THE FOLLOWING SUBMISSION IS AN AMMENDED FORM 10-K FROM DECEMBER 31, 1995
FOR THE GERMAN AMERICAN BANCORP. THE ORIGINAL SUBMISSION SENT ON 4-1-96
CONTAINED AN EXTRA END SUBMISSION TAG IN THE MIDDLE OF THE DOCUMENT AND THERE
FORE DID NOT CONTAIN ANY OF THE NECESSARY EXHIBITS THAT WERE TO BE FILED WITH
THE DOCUMENT.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark one)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended: December 31, 1995
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- -----------
Commission File Number 0 -11244
GERMAN AMERICAN BANCORP
(Exact name of registrant as specified in its Charter)
INDIANA 35-1547518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
Securities registered pursuant to Section 12 (b) or the Act:
Title of each class Name of each exchange
on which registered
NONE Not Applicable
Securities registered pursuant to Section 12 (g) of the Act:
Common Shares, $10.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant (assuming solely for purposes of this calculation that all directors
and executive officers of the Registrant are affiliates) valued at the last
trade price reported by NASDAQ as of March 11, 1996 was approximately
$42,000,000.
As of March 22, 1996, there were outstanding 1,825,040 common shares, $10.00
par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Shareholders of German American
Bancorp for 1995, to the extent stated herein, are incorporated by reference
into Parts I and II.
(2) Portions of the Proxy Statement of German American Bancorp for the
Annual Meeting of its Shareholders to be held April 25, 1996, to the extent
stated herein, are incorporated by reference into Part III.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. | |
PART I
Item 1. Business
General
German American Bancorp (``the Company'' or the `Registrant'') is a multi-
bank holding company organized in Indiana in 1982. The Company's principal
subsidiaries are The German American Bank, Jasper, Indiana (`German American
Bank'), The Union Bank, Loogootee, Indiana, (``Union Bank''), Winslow
Bancorporation, Inc. (`Winslow''), an Indiana corporation that owns all of the
outstanding capital stock of Community Trust Bank, Otwell, Indiana (`Community
Bank') and First State Bank, Southwest, Indiana of Tell City, Indiana (``First
State Bank'). The Company, through its four bank subsidiaries, operates
fourteen (14) banking offices in five contiguous counties in southwestern
Indiana and has total consolidated assets at year-end 1995 in excess of
$367,000,000.
German American Bank was organized under the law of Indiana in 1910. At
December 31, 1995, German American Bank was the second largest of the six
commercial banks with offices in Dubois County, Indiana, in terms of total
assets and total deposits. German American Bank conducts its banking operations
from its principal banking office in Jasper, Indiana, and from seven branch
office locations throughout Dubois County.
Union Bank, organized under Indiana law in 1929, operates from a single
banking office in Loogootee, Martin County, Indiana. Union Bank was acquired by
the Registrant on March 8, 1993. At December 31, 1995, Union Bank ranked third
in asset size among the seven commercial banks and thrifts headquartered in
Martin and Daviess Counties, Indiana.
On April 1, 1993, the Registrant purchased all the shares of Winslow
Bancorporation, Winslow, Indiana, and its subsidiary Southwestern Indiana Bank
in a cash transaction. On April 1, 1994, the Registrant issued 113,286 shares
for all the outstanding shares of the Otwell State Bank. Following the
completion of this transaction, Otwell and Southwestern were merged into
Community Trust Bank, a combined banking institution operating in the Pike
County, Indiana market through three offices.
On October 28, 1994, the Registrant acquired three branches of Regional
Federal Savings Bank of New Albany, Indiana. The Huntingburg, Indiana branch
was combined with an existing branch of the Registrant's lead bank, German
American Bank. The other two former branches in Tell City and Rockport, Indiana
were acquired by a new subsidiary bank of the Registrant named First State Bank,
Southwest, Indiana.
Each of the Company's subsidiary banks engages in a wide range of commercial
and personal banking services, and German American Bank and Union Bank provide a
wide range of personal and corporate trust-related services. In addition,
German American Bank shares investment services income through an operating
agreement with Invest Financial Corporation, a subsidiary of Kemper Financial
Companies, Inc., which provides full-service brokerage operations from an office
in German American's principal banking office.
The Company and its subsidiary banks operate primarily in the banking
industry, which accounts for over ninety percent (90%) of the Company's
consolidated revenues, operating income and identifiable assets. Through its
banking subsidiaries, the Company generates commercial, installment and mortgage
loans and receives deposits from customers located primarily in the local market
area. The overall loan portfolio is diversified among a variety of individual
borrowers, with a substantial portion of such borrowers' ability to honor their
indebtedness being dependent on the agriculture, poultry and wood furniture
manufacturing industries. Although wood manufacturers employ a significant
number of people in the Company's market area, the Company does not have a
concentration of credit to companies engaged in that industry. The majority of
the Company's loans are secured by specific items of collateral including
business assets, consumer assets and real property.
Additional information regarding the Company and its subsidiaries is included
in the Company's Annual Report to Shareholders for 1995 which is filed as
Exhibit 13 to this Annual Report on Form 10-K (the `Shareholders' Report'').
Competition
The banking business is highly competitive. The Company's subsidiary banks
compete not only with financial institutions that have offices in the same
counties but also compete with financial institutions that are located in other
neighboring areas in obtaining deposits, making loans and providing many other
types of financial services. The banking market in which the Company's banking
subsidiaries operate is heavily influenced by larger financial institutions
located in Evansville and Indianapolis, Indiana, Louisville, Kentucky and other
cities. In addition to other commercial banks, the Company's subsidiary banks
compete with savings and loan associations, savings banks, credit unions,
production credit associations, federal land banks, finance companies, credit
card companies, personal loan companies, money market funds, mortgage companies
and other non-depository financial intermediaries.
Employees
At January 31, 1996 the Company and its subsidiaries employed approximately
167 employees. There are no collective bargaining agreements, and employee
relations are considered to be good.
Regulation and Supervision
The Company is subject to the Bank Holding Company Act of 1956, as amended
(`BHC Act''), and is required to file with the Board of Governors of the
Federal Reserve System (`FRB'') annual reports and such additional information
as the FRB may require. The FRB may also make examinations or inspections of
the Company.
The BHC Act prohibits a bank holding company from engaging in, or acquiring
direct or indirect control of more than 5 percent of the voting shares of any
company engaged in nonbanking activities. One of the principal exceptions to
this prohibition is for activities deemed by the FRB to be `closely related to
banking.'' Under current regulations, bank holding companies and their
subsidiaries are permitted to engage in such banking-related business ventures
as sales and consumer finance, equipment leasing, computer service bureau and
software operations, and mortgage banking.
The BHC Act and Indiana law restrict banking expansion by banks and bank
holding companies. Under current Indiana law, Indiana banks may establish an
unlimited number of branches anywhere within the State of Indiana. A holding
company may establish non-banking offices without geographical limitation.
Under the BHC Act, the Company must receive the prior written approval of the
FRB or its delegate before it may acquire ownership or control of more than 5
percent of the voting shares of another bank, and under Indiana law it may not
acquire 25 percent or more of the voting shares of another bank without the
prior approval of the Indiana Department of Financial Institutions (`DFI'').
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 provides
for nationwide interstate banking and branching. Since September 30, 1995,
well-capitalized bank holding companies have been authorized, pursuant to the
legislation, to acquire banks and bank holding companies in any state. The
legislation also permits banks to merge across state lines, thereby creating a
main bank in one state with branches in other states. Interstate branching by
merger provisions will become effective on June 1, 1997, unless a state takes
legislative action prior to that date. States may pass laws to either `opt-
in''before June 1, 1997 or to ``opt-out'' by expressly prohibiting merger
transactions involving out-of-state banks, providing the legislative action is
taken before June 1, 1997. Indiana has not yet taken any legislative action
with respect to such interstate mergers.
The Company's subsidiary banks are under the supervision of and subject to
examination by both the DFI and the Federal Deposit Insurance Corporation
(`FDIC''). Regulation and examination by banking regulatory agencies are
primarily for the benefit of depositors rather than shareholders.
The earnings of commercial banks and their holding companies are affected not
only by general economic conditions but also by the policies of various
governmental regulatory authorities. In particular, the FRB regulates money and
credit conditions and interest rates in order to influence general economic
conditions, primarily through open-market operations in U.S. Government
securities, varying the discount rate on bank borrowings, and setting reserve
requirements against bank deposits. These policies have a significant influence
on overall growth and distribution of bank loans, investments and deposits, and
affect interest rates charged on loans and earned on investments or paid for
time and savings deposits. FRB monetary policies have had a significant effect
on the operating results of commercial banks in the past and this is expected to
continue in the future. The general effect, if any, of such policies upon the
future business and earnings of the Company cannot accurately be predicted.
The Company is required by the FRB and the FDIC to maintain minimum levels of
capital. These required capital levels are expressed in terms of capital
ratios, known as the leverage ratio and the capital to risk-based assets ratios.
The Company significantly exceeds the minimum required capital levels for each
measure of capital adequacy. See `Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital Resources,''included
on page 8 of the Shareholders' Report.
Also, FDIC regulations define five categories of financial institutions for
purposes of implementing prompt corrective action and supervisory enforcement
requirements of the Federal Deposit Insurance Corporation Improvements Act of
1991. The category to which the most highly capitalized institutions are
assigned is termed `Well Capitalized.'' Institutions falling into this category
must have a total risk-based capital ratio (the ratio of total capital to risk-
weighted assets) of at least 10%, a Tier 1 risk-based capital ratio (the ratio
of Tier 1, or `core'', capital to risk-weighted assets) of at least 6%, a
leverage ratio (the ratio of Tier 1 capital to total assets) of at least 5%, and
must not be subject to any written agreement, order or directive from its
regulator relative to meeting and maintaining a specific capital level. On
December 31, 1995, the Company had a total risk-based capital ratio of 15.89%, a
Tier 1 risk-based capital ratio of 14.62% (based on Tier 1 capital of
$33,957,000 and total risk-weighted assets of $232,272,000), and a leverage
ratio of 9.29%. The Company meets all of the requirements of the `Well
Capitalized''category and, accordingly, the Company does not expect these
regulations to significantly impact operations.
Statistical Disclosures
The following statistical data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7), Selected Financial Data (Item 6), and the financial
statements and notes (Item 8) included elsewhere herein through incorporation by
reference to the indicated pages of the Shareholders' Report.
Statistical Disclosures (continued)
Securities (in thousands)
The following tables set forth the carrying amount of Securities at the dates
indicated:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
<S> <C> <C> <C>
U.S. Treasury and other
U.S. Government Agencies
and Corporations ---- $17,249 $27,940
State and Political Subdivisions $9,869 21,237 16,744
Mortgage-backed Securities ---- 11,267 15,272
Corporate Securities ---- 803 1,100
Other Securities 738 717 717
Subtotal of Securities
Held-to-Maturity $10,607 $51,273 $61,773
U.S. Treasury and other U.S.
Government Agencies
and Corporations 23,727 7,280 2,000
State and Political Subdivisions 14,232 56 ----
Mortgage-backed Securities 33,144 15,584 16,532
Corporate Securities 6,375 212 617
Subtotal of Securities
Available-for-Sale 77,478 23,132 19,149
Total Securities $88,085 $74,405 $80,922
</TABLE>
The following table sets forth the contractual maturities of securities at
December 31, 1995 and the weighted average yields of such securities (calculated
on the basis of the cost and effective yields weighted for the maturity of each
security.) Contractual maturities may differ from actual due to rights to
prepay or call. Other securities totaling $738 are comprised of restricted
stock which do not have contractual maturities and are excluded from the table
below.
<TABLE>
<CAPTION>
Maturing
Within After One But
One Year Within Five Years
Amount Yield Amount Yield
<S> <C> <C> <C> <C>
U.S. Treasury and
other Government
Agencies and
Corporations $8,844 5.67% $14,883 5.81%
State and Political
Subdivisions 1,140 10.41% 5,245 9.36%
Mortgage-backed
Securities --- --- 4,890 5.66%
Corporate Securities --- --- 3,682 6.48%
Totals $9,984 6.21% $28,700 6.52%
</TABLE>
<TABLE>
<CAPTION>
Maturing
After Five But After Ten
Within Ten Years Years
Amount Yield Amount Yield
<S> <C> <C> <C> <C>
U.S. Treasury and
other Government
Agencies and
Corporations --- --- ---- ---
State and Political
Subdivisions $6,235 10.18%$ 11,481 9.73%
Mortgage-backed
Securities 11,071 5.53% 17,183 5.59%
Corporate Securities 2,693 6.54% --- ---
Totals $19,999 7.12%$ 28,664 7.24%
</TABLE>
A tax-equivalent adjustment using a tax rate of 34 percent was used in the above
table.
Statistical Disclosures (continued)
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rates:
<TABLE>
<CAPTION>
(dollar references in thousands)
1995 compared to 1994
Increase / (Decrease) Due to (1)
Volume Rate Net
<S> <C> <C> <C>
Interest Income:
Federal Funds Sold $83 $276 $359
Short-term Investments 308 95 403
Taxable Securities 88 291 379
Nontaxable Securities (2) 379 (40) 339
Loans and Leases (3) 1,372 2,529 3,901
Total Interest Income 2,230 3,151 5,381
Interest Paid:
Savings 77 290 367
Time Deposits 1,291 1,581 2,872
Federal Funds Purchased
and Securities Sold
Under Agreements to
Repurchase (99) 66 (33)
Demand Notes Issued to
the U.S. Treasury 12 19 31
Notes Payable 53 --- 53
Total Interest Expense 1,334 1,956 3,290
Net Interest Earnings $896 $1,195 $2,091
</TABLE>
<TABLE>
<CAPTION>
(dollar references in thousands)
1994 compared to 1993
Increase / (Decrease) Due to (1)
Volume Rate Net
<S> <C> <C> <C>
Interest Income:
Federal Funds Sold $71 $52 $123
Short-term Investments (100) 60 (40)
Taxable Securities (258) (474) (732)
Nontaxable Securities (2) 41 (2) 39
Loans and Leases (3) 970 75 1,045
Total Interest Income 724 (289) 435
Interest Paid:
Savings 133 (141) (8)
Time Deposits (191) (251) (442)
Federal Funds Purchased
and Securities Sold
Under Agreements to
Repurchase 76 (3) 73
Demand Notes Issued to
the U.S. Treasury (2) 12 10
Notes Payable --- --- ---
Total Interest Expense 16 (383) (367)
Net Interest Earnings $708 $94 $802
</TABLE>
(1)The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
(2)Change in interest income include the effect of tax equivalent adjustments
using a tax rate of 34 percent for all years presented.
(3)Interest income on loans includes loan fees of $254,
$253, and $206 for 1995, 1994, and 1993, respectively.
Statistical Disclosures (continued)
The following is a schedule of loans by major category for each reported
period:
<TABLE>
<CAPTION> December 31,
(dollar references in thousands)
1995 1994 1993
<S> <C> <C> <C>
Real Estate Loans Secured
by 1-4 Family Residential
Properties $68,826 $67,737 $55,225
Loans to Finance Poultry
Production and Other Related
Operations 23,784 25,599 30,505
Loans to Finance Agricultural
Production and Other Loans
to Farmers 27,310 31,959 24,806
Commercial and Industrial
Loans 74,612 67,662 62,321
Loans to Individuals for
Household, Family and Other
Personal Expenditures 34,685 29,248 26,684
Economic Development
Commission Bonds 608 625 762
Term Federal Funds Sold --- --- ---
Lease Financings 1,302 1,820 2,323
Total Loans $231,127 $224,650 $202,626
</TABLE>
<TABLE>
<CAPTION> December 31,
(dollar references in thousands)
1992 1991
<S> <C> <C>
Real Estate Loans Secured
by 1-4 Family Residential
Properties $47,170 $41,042
Loans to Finance Poultry
Production and Other Related
Operations 30,621 21,528
Loans to Finance Agricultural
Production and Other Loans
to Farmers 23,844 23,348
Commercial and Industrial
Loans 61,189 60,445
Loans to Individuals for
Household, Family and Other
Personal Expenditures 24,183 24,594
Economic Development
Commission Bonds 1,547 2,181
Term Federal Funds Sold --- 4,000
Lease Financings 2,666 2,175
Total Loans $191,220 $179,313
</TABLE>
The following table indicates the amounts of loans (excluding residential
mortgages on 1-4 family residences, installment loans and lease financing)
outstanding as of December 31, 1995 which, based on remaining scheduled
repayments of principal, are due in the periods indicated.
<TABLE>
<CAPTION>
Maturing
Within After One
One But Within
Year Five Years
<S> <C> <C>
Commercial, Financial,
Agricultural, and Poultry $40,716 $48,001
Economic Development Bonds 108 500
Total Loans $40,824 $48,501
</TABLE>
<TABLE>
<CAPTION>
Maturing
After
Five
Years Total
<S> <C> <C>
Commercial, Financial,
Agricultural, and Poultry $36,989 $125,706
Economic Development Bonds 0 608
Total Loans $36,989 $126,314
</TABLE>
<TABLE>
<CAPTION>
Interest Sensitivity
Fixed Variable
Rate Rate
<S> <C> <C>
Loans maturing after
one year $16,114 $69,376
</TABLE>
Statistical Disclosures (continued)
The Provision for Loan Losses provides a reserve (the Allowance for Loan
Losses) to which loan losses are charged as those losses become identifiable.
Management determines the appropriate level of the Allowance for Loan Losses on
a quarterly basis through an independent review by the Bank's credit review
section done by employees who have no direct lending responsibilities. Through
this review, all commercial loans with outstanding balances in excess of $25,000
are analyzed with particular attention paid to those loans which are considered
by management to have an above-average level of risk. This analysis is
evaluated by Senior Management and serves as the basis for determining the
adequacy of the Allowance for Loan Losses. Through this review process a
specific portion of the reserve is allocated to impaired loans and to those
loans which are considered to represent significant exposure to risk, and
estimated potential losses are provided based on historic loan loss experience
for consumer loans, residential mortgage loans, and commercial loans not
specifically reviewed. In addition, a balance of the reserve is unallocated to
provide an allowance for risk, such as concentrations of credit to specific
industry groups, which are difficult to quantify in an absolute dollar amount.
The following table presents information concerning the aggregate amount of
underperforming assets. Underperforming loans comprise: (a) loans accounted for
on a nonaccrual basis (`nonaccrual loans''); (b) loans contractually past due
90 days or more as to interest or principal payments (but not included in the
loans in (a) above) (`past due loans''); and (c) loans not included above which
are `troubled debt restructuring'' as defined in Statement of Financial
Standards No. 15 `FASB 15'', ``Accounting by Debtors and Creditors for Troubled
Debt Restructurings''(``restructured loans'').
<TABLE>
<CAPTION> December 31,
(dollar references in thousands)
1995 1994 1993
<S> <C> <C> <C>
Nonaccrual Loans $803 $983 $1,395
Past Due Loans 2,683 601 461
Restructured Loans --- --- ---
Total Underperforming
Loans 3,486 1,584 1,856
Other Real Estate 286 497 698
Total Underperforming
Assets $3,772 $2,081 $2,554
</TABLE>
<TABLE>
<CAPTION> December 31,
(dollar references in thousands)
1992 1991
<S> <C> <C>
Nonaccrual Loans $1,693 $1,599
Past Due Loans 665 483
Restructured Loans 6 370
Total Underperforming
Loans 2,364 2,452
Other Real Estate 660 748
Total Underperforming
Assets $3,024 $3,200
</TABLE>
The gross interest income that would have been recognized in 1995 on
underperforming loans if the loans had been current in accordance with their
original terms is $337. Interest income recognized on underperforming loans for
1995 was $280.
Loans are placed on nonaccrual status when scheduled principal or interest
payments are past due for 90 days or more, unless the loan is well secured and
in the process of collection. In addition to the nonaccrual and restructured
loans described above, there exists an additional $3,088 of loans which
management feels may not be able to comply with the existing repayment terms.
These credits have been considered in management's analysis of the allowance for
loan losses.
Statements of Financial Accounting Standards No. 114 and No. 118 were adopted
January 1, 1995. These standards require recognition of loan impairment if a
loan's full principal or interest payments are not expected to be received.
Loans considered to be impaired are reduced to the present value of expected
future cash flows or to the fair value of collateral, by allocating a portion of
the allowance for loan losses to such loans. No increase to the allowance for
loan losses was required at January 1, 1995 as a result of the adoption of these
new standards. For additional detail on impaired loans, see Note 4 on page 26
of the Shareholders' Report.
It is management's belief that loans classified for regulatory purposes as
loss, doubtful, substandard, or special mention that are not included in the
table and discussion above, do not represent or result from trends or
uncertainties which will have a material impact on future operating results,
liquidity or capital resources, and that at December 31, 1995 there were no
material credits not included in the above table about which management is aware
of possible credit problems of borrowers which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. This paragraph includes forward-looking statements that are based on
management's assumptions concerning future economic and business conditions as
they affect the local economy in general and the Company's borrowers in
particular, which economic and business assumptions are inherently uncertain and
subject to risk and may prove to be invalid. Readers are also cautioned that
management relies upon the truthfulness of statements made by the borrowers, and
that misrepresentation by borrowers is an inherent risk of the activity of
lending money that could cause these forward-looking statements to be
inaccurate.
At December 31, 1995 loans to finance poultry operations amounted to $23,784
or 10.3% of total loans.
