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What changed in GERMAN AMERICAN BANCORP, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of GERMAN AMERICAN BANCORP, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+250 added−255 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-27)

Top changes in GERMAN AMERICAN BANCORP, INC.'s 2024 10-K

250 paragraphs added · 255 removed · 199 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

38 edited+11 added−11 removed114 unchanged
Biggest changeFor instance, the Dodd-Frank Act (or agency regulations adopted and implemented (or to be adopted and implemented) under the Dodd-Frank Act) altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies 11 including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions; restricted certain proprietary trading and hedge fund and private equity activities of banks and their affiliates; eliminated the former statutory prohibition against the payment of interest on business checking accounts; limited interchange fees on debit card transactions by certain large processors; and established the Consumer Financial Protection Bureau (“CFPB”).
Biggest changeFor instance, the Dodd-Frank Act (or agency regulations adopted and implemented (or to be adopted and implemented) under the Dodd-Frank Act) altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions; restricted certain proprietary trading and hedge fund and private equity activities of banks and their affiliates; eliminated the former statutory prohibition against the payment of interest on business checking accounts; limited interchange fees on debit card transactions by certain large processors; and established the Consumer Financial Protection Bureau (“CFPB”). 12 The CFPB was granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes.
See Note 8 (Shareholders’ Equity) of the Notes to Consolidated Financial Statements included in Item 8 of this Report for further discussion. Insured depository institutions such as the Bank are also prohibited under the FDICIA from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become undercapitalized.
See Note 9 (Shareholders’ Equity) of the Notes to Consolidated Financial Statements included in Item 8 of this Report for further discussion. Insured depository institutions such as the Bank are also prohibited under the FDICIA from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become undercapitalized.
In October 2023, the federal banking regulators issued a joint final rule to modernize the CRA regulatory framework. The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and 12 online banking, and to tailor performance standards to account for differences in bank size and business models.
In October 2023, the federal banking regulators issued a joint final rule to modernize the CRA regulatory framework. The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models.
The insurance benefit generally covers up to a maximum of $250,000 per separately insured depositor. As an FDIC-insured bank, our bank subsidiary is subject to deposit insurance premiums and assessments to maintain the DIF. The Bank’s deposit insurance premium assessment rate depends on the asset and supervisory categories to which it is assigned.
The insurance benefit generally covers up to a maximum of $250,000 per separately insured depositor. As an FDIC-insured bank, our bank 14 subsidiary is subject to deposit insurance premiums and assessments to maintain the DIF. The Bank’s deposit insurance premium assessment rate depends on the asset and supervisory categories to which it is assigned.
There are numerous alternative providers (including national providers that advertise extensively and provide their services via e-mail, direct mail, telephone and the Internet) for the insurance products and services offered by German American Insurance, Inc., trust and financial planning services offered by the Bank and the brokerage products and financial planning services offered by German American Investment Services, Inc.
There are numerous alternative providers (including national providers that advertise extensively and provide their services via e-mail, direct mail, telephone and the Internet) for trust and financial planning services offered by the Bank and the brokerage products and financial planning services offered by German American Investment Services, Inc.
The laws and regulations to which we are subject are constantly under review by the U.S. Congress, the federal regulatory agencies, and the state authorities. 13 Federal Deposit Insurance Premiums and Assessments The Bank’s deposit accounts are currently insured by the Deposit Insurance Fund (the “DIF”) of the FDIC.
The laws and regulations to which we are subject are constantly under review by the U.S. Congress, the federal regulatory agencies, and the state authorities. Federal Deposit Insurance Premiums and Assessments The Bank’s deposit accounts are currently insured by the Deposit Insurance Fund (the “DIF”) of the FDIC.
With certain exceptions, the BHC Act prohibits a bank holding company from engaging in (or acquiring direct or indirect control of more than 5 percent of the voting shares of any company engaged in) nonbanking activities.
With certain exceptions, the BHC Act prohibits a bank holding company from engaging in (or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in) nonbanking activities.
The community bank leverage ratio is the ratio of a banking organization’s Tier 1 Capital to its average total consolidated assets, both as reported on the banking organization’s applicable regulatory filings.
The community bank leverage ratio is the ratio of a banking organization’s Tier 1 Capital to its average total consolidated assets, both as reported on the banking 11 organization’s applicable regulatory filings.
Full-time and part-time employees are eligible for our education assistance program which covers tuition and textbooks for work-related courses taken through a community college or university. Employees are also able to participate in on-the-job learning, classroom learning, mentoring and other internal and external career development programs 7 in order to advance or diversify their career paths throughout the organization.
Full-time and part-time employees are eligible for our education assistance program which covers tuition and textbooks for work-related courses taken through a community college or university. Employees are also able to participate in on-the-job learning, classroom learning, mentoring and other internal and external career development programs 8 in order to advance or diversify their career paths throughout the organization.
The Bank and the subsidiaries of the Bank may generally engage in activities that are permissible activities for state chartered banks under Indiana banking law, without regard to the limitations that might apply to such activities under the BHC Act if the Company were to engage directly in such activities at the parent company level or through parent company subsidiaries that were not also bank subsidiaries. 8 Indiana law and the BHC Act restrict certain types of expansion by the Company and its bank subsidiary.
The Bank and the subsidiaries of the Bank may generally engage in activities that are permissible activities for state chartered banks under Indiana banking law, without regard to the limitations that might apply to such activities under the BHC Act if the Company were to engage directly in such activities at the parent company level or through parent company subsidiaries that were not also bank subsidiaries. 9 Indiana law and the BHC Act restrict certain types of expansion by the Company and its bank subsidiary.
Although banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the conservation buffer will technically comply with minimum capital requirements under the new rules, such institutions will face limitations on 9 the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall.
Although banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the conservation buffer will technically comply with minimum capital requirements under the new rules, such institutions will face limitations on 10 the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall.
Under FDICIA, a depository institution that is not well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. Since the Bank was well-capitalized throughout 2023, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits.
Under FDICIA, a depository institution that is not well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. Since the Bank was well-capitalized throughout 2024, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits.
Those risks, and other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement, include but are not limited to : • changes in interest rates and the timing and magnitude of any such changes; • unfavorable economic conditions, including a prolonged period of inflation, and the resulting adverse impact on, among other things, credit quality; • the soundness of other financial institutions and general investor sentiment regarding the stability of financial institutions; • changes in our liquidity position; • the impacts of epidemics, pandemics or other infectious disease outbreaks; • 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; • capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities; 15 • 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 or employee 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; • potential cyber-attacks, information security breaches and other criminal activities; • 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 FRB; • the potential for increases to, and volatility in, the balance of our allowance for credit losses and related provision expense due to the current expected credit loss (CECL) standard; • 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 Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; • impacts resulting from possible amendments or revisions to the Dodd-Frank Act and the regulations promulgated thereunder, or to CFPB rules and regulations; and • the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends.
Those risks, and other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement, include but are not limited to : • changes in interest rates and the timing and magnitude of any such changes; • unfavorable economic conditions, including a prolonged period of inflation, and the resulting adverse impact on, among other things, credit quality; • the soundness of other financial institutions and general investor sentiment regarding the stability of financial institutions; • changes in our liquidity position; • the impacts of epidemics, pandemics or other infectious disease outbreaks; • 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; • 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, including the possibility that the anticipated cost savings and strategic gains, are not realized when expected or at all as a result of unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base or employee 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; 16 • potential cyber-attacks, information security breaches and other criminal activities; • 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 FRB; • the potential for increases to, and volatility in, the balance of our allowance for credit losses and related provision expense due to the current expected credit loss (CECL) standard; • 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 Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; • impacts resulting from possible amendments or revisions to the Dodd-Frank Act and the regulations promulgated thereunder, or to CFPB rules and regulations; and • the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends.
Further, the Bank competes for loans and deposits not only with commercial banks but also with savings and loan associations, savings banks, credit unions, production credit associations, federal land banks, finance companies, credit card companies, personal loan companies, investment brokerage firms, insurance agencies, insurance companies, lease finance companies, money market funds, mortgage companies, and other non-depository financial intermediaries.
Further, the Bank competes for loans and deposits not only with commercial banks but also with savings and loan associations, savings banks, credit unions, production credit associations, federal land banks, finance companies, credit card companies, personal loan companies, investment brokerage firms, private equity and debt funds, insurance agencies, insurance companies, lease finance companies, money market funds, mortgage companies, and other non-depository financial intermediaries.
The Company expects to continue to evaluate opportunities to expand its business through opening of new banking, insurance or trust, brokerage and financial planning offices, and through acquisitions of other banks, bank branches, portfolios of loans or other assets, and other financial-service-related businesses and assets in the future. 5 Office Locations The map below illustrates the locations of the Company’s 76 retail and commercial banking, insurance and investment offices. 6 Competition The industries in which the Company operates are highly competitive.
The Company expects to continue to evaluate opportunities to expand its business through opening of new banking, insurance or trust, brokerage and financial planning offices, and through acquisitions of other banks, bank branches, portfolios of loans or other assets, and other financial-service-related businesses and assets in the future. 6 Office Locations The map below illustrates the locations of the Company’s 94 retail and commercial banking, and investment offices. 7 Competition The industries in which the Company operates are highly competitive.
Substantially all of the Company’s revenues are derived from customers located in, and substantially all of its assets are located in, the United States. Subsidiaries The Company’s principal operating subsidiaries are described in the following table: Name Type of Business Principal Office Location German American Bank Commercial Bank Jasper, IN German American Insurance, Inc.
Substantially all of the Company’s revenues are derived from customers located in, and substantially all of its assets are located in, the United States. Subsidiaries The Company’s principal operating subsidiaries are described in the following table: Name Type of Business Principal Office Location German American Bank Commercial Bank Jasper, IN German American Investment Services, Inc.
In addition, financial technology, or “FinTech,” companies continue their rapid growth into key areas of banking. Many of these competitors have substantially greater resources than the Company. Human Capital At February 20, 2024, the Company and its subsidiaries employed approximately 840 full-time equivalent employees. There are no collective bargaining agreements, and we consider employee relations to be good.
In addition, financial technology, or “FinTech,” companies continue their rapid growth into key areas of banking. Many of these competitors have substantially greater resources than the Company. Human Capital At February 20, 2025, the Company and its subsidiaries employed approximately 1,020 full-time equivalent employees. There are no collective bargaining agreements, and we consider employee relations to be good.
This ability to target areas for improvement has resulted in an overall engagement score of greater than 73% in 2023, which is a score demonstrating a healthy organization in employee care and compares favorably to the banking industry.
This ability to target areas for improvement has resulted in an overall engagement score of greater than 71% in 2024, which is a score demonstrating a healthy organization in employee care and compares favorably to the banking industry.
As of December 31, 2023, the Bank exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well-capitalized”, and is unaware of any material violation or alleged violation of these regulations, policies or direct ives.
As of December 31, 2024, the Bank exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well-capitalized”, and is unaware of any material violation or alleged violation of these regulations, policies or directives.
The feedback focuses on several key metrics. including employee engagement, team dynamics, customer service, manager effectiveness, trust in leadership, future outlook, diversity and inclusion, individual needs, career growth and development and communication. During 2023, we had 76% employee participation in the survey.
The feedback focuses on several key metrics, including employee engagement, team dynamics, customer service, manager effectiveness, trust in leadership, future outlook, inclusion, individual needs, career growth and development and communication. During 2024, we had 70% employee participation in the survey.
Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in 14 those states.
Future Legislation and Regulation The U.S. Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
Occasionally, we will refer to the term “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc. and the term “Bank” when we mean to refer only to the Company’s bank subsidiary. The Company’s lines of business include retail and commercial banking, wealth management services, and insurance operations.
Occasionally, we will refer to the term “German American Bancorp”, “Bancorp”, “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc. and the term “Bank” when we mean to refer only to the Company’s bank subsidiary. The Company’s lines of business include retail and commercial banking, and wealth management services.
The Bank had no brokered deposits at December 31, 2023.
The Bank had no brokered deposits at December 31, 2024.
In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties.
In the meantime, the existing CRA regulations will remain in effect for the Company. In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties.
At December 31, 2023, the Bank was eligible for payment of dividends under the exemptive criteria established by DFI policy for this purpose, and could have declared and paid to the holding company approxi mately $175 million of its u ndivided profits without approval by the DFI in accordance with such criteria.
At December 31, 2024, the Bank was eligible for payment of dividends under the exemptive criteria established by DFI policy for this purpose, and could have declared and paid to the holding company approximately $150 million of its undivided profits without approval by the DFI in accordance with such criteria.
