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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_____________________

Date of Report (Date of earliest event reported): January 29, 2018

GERMAN AMERICAN BANCORP, INC.
(Exact name of registrant as specified in its charter)

Indiana
(State or other jurisdiction of incorporation)

001-15877
35-1547518
(Commission File Number)
(IRS Employer Identification No.)
711 Main Street
Box 810
Jasper, Indiana


47546
(Address of Principal Executive Offices)
(Zip Code)

Registrant’s telephone number, including area code: (812) 482-1314

Not Applicable
(Former name or former address, if changed since last report)
    
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [ ]




Item 2.02. Results of Operations and Financial Condition.

On January 29, 2018, German American Bancorp, Inc. (the “Company” or “German American”) issued a press release announcing its results for the quarter and year ended December 31, 2017 and making other disclosures. The press release (including the accompanying unaudited consolidated financial statements as of and for the quarter and year ended December 31, 2017, and other financial data) is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information incorporated by reference herein from Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 8.01. Other Events.

Cash Dividend. As announced in the press release that is furnished as Exhibit 99.1 to this report, the Company’s Board of Directors has declared a cash dividend of $0.15 per share which will be payable on February 20, 2018 to shareholders of record as of February 10, 2018.

Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits.

(d)
Exhibits
 
 
 
 
 
 
 
Exhibit No.
 
Description
 
 
 
 
 
99.1
 
Press release dated January 29, 2018. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.






* * * * * *






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 29, 2018
GERMAN AMERICAN BANCORP, INC.

 
By:
/s/ Mark A. Schroeder
Mark A. Schroeder, Chairman and Chief Executive Officer
 
 





EXHIBIT INDEX


Exhibit No.
 
Description
 
 
 
 
Press release dated January 29, 2018
 
 
 


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


1 of 17



JANUARY 29, 2018
GERMAN AMERICAN BANCORP, INC. (GABC) POSTS 8th CONSECUTIVE YEAR OF RECORD ANNUAL EARNINGS & ANNOUNCES 15% CASH DIVIDEND INCREASE

Jasper, Indiana: January 29, 2018 -- German American Bancorp, Inc. (NASDAQ: GABC) reported that the Company has achieved record annual earnings for the year ended on December 31, 2017, marking the 8th consecutive year of record performance. This level of annual earnings performance resulted in a 11.6% return on shareholders’ equity for 2017, noting the 13th consecutive fiscal year in which the Company has delivered double-digit returns on shareholders’ equity. The Company also announced a 15% increase in its quarterly cash dividend.

The Company’s 2017 net income of $40.7 million, or $1.77 per share, was an increase of approximately $5.5 million, or 13% on a per share basis, over its previous record annual net income of $35.2 million, or $1.57 per share, reported in 2016. Current year fourth quarter earnings of $11.6 million, or $0.51 per share, represented an increase of approximately 16%, on a per share basis, relative to 2016 fourth quarter results of $10.1 million, or $0.44 per share. The 2017 reported fourth quarter and year-to-date net income were positively impacted by a $2.3 million net tax benefit resulting from the revaluation of the Company’s deferred tax assets and liabilities related to the federal tax reform legislation enacted during the fourth quarter of 2017.

In addition to the federal income tax benefit noted above, the record financial performance achieved in 2017 was largely attributable to a $5.0 million increased level of net interest income driven primarily by a higher level of average loans outstanding. 2017 year-end loans outstanding increased by approximately $151.6 million, or 8%, from the prior year-end level. The year-over-year increase in loans outstanding was attributable to strong organic loan growth broadly based across the Company’s entire market area and within all loan categories.

Commenting on the Company’s eighth consecutive year of record financial performance in 2017, Mark A. Schroeder, German American’s Chairman & CEO, stated, "We were very pleased to be able to continue our pattern of record financial performance in the past year and were extremely encouraged to see a further strengthening of economic growth throughout our market area in 2017. As evidenced by the double-digit annualized loan growth we experienced in the last half of the year, both business and consumer clients throughout our market area are feeling more confident in the growth potential and vibrancy of the economy. Based on the exceptionally strong growth in both loans and deposits we experienced in 2017, a strong and growing pipeline at year-end of potential future loan growth, and an expectation of accelerated overall economic growth resulting from the recent federal tax reform legislation, we have a positive outlook regarding our ability to continue this record of exceptional financial performance in 2018 and beyond.”




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


2 of 17

The Company also announced a 15% increase in its regular quarterly cash dividend, as its Board of Directors declared a regular quarterly cash dividend of $0.15 per share, which will be payable on February 20, 2018 to shareholders of record as of February 10, 2018.

