• German American Bancorp, Inc. (GABC) Reports First Quarter 2022 Earnings

    Source: Nasdaq GlobeNewswire / 25 Apr 2022 17:35:48   America/New_York

    JASPER, Ind., April 25, 2022 (GLOBE NEWSWIRE) -- German American Bancorp, Inc. (Nasdaq: GABC) reported first quarter earnings of $9.1 million, or $0.31 per share. The current quarterly earnings include the results of Citizens Union Bancorp of Shelbyville, Inc. ("CUB"), which, as previously reported, was acquired by German American on January 1, 2022. The first quarter of 2022 included one-time merger and acquisition costs of approximately $11.7 million and "Day 1" provision under the current expected credit loss ("CECL") model for CUB of $6.3 million (total impact of $13.6 million, or $0.46 per share, on an after-tax basis). As a result, quarterly earnings declined by approximately $10.5 million, or 58% on a per share basis, from 2021 first quarter earnings of $19.6 million, or $0.74 per share.

    Total assets overall increased during the past year by $1.5 billion, or approximately 28% from March 31, 2021. Our 2022 first quarter financial position and performance, relative to the same quarter last year, was positively impacted by the inclusion of the CUB acquisition and ongoing organic loan and deposit growth, which were partially mitigated by the reduction of loans made under the Paycheck Protection Program ("PPP"). End of period deposits over the first quarter of 2022 grew $1.1 billion mostly as a result of the CUB acquisition. However, excluding the CUB acquisition, we continued to generate solid deposit growth into 2022 with an increase of $191 million, or 16% annualized, in organic deposits.

    First quarter 2022 net interest income increased $8.0 million, or approximately 21%, compared to the same period of 2021 driven by the Company’s higher level of average earning assets. Operating income increased $1.2 million or 8% quarter over prior year same quarter. Deposit service charge fees and interchange income improved 40% resulting from the higher utilization by existing customers as well as the expanded customer base from the acquisition. Other positive drivers include an increase of 12% in wealth management fees and a 13% increase in insurance services revenue. Net gains on sales of loans declined 35% as volume declined due to the overall slowing of the home mortgage refinance sector.

    Operating expenses increased $16.9 million or 54% compared to the first quarter 2021, of which nearly $12 million was related to the previously noted acquisition-related expenses in connection with CUB. The majority of the remaining increase was primarily attributable to the operating costs associated with CUB during the first quarter of 2022.

    The 2022 first quarter results also included a $6.7 million increase to the Company’s provision for credit losses as compared to the first quarter 2021. During the quarter ended March 31, 2022, the Company recorded a provision for credit losses of $5.2 million compared with a negative provision for credit losses of $1.5 million during the first quarter of 2021.

    D. Neil Dauby, German American’s President and CEO, stated, “While the first quarter results were impacted by the significant acquisition-related expenses and provision in connection with the completion of the Citizens Union Bank merger, we were very pleased with the level of incremental quarter over quarter growth in revenue, within both net interest income and various categories of non-interest income. The incrementally higher level of non-interest expenses in the first quarter 2022 was also largely attributable to the inclusion of both acquisition-related expenses and general operating expenses of CUB. Those expenses are expected to be reduced going forward, as the operations of CUB are fully integrated into GABC."

    Dauby continued, “Further, the level of asset quality within our loan portfolio and that of CUB’s remains strong, as indicated by our end of quarter non-performing asset ratio of 0.23%. Total end of period loans during the first quarter increased $648 million mostly as a result of the CUB acquisition. Excluding CUB and PPP loans, commercial loans increased approximately $35 million or 7% annualized (16% C&I and 4% CRE). We experienced a seasonal decline in agricultural loans of $32 million for the quarter. Although the first quarter is typically a down cycle for agricultural loans, the significant increase in corn and soy bean commodity pricing has led to outsized pay downs on agricultural lines. We are encouraged by the strength of our commercial/agricultural loan pipeline throughout most of our geographic footprint. However, continued rising inflation could be a deterrent to future loan growth. We are excited about the growth opportunities in our newly acquired markets and believe we are well positioned to execute on our High Touch- High Tech business strategy throughout our entire footprint.”

    The Company also announced its Board of Directors declared a regular quarterly cash dividend of $0.23 per share, which will be payable on May 20, 2022 to shareholders of record as of May 10, 2022.

