JASPER, Ind., July 29, 2024 (GLOBE NEWSWIRE) -- German American Bancorp, Inc. (NASDAQ:GABC) reported strong second quarter earnings of $20.5 million, or $0.69 per share. This level of quarterly earnings reflected a linked quarter increase of $1.5 million, or approximately 8% on a per share basis, from 2024 first quarter earnings of $19 million or $0.64 per share. Second quarter 2024 operating performance was highlighted by a stabilized net interest margin, solid loan and deposit growth, continued strong credit metrics, growth in most non-interest income categories and controlled non-interest expense. As previously reported, the Company also sold the assets of its wholly-owned subsidiary, German American Insurance, Inc., during the second quarter, for $40.0 million (or approximately 4x the subsidiary's 2023 revenue) in an all-cash transaction, resulting in a $27.5 million after-tax gain. In addition, the Company subsequently commenced a restructuring of its securities portfolio by selling securities, representing approximately $375 million in book value, at an after-tax loss of $27.2 million. With its strong second quarter 2024 operating performance, the Company remained well-positioned at the end of second quarter 2024 with continued solid liquidity and strong capital ratios. The Company views certain non-operating items, like the German American Insurance sale and the restructuring of the securities portfolio, as being unrepresentative of the Company's core operating performance. As such, the Company generally considers those items as adjustments to net income reported under U.S. generally accepted accounting principles. Nonetheless, as a result of these two transactions, second quarter 2024 net income, on a combined basis, was positively impacted by only $0.3 million. Net interest margin for the second quarter of 2024 was relatively stable at 3.34%, compared to linked first quarter 2024 net interest margin of 3.35%, as the earning asset yield increase of 12 basis points mostly kept pace with the funding cost increase of 13 basis points. The cost of funds in the second quarter of 2024 continued to increase at a pace similar to that of first quarter 2024, driven by continued competitive deposit pricing in the marketplace and ongoing re-mixing of the Company's deposit composition as customers continued to move into time and money market accounts seeking higher yields. Second quarter 2024 deposits increased approximately $94 million, or approximately 7% on an annualized basis, compared to first quarter 2024. Non-interest-bearing accounts remained at a healthy 27% of total deposits. During the second quarter of 2024, total loans increased $65 million, or approximately 7% on an annualized basis, with virtually all categories of loans showing growth. The Company's loan portfolio composition remained diverse with little commercial real estate office concentration. Credit metrics remained strong as non-performing assets were 0.12% of period end assets and non-performing loans totaled 0.18% of period end loans. Non-interest income for the second quarter of 2024, compared with the first quarter of 2024, excluding any impact related to the insurance sale and the securities portfolio restructuring, reflected solid growth in most categories, highlighted by an increase in wealth management fees of approximately 12% attributable to increased assets under management and improving capital markets; increased interchange fee income of approximately 8% driven by increased customer card utilization; and increased net gain on sale of loans of approximately 29% driven by higher mortgage sales volume. Excluding professional fees associated with both the sale of the insurance subsidiary and the recently announced pending merger transaction with Heartland BancCorp, the Company's operating expenses for the second quarter of 2024 remained well-controlled. The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $0.27 per share, which will be payable on August 20, 2024, to shareholders of record as of August 10, 2024. D. Neil Dauby, German American's Chairman & CEO stated, "We are extremely pleased to deliver a strong second quarter operating performance. In addition, the Company executed on several key strategic initiatives with the sale of its insurance subsidiary and the partial restructuring of our securities portfolio." In a separate news release, German American also announced today its proposed merger with Heartland BancCorp. Heartland Bank is a premier community bank operating within the high