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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): July 30, 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 July 30, 2018, German American Bancorp, Inc. (the “Company” or “German American”) issued a press release announcing its results for the quarter ended June 30, 2018, and making other disclosures. The press release (including the accompanying unaudited consolidated financial statements as of and for the quarter ended June 30, 2018, and other financial data) is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including the information incorporated herein from Exhibit 99.1, is furnished pursuant to Item 2.02 of Form 8-K and 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 August 20, 2018, to shareholders of record as of August 10, 2018.

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

(d)
Exhibits
 
 
 
 
 
 
 
Exhibit No.
 
Description
 
 
 
 
 
 
Press release dated July 30, 2018.






* * * * * *






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: July 30, 2018
By:
GERMAN AMERICAN BANCORP, INC.

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



(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 14




JULY 30, 2018
GERMAN AMERICAN BANCORP, INC. (GABC) REPORTS SECOND QUARTER EARNINGS


Jasper, Indiana: July 30, 2018 -- German American Bancorp, Inc. (NASDAQ: GABC) reported quarterly earnings of $11.1 million, or $0.48 per share in the second quarter of 2018. This level of quarterly earnings performance was an increase of approximately $1.3 million, or 12% on a per share basis, over second quarter 2017 net income of $9.8 million, or $0.43 per share. On a year-to-date basis, reported earnings for the first six months of 2018 were $22.9 million, or $1.00 per share, which represents an increase of $3.5 million, or 18% on a per share basis, over the first half 2017 net income of $19.4 million, or $0.85 per share.

2018 second quarter enhanced financial performance relative to that of the same quarter last year was largely attributable to a $2.7 million, or 11%, increase in net interest income, which was driven by the Company’s higher level of average loans outstanding. Average loans outstanding during the second quarter of 2018 increased by $218.5 million, or 11%, relative to the average loans outstanding during the second quarter of 2017. This increase in average loans was driven by organic loan growth from the Company’s existing branch footprint, and, to a lesser extent, from the growth related to the five-branch acquisition the Company completed on May 18, 2018.

Other significant positive contributors to the 2018/2017 quarter-over-quarter earnings comparison included a $1.1 million, or 14%, increase in other non-interest income, driven by a $558,000, or 48%, increase in interchange fee income, an additional $327,000, or 24%, in trust and investment product fees, and a $165,000, or 11%, increase in deposit service charges. Partially offsetting this $3.8 million revenue increase were $2.7 million of elevated total non-interest expenses, of which approximately $904,000 ($727,000 or $0.03 per share, on an after-tax basis) were acquisition related expenses in connection with the five-branch acquisition that closed on May 18, 2018 and the pending acquisition of First Security, Inc. that was announced on May 22, 2018. The 2018 second quarter results also included an $870,000 increase in the Company’s provision for loan losses.

2018 second quarter and year-to-date reported net income and earnings per share were also positively impacted by the federal income tax reform legislation, which reduced the Company’s corporate federal income tax statutory rate of 35% to 21% effective January 1, 2018. The Company’s effective tax rate during the second quarter and the first half of 2018, was approximately 17.3%.

Mark A. Schroeder, German American’s Chairman & CEO, stated, "The second quarter of 2018 marked another



    

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


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period of strong growth for our Company. During the quarter, we grew total end-of-period loan balances, on an organic basis, by over $50 million, or 10% on an annualized basis, and acquired approximately $116 million in end-of-period loans and $123 million in end-of-period deposits as a result of the previously noted five-branch network acquisition in the Columbus and Greensburg, Indiana markets. Furthermore, we also announced a pending merger transaction during the quarter with Owensboro, Kentucky-based First Security, Inc., which reported total assets of approaching $600 million, total loans of approximately $400 million and total deposits of approximately $450 million, as of the announcement date.

Schroeder continued, “This combination of First Security and German American, which is anticipated to be completed during the fourth quarter of this year, represents our Company’s entry into Owensboro, Bowling Green, and Lexington, Kentucky, three of largest and most vibrant metropolitan markets in the Commonwealth. Following completion of this transaction, German American’s consolidated total assets are projected to be nearly $4.0 billion, with a total loan portfolio of approximately $2.7 billion and total deposit balances of approximately $3.0 billion. We are extremely pleased with the pattern of consistent organic and acquisition-related balance sheet growth and earnings improvement we’ve generated not only during the past quarter but over an extended period of time. We look forward to further enhancement of long-term shareholder value through a continuation of this historic pattern of ongoing earnings and balance sheet growth in the coming months and years.”