Balance Sheet Highlights

Total assets for the Company increased to $3.144 billion at December 31, 2017, representing an increase of $71.5 million, or 9% on an annualized basis, compared with September 30, 2017 and an increase of $188.4 million, or 6%, compared with December 31, 2016.

At December 31, 2017, total loans increased $55.3 million, or 11% on an annualized basis, compared with September 30, 2017 and increased $151.6 million, or 8%, compared with December 31, 2016. The increase during the fourth quarter of 2017 was largely related to an increase of approximately $11.7 million, or 10% on an annualized basis, of commercial and industrial loans, an increase of $28.0 million, or 12% on an annualized basis, of commercial real estate loans, an increase of $6.2 million, or 8% on an annualized basis, of agricultural loans and an increase of $9.4 million, or 10% on annualized basis, of retail loans. The increase was broadly based across the Company's entire market area.

 
 
 
 
 
 
 
End of Period Loan Balances
 
12/31/2017
 
9/30/2017
 
12/31/2016
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial Loans
 
$
486,668

 
$
474,917

 
$
457,372

Commercial Real Estate Loans
 
926,729

 
898,752

 
856,094

Agricultural Loans
 
333,227

 
327,026

 
303,128

Consumer Loans
 
219,662

 
209,537

 
193,520

Residential Mortgage Loans
 
178,733

 
179,481

 
183,290

 
 
$
2,145,019

 
$
2,089,713

 
$
1,993,404

 
 
 
 
 
 
 


Non-performing assets totaled $11.9 million at December 31, 2017 compared to $10.2 million of non-performing assets at September 30, 2017 and $4.0 million at December 31, 2016. Non-performing assets represented 0.38% of total assets at December 31, 2017 compared to 0.33% of total assets at September 30, 2017 and 0.14% of total assets at December 31, 2016. Non-performing loans totaled $11.8 million at December 31, 2017 compared to $9.7 million at September 30, 2017 and $3.8 million at December 31, 2016. Non-



    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


3 of 17

performing loans represented 0.55% of total loans at December 31, 2017 compared to 0.46% at September 30, 2017 and 0.19% at December 31, 2016. The increase in non-performing assets during the fourth quarter of 2017 was primarily attributable to a single commercial lending relationship that was downgraded during the quarter. The increase in non-performing assets during the year ended December 31, 2017 compared with year-end 2016 was primarily related to two commercial lending relationships.

 
 
 
 
 
 
Non-performing Assets
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
12/31/2017
 
9/30/2017
 
12/31/2016
Non-Accrual Loans
$
11,091

 
$
9,177

 
$
3,793

Past Due Loans (90 days or more)
719

 
474

 
2

       Total Non-Performing Loans
11,810

 
9,651

 
3,795

Other Real Estate
54

 
568

 
242

       Total Non-Performing Assets
$
11,864

 
$
10,219

 
$
4,037

 
 
 
 
 
 
Restructured Loans
$
149

 
$
152

 
$
28

 
 
 
 
 
 

The Company’s allowance for loan losses totaled $15.7 million at December 31, 2017 compared to $15.3 million at September 30, 2017 and $14.8 million at December 31, 2016. The allowance for loan losses represented 0.73% of period-end loans at December 31, 2017 compared with 0.73% of period-end loans at September 30, 2017 and 0.74% of period-end loans at December 31, 2016. Under acquisition accounting treatment, loans acquired are recorded at fair value which includes a credit risk component, and therefore the allowance on loans acquired is not carried over from the seller. The Company held a net discount on acquired loans of $7.6 million as of December 31, 2017, $8.0 million at September 30, 2017 and $10.0 million at December 31, 2016.












    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


4 of 17

Total deposits increased $59.5 million, or 10% on an annualized basis, as of December 31, 2017 compared with September 30, 2017 and increased $134.5 million, or 6%, compared with December 31, 2016.

 
 
 
 
 
 
 
End of Period Deposit Balances
 
12/31/2017
 
9/30/2017
 
12/31/2016
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing Demand Deposits
 
$
606,134

 
$
589,315

 
$
571,989

IB Demand, Savings, and MMDA Accounts
 
1,490,033

 
1,454,073

 
1,399,381

Time Deposits < $100,000
 
198,646

 
204,946

 
207,824

Time Deposits > $100,000
 
189,239

 
176,238

 
170,357

 
 
$
2,484,052

 
$
2,424,572

 
$
2,349,551

 
 
 
 
 
 
 

