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Section 1: 8-K (8-K)

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false0000714395 0000714395 2020-07-27 2020-07-27


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 27, 2020

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
 
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 []
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange
on which registered
Common Stock, no par value
 
GABC
 
NASDAQ Global Select Market





Item 2.02. Results of Operations and Financial Condition.

On July 27, 2020, German American Bancorp, Inc. (the “Company”) issued a press release announcing its results for the quarter ended June 30, 2020, and making other disclosures. The press release (including the accompanying unaudited consolidated financial statements as of and for the quarter ended June 30, 2020, 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 furnished as Exhibit 99.1 to this report, the Company’s Board of Directors has declared a cash dividend of $0.19 per share which will be payable on August 20, 2020, to shareholders of record as of August 10, 2020.

Item 9.01. Financial Statements and Exhibits.

(d)
Exhibits
 
 
 
 
 
 
 
Exhibit No.
 
Description
 
 
 
 
 
 
Press release, dated July 27, 2020, issued by German American Bancorp, Inc.

 
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).



* * * * * *








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 27, 2020
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


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July 27, 2020
GERMAN AMERICAN BANCORP, INC. (GABC) REPORTS SECOND QUARTER 2020 EARNINGS


Jasper, Indiana: July 27, 2020 -- German American Bancorp, Inc. (Nasdaq: GABC) reported quarterly earnings of $14.3 million, or $0.54 per share, for the quarter ending on June 30, 2020. The second quarter 2020 performance compared to first quarter 2020 net income of $12.5 million, or $0.47 per share, and to second quarter 2019 net income of $15.3 million, or $0.61 per share. The operating results comparison was reflective of the inclusion of the acquisition of Citizens First Corporation of Bowling Green, Kentucky on July 1, 2019.

End-of-period loans, as of June 30, 2020, were approximately $3.3 billion, which represented an increase of $253 million, or approximately 8%, from end-of-period loans as of March 31, 2020 and an increase of $550 million, or approximately 20%, from end of period loans as of June 30, 2019. Total deposits at June 30, 2020 of approximately $4.0 billion increased by $501 million, or approximately 14%, relative to first quarter 2020 end-of-period total deposits and an increase of $851 million, or approximately 27%, as compared to second quarter end-of-period deposits in the prior year. Approximately 50% of the deposit growth during both periods of comparison occurred within the extremely valuable non-interest bearing demand deposit category.

The increase in end-of-period loans and deposits as of June 30, 2020, as compared to March 31, 2020, was largely related to both the origination of approximately $350 million in Paycheck Protection Program (“PPP”) loans to nearly 3,000 local business clients, supporting the retention of over 40,000 jobs throughout our market area, and the deposit of those funds into business operating accounts. The Company also experienced an overall significant inflow of other customer deposits during the second quarter of 2020 contributing to the extraordinary level of quarter-over-quarter deposit growth. The increase in year-over-year period end loans and deposits was related to these same factors, as well as to the acquisition of Citizens First on July 1, 2019.

Commenting on the Company’s second quarter performance, Mark A. Schroeder, German American’s Chairman & CEO, stated, "We’re pleased to report another period of solid profitability during the second quarter of 2020, producing $14.3 million, or $0.54 per share, in earnings for the quarter, which was inclusive of a $5.9 million provision for credit losses. This level of profitability is reflected in second quarter-end 2020 tangible book value per share of $17.44, which increased by 11%, on an annualized basis, from the prior quarter-end and by 13% from second quarter-end 2019 tangible book value per share.

Certainly, the second quarter saw a period of unprecedented organic growth of both loans and deposits for our Company in the face of operating with a number of constraints related to the COVID-19 pandemic. I’m extremely proud of our German American team of financial professionals, who, in the face of these challenges, delivered solid quarterly earnings performance and tangible book value per share growth, originated a record



    

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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level of commercial and residential mortgage loans and generated a record level of deposit growth. It’s only due to their extraordinary level of commitment and dedication that we were able accomplish all of this under extremely challenging operating conditions.”

Schroeder continued, “Our financial results for the second quarter of 2020 reflect the effects of the combination of stressed economic conditions and net interest margin pressures alongside the positive impact of record levels of loans and deposits. As we plan for the continuation of a period of economic uncertainty, we also continued to build our loan loss reserve during the second quarter, increasing the allowance for credit losses to $42.4 million (in addition to net fair value adjustments on acquired loans of $9.8 million). This represents a strong 1.30% of total loans and 1.45% excluding PPP loans from total loans. In this period of uncertainty, it’s prudent to maintain our disciplined credit culture, as evidenced by the Company’s improved credit metrics, while putting funds aside for the possibility of future credit challenges.”