For further information regarding this merger and acquisition transaction, see Note 18 (Business Combinations, Goodwill and Intangible Assets) in the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 18 is incorporated into this Item 1 by reference.
For further information regarding this merger and acquisition transaction, see Note 21 (Subsequent Events) in the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 21 is incorporated into this Item 1 by reference.
Financial and other information by segment is included in Note 16 (Segment Information) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and is incorporated into this Item 1 by reference.
See “Business Developments” below for additional information. Financial and other information by segment is included in Note 17 (Segment Information) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and is incorporated into this Item 1 by reference.
For a tabular presentation of our regulatory capital ratios and those of the Bank as of December 31, 2023, see Note 8 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 8 is incorporated herein by reference. 10 Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018 (the “Economic Growth Act”) simplified the regulatory capital requirements for eligible community banks and holding companies (which would include the Bank and the Company) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, by permitting those entities to opt-in to the community bank leverage ratio framework (the “CBLR framework”).
Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018 (the “Economic Growth Act”) simplified the regulatory capital requirements for eligible community banks and holding companies (which would include the Bank and the Company) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, by permitting those entities to opt-in to the community bank leverage ratio framework (the “CBLR framework”).
In October 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
On January 17, 2025, a new rule of the CFPB became effective that will require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
In addition, as a result of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), banking organizations were further permitted to mitigate the estimated cumulative regulatory capital effects of CECL for up to an additional two years.
The regulatory capital rules applicable to the Company provided an optional three-year phase-in period for the day-one adverse regulatory capital effects of adopting CECL. In addition, as a result of the Coronavirus Aid, Relief and Economic Security Act, banking organizations were further permitted to mitigate the estimated cumulative regulatory capital effects of CECL for up to an additional two years.
Item 1. Business. General German American Bancorp, Inc. is a Nasdaq-traded (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 75 banking offices in 20 contiguous southern Indiana counties and 14 counties in Kentucky.
Item 1. Business. General German American Bancorp, Inc. is a Nasdaq-listed (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 94 banking offices located throughout Indiana (central/southern), Kentucky (northern/central/western), and Ohio (central/southwest).
The Company also owns an investment brokerage subsidiary (German American Investment Services, Inc.) and a full line property and casualty insurance agency (German American Insurance, Inc.). Throughout this Report, when we use the term “Company”, we will usually be referring to the business and affairs (financial and otherwise) of German American Bancorp, Inc. and its consolidated subsidiaries as a whole.
Throughout this Report, when we use the term “Company” and “German American”, we will usually be referring to the business and affairs (financial and otherwise) of German American Bancorp, Inc. and its consolidated subsidiaries as a whole.
An additional 25% was phased in on each of January 1, 2023 and January 1, 2024, and another 25% will be phased in on January 1, 2025 (at which time the adverse cumulative effects of adopting CECL will have been fully phased into our regulatory capital).
As of January 1, 2025, the adverse cumulative effects of adopting CECL have been fully phased into our regulatory capital.
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services.
The rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services. For banks that hold at least $850 million but less than $50 billion in total assets (which includes the Bank), compliance will be required by April 1, 2028.
Internet Address; Internet Availability of SEC Reports The Company’s Internet address is www.germanamerican.com.
However, the impact of such changes on the regulatory, enforcement and supervisory priorities are uncertain at this time. Internet Address; Internet Availability of SEC Reports The Company’s Internet address is www.germanamerican.com.
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.
German American Bancorp issued approximately 7.74 million shares of its common stock, and paid approximately $23.1 million in cash, in exchange for all of the issued and outstanding shares of common stock of Heartland and in cancellation of all options to acquire Heartland common stock outstanding as of the effective time of the merger.
Our wealth management services involve providing trust, investment advisory, brokerage and retirement planning services to customers. In our insurance operations, we offer a full range of personal and corporate property and casualty insurance products, primarily in the Company’s banking subsidiary’s local markets.
Our wealth management services involve providing trust, investment advisory, brokerage and retirement planning services to customers. Effective June 1, 2024, the Bank’s wholly-owned subsidiary, German American Insurance, Inc. (“GAI”), sold substantially all of its assets. Prior to the sale, GAI was a full-service agency offering personal and commercial insurance products, primarily in the local markets of the Bank.
Immediately following completion of the CUB holding company merger, CUB’s subsidiary bank, Citizen Union Bank of Shelbyville, Inc., was merged with and into the Company’s subsidiary bank, German American Bank.
Immediately following completion of the Heartland 5 holding company merger, Heartland’s subsidiary bank, Heartland Bank, was merged with and into the Bancorp’s subsidiary bank, German American Bank. Heartland, headquartered in Whitehall, Ohio, operated 20 retail banking offices located in Columbus, Ohio and Greater Cincinnati.
Removed
Multi-Line Insurance Agency Jasper, IN German American Investment Services, Inc. Retail Brokerage Jasper, IN Business Developments On January 1, 2022, the Company completed the acquisition of Citizens Union Bancorp of Shelbyville, Inc. (“CUB”) through the merger of CUB with and into the Company.
Added
In Columbus, Ohio and Greater Cincinnati, the Company does business as Heartland Bank, a Division of German American Bank. The Company also owns an investment brokerage subsidiary, German American Investment Services, Inc.
Removed
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 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.
Added
Retail Brokerage Jasper, IN Business Developments Effective June 1, 2024, GAI, a wholly-owned subsidiary of the Bank, sold substantially all of its assets to The Hilb Group of Indiana, LLC, a Delaware limited liability company (“Hilb”), for a purchase price of $40.0 million in cash.
Removed
The regulatory capital rules applicable to the Company provided an optional three-year phase-in period for the day-one adverse regulatory capital effects of adopting CECL.
Added
As part of the transaction, the Bank, as the parent of GAI, may receive payments for the referral of customers to Hilb, and the Company will refrain from conducting certain insurance activities, in each case, for a period of five (5) years following closing. Prior to the sale, GAI was a full-service agency offering personal and commercial insurance products.
Removed
Beginning on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital.
Added
During June and July 2024, the Company undertook a partial restructuring of its securities portfolio by selling available-for-sale securities totaling approximately $375.3 million in book value, at an after-tax loss of approximately $27.2 million. The tax-equivalent yield on the bonds sold was approximately 3.12% with a duration of approximately 7 years.
Removed
Under these rules, the amount of adjustments to regulatory capital that could be deferred until the phase-in period included both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021.
Added
The proceeds from the securities sold were reinvested in the securities portfolio by the end of the third quarter of 2024. On February 1, 2025, German American Bancorp completed its previously announced acquisition of Heartland BancCorp (“Heartland”) through the merger of Heartland with and into the Bancorp.
Removed
The CFPB was granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes.
Added
As of December 31, 2024, Heartland had total assets of approximately $1.97 billion (unaudited), total loans of approximately $1.56 billion (unaudited), and total deposits of approximately $1.75 billion (unaudited).
Removed
For banks that hold at least $850 million but less than $50 billion in total assets (which includes the Bank), compliance would be required approximately two and a half years after adoption of the final rule.
Added
For a tabular presentation of our regulatory capital ratios and those of the Bank as of December 31, 2024, see Note 9 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 9 is incorporated herein by reference.
Removed
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027.
Added
However, on the same day the final rule was released in October 2024, certain industry participants filed a complaint against the CFPB challenging the final rule. This legal challenge may delay or halt implementation of the final rule.
Removed
Climate-Related and Other ESG Developments In recent years, federal, state and international lawmakers and regulators have increased their focus on a company’s risk oversight, disclosures and practices in connection with climate change and other environmental, social and governance (“ESG”) matters.
Added
While most provisions of the final rule would have become effective on January 1, 2026, and the data 13 reporting requirements would have become effective on January 1, 2027, the District Court for the Northern District of Texas enjoined the federal banking regulators from enforcing the CRA final rule in its entirety, extending all implementation dates, day-for-day for each day that the injunction (which was issued on March 29, 2024) remains in place.
Removed
For example, in March 2022, the SEC issued a proposed rule on the enhancement and standardization of climate-related disclosures by public companies. The proposed rule would require public issuers, including us, to significantly expand the scope of climate-related disclosures in their SEC filings.
Added
Impact of Presidential and Congressional Elections on Recent Rulemaking Control of the White House and the U.S. Congress shifted to the Republican Party in January 2025 following the November 2024 Presidential and Congressional elections.
Removed
The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. Future Legislation and Regulation The U.S.
Added
As a result, there has been much discussion about significant reductions in 15 financial services regulation, potentially including amendments to the Dodd-Frank Act and other federal banking laws, and structural changes to the CFPB. In addition, changes in the leadership of the FDIC and CFPB have also been announced by the new Administration.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

24 edited+3 added−8 removed98 unchanged
Biggest changeFailure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
Biggest changeFailure to adapt to or comply with such varying expectations could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price.
Factors impacting the price of our common stock include, among others: • actual or anticipated variations in our quarterly results of operations; • recommendations or research reports about us or the financial services industry in general published by securities analysts; • the failure of securities analysts to cover, or continue to cover, us; • operating and stock price performance of other companies that investors believe are comparable to us; • news reports relating to trends, concerns and other issues in the financial services industry; • perceptions in the marketplace regarding us, or our reputation, competitors or other financial institutions; • actual or anticipated sales of our equity or equity-related securities; • our past and future dividend practice; • departure of our management team or other key personnel; • new technology used, or services offered, by competitors; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; • existing or increased regulatory and compliance requirements, changes or proposed changes in laws or regulations, or differing interpretations thereof affecting our business, or enforcement of these laws and regulations; and • litigation and governmental investigations. 23 General market fluctuations, industry factors and general economic and political conditions and events (including elevated inflation, interest rate changes, credit loss trends, or economic slowdowns or recessions) could also cause our stock price to decrease regardless of operating results.
Factors impacting the price of our common stock include, among others: • actual or anticipated variations in our quarterly results of operations; • recommendations or research reports about us or the financial services industry in general published by securities analysts; • the failure of securities analysts to cover, or continue to cover, us; • operating and stock price performance of other companies that investors believe are comparable to us; • news reports relating to trends, concerns and other issues in the financial services industry; • perceptions in the marketplace regarding us, or our reputation, competitors or other financial institutions; • actual or anticipated sales of our equity or equity-related securities; • our past and future dividend practice; • departure of our management team or other key personnel; • new technology used, or services offered, by competitors; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; • existing or increased regulatory and compliance requirements, changes or proposed changes in laws or regulations, or differing interpretations thereof affecting our business, or enforcement of these laws and regulations; and • litigation and governmental investigations. 24 General market fluctuations, industry factors and general economic and political conditions and events (including elevated inflation, interest rate changes, credit loss trends, or economic slowdowns or recessions) could also cause our stock price to decrease regardless of operating results.
Furthermore, as we and other banks experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers (i) spread deposits among several different banks so as to maximize their amount of FDIC insurance, (ii) move deposits to larger banks (who may be considered “too big to fail”), or (iii) remove deposits from the banking system entirely.
Furthermore, as we and other banks experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers (i) spread deposits among several different banks so as to maximize their 19 amount of FDIC insurance, (ii) move deposits to larger banks (who may be considered “too big to fail”), or (iii) remove deposits from the banking system entirely.
We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition and results of operations. See “Business - Regulation and Supervision” of Item 1 above for additional information .
As a result, we could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition and results of operations. See “Business - Regulation and Supervision” of Item 1 above for additional information.
Moreover, governmental and regulatory actions taken in response to epidemics, pandemics or other infectious disease outbreaks may include decreased 17 interest rates, which could adversely impact the Company’s interest margins and may lead to decreases in the Company’s net interest income.
Moreover, governmental and regulatory actions taken in response to epidemics, pandemics or other infectious disease outbreaks may include decreased interest rates, which could adversely impact the Company’s interest margins and may lead to decreases in the Company’s net interest income.
The underwriting and credit monitoring policies and procedures that we have adopted cannot eliminate the risk that we might incur losses on account of factors relating to the economy like those identified above, and those losses could have a material adverse effect on our business, financial condition, results of operations and cash flows. 16 If our actual loan losses exceed our estimates, our earnings and financial condition will be impacted.
The underwriting and credit monitoring policies and procedures that we have adopted cannot eliminate the risk that we might incur losses on account of factors relating to the economy like those identified above, and those losses could have a material adverse effect on our business, financial condition, results of operations and cash flows. 17 If our actual loan losses exceed our estimates, our earnings and financial condition will be impacted.
