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German American Bancorp, Inc. Reports 14% Growth in Third Quarter Earnings

JASPER, Ind., Oct. 27, 2014 (GLOBE NEWSWIRE) -- German American Bancorp, Inc. (Nasdaq:GABC) today reported that the Company achieved record financial performance during the third quarter, posting a 14% growth in earnings per share during the quarter. Net income in the third quarter of 2014 was $7.7 million, or $0.58 per share, which was an increase of approximately 14%, on a reported per share basis, as compared to second quarter 2014 net income of $6.7 million, or $0.51 per share, and third quarter 2013 net income of $6.5 million, or $0.51 per share. The Company's year-to-date 2014 earnings were $20.7 million, or $1.57 per share, compared to $18.8 million, or $1.48 per share, booked in the first nine months of 2013.

Driven in part by a 12% higher level of loans outstanding, the Company's net interest income in the third quarter of this year increased by $1.6 million, or 9%, over the level of net interest income recorded in the same quarter last year. Additionally, non-interest income increased by $1.0 million, or 18%, in the third quarter 2014 versus a third quarter 2013 comparison. This significant increase in non-interest income was marked by improvements in virtually every category of non-interest revenue, one of the largest of which was a nearly $250 thousand increase in revenues generated by the Company's insurance operations.

Commenting on the German American's third quarter performance, Company Chairman & CEO, Mark A. Schroeder, stated, "A major driver of our strong performance, during both the third quarter and first nine months of this year, has been our ability to generate double-digit annualized loan growth over the course of the past 12 months. Furthermore, the continued economic recovery during the past year has benefited the level of activity within each of our lines of business, resulting in significant revenue enhancements within each of these areas, particularly within our insurance operations."

The comparison of German American's current year operating results with that of the prior year were affected by the inclusion of the United Commerce Bancorp operation which was acquired by the Company effective October 1, 2013, a new financial center in Columbus, Indiana which opened on December 2013, and the roll-out of the Company's new digital banking systems in the first half of 2014.

The Company also announced that its Board of Directors declared its regular quarterly cash dividend of $0.16 per share which will be payable on November 20, 2014 to shareholders of record as of November 10, 2014.

Balance Sheet Highlights

Total assets for the Company totaled $2.206 billion at September 30, 2014, an increase of $12.3 million, or 2% on an annualized basis, compared with June 30, 2014 and an increase of $145.8 million, or 7%, compared with September 30, 2013.

September 30, 2014 loans outstanding increased by $23.4 million or approximately 7% on an annualized basis, compared with June 30, 2014, and increased $152.5 million, or 12%, compared to September 30, 2013 total loans outstanding. The increase in loans was broad based across most categories of loans and throughout the Company's market area with the exception of a modest decline in commercial real estate loans during the period ended September 30, 2014 compared with June 30, 2014.

End of Period Loan Balances 09/30/14 06/30/14 09/30/13
(dollars in thousands)
Commercial & Industrial Loans $ 377,845 $ 366,101 $ 338,770
Commercial Real Estate Loans 586,012 594,681 530,260
Agricultural Loans 201,867 188,155 185,868
Consumer Loans 133,764 130,290 121,772
Residential Mortgage Loans 137,286 134,104 107,620
$ 1,436,774 $ 1,413,331 $ 1,284,290

Non-performing assets totaled $6.3 million at September 30, 2014 compared to $6.9 million of non-performing assets at June 30, 2014 and $7.5 million at September 30, 2013. Non-performing assets represented 0.28% of total assets at September 30, 2014 compared to 0.31% of total assets at June 30, 2014, and compared to 0.37% at September 30, 2013. Non-performing loans totaled $5.8 million at September 30, 2014 compared to $6.0 million at June 30, 2014 and compared to $6.9 million of non-performing loans at September 30, 2013. Non-performing loans represented 0.40% of total loans at September 30, 2014 compared with 0.42% of total loans outstanding at June 30, 2014 and 0.54% of total loans outstanding at September 30, 2013.