Statistical Disclosures (continued)
Summary of Loan Loss Experience
(in thousands)
The following table summarizes changes in the allowance for loan losses
arising from loans charged-off and recoveries on loans previously charged-off,
by loan category, and additions to the allowance which have been charged to
expense.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Balance of allowance
for possibleosses at
beginning of period $5,669 $4,935 $3,862
Addition of Affiliate
Banks --- 195 164
Loans charged-off:
Real Estate Loans
Secured by 1-4
Family Residential
Properties 221 101 ---
Loans to Finance
Poultry Production
and Other Related
Operations --- --- ---
Loans to Finance
Agricultural Production
and Other Loans to
Farmers --- --- 12
Commercial and
Industrial Loans 20 99 378
Loans to Individuals
for Household, Family
and Other Personal
Expenditures 98 55 53
Economic Development
Bonds --- --- ---
Term Federal Funds Sold --- --- ---
Total Loans charged-off 339 255 443
Recoveries of previously
charged-off Loans:
Real Estate Loans
Secured by 1-4 Family
Residential Properties 6 6 14
Loans to Finance Poultry
Production and
Other Related Operations --- --- ---
Loans to Finance
Agricultural Production
and Other Loans to Farmers 538 --- 500
Commercial and
Industrial Loans 53 186 148
Loans to Individuals
for Household, Family
and Other Personal
Expenditures 25 35 37
Economic Development
Commission Bonds --- --- ---
Term Federal Funds Sold --- --- ---
Total Recoveries 622 227 699
Net Loans recovered
/ (charged-off) 283 (28) 256
Additions to allowance
charged to expense (19) 567 653
Balance at end of period $5,933 $5,669 $4,935
Ratio of net recoveries /
(charge-offs) during
the period to average
loans outstanding .12% (0.01%) 0.13%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1991
<S> <C> <C>
Balance of allowance
for possibleosses at
beginning of period $3,204 $2,898
Addition of Affiliate
Banks --- ---
Loans charged-off:
Real Estate Loans
Secured by 1-4
Family Residential
Properties 96 65
Loans to Finance
Poultry Production
and Other Related
Operations --- ---
Loans to Finance
Agricultural Production
and Other Loans to
Farmers 29 758
Commercial and
Industrial Loans 835 891
Loans to Individuals
for Household, Family
and Other Personal
Expenditures 76 100
Economic Development
Bonds --- ---
Term Federal Funds Sold --- ---
Total Loans charged-off 1,036 1,814
Recoveries of previously
charged-off Loans:
Real Estate Loans
Secured by 1-4 Family
Residential Properties 46 ---
Loans to Finance Poultry
Production and
Other Related Operations --- ---
Loans to Finance
Agricultural Production
and Other Loans to Farmers 132 54
Commercial and
Industrial Loans 504 106
Loans to Individuals
for Household, Family
and Other Personal
Expenditures 28 17
Economic Development
Commission Bonds --- ---
Term Federal Funds Sold --- ---
Total Recoveries 710 177
Net Loans recovered
/ (charged-off) (326) (1,637)
Additions to allowance
charged to expense 984 1,943
Balance at end of period $3,862 $3,204
Ratio of net recoveries /
(charge-offs) during
the period to average
loans outstanding (0.17%) (0.95%)
</TABLE>
Statistical Disclosures (continued)
The following table indicates the breakdown of the allowance for loan losses for
the periods indicated:
<TABLE>
<CAPTION>
(dollar references in thousands)
December 31, December 31,
1995 1994
Allowance Ratio of Allowance Ratio of
Loans to Loans to
Total Total
Loans Loans
<S> <C> <C> <C> <C>
Real Estate Loans $3 29.78% $185 30.15%
Poultry Loans 1,493 10.29% 918 11.40%
Agricultural Loans 726 11.82% 944 14.23%
Commercial and
Industrial Loans 1,976 32.84% 1,101 30.92%
Loans to Individuals 58 15.01% 146 13.02%
Economic Development
Commission Bonds --- 0.26% --- 0.28%
Term Federal Funds
Sold --- --
Unallocated 1,677 N/A 2,375 N/A
Totals $5,933 100.00% $5,669 100.00%
</TABLE>
<TABLE>
<CAPTION>
(dollar references in thousands)
December 31,
1993
Allowance Ratio of
Loans to
Total
Loans
<S> <C> <C>
Real Estate Loans $118 27.25%
Poultry Loans 65 15.05%
Agricultural Loans 872 12.24%
Commercial and
Industrial Loans 906 31.91%
Loans to Individuals 128 13.17%
Economic Development
Commission Bonds --- 0.38%
Term Federal Funds
Sold ---
Unallocated 2,846 N/A
Totals $4,935 100.00%
</TABLE>
<TABLE>
<CAPTION>
(dollar references in thousands)
December 31, December 31,
1992 1991
Allowance Ratio of Allowance Ratio of
Loans to Loans to
Total Total
Loans Loans
<S> <C> <C> <C> <C>
Real Estate Loans $29 24.67% $28 22.89%
Poultry Loans 60 16.01% 57 12.01%
Agricultural Loans 148 12.47% 212 13.02%
Commercial and
Industrial Loans 1,229 33.39% 1,468 34.91%
Loans to Individuals 116 12.65% 114 13.72%
Economic Development
Commission Bonds --- 0.81% --- 1.22%
Term Federal Funds
Sold --- --- 2.23%
Unallocated 2,280 N/A 1,325 N/A
Totals $3,862 100.00% $3,204 100.00%
</TABLE>
Statistical Disclosures (continued)
The average amount of deposits is summarized for the periods indicated in the
following table:
<TABLE>
<CAPTION>
December 31,
1995 1994
Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Demand Deposits
Non-interest Bearing $32,576 --- $30,279 ---
Interest Bearing 40,134 2.29% 41,009 2.30%
Savings Deposits 52,177 3.01% 48,166 2.45%
Time Deposits 191,202 5.30% 164,422 4.42%
Totals $316,089 4.00% $283,876 3.31%
</TABLE>
<TABLE>
<CAPTION>
December 31,
1993
Average
Balance Rate
<S> <C> <C>
Demand Deposits
Non-interest Bearing $27,278 ---
Interest Bearing 37,924 2.50%
Savings Deposits 45,841 2.58%
Time Deposits 168,659 4.57%
Totals $279,702 3.52%
</TABLE>
Maturities of time certificates of deposit of $100,000 or more are summarized
as follows:
<TABLE>
<CAPTION>
December 31,
1995
<S> <C>
3 months or less $4,639
Over 3 through 6 months 7,960
Over 6 through 12 months 6,602
Over 12 months 7,532
Total $26,733
</TABLE>
Return on Equity and Assets
The ratio of net income to average shareholders' equity and to average total
assets, and certain other ratios, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Percentage of Net Income to:
Average Shareholders' Equity 11.68% 10.85% 9.62%
Average Total Assets 1.13% 1.08% 0.93%
Percentage of Dividends
Declared per Common Share
to Net Income per
Common Share (1) 34.55% 35.79% 40.99%
Percentage of Average
Shareholders' Equity to
Average Total Assets 9.65% 9.91% 9.69%
<FN>
<F1>
(1) Based on historical dividends declared by German American Bancorp
without restatement for pooling.
</FN>
</TABLE>
Item 2. Properties.
The Company owns no material physical properties except through its
subsidiaries. Office space for employees is leased from the German American
Bank.
German American Bank conducts its operations from its main office building
at 711 Main Street, in Jasper, Indiana. The main office building is owned by
German American and contains approximately 23,600 square feet of office space.
There is no indebtedness on such property on which German American's main office
is located. German American Bank has seven branches, three of which are located
in Jasper, and one each in the Dubois County towns of Huntingburg, Ferdinand,
Dubois and Ireland. Of these branch facilities, five are owned by German
American Bank and two are leased.
Union Bank's main office facility in Loogootee, Indiana, contains
approximately 12,000 square feet of space. The facility was constructed in 1988
and is owned by Union Bank.
Community Bank conducts its operations from three locations, all of which
are owned by Community Bank. Community Bank's principal banking office is
located in Otwell, Indiana, in a building containing approximately 2,850 square
feet.
First State Bank's main office facility, located in Tell City, Indiana,
constructed in 1981, contains approximately 13,900 square feet. The branch
office located in Rockport, Indiana contains approximately 1,660 square feet.
Both of these facilities are owned by First State Bank.
Item 3. Legal Proceedings.
There are no pending legal proceedings, other than routine litigation
incidental to the business of the Company's subsidiary banks, of a material
nature in which the Company or any of its subsidiaries is involved.
Item 4. Submission of Matters to a Vote of Security Holders.
There was no matter submitted during the fourth quarter of 1995 to a vote of
security holders, by solicitation of proxies or otherwise.
Special Item. Executive Officers of the Registrant.
[CAPTION]
<TABLE>
NAME AGE TITLE AND FIVE YEAR HISTORY
<S> <C> <C>
George W. Astrike (60) Chairman and CEO of the Company
in 1995; Chairman and President
/CEO prior thereto. Chairman of
German American Bank in 1995;
Chairman and President prior
thereto. Director of each of
the other Banks since
acquisition by the Company.
Mark A. Schroeder (42) President / Chief Operating
Officer / Chief Financial
Officer of the Company in 1995;
Vice President / Chief
Financial Officer prior
thereto. Director of each of
the other Banks since
acquisition by the Company.
Urban Giesler (58) Treasurer and Secretary of the
Corporation; Senior Vice
President Personal Banking of
German American Bank since
January, 1993; Senior Vice
President - Retail Lending of
German American Bank prior
thereto.
John M. Gutgsell (40) Vice President and Controller
of the Company in 1995; Vice
President and Controller of
German American Bank prior
thereto.
Stan J. Ruhe (44) Executive Vice President -
Credit Administration of the
Company in 1995. Executive Vice
President of German American
Bank in 1995; Senior Vice
President - Credit
Administration prior thereto.
James E. Essany (41) Senior Vice President -
Marketing in 1995; Senior
Vice President - Operations /
Administration of German
American Bank prior thereto.
</TABLE>
There are no family relationships between any of the officers of the
Corporation. All officers are elected for a term of one year.
PART II
The information in Part II of this report is incorporated by reference to
the indicated sections of the Registrant's annual report to shareholders for the
fiscal year ended December 31, 1995 (`Shareholders' Report'').
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
See ``Market and Dividend Information'' on page 35 of the Shareholders'
Report which section is incorporated herein by reference.
Item 6. Selected Financial Data.
See ``Five Year Summary of Financial Statements and Related Statistics'' on
page 1 of the Shareholders' Report which section is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See ``Management's Discussion and Analysis of Financial Condition and
Results of Operations''on pages 2 through 14 of the Shareholders' Report which
section is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Corporation and related notes on pages 15
through 33 of the Shareholders' Report and the Auditors' Report thereon on page
34 of the Shareholders' Report, and the Interim Financial Data on page 3 of the
Shareholders' Report, are all incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information relating to Directors of the Corporation will be included under
the caption `Election of Directors'' in the Corporation's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 25, 1996 which will be
filed with the Commission within 120 days of the end of the fiscal year covered
by this Report (the `1996 Proxy Statement''), which section is incorporated
herein by reference in partial answer to this Item.
Information relating to Executive Officers of the Corporation is included
under the caption `Executive Officers of the Registrant'' under Part I of this
Report on Form 10-K.
Information relating to Section 16(a) reporting will be included in the 1996
Proxy Statement under the caption `Section 16(a) Reporting'', which is
incorporated herein by reference.
Item 11. Executive Compensation.
Information relating to compensation of the Corporation's Executive Officers
and Directors will be included under the captions `Executive Compensation'' and
`Election of Directors -- Compensation of Directors'' in the 1996 Proxy
Statement of the Corporation, which sections are incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information relating to security ownership of certain beneficial owners and
management of the Corporation will be included under the captions `Election of
Directors''and ``Principal Owners of Common Shares'' of the 1996 Proxy
Statement of the Corporation, which sections are incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
Information responsive to this Item 13 will be included under the captions
`Certain Business Relationships and Transactions'' and ``Executive Compensation
- - Compensation Committee Interlocks and Insider Participation''of the 1996
Proxy Statement of the Corporation, which sections are incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
a) The following 1995, 1994, and 1993 consolidated financial statements of the
Corporation, and the Auditors' Report thereon, included on pages 15 through 34
of the Shareholders' Reports, are incorporated into Item 8 of this report by
reference.
Location in
1. Financial Statements Shareholders' Report
German American Bancorp and Subsidiaries
Consolidated Balance Sheets at December 31,
1995 and December 31, 1994 Page 15
Consolidated Statements of Income, years
ended December 31, 1995, 1994, and 1993 Page 16
Consolidated Statements of Cash Flows, years
ended December 31, 1995, 1994, and 1993 Page 17
Consolidated Statements of Changes in
Shareholders'Equity, years ended
December 31, 1995, 1994, and 1993 Page 18
Notes to the Consolidated Financial
Statements Pages 19 - 33
Independent Auditors' Report Page 34
2. Other financial statements and schedules are omitted because they are not
required or because the required information is included in the consolidated
financial statements or related notes.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1995.
c) Exhibits:
The Exhibits described in the Exhibit List immediately following the
`Signatures'' page of this report (which is incorporated herein by reference)
are hereby filed as part of this report.
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
GERMAN AMERICAN BANCORP
(Registrant)
Date: March 15, 1996 By/s/George W. Astrike
George W. Astrike,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 15, 1996 By/s/George W. Astrike
George W. Astrike,
Chairman of the
Board and Director (Chief
Executive Officer)
Date: March 15, 1996 By/s/Mark A. Schroeder
Mark A. Schroeder,
President and Director
(Principal Financial
Officer)
Date: March 15, 1996 By/s/David G. Buehler
David G. Buehler, Director
Date: March 15, 1996 By/s/Michael B. Lett
Michael B. Lett, Director
Date: March 15, 1996 By/s/Gene C. Mehne
Gene C. Mehne, Director
Date: March 15, 1996 By/s/Robert L. Ruckriegel
Robert L. Ruckriegel,
Director
Date: March 15, 1996 By/s/William R. Hoffman
William R. Hoffman,
Director
Date: March 15, 1996 By/s/Joseph F. Steurer
Joseph F. Steurer,
Director
Date:
A. Wayne (Skip) Place Jr.,
Director
Date:
Larry J. Seger, Director
Date: March 15, 1996 By/s/John M. Gutgsell
John M. Gutgsell,
Controller (Principal
Accounting Officer)
<TABLE>
<CAPTION>
Executive
Compensation
Plans and Exhibit
Arrangements** Number Description of Exhibit
<S> <C> <C>
3.1 Restated Articles of Incorporation of
the Registrant as amended
April 24, 1995.
3.2 Restated Bylaws of the Registrant as
amended August 14, 1990.
10.1 Purchase and Assumption Agreement
between the Registrant and Regional
Federal Savings Bank dated July 8,
1994, is incorporated by reference to
Exhibit 2 to the Company's Quarterly
Report on Form 10-Q, as amended by
Form 10-Q/A filed on or about
September 19, 1994.
10.2 Sublease entered by and between
Buehler Foods, Inc. and The German
American Bank dated January 2, 1987
(Huntingburg Banking Center Branch)
is incorporated by reference from
Exhibit 10.5 to the Registrant's
Registration Statement on Form S-4
filed February 28, 1994
(No. 33-75762) (the ``Otwell S-4'').
10.3 Sublease entered by and between
Buehler Foods, Inc. and the Bank
dated August 1, 1990 (The Crossing
Shopping Center Branch) is
incorporated by reference to Exhibit
10.12 of the Registrant's Report on
Form 10-K for the year ended
December 31, 1990.
10.4 Letter dated January 5, 1995 from the
German American Bank to Buehler
Foods, Inc. notifying Buehler Foods,
Inc. of exercise of renewal
option on The Crossing Shopping
Center Branch. (Exhibit 10.3).
X 10.5 The Company's 1992 Stock Option Plan
is incorporated by reference from
Exhibit 10.1 to the Unibancorp S-4.
X 10.6 Executive Deferred Compensation
Agreement dated December 1, 1992
between the German American Bank and
George W. Astrike, is incorporated
herein by reference from Exhibit 10.3
to the Unibancorp S-4.
X 10.7 Director Deferred Compensation
Agreement between The German
American Bank and certain of its
Directors, is incorporated herein by
reference from Exhibit 10.4 to the
S-4. (The Agreement entered into by
George W. Astrike, a copy of
which was filed as Exhibit 10.4 to
the S-4, is substantially identical
to the Agreements entered into by
the other Directors.) The schedule
following Exhibit 10.4 to the S-4
lists the Agreements with the other
Directors and sets forth the material
detail in which such Agreements
differ from the Agreement filed as
Exhibit 10.4 to the Unibancorp S-4.
X 10.8 Incentive stock option agreement
between the Company and George W.
Astrike dated April 20, 1993, is
incorporated by reference from
Exhibit 10.6 to the Otwell S-4.
X 10.9 Form of Incentive Stock Option
Agreement executed April 20, 1993
between the Company and each of Mark
A. Schroeder (5000 shares), James E.
Essany (1500 shares), Urban Giesler
(1500 shares) and Stan J. Ruhe (3000
shares) (all numbers and prices
unadjusted for stock splits and stock
dividends) is incorporated by
reference from Exhibit 10.7 to the
Otwell S-4.
X 10.10 Form of Incentive Stock Option
Agreement executed December 30,
1994 between the Registrant and George
W. Astrike (1700 shares) and Mark
A. Schroeder (1500 shares) is incorporated
by reference to Exhibit 10.12 of the
Registrant's Report on Form 10-K for the
year ended December 31, 1994.
X 10.11 Form of Incentive Stock Option
Agreement executed July 10, 1995
between the Registrant and Mark A.
Schroeder is incorporated by
reference to Exhibit 10.1 to the
Company's Quarterly Report on Form
10-Q filed on or about
November 13, 1995.
X 10.12 Schedule of Incentive Stock Option
Agreements between the Registrant
and its executive officers dated
July 10, 1995.
11 Computation of Earnings Per Share.
13 Registrant's Annual Report to
Shareholders for the year ended
December 31, 1995. This exhibit,
except to the extent specifically
incorporated by reference herein, is
furnished for the information of the
Commission only and is not to be
deemed `filed'' as a part of this Report.
21 Subsidiaries of the Registrant.
23 Consents of Experts and Counsel.
27 Financial Data Schedule.
</TABLE>
**Exhibits that describe or evidence all management contracts or compensatory
plans or arrangements required to be filed as exhibits to this Report are
indicated by an `X'' in this column.
RESTATED
ARTICLES OF INCORPORATION
OF GERMAN AMERICAN BANCORP
ARTICLE I
Name
The name of the Corporation is German American Bancorp.
ARTICLE II
Purposes and Powers
Section 1. Purposes of the Corporation. The purposes for which the
Corporation is formed are to transact any or all lawful business permitted by
applicable law and for which corporations may now or hereafter be incorporated
under the Corporation Law.
Section 2. Powers of the Corporation. The Corporation shall have (a) all
powers now or hereafter authorized by or vested in corporations pursuant to the
provisions of the Corporation Law, (b) all powers now or hereafter vested in
corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its Bylaws as from time to
time in effect.
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is perpetual.
Exhibit 3.1
ARTICLE IV
Registered Office and Agent
The street address of the Corporation's registered office at the time of
adoption of these Restated Articles of Incorporation is 711 Main Street, P.O.
Box 810, Jasper, Indiana 47546, and the name of its Resident Agent at such
office at the time of adoption of these Restated Articles of Incorporation is
George W. Astrike.
ARTICLE V
Shares
The total number of shares of capital stock the Corporation has authority
to issue shall be 5,500,000 shares consisting of 5,000,000 common shares (the
`Common Shares'') and 500,000 preferred shares (the ``Preferred Shares''). The
Corporation's shares shall have a par value of ten dollars ($10.00) per share.
ARTICLE VI
Terms of Shares
Section 1. General Terms of All Shares. The Corporation shall have the
power to acquire (by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel, or otherwise dispose of the shares of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Indiana. The power to purchase, redeem, or otherwise
acquire the Corporation's own shares, directly or indirectly, may be exercised
without pro rata treatment of the owners or holders of any class or series of
shares. The Corporation may not purchase, redeem or otherwise acquire the
Corporation's own shares if, after giving effect thereto, the Corporation would
not be able to pay its debts as they become due in the usual course of business
or the Corporation's total assets would be less than its total liabilities
(without regard to any amounts that would be needed, if the Corporation were to
be dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Shares in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 3(a) of this Article VI describing the terms of
such series). Shares of the Corporation purchased, redeemed, or otherwise
acquired by it shall constitute authorized by unissued shares, unless the Board
of Directors shall at any time adopt a resolution providing that such shares
constitute authorized and issued but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue, and sell
shares in accordance with, and in such amounts as may be permitted by, the laws
of the State of Indiana and the provisions of these Restated Articles of
Incorporation and for such consideration, at such price or prices, at such time
or times and upon such terms and conditions (including the privilege of
selectively repurchasing the same) as the Board of Directors of the Corporation
shall determine, without the authorization or approval by any shareholders of
the Corporation. Shares may be disposed of, issued, and sold to such persons,
firms, or corporations as the Board of Directors may determine, without any
preemptive or other right on the part of the owners or holders of other shares
of the Corporation of any class or kind to acquire such shares by reason of
their ownership of such other shares.
The Corporation shall have the power to declare and pay dividends or other
distributions upon the issued and outstanding shares of the Corporation, subject
to the limitation that a dividend or other distribution may not be made if,
after giving it effect, the Corporation would not be able to pay its debts as
they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (without regard to any amounts
that would be needed, if the Corporation were to be dissolved at the time of the
dividend or other distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those of
the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Preferred Shares in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 3(a) of this Article VI describing the terms of
such series). The Corporation shall have the power to issue shares of one class
or series as a share dividend or other distribution in respect of that class or
series or one or more other classes or series, except as may be otherwise
provided with respect to a series of Preferred Shares in the provisions of these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 3(a) of this Article VI describing the terms of such series.
Section 2. Terms of Common Shares. The Common Shares shall be equal in
every respect insofar as their relationship to the Corporation is concerned, but
such equality of rights shall not imply equality of treatment as to redemption
or other acquisition of shares by the Corporation. Subject to the rights of the
holders of any issued and outstanding Preferred Shares under this Article VI,
the holders of Common Shares shall be entitled to share ratably in such
dividends or other distributions (other than purchases, redemptions, or other
acquisitions of Common Shares of the Corporation), if any, as are declared and
paid from time to time on the Common Shares at the discretion of the Board of
Directors. In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Preferred Shares of the full amount to which they shall be
entitled under this Article VI, the holders of Common Shares shall be entitled,
to the exclusion of the holders of the Preferred Shares of any and all series,
to share, ratably according to the number of Common Shares held by them, in all
remaining assets of the Corporation available for distribution to its
shareholders.
Section 3. Terms of Preferred Shares.
(a) Preferred Shares may be issued from time to time in one or more
series, each such series to have such distinctive designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Restated Articles of Incorporation. Subject to the requirements
of the Corporation Law and subject to all other provisions of these Restated
Articles of Incorporation, the Board of Directors of the Corporation may create
one or more series of Preferred Shares and may determine the preferences,
limitations, and relative voting and other rights of one or more series of
Preferred Shares before the issuance of any shares of that series by the
adoption of an amendment to these Restated Articles of Incorporation that
specifies the terms of that series of Preferred Shares. All shares of a series
of Preferred Shares must have preferences, limitations, and relative voting and
other rights identical to those of other shares of the same series. No series
of Preferred Shares need have preferences, limitations, or relative voting or
other rights identical with those of any other series of Preferred Shares.
Before issuing any shares of a series of Preferred Shares, the Board of
Directors shall adopt an amendment to these Restated Articles of Incorporation,
which shall be effective without any shareholder approval or other action, that
fixes and sets forth the distinctive designation of such series; the number of
shares that shall constitute such series, which number may be increased or
decreased (but not below the number of shares thereof then outstanding) from
time to time by action of the Board of Directors; and the preferences,
limitations, and relative voting and other rights of the series. Authority is
hereby expressly vested in the Board of Directors, by such amendment, to fix all
of the preferences or rights, and any qualifications, limitations, or
restrictions of such preferences or rights, of such series to the full extent
permitted by the Corporation Law; provided, however, that no such preferences,
rights, qualifications, limitations, or restrictions shall be in conflict with
these Restated Articles of Incorporation or any amendment hereof.
(b) Preferred Shares of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or that, if convertible, have been converted into shares of the
Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Shares, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Shares in accordance with Section 3 (a) of this Article VI.
ARTICLE VII
Voting Rights
Section 1. Common Shares. Except as otherwise provided by the Corporation
Law or by the provisions of these Restated Articles of Incorporation adopted by
the Board of Directors pursuant to Section 3(a) of Article VI hereof describing
the Preferred Shares or a series thereof, and subject to such shareholder
disclosure and recognition procedures (which may include sanctions for
noncompliance therewith to the fullest extent permitted by the Corporation Law)
as the Corporation may by action of the Board of Directors establish, the Common
Shares have unlimited voting rights. At every meeting of the shareholders of
the Corporation every holder of Common Shares shall be entitled to one vote in
person or by proxy for each Common Share standing in such holder's name on the
share transfer records of the Corporation.
