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German American Bancorp, Inc. (NASDAQ: GABC) reported first-quarter 2021 earnings of $19.6 million, or $0.74 per share. This level of strong quarterly earnings represented an increase of $7.1 million, or approximately 57% on a per-share basis, from 2020 first-quarter earnings of $12.5 million, or $0.47 per share.

The first quarter of 2021 earnings growth was driven by a number of factors including improved net interest income, lower provision for credit losses, and increased non-interest revenue which was partially offset by a modestly higher level of non-interest expense.

Net interest income increased $2.7 million in the first quarter of 2021 compared to the same period of 2020. This increase was attributable to a $766 million, or 19%, increase in average total interest-earning assets in the first quarter 2021 relative to that in the first quarter of 2020 partially offset by a reduction in the level of the Company’s net interest margin to 3.41% in 2021 from 3.74% in 2020. The elevated level of average earning assets was driven by a $747 million, or 21%, increase in average deposits from customers throughout the Company’s footprint. On an end-of-period basis, total deposits increased by $900 million, or 26%, as of March 31, 2021 compared to period-end total deposits at March 31, 2020.

During the first quarter of 2021, the provision for credit losses declined by $6.7 million compared to the same period of 2020. In 2020, the Company had increased its allowance for credit losses due to the developments related to the COVID-19 pandemic. The decline in the level of provision for credit losses in the first quarter of 2021 was largely impacted by a lower level of outstanding loans, exclusive of Paycheck Protection Program (“PPP”) loans, and a decline in certain adversely criticized assets during the quarter.

An additional factor contributing to the first quarter of 2021 net-income improvement was a $956 thousand increase in non-interest income. The combined net revenue improvements of approximately $10.3 million were slightly offset by a $931 thousand increase in non-interest operating expenses, which was inclusive of non-recurring expenses totaling $2.0 million related to the Company’s previously announced operating optimization plan.

Mark A. Schroeder, German American’s Chairman & CEO, stated, “After an extremely challenging 2020 due to a myriad of issues associated with the pandemic, we are very pleased to have been able to start off 2021 with extremely solid and strong first quarter performance. While the environment of historically low interest rates and net interest margins are likely to continue to be a challenge in 2021 and the coming years, we are hopeful that the worst of the economic impact of the pandemic is behind us.”

Schroeder continued, “Our ability to increase the level of net interest income due to our materially larger balance sheet will hopefully allow us to mitigate the impact of the low interest rate environment. Additionally, while we’ve not seen growth during the pandemic within our loan portfolio, exclusive of PPP loans, we are encouraged by the level of interest we’re seeing from customers in terms of potential future loan demand. We are also hopeful that our customers’ utilization of their existing lines of credit will again begin to increase in the coming months as they experience the need for additional operating funds in response to an elevated level of economic growth and expansion as the impact of the pandemic wanes. We look forward to the balance of 2021 and our ability to build upon our first quarter results with a cautious optimism.”

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 May 20, 2021 to shareholders of record as of May 10, 2021.

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