German American Bancorp, Inc. (GABC) Reports Strong Second Quarter 2025 Earnings

JASPER, Ind.–(BUSINESS WIRE)–German American Bancorp, Inc. (Nasdaq: GABC) reported strong quarterly earnings of $31.4 million, or $0.84 per share, resulting in the second highest level of reported earnings per share in the Company’s history. This level of quarterly earnings represented an increase of $20.9 million, or approximately 180% on a per share basis, from 2025 first quarter earnings of $10.5 million, or $0.30 per share. The first quarter of 2025 was impacted by one-time merger and acquisition costs of $5.9 million and a “Day 2” provision under the current expected credit loss (“CECL”) model of $16.2 million (total impact of $16.8 million on an after-tax basis) resulting from the February 1, 2025 merger with Heartland BancCorp (“Heartland”), the parent company of Heartland Bank. On an adjusted basis, net income for the first quarter 2025 was $27.3 million, or $0.79 per share.¹

The second quarter 2025 earnings performance was driven by continued core net interest margin expansion, strong gains in net interest income and operating leverage, solid organic loan growth, continued high level of non-interest bearing demand deposits, healthy credit metrics and ongoing improved efficiencies resulting from the Heartland merger. Second quarter 2025 earnings also had the benefit of three months of Heartland operations while first quarter 2025 earnings included only two months.

The overall loan portfolio at June 30, 2025 remains stable and diversified. Loan growth reflected approximately 7% organic growth on an annualized linked quarter basis. The growth was broad based across all lending categories, industry segments and geographic regions. The Company’s loan portfolio reflects healthy credit metrics, as non-performing assets were 0.30% of period end assets and non-performing loans totaled 0.44% of period end loans. Net charge offs remained minimal at 6 basis points of average loans for the second quarter of 2025.

Total deposits declined in the second quarter over linked first quarter as the Company leveraged its strong liquidity position to reduce the higher cost Heartland deposits post-acquisition. Non-interest bearing demand deposit accounts continued to remain strong representing over 27% of total deposits at June 30, 2025.

Non-interest income for the second quarter of 2025 increased $1.9 million or approximately 13% over linked first quarter with all categories reflecting solid increases led by wealth management fees, interchange fees and gains on sales of residential mortgage loans and, to a lesser extent, one additional month of Heartland-related fee income.

Non-interest expense for the second quarter of 2025 decreased $3.3 million, or 6.2%, over linked first quarter 2025 as we continue to reduce our core efficiency ratio from 54.13% for first quarter 2025 to 50.23% for second quarter 2025. Heartland-related expenses will continue to be reduced in the second half of 2025 as the operations of Heartland continue to be fully integrated into German American.

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 August 20, 2025 to shareholders of record as of August 10, 2025.

In June 2025, German American was once again awarded the Raymond James Community Bankers Cup for 2024 which recognizes the top 10% of community banks based on various profitability, operational efficiency, and balance sheet metrics. Banks considered for recognition include all exchange-traded domestic banks, excluding mutual holding companies, with assets between $500 million and $10 billion. D. Neil Dauby, German American’s Chairman & CEO stated, “We believe this recognition acknowledges our ongoing strong financial performance focus and stability, and reflects our unwavering commitment to excellence. It is a true testament to the dedication of our team of professionals.”

Dauby also stated, “We are extremely pleased with our ability to build upon the momentum from our first quarter acquisition of Heartland with our strong operating performance in the second quarter. A smooth conversion of bank operating systems took place shortly after the conclusion of first quarter 2025, with very little disruption to employees and customers. We are encouraged by the potential benefits of a normalizing yield curve, the continued integration/optimization of Heartland operating expenses, and the strength of our lending pipelines throughout our legacy and newly-acquired geographic footprint. We believe we have positioned the Company for continued future growth and profitability given a stable economic environment.”