Non-performing Assets
(dollars in thousands)
09/30/14 06/30/14 9/30/13
Non-Accrual Loans $ 5,667 $ 5,902 $ 6,857
Past Due Loans (90 days or more) 96 67 91
Total Non-Performing Loans 5,763 5,969 6,948
Other Real Estate 521 935 584
Total Non-Performing Assets $ 6,284 $ 6,904 $ 7,532
Restructured Loans $ 2,688 $ 3,596 $ 2,536

The Company's allowance for loan losses totaled $15.6 million at September 30, 2014 remaining relatively unchanged from June 30, 2014 and representing an increase of $1.1 million, or 8%, from September 30, 2013. The allowance for loan losses represented 1.09% of period-end loans at September 30, 2014 compared with 1.10% of period-end loans at June 30, 2014 and 1.13% of period-end loans at September 30, 2013. Under acquisition accounting treatment, loans acquired are recorded at fair value which includes a credit risk component, and therefore the allowance on loans acquired is not carried over from the seller. The Company held a discount on acquired loans of $4.5 million as of September 30, 2014, $4.9 million at June 30, 2014 and $2.1 million at September 30, 2013.

Total deposits increased $22.1 million or 5% on an annualized basis, as of September 30, 2014 compared with June 30, 2014 total deposits and increased by $93.4 million or 6% compared with September 30, 2013.

End of Period Deposit Balances 09/30/14 06/30/14 09/30/13
(dollars in thousands)
Non-interest-bearing Demand Deposits $ 410,329 $ 398,621 $ 364,110
IB Demand, Savings, and MMDA Accounts 1,020,504 1,010,367 974,748
Time Deposits < $100,000 205,980 209,998 215,082
Time Deposits > $100,000 127,658 123,393 117,099
$ 1,764,471 $ 1,742,379 $ 1,671,039

Results of Operations Highlights – Quarter ended September 30, 2014

Net income for the quarter ended September 30, 2014 totaled $7,708,000 or $0.58 per share, an increase of $1,021,000, or 14% on a per share basis, from the second quarter of 2014 net income of $6,687,000 or $0.51 per share. Net income for the third quarter of 2014 increased $1,225,000, or 14% on a per share basis, from the third quarter of 2013 net income of $6,483,000, or $0.51 per share.

Summary Average Balance Sheet
(Tax-equivalent basis / dollars in thousands)
Quarter Ended September 30, 2014 Quarter Ended June 30, 2014 Quarter Ended September 30, 2013
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 $ 15,788 $ 2 0.04% $ 12,493 $ 3 0.11% $ 11,868 $ 2 0.08%
Securities 627,098 4,277 2.73% 626,057 4,232 2.70% 617,475 3,898 2.53%
Loans and Leases 1,424,458 16,755 4.67% 1,390,185 16,215 4.68% 1,269,222 15,368 4.81%
Total Interest Earning Assets $ 2,067,344 $ 21,034 4.05% $ 2,028,735 $ 20,450 4.04% $ 1,898,565 $ 19,268 4.04%
Liabilities
Demand Deposit Accounts $ 400,223 $ 400,656 $ 349,323
IB Demand, Savings, and
MMDA Accounts $ 1,017,266 $ 317 0.12% $ 1,039,376 $ 322 0.12% $ 979,049 $ 387 0.16%
Time Deposits 330,494 708 0.85% 336,901 715 0.85% 333,000 758 0.90%
FHLB Advances and Other Borrowings 213,205 532 0.99% 153,989 467 1.22% 161,092 475 1.17%
Total Interest-Bearing Liabilities $ 1,560,965 $ 1,557 0.40% $ 1,530,266 $ 1,504 0.39% $ 1,473,141 $ 1,620 0.44%
Cost of Funds 0.30% 0.30% 0.34%
Net Interest Income $ 19,477 $ 18,946 $ 17,648
Net Interest Margin 3.75% 3.74% 3.70%

During the quarter ended September 30, 2014, net interest income totaled $18,791,000 representing an increase of $470,000, or 3%, from the quarter ended June 30, 2014 net interest income of $18,321,000 and an increase of $1,599,000, or 9%, compared with the quarter ended September 30, 2013 net interest income of $17,192,000. The tax equivalent net interest margin for the quarter ended September 30, 2014 was 3.75% compared to 3.74% in the second quarter of 2014 and 3.70% in the third quarter of 2013. The increase in net interest income and in the net interest margin in the third quarter of 2014 compared with the second quarter of 2014 was primarily attributable to growth in the level of average loans outstanding. The increase in net interest income and in the net interest margin during the third quarter of 2014 compared with the third quarter of 2013 was largely attributable to growth of the loan portfolio, an improved yield in the securities portfolio, and a reduction in the Company's cost of funds.

