GERMAN AMERICAN BANCORP, INC.

Previous wording

This section presents an analysis of the consolidated financial condition of the Company as of March 31, 2026 and December 31, 2025 and the consolidated results of operations for the three months ended March 31, 2026 and 2025. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

This section presents an analysis of the consolidated financial condition of the Company as of June 30, 2026 and December 31, 2025 and the consolidated results of operations for the three and six months ended June 30, 2026 and 2025. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Net income for the quarter ended March 31, 2026 totaled $33,152,000, or $0.88 per share, an increase of 193% on a per share basis compared with the first quarter 2025 net income of $10,517,000, or $0.30 per share. The first quarter of 2025 results of operations included acquisition-related expenses of $5,932,000 ($4,620,000, on an after tax basis) and a “Day 2” adjustment to the provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis) in connection with the Heartland merger. On an adjusted basis, net income for the first quarter of 2025 was $27,287,000, or $0.79 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

The second quarter of 2025 results of operations included Heartland acquisition-related expenses of $929,000 ($697,000, on an after tax basis). The first six months of 2025 results of operations included acquisition-related expenses of $6,860,000 ($5,316,000, on an after tax basis) and a “Day 2” adjustment to the provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis), in each case, related to the Heartland merger. On an adjusted basis, net income for the second quarter of 2025 was $32,058,000, or $0.86 per share, and for the six months ended June 30, 2025, was $59,345,000, or $1.64 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

In calculating the adequacy of the allowance at March 31, 2026, management weighted different scenarios, including a baseline scenario as well as two additional alternative scenarios. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. Excluding the consideration of qualitative adjustments, the sensitivity analysis utilizing the adverse scenario would result in a hypothetical increase in the Company’s allowance of $5,000,000. Excluding consideration of qualitative adjustments, a corresponding $3,900,000 decrease in the Company’s allowance would occur in a hypothetical scenario if only the baseline scenario was used. The sensitivity and related range of impact is a hypothetical analysis and is not intended to represent management’s estimation of the adequacy of the allowance for credit losses at March 31, 2026.

Current wording

In calculating the adequacy of the allowance at June 30, 2026, management weighted different scenarios, including a baseline scenario as well as two additional alternative scenarios. To create hypothetical sensitivity analyses, management calculated a quantitative allowance using a 100% weighting applied to a baseline scenario and a quantitative allowance using a 100% weighting applied to an adverse scenario. Excluding the consideration of qualitative adjustments, the sensitivity analysis utilizing the adverse scenario would result in a hypothetical increase in the Company’s allowance of $5,300,000. Excluding consideration of qualitative adjustments, a corresponding $4,200,000 decrease in the Company’s allowance would occur in a hypothetical scenario if only the baseline scenario was used. The sensitivity and related range of impact is a hypothetical analysis and is not intended to represent management’s estimation of the adequacy of the allowance for credit losses at June 30, 2026.

Previous wording

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for-sale debt securities in an unrealized loss position, the Company assesses whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. 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 March 31, 2026. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses. As of March 31, 2026, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $4,205,000 and gross unrealized losses totaled approximately $224,977,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).

Current wording

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for-sale debt securities in an unrealized loss position, the Company assesses whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. 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 June 30, 2026. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses. As of June 30, 2026, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $2,760,000 and gross unrealized losses totaled approximately $211,412,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).

Previous wording

Net income for the quarter ended March 31, 2026 totaled $33,152,000, or $0.88 per share, an increase of 193% on a per share basis compared with the first quarter 2025 net income of $10,517,000, or $0.30 per share. The first quarter of 2025 results of operations included acquisition-related expenses of $5,932,000 ($4,620,000, on an after tax basis) and a “Day 2” adjustment to the provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis) in connection with the Heartland merger. On an adjusted basis, net income for the first quarter of 2025 was $27,287,000, or $0.79 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

The second quarter of 2025 results of operations included Heartland acquisition-related expenses of $929,000 ($697,000, on an after tax basis). The first six months of 2025 results of operations included acquisition-related expenses of $6,860,000 ($5,316,000, on an after tax basis) and a “Day 2” adjustment to the provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis), in each case, related to the Heartland merger. On an adjusted basis, net income for the second quarter of 2025 was $32,058,000, or $0.86 per share, and for the six months ended June 30, 2025, was $59,345,000, or $1.64 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

During the first quarter of 2026, net interest income, on a non tax-equivalent basis, totaled $78,851,000, an increase of $12,279,000, or 18%, compared to the first quarter of 2025 net interest income of $66,572,000. The increase in net interest income during the first quarter of 2026 compared with the first quarter of 2025 was primarily attributable to a higher level of average earning assets driven in large part by the Heartland acquisition and improvement of the Company’s net interest margin.

