German American Bancorp, Inc. (GABC) Reports Record Fourth Quarter and Strong Annual 2025 Earnings; Declares 7% Cash Dividend Increase

• Record quarterly earnings of $0.95 per share; $0.96 as adjusted*
• Robust 4^th quarter return on average assets (“ROAA”) of 1.67%; 1.68% as adjusted*
• Robust net interest margin* of 4.13%
• Low efficiency ratio* of 48.6%
• Healthy credit metrics, with annualized net charge-offs of 0.04%
• Strong annualized linked quarter loan growth of 7%
• Tangible Common Equity* (“TCE”) ratio increased to 9.44%; Return on average TCE (“ROATCE”)* of 19.49%
• 21^st consecutive year of double digit return on average shareholder equity
• Declared 7% cash dividend increase, making it the 14^th consecutive year of increased cash dividends
• Heartland Bank acquisition continues to integrate seamlessly
• Recognized as one of America’s Best Regional Banks in 2026 by Newsweek

JASPER, Ind.–(BUSINESS WIRE)–German American Bancorp, Inc. (Nasdaq: GABC) (“German American” or the “Company”) reported record earnings for the three months ended December 31, 2025. The Company also announced a 7% increase in its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.31 per share, which will be payable on February 20, 2026 to shareholders of record as of February 10, 2026.

For the three months ended December 31, 2025, the Company reported net income of $35.7 million, or $0.95 per share, reflecting a linked quarter increase of $0.7 million, or approximately 1% on a per share basis, from previous record third quarter 2025 net income of $35.1 million, or $0.94 per share. The Company also reported strong annual net income of $112.6 million, or $3.06 per share, for the year ended December 31, 2025, reflecting a year-over-year increase of $28.8 million, or approximately 8% on a per share basis, from year end December 31, 2024 net income of $83.8 million, or $2.83 per share.

On an adjusted basis*, net income for the three months ended December 31, 2025 was $35.9 million, or $0.96 per share, reflecting a linked quarter increase of $1.5 million, or approximately 4.4% on a per share basis, from previous third quarter net income of $34.4 million, or $0.92 per share. On an adjusted basis*, net income for the year ended December 31, 2025 was $129.7 million, or $3.52 per share, reflecting a year-over-year increase of $45.9 million, or approximately 24% on a per share basis, from year end December 31, 2024.

Profitability and capital measures remained strong as ROAA for the fourth quarter of 2025 was 1.67% (1.68% as adjusted*) and ROATCE was 19.5% (19.6% as adjusted*). These compared to ROAA of 1.68% (1.65% as adjusted*) and ROATCE of 21.1% (20.8% as adjusted*) in the third quarter of 2025.

Fourth Quarter 2025 highlights include:

• Robust net interest margin of 4.13%
  • 7 basis point increase from third quarter 2025
  • 14 basis point reduction in funding costs and 7 basis point decrease in earning asset yields
• Strong increase in loan balances during the quarter
  • End of period loans increased $97 million, or approximately 7% on an annualized basis, with growth coming from all commercial and agriculture categories, as well as consumer-home equity lines
• Slight decrease in deposits quarter over linked quarter
  • Non-interest bearing deposits increased approximately 1.5% on an annualized linked quarter basis and represented 28% of total deposits
  • Interest bearing demand, savings and money market accounts increased approximately 4.5% on an annualized linked quarter basis
  • These transactional deposit increases were offset by managed run-off of higher cost retail and jumbo time deposits
• Excluding the effects of a $283,000 non-recurring loss on the redemption of subordinated debt on December 30, 2025 and a $975,000 non-recurring gain on the redemption of subordinated debt in the third quarter of 2025, non-interest income remained stable in the fourth quarter 2025, led by an increase of $231,000, or 5%, in wealth management fees
• Stable non-interest expenses of $49.9 million
  • Strong efficiency ratio* of 48.55% for the fourth quarter
  • Quarter over linked quarter increase in salaries and benefits of approximately 8.5%, driven by incentive compensation tied to record earnings performance, was offset by broad-based cost reductions in all other remaining expense categories
• Total allowance for credit losses was $77.7 million, with total quarterly provision expense of $2.2 million as credit metrics remained healthy
  • Ratio of allowance to total loans of 1.32%
  • Annualized net charge offs remained minimal at 4 basis points of average loans
  • Non-performing assets were slightly elevated at 0.35% of period end assets compared to third quarter of 0.28%. The increase was mostly driven by two acquired credits that were adversely classified at acquisition and have subsequently been placed on non-accrual status
• Capital ratios remained strong
  • TCE* of 9.44 %
  • Tangible book value per share of $20.08; 6.3% increase from linked quarter September 30, 2025
  • The Company announced a 7% increase to its quarterly cash dividend, making it the 14^th consecutive year of increased cash dividends reflecting the Company’s strong operations and healthy capital position