    Balance Sheet Highlights

    On January 1, 2022, the Company completed the acquisition of Citizens Union Bancorp of Shelbyville, Inc. (“CUB”) CUB, headquartered in Shelbyville, Kentucky operated 15 retail banking offices located in Shelby, Jefferson, Spencer, Bullitt, Oldham, Owen, Gallatin and Hardin counties in Kentucky through its banking subsidiary, Citizens Union Bank of Shelbyville, Inc. As of the closing of the transaction, CUB had total assets of approximately $1.109 billion, total loans of approximately $683.8 million, and total deposits of approximately $930.5 million. The Company issued approximately 2.9 million shares of its common stock, and paid approximately $50.8 million in cash, in exchange for all of the issued and outstanding shares of common stock of CUB.

    Total assets for the Company totaled $6.698 billion at March 31, 2022, representing an increase of $1.089 billion compared with year-end 2021 and an increase of $1.478 billion compared with March 31, 2021. The increase in total assets at March 31, 2022 compared with year-end 2021 and March 31, 2021 was in large part attributable to the acquisition of CUB as well as continued growth in deposits.

    Securities available for sale increased $34.0 million as of March 31, 2022 compared with year-end 2021 and increased $537.7 million compared with March 31, 2021. The increase in the securities portfolio in both the first quarter of 2022 and over the past year was largely the result of increased levels of deposits. The growth in the reported level of the available for sale securities portfolio was tempered by the fair value adjustments on the portfolio caused by the rapid rise in market interest rates during the first quarter of 2022.

    March 31, 2022 total loans increased $648.1 million compared with December 31, 2021 and increased $535.1 million, or 17%, compared with March 31, 2021. The increase in total loans at March 31, 2022 compared with year-end 2021 was largely due to the acquisition of CUB. The increase at March 31, 2022 compared with March 31, 2021 was largely due to the acquisition of CUB and to organic loan growth from throughout the Company's existing market areas partially offset by a decrease in PPP loans. PPP loans, net of deferred fees, totaled $6.6 million at March 31, 2022 compared with $19.5 million at December 31, 2021 and $234.2 million at March 31, 2021. As of March 31, 2022, outstanding loans from the CUB acquisition totaled $659.2 million.

    Excluding PPP loans and loans acquired through the CUB acquisition, total loans increased $1.7 million, or less than 1% on an annualized basis, at March 31, 2022 compared with December 31, 2021 and $103.5 million, or 4%, compared with March 31, 2021. Commercial and industrial loans increased approximately $21.2 million, or 16% on an annualized basis, during the first quarter of 2022 compared with year-end 2021, commercial real estate loans increased $13.2 million, or 4% on an annualized basis, while agricultural loans seasonally declined $32.3 million, or 36% on an annualized basis. During the first quarter of 2022 compared with year-end 2021, retail loans declined $0.4 million, or less than 1% on an annualized basis.

           
    End of Period Loan Balances 3/31/2022 12/31/2021 3/31/2021
    (dollars in thousands)      
           
    Commercial & Industrial Loans $636,519 $548,350 $728,014
    Commercial Real Estate Loans  1,938,528  1,530,677  1,492,617
    Agricultural Loans  387,764  358,150  347,231
    Consumer Loans  351,083  307,184  285,485
    Residential Mortgage Loans  342,140  263,565  267,634
      $3,656,034 $3,007,926 $3,120,981
           
    Net PPP Loans (included in Commercial & Industrial Loans above) $6,612 $19,450 $234,229
           

    In response to requests from borrowers who had experienced pandemic-related business or personal cash flow interruptions, and in accordance with regulatory guidance, the Company began making short-term loan modifications involving both partial and full payment deferrals in April 2020. As of March 31, 2022, the Company has just one commercial real estate loan, in the principal amount of $3.5 million, with a payment modification that is still in effect, with such credit relationship making full interest payments.

    The Company’s allowance for credit losses totaled $45.1 million at March 31, 2022 compared to $37.0 million at year-end 2021 and $45.1 million at March 31, 2021. The allowance for credit losses represented 1.23% of period-end loans (1.24% excluding PPP loans) at March 31, 2022 and year-end 2021 and 1.45% of period-end loans (1.56% excluding PPP loans) at March 31, 2021.

    The Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("CECL") on January 1, 2020. The Company added $9.4 million to the allowance for credit losses in conjunction with the closing of the CUB acquisition on January 1, 2022 related to the CUB loan portfolio. Of the increase in the allowance for credit losses for the CUB portfolio, $6.3 million was recorded through the provision for credit losses on "Day 1" under the CECL model.

    Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of March 31, 2022, the Company held net discounts on acquired loans of $9.2 million which included $4.6 million related to the CUB loan portfolio.

    Non-performing assets totaled $15.3 million at March 31, 2022 compared to $14.8 million at year-end 2021 and $21.3 million at March 31, 2021. Non-performing assets represented 0.23% of total assets at March 31, 2022 compared to 0.26% at December 31, 2021 and 0.41% at March 31, 2021. Non-performing loans totaled $15.3 million at March 31, 2022 compared to $14.8 million at year-end 2021 and $21.3 million at March 31, 2021. Non-performing loans represented 0.42% of total loans at March 31, 2022 compared to 0.49% at December 31, 2021 and 0.67% at March 31, 2021. The increase in non-performing assets was primarily attributable to the CUB acquisition which totaled approximately $0.8 million at March 31, 2022.

          
    Non-performing Assets     
    (dollars in thousands)     
     3/31/2022 12/31/2021 3/31/2021
    Non-Accrual Loans$14,929 $14,602 $20,994
    Past Due Loans (90 days or more) 383  156  —
    Total Non-Performing Loans 15,312  14,758  20,994
    Other Real Estate 30  —  325
    Total Non-Performing Assets$15,342 $14,758 $21,319
          
    Restructured Loans$102 $104 $109
          

    March 31, 2022 total deposits increased $1.085 billion compared to year-end 2021 and increased $1.451 billion, or 33%, compared with March 31, 2021. The increase in total deposits at March 31, 2022 compared with both year-end 2021 and March 31, 2021 was largely attributable to the CUB acquisition and continued general inflows of customer deposits. As of March 31, 2022, deposits from the CUB acquisition totaled $893.9 million. Excluding the deposits related to the acquisition, total deposits increased $191.4 million, or 16% on an annualized basis, at March 31, 2022 compared with year-end 2021 and $557.1 million, or 13%, compared with March 31, 2021.

           
    End of Period Deposit Balances 3/31/2022 12/31/2021 3/31/2021
    (dollars in thousands)      
           
    Non-interest-bearing Demand Deposits $1,789,353 $1,529,223 $1,383,888
    IB Demand, Savings, and MMDA Accounts  3,527,373  2,867,994  2,548,015
    Time Deposits < $100,000  278,477  201,683  239,911
    Time Deposits > $100,000  234,407  145,416  206,859
      $5,829,610 $4,744,316 $4,378,673
           

    Results of Operations Highlights – Quarter ended March 31, 2022

    Net income for the quarter ended March 31, 2022 totaled $9,067,000, or $0.31 per share, a decline of 58% on a per share basis compared with the fourth quarter 2021 net income of $19,272,000, or $0.73 per share, and a decline of 58% on a per share basis compared with the first quarter 2021 net income of $19,557,000, or $0.74 per share. The change in net income during the first quarter of 2022, compared with both the fourth quarter of 2021 and the first quarter of 2021, was largely impacted by acquisition-related expenses for the CUB transaction that closed on January 1, 2022.

    The first quarter of 2022 results of operations included acquisition-related expenses of $11,705,000 ($8,908,000 or $.30 per share, on an after tax basis) and also included Day 1 provision for credit losses under the CECL model of $6,300,000 ($4,725,000 or $.16 per share, on an after tax basis). The fourth quarter of 2021 results of operations included acquisition-related expenses of approximately $184,000 ($138,000 or less than $0.01 per share, on an after tax basis).

                       
    Summary Average Balance Sheet
    (Tax-equivalent basis / dollars in thousands)
       Quarter Ended  Quarter Ended  Quarter Ended
      March 31, 2022 December 31, 2021 March 31, 2021
                       
       Principal Balance  Income/ Expense  Yield/ Rate  Principal Balance  Income/ Expense  Yield/ Rate  Principal Balance  Income/ Expense  Yield/ Rate
    Assets                  
    Federal Funds Sold and Other                  
    Short-term Investments $594,901 $280 0.19% $444,325 $159 0.14% $337,981 $85 0.10%
    Securities  1,986,917  11,533 2.32%  1,783,811  10,147 2.28%  1,295,630  7,327 2.26%
    Loans and Leases  3,667,082  39,022 4.31%  3,007,279  34,115 4.50%  3,107,902  35,164 4.58%
    Total Interest Earning Assets $6,248,900 $50,835 3.28% $5,235,415 $44,421 3.37% $4,741,513 $42,576 3.63%
                       
