EX-99.1 3 exhibit991q42023.htm EX-99.1 Document
    
NEWS RELEASE

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

1 of 17    

JANUARY 29, 2024 GERMAN AMERICAN BANCORP, INC. (GABC) POSTS SOLID 4TH QUARTER AND ANNUAL 2023 EARNINGS; DECLARES 8% CASH DIVIDEND INCREASE

Jasper, Indiana: January 29, 2024 -- German American Bancorp, Inc. (Nasdaq: GABC) reported solid annual earnings of $85.9 million, or $2.91 per share, for the year ended December 31, 2023, representing the second highest level of earnings per share in the Company’s history. This level of reported annual earnings resulted in a 14.7% return on average shareholders’ equity, marking the 19th consecutive fiscal year in which the Company has delivered a double-digit return on shareholders’ equity. The Company also announced the declaration of an 8% increase in its quarterly cash dividend, marking the 12th consecutive year of increased cash dividends.

The Company’s 2023 reported net income represented an increase of $4.1 million, or approximately 5% on a per share basis, over 2022 net income of $81.8 million, or $2.78 per share, which was impacted by the one-time merger costs related to the January 1, 2022 acquisition of Citizens Union Bancorp of Shelbyville, Inc.

The 2023 annual operating performance was highlighted by an expanded net interest margin of 13 basis points, which increased from 3.45% to 3.58% as rising deposit costs from continued Federal Reserve rate increases and shifting of deposit composition did not escalate meaningfully until the second half of 2023. The re-mixing of earning assets from the securities portfolio into the higher yielding loan portfolio also contributed positively to the increased margin.

In addition, the 2023 year was marked by solid organic loan growth across most lending categories, continued strong credit metrics, solid gains in non-interest income led by wealth management and interchange fees, and ongoing optimization of our non-interest expenses. The Company’s operating results were also positively impacted by the execution of qualitative strategic initiatives such as meaningful talent acquisitions and ongoing technology/digital investment.

Given the tumultuous year in the banking industry led by economic uncertainty and multiple bank failures, German American remained well positioned for long term success with strong capital levels and solid liquidity. The Company’s combined enterprise, which encompasses 75 banking offices across two contiguous states, continues to benefit from its diversified footprint of rural, suburban and urban markets providing a strong deposit franchise base as well as significant organic growth opportunities.

On a quarter over quarter basis, fourth quarter 2023 net income of $21.5 million and earnings per share of $0.73 were consistent with third quarter 2023 net income of $21.5 million, or $0.73 per share. Net interest margin declined from 3.57% to 3.43%, or 14 basis points, quarter over quarter. This compression was driven by a lower level of accretion of discounts on acquired loans that negatively impacted the net interest margin

    
NEWS RELEASE

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

2 of 17    
by 7 basis points and an overall increase in the cost of funds. The margin compression was partially offset by exceptional credit metrics, with no provision for credit losses being taken in the fourth quarter, largely as a result of a fully-reserved, non-performing commercial relationship being paid off.

In addition, the fourth quarter 2023 operating performance was highlighted by strong organic loan and deposit growth. Total loans increased $84 million, or approximately 9% on an annualized basis, and were broad-based across most loan categories and markets. Deposits increased $117 million, or 2% on a linked quarter basis, with non-interest bearing accounts remaining at a solid 28.4% of total deposits. Non-interest income growth of 5% and flat non-interest expenses, in each case on a linked-quarter basis, also contributed to the solid fourth quarter operating performance.

The Company also announced an 8% increase in the level of its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.27 per share, which will be payable on February 20, 2024 to shareholders of record as of February 10, 2024.

D. Neil Dauby, German American’s Chairman & CEO stated, “We are extremely pleased with our operating results in 2023, especially given the challenging economic environment, as we continue our decades long trend of exceptional financial performance. Thanks to the dedicated efforts of our relationship-focused team of professionals, we are confident that our strong community presence, healthy financial condition, and disciplined approach to risk management will continue to drive future profitability. We remain excited and committed to the vitality and future growth of our Indiana and Kentucky communities.”

Balance Sheet Highlights

Total assets for the Company totaled $6.152 billion at December 31, 2023, representing an increase of $146.5 million compared with September 30, 2023 and a decline of $3.8 million compared with December 31, 2022. The increase in total assets at December 31, 2023 compared with September 30, 2023 was largely related to an increase in the market value of the securities portfolio and an increase in total loans.