Section 2. Preferred Shares. Except as required by the Corporation Law or
by the provisions of these Restated Articles of Incorporation adopted by the
Board of Directors pursuant to Section 3(a) of Article VI hereof describing the
terms of Preferred Shares or a series thereof, the holders of Preferred Shares
shall have no voting rights or powers. Preferred Shares shall, when validly
issued by the Corporation, entitle the record holder thereof to vote on such
matters, but only on such matters, as the holders thereof are entitled to vote
under the Corporation Law or under these Restated Articles of Incorporation
adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof
describing the terms of Preferred Shares or a series thereof (which provisions
may provide for special, conditional, limited, or unlimited voting rights,
including multiple or fractional votes per share, or for no right to vote,
except to the extent required by the Corporation Law) and subject to such
shareholder disclosure and recognition procedures (which may include sanctions
for noncompliance therewith to the fullest extent permitted by the Corporation
Law) as the Corporation may by action of the Board of Directors establish.
ARTICLE VIII
Directors
Section 1. Number. The Board of Directors at the time of adoption of
these Restated Articles of Incorporation is composed of ten members. The number
of Directors shall be fixed by, or fixed in accordance with, the Bylaws.
Whenever there are nine or more Directors, the Bylaws may also provide for
staggering the terms of the members of the Board of Directors by dividing the
total number of Directors into two or three groups (with each group containing
one-half or one-third of the total, as near as may be) whose terms of office
expire at different times.
Section 2. Election of Directors by Holders of Preferred Shares. The
holders of one or more series of Preferred Shares may be entitled to elect all
or a specified number of Directors, but only to the extent and subject to
limitations as may be set forth in the provisions of these Restated Articles of
Incorporation adopted by the Board of Directors pursuant to Section 3(a) of
Article VI hereof describing the terms of the series of Preferred Shares.
Section 3. Vacancies. Vacancies occurring in the Board of Directors shall
be filled in the manner provided in the Bylaws or, if the Bylaws do not provide
for the filling of vacancies, in the manner provided by the Corporation Law.
Section 4. Removal of Directors. Any or all of the members of the Board
of Directors may be removed, with or without cause, at a meeting of the
shareholders called expressly for that purpose, by the affirmative vote of the
holders of at least 80 percent of the outstanding shares then entitled to vote
at an election of Directors. However, a Director elected by the holders of a
series of Preferred Shares as authorized by Section 2 of this Article VIII may
be removed only by the affirmative vote of the holders of at least 80 percent of
the outstanding shares of that series then entitled to vote at an election of
Directors. Directors may not be removed by the Board of Directors.
Section 5. Liability of Directors. A Director's responsibility to the
Corporation shall be limited to discharging his duties as a Director, including
his duties as a member of any committee of the Board of Directors upon which he
may serve, in good faith, with the care an ordinarily prudent person in a like
position would exercise under similar circumstances, and in a manner the
Director reasonably believes to be in the best interests of the Corporation, all
based on the facts then known to the Director.
In discharging his duties, a Director is entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by:
(a) One or more officers or employees of the Corporation whom the
Director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
the Director reasonably believes are within such person's professional or
expert competence; or
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 5 unwarranted. A Director may, in considering the best interests
of the Corporation, consider the effects of any action on shareholders,
employees, suppliers, and customers of the Corporation, and communities in which
offices or other facilities of the Corporation are located, and any other
factors the Director considers pertinent.
Directors shall be immune from personal liability for any action taken as a
Director, or any failure to take any action, to the fullest extent permitted by
the applicable provisions of the Corporation Law from time to time in effect and
by general principles of corporate law.
ARTICLE IX
Provisions for Regulation of Business and Conduct of Affairs of Corporation
Section 1. Bylaws. The Board of Directors shall have the exclusive power
to make, alter, amend, or repeal, or to waive provisions of, the Bylaws of the
Corporation by the affirmative vote of a majority of the number of Directors
then in office, except as provided by the Corporation Law. All provisions for
the regulation of the business and management of the affairs of the Corporation
not stated in these Restated Articles of Incorporation shall be stated in the
Bylaws. The Board of Directors may also adopt Emergency Bylaws of the
Corporation and shall have the exclusive power (except as may otherwise be
provided therein) to make, alter, amend, or repeal, or to waive provisions of,
the Emergency Bylaws by the affirmative vote of a majority of the entire number
of Directors at the time.
Section 2. Amendment or Repeal. (a) Any amendment, change or repeal of
Section 4 of Article VIII, Section 2 or 3 of Article IX, or Article X of these
Restated Articles of Incorporation, or any other amendment of these Restated
Articles of Incorporation which would have the effect of modifying or permitting
circumvention of those provisions, shall require the affirmative vote, at a
meeting of shareholders of the Corporation, by the holders of a least 80 percent
of the outstanding shares of all classes of Voting Shares of the Corporation
(considered for purposes of this Section 2(a) as a single class and as defined
in Article X) and, if the amendment, change or repeal shall be proposed by or on
behalf of a Related Person (as that term is defined in Article X), by an
Independent Majority of Shareholders (as defined in Article X); provided,
however, that this Section 2(a) shall not apply to, and such vote shall not be
required for, any such amendment, change or repeal recommended to shareholders
by the favorable vote of not less than two-thirds of the Board of Directors and,
if the amendment, change or repeal shall be proposed by or on behalf of a
Related Person, by the favorable vote of not less than two-thirds of the
Continuing Directors (as defined in Article X and computed with reference to the
Related Person who shall propose such amendment, change or repeal), and any such
amendment, change or repeal so recommended shall require only the shareholder
vote required under the applicable provisions of the Corporation Law.
(b) Except as otherwise expressly provided in Section 2(a) above, the
Corporation shall be deemed, for all purposes, to have reserved the right to
amend, alter, change or repeal any provision contained in these Restated
Articles of Incorporation to the extent and in the manner now or hereafter
permitted or prescribed by statute, and all rights herein conferred upon
shareholders are granted subject to such reservation.
Section 3. Removal of Chairman of the Board and President. The Chairman
of the Board and the President, and each of them, may be removed from office at
any time, with or without cause, at a meeting of the Board of Directors called
expressly for that purpose, but only by the affirmative vote of two-thirds of
all other members of the entire Board of Directors, Any vacancy created by the
removal of the Chairman or the President may be filled only by the affirmative
vote of two-thirds of all remaining members of the Board.
ARTICLE X
Approval of Business Combinations
Section 1. Supermajority Vote. Except as provided in Sections 2 and 3 of
this Article X, neither the Corporation nor any of its Subsidiaries shall become
party to any Business Combination with a Related Person without the prior
affirmative vote at a meeting of the Corporation's shareholders:
(a) By the holders of not less than 80 percent of the outstanding
shares of all classes of Voting Shares of the Corporation considered for
purposes of this Article X as a single class, and
(b) By an Independent Majority of Shareholders.
Such favorable votes shall be in addition to any shareholder vote that
would be required without reference to this Section 1 and shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified by law or in other Articles of these Restated
Articles of Incorporation or the Bylaws of the Corporation or otherwise.
Section 2. Reduced Supermajority Vote for Fair Pricing. The provisions of
Section 1 shall apply to a Business Combination, except that the percentage vote
required by Section 1 (a) shall be reduced from not less than 80 percent to not
less than two-thirds, if all of the conditions set forth in subsections (a)
through (d) of this Section 2 are satisfied.
(a) The fair market value of the property, securities or other
consideration to be received per share by holders of each class or series
of capital shares of the Corporation in the Business Combination is not
less, as of the date of the consummation of the Business Combination (the
`Consummation Date''), than the higher of the following: (i) the highest
per share price (with appropriate adjustments for recapitalizations and for
share splits, share dividends and like distributions) including brokerage
commissions and solicitation fees paid by the Related Person in acquiring any
of its holdings of such class or series of capital shares within the two-year
period immediately prior to the first public announcement of the proposed
Business Combination (`Announcement Date'') or in the transaction in which it
became a Related Person, whichever is higher, plus interest compounded
annually, from the later of the date that the Related Person became a Related
Person (the `Determination Date''), or the date two years before the
Consummation Date, through the Consummation Date, at the rate publicly
announced as the `prime rate'' of interest of Citibank, N.A. (or of such other
major bank headquartered in New York as may be selected by a majority of the
Continuing Directors) from time to time in effect, less the aggregate amount
of any cash dividends paid and the fair market value of any dividends
paid in other than cash on each such share from the date from which interest
accrues under the preceding clause through the Consummation Date up to but
not exceeding the amount of interest so payable per share; OR (ii) if such
class or series is then traded on an exchange or is the subject of regularly
published quotations from three or more broker/dealers who make a market in
such class or series for their own accounts, the fair market value per share
of such class or series on the Announcement Date, as determined by the highest
closing sales price on such exchange or the highest closing bid quotation
with respect to such shares during the 30-day period immediately preceding
the Announcement Date. In the event of a Business Combination upon
consummation of which the Corporation would be the surviving corporation or
company or would continue to exist (unless it is provided, contemplated or
intended that as part of such Business Combination or within one year after
consummation thereof a plan of liquidation or dissolution of the Corporation
will be effected), the term `other consideration to be received''shall
include (without limitation) Common Shares and/or the shares of any other
class of shares retained by shareholders of the Corporation other than
Related Persons who are parties to such Business Combination;
(b) The consideration to be received in such Business Combination by
holders of each class or series of capital shares other than the Related
Person involved shall, except to the extent that a shareholder agrees
otherwise as to all or part of the shares which he or she owns, be in the
same form and of the same kind as the consideration paid by the Related
Person in acquiring the majority of the capital shares of such class or series
already Beneficially Owned by it within the two-year period ending on the
Determination Date;
(c) After such Related Person became a Related Person and prior to
the consummation of such Business Combination: (i) such Related Person shall
have taken steps to insure that the Board of Directors of the Corporation
included at all times representation by Continuing Directors proportionate to
the ratio that the number of Voting Shares of the Corporation from time to time
not Beneficially Owned by the Related Person bears to all Voting Shares of
the Corporation outstanding at the time in question (with a Continuing
Director to occupy any resulting fractional position among the Directors); (ii)
such Related Person shall not have acquired from the Corporation, directly or
indirectly, any shares of the Corporation (except upon conversion of
convertible securities acquired by it prior to becoming a Related Person or
as a result of a pro rata share dividend, share split or division of shares
or in a transaction that satisfied all applicable requirements of this
Article X); (iii) such Related Person shall not have acquired any additional
Voting Shares of the Corporation or securities convertible into or exchangeable
for Voting Shares except as a part of the transaction which resulted in such
Related Person's becoming a Related Person; and (iv) such Related Person
shall not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits provided by the
Corporation or any Subsidiary, or made any major change in the Corporation's
business or equity capital structure or entered into any contract, arrangement
or understanding with the Corporation except any such change, contract,
arrangement or understanding as may have been approved by the favorable vote of
not less than a majority of the Continuing Directors of the Corporation; and
(d) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations of the Securities
and Exchange Commission thereunder, as then in force for corporations subject to
the requirements of Section 14 of such Act (even if the Corporation is not
otherwise subject to Section 14 of such Act), shall have been mailed to all
holders of Voting Shares for the purpose of soliciting shareholder approval of
such Business Combination. Such proxy statement shall contain on the face page
thereof, in a prominent place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing Directors, or
any of them, may have furnished in writing and, if deemed advisable by a
majority of the Continuing Directors, a fair summary of an opinion of a
reputable investment banking firm addressed to the Corporation as to the
fairness (or lack of fairness) of the terms of such Business Combination from
the point of view of the holders of Voting Shares other than any Related Person
(such investment banking firm to be selected by a majority of the Continuing
Directors, to be furnished with all information it reasonably requests, and to
be paid a reasonable fee for its services upon receipt by the Corporation of
such opinion).
Section 3. Director Approval Exception. The provisions of Sections 1 and
2 of this Article X shall not apply to, and such votes shall not be required,
if:
(a) The Continuing Directors of the Corporation by a two-thirds vote
(i) have expressly approved a memorandum of understanding with the Related
Person with respect to the Business Combination prior to the time the Related
Person became a Related Person, or (ii) have otherwise approved the Business
Combination (this provision is incapable of satisfaction unless there is at
least one Continuing Director); or
(b) The Business Combination is solely between the Corporation and
another corporation, 100 percent of the Voting Shares of which are owned
directly or indirectly by the Corporation.
Section 4. Definitions. For the purpose of this Article X:
(a) A `Business Combination'' means:
(i) the sale, exchange, lease, transfer or other disposition to
or with a Related Person or any Affiliate or Associate of such Related Person by
the Corporation or any of its Subsidiaries (in a single transaction or a Series
of Related Transactions) of all or substantially all, or any Substantial Part,
of its or their assets or businesses (including, without limitation, any
securities issued by a Subsidiary);
(ii) The purchase, exchange, lease or other acquisition by the
Corporation or any of its Subsidiaries (in a single transaction or a Series of
Related Transactions) of all or substantially all, or any Substantial Part, of
the assets or business of a Related Person or any Affiliate or Associate of such
Related Person;
(iii) Any merger or consolidation of the Corporation or any
Subsidiary thereof into or with a Related Person or any Affiliate or Associate
of such Related Person or into or with another Person which, after such merger
or consolidation, would be an Affiliate or an Associate of a Related Person, in
each case irrespective of which Person is the surviving entity in such merger or
consolidation;
(iv) Any reclassification of securities, recapitalization or
other transaction (other than a redemption in accordance with the terms of the
security redeemed) which has the effect, directly or indirectly, of increasing
the proportionate amount of Voting Shares of the Corporation or any Subsidiary
thereof which are Beneficially Owned by a Related Person, or any partial or
complete liquidation, spinoff, splitoff or splitup of the Corporation or any
Subsidiary thereof; provided, however, that this Section 4(a)(iv) shall not
relate to any transaction of the types specified in this Article X that has been
approved by a majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of Beneficial
Ownership by a Related Person of Voting Shares or securities convertible into
Voting Shares or any voting securities or securities convertible into voting
securities of any Subsidiary of the Corporation, or the acquisition upon the
issuance thereof of Beneficial Ownership by a Related Person of any rights,
warrants or options to acquire any of the foregoing or any combination of the
foregoing Voting Shares or voting securities of the Subsidiary.
(b) A `Series of Related Transactions'' shall be deemed to include
not only a series of transactions with the same Related Person but also a series
of separate transactions with a Related Person or any Affiliate or Associate of
such Related Person.
(c) A `Person'' shall mean any individual, firm, corporation or
other entity and any partnership, syndicate or other group.
(d) `Related Person'' shall mean any Person (other than the
Corporation or any of the Corporation's Subsidiaries) who or that:
(i) is the Beneficial Owner, directly or indirectly, of more
than ten percent of the voting power of the outstanding Voting Shares;
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the Beneficial
Owner, directly or indirectly, of ten percent or more of the voting power of the
then outstanding shares of Voting Shares; or
(iii) is an assignee of or has otherwise succeeded to any Voting
Shares which were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Related Person, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933.
A Related Person shall be deemed to have acquired a share of the
Corporation at the time when such Related Person became the Beneficial Owner
thereof. For the purposes of determining whether a Person is the Beneficial
Owner of ten percent or more of the voting power of the then outstanding Voting
Shares, the outstanding Voting Shares shall be deemed to include any Voting
Shares that may be issuable to such Person pursuant to a right to acquire such
Voting Shares and that is therefore deemed to be Beneficially Owned by such
Person pursuant to Section 4(e)(ii)(a). A Person who is a Related Person at
(i) the time any definitive agreement relating to a Business Combination is
entered into, (ii) the record date for the determination of shareholders
entitled to notice of and to vote on a Business Combination, or (iii) the time
immediately prior to the consummation of a Business Combination, shall be deemed
a Related Person.
(e) A Person shall be a `Beneficial Owner'' of any Voting Shares:
(i) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such Person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any Voting Shares.
(f) An `Affiliate'' of, or a person Affiliated with, a specific
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Person specified.
(g) The term `Associate'' used to indicate a relationship with any
Person, means (i) any corporation or organization (other than this Corporation
or a majority-owned Subsidiary of this Corporation) of which such Person is an
officer or partner or is, directly or indirectly, the Beneficial Owner of five
percent or more of any class of equity securities, (ii) any trust or other
estate in which such Person has a substantial beneficial nterest or as to which
such Person serves as trustee or in a similar fiduciary capacity, (iii) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person, or (iv) any investment company registered under the
Investment Company Act of 1940, for which such Person or any Affiliate of such
Person serves as investment advisor.
(h) `Subsidiary'' means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Related Person set
forth in paragraph (d) of this Section 4, the term `Subsidiary'' shall mean
only a corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
(i) `Continuing Director'' means any member of the Board of
Directors of the Corporation (the `Board''), other than the Related Person who
proposes the Business Combination in question and his Affiliates and Associates,
who (i) is a member of the Board at the time this Article X first became
effective or (ii) was a member of the Board prior to the time that the Related
Person who proposes the Business Combination in question became a Related Person
or (iii) is a successor of a Continuing Director who was recommended to succeed
the Continuing Director by a majority of Continuing Directors then on the Board.
(j) `Independent Majority of Shareholders'' shall mean the holders
of a majority of the outstanding Voting Shares that are not Beneficially Owned
or controlled, directly or indirectly, by the Related Person who proposes the
Business Combination in question.
(k) `Voting Shares'' shall mean all outstanding capital shares of
the Corporation or another corporation entitled to vote generally in the
election of Directors, and each reference to a proportion of shares of Voting
Shares shall refer to such proportion of the votes entitled to be cast by such
shares.
(l) `Substantial Part'' means properties and assets involved in any
single transaction or a Series of Related Transactions having an aggregate fair
market value of more than ten percent of the total consolidated assets of the
Person in question as determined immediately prior to such transaction or Series
of Related Transactions.
Section 5. Director Determinations. A majority of the Continuing
Directors shall have the power to determine for the purposes of this Article X,
on the bases of information known to them: (i) the number of Voting Shares of
which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate
or Associate of another, (iii) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition of
`Beneficial Owner,'' (iv) whether the assets subject to any Business
Combination constitute a Substantial Part, (v) whether two or more transactions
constitute a Series of Related Transactions, and (vi) such other matters with
respect to which a determination is required under this Article X.
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and its shareholders when evaluating a
business combination or a proposal by another Person or Persons to make a
business combination or a tender or exchange offer (regardless of whether such
proposal is otherwise subject to this Article X), the Board of Directors of the
Corporation shall, in addition to considering the adequacy of the consideration
to be paid in connection with any such transaction, consider all of the
following factors and any other factors that it deems relevant: (i) the social
and economic effects of the transaction on the Corporation and its Subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the communities in which the Corporation and its Subsidiaries operate or are
located; (ii) the business and financial condition and earnings prospects of
the acquiring Person or Persons, including, but not limited to, debt service and
other existing or likely financial obligations of the acquiring Person or
Persons and their Affiliates and Associates, and the possible effect of such
conditions upon the Corporation and its Subsidiaries and the other elements of
the communities in which the Corporation and its Subsidiaries operate or are
located; and (iii) the competence, experience, and integrity of the acquiring
Person or Persons and its or their management and Affiliates and Associates.
Section 6. Fiduciary Obligations Unaffected. Nothing in this Article X
shall be construed to relieve any Related Person from any fiduciary duty imposed
by law.
BYLAWS
OF GERMAN AMERICAN BANCORP
(RESTATED AS OF MARCH 14,1989)
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meetings. Annual meetings of the shareholders of
the Corporation shall be held at such hour and at such place within or without
the State of Indiana as shall be designated by the Board of Directors.
Section 1.2. Special Meetings. Special meetings of the shareholders of
the Corporation may be called at any time by the Board of Directors or the
President and shall be called by the Board of Directors if the Secretary
receives written, dated, and signed demands for a special meeting, describing in
reasonable detail the purpose or purposes for which it is to be held, from the
holders of shares representing at least 25 percent of all votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting. If
the Secretary receives one or more proper written demands for a special meeting
of shareholders, the Board of Directors may set a record date for determining
shareholders entitled to make such demand. The Board of Directors or the
President, as the case may be, calling a special meeting of shareholders shall
set the date, time, and place of such meeting, which may be held within or
without the State of Indiana.
Section 1.3. Notices. A written notice, stating the date, time and
place of any meeting of the shareholders, and in the case of a special meeting
the purpose or purposes for which such meeting is called, shall be delivered or
mailed by the Secretary of the Corporation, to each shareholder of record of the
Corporation entitled to notice of or to vote at such meeting no fewer than 10
nor more than 60 days before the date of the meeting, or as otherwise provided
by the Corporation Law. In the event of a special meeting of shareholders
required to be called as the result of a demand therefore made by shareholders,
such notice shall be given no later than the sixtieth day after the
Corporation's receipt of the demand requiring the meeting to be called. Notice
of shareholders' meetings, if mailed, shall be mailed, postage prepaid, to each
shareholder at his address shown in the Corporation's current record of
shareholders.
A shareholder or his proxy may at any time waive notice of a meeting if the
waiver is in writing and is delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's records. A shareholder's attendance at
a meeting, whether in person or by proxy, (a) waives objection to lack of notice
or defective notice of the meeting, unless the shareholders or his proxy at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder or his proxy objects to considering the
matter when it is presented. Each shareholder who has in the manner above
provided waived notice or objection to notice of the shareholders' meeting shall
be conclusively presumed to have been given due notice of such meeting,
including the purpose or purposes thereof.
Exhibit 3.2
If an annual or special shareholders' meeting is adjourned to a different
date, time or place, notice need not be given of the new date, time or place if
the new date, time or place is announced at the meeting before adjournment,
unless a new record date is or must be established for the adjourned meeting.
Section 1.4. Voting. Except as otherwise provided by the Corporation
Law or the Corporation's Articles of Incorporation, each capital share of any
class of the Corporation that is outstanding at the record date and represented
in person or by proxy at the annual or special meeting shall entitle the record
holder thereof, or his proxy, to one vote on each matter voted on at the
meeting.
Section 1.5. Quorum. Unless the Corporation's Articles of Incorporation
or the Corporation Law provide otherwise, at all meetings of shareholders a
majority of the votes entitled to be cast on a matter, represented in person or
by proxy, constitutes a quorum for action on the matter. Action may be taken at
a shareholders' meeting only on matters with respect to which a quorum exists;
provided, however, that any meeting of shareholders, including annual and
special meetings and any adjournments thereof, may be adjourned to a later date
although less than a quorum is present. Once a share is represented for any
purpose at a meeting, it is deemed present for any quorum purposes for the
remainder of the meeting and for any meeting held pursuant to an adjournment of
that meeting unless a new record date is or must be set for that adjourned
meeting.
Section 1.6. Vote Required to Take Action. If a quorum exists as to a
matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, unless
the Corporation's Articles of Incorporation or the Corporation Law requires a
greater number of affirmative votes. Directors shall be elected by a plurality
of the votes properly cast.