    Liabilities                  
    Demand Deposit Accounts $1,739,351     $1,456,179     $1,268,409    
    IB Demand, Savings, and                  
    MMDA Accounts $3,492,813 $872 0.10% $2,871,441 $702 0.10% $2,490,953 $637 0.10%
    Time Deposits  528,452  457 0.35%  364,669  403 0.44%  467,310  805 0.70%
    FHLB Advances and Other Borrowings  184,481  1,038 2.28%  193,522  1,149 2.35%  183,376  1,151 2.55%
    Total Interest-Bearing Liabilities $4,205,746 $2,367 0.23% $3,429,632 $2,254 0.26% $3,141,639 $2,593 0.33%
                       
    Cost of Funds     0.15%     0.17%     0.22%
    Net Interest Income   $48,468     $42,167     $39,983  
    Net Interest Margin     3.13%     3.20%     3.41%
                       

    During the first quarter of 2022, net interest income, on a non tax-equivalent basis, totaled $46,908,000, an increase of $6,177,000, or 15%, compared to the fourth quarter of 2021 net interest income of $40,731,000 and an increase of $7,976,000, or 20%, compared to the first quarter of 2021 net interest income of $38,932,000.

    The increase in net interest income during the first quarter of 2022 compared with both the fourth quarter of 2021 and the first quarter of 2021 was primarily attributable to a higher level of earning assets driven by both the CUB acquisition and continued deposit growth, which was partially mitigated by a lower level of PPP loan fee recognition.

    The tax equivalent net interest margin for the quarter ended March 31, 2022 was 3.13% compared with 3.20% in the fourth quarter of 2021 and 3.41% in the first quarter of 2021. The Company's net interest margin in all periods presented has been impacted by fees recognized as a part of the PPP and accretion of loan discounts on acquired loans. The impact of the PPP fees and accretion of loan discounts was significantly less in the first quarter of 2022 compared to both the fourth quarter of 2021 and the first quarter of 2021.

    Fees recognized on PPP loans through net interest income totaled $562,000 during the first quarter of 2022, $2,302,000 during the fourth quarter of 2021 and $3,008,000 during the first quarter of 2021. The fees recognized related to the PPP contributed approximately 4 basis points to the net interest margin on an annualized basis in the first quarter of 2022, 18 basis points in the fourth quarter of 2021 and 25 basis points in the first quarter of 2021. Accretion of loan discounts on acquired loans contributed approximately 7 basis points to the net interest margin in the first quarter of 2022, 11 basis points in the fourth quarter of 2021 and 7 basis points in the first quarter of 2021. Accretion of discounts on acquired loans totaled $1,112,000 during the first quarter of 2022, $1,421,000 during the fourth quarter of 2021 and $867,000 during the first quarter of 2021.

    During the quarter ended March 31, 2022, the Company recorded a provision for credit losses of $5,200,000 compared with a provision for credit losses of $2,000,000 in the fourth quarter of 2021 and a negative provision for credit losses of $1,500,000 during the first quarter of 2021. During the first quarter of 2022, the provision for credit losses included $6,300,000 for the Day 1 CECL addition to the allowance for credit loss related to the CUB acquisition.

    Net charge-offs totaled $256,000, or 3 basis point on an annualized basis, of average loans outstanding during the first quarter of 2022 compared with $2,781,000, or 37 basis points on an annualized basis, of average loans during the fourth quarter of 2021 and compared with $260,000, or 3 basis point, of average loans during the first quarter of 2021. The elevated level of net charge-offs during the fourth quarter of 2021 was primarily related to a single commercial loan relationship that became adversely classified earlier during 2021.

    During the quarter ended March 31, 2022, non-interest income totaled $16,188,000, an increase of $1,221,000, or 8%, compared with the fourth quarter of 2021 and an increase of $1,151,000, or 8%, compared with the first quarter of 2021. The increase in non-interest income during the first quarter of 2022 compared to both prior periods was primarily driven by the CUB acquisition.

