German American Bancorp, Inc. (Nasdaq: GABC) reported another
quarter of strong operating performance, resulting in quarterly
earnings of $23.8 million, or $0.90 per share, during the second
quarter of 2021. This level of quarterly earnings represented an
increase of $4.3 million, or approximately 22% on a per share
basis, from 2021 first quarter earnings of $19.6 million, or $0.74
per share. On a year-over-year basis, the current quarterly
earnings, as compared to second quarter 2020 earnings of $14.3
million, or $0.54 per share, increased by $9.6 million, or
approximately 67% on a per share basis.
The second quarter 2021 earnings growth was
driven by a number of factors including strong balance sheet
growth, within both the core loan portfolio and deposit base,
improved net interest income, and a reduced provision for credit
losses, coupled with a solid increase in core non-interest income
and disciplined control over non-interest expenses.
As of June 30, 2021, the Company’s total assets
were $5.349 billion, representing an increase of $128.7 million, or
10% on an annualized basis, compared to March 31, 2021, and an
increase of $497.5 million, or 10%, compared to June 30, 2020. This
increase in total assets, on a linked-quarter basis, was partially
attributable to total loans, exclusive of PPP loans, increasing by
5%, on an annualized basis, from March 31, 2021 to June 30, 2021.
This organic growth of the core loan portfolio represents the first
quarter of loan growth, exclusive of the impact of PPP loans, since
the onset of the COVID-19 pandemic. Additionally, the Company’s
historically strong loan portfolio demonstrated further quality
improvement, allowing for a $5.0 million reversal of the provision
for credit losses in the second quarter of 2021.
Net interest income during the second quarter of
2021 increased $948,000 from the first quarter of 2021 and $1.4
million compared to the same period of 2020. The increase in net
interest income in the second quarter of 2021 compared to the first
quarter of 2021 was primarily attributable to the increase in
average earning assets. The increase in net interest income in the
second quarter of 2021 compared to with the second quarter of 2020
was largely attributable to an increase in average earning assets
and a higher level of fees recognized related to PPP loans.
While certain seasonality factors impacted the
level of non-interest income in the second quarter compared to the
first quarter of 2021, an additional factor contributing to the
second quarter of 2021 net income improvement was a year-over-year
increase in non-interest income. Year-over-year combined net
revenue improvements of approximately $1.5 million, or 12%, were
primarily driven by a $753,000, or 40%, increase in trust and
investment product fees, and a $1.0 million, or 41%, increase in
interchange fee income. Both of these areas of fee income were
positively impacted by the ongoing improvement in economic
conditions, with the increase in trust and investment fees being
largely attributable to increased assets under management within
the Company’s wealth management group, and the increase in
interchange fees being related to increased card utilization by
customers.
The Company’s non-interest expenses declined by
$2.2 million in the second quarter of 2021, as compared to the
first quarter of 2021. The vast majority of this positive
differential was attributable to a higher level of expense in the
first quarter related to the Company’s previously disclosed
operating optimization plan.
Mark A. Schroeder, German American’s Chairman
& CEO, stated, “We were very pleased with our ability to build
upon the momentum of our solid first quarter earnings with
exceptionally strong performance in the second quarter. We were
particularly encouraged by the level of core, organic loan growth,
exclusive of the impact of PPP loan activity, and the improvement
we’ve seen in general economic conditions throughout our footprint
during the current quarter. While new developments related to the
pandemic continue to cause uncertainty for both our business and
retail customers, we are hopeful that improvements in commercial
and social activities will remain steady and look forward with
optimism to continued economic growth in the coming months.”
The Company also announced its Board of
Directors has declared a regular quarterly cash dividend of $0.21
per share, which will be payable on August 20, 2021 to shareholders
of record as of August 10, 2021.
COVID-19 Pandemic Loan
Information
The Company continued its participation in the
Paycheck Protection Program (“PPP”) for loans provided through the
Small Business Administration (“SBA”), as established under the
Coronavirus Aid, Relief and Economic Security Act (the "CARES
Act"), lending funds primarily to its existing loan and/or deposit
customers. The PPP loans carry an interest rate of 1.00% and
included a processing fee that varied depending on the balance of
the loan at origination and is recognized over the life of the
loan. The vast majority of the Company's PPP loans made during 2020
had two-year maturities, while PPP loans made during 2021 have
five-year maturities.
Under the first round of the PPP, which
concluded in 2020, the Company originated loans totaling
approximately $351.3 million in principal amount, with
approximately $12.0 million of related net processing fees on 3,070
PPP loan relationships. As of June 30, 2021, $330.8 million of
those first round PPP loans had been forgiven by the Company
pursuant to the terms of the program, with $11.7 million in net
processing fees having been recognized by the Company.
The Company also participated in the second
round of the program, which began in January 2021 and gave
applicants until May 31, 2021 to apply for a PPP loan and the SBA
until June 30, 2021 to process applications. The Company originated
loans totaling approximately $157.0 million in principal amount,
with approximately $9.0 million of related net processing fees, on
2,601 PPP loan relationships, under the second round of this
program. As of June 30, 2021, $20.8 million of second round PPP
loans had been forgiven by the Company, with $2.0 million in net
processing fees having been recognized by the Company. As a result
of the forgiveness of the first and second round PPP loans, $156.7
million of total PPP loans remain outstanding as of June 30, 2021,
with approximately $7.3 million of net fees remaining deferred on
that date.