The Company also announced its Board of Directors declared a regular quarterly cash dividend of $0.19 per share, which will be payable on August 20, 2020 to shareholders of record as of August 10, 2020.


COVID-19 Pandemic Loan Information

The Company is participating in the Paycheck Protection Program (“PPP”) for loans provided through the Small Business Administration (“SBA”), as established under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). Under this program, the Company has lent funds primarily to its existing loan and/or deposit customers, based on a pre-determined SBA-developed formula, intended to incentivize small business owners to retain their employees. These loans carry a customer interest rate of 1.00% plus a processing fee that varies depending on the balance of the loan at origination and have a two-year or five-year maturity, depending on when the loan was made. The vast majority of the Company's PPP loans have two-year maturities. As of June 30, 2020, the Company has committed approximately $349.5 million, on 2,998 PPP loan relationships, under this program, with gross processing fees estimated to total approximately $12.6 million ($12.0 million net of processing costs).

In response to requests from borrowers who have experienced pandemic-related business or personal cash flow interruptions, and in accordance with recently issued regulatory guidance, the Company has made short-term loan modifications involving both interest only and full payment deferrals. As of June 30, 2020 the following payment modifications have been made:



    

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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Type of Loans
Number of Loans
Loan Balance
% of Loan Type (excludes PPP Loans)
(dollars in thousands)
 
 
 
Commercial & Industrial Loans
257

$
54,300

10.8
%
Commercial Real Estate Loans
392

224,664

15.3
%
Agricultural Loans
8

1,175

0.3
%
Consumer Loans
80

1,115

0.4
%
Residential Mortgage Loans
110

23,103

8.2
%
Total
847

$
304,357

10.4
%

To date, the Company has not experienced significant customer requests for additional loan modifications, within the commercial and industrial loan and commercial real estate loan portfolios, after the initial short-term modifications granted for those customers during the second quarter of 2020.

The Company tracks lending exposure by industry classification to determine potential risk associated with industry concentrations, if any, that could lead to additional credit loss exposure. As a result of the COVID-19 pandemic, the Company has initially identified loan segments that could represent a potentially higher level of credit risk, as many of these customers may have incurred a significant negative impact to their businesses as a result of governmental stay-at-home orders and travel restrictions. At June 30, 2020, the Company had the following exposure to these potentially sensitive COVID-19 identified loan segments:
Industry Segment
Number of Loans
Outstanding Balance
% of Total Loans
(dollars in thousands)
 
 
 
Lodging / Hotels
51
$
130,112

4.0
%
Student Housing
107
94,226

2.9
%
Retail Shopping / Strip Centers
61
93,172

2.9
%
Restaurants
190
50,724

1.6
%

Balance Sheet Highlights

Total assets for the Company totaled $4.851 billion at June 30, 2020, representing an increase of $527.2 million, or 49% on an annualized basis, compared with March 31, 2020 and an increase of $880.3 million, or 22%, compared with June 30, 2019. The increase in total assets during the second quarter of 2020 compared with March 31, 2020 has been impacted by the Company's participation in the PPP and by significant growth of deposits during the second quarter of 2020. During the second quarter of 2020 compared with March 31, 2020,



    

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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federal funds sold and other short-term investments increased by $183.4 million and the Company's securities available for sale portfolio increased by $86.5 million. These increases were largely driven by the increased level of deposits during the second quarter of 2020. In addition, loans increased $252.5 million as of the end of the second quarter of 2020 compared with March 31, 2020 impacted primarily by the Company's participation in the PPP.

The increase in total assets as of June 30, 2020 compared to a year ago was was also driven by the acquisition of Citizens First Corporation ("Citizens First"). On July 1, 2019, the Company completed its acquisition of Citizens First and its subsidiary bank, Citizen First Bank, Inc. Citizens First, headquartered in Bowling Green, Kentucky, operated eight retail banking offices through Citizens First Bank, Inc. in Barren, Hart, Simpson and Warren Counties in Kentucky.