Results of Operations Highlights - Year ended December 31, 2017

Net income for the year ended December 31, 2017 totaled $40,676,000 or $1.77 per share, an increase of $5,492,000, or approximately 13% on a per share basis, from the year ended December 31, 2016 net income of $35,184,000 or $1.57 per share. The 2017 results of operations were positively impacted by the revaluation of the Company's deferred tax assets and deferred tax liabilities related to the federal tax reform legislation enacted during the fourth quarter of 2017. The revaluation resulted in a net tax benefit of $2,284,000, or approximately $0.10 per share during 2017. In addition, the 2016 results of operations included only ten month's operations of River Valley Bancorp, which the Company acquired effective March 1, 2016.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


5 of 17

 
 
 
 
 
 
 
 
 
 
 
 
 
Summary Average Balance Sheet












(Tax-equivalent basis / dollars in thousands)














Year Ended December 31, 2017

 Year Ended December 31, 2016















 Principal Balance

 Income/ Expense

 Yield/Rate

 Principal Balance

 Income/ Expense

 Yield/Rate
Assets












Federal Funds Sold and Other












        Short-term Investments

$
12,405


$
134


1.09
%

$
22,180


$
74


0.33
%
Securities

744,985


23,595


3.17
%

723,044


21,102


2.92
%
Loans and Leases

2,036,717


92,449


4.54
%

1,904,779


86,755


4.55
%
Total Interest Earning Assets

$
2,794,107


$
116,178


4.16
%

$
2,650,003


$
107,931


4.07
%













Liabilities












Demand Deposit Accounts

$
572,356






$
513,199





IB Demand, Savings, and












        MMDA Accounts

$
1,442,474


$
3,971


0.28
%

$
1,322,593


$
2,515


0.19
%
Time Deposits

380,316


3,123


0.82
%

414,100


2,672


0.65
%
FHLB Advances and Other Borrowings

233,315


4,027


1.73
%

242,483


3,274


1.35
%
Total Interest-Bearing Liabilities

$
2,056,105


$
11,121


0.54
%

$
1,979,176


$
8,461


0.43
%













Cost of Funds





0.40
%





0.32
%
Net Interest Income



$
105,057






$
99,470



Net Interest Margin





3.76
%





3.75
%
 
 
 
 
 
 
 
 
 
 
 
 
 

During the year ended December 31, 2017, net interest income totaled $99,909,000 representing an increase of $5,005,000, or 5%, from the year ended December 31, 2016 net interest income of $94,904,000. The increased level of net interest income during 2017 compared with 2016 was driven primarily by a higher level of earning assets resulting from organic loan growth and the acquisition of River Valley Bancorp effective March 1, 2016.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


6 of 17

The tax equivalent net interest margin for the year ended December 31, 2017 was 3.76% compared to 3.75% in 2016. The modest increase in the net interest margin during 2017 compared with the prior year was primarily attributable to an improved yield on the Company's securities portfolio combined with a larger loan portfolio, partially offset by a higher cost of funds and a lower level of accretion of loan discounts on acquired loans. Accretion of loan discounts on acquired loans contributed approximately 9 basis points to the net interest margin during 2017 and 13 basis points in 2016. The Company's cost of funds increased approximately 8 basis points during 2017 compared with 2016. The higher cost of funds was largely attributable to an increase in short-term market interest rates over the past several quarters.

During the year ended December 31, 2017, non-interest income declined less than 1% from the year ended December 31, 2016.


Year Ended

Year Ended
Non-interest Income

12/31/2017

12/31/2016
(dollars in thousands)









Trust and Investment Product Fees

$
5,272


$
4,644

Service Charges on Deposit Accounts

6,178


5,973

Insurance Revenues

7,979


7,741

Company Owned Life Insurance

1,341


987

Interchange Fee Income

4,567


3,627

Other Operating Income

2,641


3,703

     Subtotal

27,978


26,675

Net Gains on Loans

3,280


3,359

Net Gains on Securities

596


1,979

Total Non-interest Income

$
31,854


$
32,013

 
 
 
 
 

Trust and investment product fees increased $628,000, or 14%, during 2017 compared with 2016. The increase was primarily attributable to fees generated from increased assets under management in the Company's wealth advisory group.

Company owned life insurance revenue increased $354,000, or 36%, during 2017, compared with 2016. The increase was largely related to death benefits received from life insurance policies during 2017.

Interchange fee income increased $940,000, or 26%, during 2017 compared with 2016. The increase was attributable to increased card utilization by customers and a full year of operations from River Valley included in 2017 compared with ten months of operations of River Valley included in 2016.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


7 of 17

Other operating income declined $1,062,000, or 29%, during 2017 compared with 2016. The decline was largely attributable to decreased fees and fair value adjustments associated with swap transactions with loan customers.

The Company realized a net gain on sales of securities of $596,000 during 2017 compared with a net gain on the sale of securities of $1,979,000 in 2016.

During 2017, non-interest expense increased $1,216,000, or 2%, compared with 2016. During 2016, the Company recorded costs related to the River Valley merger transaction that totaled $4,318,000.



