GAB, Inc. posts solid 4th quarter and annual earnings; Declares 8% cash dividend increase

German American Bancorp, Inc. (Nasdaq: GABC) reported solid annual earnings of $85.9 million, or $2.91 per share, for the year ended December 31, 2023, representing the second highest level of earnings per share in the company’s history.

This level of reported annual earnings resulted in a 14.7 percent return on average shareholders’ equity, marking the 19th consecutive fiscal year in which the company delivered a double-digit return on shareholders’ equity. The company also announced the declaration of an eight percent increase in its quarterly cash dividend, marking the 12th consecutive year of increased cash dividends.

The company’s 2023 reported net income represented an increase of $4.1 million, or approximately 5 percent on a per share basis, over 2022 net income of $81.8 million, or $2.78 per share, which was impacted by the one-time merger costs related to the January 1, 2022 acquisition of Citizens Union Bancorp of Shelbyville, Inc.

The 2023 annual operating performance was highlighted by an expanded net interest margin of 13 basis points, which increased from 3.45 percent to 3.58 percent as rising deposit costs from continued Federal Reserve rate increases and shifting of deposit composition did not escalate meaningfully until the second half of 2023. Re-mixing earning assets from the securities portfolio into the higher-yielding loan portfolio also contributed positively to the increased margin.

In addition, the 2023 year was marked by solid organic loan growth across most lending categories, continued strong credit metrics, solid gains in non-interest income led by wealth management and interchange fees, and ongoing optimization of our non-interest expenses. The company’s operating results were also positively impacted by the execution of qualitative strategic initiatives such as meaningful talent acquisitions and ongoing technology/digital investment.

Given the tumultuous year in the banking industry led by economic uncertainty and multiple bank failures, German Americans remained well-positioned for long-term success with strong capital levels and solid liquidity. The company’s combined enterprise, which encompasses 75 banking offices across two contiguous states, continues 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.

On a quarter-over-quarter basis, the fourth quarter of 2023 net income of $21.5 million and earnings per share of $0.73 were consistent with third quarter 2023 net income of $21.5 million, or $0.73 per share. Net interest margin declined from 3.57 percent to 3.43 percent, or 14 basis points, quarter over quarter. This compression was driven by a lower level of accretion of discounts on acquired loans that negatively impacted the net interest margin by seven basis points and an overall increase in the cost of funds. The margin compression was partially offset by exceptional credit metrics, with no provision for credit losses being taken in the fourth quarter, largely as a result of a fully-reserved, non-performing commercial relationship being paid off.

In addition, the fourth quarter 2023 operating performance was highlighted by strong organic loan and deposit growth. Total loans increased $84 million, or approximately 9 percent on an annualized basis, and were broad-based across most loan categories and markets. Deposits increased $117 million, or 2 percent on a linked quarter basis, with non-interest-bearing accounts remaining at a solid 28.4 percent of total deposits. Non-interest income growth of 5 percent and flat non-interest expenses, in each case on a linked-quarter basis, also contributed to the solid fourth-quarter operating performance.

The company also announced an 8 percent increase in the level of its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.27 per share, which will be payable on February 20, 2024 to shareholders of record as of February 10, 2024.

“We are extremely pleased with our operating results in 2023, especially given the challenging economic environment, as we continue our decades-long trend of exceptional financial performance,” D. Neil Dauby, German American’s Chairman and CEO, stated. “Thanks to the dedicated efforts of our relationship-focused team of professionals, we are confident that our strong community presence, healthy financial condition, and disciplined approach to risk management will continue to drive future profitability. We remain excited and committed to the vitality and future growth of our Indiana and Kentucky communities.”