JASPER –German American Bancorp, Inc. (Nasdaq: GABC) reported first quarter earnings of $10.5 million, or $0.30 per share. The first quarter earnings included the results of Heartland BancCorp (“Heartland”), the parent company of Heartland Bank, which was acquired by German American on February 1, 2025.
The first quarter of 2025 included one-time merger and acquisition costs of $5.9 million and a “Day 2” provision under the current expected credit loss (“CECL”) model for Heartland of $16.2 million, resulting in a total impact of $ 22.1 million on an after-tax basis. As a result, quarterly earnings declined by approximately $12.7 million, or 62% on a per-share basis, compared to the $23.2 million in revenue for the 2024 fourth quarter, or $0.78 per share. On an adjusted basis, net income for the first quarter of 2025 was $27.3 million, or $0.79 per share, compared to $23.4 million, or $0.79 per share, for the fourth quarter of 2024.
While the first quarter of 2025’s operating performance compared to the linked fourth quarter of 2024 was significantly impacted by one-time merger costs, the quarter was also highlighted by net interest margin expansion, strong organic growth in commercial real estate loans, strong organic growth in non-interest-bearing demand deposits, strong credit metrics, and controlled operating expenses.
The net interest margin for the first quarter of 2025, at 3.96%, reflects a 42-basis-point expansion over the linked fourth quarter of 2024 margin of 3.54%. The accretion of loan discounts on acquired loans contributed 24 basis points to that expansion. The continued improvement in the net interest margin, excluding accretion, was primarily attributable to higher earning asset yields driven by loan growth, loan repricing, and improved yields on the securities portfolio.
Total end-of-period assets for the Company totaled $8.42 billion as of March 31, 2025, representing an increase of $2.12 billion from December 31, 2024. Loans increased by $1.52 billion on a linked-quarter basis as of March 31, 2025, driven mainly by the Heartland acquisition.
The overall loan portfolio as of March 31, 2025, remains stable and diversified. Loan growth, excluding acquired loans, reflected 4% organic growth from March 31, 2024, to March 31, 2025, and reflected 4% organic growth on a linked quarter basis when excluding seasonal agricultural line reductions. The first quarter 2025 provision for credit losses of $15.3 million included the Heartland acquisition-related Day 2 CECL provision of $16.2 million. The Company’s loan portfolio, post-acquisition, reflects strong credit metrics, as non-performing assets were 0.22% of period-end assets and non-performing loans totaled 0.33% of period-end loans. Net charge-offs were only four basis points of average loans for the first quarter of 2025.
End of period deposits at March 31, 2025 increased by $1.77 billion when compared with December 31, 2024, largely as a result of the Heartland acquisition. Excluding acquisition-related deposits, total deposits were relatively stable on a linked quarter basis, which was positive given the seasonal run-off of public funds in the first quarter. Another positive trend was the $21 million increase, or 6% on an annualized basis, in non-interest bearing demand deposit accounts at March 31, 2025 (excluding acquisition-related deposits), compared to fourth quarter 2024, which accounts represented 27% of total deposits at March 31, 2025. Heartland’s deposit portfolio composition did not result in any significant changes to the newly-merged entity’s composition.