Year Ended

Year Ended
Non-interest Expense

12/31/2017

12/31/2016
(dollars in thousands)









Salaries and Employee Benefits

$
46,642


$
43,961

Occupancy, Furniture and Equipment Expense

9,230


8,558

FDIC Premiums

954


1,151

Data Processing Fees

4,276


5,686

Professional Fees

2,817


3,672

Advertising and Promotion

3,543


2,657

Intangible Amortization

942


1,062

Other Operating Expenses

9,399


9,840

Total Non-interest Expense

$
77,803


$
76,587

 
 
 
 
 

Salaries and benefits increased $2,681,000, or 6%, during 2017 compared with the 2016. The increase in 2017 compared with 2016 was primarily attributable to having River Valley's operations included for the entire year in 2017 compared with ten months of 2016 combined with an increased number of full-time equivalent employees and higher levels of employee benefit costs including health insurance costs. During 2016, salary and benefit expense included $1,934,000 in settlement costs for various employment and benefit arrangements related to the River Valley merger.

Occupancy, furniture and equipment expense increased $672,000, or 8%, in 2017 compared with 2016. This increase was largely related to capital investments into the Company's branch network and to the operation of River Valley's 15 branch network during all of 2017.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


8 of 17

Data processing fees declined $1,410,000, or 25%, in 2017 compared with 2016. The decline during 2017 compared with 2016 was primarily related to expenses totaling $1,288,000 associated with the acquisition of River Valley that were incurred during 2016.

Professional fees declined $855,000, or 23%, in 2017 compared with 2016. The decline during 2017 compared with 2016 was attributable to expenses totaling $770,000 associated with the acquisition of River Valley.

Advertising and promotion increased $886,000 during 2017 compared with 2016. The primary driver of the increase in advertising and promotion was a contribution expense of $773,000 related to the donation of a former branch facility to a municipality in one of the Company's market areas.

During the year ended December 31, 2017, the Company recorded a provision for income tax expense of $11,534,000 compared with a provision for income tax expense of $13,946,000 during 2016. The 2017 income tax provision was positively impacted by the revaluation of the Company's deferred tax assets and deferred tax liabilities related to federal tax reform legislation enacted during the fourth quarter of 2017. The revaluation resulted in a net tax benefit of $2,284,000 during the fourth quarter of 2017. The revaluation of the Company’s deferred tax assets and deferred tax liabilities at year-end 2017 was based on reasonable estimates by the Company of certain income tax effects of the new federal tax reform legislation. These effects may be subject to adjustment as the Company completes its evaluation during 2018.
 
Results of Operations Highlights – Quarter ended December 31, 2017

Net income for the quarter ended December 31, 2017 totaled $11,621,000, or $0.51 per share, which represented an increase of approximately 21% on a per share basis compared with the third quarter 2017 net income of $9,660,000, or $0.42 per share, and an increase of 16% on a per share basis compared with the fourth quarter 2016 net income of $10,065,000, or $0.44 per share. As previously discussed, the fourth quarter of 2017 results of operation were positively impacted by the revaluation of the Company's deferred tax assets and deferred tax liabilities, resulting in a net tax benefit of $2,284,000, or approximately $0.10 per share.





    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


9 of 17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary Average Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Tax-equivalent basis / dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter Ended
 
 Quarter Ended
 
 Quarter Ended
 
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Principal Balance
 
 Income/ Expense
 
 Yield/ Rate
 
 Principal Balance
 
 Income/ Expense
 
 Yield/ Rate
 
 Principal Balance
 
 Income/ Expense
 
 Yield/ Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Funds Sold and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Short-term Investments
 
$
10,268

 
$
34

 
1.33
%
 
$
13,543

 
$
46

 
1.38
%
 
$
19,738

 
$
12

 
0.24
%
Securities
 
755,659

 
6,001

 
3.18
%
 
748,754

 
5,872

 
3.14
%
 
737,619

 
5,582

 
3.03
%
Loans and Leases
 
2,100,432

 
23,872

 
4.51
%
 
2,058,453

 
23,358

 
4.51
%
 
2,004,983

 
22,734

 
4.51
%
Total Interest Earning Assets
 
$
2,866,359

 
$
29,907

 
4.15
%
 
$
2,820,750

 
$
29,276

 
4.13
%
 
$
2,762,340

 
$
28,328

 
4.09
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Deposit Accounts
 
$
598,107

 
 
 
 
 
$
572,204

 
 
 
 
 
$
559,597

 
 
 
 
IB Demand, Savings, and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        MMDA Accounts
 