Section 1.7. Record Date. Only such persons shall be entitled to
notice of or to vote, in person or by proxy, at any shareholders' meeting as
shall appear as shareholders upon the books of the Corporation as of such record
date as the Board of Directors shall determine, which date may not be earlier
than the date 70 days immediately preceding the meeting unless otherwise
permitted by the Corporation Law. In the absence of such determination, the
record date shall be the fiftieth day immediately preceding the date of such
meeting. Unless otherwise provided by the Board of Directors, shareholders
shall be determined as of the close of business on the record date.
Section 1.8. Proxies. A shareholder may vote his shares either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder (including authorizing the proxy to receive, or to waive,
notice of any shareholders' meetings within the effective period of such proxy)
by signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes and is
effective for 11 months unless a longer period is expressly provided in the
appointment form. The proxy's authority may be limited to a particular meeting
or may be general and authorize the proxy to represent the shareholder at any
meeting of shareholders held within the time provided in the appointment form.
Subject to the Corporation Law and to any express limitation on the proxy's
authority appearing on the face of the appointment form, the Corporation is
entitled to accept the proxy's vote or other action as that of the shareholder
making the appointment.
ARTICLE II
Directors
Section 2.1. Number and Term. The business of the Corporation shall be
managed by a Board of Directors consisting of at least 9 Directors and no more
than 12 Directors. The exact number of Directors of the Corporation shall be
fixed by the Board of Directors within the range established by the preceding
sentence, and may be changed within that range from time to time by the Board
of Directors. The Directors shall be divided into two equal (or as nearly equal
as possible) classes with only one class of Directors being elected at any
annual meeting. The term of each class of Directors elected shall be two years.
Despite the expiration of a Director's term, the Director shall continue to
serve until his successor is elected and qualified, or until the earlier of his
death, resignation, disqualification, or removal, or until there is a decrease
in the number of Directors. No Director shall be elected after reaching the age
of 65 years, unless such Director for the year preceding his election has (a)
worked an average of 30 hours per week in his principal occupation, and (b)
resided in the State of Indiana for nine months. No Director shall be elected
after reaching the age of 69 years. Vacancies caused by an increase in the
number of Directors shall be apportioned so as to make the classes as nearly
equal as possible. The Directors and each of them shall have no authority to
bind the Corporation except when acting as a Board or as a committee established
by the Board and granted authority to bind the Corporation.
Section 2.2. Quorum and Vote Required to Take Action. A majority of
the members of the Board of Directors (the size of which shall be determined in
accordance with the latest action of the Board of Directors fixing the number of
Directors) shall be necessary to constitute a quorum for the transaction of any
business, except the filling of vacancies. If a quorum is present when a vote
is taken, the affirmative vote of a majority of the Directors present shall be
the act of the Board of Directors, unless the act of a greater number is
required by the Corporation Law, the Corporation's Articles of Incorporation or
these Bylaws.
Section 2.3. Annual and Regular Meetings. The Board of Directors shall
meet annually, without notice, on the same day as the annual meeting of the
shareholders, for the purpose of transacting such business as properly may come
before the meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at such times, and
at such places as shall be fixed by resolution adopted by the Board of Directors
or otherwise communicated to the Directors. The Board of Directors may at any
time alter the date for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be called by the President or by a majority of the Board of
Directors upon not less than 24 hours' notice given to each Director of the
date, time and place of the meeting, which notice need not specify the purpose
or purposes of the special meeting. Such notice may be communicated in person
(either in writing or orally), by telephone, telegraph, teletype or other form
of wire or wireless communication or by mail, and shall be effective at the
earlier of the time of its receipt or, if mailed, five days after its mailing.
Notice of any meeting of the Board may be waived in writing at any time if the
waiver is signed by the Director entitled to the notice and is filed with the
minutes of Corporate records. A Director's attendance at or participation in a
meeting waives any required notice to the Director of the meeting, unless the
Director at the beginning of the meeting (or promptly upon the Director's
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
Section 2.5. Written Consents. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced
by one or more written consents describing the action taken, signed by each
Director, and included in the minutes or filed with the corporate records
reflecting the action taken. Action taken under this Section 2.5 is effective
when the last Director signs the consent, unless the consent specifies a
different prior or subsequent effective date, in which case the action is
effective on or as of the specified date. A consent signed under this Section
2.5 has the effect of a meeting vote and may be described as such in any
document.
Section 2.6. Participation by Conference Telephone. The Board of
Directors may permit any or all Directors to participate in a regular or special
meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A Director participating in a meeting by
such means shall be deemed to be present in person at the meeting.
Section 2.7. Committees.
(a) The Board of Directors may create one or more committees and appoint
members of the Board of Directors to serve on them, by resolution of the Board
of Directors adopted by a majority of all the Directors in office when the
resolution is adopted. Each committee may have one or more members, and all the
members of a committee shall serve at the pleasure of the Board of Directors.
(b) To the extent specified by the Board of Directors in the resolutions
creating a committee, each committee may exercise all of the authority of the
Board of Directors; provided, however, that a committee may not:
(1) authorize dividends or other distributions as defined by the
Corporation Law, except a committee may authorize or approve a reacquisition of
shares if done according to a formula or method prescribed by the Board of
Directors;
(2) approve or propose to shareholders action that is required to be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Corporation's Articles of Incorporation;
(5) adopt, amend, repeal or waive any provision of these Bylaws; or
(6) approve a plan of merger not requiring shareholder approval.
(c) Except to the extent inconsistent with the resolutions creating a
committee, Sections 2.2 through 2.6 of these Bylaws, which govern meetings,
action without meetings, notice and waiver of notice, quorum and voting
requirements, and telephone participation in meetings of the Board of Directors,
apply to the committee and its members as well.
ARTICLE III
Officers
Section 3.1. Designation, Selection and Terms. The officers of the
Corporation shall consist of the Chairman of the Board, the President and the
Secretary. The Board of Directors may also elect Vice Presidents, Assistant
Secretaries and such other officers or assistant officers as it may from time to
time determine by resolution creating the office and defining the duties
thereof. In defining the duties of officers, the Board of Directors may
designate a chief executive officer, a chief operating officer, a chief
administrative officer, a chief financial officer, a chief accounting officer or
similar functional titles. The officers of the Corporation shall be elected by
the Board of Directors and need not be selected from among the members of the
Board of Directors, except for the Chairman of the Board, who shall be a member
of the Board of Directors. Any two or more offices may be held by the same
person. All officers shall serve at the pleasure of the Board of Directors.
The election or appointment of an officer does not itself create contract
rights.
Section 3.2. Removal. The Board of Directors may remove any officer at
any time with or without cause, except that a two-thirds affirmative vote of all
other members of said Board shall be required to remove the Chairman of the
Board and/or the President. Vacancies in such offices, however occurring, may
be filled by the Board of Directors at any meeting of the Board of Directors,
except that two-thirds affirmative vote of all remaining members of said Board
shall be required to fill any vacancy created by the removal of the Chairman of
the Board and/or the President.
Section 3.3. Chairman of the Board. The Chairman of the Board shall be
selected from among the members of the Board of Directors. He shall preside at
all meetings of the shareholders and the Board of Directors at which he shall be
present, and shall perform the duties and have the powers of the President in
his absence or in the event of the inability or refusal of the President to act.
The Chairman of the Board shall serve the Corporation in such other capacities
and perform such other duties as are incident to his office or may from time to
time be delegated to him by the Board of Directors or defined in these Bylaws.
Section 3.4. President. The President shall have and may exercise all
of the powers and duties as are incident to his office or may from time to time
be delegated to him by the Board of Directors or defined in these Bylaws.
Section 3.5. Secretary. The Secretary shall be the custodian of the
books, papers and records of the Corporation and of its corporate seal, if any,
and shall be responsible for seeing that the Corporation maintains the records
required by the Corporation Law (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by the Corporation Law. The Secretary shall be responsible for preparing
minutes of the meetings of the shareholders and of the Board of Directors and
for authenticating records of the Corporation, and he shall perform all of the
other duties usual in the office of the Secretary of a Corporation.
ARTICLE IV
Indemnification of Officers,
Directors and Other Eligible Persons
Section 4.1. General. To the extent not inconsistent with applicable
law, every Eligible Person shall be indemnified by the Corporation against all
Liability and reasonable Expense that may be incurred by him in connection with
or resulting from any Claim:
(a) if such Eligible Person is Wholly Successful with respect to the
Claim, or
(b) if not Wholly Successful, then if such Eligible Person is determined,
as provided in either Section 4.3(a) or 4.3(b) of this Article IV, to have:
(1) conducted himself in good faith; and
(2) reasonably believed:
(i) in the case of conduct in his official capacity with the
Corporation, that his conduct was in its best interest; and
(ii) in all other cases, that his conduct was at least not
opposed to its best interest; and
(3) in the case of any criminal proceeding, either:
(i) had reasonable cause to believe his conduct was lawful; or
(ii) had no reasonable cause to believe his conduct was unlawful.
The termination of any Claim, by judgment, order, settlement (whether with or
without court approval) or conviction or upon a plea of guilty or of nolo
contendere, or its equivalent, shall not create a presumption that an Eligible
Person did not meet the standards of conduct set forth in clause (b) of this
Section 4.1. The actions of an Eligible Person with respect to an employee
benefit plan subject the Employee Retirement Income Security Act of 1974 shall
be deemed to have been taken in what the Eligible Person reasonably believed to
be the best interests of the Corporation or at least not opposed to its best
interests if the Eligible Person reasonable believed he was acting in conformity
with the requirements of such Act or he reasonable believed his actions to be in
the interests of the participants in or beneficiaries of the plan.
Section 4.2. Definitions.
(a) The term `Claim'' as used in this Article IV shall include every
pending, threatened, or completed claim, action, suit, or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative, or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise: (i) by reason of his being or having been an
Eligible Person, or (ii) by reason of any action taken or not taken by him in
his capacity as an Eligible Person, whether or not he continued in such capacity
at the time such Liability or Expense shall have been incurred.
(b) The term `Eligible Person'' as used in this Article IV shall mean
every person (and the estate, heirs and personal representatives of such person)
who is or was a Director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee,
agent, or fiduciary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other organization or entity,
whether for profit or not. An Eligible Person shall also be considered to have
been serving an employee benefit plan at the request of the Corporation if his
duties to the Corporation also imposed duties on, or otherwise involved services
by, him to the plan or to participants in or beneficiaries of the plan.
(c) The terms `Liability'' and ``Expense'' as used in this Article IV
shall include, but shall not be limited to, counsel fees and disbursements and
amounts of judgments, fines, or penalties against (including excise taxes
assessed with respect to an employee benefit plan), and amounts paid in
settlement by or on behalf of, and Eligible Person.
(d) The term `Wholly Successful'' as used in this Article IV shall mean
(i) termination of any Claim against the Eligible Person in question without any
finding of liability or guilt against him, (ii) approval by a court, with
knowledge of the indemnity herein provided, of a settlement of any Claim, or
(iii) the expiration of a reasonable period of time after making or threatened
making of any Claim without the institution of the same, without any payment or
promise made to induce a settlement.
Section 4.3. Procedure.
(a) Every Eligible Person claiming indemnification hereunder (other than
one who has been Wholly Successful with respect to any Claim) shall be entitled
to indemnification (i) if special independent legal counsel, which may be
regular counsel of the Corporation or other disinterested person or persons, in
either case selected by the Board of Directors, whether or not a disinterested
quorum exists (such counsel or person or persons being hereinafter called the
`Referee''), shall deliver to the Corporation a written finding that such
Eligible Person has met the standards of conduct set forth in clause (b) of
Section 4.1, and (ii) if the Board of Directors, acting upon such written
finding, so determines. The Board of Directors shall, if an Eligible Person is
found to be entitled to indemnification pursuant to the preceding sentence, also
determine the reasonableness of the Eligible Person's Expenses. The Eligible
Person claiming indemnification shall, if requested, appear before the Referee,
answer questions that the Referee deems relevant, and shall be given ample
opportunity to present to the Referee evidence upon which he relies for
indemnification. The Corporation shall, at the request of the Referee, make
available facts, opinions or other evidence in any way relevant to the Referee's
finding that are within the possession or control of the Corporation.
(b) If an Eligible Person claiming indemnification pursuant to Section
4.3(a) of this Article IV is found not to be entitled thereto, or if the Board
of Directors fails to select a Referee under Section 4.3(a) within a reasonable
amount of time following a written request of an Eligible Person for the
selection of a Referee, or if the Referee or the Board of Directors fails to
make a determination under Section 4.3(a) within a reasonable amount of time
following the selection of a Referee, the Eligible Person may apply for
indemnification with respect to a Claim to a court of competent jurisdiction,
including a court in which the Claim is pending against the Eligible Person. On
receipt of an application, the Court, after giving notice to the Corporation and
giving the Corporation ample opportunity to present to the court any information
or evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in clause (b) of Section 4.1 of
this Article IV. If the court determines that the Eligible Person is entitled
to indemnification, the court shall also determine the reasonableness of the
Eligible Person's Expenses.
Section 4.4. Nonexclusive Rights. The right of indemnification provided
in this Article IV shall be in addition to any rights to which any Eligible
Person may otherwise be entitled. Irrespective of the provisions of this
Article IV, the Board of Directors may, at any time and from time to time, (a)
approve indemnification of any Eligible Person to the full extent permitted by
the provisions of applicable law at the time in effect, whether on account of
past or future transactions, and (b) authorize the Corporation to purchase and
maintain insurance on behalf of any Eligible Person against any Liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
Section 4.5. Expenses. Expenses incurred by an Eligible Person with
respect to any Claim may be advanced by the Corporation (by action of the Board
of Directors, whether or not a disinterested quorum exists) prior to the final
disposition thereof upon receipt of any undertaking by or on behalf of the
recipient to repay such amount unless he is determined to be entitled to
indemnification.
Section 4.6. Contract. The provisions of this Article IV shall be deemed
to be a contract between the Corporation and each Eligible Person, and an
Eligible Person's rights hereunder with respect to a Claim shall not be
diminished or otherwise adversely affected by any repeal, amendment, or
modification of this Article IV that occurs subsequent to the date of any action
taken or not taken by reason of which such Eligible Person becomes involved in a
Claim.
Section 4.7. Effective Date. The provisions of this Article IV shall be
applicable to Claims made or commenced after the adoption hereof, whether
arising from acts or omissions to act occurring before or after the adoption
hereof.
ARTICLE V
Checks
All checks, drafts, or other orders for payment of money shall be signed in
the name of the Corporation by such officers or persons as shall be designated
from time to time by resolution adopted by the Board of Directors and included
in the minute book of the Corporation.
ARTICLE VI
Loans
Such of the officers of the Corporation as shall be designated from time to
time by any resolution adopted by the Board of Directors and included in the
minute book of the Corporation shall have the power, with such limitations
thereon as may be fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and papers, to
pledge collateral, and to execute such notices, bonds, debentures, or other
evidences of indebtedness, and such mortgages, trust indentures, and other
instruments in connection therewith, as may be authorized from time to time by
such Board of Directors.
ARTICLE VII
Execution of Documents
The Chairman of the Board, the President or any officer designated by
either of them, may, in the Corporation's name, sign all deeds, leases,
contracts or similar documents that may be authorized by the Board of Directors
unless otherwise directed by the Board of Directors or otherwise provided herein
or in the Corporation's Restated Articles of Incorporation, or as otherwise
required by law.
ARTICLE VIII
Shares
Section 8.1. Execution. Certificates for capital shares of the
Corporation shall be signed by the President and the Secretary or by two
officers designated from time to time by the Board of Directors and the seal of
the Corporation (or a facsimile thereof), if any, may be thereto affixed. Where
any such certificate is also signed by a transfer agent or a registrar, or both,
the signatures of the officers of the Corporation may be facsimiles. The
Corporation may issue and deliver any such certificate notwithstanding that any
such officer who shall have signed, or whose facsimile signature shall have been
imprinted on, such certificate shall have ceased to be such officer.
Section 8.2. Contents. Each certificate shall state on its face the
name of the Corporation and that it is organized under the laws of the State of
Indiana, the name of the person to whom it is issued, and the number and class
and the designation of the series, if any, of shares the certificate represents,
and, whenever the Corporation is authorized to issue more than one class of
shares or different series within a class, each certificate issued after the
effectiveness of such authorization shall further state conspicuously on its
front or back that the Corporation will furnish the shareholder, upon his
written request and without charge, a summary of the designations, relative
rights, preferences and limitations applicable to each class and series and the
authority of the Board of Directors to determine variations in rights,
preferences and limitations for future series.
Section 8.3. Transfers. Except as otherwise provided by law or by
resolution of the Board of Directors, transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder thereof in
person or by duly authorized attorney, on payment of all taxes thereon and
surrender for cancellation of the certificate or certificates for such shares
(except as hereinafter provided in the case of loss, destruction or mutilation
of certificates) properly endorsed by the holder thereof or accompanied by the
proper evidence of succession, assignment or authority to transfer and delivered
to the Secretary or an Assistant Secretary.
Section 8.4. Share Transfer Records. There shall be entered upon the
share records of the Corporation the number of each certificate issued; the name
and address of the registered holder of such certificate; the number, kind and
class or series of shares represented by such certificate; the date of issue;
whether the shares are originally issued or transferred; the registered holder
from whom transferred; and such other information as is commonly required to be
shown by such records. The share records of the Corporation shall be kept at
its principal office, unless the Corporation appoints a transfer agent or
registrar, in which case the Corporation shall keep at its principal office a
complete and accurate shareholders' list giving the name and addresses of all
shareholders and the number and class of shares held by each. If a transfer
agent is appointed by the Corporation, shareholders shall give written notice of
any changes in their addresses from time to time to the transfer agent.
Section 8.5. Transfer Agents and Registrars. The Board of Directors may
appoint one or more transfer agents and one or more registrars and may require
each share certificate to bear the signature of either or both.
Section 8.6. Loss, Destruction or Mutilation of Certificates. The
holder of any of the shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate therefore,
and the Board of Directors may, in its discretion, cause to be issued to him a
new certificate or certificates of shares upon the surrender of the mutilated
certificate or, in the case of loss or destruction, upon satisfactory proof of
such loss or destruction. The Board of Directors may, in its discretion,
require the holder of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and in such form, and
with such surety or sureties as it may direct, to indemnify the Corporation, its
transfer agents and its registrars, if any, against any claim that may be made
against them or any of them with respect to the shares represented by the
certificate or certificates alleged to have been lost or destroyed, but the
Board of Directors may, in its discretion, refuse to issue a new certificate or
certificates, save upon the order of a court having jurisdiction in such
matters.
Section 8.7. Form of Certificates. The form of the certificates for
shares of the Corporation shall conform to the requirements of Section 8.2 of
these Bylaws and be in such printed form as shall from time to time be approved
by resolution of the Board of Directors.
ARTICLE IX
Seal
The corporate seal of the Corporation shall, if the Corporation elects to
have one, be in the form of a disc, with the name of the Corporation on the
periphery thereof and the word `SEAL'' in the center.
ARTICLE X
Miscellaneous
Section 10.1. Corporation Law. The provisions of the Corporation Law, as
it may from time to time be amended, applicable to all matters relevant to, but
not specifically covered by, these Bylaws are hereby, by reference, incorporated
in and made a part of these Bylaws. The term `Corporation Law'' as used in
these Bylaws means the Indiana Business Corporation Law, as amended from time to
time.
Section 10.2. Fiscal Year. The fiscal year of the Corporation shall end
on the thirty-first day of December of each year.
Section 10.3. Control Share Acquisition and Business Combination Chapters.
(a) The provisions of I.C. 23-1-42 of the Corporation Law are applicable to
the Corporation as of and after March 14, 1989. The provisions of I.C. 23-1-43
of the Corporation Law are not applicable to the Corporation.
(b) In the event (i) that no acquiring person statement complying with I.C.
23-1-42-6 has been delivered to the Corporation with respect to a control share
acquisition on or before the date of mailing a notice of redemption of control
shares pursuant to Section 10.3(c), or (ii) that control shares are not accorded
full voting rights by the shareholders pursuant to I.C. 23-1-42-9, the
Corporation shall have the power, at its option, to redeem any or all control
shares at the fair value thereof, in accordance with the time and other
requirements specified by I.C. 23-1-42-10 and this Section 10.3. `Fair Value''
for purposes of the preceding sentence shall be deemed to be equal to the fair
market value per share of the class or series of which the control shares are
part immediately prior to the first public announcement of the intent or plan of
the acquiring person to make a control share acquisition (`Announcement
Date'). Such fair market value shall be determined by (i) the highest reported
closing sale price during the thirty-day period immediately preceding the
Announcement Date if such shares are listed on a securities exchange registered
under the Securities Exchange Act of 1934 or if closing sales prices are
reported on the National Market of the National Association of Securities
Dealers, Inc. Automatic Quotation System (`NASDAQ''), or any similar system of
automated dissemination of quotations of securities prices then in common use,
or (ii) if such shares are not listed on any such exchange or such closing sales
prices are not reported on the National Market, the highest closing bid
quotation with respect to such shares during the thirty-day period immediately
preceding the Announcement Date as reported on NASDAQ or any similar system then
in use, or (iii) if no such quotations are available, the fair market value of
such shares immediately prior to the Announcement Date as determined by the
Board of Directors in good faith by such other reasonable method as the Board of
Directors of the Corporation shall, in its discretion, select and apply.
(c) In case the Corporation shall desire to exercise its right to redeem
control shares pursuant to Section 10.3(b), notice of such redemption shall be
given to the holders of the control shares to be redeemed by mailing to such
holders, within the time period, if any, specified by I.C. 23-1-42-10, a notice
of such redemption by first class mail, postage prepaid, not less than thirty
(30) days prior to the redemption date, to their last addresses as they shall
appear upon the stock transfer records of the Corporation. Any notice which is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the holder receives the notice, as of the date of
mailing of the notice. In any case, failure to give due notice by mail to the
holder of any control share, or any defect in such notice, shall not affect the
validity of the proceedings for the redemption of any other control share. Each
such notice shall specify the redemption date, the number of control shares to
be redeemed held by such holder, the place of redemption and the redemptive
price at which the control shares are to be redeemed. Such notice shall further
state that payment of the redemption price will be made upon presentation and
surrender of the certificate(s) representing the control shares (with such
instruments of transfer and other assurances as the Corporation may reasonably
request) and that from and after the redemption date such holder shall have no
rights with respect to such control shares (including no rights to vote or to
receive distributions in respect thereof with respect to matters for which the
record date shall fall on or after the redemption date) except the right to
receive the redemption price (without interest) upon compliance with the
procedures specified by this Section 10.3.
(d) The Board of Directors may by resolution specify such other procedures
as may in its discretion be deemed necessary or advisable for the purpose of
implementing this Section 10.3 and is hereby empowered to determine, on the
basis of the information known to it, all matters with respect to which a
determination is required under I.C. 23-1-42 in connection with redemption of
control shares.
(e) Terms used in this Section 10.3 not otherwise defined shall, unless the
context otherwise requires, have the meanings assigned to them by I.C. 23-1-42.
Section 10.4. Definition of Articles of Incorporation. The term
`Articles of Incorporation'' as used in these Bylaws means the Articles of
Incorporation of the Corporation, as amended and restated from time to time.