Securities available for sale increased $119.9 million as of December 31, 2023 compared with September 30, 2023 and declined $164.8 million compared with December 31, 2022. The increase in the available for sale securities portfolio during the fourth quarter of 2023 compared with the end of the third quarter of 2023 was largely attributable to fair value adjustments on the portfolio related to a decline in market interest rates while the decline from the fourth quarter of 2022 was primarily the result of the Company's utilization of cash flows from the securities portfolio to fund loan growth. Total cash flow generated from the portfolio totaled approximately $31.5 million during the fourth quarter of 2023, reflecting principal and interest payments. Current projections indicate approximately $150.0 million in principal and interest cash flows from the portfolio over the next twelve months with rates unchanged.

December 31, 2023 total loans increased $84.3 million, or 9% on an annualized basis, compared with

    
NEWS RELEASE

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

3 of 17    
September 30, 2023 and increased $189.3 million, or 5%, compared with year-end 2022. The increase during the fourth quarter of 2023 compared with September 30, 2023 was broad-based across most segments of the portfolio. Commercial real estate loans increased $44.9 million, or 9% on an annualized basis, while agricultural loans grew $25.7 million, or 26% on an annualized basis, and retail loans grew by $18.1 million, or 10% on an annualized basis. Partially offsetting these increases was a modest decline in commercial and industrial loans of $4.4 million, or 3% on an annualized basis, as line of credit utilization remains muted.

The composition of the loan portfolio has remained relatively stable and diversified over the past several years, including 2023. The portfolio is most heavily concentrated in commercial real estate loans at 53% of the portfolio, followed by commercial and industrial loans at 17% of the portfolio, and agricultural loans at 11% 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 Balances12/31/20239/30/202312/31/2022
(dollars in thousands)
Commercial & Industrial Loans$661,529 $665,892 $676,502 
Commercial Real Estate Loans2,121,835 2,076,962 1,966,884 
Agricultural Loans423,803 398,109 417,413 
Consumer Loans407,889 396,000 377,164 
Residential Mortgage Loans362,844 356,610 350,682 
$3,977,900 $3,893,573 $3,788,645 

The Company’s allowance for credit losses totaled $43.8 million at December 31, 2023 compared to $44.6 million at September 30, 2023 and $44.2 million at December 31, 2022. The allowance for credit losses represented 1.10% of period-end loans at December 31, 2023 compared with 1.15% at September 30, 2023 and 1.17% of period-end loans at December 31, 2022. The decline in the allowance for credit losses as of year-end 2023 was largely related to the resolution during the fourth quarter of 2023 of a single commercial borrowing relationship with minimal loss recognition for which the Company had established a significant reserve in previous periods.

Non-performing assets totaled $9.2 million at December 31, 2023, $12.4 million at September 30, 2023 and $14.3 million at December 31, 2022. Non-performing assets represented 0.15% of total assets at year-end 2023, 0.21% at September 30, 2023 and 0.23% at December 31, 2022. Non-performing loans totaled $9.2 million at December 31, 2023, $12.4 million at September 30, 2023 and $14.3 million at December 31, 2022. Non-performing loans represented 0.23% of total loans at December 31, 2023, 0.32% at September 30, 2023 and 0.38% at December 31, 2022. The decline in non-performing assets and loans at year-end

    
NEWS RELEASE

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

4 of 17    
2023 was largely attributable to the payoff of the aforementioned single non-performing commercial credit relationship.

Non-performing Assets
(dollars in thousands)
12/31/20239/30/202312/31/2022
Non-Accrual Loans$9,136 $11,206 $12,888 
Past Due Loans (90 days or more)55 1,170 1,427 
       Total Non-Performing Loans9,191 12,376 14,315 
Other Real Estate— 24 — 
       Total Non-Performing Assets$9,191 $12,400 $14,315 
Restructured Loans$— $— $— 

Year-end 2023 total deposits increased $117.1 million, or 2% on a linked quarter basis, compared to September 30, 2023 and declined $97.1 million, or 2%, compared with December 31, 2022. The increase at year-end 2023 compared to September 30, 2023 was largely attributable to seasonal inflows of public entity funds combined with an inflow of time deposits. 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 December 31, 2023 non-interest deposits totaling 28% of total deposits compared with 29% at September 30, 2023 and 32% at year-end 2022.

