Press Release

German American Bancorp, Inc. (GABC) Reports Second Quarter 2020 Earnings

Company Release - 7/27/2020 6:15 PM ET

JASPER, Ind., July 27, 2020 (GLOBE NEWSWIRE) -- German American Bancorp, Inc. (Nasdaq: GABC) reported quarterly earnings of $14.3 million, or $0.54 per share, for the quarter ending on June 30, 2020.  The second quarter 2020 performance compared to first quarter 2020 net income of $12.5 million, or $0.47 per share, and to second quarter 2019 net income of $15.3 million, or $0.61 per share.  The operating results comparison was reflective of the inclusion of the acquisition of Citizens First Corporation of Bowling Green, Kentucky on July 1, 2019.

End-of-period loans, as of June 30, 2020, were approximately $3.3 billion, which represented an increase of $253 million, or approximately 8%, from end-of-period loans as of March 31, 2020 and an increase of $550 million, or approximately 20%, from end of period loans as of June 30, 2019.  Total deposits at June 30, 2020 of approximately $4.0 billion increased by $501 million, or approximately 14%, relative to first quarter 2020 end-of-period total deposits and an increase of $851 million, or approximately 27%, as compared to second quarter end-of-period deposits in the prior year.  Approximately 50% of the deposit growth during both periods of comparison occurred within the extremely valuable non-interest bearing demand deposit category.

The increase in end-of-period loans and deposits as of June 30, 2020, as compared to March 31, 2020, was largely related to both the origination of approximately $350 million in Paycheck Protection Program (“PPP”) loans to nearly 3,000 local business clients, supporting the retention of over 40,000 jobs throughout our market area, and the deposit of those funds into business operating accounts.  The Company also experienced an overall significant inflow of other customer deposits during the second quarter of 2020 contributing to the extraordinary level of quarter-over-quarter deposit growth.  The increase in year-over-year period end loans and deposits was related to these same factors, as well as to the acquisition of Citizens First on July 1, 2019.

Commenting on the Company’s second quarter performance, Mark A. Schroeder, German American’s Chairman & CEO, stated, "We’re pleased to report another period of solid profitability during the second quarter of 2020, producing $14.3 million, or $0.54 per share, in earnings for the quarter, which was inclusive of a $5.9 million provision for credit losses.  This level of profitability is reflected in second quarter-end 2020 tangible book value per share of $17.44, which increased by 11%, on an annualized basis, from the prior quarter-end and by 13% from second quarter-end 2019 tangible book value per share.

Certainly, the second quarter saw a period of unprecedented organic growth of both loans and deposits for our Company in the face of operating with a number of constraints related to the COVID-19 pandemic.  I’m extremely proud of our German American team of financial professionals, who, in the face of these challenges, delivered solid quarterly earnings performance and tangible book value per share growth, originated a record level of commercial and residential mortgage loans and generated a record level of deposit growth.  It’s only due to their extraordinary level of commitment and dedication that we were able accomplish all of this under extremely challenging operating conditions.”

Schroeder continued, “Our financial results for the second quarter of 2020 reflect the effects of the combination of stressed economic conditions and net interest margin pressures alongside the positive impact of record levels of loans and deposits.  As we plan for the continuation of a period of economic uncertainty, we also continued to build our loan loss reserve during the second quarter, increasing the allowance for credit losses to $42.4 million (in addition to net fair value adjustments on acquired loans of $9.8 million).  This represents a strong 1.30% of total loans and 1.45% excluding PPP loans from total loans.  In this period of uncertainty, it’s prudent to maintain our disciplined credit culture, as evidenced by the Company’s improved credit metrics, while putting funds aside for the possibility of future credit challenges.”

The Company also announced its Board of Directors declared a regular quarterly cash dividend of $0.19 per share, which will be payable on August 20, 2020 to shareholders of record as of August 10, 2020.

COVID-19 Pandemic Loan Information

The Company is participating in the Paycheck Protection Program (“PPP”) for loans provided through the Small Business Administration (“SBA”), as established under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). Under this program, the Company has lent funds primarily to its existing loan and/or deposit customers, based on a pre-determined SBA-developed formula, intended to incentivize small business owners to retain their employees.  These loans carry a customer interest rate of 1.00% plus a processing fee that varies depending on the balance of the loan at origination and have a two-year or five-year maturity, depending on when the loan was made.  The vast majority of the Company's PPP loans have two-year maturities.  As of June 30, 2020, the Company has committed approximately $349.5 million, on 2,998 PPP loan relationships, under this program, with gross processing fees estimated to total approximately $12.6 million ($12.0 million net of processing costs).

