GERMAN AMERICAN BANCORP, INC.

German American Bancorp, Inc. is a Nasdaq-listed financial holding company based in Jasper, Indiana, operating through its banking subsidiary German American Bank, which runs 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. The industries in which the Company operates are highly competitive, with the Bank competing for commercial and retail banking business not only with financial institutions that have offices in the same counties 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. In addition, financial technology, or FinTech, companies continue their rapid growth into key areas of banking, and many of these competitors have substantially greater resources than the Company.

The Company's primary competitors are not named individually in the filing, but the competitive landscape includes much larger regional, national, and international competitors, many of which have substantially greater resources and lending limits than the Company and may offer services that the Company does not or cannot provide. The Company's stated competitive advantages include its deep roots in local communities, a long history of community involvement, and a culture that encourages employees to take initiative, accept challenges, and be collaborative to achieve performance and operating excellence for customers, shareholders, and communities. The Company's employee engagement score of 71% in 2025 compares favorably to the banking industry.

The Company generates revenue primarily through its retail and commercial banking business, which involves attracting deposits from the general public and using those funds to originate consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, primarily in the Company's local markets. These core banking activities also include the sale of residential mortgage loans in the secondary market. Wealth management services involve providing trust, investment advisory, brokerage and retirement planning services to customers. Net interest income is the Company's single largest source of earnings, representing the difference between interest and fees realized on earning assets, less interest paid on deposits and borrowed funds. Non-interest income is derived from wealth management fees, service charges on deposit accounts, insurance revenues (prior to the sale of GAI assets), company owned life insurance, interchange fee income, net gains on sales of loans, and other operating income.

The Company's lines of business include retail and commercial banking, and wealth management services. Within retail and commercial banking, the Company originates consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans. The loan portfolio is most heavily weighted in commercial real estate loans at 54% of the portfolio, followed by commercial and industrial loans at 14% of the portfolio, residential mortgage loans at 13% of the portfolio, agricultural loans at 8% of the portfolio, and home equity loans at 8% of the portfolio. The Company's commercial real estate loan portfolio is diversified by property type, with multi-family dwellings at 21% of the CRE portfolio, retail space at 14%, industrial/manufacturing/warehousing at 9%, lodging at 9%, 1-4 family investment properties at 8%, office real estate at 8%, healthcare facilities at 8%, and land development and construction at 6%. The Company's wealth management services involve providing trust, investment advisory, brokerage and retirement planning services to customers, and wealth management fees totaled $16,808,000 ¹ for the year ended December 31, 2025.

The Company's wealth management services generated wealth management fees of $16,808,000 ² in 2025, $14,416,000 ³ in 2024, and $11,711,000 ⁴ in 2023. Service charges on deposit accounts totaled $15,083,000 ⁵ in 2025, $12,669,000 ⁶ in 2024, and $11,538,000 ⁷ in 2023. Interchange fee income was $19,598,000 ⁸ in 2025, $17,125,000 ⁹ in 2024, and $17,452,000 ¹⁰ in 2023. Net gains on sales of loans were $4,510,000 ¹¹ in 2025, $3,054,000 ¹² in 2024, and $2,363,000 ¹³ in 2023. Insurance revenues were $0 ¹⁴ in 2025 due to the sale of GAI assets, compared to $4,384,000 ¹⁵ in 2024 and $9,596,000 ¹⁶ in 2023. The sale of assets of German American Insurance generated $38,323,000 ¹⁷ in 2024. Net gains (losses) on securities were $0 ¹⁸ in 2025, $(34,788,000) ¹⁹ in 2024, and $40,000 ²⁰ in 2023.

On February 1, 2025, German American Bancorp completed its acquisition of Heartland BancCorp, with Heartland having total assets of approximately $1.94 billion ²¹, total loans of approximately $1.58 billion ²², and total deposits of approximately $1.73 billion ²³ as of the closing. German American Bancorp issued approximately 7.74 million ²⁴ shares of its common stock and paid approximately $23.1 million ²⁵ in cash in exchange for all issued and outstanding shares of Heartland. On September 15, 2025, the Company redeemed the Heartland 5.0% Fixed-to-Floating Rate Subordinated Notes due 2030, outstanding in the aggregate principal amount of $24.3 million ²⁶, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest. On December 30, 2025, the Company redeemed its 4.5% Fixed-to-Floating Rate Subordinated Notes due 2029, outstanding in the aggregate principal amount of $40.0 million ²⁷, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest. 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 ²⁸ in book value, at an after-tax loss of approximately $27.2 million ²⁹. Effective June 1, 2024, German American Insurance, Inc. sold substantially all of its assets to The Hilb Group of Indiana, LLC for a purchase price of $40.0 million ³⁰ in cash.

Net income for the year ended December 31, 2025 totaled $112,635,000 ³¹, or $3.06 ³² per share, an increase of $28,824,000 ³³, or approximately 8% on a per share basis, from the year ended December 31, 2024 net income of $83,811,000 ³⁴, or $2.83 ³⁵ per share. Net income for the year ended December 31, 2024 totaled $83,811,000 ³⁶, or $2.83 ³⁷ per share, a decline of $2,077,000 ³⁸, or approximately 3% on a per share basis, from the year ended December 31, 2023 net income of $85,888,000 ³⁹, or $2.91 ⁴⁰ per share. On an adjusted basis, net income for the year ended December 31, 2025 was $129,684,000 ⁴¹, or $3.52 ⁴² per share, compared with adjusted net income of $83,839,000 ⁴³, or $2.83 ⁴⁴ per share, for the year ended December 31, 2024.