Furthermore, negative impacts on our customers caused by such a health crisis could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
Furthermore, negative impacts on our customers caused by such a health crisis 18 could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
Our success depends to a significant degree upon our ability to attract and retain qualified loan origination executives, sales executives for our trust and investment products and services, and sales executives for our insurance products and services.
Our success depends to a significant degree upon our ability to attract and retain qualified loan origination executives and sales executives for our trust and investment products and services.
Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, 22 could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.
Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, 23 could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.
The 21 occurrence of any of these events could cause us to suffer financial loss, face regulatory action and suffer damage to our reputation. Unauthorized disclosure of sensitive or confidential client or customer information, whether through a cyber-attack, other breach of our computer systems or otherwise, could harm our business.
The occurrence of any of these events could cause us to suffer financial loss, face regulatory action and suffer damage to our reputation. 22 Unauthorized disclosure of sensitive or confidential client or customer information, whether through a cyber-attack, other breach of our computer systems or otherwise, could harm our business.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, cash flows and financial condition . 19 Our methods of reducing risk exposure may not be effective.
Any failure or 20 circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, cash flows and financial condition . Our methods of reducing risk exposure may not be effective.
These regulations and supervisory guidance affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. The U.S. Congress and federal regulatory agencies continually review banking laws, regulations and policies for 20 possible changes.
These regulations and supervisory guidance affect our lending practices, capital structure, investment practices, dividend policy and growth, among 21 other things. The U.S. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
As of December 31, 2023, approximately 21% of our deposits were uninsured and 18 uncollateralized. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2024, approximately 22% of our deposits were uninsured and uncollateralized. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.
Further, the effects of weather disasters attributed to climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.
Further, the effects of weather disasters attributed to climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate.
Competition for qualified employees and personnel in the financial services industry (including banking personnel, trust and investments personnel, and insurance personnel) is intense and there are a limited number of qualified persons with knowledge of and experience in our local markets.
We are dependent on key personnel and the loss of one or more of those key personnel could harm our business. Competition for qualified employees and personnel in the financial services industry (including banking personnel and trust and investments personnel) is intense and there are a limited number of qualified persons with knowledge of and experience in our local markets.
Among other things, there may be increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate loan composition and concentrations, and capital as well as general oversight and control of the foregoing.
In addition, following the negative developments in the banking industry over the course of 2023, regulators and investors may continue to focus on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate loan composition and concentrations, and capital as well as general oversight and control of the foregoing.
Risks Related to Our Operations We face significant operational risks due to the high volume and the high dollar value nature of transactions we process. We operate in many different businesses in diverse markets and rely on the ability of our employees and systems to process transactions.
We operate in many different businesses in diverse markets and rely on the ability of our employees and systems to process transactions.
Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
Federal and state legislatures and regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives related to climate change, including initiatives that could increase supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
A favorable business environment is generally characterized by, among other factors, economic growth, low inflation, low unemployment, high business and investor confidence, strong business earnings, and efficient capital markets.
Because of the geographic concentration of our operations and customer base, our results depend largely upon economic conditions in these areas. A favorable business environment is generally characterized by, among other factors, economic growth, low inflation, low unemployment, high business and investor confidence, strong business earnings, and efficient capital markets.
Current economic conditions are being heavily impacted by elevated levels of inflation and rising interest rates. A prolonged period of inflation may impact our profitability by negatively impacting our fixed costs and expenses.
While recent higher inflation levels have moderated, current economic conditions continue to be impacted by inflation rates that persistently remain above the Federal Reserve’s target rate and by elevated interest rates. A prolonged period of higher inflation may impact our profitability by negatively impacting our fixed costs and expenses.
Future results may differ materially from past results, and from our expectations and plans. Risks Related to Our Business and Financial Strategies Economic weakness in our geographic markets could negatively affect us.
Future results may differ materially from past results, and from our expectations and plans. Risks Related to Our Business and Financial Strategies Economic weakness in our geographic markets could negatively affect us. We conduct business from offices that are located throughout Indiana (central/southern), Kentucky (northern/central/western), and Ohio (central/southwest), from which substantially all of our customer base is drawn.
Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations. The global business community has increased its political and social awareness surrounding the state of the global environment and the issue climate change. Further, the U.S.
Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations.
Our FDIC insurance premiums may increase, and special assessments could be made, which might negatively impact our results of operations. High levels of insured institution failures, as a result of the recent recession, significantly increased losses to the Deposit Insurance Fund of the FDIC.
Our FDIC insurance premiums may increase, and special assessments could be made, which may have a materially adverse effect on our results of operations and financial condition.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices may impose additional costs on the Company or expose it to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.
Expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price. Expectations from customers, regulators, investors, and other stakeholders related to the ESG practices and disclosures of companies continue to evolve.
Removed
We conduct business from offices that are located in 20 contiguous southern Indiana counties and 14 counties in Kentucky, from which substantially all of our customer base is drawn. Because of the geographic concentration of our operations and customer base, our results depend largely upon economic conditions in this area.
Added
At the same time, some policymakers have adopted, or are considering adopting, requirements that constrain climate change initiatives. Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, and reputational risks and costs, and may subject us to different and potentially conflicting requirements.
Removed
We are dependent on key personnel and the loss of one or more of those key personnel could harm our business.
Added
As a result, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.
Removed
Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives related to climate change.
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Any such increases in our premiums and assessment fees may have a materially adverse effect on our results of operations and financial condition. Risks Related to Our Operations We face significant operational risks due to the high volume and the high dollar value nature of transactions we process.
Removed
The lack of empirical data surrounding the credit and other financial risks posed by climate change make it impossible to predict how specifically climate change may impact our financial condition and results of operations.
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Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.
Removed
Increased ESG-related compliance costs for the Company as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs.
Removed
In addition, we anticipate increased regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to negative developments in the banking industry over the course of 2023, which may increase our cost of doing business and reduce our profitability.
Removed
Further, the Dodd-Frank Act mandated the FDIC to increase the level of its reserves for future losses in its Deposit Insurance Fund.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur ISO oversees a team of employees dedicated to the prevention, detection, mitigation, and remediation of cybersecurity incidents. He joined the Company in September, 2022 with more than 20 years of technology and information security experience in banking and as a consultant, and holds a Certified Information Security Manager certification.
Biggest changeOur ISO oversees a team of employees dedicated to the prevention, detection, mitigation, and remediation of cybersecurity incidents. He joined the Company in September 2022 with more than 20 years of technology and information security experience in banking and as a consultant, and he holds a Certified Information Security Manager certification.
The Technology Committee 24 receives materials on a quarterly basis to address the identification and status of information technology cybersecurity risks. Each year, the full Board of Directors also receives a comprehensive update on the Company’s cyber and information security program. Our CDIO leads the Company’s digital optimization and information technology initiatives.
The Technology Committee 25 receives materials on a quarterly basis to address the identification and status of information technology cybersecurity risks. Each year, the full Board of Directors also receives a comprehensive update on the Company’s cyber and information security program. Our CDIO leads the Company’s digital optimization and information technology initiatives.
Added
The team of employees includes information security professionals with a range of varying cybersecurity education and experience, many of whom have substantial experience assessing and managing cybersecurity initiatives and hold various cybersecurity certifications.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Bank and the Company’s other subsidiaries also conduct their operations from 50 other locations in Southern Indiana and 27 in Kentucky. Of the 77 total locations, 59 are owned by the Company and 18 are leased from third parties.
Biggest changeThe Bank and the Company’s other subsidiaries also conduct their operations from 48 other locations in Southern Indiana, 30 in Kentucky and 17 in Ohio. Of the 96 total locations, 75 are owned by the Company and 21 are leased from third parties.
Item 2. Properties. The Company’s executive offices are located in the main office building of the Bank at 711 Main Street, Jasper, Indiana. The main office building, which is owned by the Bank and also serves as the main office of the Company’s other subsidiaries, contains approximately 23,600 square feet of office space.
Item 2. Properties. The Company’s executive offices are located in the main office building of the Bank at 711 Main Street, Jasper, Indiana 47546. The main office building, which is owned by the Bank and also serves as the main office of the Company’s other subsidiaries, contains approximately 23,600 square feet of office space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. There are no pending legal proceedings, other than routine litigation incidental to the business of the Company’s subsidiaries, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 4. Mine Safety Disclosures. Not applicable. 25 PART II
Biggest changeItem 3. Legal Proceedings. There are no pending legal proceedings, other than routine litigation incidental to the business of the Company’s subsidiaries, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 4. Mine Safety Disclosures. Not applicable. 26 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares (or Units) Purchased Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) October 2023 — $ — — 1,000,000 November 2023 — — — 1,000,000 December 2023 — — — 1,000,000 Totals — $ — — (1) On January 31, 2022, the Company’s Board of Directors approved a plan to repurchase up to 1.0 million shares of the Company’s outstanding common stock.
Biggest changePeriod Total Number of Shares (or Units) Purchased Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) October 2024 — $ — — 1,000,000 November 2024 — — — 1,000,000 December 2024 — — — 1,000,000 Totals — $ — — (1) The Company’s Board of Directors has previously approved a plan to repurchase up to 1.0 million shares of the Company’s outstanding common stock.
The Indiana Bank Peer Group (which is a custom peer group identified by Company management) includes all Indiana-based commercial bank holding companies (excluding companies owning thrift institutions that are not regulated as bank holding companies) that have been in existence as commercial bank holding companies throughout the five-year period ended December 31, 2023, the stocks of which have been traded on an established securities market (NYSE, NYSE American or Nasdaq) throughout that five-year period.
The Indiana Bank Peer Group (which is a custom peer group identified by Company management) includes all Indiana-based commercial bank holding companies (excluding companies owning thrift institutions that are not regulated as bank holding companies) that have been in existence as commercial bank holding companies throughout the five-year period ended December 31, 2024, the stocks of which have been traded on an established securities market (NYSE, NYSE American or Nasdaq) throughout that five-year period.
Equity Compensation Plan Information See Item 12 of Part III of this Report for information regarding securities authorized for issuance under equity compensation plans. Item 6. [Reserved] 27
Equity Compensation Plan Information See Item 12 of Part III of this Report for information regarding securities authorized for issuance under equity compensation plans. Item 6. [Reserved] 28
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Common Stock German American Bancorp, Inc.’s stock is traded on the Nasdaq Global Select Market under the symbol GABC. The Common Stock was held of record by approximately 3,058 shareholders at February 20, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Common Stock German American Bancorp, Inc.’s stock is traded on the Nasdaq Global Select Market under the symbol GABC. The Common Stock was held of record by approximately 3,134 shareholders at February 20, 2025.
The Company’s stock is currently included in the Russell 2000 Index and Russell Microcap Index. 26 Stock Repurchase Program Information The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended December 31, 2023.
The Company’s stock is currently included in the Russell 2000 Index and Russell Microcap Index. 27 Stock Repurchase Program Information The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended December 31, 2024.
The companies comprising the Indiana Bank Peer Group for purposes of the December 2023 comparison were: 1st Source Corp., First Financial Corp., First Merchants Corp., Lakeland Financial Corp., Old National Bancorp, Horizon Bancorp, First Internet Bancorp, First Savings Financial Corp., and First Capital, Inc.
The companies comprising the Indiana Bank Peer Group for purposes of the December 2024 comparison were: 1st Source Corp., First Financial Corp., First Merchants Corp., Lakeland Financial Corp., Old National Bancorp, Horizon Bancorp, First Internet Bancorp, First Savings Financial Corp., First Capital, Inc., Merchants Bancorp, and Richmond Mutual Bancorporation, Inc.
Transfer Agent: Computershare Priority Processing 150 Royall St., Suite 101 Canton, MA 02021 (800) 884-4225 Shareholder Information and Corporate Office: Terri Eckerle German American Bancorp, Inc. P.O.
Transfer Agent: Computershare Priority Processing 150 Royall St., Suite 101 Canton, MA 02021 (800) 884-4225 Shareholder Information: German American Bancorp, Inc. P.O.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

120 edited+34 added−36 removed80 unchanged
Biggest changeSpecifically, the commercial real estate loan portfolio, as a percentage of the CRE portfolio and total loans at December 31, 2023, included the following property types: multi-family dwellings (21% of CRE portfolio and 11% of total loans); single family investment properties (12% of CRE portfolio and 7% of total loans); retail space (14% of CRE portfolio and 7% of total loans); office real estate (8% of CRE portfolio and 4% of total loans); lodging (6% of CRE portfolio and 3% of total loans); healthcare facilities (7% of CRE portfolio and 4% of total loans); and land development and construction (6% of CRE portfolio and 3% of total loans).