In response to requests from borrowers who have experienced pandemic-related business or personal cash flow interruptions, and in accordance with recently issued regulatory guidance, the Company has made short-term loan modifications involving both interest only and full payment deferrals.  As of June 30, 2020 the following payment modifications have been made:

Type of LoansNumber of LoansLoan Balance% of Loan Type
(excludes PPP Loans)
(dollars in thousands)   
Commercial & Industrial Loans257 $54,300 10.8%
Commercial Real Estate Loans392 224,664 15.3%
Agricultural Loans8 1,175 0.3%
Consumer Loans80 1,115 0.4%
Residential Mortgage Loans110 23,103 8.2%
Total847 $304,357 10.4%

To date, the Company has not experienced significant customer requests for additional loan modifications, within the commercial and industrial loan and commercial real estate loan portfolios, after the initial short-term modifications granted for those customers during the second quarter of 2020.

The Company tracks lending exposure by industry classification to determine potential risk associated with industry concentrations, if any, that could lead to additional credit loss exposure. As a result of the COVID-19 pandemic, the Company has initially identified loan segments that could represent a potentially higher level of credit risk, as many of these customers may have incurred a significant negative impact to their businesses as a result of governmental stay-at-home orders and travel restrictions. At June 30, 2020, the Company had the following exposure to these potentially sensitive COVID-19 identified loan segments:

Industry SegmentNumber of Loans
Outstanding Balance% of Total Loans
(dollars in thousands)    
Lodging / Hotels51 $130,112 4.0%
Student Housing107 94,226 2.9%
Retail Shopping / Strip Centers61 93,172 2.9%
Restaurants190 50,724 1.6%

Balance Sheet Highlights

Total assets for the Company totaled $4.851 billion at June 30, 2020, representing an increase of $527.2 million, or 49% on an annualized basis, compared with March 31, 2020 and an increase of $880.3 million, or 22%, compared with June 30, 2019.  The increase in total assets during the second quarter of 2020 compared with March 31, 2020 has been impacted by the Company's participation in the PPP and by significant growth of deposits during the second quarter of 2020.  During the second quarter of 2020 compared with March 31, 2020, federal funds sold and other short-term investments increased by $183.4 million and the Company's securities available for sale portfolio increased by $86.5 million.  These increases were largely driven by the increased level of deposits during the second quarter of 2020.  In addition, loans increased $252.5 million as  of the end of the second quarter of 2020 compared with March 31, 2020 impacted primarily by the Company's participation in the PPP.

The increase in total assets as of June 30, 2020 compared to a year ago was was  also driven by the acquisition of Citizens First Corporation ("Citizens First").  On July 1, 2019, the Company completed its acquisition of Citizens First and its subsidiary bank, Citizen First Bank, Inc.  Citizens First, headquartered in Bowling Green, Kentucky, operated eight retail banking offices through Citizens First Bank, Inc. in Barren, Hart, Simpson and Warren Counties in Kentucky.

June 30, 2020 total loans increased $252.5 million, or 33% on an annualized basis, compared with March 31, 2020 and increased $550.3 million, or 20%, compared with June 30, 2019.  The increase in loans during the second quarter of 2020 compared with the first quarter of 2020 was primarily the result in the Company's participation in the PPP.  Excluding the $349.5 million in PPP loans ($338.7 million net of deferred fees) at June 30, 2020, total loans declined by $86.2 million, or 11% on an annualized basis, during the second quarter of 2020 compared with the quarter ended March 31, 2020.  The decline in total loans excluding the PPP loans was impacted by continued elevated pay-offs within the commercial real estate loan portfolio, reduced line utilization within the commercial loan portfolio partially attributable to the PPP loan originations during the second quarter of 2020, and continued pay-downs in the Company's residential loan portfolio related to the current interest rate environment.  The increase in outstanding loans as of June 30, 2020 compared to a year ago was largely attributable to PPP loans and to the acquisition of Citizens First.

