as "will", "would", "should", "could", "might", "can", "may", or similar expressions.

These forward-looking statements include, but are not limited to, statements relating to the goals, intentions and expectations of German American Bancorp, Inc. ("German American"); statements regarding German American's business plan and growth strategies; statements regarding the asset quality of German American's loan and investment portfolios; and the pending merger of Heartland BancCorp ("Heartland") with and into German American (the "Merger") and related benefits, including future financial and operating results, cost savings, enhanced revenues, and accretion/dilution to reported earnings that may be realized from the Merger; and estimates of German American's risks and future costs and benefits, whether with respect to the Merger or otherwise.

Actual results and experience could differ materially from the anticipated results or other expectations expressed or implied by these forward-looking statements as a result of a number of factors, including but not limited to, those discussed in this press release. Factors that could cause actual experience to differ from the expectations expressed or implied in this press release include:

Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of German American. Readers are cautioned not to place undue reliance on these forward-looking statements. It is intended that these forward-looking statements speak only as of the date they are made. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

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D. Neil Dauby, Chairman and Chief Executive Officer

Bradley M Rust, President and Chief Financial Officer

(812) 482-1314