In response to requests from borrowers who have
experienced pandemic-related business or personal cash flow
interruptions, and in accordance with regulatory guidance, the
Company has made short-term loan modifications involving both
partial and full payment deferrals. The table below shows the
payment modifications that were still in effect as of June 30,
2021, with all of these credit relationships making full interest
payments.
|
|
|
|
|
|
% of Loan Category (Excludes PPP Loans) |
Type of Loans(dollars in
thousands) |
|
Number of Loans |
|
Outstanding Balance |
|
As of 6/30/2021 |
|
As of 3/31/2021 |
|
|
|
|
|
|
|
|
|
Commercial & Industrial Loans |
|
1 |
|
|
$ |
266 |
|
|
0.1 |
% |
|
0.9 |
% |
Commercial Real Estate
Loans |
|
5 |
|
|
12,267 |
|
|
0.8 |
% |
|
2.4 |
% |
Agricultural Loans |
|
— |
|
|
— |
|
|
— |
% |
|
— |
% |
Consumer Loans |
|
1 |
|
|
7 |
|
|
n/m (1) |
|
|
n/m (1) |
|
Residential Mortgage
Loans |
|
1 |
|
|
14 |
|
|
n/m (1) |
|
|
0.1 |
% |
Total |
|
8 |
|
|
$ |
12,554 |
|
|
0.4 |
% |
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) n/m = not meaningful
The Company tracks lending exposure by industry
classification to determine potential risk associated with industry
concentrations, if any, that could lead to additional credit loss
exposure. As a result of the COVID-19 pandemic, the Company
initially identified loan segments that could represent a
potentially higher level of credit risk, as many of these customers
may have incurred a significant negative impact to their businesses
as a result of governmental stay-at-home orders and travel
restrictions. At June 30, 2021, the Company had the following
exposure to these potentially sensitive COVID-19 identified loan
segments:
Industry Segment(dollars in
thousands) |
|
Number of Loans |
|
Outstanding Balance |
|
% of Total Loans (excludes PPP Loans) |
|
% of Industry Segment Under Deferral |
|
|
|
|
|
|
|
|
|
Lodging / Hotels |
|
44 |
|
$ |
130,630 |
|
|
4.5 |
% |
|
7.9 |
% |
Retail Shopping / Strip
Centers |
|
62 |
|
96,831 |
|
|
3.3 |
% |
|
— |
% |
Restaurants |
|
172 |
|
52,286 |
|
|
1.8 |
% |
|
4.1 |
% |
During the second quarter of 2021, the Company
re-assessed its exposure to the student housing industry segment,
which was formerly included as a COVID-19 pandemic-related stressed
sector. With the return of universities in its market areas to
in-person classes for the 2021/2022 school year and occupancy
levels for the upcoming school year that are similar to historical
levels, the Company removed the student housing segment from the
COVID-19 pandemic-related stressed sectors.
Balance Sheet Highlights
Total assets for the Company totaled $5.349
billion at June 30, 2021, representing an increase of $128.7
million, or 10% on an annualized basis, compared with March 31,
2021 and an increase of $497.5 million, or 10%, compared with June
30, 2020. The increase in total assets during the second quarter of
2021 compared with March 31, 2021 and June 30, 2020 has been
largely driven by significant growth of deposits.
Securities available for sale increased $199.5
million as of June 30, 2021 compared with March 31, 2021 and
increased $623.1 million compared with June 30, 2020. The increase
in the securities portfolio in both the second quarter of 2021 and
over the past year was the result of increased levels of deposits
and cash flows from the forgiveness of PPP loans.
June 30, 2021 total loans declined $46.5
million, or 6% on an annualized basis, compared with March 31, 2021
and declined $196.4 million, or 6%, compared with June 30, 2020.
The decline in total loans at June 30, 2021 compared with March 31,
2021 and June 30, 2020 was due to a decrease in PPP loans. PPP
loans, net of deferred fees, totaled $149.4 million at June 30,
2021 compared with $234.2 million at March 31, 2021 and $338.7
million at June 30, 2020.
Excluding PPP loans, total loans increased $38.4
million, or 5% on an annualized basis, at June 30, 2021 compared
with March 31, 2021. Commercial real estate loans increased
approximately $24.6 million, or 7% on an annualized basis, during
the second quarter of 2021 compared with March 31, 2021 and
commercial and industrial loans increased $4.8 million (excluding
PPP loans), or 4% on an annualized basis, while agricultural loans
declined $2.8 million, or 3% on an annualized basis. During the
second quarter of 2021 compared with March 31, 2021, retail loans
increased $11.9 million, or 9% on an annualized basis.
|
|
|
|
|
|
|
End of Period Loan
Balances |
|
6/30/2021 |
|
3/31/2021 |
|
6/30/2020 |
(dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & Industrial Loans |
|
$ |
647,918 |
|
|
$ |
728,014 |
|
|
$ |
852,416 |
|
Commercial Real Estate
Loans |
|
1,517,172 |
|
|
1,492,617 |
|
|
1,473,234 |
|
Agricultural Loans |
|
344,450 |
|
|
347,231 |
|
|
373,483 |
|
Consumer Loans |
|
290,890 |
|
|
285,485 |
|
|
291,555 |
|
Residential Mortgage
Loans |
|
274,093 |
|
|
267,634 |
|
|
280,246 |
|
|
|
$ |
3,074,523 |
|
|
$ |
3,120,981 |
|
|
$ |
3,270,934 |
|
|
|
|
|
|
|
|
Net PPP Loans (included in
Commercial & Industrial Loans above) |
|
$ |
149,372 |
|
|
$ |
234,229 |
|
|
$ |
338,673 |
|
|
|
|
|
|
|
|
The Company’s allowance for credit losses
totaled $40.0 million at June 30, 2021 compared to $45.1 million at
March 31, 2021 and $42.4 million at June 30, 2020. The allowance
for credit losses represented 1.30% of period-end loans (1.37%
excluding PPP loans) at June 30, 2021 compared with 1.45% of
period-end loans (1.56% excluding PPP loans) at March 31, 2021 and
1.30% of period-end loans (1.45% excluding PPP loans) at June 30,
2020.