D. Neil Dauby, Chairman and CEO of German American stated, “We are extremely pleased to deliver yet another record quarterly earnings performance for the fourth quarter 2025 and for the year ended December 31, 2025. We have great positive momentum as we head into 2026 and are excited about the long-term potential in connection with a normalizing yield curve and our strong diversified organic growth footprint.”

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 BancCorp (“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 $8.389 billion at December 31, 2025, representing a decline of $12.5 million compared with September 30, 2025 and an increase of $2.093 billion compared with December 31, 2024. The increase in total assets at December 31, 2025 compared with December 31, 2024 was, in large part, attributable to the Heartland acquisition, with continued organic loan growth also contributing to the increase.

December 31, 2025 total loans increased $96.8 million, or 7% on an annualized basis, compared with September 30, 2025 and increased $1.751 billion compared with December 31, 2024. The increase during the fourth quarter of 2025 compared with September 30, 2025 was broad-based across most segments of the portfolio and throughout the Company’s footprint. Commercial and industrial loans increased $33.0 million, or 16% on an annualized basis, commercial real estate loans increased $39.3 million, or 5% on an annualized basis, and agricultural loans reflected a seasonal increase of $16.4 million, or 14% on an annualized basis. Retail loans grew by $8.2 million, or 2% on an annualized basis, due in large part to strong home equity loan originations, which were partially offset by a reduced level of residential mortgage loans. The increase at December 31, 2025 compared with December 31, 2024 was largely due to the acquisition of Heartland in addition to continued organic loan growth throughout the Company’s existing market areas. Excluding loans acquired through the Heartland acquisition, total loans increased $261.9 million, or 6%, during 2025.

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 53% of the portfolio, followed by commercial and industrial loans at 14% of the portfolio, residential mortgage loans at 13% of the portfolio (up from 9% at December 31, 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 $77.7 million at December 31, 2025 compared to $76.1 million at September 30, 2025 and $44.4 million at December 31, 2024. The allowance for credit losses represented 1.32% of period-end loans at both December 31, 2025 and September 30, 2025 and 1.08% of period-end loans at December 31, 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 current 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 December 31, 2025, the Company held net discounts on acquired loans of $52.8 million, which included $50.7 million related to the Heartland loan portfolio.

Non-performing assets totaled $29.5 million at December 31, 2025, $23.7 million at September 30, 2025, and $11.1 million at December 31, 2024. Non-performing assets represented 0.35% of total assets at December 31, 2025, 0.28% at September 30, 2025 and 0.18% at December 31, 2024. Non-performing loans represented 0.50% of total loans at December 31, 2025, 0.41% at September 30, 2025, and 0.27% at December 31, 2024.

The increase in non-performing assets during the fourth quarter of 2025 was largely related to two commercial relationships acquired in the Heartland transaction. The relationships were identified as adversely classified at the time of acquisition and have subsequently been placed on non-accrual status. The overall increase in non-performing assets at December 31, 2025 compared with year-end 2024 was largely attributable to the Heartland acquisition with non-performing assets from the Heartland acquisition totaling approximately $18.6 million at year-end 2025.

December 31, 2025 total deposits declined $24.8 million, or 1% on an annualized basis, compared to September 30, 2025 and increased $1.661 billion compared with December 31, 2024. The increase in total deposits at December 31, 2025 compared with year-end 2024 was largely attributable to the Heartland acquisition. As of December 31, 2025, deposits from the Heartland acquisition totaled $1.559 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 both December 31, 2025 and September 30, 2025, and 26% at year-end 2024.

At December 31, 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 – Year ended December 31, 2025

Net income for the year ended December 31, 2025 totaled $112,635,000, or $3.06 per share, an increase of $28,824,000, or approximately 8% on a per share basis, from the year ended December 31, 2024 net income of $83,811,000, or $2.83 per share. The year ended December 31, 2025 results of operations included Heartland acquisition-related expenses of $6,996,000 ($5,418,000, on an after-tax basis) and the “Day 2” provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after-tax basis), as well as a net gain on the redemption of subordinated debentures.