Dauby continued, “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 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 $8.280 billion at June 30, 2025, representing a decline of $139.6 million compared with March 31, 2025 and an increase of $2.063 billion compared with June 30, 2024. The decline in total assets at June 30, 2024 compared with March 31, 2025 was largely driven by a decline in total deposits which in turn has led to a decline in short-term investments. At June 30, 2025, federal funds sold and other short-term investments totaled $100.3 million, a decline of $262.9 million, compared with $363.2 million at March 31, 2025 due to a decline in total deposits and solid organic loan growth during the second quarter of 2025. The increase in total assets at June 30, 2025 compared with June 30, 2024 was in large part attributable to the Heartland acquisition, with continued organic loan growth also contributing to the increase.

June 30, 2025 total loans increased $93.4 million, or 7% on an annualized basis, compared with March 31, 2025 and increased $1.704 billion compared with June 30, 2024. The increase during the second quarter of 2025 compared with March 31, 2025 was broad-based across all segments of the portfolio throughout the Company’s footprint. Commercial and industrial loans increased $5.5 million, or 3% on an annualized basis, commercial real estate loans increased $41.7 million, or 5% on an annualized basis, and agricultural loans grew $5.7 million, or 5% on an annualized basis. Retail loans grew by $40.5 million, or 12% on an annualized basis, due in large part to strong home equity loan originations. The increase at June 30, 2025 compared with June 30, 2024 was also 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 June 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 $75.5 million at June 30, 2025 compared to $75.2 million at March 31, 2025 and $43.9 million at June 30, 2024. The allowance for credit losses represented 1.32% of period-end loans at June 30, 2025, 1.33% at March 31, 2025 and 1.09% of period-end loans at June 30, 2024.

The Company added $32.1 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.

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, 2025, the Company held net discounts on acquired loans of $60.9 million, which included $58.4 million related to the Heartland loan portfolio.

Non-performing assets totaled $25.1 million at June 30, 2025, $18.6 million at March 31, 2025, and $7.3 million at June 30, 2024. Non-performing assets represented 0.30% of total assets at June 30, 2025, 0.22% at March 31, 2025 and 0.12% at June 30, 2024. Non-performing loans represented 0.44% of total loans at June 30, 2025, 0.33% at March 31, 2025 and 0.18% at June 30, 2024.

The increase in non-performing assets during the second quarter of 2025 was largely related to a single acquired commercial relationship. The relationship was identified as an adversely classified relationship at the time of acquisition and has subsequently been placed on non-accrual status. The overall increase in non-performing assets in all periods presented was largely attributable to the Heartland acquisition. As of June 30, 2025, non-performing assets from the Heartland acquisition totaled approximately $10.3 million.

June 30, 2025 total deposits declined $143.2 million compared to March 31, 2025 and increased $1.641 billion compared with June 30, 2024. The decline in total deposits at June 30, 2025 compared with March 31, 2025 was largely related to time (retail and brokered) deposits and interest bearing demand accounts from the Heartland deposit base, as post-merger pricing strategies converge. The increase in total deposits at June 30, 2025 compared with the second quarter of 2024 was largely attributable to the Heartland acquisition. As of June 30, 2025, deposits from the Heartland acquisition totaled $1.608 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 27% at June 30, 2025, March 31, 2025 and June 30, 2024.

At June 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 June 30, 2025

Net income for the quarter ended June 30, 2025 totaled $31,361,000, or $0.84 per share, an increase of 180% on a per share basis compared with the first quarter 2025 net income of $10,517,000, or $0.30 per share, and an increase of 22% on a per share basis compared with the second quarter 2024 net income of $20,530,000, or $0.69 per share.

Net income for both the first and second quarters of 2025 were impacted by acquisition-related expenses for the Heartland transaction that closed on February 1, 2025. In addition, net income for the second quarter of 2024 was impacted by the Company’s sale of the assets of its wholly-owned subsidiary German American Insurance, Inc. (“GAI”) in a $40 million all-cash transaction and a securities portfolio restructuring transaction whereby available-for-sale securities totaling approximately $375 million in book value were identified to be sold.

The second quarter of 2025 results of operations included acquisition-related expenses of $929,000 ($697,000, on an after tax basis). The first quarter of 2025 results of operations included Heartland acquisition-related expenses of $5,932,000 ($4,620,000, on an after tax basis) and also included the “Day 2” provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis). As indicated above, the second quarter of 2024 earnings included the insurance sale transaction resulting in an after-tax gain, net of transaction costs, of approximately $27,476,000, or $0.93 per share, and the partial securities portfolio restructuring transaction resulting in an after tax loss of $27,189,000, or $0.92 per share. In addition, the second quarter of 2024 included Heartland acquisition-related expenses of $425,000 ($318,000, on an after tax basis).