       
End of Period Loan Balances 6/30/2020 3/31/2020 6/30/2019
(dollars in thousands)      
       
Commercial & Industrial Loans $852,416  $565,780  $554,290 
Commercial Real Estate Loans 1,473,234  1,489,353  1,213,579 
Agricultural Loans 373,483  366,286  364,116 
Consumer Loans 291,555  303,447  280,963 
Residential Mortgage Loans 280,246  293,550  307,726 
  $3,270,934  $3,018,416  $2,720,674 
       

The Company’s allowance for credit losses totaled $42.4 million at June 30, 2020 compared to $36.6 million at March 31, 2020 and $16.2 million at June 30, 2019.  The allowance for credit losses represented 1.30% of period-end loans at June 30, 2020 compared with 1.22% of period-end loans at March 31, 2020 and 0.60% of period-end loans at June 30, 2019.

The Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("CECL") on January 1, 2020.  As a result, the Company recognized a one-time cumulative adjustment to the allowance for credit losses of $15.7 million.  The increase was primarily related to the Company's acquired loan portfolio which totaled approximately $851.1 million at the time of adoption.  The increase included $6.9 million in non-accretable credit marks allocated to purchased credit deteriorated loans which were grossed up between loans and the allowance for credit losses.  Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses.  As of June 30, 2020, the Company held net discounts on acquired loans of $9.8 million.

The allowance for credit losses increased during the quarter ended June 30, 2020, as a result of the Company recording a $5.9 million provision for credit losses while recording net charge-offs of approximately $110,000.  This followed an increase in the allowance for credit losses during the quarter ended March 31, 2020, that resulted from the Company recording a $5.2 million provision for credit losses while recording net charge-offs of approximately $440,000.  The provision for credit losses was elevated in the first and second quarters of 2020 primarily due to the recent developments related to the COVID-19 pandemic and the resulting impact on the economic assumptions used in the CECL model.

Non-performing assets totaled $19.6 million at June 30, 2020 compared to $19.1 million at March 31, 2020 and $12.5 million at June 30, 2019.  Non-performing assets represented 0.40% of total assets at June 30, 2020, 0.44% at March 31, 2020, and 0.32% at June 30, 2019.  Non-performing loans totaled $19.1 million at June 30, 2020 compared to $18.5 million at March 31, 2020 and $11.9 million at June 30, 2019.  Non-performing loans represented 0.59% of total loans at June 30, 2020 compared to 0.61% at March 31, 2020 and 0.44% at June 30, 2019.  The increase in the level of non-performing assets and non-performing loans at June 30, 2020 compared with June 30, 2019 was largely attributable to the gross-up of purchased credit deteriorated loans upon the adoption of the CECL standard during 2020 and the acquisition of Citizens First.

      
Non-performing Assets     
(dollars in thousands)     
 6/30/2020 3/31/2020 6/30/2019
Non-Accrual Loans$16,183  $18,099  $10,929 
Past Due Loans (90 days or more)2,948  355  959 
Total Non-Performing Loans19,131  18,454  11,888 
Other Real Estate425  625  635 
Total Non-Performing Assets$19,556  $19,079  $12,523 
      
Restructured Loans$114  $116  $118 
      

June 30, 2020 total deposits increased $500.9 million, or 58% on an annualized basis, compared to March 31, 2020 and increased $850.6 million, or 27%, compared with June 30, 2019.   The increase in total deposits at June 30, 2020 compared with the end of the first quarter of 2020 was partially attributable the Company's participation in the PPP and a seasonal increase in public fund operating deposits as well as an overall inflow of customer deposits during the second quarter of 2020.  The increase in total deposits at June 30, 2020 compared with June 30, 2019 was impacted by participation in the PPP and inflows of customer deposits during the second quarter of 2020 as well as the acquisition of Citizens First.

       
End of Period Deposit Balances 6/30/2020 3/31/2020 6/30/2019
(dollars in thousands)      
       
Non-interest-bearing Demand Deposits $1,139,928  $869,847  $725,367 
IB Demand, Savings, and MMDA Accounts 2,267,092  2,008,757  1,805,694 
Time Deposits < $100,000 293,059  303,519  248,744 
Time Deposits > $100,000 279,354  296,391  349,027 
  $3,979,433  $3,478,514  $3,128,832 
       

Results of Operations Highlights – Quarter ended June 30, 2020

Net income for the quarter ended June 30, 2020 totaled $14,255,000, or $0.54 per share, an increase of 15% on a per share basis compared with the first quarter 2020 net income of $12,472,000, or $0.47 per share, and a decline of 11% on a per share basis compared with the second quarter 2019 net income of $15,271,000, or $0.61 per share.