growth markets of Columbus and Cincinnati, Ohio. Dauby added, "This strategic partnership coupled with our balance sheet repositioning will build on our strong quarterly operating performance and position our Company for improved profitability and future success." Balance Sheet Highlights Total assets for the Company totaled $6.217 billion at June 30, 2024, representing an increase of $105.0 million compared with March 31, 2024 and an increase of $163.7 million compared with June 30, 2023. The increase in total assets at June 30, 2024 compared with both March 31, 2024 and June 30, 2023 was largely related to an increase in total loans and fed funds sold and other short-term investments, partially offset by a decline in the securities portfolio. Securities available-for-sale declined $165.5 million as of June 30, 2024 compared with March 31, 2024 and declined $226.9 million compared with June 30, 2023. The decline at June 30, 2024 in the available-for-sale securities portfolio compared with the end of the first quarter of 2024 and the end of the second quarter of 2023 was largely the result of the Company's utilization of cash flows from the securities portfolio to fund loan growth in addition to the timing of the sale and reinvestment of proceeds related to the restructuring transaction. During June 2024, the Company commenced a securities portfolio restructuring transaction whereby available-for-sale securities totaling approximately $375 million in book value were identified to be sold. As of June 30, 2024, $175 million of securities had been sold with the remaining $200 million sold during early July 2024. The tax-equivalent yield on the bonds sold was approximately 3.12% with a duration of approximately 7 years. Approximately $80 million of the proceeds of the securities sold were reinvested as of June 30, 2024. It is anticipated the remainder of the proceeds from the sale will be reinvested back into the securities portfolio. June 30, 2024 total loans increased $65.3 million, or 7% on an annualized basis, compared with March 31, 2024 and increased $213.8 million, or 6%, compared with June 30, 2023. The increase during the second quarter of 2024 compared with March 31, 2024 was broad-based across most segments of the portfolio. Commercial and industrial loans increased $18.3 million, or 11% on an annualized basis, commercial real estate loans increased $23.6 million, or 4% on an annualized basis, while agricultural loans grew $13.0 million, or 13% on an annualized basis, and retail loans grew by $10.4 million, or 5% 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 concentrated 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 4% of the total loan portfolio. End of Period Loan Balances   6/30/2024   3/31/2024   6/30/2023 (dollars in thousands)                           Commercial & Industrial Loans   $ 664,435     $ 646,162     $ 669,137   Commercial Real Estate Loans     2,172,447       2,148,808       2,021,109   Agricultural Loans     413,742       400,733       395,466   Consumer Loans     424,647       421,980       389,440   Residential Mortgage Loans     368,997       361,236       355,329       $ 4,044,268     $ 3,978,919     $ 3,830,481                             The Company's allowance for credit losses totaled $43.9 million at June 30, 2024, $43.8 million at March 31, 2024 and $44.3 million at June 30, 2023. The allowance for credit losses represented 1.09% of period-end loans at June 30, 2024, 1.10% of period-end loans at March 31, 2024 and 1.16% of period-end loans at June 30, 2023. Non-performing assets totaled $7.3 million at June 30, 2024, $10.0 million at March 31, 2024 and $12.4 million at June 30, 2023. Non-performing assets represented 0.12% of total assets at June 30, 2024, 0.16% at March 31, 2024 and 0.21% at June 30, 2023. Non-performing loans represented 0.18% of total loans at June 30, 2024, 0.25% at March 31, 2024 and 0.32% at June 30, 2023. Non-performing Assets           (dollars in thousands)             6/30/2024   3/31/2024   6/30/2023 Non-Accrual Loans $ 6,583     $ 9,898     $ 11,423   Past Due Loans (90 days or more)   706       85       1,000   Total Non-Performing Loans   7,289       9,983       12,423   Other Real Estate   33       —       —   Total Non-Performing Assets $ 7,322     $ 9,983     $ 12,423               June 30, 2024 total deposits increased $94.2 million, or 7% on an annualized basis, compared to March 31, 2024 and increased $133.9 million, or 3%, compared with June 30, 2023. The increase at June 30, 2024 compared