Section 10.5. Amendments. These Bylaws may be rescinded, changed or
amended, and provisions hereof may be waived, at any annual, regular or special
meeting of the Board of Directors by the affirmative vote of a majority of the
number of Directors then in office, except as otherwise required by the
GERMAN AMERICAN BANCORP
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
1995 1994
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES:
Outstanding Common
Shares 1,825,641 1,825,641 1,825,059 1,825,059
Common Stock
Equivalents:
Stock Options (2) 20,822 20,822 23,415 23,415
Assumed Repurchase
of Shares (15,429) (14,706) (16,913 ) (16,367)
Average Common and
Common Equivalent
Shares Outstanding 1,831,034 1,831,757 1,831,561 1,832,107
Net Income in
Thousands:
Before Cumulative
Effect of
Accounting Change $4,018 $4,018 $3,474 $3,474
Accounting Change 0 0 0 0
Net Income $4,018 $4,018 $3,474 $3,474
Earnings Per Share: (3)
Before Cumulative
Effect of Accounting
Change $2.20 $2.20 $1.90 $1.90
Accounting Change 0.00 0.00 0.00 0.00
Net Income $2.20 $2.20 $1.90 $1.90
</TABLE>
<TABLE>
<CAPTION>
1993
FULLY
PRIMARY DILUTED
<S> <C> <C>
AVERAGE SHARES:
Outstanding Common
Shares 1,825,053 1,825,053
Common Stock
Equivalents:
Stock Options (2) 26,775 26,775
Assumed Repurchase
of Shares (21,168) (18,946)
Average Common and
Common Equivalent
Shares Outstanding 1,830,660 1,832,882
Net Income in
Thousands:
Before Cumulative
Effect of
Accounting Change $2,782 $2,782
Accounting Change 150 150
Net Income $2,932 $2,932
Earnings Per Share: (3)
Before Cumulative
Effect of Accounting
Change $1.53 $1.52
Accounting Change 0.08 0.08
Net Income $1.61 $1.60
</TABLE>
(1) Average outstanding common shares and net income have been restated for all
periods presented to reflect acquisitions made under the pooling of interests
method and to reflect a three-for-two stock split effected in the form of a 50%
stock dividend in 1993 and a 5% stock dividend in December, 1995.
(2) Stock options of 3,497 and 2,186 have been excluded from the above
calculations as they were anti-dilutive at December 31, 1994 and 1995,
respectively.
(3) Stock options are not materially dilutive and have been excluded from
earnings per share reflected in the consolidated statements of income.
ANNUAL REPORT TO SHAREHOLDERS
FIVE YEAR SUMMARY OF CONSOLIDATED FINANCIAL STATEMENTS AND RELATED STATISTICS
(DOLLAR REFERENCES IN THOUSANDS EXCEPT SHARE DATA)
The following selected data have been taken from the Company's consolidated
financial statements and should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this annual report.
See Note 18 to the consolidated financial statements and `Management's
Discussion and Analysis of Financial Condition and Results of Operations''for
information regarding certain purchase acquisitions during 1994 and 1993 which
affect the comparability of data.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest and Fees on Loans $21,210 $17,348 $16,312
Interest on Investments 6,087 4,722 5,345
Total Interest Income 27,297 22,070 21,657
Interest on Deposits 12,633 9,394 9,844
interest on Short-term
Borrowings 184 133 50
Interest on Long-term Debt --- --- ---
Total Interest Expense 12,817 9,527 9,894
Net Interest Income 14,480 12,543 11,763
Provision for Loan Losses (19) 567 653
Net Interest Income after
Provision for Loan Losses 14,499 11,976 11,110
Service Charges on Deposit
Accounts 620 567 520
Other Income 840 1,122 1,049
Total Other Income 1,460 1,689 1,569
Salaries and Benefits 5,349 4,517 4,338
Other Expenses 4,729 4,092 4,251
Total Other Expenses 10,078 8,609 8,589
Income Before Income Taxes
and Cumulative Effect of
Change in Accounting for
Income Taxes 5,881 5,056 4,090
Income Tax Expense 1,863 1,582 1,308
Effect of Change in
Accounting for Income
Taxes 4,018 3,474 2,782
Cumulative Effect of Change
in Accounting for
Income Taxes --- --- 150
Net Income $4,018 $3,474 $2,932
<CAPTION>
<S> <C> <C> <C>
YEAR-END BALANCES
Total Assets $367,763 $346,526 $323,279
Total Loans, Net 224,657 218,141 196,465
Total Long-term Debt --- --- ---
Total Deposits 327,579 302,290 281,510
Total Shareholders' Equity 36,956 32,925 31,341
<CAPTION>
<S> <C> <C> <C>
PER SHARE DATA (1 )
Income Before Cumulative Effect
of Change in Accounting for
Income Taxes $2.20 $1.90 $1.53
Net Income 2.20 1.90 1.61
Cash Dividends (2) .76 .68 .66
Shareholders' Equity, End of Year 20.25 18.03 17.16
<CAPTION>
<S> <C> <C> <C>
OTHER DATA AT YEAR-END
Number of Shareholders 1,681 1,634 1,649
Number of Employees 167 157 143
Weighted Average Number
of Shares 1,825,641 1,825,059 1,825,053
<FN>
<F1>
(1)Per share data has been retroactively adjusted to give effect for
stock dividends and stock splits.
(2)Cash dividends represent historical per share dividends declared
without retroactive restatement for pooling.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
SUMMARY OF OPERATIONS
Interest and Fees on Loans $16,903 $17,739
Interest on Investments 6,018 7,956
Total Interest Income 22,921 25,695
Interest on Deposits 11,197 14,771
interest on Short-term
Borrowings 69 185
Interest on Long-term Debt 3 5
Total Interest Expense 11,269 14,961
Net Interest Income 11,652 10,734
Provision for Loan Losses 984 1,943
Net Interest Income after
Provision for Loan Losses 10,668 8,791
Service Charges on Deposit
Accounts 439 466
Other Income 1,175 481
Total Other Income 1,614 947
Salaries and Benefits 4,096 3,716
Other Expenses 3,881 3,281
Total Other Expenses 7,977 6,997
Income Before Income Taxes
and Cumulative Effect of
Change in Accounting for
Income Taxes 4,305 2,741
Income Tax Expense 1,403 716
Income Before Cumulative
Effect of Change in
Accounting for Income
Taxes 2,902 2,025
Cumulative Effect of Change
in Accounting for
Income Taxes --- ---
Net Income $2,902 $2,025
<CAPTION>
<S> <C> <C>
YEAR-END BALANCES
Total Assets $305,022 $291,625
Total Loans, Net 185,741 174,547
Total Long-term Debt --- 69
Total Deposits 270,952 258,133
Total Shareholders' Equity 29,470 27,446
<CAPTION>
<S> <C> <C>
PER SHARE DATA (1 )
Income Before Cumulative Effect
of Change in Accounting for
Income Taxes $1.59 $1.11
Net Income 1.59 1.11
Cash Dividends (2) .57 .60
Shareholders' Equity,
End of Year 16.14 15.03
<CAPTION>
<S> <C> <C>
OTHER DATA AT YEAR-END
Number of Shareholders 1,635 1,609
Number of Employees 133 132
Weighted Average Number
of Shares 1,825,053 1,825,559
<FN>
<F1>
(1)Per share data has been retroactively adjusted to give effect for
stock dividends and stock splits.
(2)Cash dividends represent historical per share dividends declared
without retroactive restatement for pooling.
</FN>
</TABLE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table summarizes the net interest income (on a tax-equivalent
basis) for each of the past three years. For the tax-equivalent adjustments, an
effective tax rate of 34% was used for all years presented. (1)
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
(TAX-EQUIVALENT / DOLLAR REFERENCES IN THOUSANDS)
Twelve Months Ended
December 31, 1995
Average Interest
Principal Income/ Average
Balance Expense Yield
<S> <C> <C> <C>
Short-term Investments:
Interest-bearing Balances
with Banks $1,024 $49 4.79%
Federal Funds Sold and Securities
Purchased under Agreements
to Resell 12,716 739 5.81%
Other Short-term Investments 11,247 679 6.04%
Securities:
Taxable 56,670 3,229 5.70%
Non-taxable 20,937 2,107 10.06%
Total Loans and Leases (2) (3) 230,143 21,302 9.26%
TOTAL INTEREST
EARNING ASSETS 332,737 28,105 8.45%
Cash and Due from Banks 11,159
Premises, Furniture &
Equipment 9,668
Other Assets 8,769
Less: Allowance for Loan Losses (5,790)
TOTAL ASSETS $356,543
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Savings and Interest-bearing
Demand Deposits $92,311 2,490 2.70%
Time Deposits 191,202 10,143 5.30%
Federal Funds Purchased and
Securities Sold under
Agreements to Repurchase 928 57 6.14%
Short-term Borrowings 2,141 127 5.93%
TOTAL INTEREST-BEARING
LIABILITIES 286,582 12,817 4.47%
Demand Deposit Accounts 32,576
Other Liabilities 2,993
TOTAL LIABILITIES 322,151
Shareholders' Equity 34,392
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $356,543
NET INTEREST INCOME $15,288
NET YIELD ON
EARNING ASSETS 4.59%
<FN>
<F1>
1. Effective tax rates were determined as though interest
earned on the Company's investments in municipal
bonds and loans was fully taxable.
2. Nonaccruing loans have been included in average loans.
3. Interest income on loans includes loan fees of $254,
$253, and $206 for 1995, 1994, and 1993, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
(TAX-EQUIVALENT / DOLLAR REFERENCES IN THOUSANDS)
Twelve Months Ended
December 31, 1994
Average Interest
Principal Income/ Average
Balance Expense Yield
<S> <C> <C> <C>
ASSETS
Short-term Investments:
Interest-bearing Balances
with Banks $2,841 $123 4.34%
Federal Funds Sold and Securities
Purchased under Agreements
to Resell 10,688 380 3.56%
Other Short-term Investments 4,002 202 5.05%
Securities:
Taxable 55,014 2,850 5.18%
Non-taxable 17,175 1,768 10.29%
Total Loans and Leases (2) (3) 214,041 17,401 8.13%
TOTAL INTEREST
EARNING ASSETS 303,761 22,724 7.48%
Cash and Due from Banks 10,222
Premises, Furniture &
Equipment 7,636
Other Assets 6,810
Less: Allowance for Loan Losses (5,266)
TOTAL ASSETS $323,163
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Savings and Interest-bearing
Demand Deposits $89,175 2,123 2.38%
Time Deposits 164,422 7,271 4.42%
Federal Funds Purchased and
Securities Sold under
Agreements to Repurchase 3,572 90 2.52%
Short-term Borrowings 1,081 43 4.01%
TOTAL INTEREST-BEARING
LIABILITIES 258,250 9,527 3.69%
Demand Deposit Accounts 30,279
Other Liabilities 2,603
TOTAL LIABILITIES 291,132
Shareholders' Equity 32,031
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $323,163
NET INTEREST INCOME $13,197
NET YIELD ON
EARNING ASSETS 4.34%
<FN>
<F1>
1. Effective tax rates were determined as though interest
earned on the Company's investments in municipal
bonds and loans was fully taxable.
2. Nonaccruing loans have been included in average loans.
3. Interest income on loans includes loan fees of $254,
$253, and $206 for 1995, 1994, and 1993, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
(TAX-EQUIVALENT / DOLLAR REFERENCES IN THOUSANDS)
Twelve Months Ended
December 31, 1993
Average Interest
Principal Income/ Average
Balance Expense Yield
<S> <C> <C> <C>
ASSETS
Short-term Investments:
Interest-bearing Balances
with Banks $8,183 $335 4.09%
Federal Funds Sold and Securities
Purchased under Agreements
to Resell 8,547 257 3.01%
Other Short-term Investments 910 30 3.26%
Securities:
Taxable 59,532 3,582 6.02%
Non-taxable 16,774 1,729 10.31%
Total Loans and Leases (2) (3) 202,100 16,356 8.09%
TOTAL INTEREST
EARNING ASSETS 296,046 22,289 7.53%
Cash and Due from Banks 8,779
Premises, Furniture &
Equipment 7,365
Other Assets 6,436
Less: Allowance for Loan Losses (4,166)
TOTAL ASSETS $314,460
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Savings and Interest-bearing
Demand Deposits $83,765 2,131 2.54%
Time Deposits 168,659 7,713 4.57%
Federal Funds Purchased and
Securities Sold under
Agreements to Repurchase 539 17 3.03%
Short-term Borrowings 1,155 33 2.87%
TOTAL INTEREST-BEARING
LIABILITIES 254,118 9,894 3.89%
Demand Deposit Accounts 27,278
Other Liabilities 2,596
TOTAL LIABILITIES 283,992
Shareholders' Equity 30,468
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $314,460
NET INTEREST INCOME $12,395
NET YIELD ON
EARNING ASSETS 4.19%
<FN>
<F1>
1. Effective tax rates were determined as though interest
earned on the Company's investments in municipal
bonds and loans was fully taxable.
2. Nonaccruing loans have been included in average loans.
3. Interest income on loans includes loan fees of $254,
$253, and $206 for 1995, 1994, and 1993, respectively.
</FN>
</TABLE>
<TABLE>
INTERIM FINANCIAL DATA (Table 1) (Unaudited, $ in thousands except share data)
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER SEPTEMBER
31 30
<S> <C> <C>
1995
Interest Income $7,148 $6,923
Interest Expense 3,422 3,313
Net Interest Income 3,726 3,610
Provision for Loan Losses (34) (213)
Noninterest Income 353 353
Noninterest Expense 2,715 2,418
Income before Income Taxes 1,398 1,758
Income Tax Expense 403 598
Net Income $995 $1,160
Net Income per Share $.55 $.63
Weighted Average Shares 1,825,040 1,825,346
<CAPTION>
<S> <C> <C>
1994
Interest Income $6,020 $5,466
Interest Expense 2,599 2,347
Net Interest Income 3,421 3,119
Provision for Loan Losses 105 105
Noninterest Income 370 478
Noninterest Expense 2,382 2,108
Income before Income Taxes 1,304 1,384
Income Tax Expense 419 390
Net Income $885 $994
Net Income per Share $.48 $.54
Weighted Average Shares 1,825,077 1,825,053
</TABLE>
<TABLE>
INTERIM FINANCIAL DATA (Table 1) (Unaudited, $ in thousands except share data)
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE MARCH
30 31
1995
<S> <C> <C>
Interest Income $6,819 $6,407
Interest Expense 3,253 2,829
Net Interest Income 3,566 3,578
Provision for Loan Losses 114 114
Noninterest Income 354 400
Noninterest Expense 2,509 2,436
Income before Income Taxes 1,297 1,428
Income Tax Expense 392 470
Net Income $905 $958
Net Income per Share $.50 $.52
Weighted Average Shares 1,826,023 1,826,171
<CAPTION>
1994
<S> <C> <C>
Interest Income $5,320 $5,264
Interest Expense 2,296 2,285
Net Interest Income 3,024 2,979
Provision for Loan Losses 107 250
Noninterest Income 439 402
Noninterest Expense 2,085 2,034
Income before Income Taxes 1,271 1,097
Income Tax Expense 439 334
Net Income $832 $763
Net Income per Share $.46 $.42
Weighted Average Shares 1,825,053 1,825,053
</TABLE>
INTRODUCTION AND OVERVIEW
German American Bancorp (`the Company'') is a multi-bank holding company based
in Jasper, Indiana. Its four affiliate banks conduct business in fourteen
offices in Dubois, Martin, Pike, Perry and Spencer Counties, Indiana. The banks
provide a wide range of financial services, including accepting deposits; making
commercial and consumer loans; originating, marketing, and servicing mortgage
loans; issuing credit life, accident and health insurance; providing trust
services for personal and corporate customers; providing safe deposit
facilities; and providing investment advisory and brokerage services.
The information in this Management's Discussion and Analysis is presented as an
analysis of the major components of the Company's operations for the years 1993
through 1995 and financial condition as of December 31, 1995 and 1994. The
information should be used in conjunction with accompanying consolidated
financial statements and footnotes contained elsewhere in this report. The
information has been restated to reflect the mergers with Unibancorp and The
Otwell State Bank accounted for as poolings of interests as if they had occurred
as of the beginning of the first year presented. The acquisition of Winslow
Bancorporation and certain branches of Regional Federal Savings Bank
(`Regional'') have been accounted for as purchases and included in reported
results from the dates of acquisition. (See the discussion below for further
information on mergers and acquisitions.)
MERGERS AND ACQUISITIONS
On March 8, 1993, the Company completed a merger with Unibancorp, Loogootee,
Indiana, parent company of The Union Bank (`Union'') in which the Company
issued 320,283 shares for all of the outstanding shares of Unibancorp. This
merger was recorded utilizing the pooling of interests method of accounting. On
April 1, 1993, the Company purchased all the shares of Winslow Bancorporation,
Winslow, Indiana and its subsidiary South Western Indiana National Bank
(`Southwestern'') in a cash transaction of $2,023,000, recorded utilizing the
purchase method of accounting. As a result of the Winslow acquisition, the
Company recorded approximately $730,000 of intangible assets consisting of
$377,000 of goodwill and $353,000 of core deposit intangible.
On April 1, 1994, the Company acquired The Otwell State Bank, Otwell, Indiana
(`Otwell''), by the issuance of 113,286 shares for all the outstanding shares
of Otwell. This transaction was recorded utilizing the pooling of interests
method of accounting. Following the completion of the transaction, Otwell and
Southwestern were merged into Community Trust Bank, a combined banking
institution operating in the Pike County, Indiana market through offices in
Otwell, Petersburg, and Winslow, Indiana.
On October 28, 1994, the Company acquired the Regional branches in Huntingburg,
Rockport and Tell City, Indiana. This transaction, resulting in the acquisition
of approximately $25,000,000 in assets, was recorded utilizing the purchase
method of accounting. As a result of the Regional acquisition, the Company
recorded approximately $1,670,000 of intangible assets consisting of $1,353,000
of goodwill and $317,000 of core deposit intangible. Intangible assets are
being amortized to expense on a straight line basis over a 15 year period in the
case of goodwill and over 10 years on an accelerated basis for the core deposit
intangible. Following the Regional acquisition, the Huntingburg office was
combined into the Company's lead bank, German American Bank. The Tell City and
Rockport offices were combined into the Company's newly formed subsidiary bank,
First State Bank, Southwest, Indiana (`First State''). Due to the relative
impact of First State's operating results in any analysis of the 1995 results as
compared to those of previous years, this Management's Discussion and Analysis
will attempt to quantify and identify that impact whenever it is deemed to be
material in nature. First State provided the Company with an entrance to the
Perry and Spencer County, Indiana markets which are adjacent to the general
market areas served by the Company and thereby provided a logical extension to
the Company's financial services marketing area.
The Company does not have any pending mergers or acquisitions but does plan to
continue to aggressively pursue such opportunities as they become available. The
Company's management believes other community banks located in the Company's
general geographic area will find the concept of the Company's localized
community bank holding company an attractive alternative to merging with other
larger regional multi-bank holding companies. The Company's approach offers
these community banks the competitive advantages of operational efficiencies
gained through the ability to spread fixed operating costs over a larger asset
base without the loss of flexibility and independence generally associated with
affiliation with the larger regional multi-bank holding companies. Through the
Company, these community banks can retain ownership control within a group of
shareholders who reside in their general market areas and who support the bank's
commitment to their local communities. Because of this belief, the Company's
management anticipates that additional mergers and acquisitions with like-minded
community banks may occur in future years.
RESULTS OF OPERATIONS
NET INCOME
Net Income in 1995 was $4,018,000 or $2.20 per share, an increase of 15.7% over
the $3,474,000 or $1.90 per share reported in 1994. The increase in 1995
earnings relative to those of a year earlier was materially impacted by an
increase in net interest income and a decline in the required level of provision
for loan loss. Partially offsetting these earnings improvements were a decline
in Investment Services Income and an increase in Salaries and Benefits largely
related to the inclusion of First State and the effect of the Company's
organizational structure changes discussed at more length below.
For 1994, net income was 18.5% higher than in 1993. This increase in 1994
earnings relative to 1993 was impacted by a $150,000 positive cumulative effect
of a change in the manner of accounting for income taxes required by the
implementation of Financial Accounting Standard 109 during 1993. Excluding this
cumulative effect, net income increased by $692,000 or 24.9% in 1994 as compared
to 1993. Other factors materially impacting the earnings comparison of 1994 and
1993 were the recording of a significant increase in net interest income as well
as an increase in other income and a reduction in the level of provision for
loan loss.
NET INTEREST INCOME
Net interest income is the Company's single largest source of earnings. It
represents the difference between interest and fees realized on earning assets,
primarily loans and securities, and interest paid on deposits and other borrowed
funds. The net interest margin is this difference expressed as a percentage of
average earning assets. Several factors contribute to the determination of net
interest income, including the volume of earning assets, the mix of earning
assets, interest rates, and income taxes. Many of these factors can be
controlled by management policies and actions. Factors beyond the control of
management include the general level of credit demand, Federal Reserve Board
monetary policy, and changes in tax laws.
Net interest income for 1995 on a tax-equivalent basis was 15.8% higher than
that for 1994 while the net interest margin was 4.59% for 1995 versus 4.34% for
1994. Tax-equivalent net interest income for 1994 was 6.5% higher as compared
to 1993 with net interest margin increasing to 4.34% in 1994 from 4.19% in 1993.
Excluding the effect of First State, tax-equivalent net interest income was
$14,345,000 for 1995, a $1,271,000 or 9.7% increase over the $13,074,000
recorded in 1994, and net interest margins (exclusive of First State) were 4.73%
in 1995 and 4.36% in 1994. Management anticipates the tax-equivalent net
interest margin of First State Bank will, over time, become more comparable to
that of the Company's other affiliate banks because the relative asset and
liability mix of First State Bank should become more homogeneous to that of the
Company's other affiliate banks.
The increase in net interest income during 1995 and 1994 occurred as a result of
the impact of increases in average yields on loans and short-term investments
and securities, which react more quickly to a rise in general short-term
interest rates than the average yields on longer-term investment securities and
the average rate paid on interest-bearing liabilities. The increase in short-
term interest rates which occurred throughout 1994 and in early 1995 therefore
resulted in a corresponding increase in both net interest income and net
interest margin.
See the discussion headed `Interest Rate Management'' for a further explanation
of the Company's interest rate sensitivity position.
PROVISION FOR LOAN LOSSES
The Company provides for future loan losses through regular provisions to the
allowance for loan losses. These provisions are made at a level which is
considered necessary by management to absorb estimated losses in the loan
portfolio. A detailed evaluation of the adequacy of this loan loss reserve is
completed quarterly by management.
The consolidated provision for loan losses was ($19,000) in 1995, $567,000 in
1994, and $653,000 in 1993. The $586,000 decline in provision during 1995
primarily resulted from a $475,000 negative provision for loan loss at Union
Bank. The negative provision at Union Bank was due to collections of previous
years' charged-off loans combined with management's determination that an
adequate level of loan loss reserve existed prior to the loan recoveries.
Because of the adequacy that the existing reserve, the recoveries resulted in
the recording of a negative provision.
The amount of future years' provision for loan loss will be subject to
adjustment based on the findings of future evaluations of the adequacy of the
loan loss reserve. The section entitled RISK MANAGEMENT expands this discussion
further.