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


Balance Sheet Highlights

Total assets for the Company increased to $3.345 billion at June 30, 2018, representing an increase of $219.5 million, or 28% on an annualized basis, compared with March 31, 2018 and an increase of $339.7 million, or 11%, compared with June 30, 2017. The increase in total assets was driven by the acquisition of a five-branch network in the Columbus and Greensburg, Indiana markets as well as organic loan growth.

At June 30, 2018, total loans increased $168.0 million, or 31% on an annualized basis, compared with March 31, 2018 and increased $286.7 million, or 14%, compared with June 30, 2017. At June 30, 2018, the loans acquired as a part of the branch acquisition which closed on May 18, 2018, totaled $115.7 million. At June 30, 2018, total loans, excluding those acquired as a part of the branch acqusition, increased $52.2 million, or approximately 10% on an annualized basis, compared with March 31, 2018 and increased $170.9 million, or 8%, compared with June 30, 2017.

The increase in total loans, excluding those acquired as a part of the branch acquisition, during the second



    

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 14

quarter of 2018 compared with the first quarter of 2018 was driven by an increase of approximately $10.4 million, or 9% on an annualized basis, of commercial and industrial loans, an increase of $13.8 million, or 6% on an annualized basis, of commercial real estate loans, an increase of $20.9 million, or 25% on an annualized basis, of agricultural loans and an increase of $7.1 million, or 7% on annualized basis, of retail loans.

 
 
 
 
 
 
 
End of Period Loan Balances
 
6/30/2018
 
3/31/2018
 
6/30/2017
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial Loans
 
$
518,299

 
$
482,219

 
$
467,754

Commercial Real Estate Loans
 
986,486

 
947,948

 
870,100

Agricultural Loans
 
352,308

 
329,138

 
313,254

Consumer Loans
 
241,315

 
216,435

 
202,562

Residential Mortgage Loans
 
223,437

 
178,108

 
181,477

 
 
$
2,321,845

 
$
2,153,848

 
$
2,035,147

 
 
 
 
 
 
 

Non-performing assets totaled $9.5 million at June 30, 2018 compared to $10.7 million of non-performing assets at March 31, 2018 and $4.4 million at June 30, 2017. Non-performing assets represented 0.28% of total assets at June 30, 2018 compared to 0.34% of total assets at March 31, 2018 and 0.15% of total assets at June 30, 2017. Non-performing loans totaled $9.5 million at June 30, 2018 compared to $10.6 million at March 31, 2018 and $3.2 million at June 30, 2017. Non-performing loans represented 0.41% of total loans at June 30, 2018 compared to 0.49% at March 31, 2018 and 0.16% at June 30, 2017.

 
 
 
 
 
 
Non-performing Assets
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
6/30/2018
 
3/31/2018
 
6/30/2017
Non-Accrual Loans
$
8,953

 
$
9,479

 
$
3,097

Past Due Loans (90 days or more)
534

 
1,105

 
62

       Total Non-Performing Loans
9,487

 
10,584

 
3,159

Other Real Estate
40

 
68

 
1,289

       Total Non-Performing Assets
$
9,527

 
$
10,652

 
$
4,448

 
 
 
 
 
 
Restructured Loans
$
123

 
$
124

 
$
154

 
 
 
 
 
 




    

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


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The Company’s allowance for loan losses totaled $15.6 million at June 30, 2018 compared to $14.5 million at March 31, 2018 and $15.3 million at June 30, 2017. The allowance for loan losses represented 0.67% of period-end loans at June 30, 2018 compared with 0.67% of period-end loans at March 31, 2018 and 0.75% of period-end loans at June 30, 2017. From time to time, the Company has acquired loans through bank and branch acquisitions with the most recent being a branch acquisition in the second quarter of 2018. 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 $9.6 million as of June 30, 2018, $7.3 million at March 31, 2018 and $8.4 million at June 30, 2017.