A competitive market driven by the rise in interest rates has been a significant contributing factor to the decline in total deposits over the course of the past year. Additionally, a meaningful level of the outflow of deposits experienced during the past year was captured within the Company's wealth management group.

December 31, 2023 total borrowings declined $92.3 million compared to September 30, 2023 and declined $9.9 million compared with year-end 2022. The decline in total borrowings during the fourth quarter of 2023 compared with September 30, 2023 was largely attributable to a decline in short-term borrowings primarily related to growth in overall deposits during the fourth quarter of 2023.

End of Period Deposit Balances12/31/20239/30/202312/31/2022
(dollars in thousands)
Non-interest-bearing Demand Deposits$1,493,160 $1,502,175 $1,691,804 
IB Demand, Savings, and MMDA Accounts2,992,761 2,932,180 3,229,778 
Time Deposits < $100,000289,077 269,829 235,219 
Time Deposits > $100,000477,965 431,687 193,250 
$5,252,963 $5,135,871 $5,350,051 

    
NEWS RELEASE

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

5 of 17    

At December 31, 2023, 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.

12/31/2023
Ratio		9/30/2023
Ratio		12/31/2022
Ratio
Total Capital (to Risk Weighted Assets)
Consolidated16.50 %16.21 %15.45 %
Bank14.76 %14.83 %14.07 %
Tier 1 (Core) Capital (to Risk Weighted Assets)
Consolidated14.97 %14.66 %13.97 %
Bank14.04 %14.10 %13.42 %
Common Tier 1 (CET 1) Capital Ratio
 (to Risk Weighted Assets)
Consolidated14.26 %13.95 %13.26 %
Bank14.04 %14.10 %13.42 %
Tier 1 Capital (to Average Assets)
Consolidated11.75 %11.70 %10.50 %
Bank11.03 %11.26 %10.09 %

Results of Operations Highlights – Year ended December 31, 2023

Net income for the year ended December 31, 2023 totaled $85,888,000, or $2.91 per share, an increase of $4,063,000, or approximately 5% on a per share basis, from the year ended December 31, 2022 net income of $81,825,000, or $2.78 per share. The increase in net income during 2023, compared with 2022, was primarily attributable to increased non-interest income, a decline in non-interest expenses (which was driven by higher expenses in 2022 as a result of the January 1, 2022 acquisition of Citizens Union Bancorp of Shelbyville, Inc. (“CUB”)), and a lower provision for credit losses. The positive impact of those items was partially offset by a decline in net interest income resulting primarily from a reduced level of earning assets, which was somewhat mitigated by an improved net interest margin. The 2022 results of operations included acquisition-related expenses of $12,323,000 ($9,372,000 or $0.32 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 $0.16 per share, on an after tax basis).


    
NEWS RELEASE

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

6 of 17    
Summary Average Balance Sheet
(Tax-equivalent basis / dollars in thousands)
Year Ended December 31, 2023 Year Ended December 31, 2022
 Principal Balance Income/ Expense Yield/Rate Principal Balance Income/ Expense Yield/Rate
Assets
Federal Funds Sold and Other
        Short-term Investments$39,452 $1,677 4.25 %$458,230 $5,765 1.26 %
Securities1,629,610 48,270 2.96 %1,860,730 50,263 2.70 %
Loans and Leases3,835,157 213,195 5.56 %3,680,708 169,593 4.61 %
Total Interest Earning Assets$5,504,219 $263,142 4.78 %$5,999,668 $225,621 3.76 %
Liabilities
Demand Deposit Accounts$1,553,082 $1,738,349 
IB Demand, Savings, and
        MMDA Accounts$3,055,251 $40,484 1.33 %$3,487,741 $11,462 0.33 %
Time Deposits588,142 16,432 2.79 %474,409 2,052 0.43 %
FHLB Advances and Other Borrowings210,837 9,307 4.41 %159,029 4,828 3.04 %
Total Interest-Bearing Liabilities$3,854,230 $66,223 1.72 %$4,121,179 $18,342 0.45 %
Cost of Funds1.20 %0.31 %
Net Interest Income$196,919 $207,279 
Net Interest Margin3.58 %3.45 %

During the year ended December 31, 2023, net interest income, on a non tax-equivalent basis, totaled $190,433,000, a decline of $10,151,000, or 5%, compared to the year ended December 31, 2022 net interest income of $200,584,000. The decline in net interest income during 2023 compared with 2022 was primarily attributable to a decline in average earning assets, driven by a reduced level of deposits which was somewhat offset by an improved net interest margin resulting from the rise in market interest rates.

