German American Bancorp, Inc. (GABC) Reports Record Earnings for Third Quarter 2025

JASPER, Ind.–(BUSINESS WIRE)–German American Bancorp, Inc. (Nasdaq: GABC) reported record earnings for the third quarter 2025. Third quarter earnings of $35.1 million, or $0.94 per share, resulted in the highest level of reported quarterly earnings and earnings per share in the Company’s history. This level of quarterly earnings represents an increase of $3.7 million, or approximately 12% on a per share basis, from 2025 second quarter earnings of $31.4 million, or $0.84 per share. It represents an increase of $14.0 million, or approximately 32% on a per share basis, from 2024 third quarter earnings of $21.0 million or $0.71 per share. Strong quarterly financial metrics of 1.68% return on average assets, 13.0% return on average equity, 21.0% return on average tangible equity and a 4.06% net interest margin continue to reinforce our position of strength.

The record operating performance was driven by continued net interest margin expansion, strong gains in net interest income and operating leverage, solid deposit growth with continued high level of non-interest bearing demand deposits, solid loan growth, healthy credit metrics and controlled expenses.

The overall loan portfolio at September 30, 2025 remains stable and diversified, increasing by approximately 3% on an annualized linked quarter basis. The increase was driven by solid loan originations across the Company’s entire footprint that were partially mitigated by higher commercial real estate payoffs. The Company’s loan portfolio reflects healthy credit metrics, as non-performing assets were 0.28% of period end assets and non-performing loans totaled 0.41% of period end loans. Net charge-offs remained minimal at 5 basis points of average loans on an annualized basis for the third quarter of 2025.

Third quarter total deposits increased 3.4% on an annualized linked quarter basis led by a 9% increase in non-interest bearing demand deposit accounts. Overall, non-interest bearing accounts continue to be strong, representing over 28% of total deposits at September 30, 2025. Total cost of deposits declined 6 basis points from 1.73% at June 30, 2025 to 1.67% at September 30, 2025. The 25 basis point Federal Funds rate cut that took place late in the third quarter had minimal impact on the quarter’s overall financial performance.

Non-interest income trended favorably in the third quarter of 2025 over linked second quarter 2025. Non-interest income increased $1.7 million or 10% driven by a 3% increase in wealth management and 6% increase in deposit fees both resulting from increased new business. A non-recurring gain on the redemption of subordinated debt previously issued by Heartland BancCorp (“Heartland”) also contributed to the favorable increase.

The Company’s third quarter 2025 efficiency ratio fell below 50% to 49.26% as we continue to build scale and improve profitability.

The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $0.29 per share, which will be payable on November 20, 2025 to shareholders of record as of November 10, 2025.

“We are extremely pleased to deliver a record earnings performance in the third quarter of 2025 as we positioned the Company with various strategic transactions throughout 2024 and early 2025. Our Heartland Bank acquisition that closed in the first quarter of 2025 continues to integrate extremely well, adding to the overall momentum of our Company. We are excited about the long-term growth potential in connection with a normalizing yield curve and our strong diversified organic growth footprint,” stated D. Neil Dauby, German American’s Chairman and CEO.

Dauby also stated, “We continue to add top talent to our relationship-focused team of professionals and, with their dedicated efforts, we are confident that our strong community presence, healthy financial condition and disciplined approach to growth will continue to drive future profitability and long-term shareholder value. We remain excited and committed to the vitality and future growth of our Indiana, Kentucky and Ohio communities.”

Balance Sheet Highlights

On February 1, 2025, the Company completed its acquisition of Heartland through the merger of Heartland with and into the Company. Immediately following completion of the Heartland holding company merger, Heartland’s subsidiary bank, Heartland Bank, was merged with and into the Company’s subsidiary bank, German American Bank (the “Bank”). Heartland, headquartered in Whitehall, Ohio, operated 20 retail banking offices located in Columbus, Ohio and Greater Cincinnati. As of the closing of the transaction, Heartland had total assets of approximately $1.94 billion, total loans of approximately $1.58 billion, and total deposits of approximately $1.73 billion. The Company issued approximately 7.74 million shares of its common stock, and paid approximately $23.1 million in cash, in exchange for all of the issued and outstanding shares of common stock of Heartland and in cancellation of all options to acquire Heartland common stock outstanding as of the effective time of the merger.

Total assets for the Company totaled $8.401 billion at September 30, 2025, representing an increase of $121.1 million compared with June 30, 2025 and an increase of $2.140 billion compared with September 30, 2024. The increase in total assets at September 30, 2025 compared with September 30, 2024 was, in large part, attributable to the Heartland acquisition, with continued organic loan growth also contributing to the increase.