On an adjusted basis, net income for the second quarter of 2025 was $32,058,000, or $0.86 per share, compared with the adjusted first quarter 2025 net income of $27,287,000, or $0.79 per share, and $20,351000, or $0.69 per share, for the second 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 second quarter of 2025, net interest income, on a non tax-equivalent basis, totaled $73,155,000, an increase of $6,583,000, or 10%, compared to the first quarter of 2025 net interest income of $66,572,000 and an increase of $27,184,000, or 59%, compared to the second quarter of 2024 net interest income of $45,971,000.

The increase in net interest income during the second quarter of 2025 compared with both the first quarter of 2025 and the second quarter of 2024 was primarily attributable to a higher level of average earning assets driven by the Heartland acquisition and an improvement of the Company’s net interest margin (excluding the impact of accretion of discounts on acquired loans).

The tax equivalent net interest margin for the quarter ended June 30, 2025 was 3.92% compared with 3.96% in the first quarter of 2025 and 3.34% in the second quarter of 2024. 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 $3,483,000 during the second quarter of 2025, $4,192,000 during the first quarter of 2025 and $293,000 during the second quarter of 2024. Accretion of loan discounts on acquired loans contributed approximately 18 basis points to the net interest margin in the second quarter of 2025, 24 basis points in the first quarter of 2025 and 2 basis points in the second quarter of 2024.

The continued improvement in the net interest margin, excluding the accretion of discount on acquired loans, during the second quarter of 2025 compared with both the first quarter of 2025 and second quarter of 2024 was largely driven by an improved yield on earning assets and a lower cost of deposits (excluding Heartland’s deposit base). The lower cost of deposits was 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.

During the quarter ended June 30, 2025, the Company recorded a provision for credit losses of $1,200,000 compared with a provision for credit losses of $15,300,000 in the first quarter of 2025 and a provision for credit losses of $625,000 during the second quarter of 2024. During the first quarter of 2025, the provision for credit losses included $16,200,000 for the “Day 2” CECL addition to the allowance for credit losses related to the Heartland acquisition.

Net charge-offs totaled $848,000, or 6 basis points on an annualized basis, of average loans outstanding during the second quarter of 2025 compared with $486,000, or 4 basis points on an annualized basis, of average loans during the first quarter of 2025 and $433,000, or 4 basis points, of average loans during the second quarter of 2024.

During the quarter ended June 30, 2025, non-interest income totaled $16,733,000, an increase of $1,893,000, or 13%, compared with the first quarter of 2025 and a decline of $2,190,000, or 12%, compared with the second quarter of 2024. The increase in non-interest income during the second quarter of 2025 compared with the first quarter of 2025 was driven by both improvement in the Company’s existing operations and the Heartland acquisition. The decline in the second quarter of 2025 compared to the same period of 2024 was largely the result of the sale of the GAI assets during the second quarter of 2024.

On an adjusted basis, non-interest income for the second quarter 2025 was $16,733,000 compared to $14,840,000 for the first quarter 2025 and $13,983,000 for the second quarter 2024. 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 $329,000, or 9%, during the second quarter of 2025 compared with the first quarter of 2025 and increased $382,000, or 10%, compared with the second quarter of 2024. The increase during the second quarter of 2025 compared with the first quarter of 2025 was largely attributable to seasonal fees related to customer tax filings, strong new business results, and the Heartland acquisition, partially offset by weaker equity markets during the first two months of the second quarter. The increase during the second quarter of 2025 compared with the second quarter of 2024 was largely attributable to increased assets under management driven by healthy capital markets throughout 2024 and continued strong new business results in addition to the Heartland acquisition.

Service charges on deposit accounts increased $228,000, or 7%, during the quarter ended June 30, 2025 compared with the first quarter of 2025 and increased $621,000, or 20%, compared with the second quarter of 2024.

Contacts

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

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