The tax equivalent net interest margin for the year ended December 31, 2023 was 3.58% compared with 3.45% for the year ended December 31, 2022. Accretion of loan discounts on acquired loans contributed approximately 5 basis points to the net interest margin in 2023 and 7 basis points in 2022. Accretion of discounts on acquired loans totaled $2,814,000 during 2023 and $4,341,000 during 2022.


    
NEWS RELEASE

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

7 of 17    
During the year ended December 31, 2023, the Company recorded a provision for credit losses of $2,550,000 compared with a provision for credit losses of $6,350,000 for the year ended December 31, 2022. During 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.

During the year ended December 31, 2023, non-interest income increased $1,128,000, or 2%, compared with the year ended December 31, 2022.
Year EndedYear Ended
Non-interest Income12/31/202312/31/2022
(dollars in thousands)
Wealth Management Fees$11,711 $10,076 
Service Charges on Deposit Accounts11,538 11,457 
Insurance Revenues9,596 10,020 
Company Owned Life Insurance1,731 2,264 
Interchange Fee Income17,452 15,820 
Other Operating Income5,830 5,116 
     Subtotal57,858 54,753 
Net Gains on Sales of Loans2,363 3,818 
Net Gains on Securities40 562 
Total Non-interest Income$60,261 $59,133 

Wealth management fees increased $1,635,000, or 16%, during 2023 compared with 2022. The increase during 2023 was largely attributable to increased assets under management within the Company's wealth management group as compared with 2022.

Insurance revenues declined $424,000, or 4%, during 2023 compared with 2022 which was primarily attributable to decreased contingency revenue. Contingency revenue during 2023 totaled $955,000 compared with $1,641,000 during 2022. Contingency revenue is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency.

Company owned life insurance decreased $533,000, or 24%, during 2023 compared with 2022. The decline in 2023 was primarily the result of a decrease in the death benefit claims received compared with 2022.

Interchange fee income increased $1,632,000, or 10%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The increase in the level of fees during 2023 compared with 2022 was due to increased card utilization by customers.

Other operating income increased by $714,000, or 14%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The increase during 2023 was largely attributable to the gain on sale of real estate related to the consolidation of various branch office facilities.


    
NEWS RELEASE

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

8 of 17    
Net gains on sales of loans declined $1,455,000, or 38%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline during 2023 compared with 2022 was related to both a lower volume of loans sold and lower pricing levels. Loan sales totaled $109.0 million during 2023 compared with $168.1 million during 2022.

The Company realized $40,000 in gains on sales of securities during the year ended December 31, 2023 compared with $562,000 during the year ended December 31, 2022. The sales of securities, during both years, was a completed as part of modest shifts in the allocations within the securities portfolio.

During the year ended December 31, 2023, non-interest expense declined of $9,694,000, or 6%, compared to 2022. The year ended December 31, 2022 non-interest expenses included approximately $12,323,000 of non-recurring acquisition-related expenses for the acquisition of CUB.

Year EndedYear Ended
Non-interest Expense12/31/202312/31/2022
(dollars in thousands)
Salaries and Employee Benefits$83,244 $84,145 
Occupancy, Furniture and Equipment Expense14,467 14,921 
FDIC Premiums2,829 1,860 
Data Processing Fees11,112 15,406 
Professional Fees5,575 6,295 
Advertising and Promotion4,857 4,416 
Intangible Amortization2,840 3,711 
Other Operating Expenses19,573 23,437 
Total Non-interest Expense$144,497 $154,191 

Salaries and benefits declined $901,000, or 1%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline in salaries and benefits during 2023 compared with 2022 was largely related to approximately $1,480,000 of acquisition-related salary and benefit costs of a non-recurring nature in 2022 related to the CUB acquisition.

FDIC premiums increased $969,000, or 52%, during the year ended December 31, 2023 compared with 2022. The increase during 2023 compared with 2022 was primarily related to an industry-wide 2 basis point increase in the base FDIC premium assessment effective January 1, 2023.

Data processing fees declined $4,294,000, or 28%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline during 2023 compared with 2022 was largely driven by acquisition-related costs associated with the CUB transaction, which totaled approximately $4,982,000 during 2022.