September 30, 2025 total loans increased $39.3 million, or 3% on an annualized basis, compared with June 30, 2025 and increased $1.718 billion compared with September 30, 2024. The increase during the third quarter of 2025 compared with June 30, 2025 was broad-based across most segments of the portfolio and throughout the Company’s footprint. However, the increase was partially mitigated by higher levels of payoffs of commercial real estate loans. Agricultural loans increased $11.4 million, or 10% on an annualized basis, and commercial real estate loans increased $6.5 million, or 1% on an annualized basis, while commercial and industrial loans declined $2.3 million, or 1% on an annualized basis. Retail loans grew by $23.7 million, or 7% on an annualized basis, due in large part to strong home equity loan originations. The increase at September 30, 2025 compared with September 30, 2024 was largely due to the acquisition of Heartland and, to a lesser extent, organic loan growth throughout the Company’s existing market areas.

The composition of the loan portfolio has remained relatively stable and diversified over the past several years. The addition of the Heartland loan portfolio resulted in only modest changes to the overall portfolio composition, most notably in the residential mortgage loan segment. The portfolio is most heavily weighted in commercial real estate loans at 54% of the portfolio, followed by commercial and industrial loans at 14% of the portfolio, residential mortgage loans at 14% of the portfolio (up from 9% at September 30, 2024), agricultural loans at 8% of the portfolio, and home equity loans at 8% 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 allowance for credit losses totaled $76.1 million at September 30, 2025 compared to $75.5 million at June 30, 2025 and $44.1 million at September 30, 2024. The allowance for credit losses represented 1.32% of period-end loans at both September 30, 2025 and June 30, 2025 and 1.09% of period-end loans at September 30, 2024.

The Company added $32.7 million to the allowance for credit losses in conjunction with the closing of the Heartland acquisition on February 1, 2025, related to the Heartland loan portfolio. Of the increase in the allowance for credit losses for the Heartland portfolio, $16.2 million was recorded through the “Day 2” provision for credit losses under the CECL model. In a transaction like the Heartland merger, the accounting rules require the acquirer to recognize an allowance for credit losses in the period of acquisition for both purchased credit deterioration (“PCD”) assets and non-PCD assets. The determination of PCD versus non-PCD determines how the allowance for credit loss flows through the financial statements. For PCD assets, the gross-up method includes the impact in the “Day 1” business combination entries with no impact to expense. For non-PCD assets, the impact is reflected outside of the business combination entries (sometimes referred to as “Day 2”) and is reflected in expense.

Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of September 30, 2025, the Company held net discounts on acquired loans of $56.9 million, which included $54.7 million related to the Heartland loan portfolio.

Non-performing assets totaled $23.7 million at September 30, 2025, $25.1 million at June 30, 2025, and $9.7 million at September 30, 2024. Non-performing assets represented 0.28% of total assets at September 30, 2025, 0.30% at June 30, 2025 and 0.15% at September 30, 2024. Non-performing loans represented 0.41% of total loans at September 30, 2025, 0.44% at June 30, 2025 and 0.24% at September 30, 2024.

The overall increase in non-performing assets at September 30, 2025 compared with September 30, 2024 was largely attributable to the Heartland acquisition. As of September 30, 2025, non-performing assets from the Heartland acquisition totaled approximately $11.6 million.

September 30, 2025 total deposits increased $59.8 million, or 3% on an annualized basis, compared to June 30, 2025 and increased $1.743 billion compared with September 30, 2024. The increase in total deposits at September 30, 2025 compared with the third quarter of 2024 was largely attributable to the Heartland acquisition. As of September 30, 2025, deposits from the Heartland acquisition totaled $1.615 billion.

The addition of the Heartland deposit portfolio did not result in significant changes to the overall deposit portfolio composition. Notably, non-interest bearing deposits have remained relatively stable as a percent of total deposits at approximately 28% at September 30, 2025, and 27% at both June 30, 2025 and September 30, 2024.

At September 30, 2025, the capital levels for the Company and the Bank remained well in excess of the minimum amounts needed for capital adequacy purposes and the Bank’s capital levels met the necessary requirements to be considered well-capitalized.

Results of Operations Highlights – Quarter ended September 30, 2025

Net income for the quarter ended September 30, 2025 totaled $35,074,000, or $0.94 per share, an increase of 12% on a per share basis compared with the second quarter 2025 net income of $31,361,000, or $0.84 per share, and an increase of 32% on a per share basis compared with the third quarter 2024 net income of $21,048,000, or $0.71 per share.

The results of operations for each quarter presented include Heartland acquisition-related expenses. The third quarter of 2025 also included a non-recurring gain on the redemption of certain subordinated debt. On an adjusted basis, net income for the third quarter of 2025 was $34,444,000, or $0.92 per share, compared with adjusted net income of $32,058,000, or $0.86 per share, for the second quarter of 2025, and $21,722,000, or $0.73 per share, for the third quarter of 2024. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this release for additional information including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

During the third quarter of 2025, net interest income, on a non tax-equivalent basis, totaled $75,725,000, an increase of $2,570,000, or 4%, compared to the second quarter of 2025 net interest income of $73,155,000 and an increase of $27,131,000, or 56%, compared to the third quarter of 2024 net interest income of $48,594,000.

The increase in net interest income during the third quarter of 2025 compared with the second quarter of 2025 was driven by improvement in the Company’s net interest margin. The increase in net interest income during the third quarter of 2025 compared with the third quarter of 2024 was primarily attributable to a higher level of average earning assets driven in large part by the Heartland acquisition and an improvement of the Company’s net interest margin.