The Company adopted ASU No. 2016-13, Financial
Instruments - Credit Losses (Topic 326) ("CECL") on January 1,
2020. 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, 2021, the Company held net discounts on
acquired loans of $6.0 million.
The allowance for credit losses declined during
the quarter ended June 30, 2021 as a result of the Company
recording a negative $5.0 million provision for credit losses while
recording modest net charge-offs. During 2020, the allowance for
credit losses increased through elevated provision for credit
losses primarily due to the developments during 2020 related to the
COVID-19 pandemic and the resulting impact on the economic
assumptions used in the CECL model.
Non-performing assets totaled $18.3 million at
June 30, 2021 compared to $21.3 million at March 31, 2021 and $19.6
million at June 30, 2020. Non-performing assets represented 0.34%
of total assets at June 30, 2021 compared to 0.41% at March 31,
2021 and 0.40% at June 30, 2020. Non-performing loans totaled $17.4
million at June 30, 2021 compared to $21.0 million at March 31,
2021 and $19.1 million at June 30, 2020. Non-performing loans
represented 0.57% of total loans at June 30, 2021 compared to 0.67%
at March 31, 2021 and 0.59% at June 30, 2020.
|
|
|
|
|
|
Non-performing
Assets |
|
|
|
|
|
(dollars in
thousands) |
|
|
|
|
|
|
6/30/2021 |
|
3/31/2021 |
|
6/30/2020 |
Non-Accrual Loans |
$ |
17,386 |
|
|
$ |
20,994 |
|
|
$ |
16,183 |
|
Past Due Loans (90 days or
more) |
— |
|
|
— |
|
|
2,948 |
|
Total Non-Performing Loans |
17,386 |
|
|
20,994 |
|
|
19,131 |
|
Other Real Estate |
925 |
|
|
325 |
|
|
425 |
|
Total Non-Performing Assets |
$ |
18,311 |
|
|
$ |
21,319 |
|
|
$ |
19,556 |
|
|
|
|
|
|
|
Restructured Loans |
$ |
108 |
|
|
$ |
109 |
|
|
$ |
114 |
|
|
|
|
|
|
|
June 30, 2021 total deposits increased $71.1
million, or 7% on an annualized basis, compared to March 31, 2021
and increased $470.3 million, or 12%, compared with June 30, 2020.
The increase in total deposits at June 30, 2021 compared with March
31, 2021 was largely attributable to seasonal increases in public
fund deposits. The increase in total deposits at June 30, 2021
compared with June 30, 2020 was impacted by participation in the
PPP, stimulus payments provided by the federal government, an
increase in public funds and general inflows of customer
deposits.
|
|
|
|
|
|
|
End of Period Deposit
Balances |
|
6/30/2021 |
|
3/31/2021 |
|
6/30/2020 |
(dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing Demand Deposits |
|
$ |
1,350,399 |
|
|
$ |
1,383,888 |
|
|
$ |
1,139,928 |
|
IB Demand, Savings, and MMDA
Accounts |
|
2,688,611 |
|
|
2,548,015 |
|
|
2,267,092 |
|
Time Deposits <
$100,000 |
|
226,970 |
|
|
239,911 |
|
|
293,059 |
|
Time Deposits >
$100,000 |
|
183,765 |
|
|
206,859 |
|
|
279,354 |
|
|
|
$ |
4,449,745 |
|
|
$ |
4,378,673 |
|
|
$ |
3,979,433 |
|
|
|
|
|
|
|
|
Results of Operations Highlights – Quarter ended June
30, 2021
Net income for the quarter ended June 30, 2021
totaled $23,822,000, or $0.90 per share, an increase of 22% on a
per share basis compared with the first quarter 2021 net income of
$19,557,000, or $0.74 per share, and an increase of 67% on a per
share basis compared with the second quarter 2020 net income of
$14,255,000, or $0.54 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Average
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Tax-equivalent basis /
dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
|
|
June 30, 2021 |
|
March 31, 2021 |
|
June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance |
|
Income/ Expense |
|
Yield/ Rate |
|
Principal Balance |
|
Income/ Expense |
|
Yield/ Rate |
|
Principal Balance |
|
Income/ Expense |
|
Yield/ Rate |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds Sold and
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments |
|
$ |
386,144 |
|
|
$ |
103 |
|
|
0.11 |
% |
|
$ |
337,981 |
|
|
$ |
85 |
|
|
0.10 |
% |
|
$ |
239,164 |
|
|
$ |
84 |
|
|
0.14 |
% |
Securities |
|
1,480,532 |
|
|
8,794 |
|
|
2.38 |
% |
|
1,295,630 |
|
|
7,327 |
|
|
2.26 |
% |
|
897,193 |
|
|
6,087 |
|
|
2.71 |
% |
Loans and Leases |
|
3,119,385 |
|
|
34,561 |
|
|
4.44 |
% |
|
3,107,902 |
|
|
35,164 |
|
|
4.58 |
% |
|
3,253,169 |
|
|
38,154 |
|
|
4.71 |
% |
Total Interest Earning
Assets |
|
$ |
4,986,061 |
|
|
$ |
43,458 |
|
|
3.49 |
% |
|
$ |
4,741,513 |
|
|
$ |
42,576 |
|
|
3.63 |
% |
|
$ |
4,389,526 |
|
|
$ |
44,325 |
|
|
4.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand Deposit Accounts |
|
$ |
1,377,754 |
|
|
|
|
|
|
$ |
1,268,409 |
|
|
|
|
|
|
$ |
1,074,739 |
|
|
|
|
|
IB Demand, Savings, and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMDA Accounts |
|
$ |
2,704,765 |
|
|
$ |
672 |
|
|
0.10 |
% |
|
$ |
2,490,953 |
|
|
$ |
637 |
|
|
0.10 |
% |
|
$ |
2,220,549 |
|
|
$ |
1,535 |
|
|
0.28 |
% |
Time Deposits |
|
425,972 |
|
|
597 |
|
|
0.56 |
% |
|
467,310 |
|
|
805 |
|
|
0.70 |
% |
|
586,179 |
|
|
2,208 |
|
|
1.51 |
% |
FHLB Advances and Other
Borrowings |
|
179,698 |
|
|
1,145 |
|
|
2.56 |
% |
|
183,376 |
|
|
1,151 |
|
|
2.55 |
% |
|
227,562 |
|
|
1,339 |
|
|
2.37 |
% |
Total Interest-Bearing
Liabilities |
|
$ |
3,310,435 |
|
|
$ |
2,414 |
|
|
0.29 |
% |
|
$ |
3,141,639 |
|
|
$ |
2,593 |
|
|
0.33 |
% |
|
$ |
3,034,290 |
|
|
$ |
5,082 |
|
|
0.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Funds |
|
|
|
|
|