           
      Quarter Ended Quarter Ended Quarter Ended
    Non-interest Income 3/31/2022 12/31/2021 3/31/2021
    (dollars in thousands)      
           
    Wealth Management Fees $2,638 $2,653 $2,358
    Service Charges on Deposit Accounts  2,683  2,293  1,678
    Insurance Revenues  3,721  1,949  3,292
    Company Owned Life Insurance  458  299  352
    Interchange Fee Income  3,627  3,465  2,830
    Other Operating Income  1,268  1,704  1,350
    Subtotal  14,395  12,363  11,860
    Net Gains on Sales of Loans  1,421  1,850  2,202
    Net Gains on Securities  372  754  975
    Total Non-interest Income $16,188 $14,967 $15,037
           

    Wealth management fees remained relatively stable, declining by $15,000, or less than 1%, during the first quarter of 2022 compared with the fourth quarter of 2021 and increased $280,000, or 12%, compared with the first quarter of 2021. The increase during the first quarter of 2022 compared with the first quarter of 2021 was largely attributable to increased assets under management within the Company's wealth management group.

    Service charges on deposit accounts increased $390,000, or 17%, during the first quarter of 2022 compared with the fourth quarter of 2021 and increased $1,005,000, or 60%, compared with the first quarter of 2021. The increase during the first quarter of 2022 compared with the fourth quarter of 2021 was largely the result of the acquisition while the increase compared with the first quarter of 2021 was the result of the acquisition as well as increased deposit customer activity.

    Insurance revenues increased $1,772,000, or 91%, during the quarter ended March 31, 2022, compared with the fourth quarter of 2021 and increased $429,000, or 13%, compared with the first quarter of 2021. The increase during the first quarter of 2022 compared with the fourth quarter of 2021 and the first quarter of 2021 was primarily due to increased contingency revenue and improved commercial lines revenue. Contingency revenue during the first quarter of 2022 totaled $1,620,000 compared with no contingency revenue during the fourth quarter of 2021 and $1,445,000 during the first quarter of 2021. Contingency revenue is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency. Typically, the majority of contingency revenue is recognized during the first quarter of the year.

    Interchange fee income increased $162,000, or 5%, during the quarter ended March 31, 2022 compared with the fourth quarter of 2021 and increased $797,000, or 28%, compared with the first quarter of 2021. The increase in the level of fees during the first quarter of 2022 compared with the fourth quarter of 2021 was largely related to the CUB acquisition while the increase compared to the first quarter of 2021 was related to the acquisition as well as increased card utilization by customers.

    Other operating income declined $436,000, or 26%, during the first quarter of 2022 compared with fourth quarter of 2021 and declined $82,000, or 6%, compared with the first quarter of 2021. The decline during the first quarter of 2022 was primarily attributable to a donated a building and accompanying real estate to a local municipality in one of Company's market areas during the fourth quarter of 2021. The estimated fair value of the property was approximately $575,000 greater than the book value which resulted in a net gain on the disposition of fixed assets in the fourth quarter of 2021. A corresponding contribution expense of $800,000 was recognized in advertising and promotion expense of the Company's income statement related to the donation of the building and accompanying real estate during the fourth quarter of 2021.

    Net gains on sales of loans declined $429,000, or 23%, during the first quarter of 2022 compared with the fourth quarter of 2021 and declined $781,000, or 35%, compared with the first quarter of 2021. The decline in the first quarter of 2022 compared with both the fourth quarter of 2021 and the first quarter of 2021 was largely related to a lower volume of loans sold and lower pricing levels. Loan sales totaled $52.0 million during the first quarter of 2022 compared with $66.3 million during the fourth quarter of 2021 and $68.5 million during the first quarter of 2021.

    The Company realized $372,000 in gains on sales of securities during the first quarter of 2022 compared with $754,000 during the fourth quarter of 2021 and $975,000 during the first quarter of 2021. The sales of securities in all periods was done as part of modest shifts in the allocations within the securities portfolio.

    During the quarter ended March 31, 2022, non-interest expense totaled $48,160,000, an increase of $16,893,000, or 54%, compared with the fourth quarter of 2021, and an increase of $16,901,000 or 54%, compared with the first quarter of 2021. The first quarter of 2022 non-interest expenses included approximately $11,705,000 of non-recurring acquisition-related expenses for the acquisition of CUB while the fourth quarter of 2021 included approximately $184,000 in acquisition-related expenses. The primary drivers of the remaining increases in the first quarter of 2022 compared with both the fourth quarter of 2021 and first quarter of 2021 were the operating costs for CUB.