The tax equivalent net interest margin for the quarter ended September 30, 2025 was 4.06% compared with 3.92% in the second quarter of 2025 and 3.47% in the third quarter of 2024. The continued improvement in the net interest margin, excluding the accretion of discount on acquired loans, during the third quarter of 2025 compared with both the second quarter of 2025 and third quarter of 2024 was largely driven by an improved yield on earning assets (including both loan and security yields) and a lower cost of deposits. The lower cost of deposits was largely driven by the Federal Reserve’s lowering of the Federal Funds rates over the last several months of 2024 and the Company’s ability to correspondingly lower deposit costs. The Federal Funds rate cut in mid-September 2025 had minimal impact on the average earning asset yields or average cost of deposits during the third quarter of 2025.

The Company’s net interest margin and net interest income in all periods presented have been impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $3,914,000 during the third quarter of 2025, $3,483,000 during the second quarter of 2025 and $237,000 during the third quarter of 2024. Accretion of loan discounts on acquired loans contributed approximately 21 basis points to the net interest margin in the third quarter of 2025, 18 basis points in the second quarter of 2025 and 2 basis points in the third quarter of 2024.

During the quarter ended September 30, 2025, the Company recorded a provision for credit losses of $700,000 compared with a provision for credit losses of $1,200,000 in the second quarter of 2025 and a provision for credit losses of $625,000 during the third quarter of 2024. Net charge-offs totaled $748,000, or 5 basis points on an annualized basis, of average loans outstanding during the third quarter of 2025 compared with $848,000, or 6 basis points on an annualized basis, of average loans during the second quarter of 2025 and $447,000, or 4 basis points, of average loans during the third quarter of 2024.

During the quarter ended September 30, 2025, non-interest income totaled $18,429,000, an increase of $1,696,000, or 10%, compared with the second quarter of 2025 and an increase of $4,628,000, or 34%, compared with the third quarter of 2024. The increase in non-interest income during the third quarter of 2025 compared with the second quarter of 2025 was driven by a $975,000 gain on the extinguishment of debt resulting from the redemption of $24.3 million of the Heartland fixed-to-floating rate subordinated notes during the third quarter of 2025 as well as improved wealth management revenue and deposit account fees. The increase during the third quarter of 2025 compared to the same period of 2024 was largely the result of the Heartland acquisition, improvement of the Company’s existing fee revenue generation and the debt extinguishment gain.

Excluding the gain on the extinguishment of debt, non-interest income for the third quarter of 2025 was $17,454,000 on an adjusted basis. Adjusted non-interest income is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” contained in this release for additional information including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Wealth management fees increased $123,000, or 3%, during the third quarter of 2025 compared with the second quarter of 2025 and increased $708,000, or 20%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the second quarter of 2025 was largely attributable to strong new business growth resulting in increased assets under management. The increase during the third quarter of 2025 compared with the third quarter of 2024 was also largely attributable to increased assets under management driven by healthy capital markets throughout 2024 and much of 2025, and continued strong new business results in addition to the Heartland acquisition.

Service charges on deposit accounts increased $213,000, or 6%, during the quarter ended September 30, 2025 compared with the second quarter of 2025 and increased $597,000, or 18%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the second quarter of 2025 was largely attributable to increased customer utilization of deposit services. The increase during the third quarter of 2025 compared with the third quarter of 2024 was primarily driven by the Heartland acquisition in addition to increased customer utilization of deposit services.

Interchange fees increased $30,000, or 1%, during the quarter ended September 30, 2025 compared with the second quarter of 2025 and increased $697,000, or 16%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the third quarter of 2024 was largely attributable to the Heartland acquisition.

Other operating income increased $1,493,000, or 82%, during the third quarter of 2025 compared with the second quarter of 2025 and increased $2,057,000, or 164%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the second quarter of 2025 was largely attributable to a $975,000 gain on the extinguishment of debt resulting from the redemption of $24.3 million of the Heartland fixed-to-floating rate subordinated notes during the third quarter of 2025. The increase during the third quarter of 2025 compared with the third quarter of 2024 was also primarily attributable to the aforementioned gain on extinguishment of debt and the Heartland acquisition.

Net gains on sales of loans declined $90,000, or 7%, during the third quarter of 2025 compared with the second quarter of 2025 and increased $485,000, or 69%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the third quarter of 2024 was largely related to the Heartland acquisition and a higher volume of loans sold. Loan sales totaled $55.5 million during the third quarter of 2025 compared with $50.2 million during the second quarter of 2025 and $40.3 million during the third quarter of 2024.

During the quarter ended September 30, 2025, non-interest expense totaled $49,700,000, a modest increase of $183,000, or less than 1%, compared with the second quarter of 2025, and an increase of $13,574,000, or 38%, compared with the third quarter of 2024. The increase during the third quarter of 2025 compared with the third quarter of 2024 was primarily driven by the operating costs associated with the Heartland acquisition.

Contacts

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

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