    
NEWS RELEASE

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

9 of 17    
Professional fees declined $720,000, or 11%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline during 2023 compared with 2022 was primarily due to merger-related professional fees associated with the CUB acquisition that totaled approximately $1,802,000 in 2022 partially mitigated by increased legal and other professional fees.

Intangible amortization declined $871,000, or 23%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. Intangible amortization expense consists primarily of amortization associated with the core deposit intangible of acquired deposit portfolios. The decrease during 2023 compared with 2022 was primarily attributable to the accelerated amortization method for which the intangible assets are amortized.

Other operating expenses declined $3,864,000, or 16%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. The decline during 2023 compared with 2022 was attributable to acquisition-related costs that totaled approximately $3,862,000 in 2022. The acquisition-related costs were primarily vendor contract termination costs.

Results of Operations Highlights – Quarter ended December 31, 2023

Net income for the quarter ended December 31, 2023 totaled $21,507,000, or $0.73 per share, which was consistent with the third quarter 2023 net income of $21,451,000, or $0.73 per share, and a decline of 12% on a per share basis compared with the fourth quarter 2022 net income of $24,415,000, or $0.83 per share. The decline in net income in the fourth quarter of 2023 compared to the fourth quarter of 2022 was largely driven by a reduced level of average earning assets and net interest margin resulting in a decline in net interest income.

    
NEWS RELEASE

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

10 of 17    
Summary Average Balance Sheet
(Tax-equivalent basis / dollars in thousands)
 Quarter Ended Quarter Ended Quarter Ended
December 31, 2023September 30, 2023December 31, 2022
 Principal Balance Income/ Expense Yield/ RatePrincipal BalanceIncome/ Expense Yield/ Rate Principal Balance Income/ Expense Yield/ Rate
Assets
Federal Funds Sold and Other
        Short-term Investments$36,927 $473 5.09 %$20,243 $199 3.91 %$234,107 $2,200 3.73 %
Securities1,527,306 11,903 3.12 %1,596,653 11,677 2.93 %1,735,534 13,150 3.03 %
Loans and Leases3,921,967 56,257 5.69 %3,855,586 55,343 5.70 %3,728,788 47,262 5.03 %
Total Interest Earning Assets$5,486,200 $68,633 4.98 %$5,472,482 $67,219 4.88 %$5,698,429 $62,612 4.37 %
Liabilities
Demand Deposit Accounts$1,507,780 $1,524,682 $1,735,264 
IB Demand, Savings, and
        MMDA Accounts$3,010,984 $12,433 1.64 %$2,973,909 $10,601 1.41 %$3,359,079 $6,347 0.75 %
Time Deposits709,534 6,577 3.68 %640,992 4,977 3.08 %426,710 692 0.64 %
FHLB Advances and Other Borrowings202,555 2,394 4.69 %219,371 2,505 4.53 %162,792 1,441 3.51 %
Total Interest-Bearing Liabilities$3,923,073 $21,404 2.16 %$3,834,272 $18,083 1.87 %$3,948,581 $8,480 0.85 %
Cost of Funds1.55 %1.31 %0.59 %
Net Interest Income$47,229 $49,136 $54,132 
Net Interest Margin3.43 %3.57 %3.78 %

During the fourth quarter of 2023, net interest income, on a non tax-equivalent basis, totaled $45,607,000, a decline of $1,952,000, or 4%, compared to the third quarter of 2023 net interest income of $47,559,000 and a decline of $6,774,000, or 13%, compared to the fourth quarter of 2022 net interest income of $52,381,000.

The decline in net interest income during the fourth quarter of 2023 compared with the third quarter of 2023 was primarily attributable to a decline in the Company's net interest margin. The decline in net interest income during the fourth quarter of 2023 compared with the fourth quarter of 2022 was primarily attributable to a decline in average earning assets, driven by a reduced level of average deposits, and a lower net interest margin.

The tax equivalent net interest margin for the quarter ended December 31, 2023 was 3.43% compared with 3.57% in the third quarter of 2023 and 3.78% in the fourth quarter of 2022. The decline in the net interest margin during the fourth quarter of 2023 compared with both the third quarter of 2023 and the fourth quarter of 2022 was largely driven by a lower level of accretion of discounts on acquired loans and an increase in the cost of funds. The cost of funds continued to accelerate higher in the fourth quarter of 2023 due to the continued increase of market interest rates, very competitive deposit pricing in the marketplace, customers

    
NEWS RELEASE

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

11 of 17    
actively looking for yield opportunities within and outside the banking industry and a change in the Company's deposit composition.