Net income for the year end December 31, 2024 included the sale of the assets of the Company’s wholly owned subsidiary German American Insurance, Inc. (“GAI”) in the second quarter of 2024, which resulted in an after-tax gain, net of transaction costs, of approximately $27,476,000, or $0.93 per share, and a partial securities portfolio restructuring transaction, also in the second quarter of 2024, resulting in an after-tax loss of $27,189,000, or $0.92 per share.

On an adjusted basis, net income for the year ended December 31, 2025 was $129,684,000, or $3.52 per share, compared with adjusted net income of $83,839,000, or $2.83 per share, for the year ended December 31, 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 year ended December 31, 2025, net interest income, on a non tax-equivalent basis, totaled $294,132,000, an increase of $103,541,000, or 54%, compared to the year ended December 31, 2024 net interest income of $190,591,000. The increase in net interest income for 2025 compared with 2024 was primarily attributable to a higher level of earning assets driven by the Heartland acquisition and an improvement of the Company’s net interest margin.

The tax equivalent net interest margin for the year ended December 31, 2025 was 4.02% compared with 3.43% for the year ended December 31, 2024. The improvement in the net interest margin, excluding the accretion of discount on acquired loans, during 2025 compared with 2024 was the result of improved yields 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 again in the latter months of 2025, and the Company’s ability to correspondingly lower deposit costs.

The Company’s net interest margin and net interest income in both 2025 and 2024 have been impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $15,556,000 during the year ended December 31, 2025 and $1,507,000 during the same period of 2024. Accretion of loan discounts on acquired loans contributed approximately 21 basis points to the net interest margin during 2025 and 3 basis points during 2024.

During the year ended December 31, 2025, the Company recorded a provision for credit losses of $19,425,000, as compared to the provision for credit losses of $2,775,000 recorded for the year ended December 31, 2024. The first quarter of 2025 included a provision for credit losses of $16,200,000 related to the “Day 2” adjustment for the Heartland acquisition.

During the year ended December 31, 2025, non-interest income increased $4,652,000, or 7%, compared with the year ended December 31, 2024. The increase during 2025 compared to 2024 was largely the result of the Heartland acquisition combined with an improvement in the Company’s existing fee revenue sources. The year ended December 31, 2024 included the previously mentioned sale of the GAI assets and the securities portfolio restructuring transaction, which each occurred during the second quarter of 2024. On an adjusted basis, non-interest income for the year ended December 31, 2025 was $66,620,000 compared to $54,691,000 for the same period of 2024. Adjusted non-interest income is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” section in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Wealth management fees increased $2,392,000, or 17%, during 2025 compared with 2024. The increase during the year ended December 31, 2025 compared with the same period of 2024 was largely attributable to increased assets under management, driven by healthy capital markets throughout 2024 and 2025, and continued strong new business results in addition to the Heartland acquisition.

Service charges on deposit accounts increased $2,414,000, or 19%, during the year ended December 31, 2025, compared with the same period of 2024. The increase during 2025 compared with 2024 was primarily driven by the Heartland acquisition in addition to increased customer utilization of deposit services.

No insurance revenues were recognized during the year ended December 31, 2025 due to the sale of the GAI assets effective June 1, 2024. As a result, insurance revenues declined $4,384,000 during 2025, compared with 2024. As previously discussed, the sale of substantially all of the assets of GAI in June 2024 resulted in net proceeds of $38,323,000.

Interchange fees increased $2,473,000, or 14%, during the year ended December 31, 2025, compared with the same period of 2024. The increase during 2025 compared with 2024 was largely attributable to the Heartland acquisition.

During the year ended December 31, 2025, other operating income increased $3,339,000, or 62%, compared with the same period of 2024. The increase during 2025 compared with 2024 was primarily attributable to the Heartland acquisition.

Net gains on sales of loans increased $1,456,000, or 48%, during the year ended December 31, 2025 compared with the year ended December 31, 2024. The increase during 2025 compared with 2024 was related to the Heartland acquisition and a higher volume of loans sold. Loan sales totaled $193.2 million during 2025 compared with $130.7 million during 2024.

There were no securities transactions during 2025 that resulted in net gains or losses.

Contacts

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

Read full story here