           
      Quarter Ended Quarter Ended Quarter Ended
    Non-interest Expense 3/31/2022 12/31/2021 3/31/2021
    (dollars in thousands)      
           
    Salaries and Employee Benefits $23,088 $17,116 $17,805
    Occupancy, Furniture and Equipment Expense  3,809  3,200  4,348
    FDIC Premiums  476  373  334
    Data Processing Fees  7,724  2,083  1,743
    Professional Fees  2,363  979  1,160
    Advertising and Promotion  1,138  1,813  782
    Intangible Amortization  1,017  599  760
    Other Operating Expenses  8,545  5,104  4,327
    Total Non-interest Expense $48,160 $31,267 $31,259
           

    Salaries and benefits increased $5,972,000, or 35%, during the quarter ended March 31, 2022 compared with the fourth quarter of 2021 and increased $5,283,000, or 30%, compared with the first quarter of 2021. The increase in salaries and benefits during the first quarter of 2022 compared with both the fourth quarter of 2021 and the first quarter of 2021 was largely attributable to the CUB acquisition completed on January 1, 2021. The first quarter of 2022 included approximately $1,470,000 of acquisition-related salary and benefit costs of a non-recurring nature with the remainder of the increase due primarily to the salaries and benefits costs for the CUB employee base.

    Occupancy, furniture and equipment expense increased $609,000, or 19%, during the first quarter of 2022 compared with the fourth quarter of 2021 and declined $539,000, or 12%, compared to the first quarter of 2021. The increase during the first quarter of 2022 compared with the fourth quarter of 2021 was primarily attributable to the CUB acquisition. The decline during the first quarter of 2022 compared to the first quarter of 2021 was largely related to operating fewer branch offices from the Company's existing branch network (excluding the CUB acquisition), which was the result of the Company's 2021 operating optimization plan, and non-recurring costs associated with the optimization plan in the first quarter of 2021, partially mitigated by the operating costs of the CUB branch network in the first quarter of 2022 .

    Data processing fees increased $5,641,000, or 271%, during the first quarter of 2022 compared with the fourth quarter of 2021 and increased $5,981,000 or 343% compared with the first quarter of 2021. The increase during the first quarter of 2022 compared with both the fourth quarter of 2021 and the first quarter of 2021 was largely driven by acquisition-related costs which totaled approximately $4,973,000 during the first quarter of 2022.

    Professional fees increased $1,384,000, or 141%, in the first quarter of 2022 compared with the fourth quarter of 2021 and increased $1,203,000, or 104%, compared with the first quarter of 2021. The increase during the first quarter of 2022 to both comparative periods was due in large part to professional fees associated with the CUB acquisition. Merger and acquisition related professional fees totaled approximately $1,336,000 during the first quarter of 2022 and approximately $177,000 during the fourth quarter of 2021.

    Advertising and promotion expense declined $675,000, or 37%, in the first quarter of 2022 compared with the fourth quarter of 2021 and increased $356,000, or 46%, compared with the first quarter of 2021. The decline during the first quarter of 2022 compared with the fourth quarter of 2021 was primarily related to the donation of a building and accompanying real estate to a local municipality in one of the Company's market areas in the fourth quarter of 2021 which was partially mitigated by acquisition-related expenses of approximately $189,000 during the first quarter of 2022. The estimated fair value of the property donated during the fourth quarter of 2021 was approximately $800,000. The increase during the first quarter of 2022 compared with the first quarter of 2021 was largely due to the CUB acquisition.

    Intangible amortization increased $418,000, or 70%, during the first quarter of 2022 compared with the fourth quarter of 2021 and increased $257,000, or 34%, compared with the first quarter of 2021. The increase was attributable to the CUB acquisition.

    Other operating expenses increased $3,441,000, or 67%, during the first quarter of 2022 compared with the fourth quarter of 2021 and increased $4,218,000, or 97%, compared with the first quarter of 2021. The increase in the first quarter of 2022 compared to both the fourth quarter of 2021 and the first quarter of 2021 was largely attributable to acquisition-related costs that totaled approximately $3,733,000 in the first quarter of 2022. The acquisition-related costs were primarily vendor contract termination costs.

    About German American

    German American Bancorp, Inc. is a Nasdaq-traded (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 77 banking offices in 19 contiguous southern Indiana counties and 14 counties in Kentucky. The Company also owns an investment brokerage subsidiary (German American Investment Services, Inc.) and a full line property and casualty insurance agency (German American Insurance, Inc.).