Accretion of loan discounts on acquired loans contributed approximately 6 basis points on an annualized basis to the net interest margin in both the third quarter of 2014 and second quarter of 2014, and 10 basis points in the third quarter of 2013.

During the quarter ended September 30, 2014, the Company recorded no provision for loan loss compared with a $200,000 provision during the quarter ended June 30, 2014, and a negative provision of $400,000 during the third quarter of 2013. During the third quarter of 2014, the Company had net recoveries of $41,000 representing approximately 1 basis point of average loans on an annualized basis.

During the quarter ended September 30, 2014, non-interest income totaled $6,437,000, an increase of $935,000 or 17%, compared with the quarter ended June 30, 2014, and an increase of $993,000, or 18%, compared with the third quarter of 2013.

Quarter Ended Quarter Ended Quarter Ended
Non-interest Income 09/30/14 06/30/14 09/30/13
(dollars in thousands)
Trust and Investment Product Fees $ 901 $ 905 $ 802
Service Charges on Deposit Accounts 1,300 1,191 1,029
Insurance Revenues 1,739 1,482 1,495
Company Owned Life Insurance 210 192 233
Interchange Fee Income 508 512 449
Other Operating Income 599 590 395
Subtotal 5,257 4,872 4,403
Net Gains on Loans 613 386 613
Net Gains on Securities 567 244 428
Total Non-interest Income $ 6,437 $ 5,502 $ 5,444

Service charges on deposit accounts increased $109,000, or 9%, during the quarter ended September 30, 2014 compared with the second quarter of 2014 and increased $271,000, or 26%, compared with the third quarter of 2013.

Insurance revenues increased $257,000, or 17%, during the quarter ended September 30, 2014, compared with the second quarter of 2014 and increased $244,000, or 16%, compared with the third quarter of 2013. The increase in insurance revenues in both comparative periods was primarily related to commercial insurance revenue generated through the Company's property and casualty insurance agency.

Net gains on sales of loans increased $227,000, or 59%, during the third quarter of 2014 compared with the second quarter of 2014 and remained flat to the net gains on sales of loans in the third quarter of 2013. Loan sales totaled $28.6 million during the third quarter of 2014, compared with $21.8 million during the second quarter of 2014 and $43.2 million during the third quarter of 2013.

During the third quarter of 2014, the Company realized a net gain on the sale of securities of $567,000 compared with a net gain of $244,000 during the second quarter of 2014 and $428,000 during the third quarter of 2013.

During the quarter ended September 30, 2014, non-interest expense totaled $14,082,000, a decline of $57,000 or just under 1% compared with the quarter ended June 30, 2014, and an increase of $498,000, or 4%, compared with the third quarter of 2013.

Quarter Ended Quarter Ended Quarter Ended
Non-interest Expense 09/30/14 06/30/14 09/30/13
(dollars in thousands)
Salaries and Employee Benefits $ 7,975 $ 7,886 $ 7,515
Occupancy, Furniture and Equipment Expense 1,725 1,698 1,593
FDIC Premiums 277 276 261
Data Processing Fees 935 947 717
Professional Fees 516 553 970
Advertising and Promotion 613 544 447
Intangible Amortization 302 325 329
Other Operating Expenses 1,739 1,910 1,752
Total Non-interest Expense $ 14,082 $ 14,139 $ 13,584

Salaries and benefits increased $89,000, or 1%, during the quarter ended September 30, 2014 compared with the second quarter of 2014 and increased $460,000, or 6%, compared with the third quarter of 2013. The modest increase in salaries and benefits during the third quarter of 2014 compared with the second quarter of 2014 was primarily attributable to benefits and payroll taxes that are directly attributable to the levels of cash compensation paid. The increase in salaries and benefits during the third quarter of 2014 compared with the third quarter of 2013 was largely attributable to an increased number of full-time equivalent employees and to the acquisition of United Commerce Bancorp which occurred in the fourth quarter of 2013.