                   
Summary Average Balance Sheet                  
(Tax-equivalent basis / dollars in thousands)                  
   Quarter Ended  Quarter Ended  Quarter Ended
  June 30, 2020 March 31, 2020 June 30, 2019
                   
   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 $239,164  $84  0.14% $45,687  $158  1.39% $21,257  $85  1.62%
Securities 897,193  6,087  2.71% 869,969  6,205  2.85% 842,282  6,529  3.10%
Loans and Leases 3,253,169  38,154  4.71% 3,059,398  37,936  4.98% 2,721,630  35,135  5.18%
Total Interest Earning Assets $4,389,526  $44,325  4.06% $3,975,054  $44,299  4.48% $3,585,169  $41,749  4.67%
                      
Liabilities                     
Demand Deposit Accounts $1,074,739       $847,891       $715,681      
IB Demand, Savings, and                     
MMDA Accounts $2,220,549  $1,535  0.28% $1,993,171  $2,956  0.60% $1,797,228  $2,945  0.66%
Time Deposits 586,179  2,208  1.51% 638,460  2,701  1.70% 631,174  2,814  1.79%
FHLB Advances and Other Borrowings 227,562  1,339  2.37% 236,148  1,658  2.82% 246,229  1,636  2.67%
Total Interest-Bearing Liabilities $3,034,290  $5,082  0.67% $2,867,779  $7,315  1.03% $2,674,631  $7,395  1.11%
                      
Cost of Funds     0.47%     0.74%     0.83%
Net Interest Income   $39,243       $36,984       $34,354    
Net Interest Margin     3.59%     3.74%     3.84%
                      

During the second quarter of 2020, net interest income totaled $38,459,000, an increase of $2,203,000, or 6%, compared to the first quarter of 2020 net interest income of $36,256,000 and an increase of $4,818,000, or 14%, compared to the second quarter of 2019 net interest income of $33,641,000.

The increase in net interest income during the second quarter of 2020 compared with the first quarter of 2020 was largely attributable to an increased level of loans related to the PPP, with a corresponding increase in interest income and fees.  The average balance of PPP loans during the second quarter of 2020 was approximately $276 million while the net fees recognized through interest income on those loans totaled approximately $1.1 million.

The increased level of net interest income during the second quarter of 2020 compared with the second quarter of 2019 was primarily the result of of the acquisition Citizens First and participation in the PPP.

The tax equivalent net interest margin for the quarter ended June 30, 2020 was 3.59% compared with 3.74% in the first quarter of 2020 and 3.84% in the second quarter of 2019.  The lower net interest margin during the second quarter of 2020 compared with both the first quarter of 2020 and the second quarter of 2019 was attributable to lower market interest rates, excess liquidity on the balance sheet that resulted from significant deposit growth during the second quarter of 2020 and the 1% interest rate applicable to the PPP loans.    Accretion of loan discounts on acquired loans contributed approximately 19 basis points to the net interest margin on an annualized basis in the second quarter of 2020, 14 basis points in the first quarter of 2020 and 12 basis points in the second quarter of 2019.

During the quarter ended June 30, 2020, the Company recorded a provision for credit loss of $5,900,000 compared with a provision for loan loss of $5,150,000 in the first quarter of  2020 and compared with a provision for loan loss of $250,000 during the second quarter of 2019.  The increase in the provision for credit losses compared to both the first quarter of 2020 and the second quarter of 2019 was primarily due to the developments related to the COVID-19 pandemic and the resulting impact on the economic assumptions used in the CECL model.

Net charge-offs totaled $110,000 or 1 basis point on an annualized basis of average loans outstanding during the second quarter of 2020, compared with $440,000 or 6 basis points on an annualized basis of average loans during the first quarter of 2020 and compared with $254,000 or 4 basis points of average loans during the second quarter of 2019.

During the quarter ended June 30, 2020, non-interest income totaled $12,423,000, a decline of $1,658,000, or 12%, compared with the first quarter of 2020 and an increase of $1,914,000, or 18%, compared with the second  quarter of 2019.