NONINTEREST INCOME
Exclusive of net security gains and gains on sales of loans and other real
estate (`ORE''), noninterest income decreased 5.7% in 1995 to $1,431,000
compared to $1,517,000 in 1994. First State's noninterest income increased by
$67,000 during the full year of 1995 as compared to the income recorded by the
bank for the two months of operation in 1994. The primary source of noninterest
income continues to be trust fees (income from fiduciary activities), service
charges on deposit accounts and investment services income. The decline in
noninterest income during 1995 was directly attributable to a reduction of
Investment Services Income discussed in further detail below.
As presented on Table 2 below, trust department income grew by 8.2% in 1995 and
resulted from higher levels of assets held in trust combined with an increase in
trust fee schedules. Service charges on deposit accounts increased by 9.4%
during 1995 because of a larger number of transactions and fee generating
opportunities for the Company in this area. Investment services income declined
significantly by $212,000 following a $73,000 decline in 1994 reversing a trend
of the strong growth experienced in prior years. This investment services
income is generated through a full service brokerage operation which is
available at several of the Company's affiliate banks through an operating
agreement with INVEST FINANCIAL CORPORATION, a subsidiary of Kemper Financial
Companies, Inc. The Company intends to expand the availability of investment
services throughout its affiliate banks.
Noninterest income exclusive of security gains and gains on loan and ORE sales
increased 1.7% in 1994 compared to 1993. Trust fees increased by 23.0% while
deposit service charges increased by 9.0%. The gains on sales of loans and
other real estate in 1995 were related to sales of other real estate while the
1994 gain was due primarily to the gain generated as a result of German American
Bank's sale of a portion of excess real estate adjacent to one of its branch
facilities. During 1993 the gain resulted primarily from Union's activities
involving Small Business Administration loans purchased for resale. In 1993,
Union sold the remaining loans held for resale and no longer carries any loans
held for resale. The Company's management does not anticipate that Union or any
other affiliate bank will engage in this activity in the future.
<TABLE>
NONINTEREST INCOME (Table 2)($ in thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income from Fiduciary Activities $185 $171 $139
Service Charges on Deposit
Accounts 620 567 520
Investment Services Income 208 420 493
Other Income 418 359 339
Subtotal 1,431 1,517 1,491
Gains on Sales of Loans and
Other Real Estate 29 92 61
Security Gains 0 80 17
TOTAL NONINTEREST
INCOME $1,460 $1,689 $1,569
N/M = Not Meaningful
</TABLE>
<TABLE>
NONINTEREST INCOME (Table 2)($ in thousands)
<CAPTION> % CHANGE FROM
PRIOR YEAR
1994 1993
<S> <C> <C>
Income from Fiduciary Activities 8.2% 23.0%
Service Charges on Deposit
Accounts 9.4 9.0
Investment Services Income (50.5) (14.8)
Other Income 16.4 5.9
Subtotal (5.7) 1.7
Gains on Sales of Loans and
Other Real Estate (68.5) 50.8
Security Gains N/M 370.6
TOTAL NONINTEREST
INCOME (13.6) 7.7
N/M = Not Meaningful
</TABLE>
NONINTEREST EXPENSE
Total noninterest expense increased 17.1% in 1995 over 1994 levels. As a
percentage of average total assets, total noninterest expense was 2.83% in 1995
compared to 2.66% in 1994 and 2.73% in 1993. Excluding the impact of First
State Bank, noninterest expense increased by $636,000 or 7.5% in 1995 as
compared to 1994. Salaries and employee benefits, which comprise approximately
53% of total noninterest expense, increased by 18.4% in 1995 following a 4.1%
increase in 1994. Again excluding the impact of First State, Salaries and
Benefits increased by 11.1% in 1995. A significant portion of this increase is
attributable to effects of changes in the Company's organizational structure
which occurred in mid 1995. Prior to July 1995, the Company's executive
officers and support functions served both the Company and its lead affiliate
bank, German American Bank. In recognition of the increased management and
administrative demands existing under a multi-bank holding company environment,
the management and administrative support functions of German American Bank and
the Company were segmented into distinct groups with additional staffing
implemented as deemed appropriate. Although this organizational change did
result in an increased level of Salaries & Benefits, Company management believes
the increased management focus at both the Bank and Bancorp level will result in
increased operating efficiency.
Occupancy expense and furniture and equipment expense combined, increased by
$264,000 or 20.4% in 1995 following a 4.9% increase in 1994. Approximately one-
half of this increase resulted from First State with the balance of the
increased 1995 expense level attributable to an upgrading of facilities and
equipment at the Company's other affiliate banks.
Computer processing expense increased by 13.4% and 18.5% in 1995 and 1994,
respectively reflecting conversion expenses at the Company's newly acquired
affiliates. Excluding First State Bank, computer processing fees increased by
5.4% and 17.5% in 1995 and 1994, respectively. Through the utilization of
state-of-the-art equipment and computer processing, the Company's management
believes it will, over the long-term, be able to better control the level of
employee related expenses, the Company's major noninterest expense category,
while improving the quality of customer service provided throughout the
affiliate bank system.
Professional fees declined significantly by 23.0% and 46.9% in 1995 and 1994,
respectively, as a result of a reduction in merger related professional fees.
While it is not possible to predict the level of acquisition activity and the
resulting level of costs associated thereto, management does intend to pursue
acquisition opportunities and, therefore, increased and continued costs will be
likely in future years.
During 1995, the FDIC reduced the commercial bank deposit insurance premium
rates as a result of the Bank Insurance Fund (`BIF'') reaching full
capitalization of its congressionally mandated level. The full impact of this
rate reduction won't be evident until 1996 when FDIC premiums are anticipated to
be approximately $60,000, plus any additional assessments or premiums that may
arise from proposals before Congress which would result in the recapitalization
of the Savings Association Insurance Fund (`SAIF''). Under this proposal,
institutions holding deposits insured by SAIF would be subject to a one-time
assessment followed by a reduction in ongoing FDIC premiums similar to that
currently in place for BIF insured deposits. All of First State's deposits are
insured under SAIF. Therefore, the implementation of this proposal would
increase 1996 total FDIC premiums by approximately $150,000 to an estimated
$210,000 for 1996. Subsequent years premiums following any such SAIF assessment
are anticipated to be $2,000 per affiliate bank for a total of $8,000. The
statements in this paragraph relating to FDIC premiums and assessments for 1996
and future years are forward-looking statements which may or may not be accurate
due to the impossibility of predicting future Congressional or regulatory
actions or the future capitalization levels of BIF and SAIF.
Other operating expenses increased by 41.3% in 1995 following a 2.9% decrease in
1994. Excluding First State's other operating expense, this component of
noninterest expense increased by $334,000 or 21.9% during 1995. This increase
is largely attributable to increased advertising and supplies expenses related
to the Company's introduction, throughout 1995, of a new company-wide corporate
identity program . Additionally, amortization of goodwill and the core deposit
intangible totaled $231,000 and $112,000, respectively for 1995 and 1994. First
State Bank's operating results reflected a significant portion of the
amortization expense.
<TABLE>
NONINTEREST EXPENSE (Table 3)($ in thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Salaries and Employee Benefits $5,349 $4,517 $4,338
Occupancy, Furniture and
Equipment Expense 1,561 1,297 1,237
FDIC Premiums 393 644 645
Computer Processing Fees 399 352 297
Professional Fees 198 257 484
Other Operating Expenses 2,178 1,542 1,588
TOTAL NONINTEREST
EXPENSE $10,078 $8,609 $8,589
</TABLE>
<TABLE>
NONINTEREST EXPENSE (Table 3)($ in thousands)
<CAPTION> % CHANGE FROM
PRIOR YEAR
1994 1993
<S> <C> <C>
Salaries and Employee Benefits 18.4% 4.1%
Occupancy, Furniture and
Equipment Expense 20.4 4.9
FDIC Premiums (39.0) (.2)
Computer Processing Fees 13.4 18.5
Professional Fees (23.0) (46.9)
Other Operating Expenses 41.2 (2.9)
TOTAL NONINTEREST
EXPENSE 17.1 .2
</TABLE>
PROVISION FOR INCOME TAXES
The Company records a provision for income taxes currently payable, along with
a provision for taxes payable in the future. Such deferred taxes arise from
differences in the timing of certain items for financial statement reporting
versus for income tax reporting. The major difference between the effective tax
rate applied to the Company's financial statement income and the federal
statutory rate of 34% is interest on tax-exempt securities and loans. Other
components affecting this calculation include state income taxes and
nondeductible merger costs. Note 10 to the consolidated financial statements
contains additional details relative to the Company's income tax provision. The
Company's effective tax rate was 31.7%, 31.3% and 32.0% in 1995, 1994, and 1993,
respectively. Note 1 presents further information regarding the impact of the
change in the manner of accounting for income taxes required by the
implementation in 1993 of Financial Accounting Standard 109.
CAPITAL RESOURCES
Industry regulations provide guidelines for determining the capital adequacy of
bank holding companies and banks. These guidelines provide for a more narrow
definition of core capital and assign a measure of risk to the various
categories of assets. Minimum levels of capital are required to be maintained
in proportion to total risk-weighted assets and off-balance sheet exposures such
as loan commitments and standby letters of credit.
Tier 1, or core capital, consists of shareholders' equity less goodwill, core
deposit intangibles, and certain tax receivables defined by bank regulations.
Tier 2 capital is defined as the amount of the allowance for loan losses which
does not exceed 1.25% of gross risk adjusted assets. Total capital is the sum
of Tier 1 and Tier 2 capital.
The minimum requirements under these standards are a 3.0% leverage ratio, which
is Tier 1 capital divided by defined `total assets'', and 4.0% Tier 1 capital
to risk-adjusted assets and 8.0% total capital to risk-adjusted assets ratios.
Under these guidelines, the Company, on a consolidated basis, and each of its
affiliate banks individually, have capital ratios that substantially exceed the
regulatory minimums. Table 4 below presents the Company's consolidated capital
ratios under the regulatory guidelines.
The Company's shareholders' equity of $36,956,000 and $32,925,000 at December
31, 1995 and December 31, 1994, respectively represented 10.0% and 9.5% of total
assets. The Company paid cash dividends of $1,392,000 and $1,232,000 during 1995
and 1994, respectively. The increased level of dividends paid in 1995 and 1994
resulted from the issuance of additional shares in connection with the merger
transactions and the higher level of the Company's dividend payout ratio
relative to that of Unibancorp and The Otwell State Bank.
At December 31, 1995, Management is not aware of any current recommendations by
banking regulatory authorities which, if they were to be implemented, would
have, or are reasonably likely to have, a material effect on the Company's
consolidated liquidity, capital resources or operations.
RISK BASED CAPITAL STRUCTURE (Table 4) ($ in thousands)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $36,956 $32,925
Add/(Subtract): Unrealized
Depreciation/Appreciation
on Securities Available-for-Sale (859) 658
Less: Intangible Assets and Ineligible
Deferred Tax Assets (2,140) (2,439)
Total 33,957 31,144
Tier 2 Capital:
Qualifying Allowance for Loan Loss 2,943 2,712
Total Capital $36,900 $33,856
Risk-adjusted Assets $232,272 $213,827
Tier 1 Capital to Total Assets
(leverage ratio) 9.29% 9.05%
Tier 1 Capital to Risk-adjusted Assets 14.62% 14.57%
Total Capital to Risk-adjusted Assets 15.87% 15.83%
</TABLE>
RISK BASED CAPITAL STRUCTURE (Table 4) ($ in thousands)
<TABLE>
<CAPTION>
1993
<S> <C>
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $31,341
Add/(Subtract): Unrealized
Depreciation/Appreciation
on Securities Available-for-Sale ---
Less: Intangible Assets and Ineligible
Deferred Tax Assets (864)
Total 30,477
Tier 2 Capital:
Qualifying Allowance for Loan Loss 2,522
Total Capital $32,999
Risk-adjusted Assets $199,338
Tier 1 Capital to Total Assets
(leverage ratio) 9.45%
Tier 1 Capital to Risk-adjusted Assets 15.29%
Total Capital to Risk-adjusted Assets 16.55%
</TABLE>
SOURCES OF FUNDS
The Company's primary funding source is its base of core customer deposits, such
as noninterest-bearing demand, regular savings and money market accounts and
small denomination certificates of deposit of less than $100,000. Other shorter
term sources of funds are larger denomination certificates of deposit, overnight
borrowings from other financial institutions, securities sold under agreements
to repurchase, short-term notes payable issued on an unsecured basis, and short-
term borrowings consisting of interest-bearing demand notes issued to the U.S.
Treasury. The Company did not have any long-term debt during the periods
presented. The membership of the Company's lead affiliate bank, German American
Bank, in the Federal Home Loan Bank System provides an additional source for
both long and short-term borrowings. The Company's other affiliate banks are in
the process of also obtaining membership in the Federal Home Loan Bank System.
No such advances were outstanding during the periods presented. The following
page contains a discussion of changes in these areas. Table 5 on the following
page presents changes between years in the average balances of all funding
sources.
FUNDING SOURCES - AVERAGE BALANCES (Table 5) ($ in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Demand $32,576 $30,279 $27,278
Savings and Interest-
bearing Checking 69,847 71,765 68,135
Money Market Accounts 22,464 17,410 15,630
Other Time Deposits 158,428 135,742 138,581
Total Core Deposits 283,315 255,196 249,624
Certificates of Deposits
of $100,000 and Over 32,774 28,680 30,078
Federal Funds Purchased
and Securities Sold under
Agreement to Repurchase 928 3,572 539
Other Short-term Borrowings 2,141 1,081 1,155
Total Funding Sources $319,158 $288,529 $281,396
N/M = Not Meaningful
</TABLE>
FUNDING SOURCES - AVERAGE BALANCES (Table 5) ($ in thousands)
<TABLE>
<CAPTION>
% CHANGE FROM
PRIOR YEAR
1995 1994
<S> <C> <C>
Demand 7.6% 11.0%
Savings and Interest-
bearing Checking (2.7) 5.3
Money Market Accounts 29.0 11.4
Other Time Deposits 16.7 (2.0)
Total Core Deposits 11.0 2.2
Certificates of Deposits
of $100,000 and Over 14.3 (4.6)
Federal Funds Purchased
and Securities Sold under
Agreement to Repurchase (74.0) N/M
Other Short-term Borrowings 98.1 (6.4)
Total Funding Sources 10.6 2.5
N/M = Not Meaningful
</TABLE>
CORE DEPOSITS
The Company's average core deposits have shown steady growth over the past
several years, increasing by 11.0% and 2.2% in 1995 and 1994, respectively. The
inclusion of First State accounted for approximately three-fourths of the 11.0%
increase experienced during 1995 and for approximately two-thirds of the 1994
increase. In 1995, the Company experienced a shift in the composition of its
deposits toward money market deposits and longer term certificates of deposit.
This movement is largely attributable to customer reaction to the increase in
interest rates during 1995 relative to the prior years' level of interest rates.
In total, average savings, interest-bearing checking and money market deposits
increased by 3.5% and 6.5% in 1995 and 1994, respectively while other time
deposits consisting primarily of certificates of deposits in denominations of
$100,000 or less increased by 16.7% in 1995 following a 2.0% decrease in 1994.
Average noninterest-bearing demand deposits increased by 7.6% in 1995 and 11.0%
in 1994. These changes in the mix of deposits are influenced by customers'
tendency to avoid committing to longer term instruments during periods of low or
declining interest rates and their attempts to lock in rates on longer term
instruments during periods of perceived higher rates. They are also subject to
seasonal and other non-economic factors.
OTHER FUNDING SOURCES
Exclusive of core deposits, large denomination certificates of deposit provide
the majority of other funding sources for the Company. These certificates
increased by 14.3% in 1995 following a 4.6% decrease in 1994. This entire
increase in 1995 was attributable to the inclusion of First State. The
remaining other funding sources consist of federal funds purchased from other
financial institutions on an overnight basis, secured repurchase agreements
which generally mature within 30 days, short-term notes payable extended on an
unsecured basis, and borrowings under U.S. Treasury demand notes. These
borrowings represent an important source of temporary short-term liquidity for
the Company. These types of borrowings and large dollar denominated
certificates are considered to be more subject to periodic withdrawals than are
core deposits, and, therefore, are generally not used as a permanent funding
source for loans.
INVESTMENTS
The Company's securities portfolio, consisting of all components of the
Company's investment securities, mortgage-backed securities, and securities
available-for-sale, includes U.S. Treasury securities, obligations of U.S.
government agencies, obligations of state and political subdivisions, corporate
investments and mortgage-backed securities issued by U.S. government agencies
and other intermediaries. Money market securities include federal funds sold,
interest-bearing balances with banks, and other short-term investments. The
maturities of the securities and money market portfolios are a principal source
of funds for loan growth and other liquidity needs. The Company's available-
for-sale portfolio provides an additional source of funds from which management
can respond to liquidity needs and asset/liability management requirements.
During 1995, the Financial Accounting Standards Board authorized a one-time
window of opportunity for the transfer of securities to available-for-sale
portfolios. Company management utilized this opportunity to transfer a
significant portion of its securities portfolio to the available-for-sale
classification. Although management may sell these securities if the need
arises, their designation as available-for-sale should not be interpreted to
indicate that management anticipates such sales. Securities available-for-sale
are carried at market value. All other securities are carried at amortized cost
because management intends to hold them until maturity and the Company has the
ability to do so. Note 2 to the consolidated financial statements contains
additional details regarding the Company's securities portfolio in 1995 and
1994.
SECURITIES PORTFOLIO (Table 6) ($ in thousands)
<TABLE>
<CAPTION>
December 31,
1995 %
<S> <C> <C>
Money Market Securities $19,376 17.8%
U.S. Treasury and Agency
Securities 23,787 21.8
Municipal Securities 25,255 23.2
Corporate Securities 6,463 5.9
Mortgage-backed Securities 33,272 30.6
Other Securities 738 .7
Total Securities Portfolio $108,891 100.0%
</TABLE>
SECURITIES PORTFOLIO (Table 6) ($ in thousands)
<TABLE>
<CAPTION>
December 31,
1994 %
<S> <C> <C>
Money Market Securities $22,257 23.3%
U.S. Treasury and Agency
Securities 24,330 25.5
Municipal Securities 21,294 22.3
Corporate Securities 999 1.0
Mortgage-backed Securities 25,976 27.2
Other Securities 717 .7
Total Securities Portfolio $95,573 100.0%
</TABLE>
LOANS
Total loans grew by $6,477,000 or 2.9% between 1995 and 1994. The inclusion of
First State's loans in the year-end comparison accounted for $7,152,000 of this
growth as the Company's newest affiliate bank achieved a significant market
share of the lending opportunities available within its market. Excluding the
effect of First State, total loan balances remained relatively unchanged
declining by $675,000 or .3% between the two years. The Company's loan portfolio
remains well diversified with 55% of the portfolio in commercial and
agricultural loans (including economic development bonds), 30% in 1-4 family
residential mortgages, and 15% in consumer loans at December 31, 1995. The
Company's affiliate banks lend to commercial customers in various industries
including agribusiness, manufacturing, health care services, wholesale, and
retailing.
The Company's policy is generally to extend credit to consumer and commercial
borrowers in its primary geographic market area in Southwestern Indiana.
Extensions of credit outside this primary geographic market area (other than
poultry-related loans described below) are generally concentrated in commercial
real estate loans granted on a selective basis generally within a 120 mile
radius of the Company's primary market. Loans outside the Company's general
geographic market area are further limited to loans guaranteed by either the
Small Business Administration (SBA) or the Farmers Home Administration (FmHA).
The overall loan portfolio is diversified among a variety of borrowers with a
substantial portion of the debtors' ability to honor their contracts dependent
upon the agricultural, poultry and wood manufacturing industries. Although wood
manufacturers employ a significant number of people in the market area, there is
not a concentration of credit to companies engaged in that industry. The Company
has historically been involved in the financing of poultry production and other
agriculturally integrated related operations. Approximately $23,784,000 or
10.3% of total loans at December 31, 1995 consisted of such loans. As a means
of controlling risk from concentrations of credit within this industry, the
Company has, during recent years, utilized guaranties from SBA and FmHA.
Typically, the guaranties provide for SBA and FmHA, in the event of default, to
absorb from 85% to 90% of the loan balance remaining after the application of
collateral. Assuming the guarantors perform in accordance with their
guaranties, the Company's net exposure is limited to the remaining 10% to 15%
balance. At December 31, 1995, the net unguaranteed amount of poultry and other
agricultural integrated related loans was $8,221,000 or 3.6% of total loans. The
Company intends to promote continued growth within this segment of the loan
portfolio. Such growth, however, will be limited by the extent it can be
supported by the Company's capital base and by the Company's ability to obtain
further SBA and FmHA guaranties. Approximately $17,535,000 of loans to poultry
and other agriculturally integrated related operations, substantially all of
which are covered by guaranties as described above, were originated outside the
Company's primary business market. No unguaranteed concentration of credit in
excess of 10% of total assets exists within any single industry group.
The composition of loan portfolio at December 31, 1995 and 1994 is presented in
further detail in Note 3 to the consolidated financial statements and in Table 7
on the following page.
LOAN PORTFOLIO (Table 7) ($ in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Commercial and Industrial $75,914 $69,482 $64,644
Agricultural and Poultry 51,094 57,558 55,311
Financial --- --- ---
Economic Development Bonds 608 625 762
Residential Mortgage Loans 68,826 67,737 55,225
Consumer Loans 34,685 29,248 26,684
Total Loans 231,127 224,650 202,626
Less:
Unearned Income 537 840 1,226
Allowance for Loan Loss 5,933 5,669 4,935
Loans, Net $224,657 $218,141 $196,465
</TABLE>
LOAN PORTFOLIO (Table 7) ($ in thousands)
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Commercial and Industrial $63,855 $62,620
Agricultural and Poultry 54,465 44,876
Financial --- 4,000
Economic Development Bonds 1,547 2,181
Residential Mortgage Loans 47,170 41,042
Consumer Loans 24,183 24,594
Total Loans 191,220 179,313
Less:
Unearned Income 1,617 1,562
Allowance for Loan Loss 3,862 3,204
Loans, Net $185,741 $174,547
RISK MANAGEMENT
Various procedures are employed at the Company's affiliate banks to monitor
risk. The major risk addressed by the Company on a regular basis is the credit
risk inherent in the loan portfolio and to a lesser extent, the investment
portfolio. Another risk is that associated with changes in interest rates. The
following is a discussion of the Company's philosophies and procedures to
address risk.
LENDING AND LOAN ADMINISTRATION
The primary responsibility and accountability for day-to-day lending activities
rests with the Company's affiliate banks. Loan personnel at each bank have the
authority to extend credit under guidelines approved by the bank's board of
directors. Each bank also has executive and board loan committees that serve as
vehicles for communication and the pooling of knowledge, judgment and experience
of its members. These committees provide valuable input to lending personnel
and act as an approval body. They also serve as a monitoring tool of the
overall quality of the loan portfolios. Members of the Company's executive
officers serve on the board loan committees of each of the affiliate banks to
ensure a consistent application of company policies.
The Company maintains a comprehensive loan review program for its affiliate
banks. The purpose of these reviews is to evaluate loan administration, credit
quality, loan documentation and the adequacy of the allowance for loan losses.
