(GABC) German American Bancorp – Value – Zacks Rank Buy

Earnings momentum for German American Bancorp Inc. (GABC) has been advancing since this regional bank posted strong second quarter results, which included an earnings surprise of 11.9%. The company has now surpassed the Zacks Consensus Estimate for six straight quarters with an average surprise of 21.1%.

Strong estimate revisions helped German American Bancorp achieve a Zacks #1 Rank (Strong Buy) on August 3 and reach its 52-week high on August 6. In addition, with a P/B multiple of just 1.51, this stock is an attractive pick for value investors.

Strong Second Quarter Results

On July 30, German American Bancorp reported second quarter 2012 earnings of 47 cents per share, outpacing the Zacks Consensus Estimate of 42 cents and rising 20.5% from 39 cents in the year-ago quarter. The improvement was driven by growth on the top line, partially offset by higher operating expenses.

Net interest income surged 2.4% from the year-ago quarter to $16.6 million. Likewise, non-interest income jumped 10.8% to $4.8 million. Nevertheless, non-interest expenses inched up 1.2% to $12.4 million on the back of higher salaries and benefit costs.

German American Bancorp witnessed a modest improvement in its asset quality during the quarter with provisions for loan losses showing a drastic decline. It fell from $1.3 million in the prior-year quarter to $0.4 million. Moreover, nonperforming assets totaled $18.1 million, down 8.9% from the year-ago quarter.

Surge in Earnings Estimates

Over the last 30 days, the Zacks Consensus Estimate for 2012 increased 8.2% to $1.84 per share with all five estimates revised upward. This implies year-over-year growth of 14.2%. Similarly, for 2013, all five estimates moved north over the same time frame, helping the Zacks Consensus Estimate improve 8.0% to $1.88.

Valuation Looks Reasonable

Along with a P/B multiple of 1.51, German American Bancorp has a forward P/E ratio of 11.5 (A P/E ratio under 15.0 and P/B ratio below 3.0 generally indicate value). Additionally, it currently enjoys a robust dividend yield of 2.65%. Therefore, in addition to being a value stock, the company also offers a steady income opportunity.

Jasper, Indiana-based German American Bancorp is a financial services holding company with a market capitalization of approximately $266.9 million. The company operates nearly 34 retail banking offices in 12 southern Indiana counties through its banking subsidiary – German American Bancorp. In addition, the company also owns a trust, brokerage and financial planning subsidiary, as well as a property and casualty insurance agency. Moreover, German American Bancorp competes with Firstbank Corporation (FBMI) and Enterprise Financial Services Corp. (EFSC) among others.

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