A major growth vector is the expansion through acquisitions, as the Company expects to continue to evaluate opportunities to expand its business through opening of new banking, 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. The Heartland acquisition added 20 retail banking offices located in Columbus, Ohio and Greater Cincinnati, with total assets of approximately $1.94 billion ⁴⁵, total loans of approximately $1.58 billion ⁴⁶, and total deposits of approximately $1.73 billion ⁴⁷ as of the closing. The Company expects that its total consolidated assets could exceed $10 billion as early as 2027, which would subject the Company to additional regulatory requirements including supervision by the CFPB and a cap on debit interchange fees.

Another growth vector is the continued organic loan growth throughout the Company's existing market areas. Excluding loans acquired through the Heartland acquisition, total loans increased $261.9 million ⁴⁸, or 6%, during 2025. The Company's wealth management fees increased 17% ⁴⁹ during 2025 compared with 2024, largely attributable to increased assets under management driven by healthy capital markets throughout 2024 and 2025, and continued strong new business results in addition to the Heartland acquisition. The Company also expects to benefit from the referral payments from Hilb for a period of five years following the sale of GAI assets.However, the Company's net interest margin for the year ended December 31, 2025 was 4.02% ⁵⁰, compared to 3.43% ⁵¹ in 2024 and 3.58% ⁵² in 2023. The improvement in the net interest margin during 2025 compared with 2024 was the result of improved yields on earning assets and a lower cost of deposits, largely driven by the Federal Reserve's lowering of the Federal Funds rates. The Company's efficiency ratio on an adjusted basis was 50.47% ⁵³ for 2025, compared to 54.93% ⁵⁴ for 2024.

The filing does not contain specific operational outlook regarding supply chain, manufacturing capacity, or headcount strategy. As of February 20, 2026, the Company and its subsidiaries employed approximately 984 ⁵⁵ full-time equivalent employees. The Company has engaged an advisory firm to perform a review of its compliance management system and risk management program to assess its preparedness to meet additional regulatory requirements after surpassing the $10 billion asset threshold, and began implementing action plans to address recommendations in 2025, expecting to continue throughout 2026.

The Company's Board of Directors has previously approved a plan to repurchase up to 1.0 million ⁵⁶ shares of the Company's outstanding common stock. On a share basis, the amount of common stock subject to the repurchase plan represented approximately 3.4% ⁵⁷ of the Company's outstanding shares on January 31, 2022 (the date it was approved), and currently represents 2.7% ⁵⁸ of shares outstanding. The Company has not repurchased any shares under this repurchase plan. Cash dividends paid were $1.16 ⁵⁹ per share in 2025, $1.08 ⁶⁰ per share in 2024, and $1.00 ⁶¹ per share in 2023. The Company had available to it a $15 million ⁶² revolving line of credit facility that will mature on September 23, 2026, with no outstanding balance as of December 31, 2025.

Structural headwinds include the highly competitive nature of the banking and financial services industry, with much larger regional, national, and international competitors, many of which have substantially greater resources and lending limits. The Company also faces competition from FinTech companies that continue their rapid growth into key areas of banking. Economic weakness in the Company's geographic markets in Indiana, Kentucky, and Ohio could negatively affect the Company, as substantially all of its customer base is drawn from these areas. Changes in interest rates, inflation, and monetary policy by the FRB could adversely affect net interest income and the value of the securities portfolio.

Regulatory constraints include the potential for increased regulation when the Company's total consolidated assets exceed $10 billion, which could happen as early as 2027. This would subject the Bank to supervision by the CFPB for consumer compliance and a cap on debit interchange fees, which would result in a material reduction of interchange fee income. The Company is also subject to extensive federal and state regulation, and changes in laws or regulations could have a material adverse effect on its business. The Company's FDIC insurance premiums may increase, and the method for determining premiums will change once total assets exceed $10 billion.

The Company faces significant credit risk, as its allowance for credit losses may not be adequate to cover actual losses; a hypothetical adverse economic scenario weighted at 100% would result in a hypothetical increase in the Company's allowance of $28,500,000 ⁶³. Interest rate risk is material, as a sudden and sustained 2% increase in prevailing interest rates would result in a 2.09% ⁶⁴ increase in net interest income over the next 12 months, while a 2% decrease would result in a 3.29% ⁶⁵ decline. The Company's geographic concentration in Indiana, Kentucky, and Ohio exposes it to regional economic weakness, and as of December 31, 2025, approximately 25% ⁶⁶ of deposits were uninsured and uncollateralized, creating liquidity risk. The Company will become subject to increased regulation when total consolidated assets exceed $10 billion, which could happen as early as 2027, including a cap on debit interchange fees that would materially reduce interchange fee income. The Company's commercial real estate loan portfolio represents 54% ⁶⁷ of total loans, with 76% ⁶⁸ of CRE loans being non-owner occupied, exposing the Company to concentration risk in this sector.

Management's overall tone is forward-looking and focused on the successful integration of the Heartland acquisition and positioning the Company for future growth, including preparing for the $10 billion asset threshold. Key themes include the significant increase in net income and earnings per share, the impact of the Heartland acquisition on financial results, and the improvement in net interest margin. Management emphasizes that on an adjusted basis, net income for the year ended December 31, 2025 was $129,684,000 ⁶⁹, or $3.52 ⁷⁰ per share, compared with adjusted net income of $83,839,000 ⁷¹, or $2.83 ⁷² per share, for the year ended December 31, 2024. Strategic priorities include continuing to evaluate opportunities to expand through acquisitions and organic growth, preparing for the regulatory requirements associated with exceeding $10 billion in total assets, and maintaining strong capital levels with the Company's capital ratios remaining well in excess of minimum requirements.