Current wording

During the second quarter of 2026, net interest income, on a non tax-equivalent basis, totaled $81,208,000, an increase of $8,053,000, or 11%, compared to the second quarter of 2025 net interest income of $73,155,000. During the first six months of 2026, net interest income, on a non tax-equivalent basis, totaled $160,059,000, an increase of $20,332,000, or 15%, compared to the first six months of 2025 net interest income of $139,727,000. The improvement in net interest income during the second quarter of 2026 compared with the second quarter of 2025 and six months ended June 30, 2026 compared with the same period of 2025 was the result of an improved net interest margin and a higher level of average earning assets.

Previous wording

2025 was driven by a lower cost of funds primarily attributable to lower deposit costs. The lower cost of deposits was driven by the Federal Reserve’s lowering of the Federal Funds rates over the last several months of 2025 and the Company’s ability to correspondingly lower deposit costs.

Current wording

The tax equivalent net interest margin for the quarter ended June 30, 2026 was 4.30% compared with 3.92% in the second quarter of 2025. The tax equivalent net interest margin for the six months ended June 30, 2026, was 4.28% compared with 3.94% for the six months ended June 30, 2025. The continued improvement in the net interest margin for both periods in 2026 was driven by a lower cost of funds primarily attributable to lower deposit costs and improved yields on earning assets. The lower cost of deposits was driven by the Federal Reserve’s lowering of the Federal Funds rates over the last several months of 2025 and the Company’s ability to correspondingly lower deposit costs.

Previous wording

The Company’s net interest margin and net interest income in both periods presented were impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $3,456,000 during the first quarter of 2026 and $4,192,000 during the first quarter of 2025. Accretion of discounts on acquired loans contributed approximately 18 basis points to the net interest margin in the first quarter of 2026 and 24 basis points in the first quarter of 2025.

Current wording

The Company’s net interest margin and net interest income in all periods presented were impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $3,235,000 during the second quarter of 2026 and $3,483,000 during the second quarter of 2025. Accretion of discounts on acquired loans contributed approximately 17 basis points to the net interest margin in the second quarter of 2026 and 18 basis points in the second quarter of 2025. Accretion of discounts on acquired loans totaled $6,691,000 during the six months ended June 30, 2026 compared to $7,675,000 during the six months ended June 30, 2025. Accretion of discounts on acquired loans contributed approximately 17 basis points to the net interest margin for the first six months of 2026 and 21 basis points in the first six months of 2025.

Previous wording

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 the quarter ended March 31, 2026, the Company recorded a provision for credit losses of $2,000,000 compared with a provision for credit losses of $15,300,000 during the first quarter of 2025. The first quarter of 2025 included a provision for credit losses of $16,200,000 related to the “Day 2” adjustment for the Heartland acquisition. In a transaction like the Heartland merger, the accounting rules in effect prior to adoption of ASU 2025-08 required the acquirer to recognize an allowance for credit losses in the period of acquisition for both purchased credit deterioration (“PCD”) assets and non-PCD assets. The determination of PCD versus non-PCD determines how the allowance for credit loss flows through the financial statements. For PCD assets, the gross-up method includes the impact in the “Day 1” business combination entries with no impact to expense. For non-PCD assets, the impact is reflected outside of the business combination entries (sometimes referred to as “Day 2”) and is reflected in expense.