0.19 |
% |
|
|
|
|
|
0.22 |
% |
|
|
|
|
|
0.47 |
% |
Net Interest Income |
|
|
|
$ |
41,044 |
|
|
|
|
|
|
$ |
39,983 |
|
|
|
|
|
|
$ |
39,243 |
|
|
|
Net Interest Margin |
|
|
|
|
|
3.30 |
% |
|
|
|
|
|
3.41 |
% |
|
|
|
|
|
3.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the second quarter of 2021, net interest
income, on a non tax-equivalent basis, totaled $39,880,000, an
increase of $948,000, or 2%, compared to the first quarter of 2021
net interest income of $38,932,000 and an increase of $1,421,000,
or 4%, compared to the second quarter of 2020 net interest income
of $38,459,000.
The increase in net interest income during the
second quarter of 2021 compared with the first quarter of 2021 was
primarily attributable to an increase in average earning assets.
The increase in net interest income in the second quarter of 2021
compared with the second quarter of 2020 was largely attributable
to an increase in average earning assets and a higher level of fees
recognized related to PPP loans.
The tax equivalent net interest margin for the
quarter ended June 30, 2021 was 3.30% compared with 3.41% in the
first quarter of 2021 and 3.59% in the second quarter of 2020. The
Company's net interest margin in all periods presented has been
impacted significantly by fees recognized as a part of the PPP and
accretion of loan discounts on acquired loans.
Fees recognized on PPP loans through net
interest income during the second quarter of 2021 totaled
$2,776,000, $3,017,000 during the first quarter of 2021 and
$1,121,000 during the second quarter of 2020. The fees recognized
related to the PPP contributed approximately 22 basis points to the
net interest margin on an annualized basis in the second quarter of
2021, 25 basis points in the first quarter of 2021 and 10 basis
points in the second quarter of 2020. Accretion of loan discounts
on acquired loans contributed approximately 5 basis points to the
net interest margin in the second quarter of 2021, 7 basis points
in the first quarter of 2021 and 19 basis points in the second
quarter of 2020. Accretion of discounts on acquired loans totaled
$671,000 during the second quarter of 2021, $867,000 during the
first quarter of 2021 and $2,127,000 during the second quarter of
2020.
Historically low market interest rates continue
to impact the Company's net interest margin. Lower market interest
rates continue to negatively impact earning asset yields, with
these declines being partially mitigated by a lower cost of funds.
The Company has also continued to carry excess liquidity on the
balance sheet that resulted from significant deposit growth during
2020, which has continued in the first half of 2021, forgiveness of
PPP loans, and continued somewhat muted loan growth.
During the quarter ended June 30, 2021, the
Company recorded a negative provision for credit losses of
$5,000,000 compared with a negative provision for credit losses of
$1,500,000 in the first quarter of 2021 and a provision for credit
losses of $5,900,000 during the second quarter of 2020. The
negative provision for credit losses in the first quarter of 2021
was largely due to a decline in certain adversely criticized assets
and improvement in certain pandemic-related stressed sectors for
which the Company had provided significant levels of allowance for
credit losses during 2020. The level of provision for credit losses
during the second quarter of 2020 was primarily due to the
developments related to the COVID-19 pandemic and the resulting
impact on the economic assumptions used in the CECL model.
Net charge-offs totaled $104,000, or 1 basis
point on an annualized basis, of average loans outstanding during
the second quarter of 2021 compared with $260,000, or 3 basis point
on an annualized basis, of average loans during the first quarter
of 2021 and compared with $110,000, or 1 basis point, of average
loans during the second quarter of 2020.
During the quarter ended June 30, 2021,
non-interest income totaled $13,902,000, a decline of $1,135,000,
or 8%, compared with the first quarter of 2021 and an increase of
$1,479,000, or 12%, compared with the second quarter of 2020.
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
Non-interest
Income |
|
6/30/2021 |
|
3/31/2021 |
|
6/30/2020 |
(dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust and Investment Product Fees |
|
$ |
2,620 |
|
|
$ |
2,358 |
|
|
$ |
1,867 |
|
Service Charges on Deposit
Accounts |
|
1,735 |
|
|
1,678 |
|
|
1,365 |
|
Insurance Revenues |
|
2,020 |
|
|
3,292 |
|
|
1,830 |
|
Company Owned Life
Insurance |
|
385 |
|
|
352 |
|
|
356 |
|
Interchange Fee Income |
|
3,482 |
|
|
2,830 |
|
|
2,476 |
|
Other Operating Income |
|
1,342 |
|
|
1,350 |
|
|
882 |
|
Subtotal |
|
11,584 |
|
|
11,860 |
|
|
8,776 |
|
Net Gains on Loans |
|
2,018 |
|
|
2,202 |
|
|
2,654 |
|
Net Gains on Securities |
|
300 |
|
|
975 |
|
|
993 |
|
Total Non-interest
Income |
|
$ |
13,902 |
|
|
$ |
15,037 |
|
|
$ |
12,423 |
|
|
|
|
|
|
|
|
Trust and investment product fees increased
$262,000, or 11%, during the second quarter of 2021 compared with
the first quarter of 2021 and increased $753,000, or 40%, compared
with the second quarter of 2020. The increase during the second
quarter of 2021 compared with both periods was largely attributable
to increased assets under management within the Company's wealth
management group.