Biggest changeDecember 31, 2024 December 31, 2023 % of Commercial Real Estate Portfolio % of Total Loan Portfolio % of Commercial Real Estate Portfolio % of Total Loan Portfolio Multi-Family Dwellings 20 % 11 % 21 % 11 % Retail Space 15 % 8 % 14 % 7 % 1-4 Family Investment Properties 11 % 6 % 12 % 7 % Industrial, Manufacturing, Warehousing Properties 10 % 5 % 10 % 5 % Office Real Estate 9 % 5 % 8 % 4 % Healthcare Facilities 7 % 4 % 7 % 4 % Land Development and Construction 7 % 4 % 6 % 3 % Lodging 6 % 3 % 6 % 3 % The Company’s commercial real estate (“CRE”) loan portfolio is further diversified by occupancy type, with approximately 77% of the CRE portfolio being non-owner occupied at December 31, 2024 (which is 42% of the Company’s overall loan portfolio), and 23% of the CRE portfolio being owner occupied (which is 12% of the Company’s total loan portfolio).
Actual results may differ materially from the expectations of the Company that is expressed or implied by any forward-looking statement.
Actual results may differ materially from the expectations of the Company that is expressed or implied by any forward-looking statement.
This Item 7, as well as the discussions in Item 1 (“Business”) entitled “Forward-Looking Statements and Associated Risks” and in Item 1A (“Risk Factors”) (which discussions are incorporated in this Item 7 by reference) list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any such forward-looking statements.
This Item 7, as well as the discussions in Item 1 (“Business”) entitled “Forward-Looking Statements and Associated Risks” and in Item 1A (“Risk Factors”) (which discussions are incorporated in this Item 7 by reference) list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any such forward-looking statements.
The increase in net income during 2023, compared with 2022, was primarily attributable to increased non-interest income, a decline in non-interest expenses (which was driven by higher expenses in 2022 as a result of the January 1, 2022 acquisition of CUB), and a lower provision for credit losses.
The increase in net income during 2023, compared with 2022, was primarily attributable to increased non-interest income, a decline in non-interest expenses (which was driven by higher expenses in 2022 as a result of the January 1, 2022 acquisition of CUB), and a lower provision for credit losses.
The positive impact of those items was partially offset by a decline in net interest income resulting primarily from a reduced level of earning assets, which was somewhat mitigated by an improved net interest margin.
The positive impact of those items was partially offset by a decline in net interest income resulting primarily from a reduced level of earning assets, which was somewhat mitigated by an improved net interest margin.
Economic factors include evaluating changes in international, national, regional and local economic and business conditions that affect the collectability of the loan portfolio. Internal factors include evaluating changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; and changes in experience, ability and depth of lending management and staff.
Economic factors include evaluating changes in international, national, regional and local economic and business conditions that affect the collectability of the loan portfolio. Internal factors include evaluating changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; and changes in experience, ability and depth of lending management and staff.
A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized. In evaluating the realization of deferred tax assets, management considers the likelihood that sufficient taxable income of appropriate character will be generated within carry-back and carry-forward periods, including consideration of available tax 30 planning strategies.
A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized. In evaluating the realization of deferred tax assets, management considers the likelihood that sufficient taxable income of appropriate character will be generated within carry-back and carry-forward periods, including consideration of available tax planning strategies.
Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, our management examines market conditions and current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.
Once it is determined that the borrower’s 40 management possesses sound ethics and solid business acumen, our management examines market conditions and current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.
The bank subsidiary of the Company also utilizes short-term funding sources from time to time. These sources consist of overnight federal funds purchased from other financial institutions, secured repurchase agreements that generally mature within one day of the transaction date, and secured overnight variable rate borrowings from the FHLB.
The bank subsidiary of the Company also utilizes short-term funding sources from time to time. These sources consist of overnight federal funds purchased from other financial institutions, secured repurchase agreements that generally mature within one day of the transaction date, and secured overnight variable rate borrowings from the FHLB and the Federal Reserve Bank.
See Note 7 (FHLB Advances and Other Borrowings) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report for further information regarding borrowed funds. PARENT COMPANY FUNDING SOURCES The parent company is a corporation separate and distinct from its bank and other subsidiaries.
See Note 8 (FHLB Advances and Other Borrowings) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report for further information regarding borrowed funds. PARENT COMPANY FUNDING SOURCES The parent company is a corporation separate and distinct from its bank and other subsidiaries.
Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other 34 qualitative and quantitative factors.
Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.
The liquidity of the parent company is dependent upon the receipt of dividends from its bank subsidiary, which are subject to certain regulatory limitations explained in Note 8 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
The liquidity of the parent company is dependent upon the receipt of dividends from its bank subsidiary, which are subject to certain regulatory limitations explained in Note 9 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale debt securities was needed at December 31, 2023. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale debt securities was needed at December 31, 2024. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses.
The sensitivity and related range of impact is a hypothetical analysis and is not intended to represent management’s judgements or assumptions of qualitative loss factors that were utilized at December 31, 2023 in estimation of the allowance for credit losses on loans recognized on the Consolidated Balance Sheets.
The sensitivity and related range of impact is a hypothetical analysis and is not intended to represent management’s judgements or assumptions of qualitative loss 31 factors that were utilized at December 31, 2024 in estimation of the allowance for credit losses on loans recognized on the Consolidated Balance Sheets.
Core deposits consist of demand deposits, savings, interest-bearing checking, money market accounts, and certificates of deposit of less than $100,000. Other deposit sources include certificates of deposit of $100,000 or more. The deposit base remains diverse with stable and manageable exposure to uninsured and uncollateralized deposits of approximately 21% of total deposits.
Core deposits consist of demand deposits, savings, interest-bearing checking, money market accounts, and certificates of deposit of less than $100,000. Other deposit sources include certificates of deposit of $100,000 or more. The deposit base remains diverse with stable and manageable exposure to uninsured and uncollateralized deposits of approximately 22% of total deposits.
A meaningful level of the outflow of deposits experienced during the past year was captured within the Company’s wealth management group. The Company’s ability to attract core deposits continues to be influenced by competition and the interest rate environment, as well as the availability of alternative investment products.
Throughout 2023, a meaningful level of the outflow of deposits experienced during the past year was captured within the Company’s wealth management group. The Company’s ability to attract core deposits continues to be influenced by competition and the interest rate environment, as well as the availability of alternative investment products.
FDIC premiums increased $969,000, or 52%, during the year ended December 31, 2023 compared with 2022. The increase during 2023 compared with 2022 was primarily related to an industry-wide 2 basis point increase in the base FDIC premium assessment effective January 1, 2023. FDIC premiums increased $441,000, or 31%, during 2022 compared with 2021.
FDIC premiums increased $969,000, or 52%, during the year ended December 31, 2023 compared with 2022. The increase during 2023 compared with 2022 was primarily related to an industry-wide 2 basis point increase in the base FDIC premium assessment effective January 1, 2023.
The following table indicates the amounts of loans (excluding residential mortgages on 1-4 family residences and consumer loans) outstanding as of December 31, 2023, which, based on remaining scheduled repayments of principal, are due in the periods indicated (dollars in thousands).
The following table indicates the amounts of loans (excluding residential mortgages on 1-4 family residences and consumer loans) outstanding as of December 31, 2024, which, based on remaining scheduled repayments of principal, are due in the periods indicated (dollars in thousands).
RESULTS OF OPERATIONS NET INCOME Net income for the year ended December 31, 2023 totaled $85,888,000, or $2.91 per share, an increase of $4,063,000, or approximately 5% on a per share basis, from the year ended December 31, 2022 net income of $81,825,000, or $2.78 per share.
Net income for the year ended December 31, 2023 totaled $85,888,000, or $2.91 per share, an increase of $4,063,000, or approximately 5% on a per share basis, from the year ended December 31, 2022 net income of $81,825,000, or $2.78 per share.
Throughout this Management’s Discussion and Analysis, as elsewhere in this Report, when we use the term “Company”, we will usually be referring to the business and affairs (financial and otherwise) of the Company and its subsidiaries and affiliates as a whole.
Throughout this Management’s Discussion and Analysis, as elsewhere in this Report, when we use the term “Company” and “German American”, we will usually be referring to the business and affairs (financial and otherwise) of the Company and its subsidiaries and affiliates as a whole.
The selection of and application of these policies involve estimates, judgments, and uncertainties that are subject to change.
The selection of and application of these 30 policies involve estimates, judgments, and uncertainties that are subject to change.
For information regarding the financial condition, result of operations, and cash flows of the Company, presented on a parent-company-only basis, see Note 17 (Parent Company Financial Statements) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
For information regarding the financial condition, result of operations, and cash flows of the Company, presented on a parent-company-only basis, see Note 18 (Parent Company Financial Statements) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.
The Company’s Asset/Liability Committee monitors compliance within established guidelines of the Funds Management Policy. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk section for further discussion regarding interest rate risk. 47
The Company’s Asset/Liability Committee monitors compliance within established guidelines of the Funds Management Policy. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk section for further discussion regarding interest rate risk. 48
The Company has continued to see customer movement from both interest bearing and non-interest bearing transactional accounts to time deposits due primarily to a higher interest rate environment. Core deposits continue to represent a significant funding source for the Company’s operations and represented 90% of average total funding sources during 2023 compared with 94% during 2022 and 92% during 2021.
The Company has continued to see customer movement from both interest bearing and non-interest bearing transactional accounts to time deposits due primarily to a higher interest rate environment. Core deposits continue to represent a significant funding source for the Company’s operations and represented 90% of average total funding sources during 2024 compared with 90% during 2023 and 94% during 2022.
This Management’s Discussion and Analysis includes an analysis of the major components of the Company’s operations for the years 2021 through 2023 and its financial condition as of December 31, 2022 and 2023.
This Management’s Discussion and Analysis includes an analysis of the major components of the Company’s operations for the years 2022 through 2024 and its financial condition as of December 31, 2023 and 2024.
Financial and other information by segment is included in Note 16 (Segment Information) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and is incorporated into this Item 7 by reference.
Financial and other information by segment is included in Note 17 (Segment Information) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and is incorporated into this Item 7 by reference.
The net interest margin represents tax-equivalent net interest income expressed as a percentage of average earning assets. The net interest margin for the year ended December 31, 2023 was 3.58% compared to 3.45% in 2022 and 3.31% in 2021.
The net interest margin represents tax-equivalent net interest income expressed as a percentage of average earning assets. The net interest margin for the year ended December 31, 2024 was 3.43%, compared to 3.58% in 2023 and 3.45% in 2022.
The Company’s commercial real estate loan portfolio is further diversified by occupancy type, with approximately 77% of the CRE portfolio being non-owner occupied at December 31, 2023 (which is 41% of the Company’s overall loan portfolio), and 23% of the CRE portfolio being owner occupied (which is 12% of the Company’s total loan portfolio).
At December 31, 2023, the Company’s commercial real estate loan portfolio was diversified by occupancy type, with approximately 77% of the CRE portfolio being non-owner occupied (which was 41% of the Company’s overall loan portfolio), and 23% of the CRE portfolio being owner occupied (which was 12% of the Company’s total loan portfolio).
For further information about such commitments, see Note 14 (Commitments and Off-balance Sheet Items) in Notes to the Consolidated Financial Statements included in Item 8 of this Report. 41 SOURCES OF FUNDS The Company’s primary source of funding is its base of core customer deposits.
For further information about such commitments, see Note 15 42 (Commitments and Off-balance Sheet Items) in Notes to the Consolidated Financial Statements included in Item 8 of this Report. SOURCES OF FUNDS The Company’s primary source of funding is its base of core customer deposits.
In addition, the Company had a borrowing capacity of approximately $200 million at the Federal Reserve Bank as of December 31, 2023, based on the then pledged collateral. The capacity for borrowings from the FHLB and the Federal Reserve Bank could be increased, in each case, by the Company pledging additional available collateral.
In addition, the Company had a borrowing capacity of approximately $595 million at the Federal Reserve Bank as of December 31, 2024, based on the then pledged collateral. The capacity for borrowings from the FHLB and the Federal Reserve Bank could be increased, in each case, by the Company pledging additional available collateral.
The allowance for credit losses represented 1.10% of period-end loans at December 31, 2023 compared with 1.17% of period-end loans at December 31, 2022. The Company adopted ASU No. 2016-13, Financial instruments - Credit Losses (Topic 326) on January 1, 2020.
The allowance for credit losses represented 1.08% of period-end loans at December 31, 2024 compared with 1.10% of period-end loans at December 31, 2023. The Company adopted ASU No. 2016-13, Financial instruments - Credit Losses (Topic 326) on January 1, 2020.