    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. 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. 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:

    1. the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates;
    2. changes in competitive conditions;
    3. the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies;
    4. changes in customer borrowing, repayment, investment and deposit practices;
    5. changes in fiscal, monetary and tax policies;
    6. changes in financial and capital markets;
    7. potential deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration;
    8. the severity and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and our business, results of operations and financial condition;
    9. our participation in the Paycheck Protection Program administered by the Small Business Administration;
    10. capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by German American of outstanding debt or equity securities;
    11. factors driving impairment charges on investments;
    12. the impact, extent and timing of technological changes;
    13. potential cyber-attacks, information security breaches and other criminal activities;
    14. litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;
    15. actions of the Federal Reserve Board;
    16. the possible effects of the replacement of the London Interbank Offering Rate (LIBOR);
    17. the impact of the current expected credit loss (CECL) standard;
    18. changes in accounting principles and interpretations;
    19. potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to German American’s banking subsidiary;
    20. actions of the regulatory authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms;
    21. impacts resulting from possible amendments or revisions to the Dodd-Frank Act and the regulations promulgated thereunder, or to Consumer Financial Protection Bureau rules and regulations;
    22. the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends;
    23. with respect to the merger with Citizens Union, the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies, unexpected credit quality problems of the acquired loans or other assets, or unexpected attrition of the customer base of the acquired institution or branches; and
    24. other risk factors expressly identified in German American’s filings with the SEC.

    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.

     
    GERMAN AMERICAN BANCORP, INC.
    (unaudited, dollars in thousands except per share data)
          
    Consolidated Balance Sheets
          
     March 31, 2022 December 31, 2021 March 31, 2021
    ASSETS     
    Cash and Due from Banks$60,477  $47,173  $102,758 
    Short-term Investments 611,110   350,462   291,727 
    Investment Securities 1,923,973   1,889,970   1,386,226 
          
    Loans Held-for-Sale 12,675   10,585   18,493 
          
    Loans, Net of Unearned Income 3,652,452   3,004,264   3,117,203 
    Allowance for Credit Losses (45,078)  (37,017)  (45,099)
    Net Loans 3,607,374   2,967,247   3,072,104 
          
    Stock in FHLB and Other Restricted Stock 15,455   13,048   13,048 
    Premises and Equipment 111,815   88,863   92,044 
    Goodwill and Other Intangible Assets 190,949   127,606   130,086 
    Other Assets 163,801   113,585   113,348 
    TOTAL ASSETS$6,697,629  $5,608,539  $5,219,834 
          
    LIABILITIES     
    Non-interest-bearing Demand Deposits$1,789,353  $1,529,223  $1,383,888 
    Interest-bearing Demand, Savings, and Money Market Accounts 3,527,373   2,867,994   2,548,015 
    Time Deposits 512,884   347,099   446,770 
    Total Deposits 5,829,610   4,744,316   4,378,673 
          
    Borrowings 156,124   152,183   173,547 
    Other Liabilities 62,859   43,581   50,401 
    TOTAL LIABILITIES 6,048,593   4,940,080   4,602,621 
          
    SHAREHOLDERS' EQUITY     
    Common Stock and Surplus 414,758   302,611   301,216 
    Retained Earnings 352,679   350,364   302,450 
    Accumulated Other Comprehensive Income (118,401)  15,484   13,547 
    SHAREHOLDERS' EQUITY 649,036   668,459   617,213 
          
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$6,697,629  $5,608,539  $5,219,834 
          
    END OF PERIOD SHARES OUTSTANDING  29,485,683   26,553,508   26,546,280 
          
    TANGIBLE BOOK VALUE PER SHARE (1) $15.54  $20.37  $18.35 
          
    (1) Tangible Book Value per Share is defined as Total Shareholders' Equity less Goodwill and Other Intangible Assets divided by End of Period Shares Outstanding.


     
    GERMAN AMERICAN BANCORP, INC.
    (unaudited, dollars in thousands except per share data)
           
    Consolidated Statements of Income
           
      Three Months Ended
      March 31, 2022 December 31, 2021 March 31, 2021
    INTEREST INCOME     
    Interest and Fees on Loans$38,935 $34,060 $35,104 
    Interest on Short-term Investments 280  159  85 
    Interest and Dividends on Investment Securities 10,060  8,766  6,336 
    TOTAL INTEREST INCOME 49,275  42,985  41,525 
           
    INTEREST EXPENSE     
    Interest on Deposits 1,329  1,105  1,442 
    Interest on Borrowings 1,038  1,149  1,151 
    TOTAL INTEREST EXPENSE 2,367  2,254  2,593 
           