to March 31, 2024 was largely attributable to seasonal inflows of public entity funds. The Company has continued to see 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 June 30, 2024 non-interest deposits totaling 27% of total deposits while non-interest deposits totaled 28% of total deposits at March 31, 2024 and 30% at June 30, 2023. End of Period Deposit Balances   6/30/2024   3/31/2024   6/30/2023 (dollars in thousands)                           Non-interest-bearing Demand Deposits   $ 1,448,467     $ 1,463,933     $ 1,540,564   IB Demand, Savings, and MMDA Accounts     2,984,571       2,918,459       3,056,396   Time Deposits < $100,000     348,025       328,804       256,504   Time Deposits > $100,000     532,494       508,151       326,241       $ 5,313,557     $ 5,219,347     $ 5,179,705                             At June 30, 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.     6/30/2024Ratio   3/31/2024Ratio   6/30/2023Ratio Total Capital (to Risk Weighted Assets)             Consolidated     16.78 %     16.57 %     16.06 % Bank     14.52 %     14.53 %     14.50 % Tier 1 (Core) Capital (to Risk Weighted Assets)             Consolidated     15.19 %     14.97 %     14.50 % Bank     13.72 %     13.73 %     13.76 % Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets)             Consolidated     14.49 %     14.27 %     13.78 % Bank     13.72 %     13.73 %     13.76 % Tier 1 Capital (to Average Assets)             Consolidated     11.92 %     12.01 %     11.44 % Bank     10.78 %     11.02 %     10.87 %                           Results of Operations Highlights – Quarter ended June 30, 2024 Net income for the second quarter of 2024 totaled $20,530,000, or $0.69 per share, an increase of 8% on a per share basis, compared with the first quarter of 2024 net income of $19,022,000, or $0.64 per share, and a decline of 8% on a per share basis compared with the second quarter 2023 net income of $22,123,000, or $0.75 per share. Net income for the second quarter of 2024 was impacted by the previously announced completion of the sale of the assets of its wholly-owned subsidiary German American Insurance, Inc. ("GAI") to Hilb Group, an industry-leading insurance broker. The all-cash transaction sale price totaled $40 million, and resulted in an after-tax gain, net of transaction costs, of approximately $27,476,000, or $0.93 per share. Net income for the second quarter of 2024 was also impacted by the aforementioned securities portfolio restructuring transaction whereby available securities totaling approximately $375 million in book value were identified to be 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. Summary Average Balance Sheet (Tax-equivalent basis / dollars in thousands)     Quarter Ended   Quarter Ended   Quarter Ended     June 30, 2024   March 31, 2024   June 30, 2023                                           PrincipalBalance   Income/Expense   Yield/Rate   PrincipalBalance   Income/Expense   Yield/Rate   PrincipalBalance   Income/Expense   Yield/Rate Assets                                     Federal Funds Sold and Other                                     Short-term Investments   $ 180,595   $ 2,383   5.31 %   $ 22,903   $ 299   5.25 %   $ 54,228   $ 660   4.88 % Securities     1,505,807     11,224   2.98 %     1,595,700     11,537   2.89 %     1,667,871     12,094   2.90 % Loans and Leases     4,022,612     59,496   5.95 %     3,972,232     58,067   5.88 %     3,787,436     52,350   5.54 % Total Interest Earning Assets   $ 5,709,014   $ 73,103   5.14 %   $ 5,590,835   $ 69,903   5.02 %   $ 5,509,535   $ 65,104   4.74 %                                       Liabilities                                     Demand Deposit Accounts   $ 1,421,710           $ 1,426,239           $ 1,545,455         IB Demand, Savings, and                                     MMDA Accounts   $ 3,049,511   $ 14,006   1.85 %   $ 2,969,755   $ 12,823   1.74 %   $ 3,118,225   $ 10,035   1.29 % Time Deposits     881,880     9,379   4.28 %     806,976     8,166   4.07 %     546,982     3,322   2.44 % FHLB Advances and Other Borrowings     182,960     2,221   4.88 %     196,348     2,275   4.66 %     177,146     1,899   4.30 % Total Interest-Bearing Liabilities   $ 4,114,351   $ 25,606   2.50 %   $ 3,973,079   $ 23,264   2.36 %   $ 3,842,353   $ 15,256   1.59 %                                       Cost of Funds           1.80 %           1.67 %           1.11 % Net Interest Income       $ 47,497           $ 46,639           $ 49,848     Net Interest Margin           3.34 %