German American Bancorp, Inc. (Nasdaq: GABC) reported continued strong operating performance with earnings of $21.5 million, or $0.81 per share, for the third quarter.
This level of solid quarterly earnings represented an increase of $6.9 million, or $0.26 per share, approximately 47% on a per-share basis, from 2020 third-quarter earnings of $14.6 million, or $0.55 per share. On a year-to-date basis, the current earnings of $64.9 million, or $2.44 per share, increased by $23.5 million, or approximately 56% on a per-share basis, as compared to third quarter 2020 year-to-date earnings of $41.3 million, or $1.56 per share.
The third quarter 2021 earnings growth, as compared to third quarter 2020, 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 solid core non-interest income revenue increases and controlled non-interest expenses.
As of September 30, 2021, the company’s total assets were $5.476 billion, representing an increase of $127.2 million, or 10% on an annualized basis, compared to June 30, 2021, and an increase of $622.9 million, or 13%, compared to September 30, 2020. Exclusive of PPP loans and certain sold loans, the increase in total assets reflects an increase in total loans of approximately 5%, on an annualized basis, when comparing September 30, 2021, to June 30, 2021, and an increase of approximately 2% when compared to September 30, 2020. Additionally, the Company’s historically strong loan portfolio demonstrated continued quality improvement, allowing for a $2.0 million reversal of the provision for credit losses in the third quarter of 2021.
Net interest income during the third quarter of 2021 increased by $2.9 million, or 8%, from the third quarter of 2020, and $7.0 million, or 6%, in 2021 relative to 2020 on year-to-date basis. The increase in net interest income in the third quarter of 2021 compared to the third quarter of 2020 was primarily attributable to the increase in average earning assets. The increase in net interest income for year-to-date 2021 was primarily attributable to an increase in average earning assets, a higher level of fees recognized related to PPP loans and a lower cost of funds.
Year-over-year non-interest income improvements totaled approximately $2.3 million, or 17%, on a
quarterly basis, and $4.7 million, or 12%, on a year-to-date basis. A comparison of third quarter 2021 noninterest income to the third quarter of 2020 was driven by a $1.7 million increase in other operating income primarily related to the gain from the sale of two branch office locations during the current quarter.
Additionally, the company generated a $733,000, or 37%, increase in trust and investment product fees and a $544,000, or 19%, increase in interchange fee income during the third quarter of 2021 as compared to the same quarter in 2020. 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 largely attributable to increased assets under management within the company’s wealth management group and the increase in interchange fees related to increased card utilization by customers. This non-interest income improvements were partially offset by reduced levels of net gains on sales of residential loans into the secondary market and of net gains on sales of securities.
The company’s level of non-interest expenses reflected modest increases in 2021 on both a quarterly and year-to-date basis relative to 2020. The primary drivers of the increase were related to several areas of nonrecurring professional and legal related expenses in connection with the previously noted branch office sale, the recently announced pending acquisition of Citizens Union Bancorp of Shelbyville, Inc., and certain other legal matters.
Mark A. Schroeder, German American’s Chairman & CEO, stated, “We were again very pleased with our ability to build upon the momentum of our strong first half of 2021 earnings with very solid performance in the third quarter. We are also excited about the future growth potential in connection with the recent announcement of our pending acquisition of Citizens Union Bancorp of Shelbyville, Kentucky. Citizens Union primarily operates within the Louisville, Kentucky Metropolitan Statistical Area (“MSA”), which will provide us with a strong platform from which we can build upon our existing strong presence on the Indiana side of the Louisville MSA and on our successful Louisville-based Commercial Loan Production and Wealth Management Office. I believe this acquisition represents one of the most important strategic opportunities we’ve had during my tenure as CEO to take our Company to the next level in terms of both future balance sheet and earnings growth.”
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 November 20, 2021, to shareholders of record as of November 10, 2021.