       
  Quarter Ended Quarter Ended Quarter Ended
Non-interest Income 6/30/2020 3/31/2020 6/30/2019
(dollars in thousands)      
       
Trust and Investment Product Fees $1,867  $2,031  $1,913 
Service Charges on Deposit Accounts 1,365  2,237  2,024 
Insurance Revenues 1,830  3,229  1,929 
Company Owned Life Insurance 356  1,222  304 
Interchange Fee Income 2,476  2,482  2,332 
Other Operating Income 882  427  461 
Subtotal 8,776  11,628  8,963 
Net Gains on Loans 2,654  1,863  1,030 
Net Gains on Securities 993  590  516 
Total Non-interest Income $12,423  $14,081  $10,509 
       

Service charges on deposit accounts declined $872,000, or 39%, during the second quarter of 2020 compared with the first quarter of 2020 and declined $659,000, or 33%, compared with the second quarter of 2019.  The decline during the second quarter of 2020 compared with the both the first quarter of 2020 and the second quarter of 2019 was largely related to the economic impacts of the COVID-19 pandemic and resulting change in deposit customer activity.

Insurance revenues declined $1,399,000, or 43%, during the quarter ended June 30, 2020, compared with the first quarter of 2020 and declined $99,000, or 5%, compared with the second quarter of 2019.  The decline during the second quarter of 2020 compared with the first quarter of 2020 was primarily due to contingency revenue.  Contingency revenue during the first quarter of 2020 totaled $1,319,000 compared with no contingency revenue during the second quarter of 2020.  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.

Company owned life insurance revenue declined $866,000, or 71%, during the quarter ended June 30, 2020, compared with the first quarter of 2020 and increased $52,000, or 17%, compared with the second quarter of 2019. The decline in the second quarter of 2020 compared with the first quarter of 2020 was largely related to death benefits of $838,000 received from life insurance policies during the first quarter of 2020.

Other operating income increased $455,000, or 107%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $421,000, or 91%, compared with the second quarter of 2019.  The increase during the second quarter of 2020 compared with the first quarter of 2020 was largely attributable to lower fair value adjustments associated with interest rate swap transactions with loan customers.  The increase during the second quarter of 2020 compared with the second quarter of 2019 was largely attributable to lower fair value adjustments on interest rate swap transactions and the acquisition of Citizens First which was completed on July 1, 2019.

Net gains on sales of loans increased $791,000, or 42%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $1,624,000, or 158%, compared with the second quarter of 2019.  The increase during the second quarter of 2020 compared with both the first quarter of 2020 and the second quarter of 2019 was generally attributable to a higher sales volume, higher pricing levels on loans sold and an increased level of commitments to originate loans which resulted in a higher fair value adjustment on those commitments.  Loan sales totaled $79.7 million during the second quarter of 2020, compared with $56.2 million during the first quarter of 2020 and $39.6 million during the second quarter of 2019.

The Company realized $993,000 in gains on sales of securities during the second quarter of 2020 compared with $590,000 during the first quarter of 2020 and $516,000 during the second quarter of 2019.  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 June 30, 2020, non-interest expense totaled $28,088,000, a decline of $2,240,000, or 7%, compared with the first quarter of 2020, and an increase of $2,470,000, or 10%, compared with the second quarter of 2019.

       
  Quarter Ended Quarter Ended Quarter Ended
Non-interest Expense 6/30/2020 3/31/2020 6/30/2019
(dollars in thousands)      
       
Salaries and Employee Benefits $15,882  $17,400  $14,117 
Occupancy, Furniture and Equipment Expense 3,481  3,581  3,212 
FDIC Premiums 123    245 
Data Processing Fees 1,763  1,686  1,803 
Professional Fees 1,082  1,084  1,174 
Advertising and Promotion 882  1,071  936 
Intangible Amortization 909  960  802 
Other Operating Expenses 3,966  4,546  3,329 
Total Non-interest Expense $28,088  $30,328  $25,618 
       

Salaries and benefits declined $1,518,000, or 9%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $1,765,000, or 13%, compared with the second quarter of 2019.  The decline in salaries and benefits during the second quarter of 2020 compared with the first quarter of 2020 was primarily attributable to lower incentive plan costs, lower costs related to health insurance and retirement plan benefits, and the deferral of a portion of salary costs related to the origination of PPP loans.  The increase in salaries and benefits during the second quarter of 2020 compared with the second quarter of 2019 was primarily attributable to the acquisition of Citizens First.

Occupancy, furniture and equipment expense declined $100,000, or 3%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $269,000, or 8%, compared to the second quarter of 2019.  The increase during the second quarter of 2020 compared with the second quarter of 2019 was primarily due to the operating costs of the Citizens First branch network.