Service charges on deposit accounts increased
$57,000, or 3%, during the second quarter of 2021 compared with the
first quarter of 2021 and increased $370,000, or 27%, compared with
the second quarter of 2020. The increase during the second quarter
of 2021 compared with the second quarter of 2020 was largely
related to the economic impacts of the COVID-19 pandemic and
resulting change in deposit customer activity during 2020.
Insurance revenues declined $1,272,000, or 39%,
during the quarter ended June 30, 2021 compared with the first
quarter of 2021 and increased $190,000, or 10%, compared with the
second quarter of 2020. The decline during the second quarter of
2021 compared with the first quarter of 2021 was primarily due to
contingency revenue. Contingency revenue during the first quarter
of 2021 totaled $1,445,000 compared with no contingency revenue
during the second quarter of 2021. Contingency revenue is
reflective of claims and loss experience with insurance carriers
that the Company represents through its property and casualty
insurance agency. Typically, the majority of contingency revenue is
recognized during the first quarter of the year.
Interchange fee income increased $652,000, or
23%, during the quarter ended June 30, 2021 compared with the first
quarter of 2021 and increased $1,006,000, or 41%, compared with the
second quarter of 2020. The increased level of fees during the
second quarter of 2021 compared with both the first quarter of 2021
and the second quarter of 2020 was due to increased card
utilization by customers. Card utilization in prior periods was
impacted by economic impacts of the COVID-19 pandemic.
Net gains on sales of loans declined $184,000,
or 8%, during the second quarter of 2021 compared with the first
quarter of 2021 and declined $636,000, or 24%, compared with the
second quarter of 2020. The decline in the second quarter of 2021
compared with the first quarter of 2021 was largely related to a
lower volume of loans sold. The decline in the second quarter of
2021 compared with the second quarter of 2020 was generally
attributable to a lower volume of loans sold and fair value
adjustments on commitments to sell loans partially offset by higher
pricing levels on loans sold. Loan sales totaled $61.5 million
during the second quarter of 2021 compared with $68.5 million
during the first quarter of 2021 and $79.7 million during the
second quarter of 2020.
The Company realized $300,000 in gains on sales
of securities during the second quarter of 2021 compared with
$975,000 during the first quarter of 2021 and $993,000 during the
second quarter of 2020. The sales of securities in all periods was
done as part of modest shifts in the allocations within the
securities portfolio.
During the quarter ended June 30, 2021,
non-interest expense totaled $29,037,000, a decline of $2,222,000,
or 7%, compared with the first quarter of 2021, and an increase of
$949,000, or 3%, compared with the second quarter of 2020.
Non-interest expense included non-recurring expenses that totaled
$554,000 during the second quarter of 2021 and $2,012,000 during
the first quarter of 2021 related to an operating optimization plan
previously announced by the Company.
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Quarter Ended |
|
Quarter Ended |
Non-interest
Expense |
|
6/30/2021 |
|
3/31/2021 |
|
6/30/2020 |
(dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and Employee Benefits |
|
$ |
16,375 |
|
|
$ |
17,805 |
|
|
$ |
15,882 |
|
Occupancy, Furniture and
Equipment Expense |
|
3,830 |
|
|
4,348 |
|
|
3,481 |
|
FDIC Premiums |
|
329 |
|
|
334 |
|
|
123 |
|
Data Processing Fees |
|
1,779 |
|
|
1,743 |
|
|
1,763 |
|
Professional Fees |
|
1,513 |
|
|
1,160 |
|
|
1,082 |
|
Advertising and Promotion |
|
705 |
|
|
782 |
|
|
882 |
|
Intangible Amortization |
|
711 |
|
|
760 |
|
|
909 |
|
Other Operating Expenses |
|
3,795 |
|
|
4,327 |
|
|
3,966 |
|
Total Non-interest
Expense |
|
$ |
29,037 |
|
|
$ |
31,259 |
|
|
$ |
28,088 |
|
|
|
|
|
|
|
|
Salaries and benefits declined $1,430,000, or
8%, during the quarter ended June 30, 2021 compared with the first
quarter of 2021 and increased $493,000, or 3%, compared with the
second quarter of 2020. The decline in salaries and benefits during
the second quarter of 2021 compared with the first quarter of 2021
was impacted by the employee severance and related costs associated
with the Company's previously disclosed operating optimization plan
that totaled approximately $19,000 during the second quarter of
2021 and $594,000 during the first quarter of 2021. In addition,
various benefit costs were reduced during the second quarter of
2021 compared with the first quarter of 2021 including health
insurance costs and retirement plan costs.
Occupancy, furniture and equipment expense
declined $518,000, or 12%, during the second quarter of 2021
compared with the first quarter of 2021 and increased $349,000, or
10%, compared to the second quarter of 2020. The decline during the
second quarter of 2021 compared first quarter of 2021 and the
increase compared with the second quarter of 2020 were both
primarily related to lease termination costs associated with the
Company's operating optimization plan. Lease termination costs
totaled approximately $536,000 during the second quarter of 2021
and totaled approximately $875,000 during the first quarter of
2021. The Company did not incur any lease termination costs during
the second quarter of 2020.