Total deposits increased $134.3 million, or 22% on an annualized basis, as of June 30, 2018 compared with March 31, 2018 and increased $238.1 million, or 10%, compared with June 30, 2017. The increase in total deposits during the second quarter of 2018 compared with March 31, 2018 was largely driven by the previously discussed branch acquisition. At June 30, 2018, the deposits acquired as a part of the branch acquisition totaled approximately $122.7 million.

 
 
 
 
 
 
 
End of Period Deposit Balances
 
6/30/2018
 
3/31/2018
 
6/30/2017
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing Demand Deposits
 
$
629,724

 
$
599,374

 
$
557,535

IB Demand, Savings, and MMDA Accounts
 
1,611,583

 
1,465,150

 
1,453,512

Time Deposits < $100,000
 
190,179

 
193,864

 
203,923

Time Deposits > $100,000
 
169,954

 
208,733

 
148,351

 
 
$
2,601,440

 
$
2,467,121

 
$
2,363,321

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











    

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 14


Results of Operations Highlights – Quarter ended June 30, 2018

Net income for the quarter ended June 30, 2018 totaled $11,097,000, or $0.48 per share, a decline of 6% on a per share basis compared with the first quarter 2018 net income of $11,813,000, or $0.51 per share, and an increase of 12% on a per share basis compared with the second quarter 2017 net income of $9,839,000, or $0.43 per share.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary Average Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Tax-equivalent basis / dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter Ended
 
 Quarter Ended
 
 Quarter Ended
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 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
 
$
12,939

 
$
54

 
1.68
%
 
$
8,556

 
$
56

 
2.65
%
 
$
13,268

 
$
27

 
0.79
%
Securities
 
751,367

 
5,758

 
3.07
%
 
753,589

 
5,708

 
3.03
%
 
743,354

 
5,887

 
3.17
%
Loans and Leases
 
2,229,972

 
26,394

 
4.75
%
 
2,139,704

 
24,032

 
4.55
%
 
2,011,518

 
22,780

 
4.54
%
Total Interest Earning Assets
 
$
2,994,278

 
$
32,206

 
4.31
%
 
$
2,901,849

 
$
29,796

 
4.15
%
 
$
2,768,140

 
$
28,694

 
4.15
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Deposit Accounts
 
$
625,158

 
 
 
 
 
$
585,432

 
 
 
 
 
$
560,763

 
 
 
 
IB Demand, Savings, and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        MMDA Accounts
 
$
1,560,838

 
$
1,597

 
0.41
%
 
$
1,489,363

 
$
1,275

 
0.35
%
 
$
1,446,994

 
$
939

 
0.26
%
Time Deposits
 
417,585

 
1,251

 
1.20
%
 
398,397

 
1,008

 
1.03
%
 
360,938

 
687

 
0.76
%
FHLB Advances and Other Borrowings
 
238,775

 
1,216

 
2.04
%
 
262,784

 
1,252

 
1.93
%
 
233,197

 
962

 
1.65
%
Total Interest-Bearing Liabilities
 
$
2,217,198

 
$
4,064

 
0.74
%
 
$
2,150,544

 
$
3,535

 
0.67
%
 
$
2,041,129

 
$
2,588

 
0.51
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Funds
 
 
 
 
 
0.54
%
 
 
 
 
 
0.49
%
 
 
 
 
 
0.37
%
Net Interest Income
 
 
 
$
28,142

 
 
 
 
 
$
26,261

 
 
 
 
 
$
26,106

 
 
Net Interest Margin
 
 
 
 
 
3.77
%
 
 
 
 
 
3.66
%
 
 
 
 
 
3.78
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




    

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 14

During the quarter ended June 30, 2018, net interest income totaled $27,469,000, which represented an increase of $1,859,000, or 7%, from the quarter ended March 31, 2018 net interest income of $25,610,000 and an increase of $2,656,000, or 11%, compared with the quarter ended June 30, 2017 net interest income of $24,813,000. The increased level of net interest income during the second quarter of 2018 compared with the both the first quarter of 2018 and second quarter of 2017 was driven primarily by a higher level of average earning assets and an improved net interest margin. The increased level of average earning assets in the second quarter of 2018 was driven by organic loan growth from the Company's existing branch footprint combined with growth related to the branch acquisition completed during the quarter.