Current wording

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 the quarter ended June 30, 2026, the Company recorded a provision for credit losses of $1,500,000 compared with a provision for credit losses of $1,200,000 during the second quarter of 2025. During the six months ended June 30, 2026, the Company recorded a provision for credit losses of $3,500,000 compared with a provision for credit losses of $16,500,000 for the first six months of 2025. The first six months of 2025 included a provision for credit losses of $16,200,000 related to the “Day 2” adjustment for the Heartland acquisition. In a transaction like the Heartland merger, the accounting rules in effect prior to adoption of ASU 2025-08 required the acquirer to recognize an allowance for credit losses in the period of acquisition for both purchased credit deterioration (“PCD”) assets and non-PCD assets. The determination of PCD versus non-PCD determines how the allowance for credit loss flows through the financial statements. For PCD assets, the gross-up method includes the impact in the “Day 1” business combination entries with no impact to expense. For non-PCD assets, the impact is reflected outside of the business combination entries (sometimes referred to as “Day 2”) and is reflected in expense.

Previous wording

Net charge-offs totaled $1,147,000, or 8 basis points, on an annualized basis, of average loans outstanding during the first quarter of 2026 compared with $486,000, or 4 basis points, on an annualized basis, of average loans during the first quarter of 2025.

Current wording

Net charge-offs totaled $673,000, or 5 basis points, on an annualized basis, of average loans outstanding during the second quarter of 2026 compared with $848,000, or 6 basis points, on an annualized basis, of average loans during the second quarter of 2025. Net charge-offs totaled $1,820,000, or 6 basis points, on an annualized basis, of average loans for the six months ended June 30, 2026 compared with $1,334,000, or 5 basis points, on an annualized basis, of average loans for the same period of 2025.

Previous wording

The provision for credit losses for the three months ended March 31, 2026 was made at a level deemed necessary by management to absorb expected losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. 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.

Current wording

The provision for credit losses for the three and six months ended June 30, 2026 was made at a level deemed necessary by management to absorb expected losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. 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.

Previous wording

During the quarter ended March 31, 2026, non-interest income totaled $17,226,000, an increase of $2,386,000, or 16%, compared with the first quarter of 2025. The increase during the first quarter of 2026 compared to the same period of 2025 was in part the result of the Heartland acquisition on February 1, 2025 and improvement of the Company’s existing fee revenue generation.

Current wording

During the quarter ended June 30, 2026, non-interest income totaled $18,746,000, an increase of $2,013,000, or 12%, compared with the second quarter of 2025. The increase during the second quarter of 2026 compared to the same period of 2025 was primarily attributable to improvement of the Company’s existing fee revenue generation and increased gains on sales of loans.

Previous wording

Wealth management fees increased $673,000, or 18%, during the first quarter of 2026 compared with the first quarter of 2025. The increase during the first quarter of 2026 compared with the first quarter of 2025 was largely attributable to increased assets under management, driven by healthy capital markets throughout much of 2025 and continued strong new business results.

Current wording

Wealth management fees increased $845,000, or 20%, during the second quarter of 2026 compared with the second quarter of 2025. The increase during the second quarter of 2026 compared with the second quarter of 2025 was largely attributable to increased assets under management driven by healthy capital markets throughout the past year and continued strong new business results.

Previous wording

For the quarter ended March 31, 2026, interchange fees increased $355,000, or 8%, compared with the same quarter of 2025. The increase during the first quarter of 2026 compared with the first quarter of 2025 was largely attributable to increased card utilization by customers and the Heartland acquisition.

Current wording

For the quarter ended June 30, 2026, interchange fees increased $271,000, or 5%, compared with the same quarter of 2025. The increase during the second quarter of 2026 compared with the second quarter of 2025 was largely related to a higher level of customer transaction volume.

Previous wording

Net gains on sales of loans increased $550,000, or 59%, compared with the first quarter of 2025. The increase during the first quarter of 2026 compared with the first quarter of 2025 was driven by a higher volume of loans sold and improved pricing on loans sold. Loan sales totaled $52.1 million during the first quarter of 2026 compared with $39.3 million during the first quarter of 2025.

Current wording

Net gains on sales of loans increased $270,000, or 21%, in the second quarter of 2026 compared with the second quarter of 2025. The increase during the second quarter of 2026 compared with the second quarter of 2025 was driven by a higher volume of loans sold. Loan sales totaled $70.8 million during the second quarter of 2026 compared with $50.2 million during the second quarter of 2025.

Previous wording

Intangible amortization increased $401,000, or 19%, during the first quarter of 2026 compared with the first quarter of 2025. The increase during the first quarter of 2026 compared with the same period of 2025 was attributable to the Heartland acquisition.