FDIC premiums increased $123,000, or 100%, during the second quarter of 2020 compared with the first quarter of 2020 and declined $122,000, or 50%, compared with the second quarter of 2019.  The change during the second quarter of 2020 to both comparative periods was related to credits received from the FDIC during the first and second quarters of 2020.  The credits received were due to the reserve ratio of the deposit insurance fund exceeding the FDIC targeted levels.  No credits were received during the second quarter of 2019.

Advertising and promotion expense declined $189,000, or 17%, in the second quarter of 2020 compared with the first quarter of 2020 and declined $54,000, or 6%, compared with the second quarter of 2019.  The decline in the second quarter of 2020 compared with the first quarter of 2020 was largely related to an overall decline in advertising expense due in part to the COVID-19 pandemic, partially mitigated by an increased level of contributions.

Intangible amortization declined $51,000, or 5%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $107,000, or 13%, compared with the second quarter of 2019.  The increase in intangible amortization in the second quarter of 2020 compared with the second quarter of 2019 was attributable to the Citizens First acquisition completed during 2019.

Other operating expenses declined $580,000, or 13%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $637,000, or 19%, compared with the second quarter of 2019.  The decline during the second quarter of 2020 compared with the first quarter of 2020 was largely impacted by lower training and education expenses and reduced business travel and entertainment expenses, resulting from the effect of the travel restrictions and slowdown of economic activity related to the COVID-19 pandemic.   The increase in the second quarter of 2020 compared with second quarter of 2019 was largely attributable to the Citizens First acquisition.

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 73 banking offices in 20 contiguous southern Indiana counties and eight 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. 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 the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates; changes in competitive conditions; the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in financial and capital markets; potential deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration; 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; our participation in the Paycheck Protection Program administered by the Small Business Administration; capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities; risks of expansion through acquisitions and mergers, such as unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base of the acquired institution or branches, and difficulties in integration of the acquired operations; factors driving impairment charges on investments; the impact, extent and timing of technological changes; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future; actions of the Federal Reserve Board; changes in accounting principles and interpretations; potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to the Company’s banking subsidiary; 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; 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; the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends; and other risk factors expressly identified in the Company’s filings with the United States Securities and Exchange Commission. 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 the Company. 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
      
 June 30, 2020 March 31, 2020 June 30, 2019
ASSETS     
Cash and Due from Banks$53,081  $48,293  $48,634 
Short-term Investments227,275  43,832  41,623 
Investment Securities962,623  876,140  841,045 
      
Loans Held-for-Sale21,756  15,561  14,184 
      
Loans, Net of Unearned Income3,266,347  3,013,733  2,717,028 
Allowance for Credit Losses(42,431) (36,641) (16,239)
Net Loans3,223,916  2,977,092  2,700,789 
      
Stock in FHLB and Other Restricted Stock13,368  13,968  13,048 
Premises and Equipment96,748  96,383  89,413 
Goodwill and Other Intangible Assets132,676  132,968  113,309 
Other Assets119,608  119,616  108,694 
TOTAL ASSETS$4,851,051  $4,323,853  $3,970,739 
      
LIABILITIES     
Non-interest-bearing Demand Deposits$1,139,928  $869,847  $725,367 
Interest-bearing Demand, Savings, and Money Market Accounts2,267,092  2,008,757  1,805,694 
Time Deposits572,413  599,910  597,771 
Total Deposits3,979,433  3,478,514  3,128,832 
      
Borrowings219,700  207,965  305,940 
Other Liabilities57,244  53,834  36,556 
TOTAL LIABILITIES4,256,377  3,740,313  3,471,328 
      
SHAREHOLDERS' EQUITY     
Common Stock and Surplus300,514  301,400  254,935 
Retained Earnings263,011  253,780  233,269 
Accumulated Other Comprehensive Income31,149  28,360  11,207 
SHAREHOLDERS' EQUITY594,674  583,540  499,411 
      
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$4,851,051  $4,323,853  $3,970,739 
      
END OF PERIOD SHARES OUTSTANDING26,497,291  26,540,031  24,992,238 
      
TANGIBLE BOOK VALUE PER SHARE (1)$17.44  $16.98  $15.45 
      
 
(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 Six Months Ended
  June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
INTEREST INCOME         
Interest and Fees on Loans$38,080  $37,858  $35,046  $75,938  $70,165 
Interest on Short-term Investments84  158  85  242  226 
Interest and Dividends on Investment Securities5,377  5,555  5,905  10,932  11,834 
TOTAL INTEREST INCOME43,541  43,571  41,036  87,112  82,225 
           