The tax equivalent net interest margin for the quarter ended June 30, 2018 was 3.77% compared with 3.66% in the first quarter of 2018 and 3.83% in the second quarter of 2017. The lower federal income tax rates during 2018 had an approximately 9 basis point negative impact on the Company's net interest margin in both the first and second quarters of 2018 compared with 2017. The improvement in the net interest margin, excluding the impact of the lower federal tax rates, during second quarter of 2018 compared to both comparative periods was related to the positive impact on earning asset yields caused by the continued increase in short-term market interest rates partially offset by an increased cost of funds also related to the increased short-term interest rates.

Accretion of loan discounts on acquired loans contributed approximately 7 basis points to the net interest margin on an annualized basis in the second quarter of 2018, 4 basis points in the first quarter of 2018, and 10 basis points in the second quarter of 2017.

During the quarter ended June 30, 2018, the Company recorded a provision for loan loss of $1,220,000 compared with a provision for loan loss of $350,000 for both the first quarter of 2018 and the second quarter of 2017. The increase in provision during the second quarter of 2018 was largely related to allocations for classified loans and qualitative factors related to past due loans. 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 June 30, 2018, non-interest income totaled $8,882,000, a decrease of $610,000, or 6%, compared with the quarter ended March 31, 2018, and an increase of $1,085,000, or 14%, compared with the second 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


7 of 14

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Income
 
6/30/2018
 
3/31/2018
 
6/30/2017
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Trust and Investment Product Fees
 
$
1,677

 
$
1,773

 
$
1,350

Service Charges on Deposit Accounts
 
1,643

 
1,471

 
1,478

Insurance Revenues
 
1,696

 
2,930

 
1,744

Company Owned Life Insurance
 
260

 
312

 
480

Interchange Fee Income
 
1,714

 
1,482

 
1,156

Other Operating Income
 
913

 
604

 
630

     Subtotal
 
7,903

 
8,572

 
6,838

Net Gains on Loans
 
905

 
650

 
959

Net Gains on Securities
 
74

 
270

 

Total Non-interest Income
 
$
8,882

 
$
9,492

 
$
7,797

 
 
 
 
 
 
 

Trust and investment product fees declined $96,000, or 5%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $327,000, or 24%, compared with the second quarter of 2017. The increase in the second quarter of 2018 compared with the second quarter of 2017 was largely attributable to increased assets under management in the Company's wealth advisory group.

Insurance revenues declined $1,234,000, or 42%, during the quarter ended June 30, 2018, compared with the first quarter of 2018 and declined $48,000, or 3%, compared with the second quarter of 2017. The decline during the second quarter of 2018 compared with the first quarter of 2018 was primarily due to contingency revenue. Contingency revenue during the first quarter of 2018 totaled $1,218,000 compared with no contingency revenue during the second quarter of 2018 or second quarter of 2017. The fluctuation in contingency revenue is a normal course of business variance and is reflective of claims and loss experience with insurance carriers that the Company represents through its property and casualty insurance agency. Typically, the majority of contingency revenue is recognized during the first quarter of the year.

Interchange fees increased $232,000, or 16%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $558,000, or 48%, compared with the second quarter of 2017. The increase during the second quarter of 2018 compared with the first quarter of 2018 was largely attributable to increased card utilization by customers. The increase during the second quarter of 2018 compared with the second quarter of 2017 was attributable to increased card utilization by customers and also attributable to the adoption of the new revenue recognition standard effective January 1, 2018. While the adoption of the standard did not have



    

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 14

a significant impact on the Company's financial results, the recording of revenue gross versus net of certain expenses, in accordance with the standard, did result in the reclassification of some expenses associated with the interchange fee revenue during the first half of 2018.

Other operating income increased $309,000, or 51%, during the quarter ended June 30, 2018 compared with the first quarter of 2018 and increased $283,000, or 45%, compared with the second quarter of 2017. The increase in the second quarter of 2018 compared with both comparative periods was largely attributable to increased merchant card services revenue.

Net gains on sales of loans increased $255,000, or 39%, during the second quarter of 2018 compared with the first quarter of 2018 and declined $54,000, or 6%, compared with the second quarter of 2017. Loan sales totaled $32.1 million during the second quarter of 2018, compared with $29.9 million during the first quarter of 2018 and $29.8 million during the second quarter of 2017.

The Company realized $74,000 in gains on sales of securities during the second quarter of 2018 compared with $270,000 during the first quarter of 2018 and no gains in the second quarter of 2017.