    NET INTEREST INCOME 46,908  40,731  38,932 
    Provision for Credit Losses 5,200  2,000  (1,500)
    NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 41,708  38,731  40,432 
           
    NON-INTEREST INCOME     
    Net Gain on Sales of Loans 1,421  1,850  2,202 
    Net Gain on Securities 372  754  975 
    Other Non-interest Income 14,395  12,363  11,860 
    TOTAL NON-INTEREST INCOME 16,188  14,967  15,037 
           
    NON-INTEREST EXPENSE     
    Salaries and Benefits 23,088  17,116  17,805 
    Other Non-interest Expenses 25,072  14,151  13,454 
    TOTAL NON-INTEREST EXPENSE 48,160  31,267  31,259 
           
    Income before Income Taxes 9,736  22,431  24,210 
    Income Tax Expense 669  3,159  4,653 
           
    NET INCOME$9,067 $19,272 $19,557 
           
    BASIC EARNINGS PER SHARE $0.31 $0.73 $0.74 
    DILUTED EARNINGS PER SHARE $0.31 $0.73 $0.74 
           
    WEIGHTED AVERAGE SHARES OUTSTANDING  29,403,052  26,547,008  26,510,001 
    DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING  29,403,052  26,547,008  26,510,001 


    GERMAN AMERICAN BANCORP, INC.
    (unaudited, dollars in thousands except per share data)
            
       Three Months Ended
       March 31, December 31, March 31,
        2022   2021   2021 
    EARNINGS PERFORMANCE RATIOS      
     Annualized Return on Average Assets  0.54%  1.38%  1.54%
     Annualized Return on Average Equity  4.88%  11.79%  12.47%
     Annualized Return on Average Tangible Equity (1)  6.56%  14.66%  15.75%
     Net Interest Margin  3.13%  3.20%  3.41%
     Efficiency Ratio (2)  74.49%  54.73%  56.81%
     Net Overhead Expense to Average Earning Assets (3)  2.05%  1.25%  1.37%
            
    ASSET QUALITY RATIOS      
     Annualized Net Charge-offs to Average Loans  0.03%  0.37%  0.03%
     Allowance for Credit Losses to Period End Loans  1.23%  1.23%  1.45%
     Non-performing Assets to Period End Assets  0.23%  0.26%  0.41%
     Non-performing Loans to Period End Loans  0.42%  0.49%  0.67%
     Loans 30-89 Days Past Due to Period End Loans  0.17%  0.13%  0.15%
            
    SELECTED BALANCE SHEET & OTHER FINANCIAL DATA      
     Average Assets $6,739,970  $5,585,419  $5,090,369 
     Average Earning Assets $6,248,900  $5,235,415  $4,741,513 
     Average Total Loans $3,667,082  $3,007,279  $3,107,902 
     Average Demand Deposits $1,739,351  $1,456,179  $1,268,409 
     Average Interest Bearing Liabilities $4,205,746  $3,429,632  $3,141,639 
     Average Equity $743,518  $653,768  $627,268 
            
     Period End Non-performing Assets (4) $15,342  $14,758  $21,319 
     Period End Non-performing Loans (5) $15,312  $14,758  $20,994 
     Period End Loans 30-89 Days Past Due (6) $6,185  $3,909  $4,791 
            
     Tax Equivalent Net Interest Income $48,468  $42,167  $39,983 
     Net Charge-offs during Period $256  $2,781  $260 
            
    (1)Average Tangible Equity is defined as Average Equity less Average Goodwill and Other Intangibles.
    (2)Efficiency Ratio is defined as Non-interest Expense divided by the sum of Net Interest Income, on a tax equivalent basis, and Non-interest Income.
    (3)Net Overhead Expense is defined as Total Non-interest Expense less Total Non-interest Income.
    (4)Non-performing assets are defined as Non-accrual Loans, Loans Past Due 90 days or more, and Other Real Estate Owned.
    (5)Non-performing loans are defined as Non-accrual Loans and Loans Past Due 90 days or more.
    (6)Loans 30-89 days past due and still accruing.      
             

    For additional information, contact:
    Mark A Schroeder, Executive Chairman
    D. Neil Dauby, President and Chief Executive Officer
    Bradley M Rust, Sr. EVP, Chief Operating Officer and Chief Financial Officer
    (812) 482-1314


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