June 30, 2020 total loans increased $252.5 million, or 33% on an annualized basis, compared with March 31, 2020 and increased $550.3 million, or 20%, compared with June 30, 2019. The increase in loans during the second quarter of 2020 compared with the first quarter of 2020 was primarily the result in the Company's participation in the PPP. Excluding the $349.5 million in PPP loans ($338.7 million net of deferred fees) at June 30, 2020, total loans declined by $86.2 million, or 11% on an annualized basis, during the second quarter of 2020 compared with the quarter ended March 31, 2020. The decline in total loans excluding the PPP loans was impacted by continued elevated pay-offs within the commercial real estate loan portfolio, reduced line utilization within the commercial loan portfolio partially attributable to the PPP loan originations during the second quarter of 2020, and continued pay-downs in the Company's residential loan portfolio related to the current interest rate environment. The increase in outstanding loans as of June 30, 2020 compared to a year ago was largely attributable to PPP loans and to the acquisition of Citizens First.
 
 
 
 
 
 
 
End of Period Loan Balances
 
6/30/2020
 
3/31/2020
 
6/30/2019
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial Loans
 
$
852,416

 
$
565,780

 
$
554,290

Commercial Real Estate Loans
 
1,473,234

 
1,489,353

 
1,213,579

Agricultural Loans
 
373,483

 
366,286

 
364,116

Consumer Loans
 
291,555

 
303,447

 
280,963

Residential Mortgage Loans
 
280,246

 
293,550

 
307,726

 
 
$
3,270,934

 
$
3,018,416

 
$
2,720,674

 
 
 
 
 
 
 

The Company’s allowance for credit losses totaled $42.4 million at June 30, 2020 compared to $36.6 million at March 31, 2020 and $16.2 million at June 30, 2019. The allowance for credit losses represented 1.30% of



    

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-end loans at June 30, 2020 compared with 1.22% of period-end loans at March 31, 2020 and 0.60% of period-end loans at June 30, 2019.

The Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("CECL") on January 1, 2020. As a result, the Company recognized a one-time cumulative adjustment to the allowance for credit losses of $15.7 million. The increase was primarily related to the Company's acquired loan portfolio which totaled approximately $851.1 million at the time of adoption. The increase included $6.9 million in non-accretable credit marks allocated to purchased credit deteriorated loans which were grossed up between loans and the allowance for credit losses. Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of June 30, 2020, the Company held net discounts on acquired loans of $9.8 million.

The allowance for credit losses increased during the quarter ended June 30, 2020, as a result of the Company recording a $5.9 million provision for credit losses while recording net charge-offs of approximately $110,000. This followed an increase in the allowance for credit losses during the quarter ended March 31, 2020, that resulted from the Company recording a $5.2 million provision for credit losses while recording net charge-offs of approximately $440,000. The provision for credit losses was elevated in the first and second quarters of 2020 primarily due to the recent developments related to the COVID-19 pandemic and the resulting impact on the economic assumptions used in the CECL model.

Non-performing assets totaled $19.6 million at June 30, 2020 compared to $19.1 million at March 31, 2020 and $12.5 million at June 30, 2019. Non-performing assets represented 0.40% of total assets at June 30, 2020, 0.44% at March 31, 2020, and 0.32% at June 30, 2019. Non-performing loans totaled $19.1 million at June 30, 2020 compared to $18.5 million at March 31, 2020 and $11.9 million at June 30, 2019. Non-performing loans represented 0.59% of total loans at June 30, 2020 compared to 0.61% at March 31, 2020 and 0.44% at June 30, 2019. The increase in the level of non-performing assets and non-performing loans at June 30, 2020 compared with June 30, 2019 was largely attributable to the gross-up of purchased credit deteriorated loans upon the adoption of the CECL standard during 2020 and the acquisition of Citizens First.



    

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 16

 
 
 
 
 
 
Non-performing Assets
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
6/30/2020
 
3/31/2020
 
6/30/2019
Non-Accrual Loans
$
16,183

 
$
18,099

 
$
10,929

Past Due Loans (90 days or more)
2,948

 
355

 
959

       Total Non-Performing Loans
19,131

 
18,454

 
11,888

Other Real Estate
425

 
625

 
635

       Total Non-Performing Assets
$
19,556

 
$
19,079

 
$
12,523

 
 
 
 
 
 
Restructured Loans
$
114

 
$
116

 
$
118

 
 
 
 
 
 

June 30, 2020 total deposits increased $500.9 million, or 58% on an annualized basis, compared to March 31, 2020 and increased $850.6 million, or 27%, compared with June 30, 2019. The increase in total deposits at June 30, 2020 compared with the end of the first quarter of 2020 was partially attributable the Company's participation in the PPP and a seasonal increase in public fund operating deposits as well as an overall inflow of customer deposits during the second quarter of 2020. The increase in total deposits at June 30, 2020 compared with June 30, 2019 was impacted by participation in the PPP and inflows of customer deposits during the second quarter of 2020 as well as the acquisition of Citizens First.
 