During the quarter ended June 30, 2018, non-interest expense totaled $21,708,000, an increase of $1,253,000, or 6%, compared with the quarter ended March 31, 2018, and an increase of $2,712,000, or 14%, compared with the second quarter of 2017. The second quarter of 2018 included acquisition related expenses of a non-recurring nature of approximately $904,000 (approximately $727,000 or $0.03 per share, on an after-tax basis) for the five-branch acquisition that closed on May 18, 2018 and the pending acquisition of First Security, Inc. that was also announced in May 2018. The first quarter of 2018 included acquisition costs of approximately $186,000 (approximately $139,000 or less than $0.01 per share on an after-tax basis) related to these transactions.





    

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 14

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Expense
 
6/30/2018
 
3/31/2018
 
6/30/2017
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and Employee Benefits
 
$
12,019

 
$
12,126

 
$
11,460

Occupancy, Furniture and Equipment Expense
 
2,527

 
2,409

 
2,224

FDIC Premiums
 
238

 
237

 
232

Data Processing Fees
 
1,398

 
1,127

 
1,044

Professional Fees
 
1,361

 
871

 
913

Advertising and Promotion
 
857

 
701

 
630

Intangible Amortization
 
306

 
206

 
242

Other Operating Expenses
 
3,002

 
2,778

 
2,251

Total Non-interest Expense
 
$
21,708

 
$
20,455

 
$
18,996

 
 
 
 
 
 
 

Salaries and benefits declined $107,000, or just under 1%, during the quarter ended June 30, 2018 compared with the first quarter of 2018 and increased $559,000, or 5%, compared with the second quarter of 2017. The increase in salaries and benefits during the second quarter of 2018 compared with the second quarter of 2017 was primarily attributable to an increased number of full-time equivalent employees.
 
Occupany, furniture and equipment expense increased $118,000, or 5%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $303,000, or 14%, compared to the second quarter of 2017. The increase during the second quarter of 2018 compared to both the first quarter of 2018 and the second quarter of 2017 was primarily due to operating costs related to the acquisition of the five banking branches in the Columbus and Greensburg, Indiana markets as well as other facilities the Company has placed into service over the past twelve months.

Data processing fees increased $271,000, or 24%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $354,000, or 34%, compared to the second quarter of 2017. The increase during the second quarter of 2018 compared with all periods presented was largely related to conversion costs associated with the aforementioned branch acquisition.
 
Professional fees increased $490,000, or 56%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $448,000, or 49%, compared to the second quarter of 2017. The increase during the second quarter of 2018 compared with all periods presented was largely related to professional fees associated



    

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 14

with the the five-branch acquisition that closed on May 18, 2018 and the pending acquisition of First Security, Inc. that was also announced in May 2018.

Advertising and promotion expense increased $156,000, or 22%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $227,000, or 36%, compared to the second quarter of 2017. The increase during the second quarter of 2018 compared to all periods presented was the result of the branch acquisition completed during the second quarter of 2018 and increased contributions throughout the Company's market areas.

Other operating expenses increased $224,000, or 8%, during the second quarter of 2018 compared with the first quarter of 2018 and increased $751,000, or 33%, compared with the second quarter of 2017. The increase in the second quarter of 2018 compared with the second quarter of 2017 was largely attributable to the adoption of the revenue recognition standard effective January 1, 2018 and the reclassification of expense as previously discussed.

The Company’s effective income tax rate was 17.3% during the three months ended June 30, 2018 compared with an effective tax rate of 17.4% during the first quarter of 2018 and 25.8% during the second quarter of 2017. The Company's effective tax rate and provision for income tax was positively impacted during the first two quarters of 2018 by the reduction of federal income tax rates from a statutory rate of 35% to 21% effective January 1, 2018 related to the federal tax reform legislation enacted during the fourth quarter of 2017.