Data processing fees declined 1%, during the third quarter of 2014 compared with the second quarter of 2014 and increased $218,000, or 30%, compared with the third quarter of 2013. The data processing fees during the third quarter of 2014 compared with the third quarter of 2013 were elevated related to the implementation of new commercial and retail digital banking platforms during the past year.

Professional fees declined $37,000, or 7%, during the quarter ended September 30, 2014 compared with the second quarter of 2014 and declined $454,000, or 47%, compared with the third quarter of 2014. The decline in professional fees during the third quarter of 2014 compared with the third quarter of 2013 was related to professional fees associated with the acquisition of United Commerce Bancorp and fees associated with the Company's review of its overall operating effectiveness and efficiency that were incurred during the third quarter of 2013.

About German American

German American Bancorp, Inc., is a NASDAQ-traded (symbol: GABC) financial services holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bancorp, operates 37 retail and commercial banking offices in 13 southern Indiana counties. The Company also owns a trust, brokerage, and financial planning subsidiary (German American Financial Advisors & Trust Company) and a full line property and casualty insurance agency (German American Insurance, Inc.).

Cautionary Note Regarding Forward-Looking Statements

The Company's management, from time to time, in this press release and in its other public communications, may make statements that could be viewed as reflecting or implying management's expectations for the future, and therefore be deemed to be "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 the press release. Factors that could cause actual experience to differ from the expectations 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; deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration; 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; 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 and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; and the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends. 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
September 30, June 30, September 30,
2014 2014 2013
ASSETS
Cash and Due from Banks $ 37,427 $ 40,391 $ 46,657
Short-term Investments 49,740 16,723 18,014
Interest-bearing Time Deposits with Banks 100 100 --
Investment Securities 575,925 615,576 608,921
Loans Held-for-Sale 7,590 8,812 9,054
Loans, Net of Unearned Income 1,432,749 1,409,485 1,281,442
Allowance for Loan Losses (15,592) (15,550) (14,464)
Net Loans 1,417,157 1,393,935 1,266,978
Stock in FHLB and Other Restricted Stock 9,096 9,096 8,340
Premises and Equipment 40,322 40,479 36,679
Goodwill and Other Intangible Assets 22,888 23,191 20,512
Other Assets 45,676 45,270 44,967
TOTAL ASSETS $ 2,205,921 $ 2,193,573 $ 2,060,122
LIABILITIES
Non-interest-bearing Demand Deposits $ 410,329 $ 398,621 $ 364,110
Interest-bearing Demand, Savings, and
Money Market Accounts 1,020,504 1,010,367 974,748
Time Deposits 333,638 333,391 332,181
Total Deposits 1,764,471 1,742,379 1,671,039
Borrowings 208,086 225,546 191,554
Other Liabilities 13,099 11,310 12,386
TOTAL LIABILITIES 1,985,656 1,979,235 1,874,979
SHAREHOLDERS' EQUITY
Common Stock and Surplus 121,691 121,566 108,505
Retained Earnings 98,528 92,934 79,550
Accumulated Other Comprehensive Income (Loss) 46 (162) (2,912)
TOTAL SHAREHOLDERS' EQUITY 220,265 214,338 185,143
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,205,921 $ 2,193,573 $ 2,060,122
END OF PERIOD SHARES OUTSTANDING 13,210,395 13,210,395 12,666,836
BOOK VALUE PER SHARE $ 16.67 $ 16.22 $ 14.62
GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
Consolidated Statements of Income
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