Occasionally, we will refer to the term “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc., and the term “Bank” when we mean to refer to only the Company’s bank subsidiary.
Occasionally, we will refer to the term “German American”, “Bancorp”, “parent company” or “holding company” when we mean to refer to only German American Bancorp, Inc., and the term “Bank” when we mean to refer to only the Company’s bank subsidiary.
OTHER FUNDING SOURCES Certificates of deposits in denominations of $100,000 or more are an additional source of other funding for the Company’s bank subsidiary and are used as both long-term and short-term funding sources. On an average basis, large denomination certificates increased $118.8 million, or 56%, during 2023. This follows an increase of $25.1 million, or 13% during 2022.
OTHER FUNDING SOURCES Certificates of deposits in denominations of $100,000 or more are an additional source of other funding for the Company’s bank subsidiary and are used as both long-term and short-term funding sources. On an average basis, large denomination certificates increased $207.1 million, or 63%, during 2024. This follows an increase of $118.8 million, or 56%, during 2023.
Accretion of discounts on acquired loans totaled $2,814,000 during 2023, $4,341,000 during 2022, and $3,476,000 during 2021. 32 The following table summarizes net interest income (on a tax-equivalent basis) for each of the past three years. For tax-equivalent adjustments, an effective tax rate of 21% was used for all periods presented (1) .
Accretion of discounts on acquired loans totaled $1,507,000 during 2024, $2,814,000 during 2023, and $4,341,000 during 2022. The following table summarizes net interest income (on a tax-equivalent basis) for each of the past three years. For tax-equivalent adjustments, an effective tax rate of 21% was used for all periods presented (1) .
As previously discussed, customers seeking higher yield opportunities were a contributing factor to growth in this category of the Company’s funding sources. The Company had no brokered deposits as of December 31, 2023 and 2022. The Company participates in a reciprocal deposit program. Reciprocal Deposits totaled $77.9 million at December 31, 2023 and $42.6 million at December 31, 2022.
As previously discussed, customers seeking higher yield opportunities were a contributing factor to growth in this category of the Company’s funding sources. The Company had no brokered deposits as of December 31, 2024 and 2023. The Company participates in a reciprocal deposit program. Reciprocal Deposits totaled $96.8 million at December 31, 2024 and $77.9 million at December 31, 2023.
The Company’s overall level of period-end core deposits declined approximately $381.8 million, or 7%, during 2023 compared with 2022. Competitive deposit pricing in the marketplace as well as customers actively looking for yield opportunities within and outside the banking industry are contributing factors to the decline in total deposits over the course of the past year.
The Company’s overall level of average core deposits declined approximately $622.8 million, or 11%, during 2023 compared with 2022. Competitive deposit pricing in the marketplace as well as customers actively looking for yield opportunities within and outside the banking industry are contributing factors to the decline in total deposits over the course of the past year.
During 2022, the provision for credit losses represented approximately 17 basis points of average loans. The provision for credit losses in 2022 included $6,300,000 for the Day 1 CECL addition to the allocation for credit loss related to the CUB acquisition for the non-purchased with credit deterioration (“PCD”) loans.
During 2022, the provision for credit losses represented approximately 17 basis points of average loans. The provision for credit losses in 2022 included $6,300,000 for the Day 1 CECL addition to the allocation for credit loss related to the CUB acquisition for the non-PCD loans.
The need for specific reserves are considered for credits when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectability of the loan is in question, or the loan characteristics require special monitoring. 44 Allowance for Credit Losses (dollars in thousands) Years Ended December 31, 2023 2022 2021 2020 2019 Balance of Allowance for Expected Credit Losses at Beginning of Period $ 44,168 $ 37,017 $ 46,859 $ 16,278 $ 15,823 Impact of adopting ASC 326 — — — 8,767 — Impact of adopting ASC 326 - PCD loans — — — 6,886 — Loans Charged-off: Commercial and Industrial Loans and Leases 1,792 1,149 2,777 2,119 3,810 Commercial Real Estate Loans 56 79 10 36 320 Agricultural Loans 27 — — — — Home Equity and Consumer Loans 1,858 1,598 1,003 942 1,155 Residential Mortgage Loans 58 24 45 39 117 Total Loans Charged-off 3,791 2,850 3,835 3,136 5,402 Recoveries of Previously Charged-off Loans: Commercial and Industrial Loans and Leases 154 26 61 23 56 Commercial Real Estate Loans 76 24 40 129 29 Agricultural Loans — — — — — Home Equity and Consumer Loans 605 479 359 358 440 Residential Mortgage Loans 3 5 33 4 7 Total Recoveries 838 534 493 514 532 Net Loans Recovered (Charged-off) (2,953) (2,316) (3,342) (2,622) (4,870) Acquisition of Citizens Union Bank of Shelbyville, KY - PCD Loans — 3,117 — — — Additions to Allowance Charged to Expense 2,550 6,350 (6,500) 17,550 5,325 Balance at End of Period $ 43,765 $ 44,168 $ 37,017 $ 46,859 $ 16,278 Net Charge-offs (Recoveries) to Average Loans Outstanding 0.08 % 0.06 % 0.11 % 0.08 % 0.17 % Provision for Credit Losses to Average Loans Outstanding 0.07 % 0.17 % (0.21) % 0.55 % 0.18 % Allowance for Credit Losses to Total Loans at Year-end 1.10 % 1.17 % 1.23 % 1.52 % 0.53 % The following table indicates the breakdown of the allowance for credit losses for the periods indicated (dollars in thousands): Years Ended December 31, 2023 2022 2021 2020 2019 Commercial and Industrial Loans and Leases $ 8,267 $ 13,958 $ 9,754 $ 6,645 $ 4,799 Commercial Real Estate Loans 25,923 21,598 19,245 29,878 4,692 Agricultural Loans 3,837 4,188 4,505 6,756 5,315 Home Equity and Consumer Loans 2,976 2,196 1,808 1,636 634 Residential Mortgage Loans 2,762 2,228 1,705 1,944 333 Unallocated — — — — 505 Total Allowance for Credit Losses $ 43,765 $ 44,168 $ 37,017 $ 46,859 $ 16,278 The Company’s allowance for credit losses totaled $43.8 million at December 31, 2023 compared to $44.2 million at December 31, 2022.
The need for specific reserves are considered for credits when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectability of the loan is in question, or the loan characteristics require special monitoring. 45 Allowance for Credit Losses (dollars in thousands) Years Ended December 31, 2024 2023 2022 2021 2020 Balance of Allowance for Expected Credit Losses at Beginning of Period $ 43,765 $ 44,168 $ 37,017 $ 46,859 $ 16,278 Impact of adopting ASC 326 — — — — 8,767 Impact of adopting ASC 326 - PCD loans — — — — 6,886 Loans Charged-off: Commercial and Industrial Loans and Leases 223 1,792 1,149 2,777 2,119 Commercial Real Estate Loans 308 56 79 10 36 Agricultural Loans 8 27 — — — Home Equity and Consumer Loans 2,362 1,858 1,598 1,003 942 Residential Mortgage Loans — 58 24 45 39 Total Loans Charged-off 2,901 3,791 2,850 3,835 3,136 Recoveries of Previously Charged-off Loans: Commercial and Industrial Loans and Leases 55 154 26 61 23 Commercial Real Estate Loans 83 76 24 40 129 Agricultural Loans 2 — — — — Home Equity and Consumer Loans 657 605 479 359 358 Residential Mortgage Loans — 3 5 33 4 Total Recoveries 797 838 534 493 514 Net Loans Recovered (Charged-off) (2,104) (2,953) (2,316) (3,342) (2,622) Acquisition of Citizens Union Bank of Shelbyville, KY - PCD Loans — — 3,117 — — Additions to Allowance Charged to Expense 2,775 2,550 6,350 (6,500) 17,550 Balance at End of Period $ 44,436 $ 43,765 $ 44,168 $ 37,017 $ 46,859 Net Charge-offs (Recoveries) to Average Loans Outstanding 0.05 % 0.08 % 0.06 % 0.11 % 0.08 % Provision for Credit Losses to Average Loans Outstanding 0.07 % 0.07 % 0.17 % (0.21) % 0.55 % Allowance for Credit Losses to Total Loans at Year-end 1.08 % 1.10 % 1.17 % 1.23 % 1.52 % The following table indicates the breakdown of the allowance for credit losses for the periods indicated (dollars in thousands): Years Ended December 31, 2024 2023 2022 2021 2020 Commercial and Industrial Loans and Leases $ 7,456 $ 8,267 $ 13,958 $ 9,754 $ 6,645 Commercial Real Estate Loans 25,818 25,923 21,598 19,245 29,878 Agricultural Loans 4,917 3,837 4,188 4,505 6,756 Home Equity and Consumer Loans 3,443 2,976 2,196 1,808 1,636 Residential Mortgage Loans 2,802 2,762 2,228 1,705 1,944 Unallocated — — — — — Total Allowance for Credit Losses $ 44,436 $ 43,765 $ 44,168 $ 37,017 $ 46,859 The Company’s allowance for credit losses totaled $44.4 million at December 31, 2024 compared to $43.8 million at December 31, 2023.
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.
German American Bancorp 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.
The composition of the year-end balances in the investment portfolio is presented in Note 2 (Securities) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and in the table below: Investment Portfolio, at Amortized Cost December 31, (dollars in thousands) 2023 % 2022 % 2021 % Federal Funds Sold and Other Short-term Investments $ 36,525 2 % $ 41,905 2 % $ 349,717 16 % U.S.
The composition of the year-end balances in the investment portfolio is presented in Note 3 (Securities) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report and in the table below: Investment Portfolio, at Amortized Cost December 31, (dollars in thousands) 2024 % 2023 % 2022 % Federal Funds Sold and Other Short-term Investments $ 119,543 6 % $ 36,525 2 % $ 41,905 2 % U.S.
At December 31, 2023, the capital levels for the Company and its subsidiary bank remained well in excess of the minimum amounts needed for capital adequacy purposes and the Bank’s capital levels met the necessary requirements to be considered well-capitalized. 37 The table below presents the Company’s consolidated and the subsidiary bank’s capital ratios under regulatory guidelines: 12/31/2023 Ratio 12/31/2022 Ratio Minimum for Capital Adequacy Purposes ⁽¹⁾ Well-Capitalized Guidelines Total Capital (to Risk Weighted Assets) Consolidated 16.50 % 15.45 % 8.00 % N/A Bank 14.76 14.07 8.00 10.00 % Tier 1 (Core) Capital (to Risk Weighted Assets) Consolidated 14.97 % 13.97 % 6.00 % N/A Bank 14.04 13.42 6.00 8.00 % Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets) Consolidated 14.26 % 13.26 % 4.50 % N/A Bank 14.04 13.42 4.50 6.50 % Tier 1 Capital (to Average Assets) Consolidated 11.75 % 10.50 % 4.00 % N/A Bank 11.03 10.09 4.00 5.00 % (1) Excludes capital conservation buffer.
At December 31, 2024, the capital levels for the Company and its subsidiary bank remained well in excess of the minimum amounts needed for capital adequacy purposes and the Bank’s capital levels met the necessary requirements to be considered well-capitalized. 38 The table below presents the Company’s consolidated and the subsidiary bank’s capital ratios under regulatory guidelines: 12/31/2024 Ratio 12/31/2023 Ratio Minimum for Capital Adequacy Purposes ⁽¹⁾ Well-Capitalized Guidelines Total Capital (to Risk Weighted Assets) Consolidated 17.15 % 16.50 % 8.00 % N/A Bank 15.02 14.76 8.00 10.00 % Tier 1 (Core) Capital (to Risk Weighted Assets) Consolidated 15.72 % 14.97 % 6.00 % N/A Bank 14.23 14.04 6.00 8.00 % Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets) Consolidated 15.02 % 14.26 % 4.50 % N/A Bank 14.23 14.04 4.50 6.50 % Tier 1 Capital (to Average Assets) Consolidated 12.28 % 11.75 % 4.00 % N/A Bank 11.12 11.03 4.00 5.00 % (1) Excludes capital conservation buffer.
These borrowings represent an important source of short-term liquidity for the Company’s bank subsidiary. The Company’s bank subsidiary is authorized by its Board to borrow up to $500 million at the FHLB, but availability at December 31, 2023 was limited to approximately $226 million based on the then pledged collateral and outstanding borrowings.
These borrowings represent an important source of short-term liquidity for the Company’s bank subsidiary. The Company’s bank subsidiary is authorized by its Board to borrow up to $1.25 billion at the FHLB, but availability at December 31, 2024 was limited to approximately $470 million based on the then pledged collateral and outstanding borrowings.