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 58 banking offices in 20 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


11 of 14

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; the expected impact of U.S. tax regulations passed in December 2017; 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 (the "Dodd-Frank Act") and the Federal Deposit Insurance Act and other possible legislative and regulatory actions and reforms; impacts resulting from possible amendments or revisions to the Dodd-Frank Act and the regulations promulgated thereunder, or to Consumer Financial Protection Bureau rules and regulations; 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
 
 
 
 
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
ASSETS
 
 
 
 
 
     Cash and Due from Banks
$
60,244

 
$
32,023

 
$
36,833

     Short-term Investments
11,038

 
8,187

 
7,204

     Investment Securities
739,834

 
737,957

 
740,578

 
 
 
 
 
 
     Loans Held-for-Sale
9,552

 
6,628

 
9,844

 
 
 
 
 
 
     Loans, Net of Unearned Income
2,318,510

 
2,150,546

 
2,031,743

     Allowance for Loan Losses
(15,637
)
 
(14,460
)
 
(15,320
)
        Net Loans
2,302,873

 
2,136,086

 
2,016,423

 
 
 
 
 
 
     Stock in FHLB and Other Restricted Stock
13,048

 
13,048

 
13,048

     Premises and Equipment
66,641

 
58,024

 
49,249

     Goodwill and Other Intangible Assets
65,978

 
55,954

 
56,607

     Other Assets
75,336

 
77,111

 
75,017

   TOTAL ASSETS
$
3,344,544

 
$
3,125,018

 
$
3,004,803

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
     Non-interest-bearing Demand Deposits
$
629,724

 
$
599,374

 
$
557,535

     Interest-bearing Demand, Savings, and Money Market Accounts
1,611,583

 
1,465,150

 
1,453,512

     Time Deposits
360,133

 
402,597

 
352,274

        Total Deposits
2,601,440

 
2,467,121

 
2,363,321

 
 
 
 
 
 
     Borrowings
354,803

 
274,473

 
263,469

     Other Liabilities
17,761

 
19,419

 
23,059

   TOTAL LIABILITIES
2,974,004

 
2,761,013

 
2,649,849

 
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
 
     Common Stock and Surplus
188,885

 
188,501

 
187,613

     Retained Earnings
194,994

 
187,342

 
163,181

     Accumulated Other Comprehensive Income (Loss)
(13,339
)
 
(11,838
)
 
4,160

SHAREHOLDERS' EQUITY
370,540

 
364,005

 
354,954

 
 
 
 
 
 
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
3,344,544

 
$
3,125,018

 
$
3,004,803

 
 
 
 
 
 
END OF PERIOD SHARES OUTSTANDING
22,967,898

 
22,968,813

 
22,929,627

 
 
 
 
 
 
TANGIBLE BOOK VALUE PER SHARE (1)
$
13.26

 
$
13.41

 
$
13.01

 
 
 
 
 
 
 
(1) 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
 
Six Months Ended
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Interest and Fees on Loans
$
26,308

 
$
23,950

 
$
22,602

 
$
50,258

 
$
44,864

   Interest on Short-term Investments
54

 
56

 
27

 
110

 
54

   Interest and Dividends on Investment Securities
5,171

 
5,139

 
4,772

 
10,310

 
9,516

  TOTAL INTEREST INCOME
31,533

 
29,145

 
27,401

 
60,678

 
54,434

 
 
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Interest on Deposits
2,848

 
2,283

 
1,626

 
5,131

 
3,069

   Interest on Borrowings
1,216

 
1,252

 
962

 
2,468

 
1,827

  TOTAL INTEREST EXPENSE
4,064

 
3,535

 
2,588

 
7,599

 
4,896

 
 
 
 
 
 
 
 
 
 
 
   NET INTEREST INCOME
27,469

 
25,610

 
24,813

 
53,079

 
49,538

   Provision for Loan Losses
1,220

 
350

 
350

 
1,570

 
850

   NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
26,249

 
25,260

 
24,463

 
51,509

 
48,688

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Net Gain on Sales of Loans
905

 
650

 
959

 
1,555

 
1,646

   Net Gain on Securities
74

 
270

 

 
344

 

   Other Non-interest Income
7,903

 
8,572

 
6,838

 
16,475

 
14,339

  TOTAL NON-INTEREST INCOME
8,882

 
9,492

 
7,797

 
18,374

 
15,985

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Salaries and Benefits
12,019

 
12,126

 
11,460

 
24,145

 
22,904

   Other Non-interest Expenses
9,689

 
8,329

 
7,536

 
18,018

 
15,128

  TOTAL NON-INTEREST EXPENSE
21,708

 
20,455

 
18,996

 
42,163

 
38,032

 
 