The Company's net interest margin and net interest income have been impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $280,000 during the fourth quarter of 2023, $1,288,000 during the third quarter of 2023 and $603,000 during the fourth quarter of 2022. Accretion of loan discounts on acquired loans contributed approximately 2 basis points to the net interest margin in the fourth quarter of 2023, 9 basis points in the third quarter of 2023 and 4 basis points in the fourth quarter of 2022.

During the quarter ended December 31, 2023, the Company did not record a provision for credit losses compared with a provision for credit losses of $900,000 in the third quarter of 2023 and a provision for credit losses of $500,000 during the fourth quarter of 2022. The lack of a provision in the fourth quarter of 2023 was largely related to the resolution during the fourth quarter of 2023 of a single commercial borrowing relationship with minimal loss recognition for which the Company had established a significant reserve in previous periods.

Net charge-offs totaled $881,000, or 9 basis points on an annualized basis, of average loans outstanding during the fourth quarter of 2023 compared with $520,000, or 5 basis points on an annualized basis, of average loans during the third quarter of 2023 and compared with $1,031,000, or 11 basis points, of average loans during the fourth quarter of 2022.

During the quarter ended December 31, 2023, non-interest income totaled $15,594,000, an increase of $790,000, or 5%, compared with the third quarter of 2023 and an increase of $1,926,000, or 14%, compared with the fourth quarter of 2022.
Quarter EndedQuarter EndedQuarter Ended
Non-interest Income12/31/20239/30/202312/31/2022
(dollars in thousands)
Wealth Management Fees$3,198 $2,957 $2,420 
Service Charges on Deposit Accounts2,885 2,982 2,889 
Insurance Revenues2,266 2,065 2,050 
Company Owned Life Insurance455 446 496 
Interchange Fee Income4,371 4,470 3,972 
Other Operating Income1,887 1,270 1,258 
     Subtotal15,062 14,190 13,085 
Net Gains on Sales of Loans532 614 494 
Net Gains on Securities— — 89 
Total Non-interest Income$15,594 $14,804 $13,668 


    
NEWS RELEASE

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

12 of 17    
Wealth management fees increased $241,000, or 8%, during the fourth quarter of 2023 compared with the third quarter of 2023 and increased $778,000, or 32%, compared with the fourth quarter of 2022. The increase during the fourth quarter of 2023 was largely attributable to increased assets under management within the Company's wealth management group as compared with both the third quarter of 2023 and fourth quarter of 2022.

Interchange fee income declined $99,000, or 2%, during the quarter ended December 31, 2023 compared with the third quarter of 2023 and increased $399,000, or 10%, compared with the fourth quarter of 2022. The decline in the fourth quarter of 2023 compared with the third quarter of 2023 was related to a modestly lower level of customer transaction volume. The increased level of fees during the fourth quarter of 2023 compared with the fourth quarter of 2022 was due to increased card utilization by customers.

Other operating income increased $617,000, or 49%, during the fourth quarter of 2023 compared with the third quarter of 2023 and increased $629,000, or 50%, compared with the fourth quarter of 2022. The increase during the fourth quarter of 2023 was largely attributable to the gain on sale of real estate related to the consolidation of various branch office facilities.

During the quarter ended December 31, 2023, non-interest expense totaled $35,734,000, an increase of $313,000, or 1%, compared with the third quarter of 2023, and increased $120,000, or less than 1%, compared with the fourth quarter of 2022.
Quarter EndedQuarter EndedQuarter Ended
Non-interest Expense12/31/20239/30/202312/31/2022
(dollars in thousands)
Salaries and Employee Benefits$20,948 $20,347 $20,922 
Occupancy, Furniture and Equipment Expense3,513 3,691 3,655 
FDIC Premiums701 700 442 
Data Processing Fees2,835 2,719 2,510 
Professional Fees1,170 1,229 1,171 
Advertising and Promotion1,151 1,278 1,036 
Intangible Amortization636 685 840 
Other Operating Expenses4,780 4,772 5,038 
Total Non-interest Expense$35,734 $35,421 $35,614 

Salaries and benefits increased $601,000, or 3%, during the quarter ended December 31, 2023 compared with the third quarter of 2023 and increased $26,000, or less than 1%, compared with the fourth quarter of 2022. The increase in salaries and benefits during the fourth quarter of 2023 compared with the third quarter of 2023 was primarily due to incentive and commission compensation along with higher health insurance benefit costs.