 
 
 
 
 
 
 
End of Period Deposit Balances
 
6/30/2020
 
3/31/2020
 
6/30/2019
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing Demand Deposits
 
$
1,139,928

 
$
869,847

 
$
725,367

IB Demand, Savings, and MMDA Accounts
 
2,267,092

 
2,008,757

 
1,805,694

Time Deposits < $100,000
 
293,059

 
303,519

 
248,744

Time Deposits > $100,000
 
279,354

 
296,391

 
349,027

 
 
$
3,979,433

 
$
3,478,514

 
$
3,128,832

 
 
 
 
 
 
 

Results of Operations Highlights – Quarter ended June 30, 2020

Net income for the quarter ended June 30, 2020 totaled $14,255,000, or $0.54 per share, an increase of 15% on a per share basis compared with the first quarter 2020 net income of $12,472,000, or $0.47 per share, and a decline of 11% on a per share basis compared with the second quarter 2019 net income of $15,271,000, or $0.61 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


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Summary Average Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Tax-equivalent basis / dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter Ended
 
 Quarter Ended
 
 Quarter Ended
 
 
June 30, 2020
 
March 31, 2020
 
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 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
 
$
239,164

 
$
84

 
0.14
%
 
$
45,687

 
$
158

 
1.39
%
 
$
21,257

 
$
85

 
1.62
%
Securities
 
897,193

 
6,087

 
2.71
%
 
869,969

 
6,205

 
2.85
%
 
842,282

 
6,529

 
3.10
%
Loans and Leases
 
3,253,169

 
38,154

 
4.71
%
 
3,059,398

 
37,936

 
4.98
%
 
2,721,630

 
35,135

 
5.18
%
Total Interest Earning Assets
 
$
4,389,526

 
$
44,325

 
4.06
%
 
$
3,975,054

 
$
44,299

 
4.48
%
 
$
3,585,169

 
$
41,749

 
4.67
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Deposit Accounts
 
$
1,074,739

 
 
 
 
 
$
847,891

 
 
 
 
 
$
715,681

 
 
 
 
IB Demand, Savings, and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        MMDA Accounts
 
$
2,220,549

 
$
1,535

 
0.28
%
 
$
1,993,171

 
$
2,956

 
0.60
%
 
$
1,797,228

 
$
2,945

 
0.66
%
Time Deposits
 
586,179

 
2,208

 
1.51
%
 
638,460

 
2,701

 
1.70
%
 
631,174

 
2,814

 
1.79
%
FHLB Advances and Other Borrowings
 
227,562

 
1,339

 
2.37
%
 
236,148

 
1,658

 
2.82
%
 
246,229

 
1,636

 
2.67
%
Total Interest-Bearing Liabilities
 
$
3,034,290

 
$
5,082

 
0.67
%
 
$
2,867,779

 
$
7,315

 
1.03
%
 
$
2,674,631

 
$
7,395

 
1.11
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Funds
 
 
 
 
 
0.47
%
 
 
 
 
 
0.74
%
 
 
 
 
 
0.83
%
Net Interest Income
 
 
 
$
39,243

 
 
 
 
 
$
36,984

 
 
 
 
 
$
34,354

 
 
Net Interest Margin
 
 
 
 
 
3.59
%
 
 
 
 
 
3.74
%
 
 
 
 
 
3.84
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

During the second quarter of 2020, net interest income totaled $38,459,000, an increase of $2,203,000, or 6%, compared to the first quarter of 2020 net interest income of $36,256,000 and an increase of $4,818,000, or 14%, compared to the second quarter of 2019 net interest income of $33,641,000.

The increase in net interest income during the second quarter of 2020 compared with the first quarter of 2020 was largely attributable to an increased level of loans related to the PPP, with a corresponding increase in



    

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 16

interest income and fees. The average balance of PPP loans during the second quarter of 2020 was approximately $276 million while the net fees recognized through interest income on those loans totaled approximately $1.1 million.

The increased level of net interest income during the second quarter of 2020 compared with the second quarter of 2019 was primarily the result of of the acquisition Citizens First and participation in the PPP.

