Southern Indiana Business Report
JASPER — German American Bancorp Inc. 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, 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, 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 Aug. 20 to shareholders of record as of Aug. 10.
About German American
German American Bancorp Inc. is a Nasdaq-traded (symbol: GABC) financial holding company based in Jasper. 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.