    
NEWS RELEASE

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

13 of 17    
FDIC premiums were flat during the quarter ended December 31, 2023 compared with the third quarter of 2023 and increased $259,000, or 59%, compared with the fourth quarter of 2022. The increase in the fourth quarter of 2023 compared with the fourth quarter of 2022 was primarily related to an industry-wide 2 basis point increase in the base FDIC premium assessment effective January 1, 2023.

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 75 banking offices in 20 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:

a.changes in interest rates and the timing and magnitude of any such changes;
b.unfavorable economic conditions, including a prolonged period of inflation, and the resulting adverse impact on, among other things, credit quality;
c. the impacts related to or resulting from recent bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
d. the impacts of epidemics, pandemics or other infectious disease outbreaks;
e.    changes in competitive conditions;
f.    the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies;
g.    changes in customer borrowing, repayment, investment and deposit practices;
h.    changes in fiscal, monetary and tax policies;
i.    changes in financial and capital markets;

    
NEWS RELEASE

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

14 of 17    
j.    capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by German American of outstanding debt or equity securities;
k.    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 or employee base of the acquired institution or branches, and difficulties in integration of the acquired operations;    

l.    factors driving impairment charges on investments;

m.    the impact, extent and timing of technological changes;
n.    potential cyber-attacks, information security breaches and other criminal activities;
o.    litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;
p.    actions of the Federal Reserve Board;
q.    the potential for increases to, and volatility in, the balance of our allowance for credit losses and related provision expense due to the current expected credit loss (CECL) standard;

r.    changes in accounting principles and interpretations;
s.    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;
t.    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;
u.    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;
v.    the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends; and
w.    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
December 31, 2023September 30, 2023December 31, 2022
ASSETS
     Cash and Due from Banks $78,805 $72,063 $75,476 
     Short-term Investments 37,025 60,856 42,405 
     Investment Securities1,597,185 1,477,309 1,762,022 
     Loans Held-for-Sale5,226 7,085 8,600 
     Loans, Net of Unearned Income3,971,082 3,887,550 3,784,934 
     Allowance for Credit Losses(43,765)(44,646)(44,168)
        Net Loans3,927,317 3,842,904 3,740,766 
     Stock in FHLB and Other Restricted Stock14,687 14,763 15,037 
     Premises and Equipment106,776 111,252 112,237 
     Goodwill and Other Intangible Assets186,664 187,373 189,783 
     Other Assets198,513 232,061 209,665 
   TOTAL ASSETS$6,152,198 $6,005,666 $6,155,991 
LIABILITIES
     Non-interest-bearing Demand Deposits$1,493,160 $1,502,175 $1,691,804 
     Interest-bearing Demand, Savings, and Money Market Accounts2,992,761 2,932,180 3,229,778 
     Time Deposits767,042 701,516 428,469 
        Total Deposits5,252,963 5,135,871 5,350,051 
     Borrowings193,937 286,193 203,806 
     Other Liabilities41,740 45,210 43,741 
   TOTAL LIABILITIES5,488,640 5,467,274 5,597,598 
SHAREHOLDERS' EQUITY
     Common Stock and Surplus418,996 418,530 416,664 
     Retained Earnings461,622 447,475 405,167 
     Accumulated Other Comprehensive Income (Loss)(217,060)(327,613)(263,438)
SHAREHOLDERS' EQUITY663,558 538,392 558,393 
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$6,152,198 $6,005,666 $6,155,991 
END OF PERIOD SHARES OUTSTANDING 29,584,709 29,575,451 29,493,193 
TANGIBLE BOOK VALUE PER SHARE (1)
$16.12 $11.87 $12.50 
(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 EndedTwelve Months Ended
December 31, 2023September 30, 2023December 31, 2022December 31, 2023December 31, 2022
INTEREST INCOME
   Interest and Fees on Loans$56,058 $55,196 $47,108 $212,517 $169,158 
   Interest on Short-term Investments473 199 2,200 1,677 5,765 
   Interest and Dividends on Investment Securities10,480 10,247 11,553 42,462 44,003 
  TOTAL INTEREST INCOME67,011 65,642 60,861 256,656 218,926 
INTEREST EXPENSE
   Interest on Deposits19,010 15,578 7,039 56,916 13,514 
   Interest on Borrowings2,394 2,505 1,441 9,307 4,828 
  TOTAL INTEREST EXPENSE21,404 18,083 8,480 66,223 18,342 
   NET INTEREST INCOME45,607 47,559 52,381 190,433 200,584 
   Provision for Credit Losses— 900 500 2,550 6,350 
   NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES45,607 46,659 51,881 187,883 194,234 
NON-INTEREST INCOME
   Net Gain on Sales of Loans532 614 494 2,363 3,818 
   Net Gain on Securities— — 89 40 562 
   Other Non-interest Income15,062 14,190 13,085 57,858 54,753 
  TOTAL NON-INTEREST INCOME15,594 14,804 13,668 60,261 59,133 
NON-INTEREST EXPENSE
   Salaries and Benefits20,948 20,347 20,922 83,244 84,145 
   Other Non-interest Expenses14,786 15,074 14,692 61,253 70,046 
  TOTAL NON-INTEREST EXPENSE35,734 35,421 35,614 144,497 154,191 
   Income before Income Taxes25,467 26,042 29,935 103,647 99,176 
   Income Tax Expense3,960 4,591 5,520 17,759 17,351 
NET INCOME$21,507 $21,451 $24,415 $85,888 $81,825 
BASIC EARNINGS PER SHARE $0.73 $0.73 $0.83 $2.91 $2.78 
DILUTED EARNINGS PER SHARE $0.73 $0.73 $0.83 $2.91 $2.78 
WEIGHTED AVERAGE SHARES OUTSTANDING 29,575,398 29,573,461 29,485,940 29,557,567 29,464,591 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 29,575,398 29,573,461 29,485,940 29,557,567 29,464,591 


GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
Three Months EndedTwelve Months Ended
December 31,September 30,December 31,December 31,December 31,
20232023202220232022
EARNINGS PERFORMANCE RATIOS
Annualized Return on Average Assets1.43 %1.43 %1.56 %1.42 %1.26 %
Annualized Return on Average Equity15.45 %14.36 %18.99 %14.70 %13.41 %
Annualized Return on Average Tangible Equity (1)
23.26 %20.95 %30.14 %21.69 %19.51 %
Net Interest Margin3.43 %3.57 %3.78 %3.58 %3.45 %
Efficiency Ratio (2)
55.87 %54.33 %51.36 %55.09 %56.60 %
Net Overhead Expense to Average Earning Assets (3)
1.47 %1.51 %1.54 %1.53 %1.58 %
ASSET QUALITY RATIOS
Annualized Net Charge-offs to Average Loans0.09 %0.05 %0.11 %0.08 %0.06 %
Allowance for Credit Losses to Period End Loans1.10 %1.15 %1.17 %
Non-performing Assets to Period End Assets0.15 %0.21 %0.23 %
Non-performing Loans to Period End Loans0.23 %0.32 %0.38 %
Loans 30-89 Days Past Due to Period End Loans0.33 %0.33 %0.37 %
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA
Average Assets$6,036,242 $6,003,069 $6,243,859 $6,037,874 $6,514,030 
Average Earning Assets$5,486,200 $5,472,482 $5,698,429 $5,504,219 $5,999,668 
Average Total Loans$3,921,967 $3,855,586 $3,728,788 $3,835,157 $3,680,708 
Average Demand Deposits$1,507,780 $1,524,682 $1,735,264 $1,553,082 $1,738,349 
Average Interest Bearing Liabilities$3,923,073 $3,834,272 $3,948,581 $3,854,230 $4,121,179 
Average Equity$556,914 $597,375 $514,335 $584,106 $610,066 
Period End Non-performing Assets (4)
$9,191 $12,400 $14,315 
Period End Non-performing Loans (5)
$9,191 $12,376 $14,315 
Period End Loans 30-89 Days Past Due (6)
$13,208 $12,673 $14,040 
Tax Equivalent Net Interest Income$47,229 $49,136 $54,132 $196,919 $207,279 
Net Charge-offs during Period$881 $520 $1,031 $2,953 $2,316 
(1)Average Tangible Equity is defined as Average Equity less Average Goodwill and Other Intangibles.
(2)Efficiency Ratio is defined as Non-interest Expense less Intangible Amortization divided by the sum of Net Interest Income, on a tax equivalent basis, and Non-interest Income less Net Gain on Securities.
(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.