The tax equivalent net interest margin for the quarter ended June 30, 2020 was 3.59% compared with 3.74% in the first quarter of 2020 and 3.84% in the second quarter of 2019. The lower net interest margin during the second quarter of 2020 compared with both the first quarter of 2020 and the second quarter of 2019 was attributable to lower market interest rates, excess liquidity on the balance sheet that resulted from significant deposit growth during the second quarter of 2020 and the 1% interest rate applicable to the PPP loans. Accretion of loan discounts on acquired loans contributed approximately 19 basis points to the net interest margin on an annualized basis in the second quarter of 2020, 14 basis points in the first quarter of 2020 and 12 basis points in the second quarter of 2019.

During the quarter ended June 30, 2020, the Company recorded a provision for credit loss of $5,900,000 compared with a provision for loan loss of $5,150,000 in the first quarter of 2020 and compared with a provision for loan loss of $250,000 during the second quarter of 2019. The increase in the provision for credit losses compared to both the first quarter of 2020 and the second quarter of 2019 was primarily due to the developments related to the COVID-19 pandemic and the resulting impact on the economic assumptions used in the CECL model.

Net charge-offs totaled $110,000 or 1 basis point on an annualized basis of average loans outstanding during the second quarter of 2020, compared with $440,000 or 6 basis points on an annualized basis of average loans during the first quarter of 2020 and compared with $254,000 or 4 basis points of average loans during the second quarter of 2019.

During the quarter ended June 30, 2020, non-interest income totaled $12,423,000, a decline of $1,658,000, or 12%, compared with the first quarter of 2020 and an increase of $1,914,000, or 18%, compared with the second quarter of 2019.




    

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 16

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Income
 
6/30/2020
 
3/31/2020
 
6/30/2019
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Trust and Investment Product Fees
 
$
1,867

 
$
2,031

 
$
1,913

Service Charges on Deposit Accounts
 
1,365

 
2,237

 
2,024

Insurance Revenues
 
1,830

 
3,229

 
1,929

Company Owned Life Insurance
 
356

 
1,222

 
304

Interchange Fee Income
 
2,476

 
2,482

 
2,332

Other Operating Income
 
882

 
427

 
461

     Subtotal
 
8,776

 
11,628

 
8,963

Net Gains on Loans
 
2,654

 
1,863

 
1,030

Net Gains on Securities
 
993

 
590

 
516

Total Non-interest Income
 
$
12,423

 
$
14,081

 
$
10,509

 
 
 
 
 
 
 

Service charges on deposit accounts declined $872,000, or 39%, during the second quarter of 2020 compared with the first quarter of 2020 and declined $659,000, or 33%, compared with the second quarter of 2019. The decline during the second quarter of 2020 compared with the both the first quarter of 2020 and the second quarter of 2019 was largely related to the economic impacts of the COVID-19 pandemic and resulting change in deposit customer activity.

Insurance revenues declined $1,399,000, or 43%, during the quarter ended June 30, 2020, compared with the first quarter of 2020 and declined $99,000, or 5%, compared with the second quarter of 2019. The decline during the second quarter of 2020 compared with the first quarter of 2020 was primarily due to contingency revenue. Contingency revenue during the first quarter of 2020 totaled $1,319,000 compared with no contingency revenue during the second quarter of 2020. Contingency revenue 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.

Company owned life insurance revenue declined $866,000, or 71%, during the quarter ended June 30, 2020, compared with the first quarter of 2020 and increased $52,000, or 17%, compared with the second quarter of 2019. The decline in the second quarter of 2020 compared with the first quarter of 2020 was largely related to death benefits of $838,000 received from life insurance policies during the first quarter of 2020.





    

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 16

Other operating income increased $455,000, or 107%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $421,000, or 91%, compared with the second quarter of 2019. The increase during the second quarter of 2020 compared with the first quarter of 2020 was largely attributable to lower fair value adjustments associated with interest rate swap transactions with loan customers. The increase during the second quarter of 2020 compared with the second quarter of 2019 was largely attributable to lower fair value adjustments on interest rate swap transactions and the acquisition of Citizens First which was completed on July 1, 2019.

Net gains on sales of loans increased $791,000, or 42%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $1,624,000, or 158%, compared with the second quarter of 2019. The increase during the second quarter of 2020 compared with both the first quarter of 2020 and the second quarter of 2019 was generally attributable to a higher sales volume, higher pricing levels on loans sold and an increased level of commitments to originate loans which resulted in a higher fair value adjustment on those commitments. Loan sales totaled $79.7 million during the second quarter of 2020, compared with $56.2 million during the first quarter of 2020 and $39.6 million during the second quarter of 2019.