Current wording

Wealth management fees increased $1,518,000, or 19%, during the first six months of 2026 compared with the same period of 2025. The increase during the first six months of 2026 compared with the same period of 2025 was largely attributable to increased assets under management, driven by healthy capital markets and continued strong new business results.

Previous wording

Service charges on deposit accounts increased $340,000, or 10%, during the quarter ended March 31, 2026 compared with the same period of 2025. The increase during the first quarter of 2026 compared with the first quarter of 2025 was primarily driven by the Heartland acquisition in addition to increased customer utilization of deposit services.

Current wording

Service charges on deposit accounts increased $614,000, or 9%, during the six months ended June 30, 2026 compared with the same period of 2025. The increase during the first six months of 2026 compared with the same period of 2025 was primarily driven by the Heartland acquisition in addition to increased customer utilization of deposit services.

Previous wording

Other operating income increased $406,000, or 26%, in the first quarter of 2026 compared with the first quarter of 2025. The increase during the first quarter of 2026 compared with the first quarter of 2025 was largely the result of the Heartland transaction.

Current wording

Other operating income increased $795,000, or 23%, in the first six months of 2026 compared with the same period of 2025. The increase during the first six months of 2026 compared with the first six months of 2025 was largely the result of the Heartland transaction.

Previous wording

During the quarter ended March 31, 2026, non-interest expense totaled $52,368,000, a decline of $414,000, or 1%, compared with the first quarter of 2025. The first quarter of 2025 non-interest expenses included approximately $5,932,000 of non-recurring acquisition-related expenses associated with the Heartland acquisition. On an adjusted basis, non-interest expense for the first quarter of 2025 was $46,850,000.

Current wording

During the quarter ended June 30, 2026, non-interest expense totaled $50,382,000, an increase of $865,000, or 2%, compared with the second quarter of 2025. The second quarter of 2025 non-interest expenses included approximately $929,000 of non-recurring acquisition-related expenses associated with the Heartland acquisition. On an adjusted basis, non-interest expense for the second quarter of 2025 was $48,588,000.

Previous wording

Salaries and benefits increased $272,000, or 1%, during the first quarter of 2026 compared with the first quarter of 2025. The first quarter of 2025 included approximately $1,843,000 of acquisition-related salary and benefit costs of a non-recurring nature. On an adjusted basis, salaries and benefits expense for the first quarter of 2025 totaled $26,197,000. The increase of $2,115,000 comparing the first quarter of 2026 to the adjusted first quarter of 2025 was primarily driven by an additional month of expense for the acquisition of Heartland in the first quarter of 2026 and a higher level of incentive compensation.

Current wording

Salaries and benefits increased $776,000, or 1%, during the first six months of 2026 compared with the same period of 2025. The first six months of 2025 included approximately $1,850,000 of acquisition-related salary and benefit costs of a non-recurring nature. On an adjusted basis, salaries and benefits expense for the first six months of 2025 totaled $52,828,000. The increase of $2,626,000 comparing the six months of 2026 to the adjusted first six months of 2025 was primarily driven by an additional month of expense for the acquisition of Heartland in the first quarter of 2026 and a higher level of incentive compensation.

Previous wording

Occupancy, furniture and equipment expense increased $673,000, or 14%, for the three months ended March 31, 2026, compared to the same period of 2025. The increase during the three months ended March 31, 2026 compared with the same period of 2025 was largely attributable to the operating costs of the Heartland branch network.

Current wording

Occupancy, furniture and equipment expense increased $1,100,000, or 12%, for the six months ended June 30, 2026, compared to the same period of 2025. The increase during the six months ended June 30, 2026 compared with the same period of 2025 was largely attributable to the operating costs of the Heartland branch network.

Previous wording

During the first quarter of 2026, data processing fees declined $1,227,000, or 22%, compared with the first quarter of 2025. The decline in the first quarter of 2026 compared with the same period of 2025 was largely driven by acquisition-related costs, which totaled approximately $1,323,000 during the first quarter of 2025.

Current wording

During the six months of 2026, data processing fees declined $955,000, or 10%, compared with the same period of 2025. The decline in the first six months of 2026 compared with the same period of 2025 was largely driven by acquisition-related costs, which totaled approximately $1,558,000 during the first six months of 2025.