The lower effective rate in all periods primarily resulted from the Company’s tax-exempt investment income on securities, loans, and company owned life insurance, income tax credits generated by investments in affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.
The effective tax rate in all periods presented was lower than the blended statutory rate resulting primarily from the Company’s tax-exempt investment income on securities, loans and company-owned life insurance, income tax credits generated from affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.
The Company realized net charge-offs of $2,953,000, or 0.08% of average loans outstanding, during 2023 compared with $2,316,000, or 0.06% of average loans outstanding, during 2022 and $3,342,000, or 0.11% of average loans outstanding, during 2021. 45 Please see “RESULTS OF OPERATIONS - Provision for Credit Losses” and “CRITICAL ACCOUNTING POLICIES AND ESTIMATES - Allowance for Credit Losses” for additional information regarding the allowance.
The Company realized net charge-offs of $2,104,000, or 0.05% of average loans outstanding, during 2024 compared with $2,953,000, or 0.08% of average loans outstanding, during 2023 and $2,316,000, or 0.06% of average loans outstanding, during 2022. 46 Please see “RESULTS OF OPERATIONS - Provision for Credit Losses” and “CRITICAL ACCOUNTING POLICIES AND ESTIMATES - Allowance for Credit Losses” for additional information regarding the allowance.
Interest income recognized on non-performing loans for 2023 was $231,000. The gross interest income that would have been recognized in 2023 on non-performing loans if the loans had been current in accordance with their original terms was $1,313,000.
The gross interest income that would have been recognized in 2024 on non-performing loans if the loans had been current in accordance with their original terms was $1,040,000.
Loan Portfolio December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial and Industrial Loans and Leases $ 661,529 $ 676,502 $ 548,350 $ 694,437 $ 589,758 Commercial Real Estate Loans 2,121,835 1,966,884 1,530,677 1,467,397 1,495,862 Agricultural Loans 423,803 417,413 358,150 376,186 384,526 Home Equity and Consumer Loans 407,889 377,164 307,184 297,702 306,972 Residential Mortgage Loans 362,844 350,682 263,565 256,276 304,855 Total Loans 3,977,900 3,788,645 3,007,926 3,091,998 3,081,973 Less: Unearned Income (6,818) (3,711) (3,662) (3,926) (4,882) Subtotal 3,971,082 3,784,934 3,004,264 3,088,072 3,077,091 Less: Allowance for Credit Losses (43,765) (44,168) (37,017) (46,859) (16,278) Loans, Net $ 3,927,317 $ 3,740,766 $ 2,967,247 $ 3,041,213 $ 3,060,813 Net PPP Loans (Included in Commercial and Industrial Loans above) — — 19,450 181,984 — Ratio of Loans to Total Loans Commercial and Industrial Loans and Leases 17 % 18 % 18 % 23 % 19 % Commercial Real Estate Loans 53 % 52 % 51 % 47 % 49 % Agricultural Loans 11 % 11 % 12 % 12 % 12 % Home Equity and Consumer Loans 10 % 10 % 10 % 10 % 10 % Residential Mortgage Loans 9 % 9 % 9 % 8 % 10 % Total Loans 100 % 100 % 100 % 100 % 100 % The Company’s policy is generally to extend credit to consumer and commercial borrowers in its primary geographic market area in southern Indiana and central and western Kentucky.
Loan Portfolio December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Commercial and Industrial Loans and Leases $ 671,038 $ 661,529 $ 676,502 $ 548,350 $ 694,437 Commercial Real Estate Loans 2,224,872 2,121,835 1,966,884 1,530,677 1,467,397 Agricultural Loans 431,037 423,803 417,413 358,150 376,186 Home Equity and Consumer Loans 448,872 407,889 377,164 307,184 297,702 Residential Mortgage Loans 357,448 362,844 350,682 263,565 256,276 Total Loans 4,133,267 3,977,900 3,788,645 3,007,926 3,091,998 Less: Unearned Income (8,365) (6,818) (3,711) (3,662) (3,926) Subtotal 4,124,902 3,971,082 3,784,934 3,004,264 3,088,072 Less: Allowance for Credit Losses (44,436) (43,765) (44,168) (37,017) (46,859) Loans, Net $ 4,080,466 $ 3,927,317 $ 3,740,766 $ 2,967,247 $ 3,041,213 Net PPP Loans (Included in Commercial and Industrial Loans above) $ — $ — $ — $ 19,450 $ 181,984 Ratio of Loans to Total Loans Commercial and Industrial Loans and Leases 16 % 17 % 18 % 18 % 23 % Commercial Real Estate Loans 54 % 53 % 52 % 51 % 47 % Agricultural Loans 10 % 11 % 11 % 12 % 12 % Home Equity and Consumer Loans 11 % 10 % 10 % 10 % 10 % Residential Mortgage Loans 9 % 9 % 9 % 9 % 8 % Total Loans 100 % 100 % 100 % 100 % 100 % The Company’s policy is generally to extend credit to consumer and commercial borrowers in its primary geographic market area in southern Indiana and central and western Kentucky.
Shareholders’ equity included $186.7 million of goodwill and other intangible assets at December 31, 2023 compared to $189.8 million of goodwill and other intangible assets at December 31, 2022. In January 2022, the Company’s Board of Directors approved a plan to repurchase up to 1.0 million shares of the Company’s outstanding common stock.
Shareholders’ equity included $183.0 million of goodwill and other intangible assets at December 31, 2024 compared to $186.7 million of goodwill and other intangible assets at December 31, 2023. The Company’s Board of Directors previously approved a plan to repurchase up to 1.0 million shares of the Company’s outstanding common stock.
The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. See Note 8 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which is incorporated herein by reference.
The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. See Note 9 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which is incorporated herein by reference. The parent company has, from time-to-time, supplemented the dividends received from its subsidiaries with borrowings.
The decline during 2023 compared with 2022 was largely driven by acquisition-related costs associated with the CUB transaction, which totaled approximately $4,982,000 during 2022. Data processing fees increased $7,795,000, or 102%, during the year ended December 31, 2022 compared with 2021.
Data processing fees declined $4,294,000, or 28%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline during 2023 compared with 2022 was largely driven by acquisition-related costs associated with the CUB transaction, which totaled approximately $4,982,000 during 2022.
Non-performing Assets December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Non-accrual Loans $ 9,136 $ 12,888 $ 14,602 $ 21,507 $ 13,802 Past Due Loans (90 days or more and accruing) 55 1,427 156 — 190 Total Non-performing Loans 9,191 14,315 14,758 21,507 13,992 Other Real Estate — — — 325 425 Total Non-performing Assets $ 9,191 $ 14,315 $ 14,758 $ 21,832 $ 14,417 Restructured Loans $ — $ — $ 104 $ 111 $ 116 Non-performing Loans to Total Loans 0.23 % 0.38 % 0.49 % 0.70 % 0.45 % Allowance for Credit Losses to Non-performing Loans 476.17 % 308.54 % 250.83 % 217.88 % 116.34 % The following tables present an analysis of the Company’s non-accrual loans and loans past due 90 days or more and still accruing.
Non-performing Assets December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Non-accrual Loans $ 10,934 $ 9,136 $ 12,888 $ 14,602 $ 21,507 Past Due Loans (90 days or more and accruing) 188 55 1,427 156 — Total Non-performing Loans 11,122 9,191 14,315 14,758 21,507 Other Real Estate — — — — 325 Total Non-performing Assets $ 11,122 $ 9,191 $ 14,315 $ 14,758 $ 21,832 Restructured Loans $ — $ — $ — $ 104 $ 111 Non-performing Loans to Total Loans 0.27 % 0.23 % 0.38 % 0.49 % 0.70 % Allowance for Credit Losses to Non-performing Loans 399.53 % 476.17 % 308.54 % 250.83 % 217.88 % The following tables present an analysis of the Company’s non-accrual loans and loans past due 90 days or more and still accruing.
Net gains on sales of loans declined $1,455,000, or 38%, during the year ended December 31, 2023 compared with 2022. The decline during 2023 compared with 2022 was related to both a lower volume of loans sold and lower pricing levels.
Net gains on sales of loans declined $1,455,000, or 38%, during the year ended December 31, 2023 compared with 2022. The decline during 2023 compared with 2022 was related to both a lower volume of loans sold and lower pricing levels. Loan sales totaled $130.7 million during 2024, $109.0 million during 2023, and $168.1 million during 2022.
These guidelines provide for a more narrow definition of core capital and assign a measure of risk to the various categories of assets. The Company is required to maintain minimum levels of capital in proportion to total risk-weighted assets and off-balance sheet exposures.
Federal banking regulations provide guidelines for determining the capital adequacy of bank holding companies and banks. These guidelines provide for a more narrow definition of core capital and assign a measure of risk to the various categories of assets. The Company is required to maintain minimum levels of capital in proportion to total risk-weighted assets and off-balance sheet exposures.
Refer also to the sections entitled “CRITICAL ACCOUNTING POLICIES AND ESTIMATES” and “RISK MANAGEMENT - Lending and Loan Administration” for further discussion of the provision and allowance for credit losses. NON-INTEREST INCOME During the year ended December 31, 2023, non-interest income increased $1,128,000 or 2% from the year ended December 31, 2022.
Refer also to the sections entitled “CRITICAL ACCOUNTING POLICIES AND 35 ESTIMATES” and “RISK MANAGEMENT - Lending and Loan Administration” for further discussion of the provision and allowance for credit losses. NON-INTEREST INCOME During the year ended December 31, 2024, non-interest income increased $2,399,000, or 4%, compared with the year ended December 31, 2023.
As of December 31, 2023, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $1,337,000 and gross unrealized losses totaled approximately $275,765,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).
As of December 31, 2024, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $413,000 and gross unrealized losses totaled approximately $279,166,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).
Large certificate deposits comprised approximately 6% of average total funding sources in 2023 compared with 4% in 2022 and 4% in 2021. On an end of period basis, certificates of deposits in denominations of $100,000 or more increased $284.7 million, or 147%, during 2023 compared to an increase of $47.8 million, or 33%, during 2022.
Large certificate deposits comprised approximately 10% of average total funding sources in 2024 compared with 6% in 2023 and 4% in 2022. On an end of period basis, certificates of deposits in denominations of $100,000 or more increased $111.6 million, or 23%, during 2024 following an increase of $284.7 million, or 147%, during 2023.
The decline during 2023 compared with 2022 was primarily due to merger-related professional fees associated with the CUB acquisition that totaled approximately $1,802,000 in 2022, which were partially mitigated by increased legal and other professional fees during 2023. Professional fees increased $1,286,000, or 26%, during 2022 compared with 2021.
Professional fees declined $720,000, or 11%, during the year ended December 31, 2023 compared with the year ended December 31, 2022. The decline during 2023 compared with 2022 was primarily due to merger-related professional fees associated with the CUB acquisition that totaled approximately $1,802,000 in 2022, which were partially mitigated by increased legal and other professional fees during 2023.
Non-Accrual Loans December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial and Industrial Loans and Leases $ 3,707 $ 7,936 $ 10,530 $ 8,133 $ 4,940 Commercial Real Estate Loans 1,889 1,950 2,243 10,188 3,433 Agricultural Loans 879 1,062 1,136 1,915 2,739 Home Equity Loans 1,033 310 24 271 79 Consumer Loans 253 400 82 170 115 Residential Mortgage Loans 1,375 1,230 587 830 2,496 Total $ 9,136 $ 12,888 $ 14,602 $ 21,507 $ 13,802 Loans Past Due 90 Days or More & Still Accruing December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial and Industrial Loans and Leases $ — $ 1,427 $ — $ — $ 190 Commercial Real Estate Loans 55 — 156 — — Agricultural Loans — — — — — Home Equity Loans — — — — — Consumer Loans — — — — — Residential Mortgage Loans — — — — — Total $ 55 $ 1,427 $ 156 $ — $ 190 Non-performing assets totaled $9.2 million, or 0.15% of total assets, at December 31, 2023 compared to $14.3 million, or 0.23% of total assets, at December 31, 2022 and compared to $14.8 million, or 0.26% of total assets, at December 31, 2021.