The Company realized $993,000 in gains on sales of securities during the second quarter of 2020 compared with $590,000 during the first quarter of 2020 and $516,000 during the second quarter of 2019. The sales of securities in all periods was done as part of modest shifts in the allocations within the securities portfolio.

During the quarter ended June 30, 2020, non-interest expense totaled $28,088,000, a decline of $2,240,000, or 7%, compared with the first quarter of 2020, and an increase of $2,470,000, or 10%, compared with the second quarter of 2019.



    

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 16

 
 
 
 
 
 
 
 
 
Quarter Ended
 
Quarter Ended
 
Quarter Ended
Non-interest Expense
 
6/30/2020
 
3/31/2020
 
6/30/2019
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and Employee Benefits
 
$
15,882

 
$
17,400

 
$
14,117

Occupancy, Furniture and Equipment Expense
 
3,481

 
3,581

 
3,212

FDIC Premiums
 
123

 

 
245

Data Processing Fees
 
1,763

 
1,686

 
1,803

Professional Fees
 
1,082

 
1,084

 
1,174

Advertising and Promotion
 
882

 
1,071

 
936

Intangible Amortization
 
909

 
960

 
802

Other Operating Expenses
 
3,966

 
4,546

 
3,329

Total Non-interest Expense
 
$
28,088

 
$
30,328

 
$
25,618

 
 
 
 
 
 
 

Salaries and benefits declined $1,518,000, or 9%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $1,765,000, or 13%, compared with the second quarter of 2019. The decline in salaries and benefits during the second quarter of 2020 compared with the first quarter of 2020 was primarily attributable to lower incentive plan costs, lower costs related to health insurance and retirement plan benefits, and the deferral of a portion of salary costs related to the origination of PPP loans. The increase in salaries and benefits during the second quarter of 2020 compared with the second quarter of 2019 was primarily attributable to the acquisition of Citizens First.

Occupancy, furniture and equipment expense declined $100,000, or 3%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $269,000, or 8%, compared to the second quarter of 2019. The increase during the second quarter of 2020 compared with the second quarter of 2019 was primarily due to the operating costs of the Citizens First branch network.

FDIC premiums increased $123,000, or 100%, during the second quarter of 2020 compared with the first quarter of 2020 and declined $122,000, or 50%, compared with the second quarter of 2019. The change during the second quarter of 2020 to both comparative periods was related to credits received from the FDIC during the first and second quarters of 2020. The credits received were due to the reserve ratio of the deposit insurance fund exceeding the FDIC targeted levels. No credits were received during the second quarter of 2019.

Advertising and promotion expense declined $189,000, or 17%, in the second quarter of 2020 compared with the first quarter of 2020 and declined $54,000, or 6%, compared with the second quarter of 2019. The decline



    

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 16

in the second quarter of 2020 compared with the first quarter of 2020 was largely related to an overall decline in advertising expense due in part to the COVID-19 pandemic, partially mitigated by an increased level of contributions.

Intangible amortization declined $51,000, or 5%, during the quarter ended June 30, 2020 compared with the first quarter of 2020 and increased $107,000, or 13%, compared with the second quarter of 2019. The increase in intangible amortization in the second quarter of 2020 compared with the second quarter of 2019 was attributable to the Citizens First acquisition completed during 2019.

Other operating expenses declined $580,000, or 13%, during the second quarter of 2020 compared with the first quarter of 2020 and increased $637,000, or 19%, compared with the second quarter of 2019. The decline during the second quarter of 2020 compared with the first quarter of 2020 was largely impacted by lower training and education expenses and reduced business travel and entertainment expenses, resulting from the effect of the travel restrictions and slowdown of economic activity related to the COVID-19 pandemic. The increase in the second quarter of 2020 compared with second quarter of 2019 was largely attributable to the Citizens First acquisition.

About German American
German American Bancorp, Inc. is a Nasdaq-traded (symbol: GABC) financial holding company based in Jasper, Indiana. German American, through its banking subsidiary German American Bank, operates 73 banking offices in 20 contiguous southern Indiana counties and eight counties in Kentucky. 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


13 of 16

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; the severity and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and our business, results of operations and financial condition; our participation in the Paycheck Protection Program administered by the Small Business Administration; 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 (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, 2020
 
March 31, 2020
 
June 30, 2019
ASSETS
 
 
 
 
 
     Cash and Due from Banks
$
53,081

 
$
48,293

 
$
48,634

     Short-term Investments
227,275

 
43,832

 
41,623

     Investment Securities
962,623

 
876,140

 
841,045

 
 
 
 
 
 