Previous wording

Professional fees declined $2,193,000, or 52%, during the first quarter of 2026 compared with the first quarter of 2025. This decline was largely attributable to acquisition related costs included in the first quarter of 2025, which totaled $2,661,000.

Current wording

Professional fees declined $2,161,000, or 34%, during the first six months of 2026 compared with the first six months of 2025. This decline was largely attributable to acquisition related costs included in the first six months of 2025, which totaled approximately $2,883,000.

Previous wording

Other operating expenses increased $1,397,000, or 23%, for the three months ended March 31, 2026 compared with the same period of 2025. The increase during the first quarter of 2026 compared with the same period of 2025 was primarily attributable to an increase in reserves related to unfunded loan commitments, an increase in the Ohio financial institution tax and increased amortization expense for residential mortgage servicing rights as well as the operating costs of Heartland for a full quarter in 2026.

Current wording

Other operating expenses increased $1,480,000, or 11%, for the six months ended June 30, 2026 compared with the same period of 2025. The increase during the six months ended June 30, 2026 compared with the same period of 2025 was primarily attributable to an increase in the Ohio financial institution tax and increased amortization expense for residential mortgage servicing rights as well as the operating costs of Heartland for a full six months in 2026.

Previous wording

The Company’s effective income tax rate was 20.5% and 21.1%, respectively, during the three months ended March 31, 2026 and 2025. 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.

Current wording

The Company’s effective income tax rate was 20.6% and 19.9%, respectively, during the three months ended June 30, 2026 and 2025. The Company's effective income tax rate was 20.6% and 20.2%, respectively, during the six months ended June 30, 2026 and 2025. 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.

Previous wording

At March 31, 2026, total assets for the Company remained relatively stable compared with year end 2025 at $8.4 billion. Modest increases in cash and cash equivalents, securities available-for-sale and loans held for sale, were offset by a decline in the Company’s loan portfolio.

Current wording

At June 30, 2026, total assets for the Company remained relatively stable compared with year end 2025 at $8.4 billion. During the first six months of 2026, increases in loans and securities available-for-sale were somewhat offset by a decline in cash and cash equivalents.

Previous wording

March 31, 2026 total loans declined $25.8 million, or 2% on an annualized basis, compared with December 31, 2025. The decline during the first quarter of 2026 compared with December 31, 2025 was largely driven by seasonal declines in agricultural lines of credit and a decline in commercial and industrial loans, partially mitigated by increased commercial real estate loans and retail loans. Agricultural loans declined $22.0 million, or 18% on an annualized basis, and commercial and industrial loans declined $15.3 million, or 7% on an annualized basis, while commercial real estate loans increased $9.9 million, or 1% on an annualized basis. Retail loans grew by $1.6 million, or 0.5% on an annualized basis, due in large part to strong home equity loan originations, which were partially offset by a reduced level of residential mortgage loans and consumer loans.

Current wording

June 30, 2026 total loans increased $57.0 million, or 2% on an annualized basis, compared with December 31, 2025. The increase during the first half of 2026 compared with December 31, 2025 was largely driven by growth in commercial real estate and retail loans. Commercial real estate loans increased $77.0 million, or 5% on an annualized basis, and home equity lines of credit increased $38.1 million, or 16% on an annualized basis. These increases were partially mitigated by declines in commercial and industrial loans and leases of $14.4 million, or 3% on an annualized basis, agricultural loans of $12.6 million, or 5% on an annualized basis, residential mortgage loans of $13.9 million, or 4% on an annualized basis, and other consumer loans of $17.3 million, or 24% on an annualized basis.

Previous wording

The Company’s commercial real estate (“CRE”) loan portfolio is further diversified by occupancy type, with approximately 76% of the CRE portfolio being non-owner occupied at March 31, 2026 (which is 41% of the Company’s overall loan portfolio), and 24% of the CRE portfolio being owner occupied (which is 13% of the Company’s total loan portfolio). At December 31, 2025, the Company’s commercial real estate loan portfolio was diversified by occupancy type, with approximately 76% of the CRE portfolio being non-owner occupied (which was 40% of the Company’s overall loan portfolio), and 24% of the CRE portfolio being owner occupied (which was 13% of the Company’s total loan portfolio).