Non-Accrual Loans December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Commercial and Industrial Loans and Leases $ 5,018 $ 3,707 $ 7,936 $ 10,530 $ 8,133 Commercial Real Estate Loans 1,745 1,889 1,950 2,243 10,188 Agricultural Loans 765 879 1,062 1,136 1,915 Home Equity Loans 1,087 1,033 310 24 271 Consumer Loans 117 253 400 82 170 Residential Mortgage Loans 2,202 1,375 1,230 587 830 Total $ 10,934 $ 9,136 $ 12,888 $ 14,602 $ 21,507 Loans Past Due 90 Days or More & Still Accruing December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Commercial and Industrial Loans and Leases $ — $ — $ 1,427 $ — $ — Commercial Real Estate Loans 183 55 — 156 — Agricultural Loans 5 — — — — Home Equity Loans — — — — — Consumer Loans — — — — — Residential Mortgage Loans — — — — — Total $ 188 $ 55 $ 1,427 $ 156 $ — Non-performing assets totaled $11.1 million, or 0.18% of total assets, at December 31, 2024 compared to $9.2 million, or 0.15% of total assets, at December 31, 2023 and compared to $14.3 million, or 0.23% of total assets, at December 31, 2022.
LENDING AND LOAN ADMINISTRATION Primary responsibility and accountability for day-to-day lending activities rests with the Company’s subsidiary bank. Loan personnel at the subsidiary bank have the authority to extend credit under guidelines approved by the Bank’s board of directors.
Following is a discussion of the Company’s philosophies and procedures to address these risks. LENDING AND LOAN ADMINISTRATION Primary responsibility and accountability for day-to-day lending activities rests with the Company’s subsidiary bank. Loan personnel at the subsidiary bank have the authority to extend credit under guidelines approved by the Bank’s board of directors.
Deferred taxes arise from temporary differences, which are items recorded for financial statement purposes in a different period than for income tax returns. The Company’s effective tax rate was 17.1%, 17.5%, and 18.1%, respectively, in 2023, 2022, and 2021. The effective tax rate in all periods is lower than the blended statutory rate.
Deferred taxes arise from temporary differences, which are items recorded for financial statement purposes in a different period than for income tax returns. The Company’s effective tax rate was 19.5%, 17.1%, and 17.5%, respectively, in 2024, 2023, and 2022.
As reflected in the table below, over the past several years (including 2023), the composition of the loan portfolio has remained relatively stable and diversified. 38 The portfolio is most heavily concentrated in commercial real estate loans at 53% of the portfolio in 2023, followed by commercial and industrial loans at 17% of the portfolio, and agricultural loans at 11% of the portfolio.
As reflected in the table below, over the past several years (including 2024), the composition of the loan portfolio has remained relatively stable and diversified. 39 The portfolio is most heavily concentrated in commercial real estate loans at 54% of the portfolio in 2024, followed by commercial and industrial loans at 16% of the portfolio, and agricultural loans at 10% of the portfolio.
Average demand, savings, and money market deposits totaled $4.608 billion or 95% of core deposits (85% of total funding sources) in 2023 compared with $5.226 billion or 95% of core deposits (89% of total funding sources) in 2022 and $4.080 billion or 95% of core deposits (87% of total funding sources) in 2021.
Average demand, savings, and money market deposits totaled $4.432 billion or 93% of core deposits (81% of total funding sources) in 2024 compared with $4.608 billion or 95% of core deposits (85% of total funding sources) in 2023 and $5.226 billion or 95% 43 of core deposits (89% of total funding sources) in 2022.
See Note 10 to the Company’s consolidated financial statements included in Item 8 of this Report for additional details relative to the Company’s income tax provision. CAPITAL RESOURCES As of December 31, 2023, shareholders’ equity increased by $105.2 million to $663.6 million compared with $558.4 million at year-end 2022.
See Note 11 to the Company’s consolidated financial statements included in Item 8 of this Report for additional details relative to the Company’s income tax provision. CAPITAL RESOURCES As of December 31, 2024, shareholders’ equity increased by $51.5 million to $715.1 million compared with $663.6 million at year-end 2023.
As a result, on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital.
As a result, on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital. An additional 25% was phased in on each of January 1, 2023, January 1, 2024, and January 1, 2025.
Such allocations are based on past loss experience, reasonable and supportable forecasts and information about specific borrower situations and estimated collateral values. 29 General allocations are made for commercial and agricultural loans that are graded as substandard and special mention, but are not individually analyzed for specific reserves as well as other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss.
General allocations are made for commercial and agricultural loans that are graded as substandard and special mention, but are not individually analyzed for specific reserves as well as other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss.
Contingency revenue during 2023 totaled $955,000 compared with $1,641,000 during 2022. Contingency revenue is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency.
Insurance revenues declined $424,000, or 4%, during 2023 compared with 2022, which was primarily attributable to decreased contingency revenue. Contingency revenue during 2023 totaled $955,000 compared with $1,641,000 during 2022. Contingency revenue is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency.
The Company’s level of obligations of state and political subdivisions increased to $889.9 million, or 47% of the portfolio at December 31, 2023. 40 Investment Securities, at Carrying Value (dollars in thousands) December 31, Securities Available-for-Sale 2023 2022 2021 U.S.
The Company’s 41 level of obligations of state and political subdivisions decreased to $588.0 million, or 31% of the portfolio at December 31, 2024. Investment Securities, at Carrying Value (dollars in thousands) December 31, Securities Available-for-Sale 2024 2023 2022 U.S.
FHLB advances and other borrowings represent an important source of other funding for the Company. Average borrowed funds increased $51.8 million, or 33%, during 2023 compared to a decline of $27.8 million, or 15%, during 2022. Borrowings comprised approximately 4% of average total funding sources during 2023 compared with 3% in 2022 and 4% in 2021.
FHLB advances and other borrowings represent an important source of other funding for the Company. Average borrowed funds decreased $14.4 million, or 7%, during 2024 following an increase of $51.8 million, or 33%, during 2023. Borrowings comprised approximately 4% of average total funding sources during 2024 and 2023 compared with 3% in 2022.
Treasury $ — $ 64,119 $ — Obligations of State and Political Subdivisions 768,875 777,852 925,706 MBS/CMO 645,040 714,681 791,950 US Gov’t Sponsored Entities & Agencies 182,917 205,017 171,961 Total Securities $ 1,596,832 $ 1,761,669 $ 1,889,617 As discussed above, the Company utilized cash flows from the available for sale portfolio to fund loan growth and an overall modest decline in deposits.
Treasury $ 110,864 $ — $ 64,119 Obligations of State and Political Subdivisions 463,169 768,875 777,852 MBS/CMO 702,179 645,040 714,681 US Gov’t Sponsored Entities & Agencies 241,075 182,917 205,017 Total Securities $ 1,517,287 $ 1,596,832 $ 1,761,669 In 2023, the Company utilized cash flows from the available for sale portfolio to fund loan growth and an overall modest decline in deposits.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. INTRODUCTION German American Bancorp, Inc. is a Nasdaq-traded (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 76 banking offices in 20 contiguous southern Indiana counties and 14 counties in Kentucky.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. INTRODUCTION German American Bancorp, Inc. is a Nasdaq-listed (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 94 banking offices located throughout Indiana (central/southern), Kentucky (northern/central/western), and Ohio (central/ southwest).
The decline in salaries and benefits during 2023 compared with 2022 was largely related to approximately $1,480,000 of acquisition-related salary and benefit costs of a non-recurring nature in 2022 related to the CUB acquisition. Salaries and benefits increased $15,575,000, or 23%, during 2022 compared with 2021.
The decline in salaries and benefits during 2023 compared with 2022 was largely related to approximately $1,480,000 of acquisition-related salary and benefit costs of a non-recurring nature in 2022 related to the CUB acquisition. FDIC Premiums increased $79,000, or 3%, during the year ended December 31, 2024 compared with 2023.
Non-interest Expense (dollars in thousands) Years Ended December 31, % Change From Prior Year 2023 2022 2021 2022 2021 Salaries and Employee Benefits $ 83,244 $ 84,145 $ 68,570 (1) % 23 % Occupancy, Furniture and Equipment Expense 14,467 14,921 14,831 (3) 1 FDIC Premiums 2,829 1,860 1,419 52 31 Data Processing Fees 11,112 15,406 7,611 (28) 102 Professional Fees 5,575 6,295 5,009 (11) 26 Advertising and Promotion 4,857 4,416 4,197 10 5 Intangible Amortization 2,840 3,711 2,731 (23) 36 Other Operating Expenses 19,573 23,437 19,639 (16) 19 TOTAL NON-INTEREST EXPENSE $ 144,497 $ 154,191 $ 124,007 (6) 24 Salaries and benefits declined $901,000, or 1%, during the year ended December 31, 2023 compared with 2022.
Non-interest Expense (dollars in thousands) Years Ended December 31, % Change From Prior Year 2024 2023 2022 2023 2022 Salaries and Employee Benefits $ 82,257 $ 83,244 $ 84,145 (1) % (1) % Occupancy, Furniture and Equipment Expense 14,944 14,467 14,921 3 (3) FDIC Premiums 2,908 2,829 1,860 3 52 Data Processing Fees 12,243 11,112 15,406 10 (28) Professional Fees 8,147 5,575 6,295 46 (11) Advertising and Promotion 3,939 4,857 4,416 (19) 10 Intangible Amortization 2,032 2,840 3,711 (28) (23) Other Operating Expenses 19,907 19,573 23,437 2 (16) TOTAL NON-INTEREST EXPENSE $ 146,377 $ 144,497 $ 154,191 1 (6) Salaries and benefits declined $987,000, or 1%, during the year ended December 31, 2024 compared with the year ended December 31, 2023.
These risks include credit risk, liquidity risk and interest rate risk. Various procedures are employed at the Company’s subsidiary bank to monitor and mitigate risk in the loan and investment portfolios, as well as risks associated with changes in interest rates. Following is a discussion of the Company’s philosophies and procedures to address these risks.
RISK MANAGEMENT The Company is exposed to various types of business risk on an on-going basis. These risks include credit risk, liquidity risk and interest rate risk. Various procedures are employed at the Company’s subsidiary bank to monitor and mitigate risk in the loan and investment portfolios, as well as risks associated with changes in interest rates.
Treasury — — 64,097 3 — — Obligations of State and Political Subdivisions 889,940 47 939,193 44 896,048 40 MBS/CMO 761,025 40 846,519 40 797,693 36 US Gov’t Sponsored Entities & Agencies 220,295 11 245,017 11 175,457 8 Equity Securities 353 n/m ⁽¹⁾ 353 n/m ⁽¹⁾ 353 n/m ⁽¹⁾ Total Securities Portfolio $ 1,908,138 100 % $ 2,137,084 100 % $ 2,219,268 100 % (1) n/m = not meaningful The amortized cost of investment securities, including federal funds sold and short-term investments, decreased $229.0 million, or 11%, at year-end 2023 compared to year-end 2022 and decreased $82.2 million, or 4%, at year-end 2022 compared to year-end 2021.
Treasury 110,813 6 — — 64,097 3 Obligations of State and Political Subdivisions 587,963 31 889,940 47 939,193 44 MBS/CMO 817,553 43 761,025 40 846,519 40 US Gov’t Sponsored Entities & Agencies 279,711 14 220,295 11 245,017 11 Equity Securities 353 n/m ⁽¹⁾ 353 n/m ⁽¹⁾ 353 n/m ⁽¹⁾ Total Securities Portfolio $ 1,915,936 100 % $ 1,908,138 100 % $ 2,137,084 100 % (1) n/m = not meaningful The amortized cost of investment securities, including federal funds sold and short-term investments, increased $7.8 million, or less than 1%, at year-end 2024 compared to year-end 2023 and decreased $229.0 million, or 11%, at year-end 2023.