     Loans Held-for-Sale
21,756

 
15,561

 
14,184

 
 
 
 
 
 
     Loans, Net of Unearned Income
3,266,347

 
3,013,733

 
2,717,028

     Allowance for Credit Losses
(42,431
)
 
(36,641
)
 
(16,239
)
        Net Loans
3,223,916

 
2,977,092

 
2,700,789

 
 
 
 
 
 
     Stock in FHLB and Other Restricted Stock
13,368

 
13,968

 
13,048

     Premises and Equipment
96,748

 
96,383

 
89,413

     Goodwill and Other Intangible Assets
132,676

 
132,968

 
113,309

     Other Assets
119,608

 
119,616

 
108,694

   TOTAL ASSETS
$
4,851,051

 
$
4,323,853

 
$
3,970,739

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
     Non-interest-bearing Demand Deposits
$
1,139,928

 
$
869,847

 
$
725,367

     Interest-bearing Demand, Savings, and Money Market Accounts
2,267,092

 
2,008,757

 
1,805,694

     Time Deposits
572,413

 
599,910

 
597,771

        Total Deposits
3,979,433

 
3,478,514

 
3,128,832

 
 
 
 
 
 
     Borrowings
219,700

 
207,965

 
305,940

     Other Liabilities
57,244

 
53,834

 
36,556

   TOTAL LIABILITIES
4,256,377

 
3,740,313

 
3,471,328

 
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
 
     Common Stock and Surplus
300,514

 
301,400

 
254,935

     Retained Earnings
263,011

 
253,780

 
233,269

     Accumulated Other Comprehensive Income
31,149

 
28,360

 
11,207

SHAREHOLDERS' EQUITY
594,674

 
583,540

 
499,411

 
 
 
 
 
 
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
4,851,051

 
$
4,323,853

 
$
3,970,739

 
 
 
 
 
 
END OF PERIOD SHARES OUTSTANDING
26,497,291

 
26,540,031

 
24,992,238

 
 
 
 
 
 
TANGIBLE BOOK VALUE PER SHARE (1)
$
17.44

 
$
16.98

 
$
15.45

 
 
 
 
 
 
 
(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, 2020
 
March 31, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Interest and Fees on Loans
$
38,080

 
$
37,858

 
$
35,046

 
$
75,938

 
$
70,165

   Interest on Short-term Investments
84

 
158

 
85

 
242

 
226

   Interest and Dividends on Investment Securities
5,377

 
5,555

 
5,905

 
10,932

 
11,834

  TOTAL INTEREST INCOME
43,541

 
43,571

 
41,036

 
87,112

 
82,225

 
 
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Interest on Deposits
3,743

 
5,657

 
5,759

 
9,400

 
11,175

   Interest on Borrowings
1,339

 
1,658

 
1,636

 
2,997

 
3,818

  TOTAL INTEREST EXPENSE
5,082

 
7,315

 
7,395

 
12,397

 
14,993

 
 
 
 
 
 
 
 
 
 
 
   NET INTEREST INCOME
38,459

 
36,256

 
33,641

 
74,715

 
67,232

   Provision for Credit Losses
5,900

 
5,150

 
250

 
11,050

 
925

   NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
32,559

 
31,106

 
33,391

 
63,665

 
66,307

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
 
   Net Gain on Sales of Loans
2,654

 
1,863

 
1,030

 
4,517

 
2,011

   Net Gain on Securities
993

 
590

 
516

 
1,583

 
671

   Other Non-interest Income
8,776

 
11,628

 
8,963

 
20,404

 
19,485

  TOTAL NON-INTEREST INCOME
12,423

 
14,081

 
10,509

 
26,504

 
22,167

 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
   Salaries and Benefits
15,882

 
17,400

 
14,117

 
33,282

 
29,161

   Other Non-interest Expenses
12,206

 
12,928

 
11,501

 
25,134

 
23,216

  TOTAL NON-INTEREST EXPENSE
28,088

 
30,328

 
25,618

 
58,416

 
52,377

 
 
 
 
 
 
 
 
 
 
 
   Income before Income Taxes
16,894

 
14,859

 
18,282

 
31,753

 
36,097

   Income Tax Expense
2,639

 
2,387

 
3,011

 
5,026

 
5,759

 
 
 
 
 
 
 
 
 
 
 
NET INCOME
$
14,255

 
$
12,472

 
$
15,271

 
$
26,727

 
$
30,338

 
 
 
 
 
 
 
 
 
 