Current wording

The Company’s commercial real estate (“CRE”) loan portfolio is further diversified by occupancy type, with approximately 75% of the CRE portfolio being non-owner occupied at June 30, 2026 (which is 41% of the Company’s overall loan portfolio), and 25% of the CRE portfolio being owner occupied (which is 13% of the Company’s total loan portfolio). At December 31, 2025, the Company’s commercial real estate loan portfolio was diversified by occupancy type, with approximately 76% of the CRE portfolio being non-owner occupied (which was 40% of the Company’s overall loan portfolio), and 24% of the CRE portfolio being owner occupied (which was 13% of the Company’s total loan portfolio).

Previous wording

The Company’s allowance for credit losses totaled $78.5 million at March 31, 2026 compared to $77.7 million at December 31, 2025. The allowance for credit losses represented 1.34% of period-end loans at March 31, 2026 compared with 1.32% at December 31, 2025.

Current wording

The Company’s allowance for credit losses totaled $79.4 million at June 30, 2026 compared to $77.7 million at December 31, 2025. The allowance for credit losses represented 1.34% of period-end loans at June 30, 2026 compared with 1.32% at December 31, 2025.

Previous wording

Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of March 31, 2026, the Company held net discounts on acquired loans of $49.5 million, which included $47.6 million related to the Heartland loan portfolio.

Current wording

Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of June 30, 2026, the Company held net discounts on acquired loans of $46.3 million, which included $44.6 million related to the Heartland loan portfolio.

Previous wording

Non-performing assets totaled $29.6 million at March 31, 2026 compared to $29.4 million at December 31, 2025. Non-performing assets represented 0.35% of total assets at March 31, 2026 and December 31, 2025. Non-performing loans totaled $29.6 million at March 31, 2026 compared to $29.4 million at December 31, 2025. Non-performing loans represented 0.51% of total loans at March 31, 2026 compared to 0.50% at December 31, 2025. Total non-performing assets from the Heartland acquisition were approximately $18.7 million at March 31, 2026.

Current wording

Non-performing assets totaled $26.8 million at June 30, 2026 compared to $29.5 million at December 31, 2025. Non-performing assets represented 0.32% of total assets at June 30, 2026 compared to 0.35% at December 31, 2025. Non-performing loans totaled $26.8 million at June 30, 2026 compared to $29.4 million at December 31, 2025. Non-performing loans represented 0.45% of total loans at June 30, 2026 compared to 0.50% at December 31, 2025. Total non-performing assets from the Heartland acquisition were approximately $17.7 million at June 30, 2026.

Previous wording

As of March 31, 2026, shareholders’ equity increased by $12.3 million to $1.175 billion compared with $1.162 billion at year-end 2025. The increase in shareholders’ equity was primarily attributable to increased retained earnings of $21.6 million due to net income of $33.2 million. Partially offsetting the increase in retained earnings was the payment of $11.6 million in shareholder dividends.

Current wording

As of June 30, 2026, shareholders’ equity increased by $49.2 million to $1.212 billion compared with $1.162 billion at year-end 2025. The increase in shareholders’ equity was primarily attributable to increased retained earnings of $48.2 million due to net income of $71.3 million. Partially offsetting the increase in retained earnings was the payment of $23.2 million in shareholder dividends.

Previous wording

Shareholders’ equity represented 14.0% of total assets at March 31, 2026 and 13.9% of total assets at December 31, 2025. Shareholders’ equity included $406.8 million of goodwill and other intangible assets at March 31, 2026 compared to $409.3 million of goodwill and other intangible assets at December 31, 2025.

Current wording

Shareholders’ equity represented 14.4% of total assets at June 30, 2026 and 13.9% of total assets at December 31, 2025. Shareholders’ equity included $404.4 million of goodwill and other intangible assets at June 30, 2026 compared to $409.3 million of goodwill and other intangible assets at December 31, 2025.

Previous wording

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents increased $5.5 million during the three months ended March 31, 2026 ending at $123.9 million. During the three months ended March 31, 2026, operating activities resulted in net cash inflows of $37.0 million. Investing activities resulted in net cash inflows of $2.5 million during the three months ended March 31, 2026. Financing activities resulted in net cash outflows for the three months ended March 31, 2026 of $34.0 million.