Professional fees increased $353,000, or 30%, in
the second quarter of 2021 compared with the first quarter of 2021
and increased $431,000, or 40%, compared with the second quarter of
2020. The increase during the second quarter of 2021 compared with
both the first quarter of 2021 and second quarter of 2020 was
largely attributable to an increase in legal fees.
Other operating expenses declined $532,000, or
12%, during the second quarter of 2021 compared with the first
quarter of 2021 and declined $171,000, or 4%, compared with the
second quarter of 2020. The decline during the second quarter of
2021 compared with the first quarter of 2021 was primarily
attributable to the write-down of leasehold improvements and
furniture and equipment of approximately $543,000 related to the
Company's previously announced operating optimization plan in the
first quarter of 2021.
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 68 banking offices in 19 contiguous southern Indiana
counties and eight counties in Kentucky. The Company also owns an
investment brokerage subsidiary (German American Investment
Services, Inc.) and a full line property and casualty insurance
agency (German American Insurance, Inc.).
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may be
deemed “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Readers are
cautioned that, by their nature, forward-looking statements are
based on assumptions and are subject to risks, uncertainties, and
other factors. Actual results and experience could differ
materially from the anticipated results or other expectations
expressed or implied by these forward-looking statements as a
result of a number of factors, including but not limited to, those
discussed in this press release. Factors that could cause actual
experience to differ from the expectations expressed or implied in
this press release include the unknown future direction of interest
rates and the timing and magnitude of any changes in interest
rates; changes in competitive conditions; the introduction,
withdrawal, success and timing of asset/liability management
strategies or of mergers and acquisitions and other business
initiatives and strategies; changes in customer borrowing,
repayment, investment and deposit practices; changes in fiscal,
monetary and tax policies; changes in financial and capital
markets; potential deterioration in general economic conditions,
either nationally or locally, resulting in, among other things,
credit quality deterioration; the severity and duration of the
COVID-19 pandemic and its impact on general economic and financial
market conditions and our business, results of operations and
financial condition; our participation in the Paycheck Protection
Program administered by the Small Business Administration; capital
management activities, including possible future sales of new
securities, or possible repurchases or redemptions by the Company
of outstanding debt or equity securities; risks of expansion
through acquisitions and mergers, such as unexpected credit quality
problems of the acquired loans or other assets, unexpected
attrition of the customer base of the acquired institution or
branches, and difficulties in integration of the acquired
operations; factors driving impairment charges on investments; the
impact, extent and timing of technological changes; potential
cyber-attacks, information security breaches and other criminal
activities; litigation liabilities, including related costs,
expenses, settlements and judgments, or the outcome of matters
before regulatory agencies, whether pending or commencing in the
future; actions of the Federal Reserve Board; changes in accounting
principles and interpretations; potential increases of federal
deposit insurance premium expense, and possible future special
assessments of FDIC premiums, either industry wide or specific to
the Company’s banking subsidiary; actions of the regulatory
authorities under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the "Dodd-Frank Act") and the Federal Deposit
Insurance Act and other possible legislative and regulatory actions
and reforms; impacts resulting from possible amendments or
revisions to the Dodd-Frank Act and the regulations promulgated
thereunder, or to Consumer Financial Protection Bureau rules and
regulations; the continued availability of earnings and excess
capital sufficient for the lawful and prudent declaration and
payment of cash dividends; and other risk factors expressly
identified in the Company’s filings with the United States
Securities and Exchange Commission. Such statements reflect our
views with respect to future events and are subject to these and
other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of