$
1,488,671

 
$
1,177

 
0.31
%
 
$
1,447,693

 
$
1,117

 
0.31
%
 
$
1,412,398

 
$
708

 
0.20
%
Time Deposits
 
376,585

 
889

 
0.94
%
 
382,827

 
842

 
0.87
%
 
412,151

 
675

 
0.65
%
FHLB Advances and Other Borrowings
 
226,437

 
1,090

 
1.91
%
 
246,698

 
1,110

 
1.79
%
 
217,033

 
829

 
1.52
%
Total Interest-Bearing Liabilities
 
$
2,091,693

 
$
3,156

 
0.60
%
 
$
2,077,218

 
$
3,069

 
0.59
%
 
$
2,041,582

 
$
2,212

 
0.43
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Funds
 
 
 
 
 
0.44
%
 
 
 
 
 
0.43
%
 
 
 
 
 
0.32
%
Net Interest Income
 
 
 
$
26,751

 
 
 
 
 
$
26,207

 
 
 
 
 
$
26,116

 
 
Net Interest Margin
 
 
 
 
 
3.71
%
 
 
 
 
 
3.70
%
 
 
 
 
 
3.77
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

During the quarter ended December 31, 2017, net interest income totaled $25,454,000, which represented an increase of $537,000, or 2%, from the quarter ended September 30, 2017 net interest income of $24,917,000 and an increase of $565,000, or 2%, compared with the quarter ended December 31, 2016 net interest income of $24,889,000. The increased level of net interest income during the fourth quarter of 2017 compared with the third quarter of 2017 was driven primarily by a higher level of earning assets resulting from organic loan growth.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


10 of 17

The tax equivalent net interest margin for the quarter ended December 31, 2017 was 3.71% compared with 3.70% in the third quarter of 2017 and 3.77% in the fourth quarter of 2016. The modest increase in the stated net interest margin, when comparing the fourth quarter of 2017 with the third quarter, was primarily due to an improved yield on securities, organic loan growth, and increased accretion of loan discounts on acquired loans partially offset by an increase in Company's cost of funds. Accretion of loan discounts on acquired loans contributed approximately 6 basis points to the net interest margin on an annualized basis in the fourth quarter of 2017, 5 basis points in the third quarter of 2017, and 13 basis points in the fourth quarter of 2016. The Company's cost of funds increased approximately 1 basis points in the fourth quarter of 2017 compared with the third quarter of 2017 and 12 basis points compared with the fourth quarter of 2016. The higher cost of funds was largely attributable to an increase in short-term market interest rates over the past several quarters.

During the quarter ended December 31, 2017, the Company recorded a provision for loan loss of $650,000 compared with a provision for loan loss of $250,000 during the third quarter of 2017 and no provision for loan loss in the fourth quarter of 2016. The provision during all periods was done in accordance with the Company's standard methodology for determining the adequacy of its allowance for loan loss.

During the quarter ended December 31, 2017, non-interest income totaled $7,594,000, a decline of $681,000, or 8%, compared with the quarter ended September 30, 2017, and a decline of $763,000, or 9%, compared with the fourth quarter of 2016.

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Income
 
12/31/2017
 
9/30/2017
 
12/31/2016
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Trust and Investment Product Fees
 
$
1,378

 
$
1,301

 
$
1,209

Service Charges on Deposit Accounts
 
1,608

 
1,608

 
1,594

Insurance Revenues
 
1,867

 
1,728

 
1,748

Company Owned Life Insurance
 
290

 
317

 
278

Interchange Fee Income
 
1,202

 
1,186

 
1,001

Other Operating Income
 
546

 
608

 
1,222

     Subtotal
 
6,891

 
6,748

 
7,052

Net Gains on Loans
 
682

 
952

 
752

Net Gains on Securities
 
21

 
575

 
553

Total Non-interest Income
 
$
7,594

 
$
8,275

 
$
8,357

 
 
 
 
 
 
 




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


11 of 17


Interchange fee income increased $16,000, or 1%, during the fourth quarter of 2017 compared with the third quarter of 2017 and $201,000, or 20%, compared with the fourth quarter of 2016. The increase during the fourth quarter of 2017 compared with the fourth quarter of 2016 was largely attributable to increased card utilization by customers.

Other operating income decreased $62,000, or 10%, during the quarter ended December 31, 2017 compared with the third quarter of 2017 and decreased $676,000, or 55%, compared with the fourth quarter of 2016. The decline in the fourth quarter of 2017 compared with the fourth quarter of 2016 was largely attributable to decreased fees associated with swap transactions with loan customers and to a gain realized in 2016 related to the liquidation of a limited partnership tax credit investment.