This program also includes regular reviews of problem loan reports,
delinquencies and charge-offs. The adequacy of the allowance for loan losses is
also evaluated at the affiliate bank level on a quarterly basis. This
evaluation of the allowances for loan losses is based on reviews of specific
loans, changes in the type and volume of the loan portfolios given current and
anticipated economic conditions, and historical loss experience. The review of
specific loans includes loans where the customer's cash flow or net worth may
not be sufficient to repay the loan, the loan has been criticized in a
regulatory examination, the accrual of interest has been suspended, or for other
reasons where either the ultimate collectibility of the loan is in question or
the loan has characteristics requiring special monitoring.
Activity in the allowance for loan losses is summarized in Table 8 on the
following page. Table 9 presents data for the underperforming assets.
Underperforming assets consist of 1) nonaccrual loans; 2) loans which have been
renegotiated to provide for a reduction or deferral of interest or principal
because of a deterioration in the financial condition of the borrower; 3) loans
past due ninety (90) days or more as to principal or interest; and 4) other real
estate owned. Loans are placed on nonaccrual status when scheduled principal or
interest payments are past due for 90 days or more, unless the loan is well
secured and in the process of collection. Loans are charged-off when they are
deemed uncollectible.
During 1995, the Company's level of underperforming loans increased from
$1,584,000 or .71% of total loans as of December 31, 1994 to $3,486,000 or 1.51%
of total loans at December 31, 1995. This increase in the amount of
underperforming loans is largely attributable to the past-due status of a single
large commercial real estate loan in the loan portfolio of the Company's lead
bank, German American Bank. Although past due and a specific allocation of the
loan loss reserve has been provided, this credit is not anticipated to present
any significant exposure to loss; however, this forward-looking statement
assumes the accuracy of financial information provided by the borrower, the
borrower's willingness to comply with the promises made to German American Bank,
the lack of any adverse change in the borrower's financial condition or results
of operations, and the willingness of other creditors to cooperate with the
borrower's plans. During 1995, the allowance for loan loss increased by
$264,000 as the recoveries of prior years' charge-offs offset all of the loans
charged-off during the year allowing for the small negative provision for loan
losses recorded in 1995. See the discussion entitled `PROVISION FOR LOAN
LOSS''elsewhere in this report for further details regarding the negative
provision.
ALLOWANCE FOR LOAN LOSSES (Table 8) ($ in thousands)
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance as of January 1 $5,669 $4,935 $3,862
Addition of Affiliate Banks --- 195 164
Provision for Loan Losses (19) 567 653
Recoveries of Prior Loan Losses 622 227 699
Loan Losses Charged to
the Allowance (339) (255) (443)
Balance as of December 31 $5,933 $5,669 $4,935
</TABLE>
UNDERPERFORMING ASSETS (Table 9) ($ in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Nonaccrual Loans $803 $983 $1,395
Past Due Loans (90 days or more) 2,683 601 461
Renegotiated Loans --- --- ---
Total Underperforming Loans 3,486 1,584 1,856
Other Real Estate Owned 286 497 698
Total Underperforming Assets $3,772 $2,081 $2,554
Allowance for Loan Losses to
Underperforming Loans 170.20% 357.89% 265.89%
Underperforming Loans to
Total Loans 1.51% .71% .92%
</TABLE>
INVESTMENTS, LIQUIDITY, AND INFLATION
Two of the more important and interrelated areas the Company and its affiliate
banks manage very closely are the Company's liquidity requirements and its
balance between interest-rate-sensitive assets and interest-rate-sensitive
liabilities.
Liquidity needs in a banking organization arise from new loan demand, the
funding of existing loan commitments, and deposit withdrawals. One important
objective in managing the securities portfolio is to ensure the Company has
adequate liquidity. The purposes of liquidity management are to match sources
of funds with anticipated customer borrowings and withdrawals and other
obligations and to ensure a dependable funding base. As discussed in the
`Investments'' discussion contained elsewhere in this report, management
significantly increased the available-for-sale portfolio during 1995. This
action greatly enhanced the Company's ability to quickly react to changes in
liquidity and asset and liability needs. Failure to properly manage liquidity
requirements can result in the need to satisfy customer withdrawals and other
obligations on less than desirable terms.
The Company's asset and liability structure is substantially different from that
of an industrial company, in that virtually all assets and liabilities of a
financial institution are monetary in nature. Accordingly, changes in interest
rates may have a significant impact on a financial institution's performance.
Interest rates do not necessarily move in the same direction, or in the same
magnitude, as the prices of other goods and services.
Attention should be directed to the various analyses and schedules throughout
Management's Discussion and Analysis which are useful in analyzing how the
Company is positioned to react to changing interest rates.
INTEREST RATE MANAGEMENT
Interest rate sensitivity occurs when assets or liabilities are subject to rate
and yield changes within a designated time period. The Company performs rate
sensitivity analyses which place each of the Company's balance sheet components
in its appropriate maturity category according to its repricing frequency. In
addition to rate sensitivity analyses, the Company also utilizes other
asset/liability measurements such as computer generated simulation modeling.
This enables management to measure the effect on earnings of changes in interest
rates.
Without regular monitoring and management of these critical areas, a movement in
interest rates and its corresponding effect on the net interest margin may
significantly affect profitability. The degree of any potential consequences of
such interest rate changes can be mitigated by maintaining a proper
asset/liability position given projected interest rates. The Company's policy
is to actively manage its asset / liability position within a one-year interval
with a goal to protect its earnings from being materially adversely impacted by
changes in interest rates during the coming year.
The Company has a Funds Management Policy which established guidelines under
which the affiliate banks manage their securities portfolios. Funds Management
Committees at each of the affiliate banks meet quarterly to monitor the
established guidelines. The overall objective of these committees is to ensure
the Company maintains an adequate level of liquidity and maximizes its net
interest margins while implementing and monitoring programs for the matching of
the mix and maturities of various asset and liability categories so as to avoid
undue interest rate risk. The committees formulate short and long-term
strategies, direct the acquisition and allocation of funds and monitor the level
of interest rate sensitivity within the established guidelines.
Table 10 below reflects the Company's interest rate sensitivity position
(interest rate-sensitive assets minus interest rate-sensitive liabilities)
individually and cumulatively, over various time horizons. As indicated in the
table, a significant portion of the Company's assets and liabilities reprice
within 1-181 days. While slightly more of its liabilities than assets are
subject to repricing during this period, the Company believes its
asset/liability management program allows adequate reaction time to adjust to
changes in interest rate trends and believes the current asset/liability
position does effectively protect the Company's net interest margin and the
resulting net interest income from any material adverse impact during 1996
assuming a moderate rise or decline in interest rates.
ANALYSIS OF INTEREST RATE SENSITIVITY at December 31, 1995
(Table 10) ($ in thousands)
<TABLE>
<CAPTION>
1-3 3-6 6-12
Months Months Months
<S> <C> <C> <C>
Money Market Assets $14,543 $4,434 $99
Securities 14,472 7,337 15,026
Loans (Net of Unearned) 81,348 34,594 68,423
TOTAL EARNING ASSETS $110,363 $46,365 $83,548
INTEREST BEARING LIABILITIES
Retail Savings Deposits $96,165 --- ---
Retail Time Deposits 26,010 $26,354 $43,534
Large Dollar Denominated
Time Deposits 4,639 7,960 6,602
Other Borrowings --- --- ---
TOTAL INTEREST BEARING
LIABILITIES $126,814 $34,314 $50,136
Periodic GAP $(16,451) $12,051 $33,412
Cumulative GAP $(16,451) $(4,400) $29,012
Cumulative Ratio (1) 87% 97% 114%
<FN>
<F1>
(1)Rate-sensitive Assets / Rate-sensitive Liabilities
</FN>
</TABLE>
ANALYSIS OF INTEREST RATE SENSITIVITY at December 31, 1995 (Table 10) ($ in
thousands)
<TABLE>
<CAPTION>
1-5 Beyond
Years 5 Years Total
<S> <C> <C> <C>
EARNING ASSETS
Money Market Assets $300 --- $19,376
Securities 33,963 $18,717 89,515
Loans (Net of Unearned) 36,989 9,236 230,590
TOTAL EARNING ASSETS $71,252 $27,953 $339,481
INTEREST BEARING LIABILITIES
Retail Savings Deposits --- --- $96,165
Retail Time Deposits $67,742 $186 163,826
Large Dollar Denominated
Time Deposits 7,532 --- 26,733
Other Borrowings --- --- ---
TOTAL INTEREST BEARING
LIABILITIES $75,274 $186 $286,724
Periodic GAP $(4,022) $27,767
Cumulative GAP $24,990 $52,757
Cumulative Ratio (1) 109% 118%
<FN>
<F1>
(1)Rate-sensitive Assets / Rate-sensitive Liabilities
</FN>
</TABLE>
CONSOLIDATED BALANCE SHEETS
(DOLLAR REFERENCES IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and Due from Banks (Note 13) $ 15,421 $ 14,636
Federal Funds Sold 12,550 7,650
Cash and Cash Equivalents 27,971 22,286
Interest-bearing Balances with Banks 897 1,192
Other Short-term Investments 5,929 13,415
Securities Available-for-Sale, at Market
(Note 2) 78,908 22,043
Securities Held-to-Maturity, at Cost
(Market Value of $11,237 and
$50,316 on December 31, 1995 and
1994, respectively) (Note 2) 10,607 51,273
Loans (Note 3) 231,127 224,650
Less: Unearned Income (537) (840)
Allowance for Loan Losses
(Note 4) (5,933) (5,669)
Loans, Net 224,657 218,141
Premises, Furniture and Equipment,
Net (Note 5) 9,624 9,407
Other Real Estate 286 497
Intangible Assets 1,990 2,235
Accrued Interest Receivable and
Other Assets 6,894 6,037
TOTAL ASSETS $ 367,763 $ 346,526
LIABILITIES
Noninterest-bearing Deposits $ 40,855 $ 36,448
Interest-bearing Deposits
(Note 6) 286,724 265,842
Total Deposits 327,579 302,290
Short-term Borrowings (Note 7) --- 9,169
Accrued Interest Payable and
Other Liabilities 3,228 2,142
TOTAL LIABILITIES 330,807 313,601
Commitments and Contingent
Liabilities (Notes 12 & 13)
SHAREHOLDERS' EQUITY
Common Stock, $10 par value;
5,000,000 shares authorized,
and 1,825,040 and 1,739,994
issued and outstanding
in 1995 and 1994, respectively 18,250 17,400
Preferred Stock, $10 par value;
5,000,000 shares authorized,
no shares issued --- ---
Additional Paid-in Capital 5,449 3,542
Retained Earnings 12,398 12,641
Unrealized Appreciation /
(Depreciation) on Securities
Available-for-Sale (Net of tax
of $571 and ($431) in
1995 and 1994, respectively) 859 (658)
TOTAL SHAREHOLDERS' EQUITY 36,956 32,925
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 367,763 $ 346,526
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR REFERENCES IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $21,210 $17,348 $16,312
Interest on Federal Funds Sold 739 319 161
Interest on Short-term Investments 728 386 461
Interest and Dividends
on Securities
Taxable 3,229 2,850 3,582
Non-taxable 1,391 1,167 1,141
TOTAL INTEREST INCOME 27,297 22,070 21,657
INTEREST EXPENSE
Interest on Deposits 12,633 9,394 9,844
Interest on Short-term Borrowings 184 133 50
TOTAL INTEREST EXPENSE 12,817 9,527 9,894
NET INTEREST INCOME 14,480 12,543 11,763
Provision for Loan Losses
(Note 4) (19) 567 653
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 14,499 11,976 11,110
NONINTEREST INCOME
Income from Fiduciary Activities 185 171 139
Service Charges on
Deposit Accounts 620 567 520
Investment Services Income 208 420 493
Other Service Charges,
Commissions, and Fees 418 359 339
Gains on Sales of Loans and
Other Real Estate 29 92 61
Security Gains --- 80 71
TOTAL NONINTEREST INCOME 1,460 1,689 1,569
NONINTEREST EXPENSE
Salaries and Employee Benefits
(Note 8) 5,349 4,517 4,338
Occupancy Expense 813 678 659
Furniture and Equipment Expense 748 619 578
FDIC Premiums 393 644 645
Computer Processing Fees 399 352 297
Professional Fees 198 257 484
Other Operating Expenses 2,178 1,542 1,588
TOTAL NONINTEREST EXPENSE 10,078 8,609 8,589
Income before Income Taxes
and Cumulative Effect of
Change in Accounting
for Income Taxes 5,881 5,056 4,090
Income Tax Expense (Note 10) 1,863 1,582 1,308
Income before Cumulative
Effect of Change in
Accounting for Income Taxes 4,018 3,474 2,782
Cumulative Effect of Change in
Accounting for Income
Taxes (Note 1) --- --- 150
NET INCOME $ 4,018 $ 3,474 $ 2,932
EARNINGS PER SHARE (NOTE 11):
Income before Cumulative
Effect of Accounting Change $ 2.20 $ 1.90 $ 1.53
Cumulative Effect --- --- .08
Net Income $ 2.20 $ 1.90 $ 1.61
</TABLE>
See Accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR REFERENCES IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $4,018 $3,474
Adjustments to Reconcile
Net Income to Net Cash from
Operating Activities
Accretion and Amortization on
Investments (662) (50)
Depreciation and Amortization 948 712
Provision for Loan Losses (19) 567
Gain on Sale of Securities --- (80)
Gain on Sales of Loans and
Other Real Estate (29) (92)
Change in Assets and Liabilities:
Loans Purchased for Resale --- ---
Deferred Taxes 5 (349)
Deferred Loan Fees 34 (157)
Interest Receivable (632) (143)
Interest Payable 340 40
Other Assets (649) 316
Other Liabilities 163 (274)
Unearned Income (303) (386)
Total Adjustments (804) 104
NET CASH FROM
OPERATING ACTIVITIES 3,214 3,578
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing
Balances with Banks 295 5,172
Proceeds from Maturities of
Other Short-term Investments 52,133 14,835
Purchase of Other Short-term
Investments (43,967) (22,049)
Proceeds from Maturities of
Securities Available-for-Sale 8,518 10,661
Proceeds from Sales of Securities
Available-for-Sale --- 3,354
Purchase of Securities
Available-for-Sale (26,940) (3,391)
Proceeds from Maturities
of Securities Held-to-Maturity 8,967 11,972
Proceeds from Sales of Securities
Held-to-Maturity --- ---
Purchase of Securities
Held-to-Maturity (4,243) (16,153)
Purchase of Loans (3,691) (7,332)
Proceeds from Sales of Loans 500 7,625
Loans Made to Customers net
of Payments Received (3,186) (9,462)
Proceeds from Sales of
Other Real Estate 389 415
Property and Equipment
Expenditures (920) (956)
Cash Acquired / (Paid) in
Acquisition of Affiliates --- 8,934
NET CASH FROM
INVESTING ACTIVITIES (12,145) 3,625
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits 25,289 (4,088)
Change in Short-term
Borrowings (9,169) 1,003
Purchase and Retire
Common Stock (110) ---
Dividends Paid (1,392) (1,232)
Exercise of Stock Option 22 2
Purchase of Interest in
Fractional Shares (24) (2)
NET CASH FROM
FINANCING ACTIVITIES 14,616 (4,317)
NET CHANGE IN CASH AND
CASH EQUIVALENTS 5,685 2,886
Cash and Cash Equivalents
at Beginning of Year 22,286 19,400
Cash and Cash Equivalents
at End of Year $ 27,971 $ 22,286
CASH PAID DURING THE YEAR FOR:
Interest $ 12,477 $ 9,487
Income Taxes 1,980 1,984
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR REFERENCES IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $2,932
Adjustments to Reconcile
Net Income to Net Cash from
Operating Activities
Accretion and Amortization on
Investments 277
Depreciation and Amortization 557
Provision for Loan Losses 653
Gain on Sale of Securities (17)
Gain on Sales of Loans and
Other Real Estate (61)
Change in Assets and Liabilities:
Loans Purchased for Resale 1,862
Deferred Taxes (238)
Deferred Loan Fees (28)
Interest Receivable 118
Interest Payable (143)
Other Assets 470
Other Liabilities (31)
Unearned Income (364)
Total Adjustments 3,055
NET CASH FROM
OPERATING ACTIVITIES 5,987
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing
Balances with Banks 6,882
Proceeds from Maturities of
Other Short-term Investments 11,539
Purchase of Other Short-term
Investments (9,021)
Proceeds from Maturities of
Securities Available-for-Sale 2,229
Proceeds from Sales of Securities
Available-for-Sale 1,998
Purchase of Securities
Available-for-Sale (13,906)
Proceeds from Maturities
of Securities Held-to-Maturity 36,835
Proceeds from Sales of Securities
Held-to-Maturity 487
Purchase of Securities
Held-to-Maturity (32,118)
Purchase of Loans (5,208)
Proceeds from Sales of Loans 632
Loans Made to Customers net
of Payments Received 2,400
Proceeds from Sales of
Other Real Estate 57
Property and Equipment
Expenditures (488)
Cash Acquired / (Paid) in
Acquisition of Affiliates (963)
NET CASH FROM
INVESTING ACTIVITIES 1,355
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits (5,287)
Change in Short-term
Borrowings 5,581
Purchase and Retire
Common Stock ---
Dividends Paid (1,049)
Exercise of Stock Option ---
Purchase of Interest in
Fractional Shares (12)
NET CASH FROM
FINANCING ACTIVITIES (767)
NET CHANGE IN CASH AND
CASH EQUIVALENTS 6,575
Cash and Cash Equivalents
at Beginning of Year 12,825
Cash and Cash Equivalents
at End of Year $ 19,400
CASH PAID DURING THE YEAR FOR:
Interest $ 10,037
Income Taxes 1,201
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR REFERENCES IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
<S> <C> <C> <C>
BALANCES,
JANUARY 1, 1993 $11,973 $3,509 $13,988
Net Income for 1993 2,932
Stock Split (Note 11)
(541,624 Shares) 5,416 (5,416)
Purchase of Interest in
Fractional Shares
(Notes 11 & 18) (12)
Cash Dividends ($.57
per Common Share)
as restated for the
pooling of interests (1,049)
BALANCES,
DECEMBER 31, 1993 17,389 3,509 10,443
Net Income for 1994 3,474
Changes in Accounting
for Securities (Note 1)
Net Change in Unrealized
Appreciation / (Depreciation)
on Securities
Purchase and Retirement
of 2,082 Shares pursuant
to Exercise of Stock
Options (Note 9) (21) (4) (42)
Issuance of 3,200 shares
upon Exercise of
Stock Options (Note 9) 32 37
Purchase of Interest in
Fractional Shares
(Note 18) (2)
Cash Dividends ($.68 per
Common Share )
as restated for pooling
of interests (1,232)
BALANCES,
DECEMBER 31, 1994 17,400 3,542 12,641
Net Income for 1995 4,018
Unrealized Appreciation
on Securities
Transferred to
Available-for-Sale
Net Change in Unrealized
Appreciation / (Depreciation)
on Securities
Purchase and Retirement
of 3,600 Shares of
Common Stock (36) (7) (67)
Purchase and Retirement
of 3,331 Shares pursuant
to Exercise of Stock
Options (Note 9) (33) (7) (64)
Issuance of 5,800 Shares
upon Exercise
of Stock Options
(Note 9) 58 68
5% Stock Dividend
(86,177 Shares)
(Note 11) 861 1,853 (2,714)
Purchase of Interest in
Fractional Shares
(Note 11) (24)
Cash Dividends ($.76 per
Common Share) (1,392)
BALANCES,
DECEMBER 31, 1995 $18,250 $5,449 $12,398
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR REFERENCES IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION /
(DEPRECIATION)
ON SECURITIES TOTAL
AVAILABLE- SHAREHOLDERS'
FOR-SALE EQUITY
<S> <C> <C>
BALANCES,
JANUARY 1, 1993 $29,470
Net Income for 1993 2,932
Stock Split (Note 11)
(541,624 Shares) ---
Purchase of Interest in
Fractional Shares
(Notes 11 & 18) (12)
Cash Dividends ($.57
per Common Share)
as restated for the
pooling of interests (1,049)
BALANCES,
DECEMBER 31, 1993 31,341
Net Income for 1994 3,474
Changes in Accounting
for Securities (Note 1) $274 274
Net Change in Unrealized
Appreciation / (Depreciation)
on Securities (932) (932)
Purchase and Retirement
of 2,082 Shares pursuant
to Exercise of Stock
Options (Note 9) (67)
Issuance of 3,200 shares
upon Exercise of
Stock Options (Note 9) 69
Purchase of Interest in
Fractional Shares
(Note 18) (2)
Cash Dividends ($.68 per
Common Share )
as restated for pooling
of interests (1,232)
BALANCES,
DECEMBER 31, 1994 (658) 32,925
Net Income for 1995 4,018
Unrealized Appreciation
on Securities
Transferred to
Available-for-Sale 523 523
Net Change in Unrealized
Appreciation / (Depreciation)
on Securities 994 994
Purchase and Retirement
of 3,600 Shares of
Common Stock (110)
Purchase and Retirement
of 3,331 Shares pursuant
to Exercise of Stock
Options (Note 9) (104)
Issuance of 5,800 Shares
upon Exercise
of Stock Options
(Note 9) 126
5% Stock Dividend
(86,177 Shares)
(Note 11) ---
Purchase of Interest in
Fractional Shares
(Note 11) (24)
Cash Dividends ($.76 per
Common Share) (1,392)
BALANCES,
DECEMBER 31, 1995 $859 $36,956
</TABLE>
See accompanying notes to consolidated financial statements.
Notes to the Consolidated Financial Statements
December 31, 1995, 1994, and 1993
(dollar references in thousands)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
German American Bancorp, (formerly known as GAB Bancorp) operates primarily in
the banking industry, which accounts for over 90% of its revenues, operating
income and identifiable assets. German American Bancorp generates commercial,
installment and mortgage loans and receives deposits from customers through its
locations in the Indiana counties of Dubois, Martin, Pike, Perry and Spencer.
The overall loan portfolio is diversified among a variety of individual
borrowers, with a substantial portion of debtors' ability to honor their
contracts dependent on the agriculture, poultry and wood manufacturing
industries. Although wood manufacturers employ a significant number of people
in the Company's market area, the Company does not have a concentration of
credit to companies engaged in that industry. The majority of the Company's
loans are secured by specific items of collateral including business assets,
consumer assets and real property. These financial statements include the
accounts of German American Bancorp and its wholly-owned subsidiaries, The
German American Bank, The Union Bank, Winslow Bancorporation, Inc., Community
Trust Bank (wholly-owned by Winslow Bancorporation), First State Bank, Southwest
Indiana and GAB Mortgage Corp. Significant intercompany balances and
transactions have been eliminated in consolidation. Certain items in the 1994
and 1993 financial statements have been reclassified to correspond with the 1995
presentation.
USES OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
Management must make estimates and assumptions in preparing financial
statements that affect the amounts reported therein and the disclosures
provided. These estimates and assumptions may change in the future and future
results could differ. Areas involving the use of management's estimates and
assumptions include the allowance for loan losses, the realization of deferred
tax assets, fair values of certain securities, the determination and carrying
value of impaired loans, the carrying value of other real estate, the
determination of other-than-temporary reductions in the fair value of
securities, recognition and measurement of loss contingencies, depreciation of
premises and equipment, and the carrying value and amortization of intangibles.
Estimates that are more susceptible to change in the near term include the
allowance for loan losses, the determination and carrying value of impaired
loans, and the fair value of certain securities.