INTEREST EXPENSE         
Interest on Deposits3,743  5,657  5,759  9,400  11,175 
Interest on Borrowings1,339  1,658  1,636  2,997  3,818 
TOTAL INTEREST EXPENSE5,082  7,315  7,395  12,397  14,993 
           
NET INTEREST INCOME38,459  36,256  33,641  74,715  67,232 
Provision for Credit Losses5,900  5,150  250  11,050  925 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES32,559  31,106  33,391  63,665  66,307 
           
NON-INTEREST INCOME         
Net Gain on Sales of Loans2,654  1,863  1,030  4,517  2,011 
Net Gain on Securities993  590  516  1,583  671 
Other Non-interest Income8,776  11,628  8,963  20,404  19,485 
TOTAL NON-INTEREST INCOME12,423  14,081  10,509  26,504  22,167 
           
NON-INTEREST EXPENSE         
Salaries and Benefits15,882  17,400  14,117  33,282  29,161 
Other Non-interest Expenses12,206  12,928  11,501  25,134  23,216 
TOTAL NON-INTEREST EXPENSE28,088  30,328  25,618  58,416  52,377 
           
Income before Income Taxes16,894  14,859  18,282  31,753  36,097 
Income Tax Expense2,639  2,387  3,011  5,026  5,759 
           
NET INCOME$14,255  $12,472  $15,271  $26,727  $30,338 
           
BASIC EARNINGS PER SHARE$0.54  $0.47  $0.61  $1.01  $1.21 
DILUTED EARNINGS PER SHARE$0.54  $0.47  $0.61  $1.01  $1.21 
           
WEIGHTED AVERAGE SHARES OUTSTANDING26,502,731  26,663,604  24,992,238  26,583,167  24,982,107 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING26,502,731  26,663,604  24,992,238  26,583,167  24,982,107 
           
           


GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
            
   Three Months Ended Six Months Ended
   June 30, March 31, June 30, June 30, June 30,
   2020 2020 2019 2020 2019
EARNINGS PERFORMANCE RATIOS          
 Annualized Return on Average Assets 1.20% 1.15% 1.56% 1.18% 1.56%
 Annualized Return on Average Equity 9.71% 8.66% 12.60% 9.19% 12.78%
 Annualized Return on Average Tangible Equity (1) 12.53% 11.27% 16.41% 11.91% 16.78%
 Net Interest Margin 3.59% 3.74% 3.84% 3.66% 3.86%
 Efficiency Ratio (2) 54.36% 59.39% 57.10% 56.86% 57.67%
 Net Overhead Expense to Average Earning Assets (3) 1.43% 1.63% 1.69% 1.53% 1.69%
            
ASSET QUALITY RATIOS          
 Annualized Net Charge-offs to Average Loans 0.01% 0.06% 0.04% 0.03% 0.04%
 Allowance for Credit Losses to Period End Loans 1.30% 1.22% 0.60%    
 Non-performing Assets to Period End Assets 0.40% 0.44% 0.32%    
 Non-performing Loans to Period End Loans 0.59% 0.61% 0.44%    
 Loans 30-89 Days Past Due to Period End Loans 0.23% 0.71% 0.39%    
            
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA          
 Average Assets $4,751,772  $4,335,841  $3,908,669  $4,543,804  $3,897,757 
 Average Earning Assets $4,389,526  $3,975,054  $3,585,169  $4,182,290  $3,577,115 
 Average Total Loans $3,253,169  $3,059,398  $2,721,630  $3,156,284  $2,720,227 
 Average Demand Deposits $1,074,739  $847,891  $715,681  $961,315  $703,462 
 Average Interest Bearing Liabilities $3,034,290  $2,867,779  $2,674,631  $2,951,035  $2,691,376 
 Average Equity $587,472  $575,995  $484,891  $581,733  $474,619 
            
 Period End Non-performing Assets (4) $19,556  $19,079  $12,523     
 Period End Non-performing Loans (5) $19,131  $18,454  $11,888     
 Period End Loans 30-89 Days Past Due (6) $7,554  $21,500  $10,605     
            
 Tax Equivalent Net Interest Income $39,243  $36,984  $34,354  $76,227  $68,653 
 Net Charge-offs during Period $110  $440  $254  $550  $509 
            
(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,Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust,Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


Source: German American Bancorp, Inc.