Net gains on sales of loans decreased $270,000, or 28%, during the fourth quarter of 2017 compared with the third quarter of 2017 and declined $70,000, or 9%, compared with the fourth quarter of 2016. The decline in the gain on sales of loans during the fourth quarter of 2017 compared with both comparative periods was primarily due to a lower level of loans sold in secondary market. Loan sales totaled $28.9 million during the fourth quarter of 2017, compared with $39.2 million during the third quarter of 2017 and $37.9 million during the fourth quarter of 2016.

The Company realized $21,000 in gains on sales of securities during the fourth quarter of 2017 compared with $575,000 during the third quarter of 2017 and gains of $553,000 in the fourth quarter of 2016.

During the quarter ended December 31, 2017, non-interest expense totaled $20,000,000, an increase of $229,000, or 1%, compared with the quarter ended September 30, 2017, and an increase of $645,000, or 3%, compared with the fourth quarter of 2016.



    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


12 of 17

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Expense
 
12/31/2017
 
9/30/2017
 
12/31/2016
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and Employee Benefits
 
$
12,168

 
$
11,570

 
$
11,604

Occupancy, Furniture and Equipment Expense
 
2,452

 
2,372

 
2,229

FDIC Premiums
 
242

 
241

 
111

Data Processing Fees
 
1,154

 
1,067

 
1,079

Professional Fees
 
550

 
551

 
797

Advertising and Promotion
 
820

 
1,315

 
797

Intangible Amortization
 
217

 
230

 
262

Other Operating Expenses
 
2,397

 
2,425

 
2,476

Total Non-interest Expense
 
$
20,000

 
$
19,771

 
$
19,355

 
 
 
 
 
 
 

Salaries and benefits increased $598,000, or 5%, during the quarter ended December 31, 2017 compared with the third quarter of 2017 and increased $564,000, or 5%, compared with the fourth quarter of 2016. The increase in salaries and benefits during the fourth quarter of 2017 compared with the third quarter of 2017 was primarily attributable to higher levels employee benefit costs. The increase in salaries and benefits during the fourth quarter of 2017 compared with the fourth quarter of 2016 was primarily attributable to an increased number of full-time equivalent employees and higher level health insurance costs.
 
Advertising and promotion declined $495,000, or 38%, during the quarter ended December 31, 2017 compared with the third quarter of 2017 and increased $23,000 or 3%, compared with the fourth quarter of 2016. The primary driver of the decrease in advertising and promotion during the fourth quarter compared with the third quarter of 2017 was the recognition of a contribution expense of $773,000 related to the donation of a former branch facility to a municipality in one of the Company's market areas during the third quarter of 2017.

During the quarter ended December 31, 2017, the Company recorded a provision for income tax expense of $777,000 compared with a provision for income tax expense of $3,511,000 during the third quarter of 2017 and $3,826,000 in the fourth quarter of 2016. The fourth quarter of 2017 income tax provision was positively impacted by the revaluation of the Company's deferred tax assets and deferred tax liabilities related to federal tax reform legislation enacted during the fourth quarter of 2017. The revaluation resulted in a net tax benefit of $2,284,000 during the fourth quarter of 2017.




    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


13 of 17

About German American
German American Bancorp, Inc., is a NASDAQ-traded (symbol: GABC) bank holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bancorp, operates 53 banking offices in 19 contiguous southern Indiana counties and one northern Kentucky county. The Company also owns an investment brokerage subsidiary (German American Investment Services, Inc.) and a full line property and casualty insurance agency (German American Insurance, Inc.).





    

NEWS RELEASE

For additional information, contact:
Mark A Schroeder, Chairman & Chief Executive Officer of German American Bancorp, Inc.
Bradley M Rust, Executive Vice President/CFO of German American Bancorp, Inc.
(812) 482-1314


14 of 17

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that, by their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Actual results and experience could differ materially from the anticipated results or other expectations expressed or implied by these forward-looking statements as a result of a number of factors, including but not limited to, those discussed in this press release. Factors that could cause actual experience to differ from the expectations expressed or implied in this press release include the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates; changes in competitive conditions; the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in financial and capital markets; potential deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration; capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities; risks of expansion through acquisitions and mergers, such as unexpected credit quality problems of the acquired loans or other assets, unexpected attrition of the customer base of the acquired institution or branches, and difficulties in integration of the acquired operations; factors driving impairment charges on investments; the impact, extent and timing of technological changes; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future; actions of the Federal Reserve Board; changes in accounting principles and interpretations; potential increases of federal deposit insurance premium expense, and possible future special assessments of FDIC premiums, either industry wide or specific to the Company’s banking subsidiary; actions of the regulatory authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends; and other risk factors expressly identified in the Company’s filings with the United States Securities and Exchange Commission. Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements. It is intended that these forward-looking statements speak only as of the date they are made. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.









GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
 
 
 
 
 
 
Consolidated Balance Sheets
 
 
 
 
 
 
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
 
 
     Cash and Due from Banks
$
58,233

 
$
44,804

 
$
48,467

     Short-term Investments
12,126

 
9,758

 
16,349

     Interest-bearing Time Deposits with Banks

 

 

     Investment Securities
740,994

 
741,710

 
709,786

 
 
 
 
 
 
     Loans Held-for-Sale
6,719

 
8,484

 
15,273

 
 
 
 
 
 
     Loans, Net of Unearned Income
2,141,638

 
2,086,325

 
1,989,955

     Allowance for Loan Losses
(15,694
)
 
(15,321
)
 
(14,808
)
        Net Loans
2,125,944

 
2,071,004

 
1,975,147

 
 
 
 
 
 
     Stock in FHLB and Other Restricted Stock
13,048

 
13,048

 
13,048

     Premises and Equipment
54,246

 
51,355

 
48,230

     Goodwill and Other Intangible Assets
56,160

 
56,378

 
56,893

     Other Assets
76,890

 
76,348

 
72,801

   TOTAL ASSETS
$
3,144,360

 
$
3,072,889

 
$
2,955,994

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
     Non-interest-bearing Demand Deposits
$
606,134

 
$
589,315

 
$
571,989

     Interest-bearing Demand, Savings, and Money Market Accounts
1,490,033

 
1,454,073

 
1,399,381

     Time Deposits
387,885

 
381,184

 
378,181

        Total Deposits
2,484,052

 
2,424,572

 
2,349,551

 
 
 
 
 
 
     Borrowings
275,216

 
261,941

 
258,114

     Other Liabilities
20,521

 
25,751

 
18,062

   TOTAL LIABILITIES
2,779,789

 
2,712,264

 
2,625,727

 
 
 
 
 
 
SHAREHOLDERS' EQUITY
364,571

 
360,625

 
330,267

 
 
 
 
 
 
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
3,144,360

 
$
3,072,889

 
$
2,955,994

 
 
 
 
 
 
END OF PERIOD SHARES OUTSTANDING (1)
22,934,403

 
22,930,017

 
22,904,157

 
 
 
 
 
 
TANGIBLE BOOK VALUE PER SHARE (1) (2)
$
13.45

 
$
13.27

 
$
11.94

 
 
 
 
 
 
(1) As Adjusted for the 3 for 2 Stock Split distributed on April 21, 2017.
(2) Tangible Book Value per Share is defined as Total Shareholders' Equity less Goodwill and Other Intangible Assets divided by End of Period Shares Outstanding.




GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Income
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Interest and Fees on Loans
$
23,699

 
$
23,182

 
$
22,557

 
$
91,745

 
$
86,202

   Interest on Short-term Investments and Time Deposits
34

 
46

 
12

 
134

 
74

   Interest and Dividends on Investment Securities
4,877

 
4,758

 
4,532

 
19,151

 
17,089

  TOTAL INTEREST INCOME
28,610

 
27,986

 
27,101

 
111,030

 
103,365

 
 
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Interest on Deposits
2,066

 
1,959

 
1,383

 
7,094

 
5,187

   Interest on Borrowings
1,090

 
1,110

 
829

 
4,027

 
3,274

  TOTAL INTEREST EXPENSE
3,156

 
3,069

 
2,212

 
11,121

 
8,461

 
 
 
 
 
 
 
 
 
 
 
   NET INTEREST INCOME
25,454

 
24,917

 
24,889

 
99,909

 
94,904

   Provision for Loan Losses
650

 
250

 

 
1,750

 
1,200

   NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
24,804

 
24,667

 
24,889

 
98,159

 
93,704

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Net Gain on Sales of Loans
682

 
952

 
752

 
3,280

 
3,359

   Net Gain on Securities
21

 
575

 
553

 
596

 
1,979

   Other Non-interest Income
6,891

 
6,748

 
7,052

 
27,978

 
26,675

  TOTAL NON-INTEREST INCOME
7,594

 
8,275

 
8,357

 
31,854

 
32,013

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Salaries and Benefits
12,168

 
11,570

 
11,604

 
46,642

 
43,961

   Other Non-interest Expenses
7,832

 
8,201

 
7,751

 
31,161

 
32,626

  TOTAL NON-INTEREST EXPENSE
20,000

 
19,771

 
19,355

 
77,803

 
76,587

 
 
 
 
 
 
 
 
 
 
 
   Income before Income Taxes
12,398

 
13,171

 
13,891

 
52,210

 
49,130

   Income Tax Expense
777

 
3,511

 
3,826

 
11,534

 
13,946

 
 