the Company. Readers are cautioned not to place undue reliance on
these forward-looking statements. It is intended that these
forward-looking statements speak only as of the date they are made.
We do not undertake any obligation to release publicly any
revisions to these forward-looking statements to reflect future
events or circumstances or to reflect the occurrence of
unanticipated events.
GERMAN AMERICAN BANCORP, INC. |
(unaudited, dollars in thousands except per share
data) |
|
|
|
|
|
|
Consolidated Balance Sheets |
|
|
|
|
|
|
|
June 30, 2021 |
|
March 31, 2021 |
|
June 30, 2020 |
ASSETS |
|
|
|
|
|
Cash and Due from Banks |
$ |
55,491 |
|
|
$ |
102,758 |
|
|
$ |
53,081 |
|
Short-term Investments |
315,585 |
|
|
291,727 |
|
|
227,275 |
|
Investment Securities |
1,585,701 |
|
|
1,386,226 |
|
|
962,623 |
|
|
|
|
|
|
|
Loans Held-for-Sale |
17,459 |
|
|
18,493 |
|
|
21,756 |
|
|
|
|
|
|
|
Loans, Net of Unearned Income |
3,070,690 |
|
|
3,117,203 |
|
|
3,266,347 |
|
Allowance for Credit Losses |
(39,995 |
) |
|
(45,099 |
) |
|
(42,431 |
) |
Net Loans |
3,030,695 |
|
|
3,072,104 |
|
|
3,223,916 |
|
|
|
|
|
|
|
Stock in FHLB and Other Restricted Stock |
13,048 |
|
|
13,048 |
|
|
13,368 |
|
Premises and Equipment |
90,113 |
|
|
92,044 |
|
|
96,748 |
|
Goodwill and Other Intangible Assets |
129,305 |
|
|
130,086 |
|
|
132,676 |
|
Other Assets |
111,172 |
|
|
113,348 |
|
|
119,608 |
|
TOTAL ASSETS |
$ |
5,348,569 |
|
|
$ |
5,219,834 |
|
|
$ |
4,851,051 |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Non-interest-bearing Demand Deposits |
$ |
1,350,399 |
|
|
$ |
1,383,888 |
|
|
$ |
1,139,928 |
|
Interest-bearing Demand, Savings, and Money Market Accounts |
2,688,611 |
|
|
2,548,015 |
|
|
2,267,092 |
|
Time Deposits |
410,735 |
|
|
446,770 |
|
|
572,413 |
|
Total Deposits |
4,449,745 |
|
|
4,378,673 |
|
|
3,979,433 |
|
|
|
|
|
|
|
Borrowings |
205,506 |
|
|
173,547 |
|
|
219,700 |
|
Other Liabilities |
44,321 |
|
|
50,401 |
|
|
57,244 |
|
TOTAL LIABILITIES |
4,699,572 |
|
|
4,602,621 |
|
|
4,256,377 |
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
Common Stock and Surplus |
301,855 |
|
|
301,216 |
|
|
300,514 |
|
Retained Earnings |
320,717 |
|
|
302,450 |
|
|
263,011 |
|
Accumulated Other Comprehensive Income |
26,425 |
|
|
13,547 |
|
|
31,149 |
|
SHAREHOLDERS'
EQUITY |
648,997 |
|
|
617,213 |
|
|
594,674 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
5,348,569 |
|
|
$ |
5,219,834 |
|
|
$ |
4,851,051 |
|
|
|
|
|
|
|
END OF PERIOD SHARES
OUTSTANDING |
26,545,704 |
|
|
26,546,280 |
|
|
26,497,291 |
|
|
|
|
|
|
|
TANGIBLE BOOK VALUE
PER SHARE (1) |
$ |
19.58 |
|
|
$ |
18.35 |
|
|
$ |
17.44 |
|
|
|
|
|
|
|
|
(1) Tangible Book
Value per Share is defined as Total Shareholders' Equity less
Goodwill and Other Intangible Assets divided by End of Period
Shares Outstanding. |
GERMAN AMERICAN BANCORP, INC. |
(unaudited, dollars in thousands except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2021 |
|
March 31, 2021 |
|
June 30, 2020 |
|
June 30, 2021 |
|
June 30, 2020 |
INTEREST
INCOME |
|
|
|
|
|
|
|
|
|
Interest and Fees on Loans |
$ |
34,504 |
|
|
$ |
35,104 |
|
|
$ |
38,080 |
|
|
$ |
69,608 |
|
|
$ |
75,938 |
|
Interest on Short-term Investments |
103 |
|
|
85 |
|
|
84 |
|
|
188 |
|
|
242 |
|
Interest and Dividends on Investment Securities |
7,687 |
|
|
6,336 |
|
|
5,377 |
|
|
14,023 |
|
|
10,932 |
|
TOTAL INTEREST INCOME |
42,294 |
|
|
41,525 |
|
|
43,541 |
|
|
83,819 |
|
|
87,112 |
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE |
|
|
|
|
|
|
|
|
|
Interest on Deposits |
1,269 |
|
|
1,442 |
|
|
3,743 |
|
|
2,711 |
|
|
9,400 |
|
Interest on Borrowings |
1,145 |
|
|
1,151 |
|
|
1,339 |
|
|
2,296 |
|
|
2,997 |
|
TOTAL INTEREST EXPENSE |
2,414 |
|
|
2,593 |
|
|
5,082 |
|
|
5,007 |
|
|
12,397 |
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
39,880 |
|
|
38,932 |
|
|
38,459 |
|
|
78,812 |
|
|
74,715 |
|
Provision for Credit Losses |
(5,000 |
) |
|
(1,500 |
) |
|
5,900 |
|
|
(6,500 |
) |
|
11,050 |
|
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES |
44,880 |
|
|
40,432 |
|
|
32,559 |
|
|
85,312 |
|
|
63,665 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST INCOME |
|
|
|
|
|
|
|
|
|
Net Gain on Sales of Loans |
2,018 |
|
|
2,202 |
|
|
2,654 |
|
|
4,220 |
|
|
4,517 |
|
Net Gain on Securities |
300 |
|
|
975 |
|
|
993 |
|
|
1,275 |
|
|
1,583 |
|
Other Non-interest Income |
11,584 |
|
|
11,860 |
|
|
8,776 |
|
|
23,444 |
|
|
20,404 |
|
TOTAL NON-INTEREST INCOME |
13,902 |
|
|
15,037 |
|
|
12,423 |
|
|
28,939 |
|
|
26,504 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
Salaries and Benefits |
16,375 |
|
|
17,805 |
|
|
15,882 |
|
|
34,180 |
|
|
33,282 |
|
Other Non-interest Expenses |
12,662 |
|
|
13,454 |
|
|
12,206 |
|
|
26,116 |
|
|
25,134 |
|
TOTAL NON-INTEREST EXPENSE |