 
BASIC EARNINGS PER SHARE
$
0.54

 
$
0.47

 
$
0.61

 
$
1.01

 
$
1.21

DILUTED EARNINGS PER SHARE
$
0.54

 
$
0.47

 
$
0.61

 
$
1.01

 
$
1.21

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
26,502,731

 
26,663,604

 
24,992,238

 
26,583,167

 
24,982,107

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
26,502,731

 
26,663,604

 
24,992,238

 
26,583,167

 
24,982,107

 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 




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,
 
 
 
2020
 
2020
 
2019
 
2020
 
2019
EARNINGS PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
 
 
Annualized Return on Average Assets
 
1.20
%
 
1.15
%
 
1.56
%
 
1.18
%
 
1.56
%
 
Annualized Return on Average Equity
 
9.71
%
 
8.66
%
 
12.60
%
 
9.19
%
 
12.78
%
 
Annualized Return on Average Tangible Equity (1)
 
12.53
%
 
11.27
%
 
16.41
%
 
11.91
%
 
16.78
%
 
Net Interest Margin
 
3.59
%
 
3.74
%
 
3.84
%
 
3.66
%
 
3.86
%
 
Efficiency Ratio (2)
 
54.36
%
 
59.39
%
 
57.10
%
 
56.86
%
 
57.67
%
 
Net Overhead Expense to Average Earning Assets (3)
 
1.43
%
 
1.63
%
 
1.69
%
 
1.53
%
 
1.69
%
 
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY RATIOS
 
 
 
 
 
 
 
 
 
 
 
Annualized Net Charge-offs to Average Loans
 
0.01
%
 
0.06
%
 
0.04
%
 
0.03
%
 
0.04
%
 
Allowance for Credit Losses to Period End Loans
 
1.30
%
 
1.22
%
 
0.60
%
 
 
 
 
 
Non-performing Assets to Period End Assets
 
0.40
%
 
0.44
%
 
0.32
%
 
 
 
 
 
Non-performing Loans to Period End Loans
 
0.59
%
 
0.61
%
 
0.44
%
 
 
 
 
 
Loans 30-89 Days Past Due to Period End Loans
 
0.23
%
 
0.71
%
 
0.39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED BALANCE SHEET & OTHER FINANCIAL DATA
 
 
 
 
 
 
 
 
 
 
 
Average Assets
 
$
4,751,772

 
$
4,335,841

 
$
3,908,669

 
$
4,543,804

 
$
3,897,757

 
Average Earning Assets
 
$
4,389,526

 
$
3,975,054

 
$
3,585,169

 
$
4,182,290

 
$
3,577,115

 
Average Total Loans
 
$
3,253,169

 
$
3,059,398

 
$
2,721,630

 
$
3,156,284

 
$
2,720,227

 
Average Demand Deposits
 
$
1,074,739

 
$
847,891

 
$
715,681

 
$
961,315

 
$
703,462

 
Average Interest Bearing Liabilities
 
$
3,034,290

 
$
2,867,779

 
$
2,674,631

 
$
2,951,035

 
$
2,691,376

 
Average Equity
 
$
587,472

 
$
575,995

 
$
484,891

 
$
581,733

 
$
474,619

 
 
 
 
 
 
 
 
 
 
 
 
 
Period End Non-performing Assets (4)
 
$
19,556

 
$
19,079

 
$
12,523

 
 
 
 
 
Period End Non-performing Loans (5)
 
$
19,131

 
$
18,454

 
$
11,888

 
 
 
 
 
Period End Loans 30-89 Days Past Due (6)
 
$
7,554

 
$
21,500

 
$
10,605

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax Equivalent Net Interest Income
 
$
39,243

 
$
36,984

 
$
34,354

 
$
76,227

 
$
68,653

 
Net Charge-offs during Period
 
$
110

 
$
440

 
$
254

 
$
550

 
$
509

 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Average Tangible Equity is defined as Average Equity less Average Goodwill and Other Intangibles.
 
 
 
 
(2) 
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.
 
 
 
 
(3) 
Net Overhead Expense is defined as Total Non-interest Expense less Total Non-interest Income.
 
 
 
 
(4) 
Non-performing assets are defined as Non-accrual Loans, Loans Past Due 90 days or more, and Other Real Estate Owned.
 
 
 
 
(5) 
Non-performing loans are defined as Non-accrual Loans and Loans Past Due 90 days or more.
 
 
 
 
(6) 
Loans 30-89 days past due and still accruing.
 
 
 
 
 
 
 
 
 
 


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