Southern Indiana Business Report
JASPER – German American Bancorp, Inc. (Nasdaq: GABC) reported strong annual earnings of $81.8 million, or $2.78 per share, for the year end Dec. 31, 2022, representing the second highest level of annual earnings in the company’s history. This level of reported annual earnings resulted in a 13.4% return on average shareholders’ equity, marking the 18th consecutive fiscal year in which the company has delivered a double-digit return on shareholders’ equity. The company also announced the declaration of a 9% increase in its quarterly cash dividend, marking the 11th consecutive year of increased cash dividends.
German American’s 2022 reported annual earnings represented a decrease of $2.3 million, or approximately 12% on a per share basis, from the prior year 2021 record annual earnings of $84.1 million, or $3.17 per share. The 2021 earnings were positively impacted by non-recurring Paycheck Protection Program fees of $12.2 million, reserve release of $6.5 million, and record level mortgage revenues. As a result of the Jan. 1, 2022 acquisition of Citizens Union Bancorp of Shelbyville, Inc. (CUB), 2022 earnings included $18.6 million of one-time merger and acquisition costs and “Day 1” provision under the current expected credit loss (“CECL”) model for an after-tax impact of $14.1 million, or $0.48 per share.
Fourth quarter 2022 net income of $24.4 million, or $0.83 per share, represented an increase of $5.1 million, or approximately 14% on a per share basis, from fourth quarter 2021 net income of $19.3 million, or $0.73 per share, aided in part by the CUB acquisition. In addition to the net income impact of the CUB acquisition, the per share amount for fourth quarter 2022 also reflects the issuance of approximately 2.9 million shares of the company’s common stock as part of the merger consideration. On a quarter over quarter basis, earnings and earnings per share were virtually identical at approximately $24.5 million and $0.83 per share as core operations began to normalize. Fourth quarter 2022 performance was highlighted by strong organic loan growth, continued net interest margin expansion and strong credit metrics. Total loans increased $102 million, or approximately 11% on an annualized basis, and were broad based across all loan categories and all markets.
The 2022 year was marked by the successful integration of CUB, meaningful talent acquisitions, opening of a Greenwood (Indianapolis MSA) loan production office, ongoing expense optimization and the execution/advancement of our new five year strategic plan. The company’s combined enterprise, which encompasses 77 banking offices across two contiguous states, will continue to benefit from its diversified footprint of rural, suburban and urban markets providing a strong deposit franchise base as well as significant organic growth opportunities in banking, insurance and wealth management.
German American also announced a 9% increase in the level of its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.25 per share, which will be payable on Feb. 20, 2023 to shareholders of record as of Feb. 10, 2023.
D. Neil Dauby, German American’s President & CEO stated, “We are extremely pleased with our operating results in 2022, continuing our decades long trend of exceptional financial performance. Thanks to the dedicated efforts of our team members, we effectively executed on the integration of our CUB acquisition over the last three quarters of 2022, positioning our Company for continued future success. While we anticipate some potential inflationary and recessionary challenges in 2023, we remain excited and committed to the vitality and future growth of our Indiana and Kentucky communities.”
Balance sheet highlights
On Jan. 1, 2022, the company completed the acquisition of 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.
Total assets for the company totaled $6.156 billion at Dec. 31, 2022, representing a decrease of $103.9 million compared with September 30, 2022 and an increase of $547.5 million compared with December 31, 2021. The decline in total assets at Dec. 31, 2022 compared with Sept. 30, 2022 was largely attributable to a decline in federal funds sold and other short-term investments. The decline in federal funds sold and other short-term investments was driven by loan growth and a decline in total deposits. The increase in total assets at Dec. 31, 2022 compared with Dec. 31, 2021 was in large part attributable to the acquisition of CUB.
Securities available for sale increased $60.0 million as of Dec. 31, 2022 compared with Sept. 30, 2022 and declined $127.9 million compared with Dec. 31, 2021. The changes in the available for sale securities portfolio during both comparative periods was largely attributable to fair value adjustments on the portfolio caused by the rise in market interest rates.
Dec. 31, 2022 total loans increased $102.3 million, or approximately 11% on an annualized basis, compared with Sept. 30, 2022 and increased $780.7 million, or 26%, compared with Dec. 31, 2021. The increase in loans was broad based across all categories and spread throughout the Company’s footprint during the fourth quarter of 2022. Commercial and industrial loans increased approximately $32.2 million, or 20% on an annualized basis, during the fourth quarter of 2022 compared with Sept. 30, 2022, commercial real estate loans increased $43.1 million, or 9% on an annualized basis, while agricultural loans increased $15.8 million, or 16% on an annualized basis. During the fourth quarter of 2022 compared with Sept. 30, 2022, retail loans increased $11.2 million, or 6% on an annualized basis.