29,037 |
|
|
31,259 |
|
|
28,088 |
|
|
60,296 |
|
|
58,416 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
29,745 |
|
|
24,210 |
|
|
16,894 |
|
|
53,955 |
|
|
31,753 |
|
Income Tax Expense |
5,923 |
|
|
4,653 |
|
|
2,639 |
|
|
10,576 |
|
|
5,026 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME |
$ |
23,822 |
|
|
$ |
19,557 |
|
|
$ |
14,255 |
|
|
$ |
43,379 |
|
|
$ |
26,727 |
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
EARNINGS PER SHARE |
$ |
0.90 |
|
|
$ |
0.74 |
|
|
$ |
0.54 |
|
|
$ |
1.64 |
|
|
$ |
1.01 |
|
DILUTED
EARNINGS PER SHARE |
$ |
0.90 |
|
|
$ |
0.74 |
|
|
$ |
0.54 |
|
|
$ |
1.64 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING |
26,545,869 |
|
|
26,510,001 |
|
|
26,502,731 |
|
|
26,528,034 |
|
|
26,583,167 |
|
DILUTED
WEIGHTED AVERAGE SHARES OUTSTANDING |
26,545,869 |
|
|
26,510,001 |
|
|
26,502,731 |
|
|
26,528,034 |
|
|
26,583,167 |
|
GERMAN AMERICAN BANCORP, INC. |
(unaudited, dollars in thousands except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
EARNINGS
PERFORMANCE RATIOS |
|
|
|
|
|
|
|
|
|
|
|
Annualized Return on Average
Assets |
|
1.78 |
% |
|
1.54 |
% |
|
1.20 |
% |
|
1.66 |
% |
|
1.18 |
% |
|
Annualized Return on Average
Equity |
|
15.09 |
% |
|
12.47 |
% |
|
9.71 |
% |
|
13.78 |
% |
|
9.19 |
% |
|
Annualized Return on Average
Tangible Equity (1) |
|
18.99 |
% |
|
15.75 |
% |
|
12.53 |
% |
|
17.38 |
% |
|
11.91 |
% |
|
Net Interest Margin |
|
3.30 |
% |
|
3.41 |
% |
|
3.59 |
% |
|
3.35 |
% |
|
3.66 |
% |
|
Efficiency Ratio (2) |
|
52.85 |
% |
|
56.81 |
% |
|
54.36 |
% |
|
54.83 |
% |
|
56.86 |
% |
|
Net Overhead Expense to
Average Earning Assets (3) |
|
1.21 |
% |
|
1.37 |
% |
|
1.43 |
% |
|
1.29 |
% |
|
1.53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
ASSET
QUALITY RATIOS |
|
|
|
|
|
|
|
|
|
|
|
Annualized Net Charge-offs to
Average Loans |
|
0.01 |
% |
|
0.03 |
% |
|
0.01 |
% |
|
0.02 |
% |
|
0.03 |
% |
|
Allowance for Credit Losses to
Period End Loans |
|
1.30 |
% |
|
1.45 |
% |
|
1.30 |
% |
|
|
|
|
|
Non-performing Assets to
Period End Assets |
|
0.34 |
% |
|
0.41 |
% |
|
0.40 |
% |
|
|
|
|
|
Non-performing Loans to Period
End Loans |
|
0.57 |
% |
|
0.67 |
% |
|
0.59 |
% |
|
|
|
|
|
Loans 30-89 Days Past Due to
Period End Loans |
|
0.12 |
% |
|
0.15 |
% |
|
0.23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED BALANCE SHEET & OTHER FINANCIAL
DATA |
|
|
|
|
|
|
|
|
|
|
|
Average Assets |
|
$ |
5,359,387 |
|
|
$ |
5,090,369 |
|
|
$ |
4,751,772 |
|
|
$ |
5,225,621 |
|
|
$ |
4,543,804 |
|
|
Average Earning Assets |
|
$ |
4,986,061 |
|
|
$ |
4,741,513 |
|
|
$ |
4,389,526 |
|
|
$ |
4,864,463 |
|
|
$ |
4,182,290 |
|
|
Average Total Loans |
|
$ |
3,119,385 |
|
|
$ |
3,107,902 |
|
|
$ |
3,253,169 |
|
|
$ |
3,113,675 |
|
|
$ |
3,156,284 |
|
|
Average Demand Deposits |
|
$ |
1,377,754 |
|
|
$ |
1,268,409 |
|
|
$ |
1,074,739 |
|
|
$ |
1,323,384 |
|
|
$ |
961,315 |
|
|
Average Interest Bearing
Liabilities |
|
$ |
3,310,435 |
|
|
$ |
3,141,639 |
|
|
$ |
3,034,290 |
|
|
$ |
3,226,503 |
|
|
$ |
2,951,035 |
|
|
Average Equity |
|
$ |
631,603 |
|
|
$ |
627,268 |
|
|
$ |
587,472 |
|
|
$ |
629,448 |
|
|
$ |
581,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period End Non-performing
Assets (4) |
|
$ |
18,311 |
|
|
$ |
21,319 |
|
|
$ |
19,556 |
|
|
|
|
|
|
Period End Non-performing
Loans (5) |
|
$ |
17,386 |
|
|
$ |
20,994 |
|
|
$ |
19,131 |
|
|
|
|
|
|
Period End Loans 30-89 Days
Past Due (6) |
|
$ |
3,681 |
|
|
$ |
4,791 |
|
|
$ |
7,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Equivalent Net Interest
Income |
|
$ |
41,044 |
|
|
$ |
39,983 |
|
|
$ |
39,243 |
|
|
$ |
81,027 |
|
|
$ |
76,227 |
|
|
Net Charge-offs during
Period |
|
$ |
104 |
|
|
$ |
260 |
|
|
$ |
110 |
|
|
$ |
364 |
|
|
$ |
550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Average Tangible
Equity is defined as Average Equity less Average Goodwill and Other
Intangibles. |
|
|
|
|
(2 |
) |
Efficiency Ratio
is defined as Non-interest Expense divided by the sum of Net
Interest Income, on a tax equivalent basis, and Non-interest
Income. |
|
|
|
|
(3 |
) |
Net Overhead
Expense is defined as Total Non-interest Expense less Total
Non-interest Income. |
|
|
|
|
(4 |
) |
Non-performing
assets are defined as Non-accrual Loans, Loans Past Due 90 days or
more, and Other Real Estate Owned. |
|
|
|
|
(5 |
) |
Non-performing
loans are defined as Non-accrual Loans and Loans Past Due 90 days
or more. |
|
|
|
|
(6 |
) |
Loans 30-89 days past due and
still accruing. |
|
|
|
|
|
|
|
|
|
|
For additional information, contact:Mark
A Schroeder, Chairman and Chief Executive
OfficerD. Neil Dauby, President and Chief
Operating OfficerBradley M Rust, Senior Executive
Vice President and Chief Financial Officer(812) 482-1314
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