INTEREST INCOME
Interest and Fees on Loans $ 16,680 $ 16,142 $ 15,307 $ 48,766 $ 45,227
Interest on Short-term Investments and Time Deposits 2 3 2 8 25
Interest and Dividends on Investment Securities 3,666 3,680 3,503 11,080 10,388
TOTAL INTEREST INCOME 20,348 19,825 18,812 59,854 55,640
INTEREST EXPENSE
Interest on Deposits 1,025 1,037 1,145 3,098 3,533
Interest on Borrowings 532 467 475 1,448 1,978
TOTAL INTEREST EXPENSE 1,557 1,504 1,620 4,546 5,511
NET INTEREST INCOME 18,791 18,321 17,192 55,308 50,129
Provision for Loan Losses -- 200 (400) 550 (250)
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 18,791 18,121 17,592 54,758 50,379
NON-INTEREST INCOME
Net Gain on Sales of Loans 613 386 613 1,475 2,176
Net Gain on Securities 567 244 428 1,039 1,508
Other Non-interest Income 5,257 4,872 4,403 15,706 13,780
TOTAL NON-INTEREST INCOME 6,437 5,502 5,444 18,220 17,464
NON-INTEREST EXPENSE
Salaries and Benefits 7,975 7,886 7,515 24,285 22,926
Other Non-interest Expenses 6,107 6,253 6,069 19,026 17,381
TOTAL NON-INTEREST EXPENSE 14,082 14,139 13,584 43,311 40,307
Income before Income Taxes 11,146 9,484 9,452 29,667 27,536
Income Tax Expense 3,438 2,797 2,969 8,967 8,712
NET INCOME $ 7,708 $ 6,687 $ 6,483 $ 20,700 $ 18,824
BASIC EARNINGS PER SHARE $ 0.58 $ 0.51 $ 0.51 $ 1.57 $ 1.49
DILUTED EARNINGS PER SHARE $ 0.58 $ 0.51 $ 0.51 $ 1.57 $ 1.48
WEIGHTED AVERAGE SHARES OUTSTANDING 13,210,395 13,210,150 12,666,780 13,200,025 12,658,403
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,230,675 13,230,812 12,691,164 13,221,000 12,678,353
GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
EARNINGS PERFORMANCE RATIOS
Annualized Return on Average Assets 1.41% 1.24% 1.29% 1.28% 1.25%
Annualized Return on Average Equity 14.19% 12.68% 14.25% 13.08% 13.52%
Net Interest Margin 3.75% 3.74% 3.70% 3.76% 3.65%
Efficiency Ratio (1) 54.34% 57.83% 58.82% 57.41% 58.55%
Net Overhead Expense to Average Earning Assets (2) 1.48% 1.70% 1.71% 1.64% 1.62%
ASSET QUALITY RATIOS
Annualized Net Charge-offs to Average Loans -0.01% 0.04% 0.13% -0.04% 0.09%
Allowance for Loan Losses to Period End Loans 1.09% 1.10% 1.13%
Non-performing Assets to Period End Assets 0.28% 0.31% 0.37%
Non-performing Loans to Period End Loans 0.40% 0.42% 0.54%
Loans 30-89 Days Past Due to Period End Loans 0.25% 0.34% 0.32%
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA
Average Assets $ 2,191,484 $ 2,152,785 $ 2,016,376 $ 2,159,241 $ 2,000,597
Average Earning Assets $ 2,067,344 $ 2,028,735 $ 1,898,565 $ 2,034,131 $ 1,881,351
Average Total Loans $ 1,424,458 $ 1,390,185 $ 1,269,222 $ 1,395,529 $ 1,238,243
Average Demand Deposits $ 400,223 $ 400,656 $ 349,323 $ 402,070 $ 342,235
Average Interest Bearing Liabilities $ 1,560,965 $ 1,530,266 $ 1,473,141 $ 1,534,555 $ 1,456,461
Average Equity $ 217,268 $ 210,960 $ 181,960 $ 210,995 $ 185,654
Period End Non-performing Assets (3) $ 6,284 $ 6,904 $ 7,532
Period End Non-performing Loans (4) $ 5,763 $ 5,969 $ 6,948
Period End Loans 30-89 Days Past Due (5) $ 3,652 $ 4,728 $ 4,140
Tax Equivalent Net Interest Income $ 19,477 $ 18,946 $ 17,648 $ 57,219 $ 51,375
Net Charge-offs during Period $ (42) $ 134 $ 399 $ (458) $ 806
(1) 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.
(2) Net Overhead Expense is defined as Total Non-interest Expense less Total Non-interest Income.
(3) Non-performing assets are defined as Non-accrual Loans, Loans Past Due 90 days or more, Restructured Loans, and Other Real Estate Owned.
(4) Non-performing loans are defined as Non-accrual Loans, Loans Past Due 90 days or more, and Restructured Loans.
(5) Loans 30-89 days past due and still accruing.

CONTACT: For additional information, contact: Mark A Schroeder Chief Executive Officer of German American Bancorp, Inc. Bradley M Rust Executive Vice President/CFO of German American Bancorp, Inc. (812) 482-1314Source:German American Bancorp, Inc.