Southern Indiana Business Report
JASPER – German American Bancorp Inc. (Nasdaq: GABC) reported strong operating performance for the third quarter ended Sept. 30, 2022, with earnings of $24.6 million, resulting in the Company’s second highest level of historical earnings per share at $0.83 per share. This level of quarterly earnings represented an increase of $0.9 million, or approximately 2.5% on a per share basis, from its 2022 second quarter earnings of $23.7 million, or $0.81 per share.
On a year-over-year basis, the current quarterly earnings represented an increase of $3.1 million from its 2021 third quarter earnings of $21.5 million.
The third quarter 2022 earnings performance was driven by a number of factors including continued net interest margin expansion as well as solid credit metrics and ongoing disciplined operating expense management. The third quarter 2021 earnings included a reserve release of $2.0 million and $4.1 million of Paycheck Protection Program (“PPP”) fees.
As of Sept. 30, 2022, the Company’s balance sheet contracted somewhat as a result of a decline in deposits and a decline in the market value of available-for-sale securities. The Company continues to focus on its strong deposit mix and the retention of relational deposit accounts. Total loans increased $33.6 million, or 4% annualized, as solid loan originations for the quarter were partially offset by certain large pay offs late in the quarter as a result of business sales.
All loan categories including commercial, agriculture and retail experienced some level of growth during the third quarter of 2022. Commercial line utilization still remains suppressed as business balance sheets and cash positions remain strong. While lending pipelines remain relatively healthy across our footprint and credit metrics are currently strong, we continue to closely monitor and stress our credit portfolio in light of inflationary and potential recessionary headwinds.
The Company’s net interest income increased by $2.1 million, or 4%, in the third quarter of 2022 when compared to the second quarter of 2022 primarily driven by an improved net interest margin and solid loan growth early in the quarter.
The Company continues to maintain a very diversified operating revenue stream which declined slightly quarter over sequential quarter. Non-interest income of $14.1 million declined in the third quarter by $1.1 million, or 7%, compared with second quarter of 2022 driven mostly by a decline in wealth management fees as a result of down equity markets, a company owned life insurance death benefit claim in the second quarter of 2022 and declining mortgage revenues as the housing market continues to contract in this high interest rate environment.
The Company’s non-interest expenses declined approximately $1.0 million, or 3%, in the third quarter of 2022, as compared to the second quarter of 2022 as the Company continues to focus on controlling expenses and increasing efficiency.
D. Neil Dauby, German American’s president and CEO, stated, “We were very pleased to continue building upon our momentum from our first quarter acquisition of Citizen Union Bank of Shelbyville, Inc. (“CUB”) which has contributed positively to our strong third quarter earnings. Acquisitions over the past several years have provided us geographic diversity in our footprint allowing opportunity for organic growth within our banking and non-banking operations. We remain cautiously optimistic about continued improvements in our net interest margin and the strength of our lending pipeline for continued growth. Although continued fears of inflation and recession may potentially slow future growth and stress credit, we are preparing to face the headwinds from any future economic uncertainties.”
The Company also announced its Board of Directors has declared a regular quarterly cash dividend of $0.23 per share, which will be payable on Nov. 20 to shareholders of record.
German American acquires Kentucky bank
On Jan. 1, 2022, German American acquired Citizens Union Bancorp of Shelbyville Inc. (“CUB”). CUB, headquartered in Shelbyville, Kentucky, operated 15 retail banking offices located in Shelby, Jefferson, Spencer, Bullitt, Oldham, Owen, Gallatin and Hardin counties in Kentucky through its banking subsidiary, Citizens Union Bank of Shelbyville, Inc. As of the closing of the transaction, CUB had total assets of approximately $1.109 billion, total loans of approximately $683.8 million, and total deposits of approximately $930.5 million. The Company issued approximately 2.9 million shares of its common stock, and paid approximately $50.8 million in cash, in exchange for all of the issued and outstanding shares of common stock of CUB.