 
 
 
 
 
 
 
 
 
   Income before Income Taxes
13,423

 
14,297

 
13,264

 
27,720

 
26,641

   Income Tax Expense
2,326

 
2,484

 
3,425

 
4,810

 
7,246

 
 
 
 
 
 
 
 
 
 
 
NET INCOME
$
11,097

 
$
11,813

 
$
9,839

 
$
22,910

 
$
19,395

 
 
 
 
 
 
 
 
 
 
 
BASIC EARNINGS PER SHARE
$
0.48

 
$
0.51

 
$
0.43

 
$
1.00

 
$
0.85

DILUTED EARNINGS PER SHARE
$
0.48

 
$
0.51

 
$
0.43

 
$
1.00

 
$
0.85

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
22,968,178

 
22,940,402

 
22,929,426

 
22,954,367

 
22,919,094

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
22,968,178

 
22,940,402

 
22,929,426

 
22,954,367

 
22,919,094

 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 




GERMAN AMERICAN BANCORP, INC.
(unaudited, dollars in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
June 30,
 
 
 
2018
 
2018
 
2017
 
2018
 
2017
EARNINGS PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
 
 
Annualized Return on Average Assets
 
1.38
%
 
1.51
%
 
1.32
%
 
1.44
%
 
1.32
%
 
Annualized Return on Average Equity
 
12.15
%
 
13.00
%
 
11.34
%
 
12.57
%
 
11.36
%
 
Net Interest Margin
 
3.77
%
 
3.66
%
 
3.78
%
 
3.71
%
 
3.82
%
 
Efficiency Ratio (1)
 
58.63
%
 
57.21
%
 
56.03
%
 
57.93
%
 
55.86
%
 
Net Overhead Expense to Average Earning Assets (2)
 
1.71
%
 
1.51
%
 
1.62
%
 
1.61
%
 
1.61
%
 
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY RATIOS
 
 
 
 
 
 
 
 
 
 
 
Annualized Net Charge-offs to Average Loans
 
0.01
%
 
0.30
%
 
0.04
%
 
0.15
%
 
0.03
%
 
Allowance for Loan Losses to Period End Loans
 
0.67
%
 
0.67
%
 
0.75
%
 
 
 
 
 
Non-performing Assets to Period End Assets
 
0.28
%
 
0.34
%
 
0.15
%
 
 
 
 
 
Non-performing Loans to Period End Loans
 
0.41
%
 
0.49
%
 
0.16
%
 
 
 
 
 
Loans 30-89 Days Past Due to Period End Loans
 
0.52
%
 
0.33
%
 
0.26
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA
 
 
 
 
 
 
 
 
 
 
 
Average Assets
 
$
3,226,091

 
$
3,120,971

 
$
2,970,745

 
$
3,173,821

 
$
2,948,543

 
Average Earning Assets
 
$
2,994,278

 
$
2,901,849

 
$
2,768,140

 
$
2,948,319

 
$
2,743,840

 
Average Total Loans
 
$
2,229,972

 
$
2,139,704

 
$
2,011,518

 
$
2,185,087

 
$
1,993,283

 
Average Demand Deposits
 
$
625,158

 
$
585,432

 
$
560,763

 
$
605,405

 
$
559,345

 
Average Interest Bearing Liabilities
 
$
2,217,198

 
$
2,150,544

 
$
2,041,129

 
$
2,184,055

 
$
2,027,285

 
Average Equity
 
$
365,197

 
$
363,579

 
$
347,035

 
$
364,392

 
$
341,342

 
 
 
 
 
 
 
 
 
 
 
 
 
Period End Non-performing Assets (3)
 
$
9,527

 
$
10,652

 
$
4,448

 
 
 
 
 
Period End Non-performing Loans (4)
 
$
9,487

 
$
10,584

 
$
3,159

 
 
 
 
 
Period End Loans 30-89 Days Past Due (5)
 
$
12,146

 
$
7,013

 
$
5,238

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax Equivalent Net Interest Income
 
$
28,142

 
$
26,261

 
$
26,106

 
$
54,403

 
$
52,099

 
Net Charge-offs during Period
 
$
43

 
$
1,584

 
$
196

 
$
1,627

 
$
338

 
 
 
 
 
 
 
 
 
 
 
 
(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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