 
 
 
 
 
 
 
 
 
NET INCOME
$
11,621

 
$
9,660

 
$
10,065

 
$
40,676

 
$
35,184

 
 
 
 
 
 
 
 
 
 
 
BASIC EARNINGS PER SHARE (1)
$
0.51

 
$
0.42

 
$
0.44

 
$
1.77

 
$
1.57

DILUTED EARNINGS PER SHARE (1)
$
0.51

 
$
0.42

 
$
0.44

 
$
1.77

 
$
1.57

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING (1)
22,930,666

 
22,929,864

 
22,887,567

 
22,924,726

 
22,389,137

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (1)
22,930,666

 
22,929,864

 
22,887,567

 
22,924,726

 
22,391,115

 
 
 
 
 
 
 
 
 
 
 
(1) 
As Adjusted for the 3 for 2 Stock Split distributed on April 21, 2017.
 
 
 
 
 
 
 
 
 




GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
December 31,
 
 
2017
 
2017
 
2016
 
2017
 
2016
EARNINGS PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
 
Annualized Return on Average Assets
1.51
%
 
1.27
%
 
1.36
%
 
1.35
%
 
1.24
%
 
Annualized Return on Average Equity
12.83
%
 
10.78
%
 
11.90
%
 
11.59
%
 
10.94
%
 
Net Interest Margin
3.71
%
 
3.70
%
 
3.77
%
 
3.76
%
 
3.75
%
 
Efficiency Ratio (1)
58.23
%
 
57.34
%
 
56.15
%
 
56.83
%
 
58.25
%
 
Net Overhead Expense to Average Earning Assets (2)
1.73
%
 
1.63
%
 
1.59
%
 
1.64
%
 
1.68
%
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY RATIOS
 
 
 
 
 
 
 
 
 
 
Annualized Net Charge-offs to Average Loans
0.05
%
 
0.05
%
 
0.07
%
 
0.04
%
 
0.04
%
 
Allowance for Loan Losses to Period End Loans
0.73
%
 
0.73
%
 
0.74
%
 
 
 
 
 
Non-performing Assets to Period End Assets
0.38
%
 
0.33
%
 
0.14
%
 
 
 
 
 
Non-performing Loans to Period End Loans
0.55
%
 
0.46
%
 
0.19
%
 
 
 
 
 
Loans 30-89 Days Past Due to Period End Loans
0.32
%
 
0.48
%
 
0.36
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA
 
 
 
 
 
 
 
 
 
 
Average Assets
$
3,078,875

 
$
3,033,055

 
$
2,970,408

 
$
3,002,695

 
$
2,841,096

 
Average Earning Assets
$
2,866,359

 
$
2,820,750

 
$
2,762,340

 
$
2,794,107

 
$
2,650,003

 
Average Total Loans
$
2,100,432

 
$
2,058,453

 
$
2,004,983

 
$
2,036,717

 
$
1,904,779

 
Average Demand Deposits
$
598,107

 
$
572,204

 
$
559,597

 
$
572,356

 
$
513,199

 
Average Interest Bearing Liabilities
$
2,091,693

 
$
2,077,218

 
$
2,041,583

 
$
2,056,105

 
$
1,979,176

 
Average Equity
$
362,356

 
$
358,299

 
$
338,270

 
$
350,913

 
$
321,520

 
 
 
 
 
 
 
 
 
 
 
 
Period End Non-performing Assets (3)
$
11,864

 
$
10,219

 
$
4,037

 
 
 
 
 
Period End Non-performing Loans (4)
$
11,810

 
$
9,651

 
$
3,795

 
 
 
 
 
Period End Loans 30-89 Days Past Due (5)
$
6,865

 
$
10,089

 
$
7,109

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax Equivalent Net Interest Income
$
26,751

 
$
26,207

 
$
26,116

 
$
105,057

 
$
99,470

 
Net Charge-offs during Period
$
277

 
$
249

 
$
346

 
$
864

 
$
830

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Efficiency Ratio is defined as Non-interest Expense divided by the sum of Net Interest Income, on a tax equivalent basis, and Non-interest Income.
 
 
 
 
(2) 
Net Overhead Expense is defined as Total Non-interest Expense less Total Non-interest Income.
 
 
 
 
(3) 
Non-performing assets are defined as Non-accrual Loans, Loans Past Due 90 days or more, Restructured Loans, and Other Real Estate Owned.
 
 
 
 
(4) 
Non-performing loans are defined as Non-accrual Loans, Loans Past Due 90 days or more, and Restructured Loans.
 
 
 
 
(5) 
Loans 30-89 days past due and still accruing.
 
 
 
 
 
 
 
 
 


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