Current wording

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents decreased $24.2 million during the six months ended June 30, 2026 ending at $94.2 million. During the six months ended June 30, 2026, operating activities resulted in net cash inflows of $95.2 million. Investing activities resulted in net cash outflows of $88.3 million during the six months ended June 30, 2026. Financing activities resulted in net cash outflows for the six months ended June 30, 2026 of $31.1 million.

Previous wording

The Company’s bank subsidiary is authorized by its Board to borrow up to $1.68 billion at the FHLB, but availability at March 31, 2026 was limited to approximately $634 million based on the then pledged collateral and outstanding borrowings. In addition, the Company had a borrowing capacity of approximately $764 million at the Federal Reserve Bank as of March 31, 2026, 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 Company’s Asset/Liability Committee closely monitors the availability of these sources as part of its overall oversight and management of the bank subsidiary’s liquidity.

Current wording

The Company’s bank subsidiary is authorized by its Board to borrow up to $1.68 billion at the FHLB, but availability at June 30, 2026 was limited to approximately $660 million based on the then pledged collateral and outstanding borrowings. In addition, the Company had a borrowing capacity of approximately $771 million at the Federal Reserve Bank as of June 30, 2026, 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 Company’s Asset/Liability Committee closely monitors the availability of these sources as part of its overall oversight and management of the bank subsidiary’s liquidity.

Previous wording

The parent company is a corporation separate and distinct from its bank and other subsidiaries. The Company uses funds at the parent-company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes including debt service. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. The parent company has, from time-to-time, supplemented the dividends received from its subsidiaries with borrowings. As of March 31, 2026, the parent company had approximately $62.1 million of cash and cash equivalents available to meet its cash flow needs.

Current wording

The parent company is a corporation separate and distinct from its bank and other subsidiaries. The Company uses funds at the parent-company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes including debt service. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. The parent company has, from time-to-time, supplemented the dividends received from its subsidiaries with borrowings. As of June 30, 2026, the parent company had approximately $65.1 million of cash and cash equivalents available to meet its cash flow needs.

Previous wording

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (“GAAP”) and general practices within the banking industry. As a supplement to GAAP, the Company has provided certain, non-GAAP financial measures, which it believes are useful because they assist investors in assessing the Company’s operating performance. Specifically, the Company has presented its net income, earnings per share, provision for credit losses, non-interest expense, non-interest income, efficiency ratio, return on average assets, return on average equity, return on tangible equity, and net interest margin on an as adjusted basis for the periods set forth below to reflect the exclusion of the following items: (1) the Current Expected Credit Losses (“CECL”) “Day 2” provision expense for acquired loans that have only insignificant credit deterioration (i.e., non-PCD loans) related to the Heartland merger; and (2) non-recurring expenses related to the Heartland merger. Management believes excluding such items from these financial measures may be useful in assessing the Company’s underlying operational performance since the applicable transactions do not pertain to its core business operations and exclusion may facilitate better comparability between periods. In addition, management believes that by excluding such items the measures are useful to the Company, as well as analysts and investors, in assessing operating performance. Management also believes excluding these items may enhance comparability for peer comparison purposes.

Current wording

The accounting and reporting policies of German American Bancorp, Inc. (the “Company”) conform to U.S. generally accepted accounting principles (“GAAP”) and general practices within the banking industry. As a supplement to GAAP, the Company has provided certain, non-GAAP financial measures, which it believes are useful because they assist investors in assessing the Company’s operating performance. Specifically, the Company has presented its net income, earnings per share, non-interest expense, efficiency ratio, return on average assets, return on average equity, return on average tangible common equity, and net interest margin on an as adjusted basis for the periods set forth below to reflect the exclusion of the following items: (1) the Current Expected Credit Losses (“CECL”) “Day 2” provision expense for acquired loans that have only insignificant credit deterioration (i.e., non-PCD loans) related to the Heartland merger; and (2) non-recurring expenses related to the Heartland merger. Management believes excluding such items from these financial measures may be useful in assessing the Company’s underlying operational performance since the applicable transactions do not pertain to its core business operations and exclusion may facilitate better comparability between periods. In addition, management believes that by excluding such items the measures are useful to the Company, as well as analysts and investors, in assessing operating performance. Management also believes excluding these items may enhance comparability for peer comparison purposes.