Average Balance Sheet (Tax-equivalent basis, dollars in thousands) Twelve Months Ended December 31, 2023 Twelve Months Ended December 31, 2022 Twelve Months Ended December 31, 2021 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 $ 39,452 $ 1,677 4.25 % $ 458,230 $ 5,765 1.26 % $ 390,362 $ 488 0.12 % Securities: Taxable 890,841 20,614 2.31 % 1,015,958 20,453 2.01 % 824,204 12,962 1.57 % Non-taxable 738,769 27,656 3.74 % 844,772 29,810 3.53 % 728,765 22,504 3.09 % Total Loans and Leases ⁽²⁾ 3,835,157 213,195 5.56 % 3,680,708 169,593 4.61 % 3,072,302 139,378 4.54 % TOTAL INTEREST EARNING ASSETS 5,504,219 263,142 4.78 % 5,999,668 225,621 3.76 % 5,015,633 175,332 3.50 % Other Assets 578,399 559,949 397,147 Less: Allowance for Credit Losses (44,744) (45,587) (43,073) TOTAL ASSETS $ 6,037,874 $ 6,514,030 $ 5,369,707 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing Demand Deposits $ 1,826,232 $ 28,378 1.55 % $ 2,013,969 $ 8,583 0.43 % $ 1,595,579 $ 1,789 0.11 % Savings Deposits and Money Market Accounts 1,229,019 12,106 0.99 % 1,473,772 2,879 0.20 % 1,106,692 885 0.08 % Time Deposits 588,142 16,432 2.79 % 474,409 2,052 0.43 % 412,935 2,281 0.55 % FHLB Advances and Other Borrowings 210,837 9,307 4.41 % 159,029 4,828 3.04 % 186,750 4,594 2.46 % TOTAL INTEREST-BEARING LIABILITIES 3,854,230 66,223 1.72 % 4,121,179 18,342 0.45 % 3,301,956 9,549 0.29 % Demand Deposit Accounts 1,553,082 1,738,349 1,378,647 Other Liabilities 46,456 44,436 46,170 TOTAL LIABILITIES 5,453,768 5,903,964 4,726,773 Shareholders’ Equity 584,106 610,066 642,934 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 6,037,874 $ 6,514,030 $ 5,369,707 COST OF FUNDS 1.20 % 0.31 % 0.19 % NET INTEREST INCOME $ 196,919 $ 207,279 $ 165,783 NET INTEREST MARGIN 3.58 % 3.45 % 3.31 % (1) Effective tax rates were determined as though interest earned on the Company’s investments in municipal bonds and loans was fully taxable.
Average Balance Sheet (Tax-equivalent basis, dollars in thousands) Twelve Months Ended December 31, 2024 Twelve Months Ended December 31, 2023 Twelve Months Ended December 31, 2022 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 $ 151,907 $ 7,697 5.07 % $ 39,452 $ 1,677 4.25 % $ 458,230 $ 5,765 1.26 % Securities: Taxable 947,884 26,586 2.80 % 890,841 20,614 2.31 % 1,015,958 20,453 2.01 % Non-taxable 586,549 20,910 3.56 % 738,769 27,656 3.74 % 844,772 29,810 3.53 % Total Loans and Leases ⁽²⁾ 4,035,670 241,344 5.98 % 3,835,157 213,195 5.56 % 3,680,708 169,593 4.61 % TOTAL INTEREST EARNING ASSETS 5,722,010 296,537 5.19 % 5,504,219 263,142 4.78 % 5,999,668 225,621 3.76 % Other Assets 556,022 578,399 559,949 Less: Allowance for Credit Losses (44,279) (44,744) (45,587) TOTAL ASSETS $ 6,233,753 $ 6,037,874 $ 6,514,030 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing Demand Deposits $ 1,720,823 $ 30,957 1.80 % $ 1,826,232 $ 28,378 1.55 % $ 2,013,969 $ 8,583 0.43 % Savings Deposits and Money Market Accounts 1,291,250 23,346 1.81 % 1,229,019 12,106 0.99 % 1,473,772 2,879 0.20 % Time Deposits 872,429 36,319 4.16 % 588,142 16,432 2.79 % 474,409 2,052 0.43 % FHLB Advances and Other Borrowings 196,480 9,830 5.00 % 210,837 9,307 4.41 % 159,029 4,828 3.04 % TOTAL INTEREST-BEARING LIABILITIES 4,080,982 100,452 2.46 % 3,854,230 66,223 1.72 % 4,121,179 18,342 0.45 % Demand Deposit Accounts 1,420,412 1,553,082 1,738,349 Other Liabilities 46,497 46,456 44,436 TOTAL LIABILITIES 5,547,891 5,453,768 5,903,964 Shareholders’ Equity 685,862 584,106 610,066 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 6,233,753 $ 6,037,874 $ 6,514,030 COST OF FUNDS 1.76 % 1.20 % 0.31 % NET INTEREST INCOME $ 196,085 $ 196,919 $ 207,279 NET INTEREST MARGIN 3.43 % 3.58 % 3.45 % (1) Effective tax rates were determined as though interest earned on the Company’s investments in municipal bonds and loans was fully taxable.
The investment portfolio continues to be relatively balanced with agency issued mortgage related securities and collateralized and uncollateralized federal agency securities totaling $981.3 million, or 51% of the total securities portfolio at December 31, 2023.
After the restructuring, the investment portfolio continues to be relatively balanced with agency issued mortgage related securities and collateralized and uncollateralized federal agency securities totaling $1.097 billion, or 57% of the total securities portfolio at December 31, 2024.
During the year ended December 31, 2022, non-interest income declined $329,000, or 1%, from the year ended December 31, 2021.
During the year ended December 31, 2023, non-interest income increased $1,128,000 or 2% from the year ended December 31, 2022.
Other time deposits consist of certificates of deposits in denominations of less than $100,000. These average deposits declined by 2% during 2023 following an increase of 16% during 2022. Other time deposits comprised 5% of core deposits in all periods presented.
Other time deposits consist of certificates of deposits in denominations of less than $100,000. These average deposits increased by 30% in 2024 following a decline of 2% during 2023. Other time deposits comprised 7% of core deposits in all periods presented.
Interest income on loans includes loan fees of $4,316, $6,972, and $15,761 for 2023, 2022 and 2021, respectively. 33 The following table sets forth for the periods indicated a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rates: Net Interest Income – Rate / Volume Analysis (Tax-Equivalent basis, dollars in thousands) 2023 compared to 2022 Increase / (Decrease) Due to ⁽¹⁾ 2022 compared to 2021 Increase / (Decrease) Due to ⁽¹⁾ Volume Rate Net Volume Rate Net Interest Income: Federal Funds Sold and Other Short-term Investments $ (8,748) $ 4,660 $ (4,088) $ 99 $ 5,178 $ 5,277 Taxable Securities (2,689) 2,849 160 3,399 4,093 7,492 Non-taxable Securities (3,894) 1,741 (2,153) 3,852 3,453 7,305 Loans and Leases 7,365 36,237 43,602 28,001 2,214 30,215 Total Interest Income (7,966) 45,487 37,521 35,351 14,938 50,289 Interest Expense: Savings and Interest-bearing Demand (1,590) 30,612 29,022 978 7,810 8,788 Time Deposits 605 13,775 14,380 310 (539) (229) FHLB Advances and Other Borrowings 1,871 2,608 4,479 (744) 978 234 Total Interest Expense 886 46,995 47,881 544 8,249 8,793 Net Interest Income $ (8,852) $ (1,508) $ (10,360) $ 34,807 $ 6,689 $ 41,496 (1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
Interest income on loans includes loan fees of $3,325, $4,316, and $6,972 for 2024, 2023 and 2022, respectively. 34 The following table sets forth for the periods indicated a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rates: Net Interest Income – Rate / Volume Analysis (Tax-Equivalent basis, dollars in thousands) 2024 compared to 2023 Increase / (Decrease) Due to ⁽¹⁾ 2023 compared to 2022 Increase / (Decrease) Due to ⁽¹⁾ Volume Rate Net Volume Rate Net Interest Income: Federal Funds Sold and Other Short-term Investments $ 5,641 $ 379 $ 6,020 $ (8,748) $ 4,660 $ (4,088) Taxable Securities 1,384 4,588 5,972 (2,689) 2,849 160 Non-taxable Securities (5,478) (1,268) (6,746) (3,894) 1,741 (2,153) Loans and Leases 11,491 16,658 28,149 7,365 36,237 43,602 Total Interest Income 13,038 20,357 33,395 (7,966) 45,487 37,521 Interest Expense: Savings and Interest-bearing Demand (580) 14,399 13,819 (1,590) 30,612 29,022 Time Deposits 9,875 10,012 19,887 605 13,775 14,380 FHLB Advances and Other Borrowings (662) 1,185 523 1,871 2,608 4,479 Total Interest Expense 8,633 25,596 34,229 886 46,995 47,881 Net Interest Income $ 4,405 $ (5,239) $ (834) $ (8,852) $ (1,508) $ (10,360) (1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
Allocations are also applied to categories of loans not individually analyzed but for which the rate of loss is expected to be greater than other similar type loans, including non-performing consumer or residential real estate loans.
Allocations are also applied to categories of loans not individually analyzed but for which the rate of loss is expected to be greater than other similar type loans, including non-performing consumer or residential real estate loans. Such allocations are based on past loss experience, reasonable and supportable forecasts and information about specific borrower situations and estimated collateral values.
PROVISION FOR CREDIT LOSSES The Company provides for credit losses through regular provisions to the allowance for credit losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance.
PROVISION FOR CREDIT LOSSES The Company provides for credit losses through regular provisions to the allowance for credit losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance. During 2024, the Company recorded a provision for credit losses of $2,775,000 compared with $2,550,000 during 2023 and $6,350,000 during 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+2 added−1 removed12 unchanged
Biggest changeThe liquidity of the parent company is dependent upon the receipt of dividends from its subsidiary bank, which is subject to certain regulatory limitations. The Bank’s source of funding is predominately core deposits, maturities of securities, repayments of loan principal and interest, federal funds purchased, securities sold under agreements to repurchase and borrowings from the Federal Home Loan Bank.
Biggest changeThe Bank’s source of funding is predominately core deposits, maturities of securities, repayments of loan principal and interest, federal funds purchased, securities sold under agreements to repurchase and borrowings from the Federal Home Loan Bank and the Federal Reserve Bank.
Actual results may differ materially from those expressed or implied therein as a result of certain risks and uncertainties, including those risks and uncertainties expressed above, those that are described in MANAGEMENT’S DISCUSSION AND ANALYSIS in Item 7 of this Report, and those that are described in Item 1 of this Report, “Business,” under the caption “Forward-Looking Statements and Associated Risks,” which discussions are incorporated herein by reference. 49
Actual results may differ materially from those expressed or implied therein as a result of certain risks and uncertainties, including those risks and uncertainties expressed above, those that are described in MANAGEMENT’S DISCUSSION AND ANALYSIS in Item 7 of this Report, and those that are described in Item 1 of this Report, “Business,” under the caption “Forward-Looking Statements and Associated Risks,” which discussions are incorporated herein by reference. 50
This type of scenario can at times produce different modeling results in measuring interest rate risk sensitivity. 48 The table below provides an assessment of the risk to NPV in the event of a sudden and sustained 1% and 2% increase and decrease in prevailing interest rates (dollars in thousands).
This type of scenario can at times produce different modeling results in measuring interest rate risk sensitivity. 49 The table below provides an assessment of the risk to NPV in the event of a sudden and sustained 1% and 2% increase and decrease in prevailing interest rates (dollars in thousands).
Interest Rate Sensitivity as of December 31, 2023 - Net Interest Income Net Interest Income Changes in Rates Amount % Change +2% $ 201,181 (0.34) % +1% 202,136 0.14 Base 201,862 — -1% 199,444 (1.20) -2% 196,374 (2.72) The above table is a measurement of the Company’s net interest income at risk, assuming a static balance sheet as of December 31, 2023 and instantaneous parallel changes in interest rates.
Interest Rate Sensitivity as of December 31, 2024 - Net Interest Income Net Interest Income Changes in Rates Amount % Change +2% $ 223,479 0.14 % +1% 223,507 0.15 Base 223,163 — -1% 220,095 (1.37) -2% 215,961 (3.23) The above table is a measurement of the Company’s net interest income at risk, assuming a static balance sheet as of December 31, 2024 and instantaneous parallel changes in interest rates.
Interest Rate Sensitivity as of December 31, 2023 - Net Portfolio Value Net Portfolio Value Net Portfolio Value as a % of Present Value of Assets Changes in Rates Amount % Change NPV Ratio Change +2% $ 575,830 (17.25) % 10.72 % (140) b.p. +1% 637,347 (8.41) 11.48 (64) b.p.
Interest Rate Sensitivity as of December 31, 2024 - Net Portfolio Value Net Portfolio Value Net Portfolio Value as a % of Present Value of Assets Changes in Rates Amount % Change NPV Ratio Change +2% $ 771,464 (11.29) % 13.67 % (87) b.p. +1% 821,107 (5.58) 14.13 (41) b.p.
Removed
Base 695,888 — 12.12 — -1% 743,599 6.86 12.54 42 b.p. -2% 770,311 10.69 12.60 48 b.p.
Added
The liquidity of the parent company is dependent upon the receipt of dividends from its subsidiary bank, which is subject to certain regulatory limitations.
Added
Base 869,642 — 14.54 — -1% 908,549 4.47 14.75 21 b.p. -2% 932,318 7.21 14.72 18 b.p.

Other GABC 10-K year-over-year comparisons