SHORT-TERM INVESTMENTS
Short-term Investments consist of interest-bearing balances with banks, which
are generally limited to FDIC insured amounts, and Bankers Acceptances. These
investments generally have terms to maturity of less than one year and are
carried at cost, which approximates market value.
SECURITIES
On January 1, 1994, the Company adopted Financial Accounting Standard No. 115
(FAS 115), `Accounting for Certain Investments in Debt and Equity Securities.''
Upon adoption of FAS 115, securities were classified by management as available-
for-sale or held-to-maturity. The adoption of FAS 115 in 1994 had no effect on
net income, earnings per share or retained earnings, but did increase
shareholders' equity by $274 on January 1, 1994, which is a market adjustment of
$454 less $180 in deferred taxes.
Securities classified as available-for-sale are securities that the Company
intends to hold for an indefinite period of time, but not necessarily until
maturity, and includes securities that management might use as part of its
asset-liability strategy or that may be sold in response to changes in the
interest rates, changes in prepayment risk, or for similar reasons. It is
difficult to predict whether changes such as the above will occur or the degree
or specific nature of such changes. The amount of securities reported as
available-for-sale include securities that might be sold if a condition changes
in a given way, whereas those securities might not be sold if the condition does
not change or if it changes in a different way. Accordingly, many securities
reported as available-for-sale may not be sold and thus the amount reported does
not necessarily represent anticipated sales and resulting cash receipts.
Securities available-for-sale are reported at market value with unrealized gains
or losses included as a separate component of equity net of tax.
Securities classified as held-to-maturity are securities that the Company has
both the ability and positive intent to hold to maturity. Securities held-to-
maturity are carried at amortized cost.
Premium amortization is deducted from and discount accretion is added to
interest income using the level yield method. The cost of securities sold is
computed on the identified securities method.
INTEREST INCOME ON LOANS
Interest is accrued over the term of the loans based on the principal balance
outstanding. Loans are placed on a nonaccrual status when scheduled principal
or interest payments are past due 90 days or more, unless the loan is well
secured and in the process of collection.
Under FAS 114 and 118 (as explained below in ``Allowance for Loan Losses''),
the carrying values of impaired loans are periodically adjusted to reflect cash
payments, revised estimates of future cash flows, and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported as bad debt expense, if reductions, or otherwise as interest income.
LOAN FEES AND COSTS
The Company defers loan fees and certain direct loan origination costs. The
amounts deferred are reported in the balance sheet as part of loans and are
recognized into interest income over the term of the loan using the level yield
method.
ALLOWANCE FOR LOAN LOSSES
Because some loans may not be repaid in full, an allowance for loan losses is
recorded. Increases of the allowance are recorded by a provision for possible
loan losses charged to expense. Estimating the risk of loss and the amount of
loss on any loan is necessarily subjective. Accordingly, the allowance is
maintained by management at a level considered adequate to cover possible losses
that are currently anticipated based on past loss experience, general economic
conditions, information about specific borrower situations including their
financial position and collateral values, and other factors and estimates which
are subject to change over time. While management may periodically allocate
portions of the allowance for specific problem loan situations, the whole
allowance is available for any loan charge-offs that occur. A loan is charged-
off by management as a loss when deemed uncollectible, although collection
efforts continue and future recoveries may occur.
Statements of Financial Accounting Standards No. 114 and No. 118 were adopted
January 1, 1995. These standards require recognition of loan impairment if a
loan's full principal or interest payments are not expected to be received.
Loans considered to be impaired are reduced to the present value of expected
future cash flows or to the fair value of collateral, by allocating a portion of
the allowance for loan losses to such loans. No increase to the allowance for
loan losses was required at January 1, 1995 as a result of the adoption of these
new standards.
Smaller-balance homogenous loans are evaluated for impairment in total. Such
loans include real estate loans secured by one-to-four family residences and
loans to individuals for household, family and other personal expenditures.
Commercial, agricultural, and poultry loans are evaluated individually for
impairment. When analysis of borrower operating results and financial condition
indicates that underlying cash flows of the borrower's business are not adequate
to meet its debt service requirements, the loan is evaluated for impairment.
Often this is associated with a delay or shortfall in payments of more than 30
days. Nonaccrual loans are generally also considered impaired. Impaired loans,
or portions thereof, are charged off when deemed uncollectible. The nature of
disclosures for impaired loans is considered generally comparable to prior
nonaccrual and renegotiated loan disclosures.
PREMISES, FURNITURE, AND EQUIPMENT
Premises, Furniture and Equipment are stated at cost less accumulated
depreciation. Premises and related components are depreciated on the straight-
line method with useful lives ranging from 10 to 40 years. Furniture and
equipment are primarily depreciated using straight-line methods with useful
lives ranging from 3 to 12 years. Maintenance and repairs are expensed and
major improvements are capitalized. At the time of sale or disposition of an
asset, the applicable cost and accumulated depreciation amounts are removed from
the accounting records.
OTHER REAL ESTATE
Other Real Estate is carried at the lower of cost or fair value less estimated
selling costs. Expenses incurred in carrying Other Real Estate are charged to
operations as incurred.
INTANGIBLE ASSETS
Intangible Assets are comprised of core deposit intangible ($434 and $548 at
December 31, 1995 and 1994, respectively) and goodwill ($1,556 and $1,687, at
December 31, 1995 and 1994, respectively). Core deposit intangible is being
amortized on an accelerated method over ten years and goodwill is being
amortized on a straight-line basis over fifteen years.
CHANGE IN ACCOUNTING FOR INCOME TAXES
The Company adopted, effective January 1, 1993, Statement of Financial
Accounting Standards 109 (FAS 109). The adoption of FAS 109 changes the
Company's accounting for income taxes from an income statement approach to an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets and
liabilities. The effect of adopting FAS 109 in 1993 was to increase net income
by $150, which represents the cumulative effect of the accounting change on
years prior to January 1, 1993.
INCOME TAXES
Deferred tax liabilities and assets are determined at each balance sheet date.
They are measured by applying enacted tax laws to future amounts that will
result from differences in the financial statement and tax basis of assets and
liabilities. Recognition of deferred tax assets is limited by the establishment
of a valuation reserve unless management concludes that the assets will more
likely than not result in future tax benefits to the Company. Income tax
expense is the amount due on the current year tax returns plus or minus the
change in deferred taxes.
STATEMENT OF CASH FLOWS
The Company reports net cash flows for customer loan transactions, deposit
transactions and deposits made with other financial institutions. Cash and cash
equivalents are defined to include cash on hand, demand deposits in other
institutions and Federal Funds Sold.
NOTE 2 - SECURITIES
The amortized cost and estimated market values of Securities as of December 31,
1995 are as follows:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
COST GAINS
<S> <C> <C>
Securities Available-for-Sale:
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $23,727 $172
Obligations of State and
Political Subdivisions 14,232 1,154
Corporate Securities 6,375 88
Mortgage-backed Securities 33,144 317
Total $77,478 $1,731
</TABLE>
<TABLE>
<CAPTION>
GROSS ESTIMATED
UNREALIZED MARKET
LOSSES VALUE
<S> <C> <C>
Securities Available-for-Sale:
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $(112) $23,787
Obligations of State and
Political Subdivisions --- 15,386
Corporate Securities --- 6,463
Mortgage-backed Securities (189) 33,272
Total $(301) $78,908
</TABLE>
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
COST GAINS
<S> <C> <C>
Securities Held-to-Maturity:
Obligations of State and
Political Subdivisions $9,869 $659
Other Securities 738 ---
Total $10,607 $659
</TABLE>
<TABLE>
<CAPTION>
GROSS ESTIMATED
UNREALIZED MARKET
LOSSES VALUE
Securities Held-to-Maturity:
<S> <C> <C>
Obligations of State and
Political Subdivisions $(29) $10,499
Other Securities --- 738
Total $(29) $11,237
</TABLE>
The amortized cost and estimated market values of Securities as of December 31,
1994 are as follows:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
COST GAINS
Securities Available-for-Sale:
<S> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $7,280 $11
Obligations of State and
Political Subdivisions 56 1
Corporate Securities 212 ---
Mortgage-backed Securities 15,584 30
Total $23,132 $42
</TABLE>
<TABLE>
<CAPTION>
GROSS ESTIMATED
UNREALIZED MARKET
LOSSES VALUE
Securities Available-for-Sale:
<S> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $(210) $7,081
Obligations of State and
Political Subdivisions --- 57
Corporate Securities (16) 196
Mortgage-backed Securities (905) 14,709
Total $(1,131) $22,043
</TABLE>
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
COST GAINS
Securities Held-to-Maturity:
<S> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $17,249 $7
Obligations of State and
Political Subdivisions 21,237 634
Corporate Securities 803 ---
Mortgage-backed Securities 11,267 1
Other Securities 717 ---
Total $51,273 $642
</TABLE>
<TABLE>
<CAPTION>
GROSS ESTIMATED
UNREALIZED MARKET
LOSSES VALUE
Securities Held-to-Maturity:
<S> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $(769) $16,487
Obligations of State and
Political Subdivisions (234) 21,637
Corporate Securities (1) 802
Mortgage-backed Securities (595) 10,673
Other Securities --- 717
Total $(1,599) $50,316
</TABLE>
NOTE 2 - SECURITIES (CONTINUED)
The amortized cost and estimated market value of Securities at December 31,
1995 by contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because some issuers have the right to call or
prepay certain obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
Securities Available-for-Sale:
<S> <C> <C>
Due in one year or less $9,794 $9,826
Due after one year through five years 21,861 22,091
Due after five years through ten years 6,770 7,216
Due after ten years 5,909 6,503
Mortgage-backed Securities 33,144 33,272
Totals $77,478 $78,908
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
Securities Held-to-Maturity:
<S> <C> <C>
Due in one year or less $190 $201
Due after one year through five years 1,949 2,012
Due after five years through ten years 2,158 2,357
Due after ten years 5,572 5,929
Other Securities 738 738
Totals $10,607 $11,237
</TABLE>
<TABLE>
<CAPTION>
1995
AVAILABLE- HELD-TO-
FOR-SALE MATURITY
Sales of Securities are summarized below:
<S> <C> <C>
Proceeds from Sales $0 $0
Gross Gains on Sales 0 0
Gross Losses on Sales 0 0
Income Taxes on Gross Gains 0 0
Income Taxes on Gross Losses 0 0
</TABLE>
<TABLE>
<CAPTION>
1994
AVAILABLE- HELD-TO-
FOR-SALE MATURITY
Sales of Securities are summarized below:
<S> <C> <C>
Proceeds from Sales $3,354 $0
Gross Gains on Sales 82 0
Gross Losses on Sales 2 0
Income Taxes on Gross Gains 33 0
Income Taxes on Gross Losses 1 0
</TABLE>
<TABLE>
<CAPTION>
1993
AVAILABLE- HELD-TO-
FOR-SALE MATURITY
Sales of Securities are summarized below:
<S> <C> <C>
Proceeds from Sales $1,998 $487
Gross Gains on Sales 0 48
Gross Losses on Sales 11 20
Income Taxes on Gross Gains 0 19
Income Taxes on Gross Losses 4 8
</TABLE>
Upon acquisition of The Otwell State Bank in 1994, $2,400 of securities were
transferred from held-to-maturity to available-for-sale.
Securities with a carrying value of $8,488 and $13,349 as of December 31,
1995 and 1994, respectively, were pledged to secure public and trust deposits
and for other purposes as required by law.
No investment securities of an individual issuer exceeded ten percent of
German American Bancorp shareholders' equity at December 31, 1995. The total
dollar amount of Cash and Due from Banks, Federal Funds Sold and Other Short-
term Investments with National City Bank, Louisville, Kentucky was $16,278 at
December 31, 1995.
Investments in state and political subdivisions and corporate obligations
are generally required by policy to be investment grade as established by
national rating organizations. However, the purchase of non-rated Indiana
municipal securities is permitted by policy when the inherent quality of the
issue is clearly evident to management. These investments are actively traded
and have a readily available market valuation. Market values of these
investments are reviewed quarterly with market values being obtained from an
independent rating service or broker.
At December 31, 1995, U.S. Government Agency structured notes with an
amortized cost of $9,250 and fair value of $9,201 are included in securities
available-for-sale, consisting primarily of step-up and single-index bonds.
At December 31, 1995, mortgage-backed securities include collateralized
mortgage obligations (CMO's) and real estate mortgage investment conduits
(REMIC's) with an amortized cost of $29,429 and fair value of $29,474, all of
which are issued by U.S. Government Agencies and of which approximately $28,041
are fixed rate and approximately $1,433 are single-index variable rate.
NOTE 3 - LOANS
<TABLE>
Loans, as presented on the balance sheet, are comprised of the
following classifications as of December 31,
<CAPTION>
1995 1994
<S> <C> <C>
Real Estate Loans Secured by
1- 4 Family Residential
Properties $68,826 $67,737
Loans to Finance Poultry
Production and Other
Related Operations 23,784 25,599
Loans to Finance Agricul-
tural Production and
Other Loans to Farmers 27,310 31,959
Commercial and Industrial
Loans 74,612 67,662
Loans to Individuals for
Household, Family and
Other Personal Expenditures 34,685 29,248
Economic Development
Commission Bonds 608 625
Lease Financing 1,302 1,820
Total $231,127 $224,650
</TABLE>
Underperforming loans are loans which are contractually past due 90 days or
more as to interest or principal payments, loans accounted for on a nonaccrual
basis and troubled debt restructurings. Underperforming assets at December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Underperforming Loans $3,486 $1,584
Other Real Estate Owned 286 497
Total Underperforming Assets $3,772 $2,081
Interest that would have been
recognized at the original rate
on Underperforming Loans $337 $136
Amount of interest recognized
on Underperforming Loans $280 $123
</TABLE>
Certain directors, executive officers, and principal shareholders of the
Company, including their immediate families and companies in which they are
principal owners, were loan customers of the Company during 1995. A summary of
the activity of these loans is as follows:
<TABLE>
<CAPTION>
BALANCE CHANGES
JANUARY 1, IN PERSONS
1995 ADDITIONS INCLUDED
<C> <C> <C>
$9,740 $7,264 $0
</TABLE>
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE
DECEMBER 31,
COLLECTED CHARGED-OFF 1995
<C> <C> <C>
$(7,126) $0 $9,878
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the Allowance for Loan
Losses is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance as of January 1 $5,669 $4,935 $3,862
Addition of Affiliate Banks --- 195 164
Provision for Loan Losses (19) 567 653
Recoveries of Prior
Loan Losses 622 227 699
Loan Losses Charged to
the Allowance (339) (255) (443)
Balance as of December 31 $5,933 $5,669 $4,935
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES (CONTINUED)
<TABLE>
<CAPTION>
Information regarding impaired loans is as follows for the
year ended December 31, 1995:
<S> <C>
Average investment in impaired loans $4,233
Interest income recognized on impaired
loans including interest
income recognized on cash basis $353
Interest income recognized on impaired
loans on cash basis 270
Information regarding impaired loans
is as follows at December 31, 1995:
Balance of impaired loans $6,244
Less: Portion for which no allowance
for loan loss is allocated 215
Portion of impaired loan balance for
which an allowance for
credit losses is allocated $6,029
Portion of allowance for loan losses
allocated to the impaired loan balance $898
</TABLE>
At December 31, 1995, impaired loans of $2,646 are also included in
Underperforming Loans (Note 3).
NOTE 5 - PREMISES, FURNITURE, AND EQUIPMENT
<TABLE>
<CAPTION>
Premises, furniture, and equipment as presented on the balance sheet
is comprised of the following classifications:
1995 1994
<S> <C> <C>
Land $1,472 $1,418
Buildings and Improvements 9,160 8,841
Furniture and Equipment 4,578 4,269
Total Premises, Furniture and Equipment 15,210 14,528
Less: Accumulated Depreciation (5,586) (5,121)
Total $9,624 $9,407
</TABLE>
NOTE 6 - DEPOSITS
The aggregate amount of interest-bearing deposits in denominations of $100 or
more was $26,733 and $26,868 as of December 31, 1995 and 1994, respectively.
NOTE 7 - SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Short-term borrowings, as presented in the balance sheet,
consist of the following:
1995 1994
<S> <C> <C>
Interest-bearing Demand Notes
issued to the U.S. Treasury $ --- $ 898
Securities Sold under Agreements
to Repurchase --- 8,171
Federal Funds Purchased --- 100
Total Short-term Borrowings $ --- $9,169
</TABLE>
NOTE 8 - EMPLOYEE BENEFIT PLANS
During 1995, the Company and all its banking affiliates provided a trusteed
noncontributory profit sharing plan which covered substantially all full-time
employees. Contributions are discretionary and are subject to determination by
the Board of Directors. Contributions to this plan for 1995 were $184. During
1994, First State Bank did not participate in the plan and, prior to 1994, only
German American Bank had such a plan. Contributions were $170 and $121 for 1994
and 1993, respectively.
During 1995, the Company and all its banking affiliates offered 401(k)
deferred compensation plans under which the banks agree to match certain
employee contributions. Contributions to this plan during 1995 were $196.
During 1994, all affiliate banks of the Company except First State Bank offered
this plan. Only German American and Union provided such plans in 1993.
Contributions to these plans were $154 and $135 for 1994 and 1993, respectively.
NOTE 9 - STOCK OPTION PLAN
During 1992, the Company adopted a Stock Option Plan which reserved 76,287
shares of Common Stock (as adjusted for subsequent stock splits and subject to
further customary antidilution adjustments) for the purpose of grants of options
to officers and other employees of the Company. The date on which options are
first exercisable is determined by the Stock Option Committee of the Company,
but no stock option may be exercised after ten years from the date of grant.
Options may be designated as `incentive stock options'' under the Internal
Revenue Code of 1986, or as nonqualified options. The exercise price of
incentive stock options granted pursuant to the Plan must be no less than the
fair market value of the Common Stock on the date of the grant.
The Plan authorizes an optionee to pay the exercise price of options in cash
or in common shares of the Company or in some combination of cash or common
shares. If an optionee tenders already-owned common shares to the Company to
exercise an option, the Company is obligated to use its best efforts to issue to
such optionee a replacement option for the number of shares tendered of the same
type (either an incentive stock option or a nonqualified option) as the option
exercised and with the same expiration date priced at the fair market value of
the stock on that date. Replacement options may not be exercised until one year
from the date of grant.
Changes in options outstanding were as follows, as adjusted to reflect stock
splits and stock dividends:
WEIGHTED AVERAGE
OPTION PRICE
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Outstanding at beginning of year $21.51 $20.64 ---
Granted during the year $29.71 $30.83 $20.64
Exercised during the year $20.64 $20.64 ---
Outstanding at end of year $22.99 $21.51 $20.64
Exercisable at end of year $23.08 $20.64 $20.64
</TABLE>
NUMBER OF OPTIONS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Outstanding at beginning of year 25,601 26,775 ---
Granted during the year 3,497 2,186 26,775
Exercised during the year (6,090) (3,360) ---
Outstanding at end of year 23,008 25,601 26,775
Exercisable at end of year 9,116 9,555 4,725
</TABLE>
There were 49,512 shares available for grant as of December 31, 1995.
NOTE 10 - INCOME TAXES
THE PROVISION FOR INCOME TAXES CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Currently Payable $1,858 $1,931 $1,546
Deferred 52 (267 ) (238 )
Net Operating Loss
Carryforward (47) (82 ) ---
Total $1,863 $1,582 $1,308
</TABLE>
Income tax expense is reconciled to the 34% statutory rate applied
to pre-tax income as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory Rate Times
Pre-tax Income $2,000 $1,719 $1,391
Add/(Subtract) the Tax Effect of:
Income from Tax-exempt
Loans and Investments (531) (435 ) (423 )
Non-deductible Merger Costs --- 26 74
Non-deductible Interest Expense 49 30 27
State Income Tax, Net of
Federal Tax Effect 344 291 249
Tax Effect of Other Differences 1 (49) (10)
Total Income Taxes $1,863 $1,582 $1,308
</TABLE>
The net deferred tax asset at December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred Tax Assets:
Allowance for Loan Losses $1,474 $1,521
Net Operating Loss
Carryforwards 281 328
Unrealized Depreciation
on Securities --- 431
Other 271 199
Total Deferred Tax Assets 2,026 2,479
Deferred Tax Liabilities:
Leasing Activities, net (227 ) (286 )
Depreciation (122) (102 )
Purchase Accounting
Adjustments (63) (80 )
Unrealized Appreciation
on Securities (571) ---
Other (145) (46 )
Total Deferred
Tax Liabilities (1,128) (514 )
Valuation Allowance (48) (71 )
Net Deferred Tax Asset $850 $1,894
</TABLE>
<TABLE>
The Company's subsidiary, Winslow Bancorporation, has $826 of federal tax
net operating loss carryforwards expiring in the following amounts:
<CAPTION>
YEAR AMOUNT
<C> <C>
1996 $52
1997 128
1998 80
1999 135
2000 135
2001 129
2002 105
2007 58
2008 4
</TABLE>
NOTE 11 - PER SHARE DATA
In July 1993, the Board of Directors authorized a three-for-two stock split
effected in the form of a 50 percent stock dividend issued in August, 1993. In
December 1995, the Board of Directors declared a 5 percent stock dividend
payable on December 22, 1995. In lieu of issuing fractional shares, the Company
purchased from shareholders their fractional interest in both instances.
Earnings and dividend per share amounts have been retroactively computed as
though these additionally issued shares had been outstanding for all periods
presented. The weighted average number of shares used in calculating earnings
and dividends per share amounts were 1,825,641, 1,825,059, and 1,825,053 for
1995, 1994, and 1993, respectively. Stock Options (see Note 9) are not
materially dilutive and have been excluded from weighted average shares.
NOTE 12 - LEASE COMMITMENTS
The total rental expense for all leases for the years ended December 31,
1995, 1994, and 1993 was $73, $67, and $61, respectively, including amounts paid
under short-term cancelable leases.
At December 31, 1995, the German American Bank subleased space for two branch
banking facilities from a company controlled by a director and principal
shareholder of the Company. The subleases expire in 1996 and 2000 with various
renewal options provided. Aggregate annual rental payments to this Director's
company totaled $31 for 1995. Exercise of the Bank's sublease renewal options
are contingent upon the Director's company renewing its primary leases.
The following is a schedule of future minimum lease payments:
<TABLE>
<CAPTION>
Years Ending December 31:
PREMISES EQUIPMENT TOTAL
<S> <C> <C> <C>
1996 $25 $11 $36
1997 17 8 25
1998 17 1 18
1999 17 --- 17
2000 10 --- 10
Total $86 $20 $106
</TABLE>
NOTE 13 - COMMITMENTS AND OFF-BALANCE SHEET ITEMS
In the normal course of business, there are various commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the accompanying consolidated financial statements.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to make loans, standby
letters of credit, and financial guarantees is represented by the contractual
amount of those instruments. The Company uses the same credit policy to make
such commitments as it uses for on-balance sheet items. These financial
instruments at December 31, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commitments to Fund Loans
Home Equity $5,760 $5,036
Credit Card Lines 3,287 2,200
Commercial Real Estate Commitments 1,516 385
Commercial Operating Lines 22,913 14,593
Total Commitments to Fund Loans $33,476 $22,214
Standby Letters of Credit $3,110 $4,188
</TABLE>
NOTE 13 - COMMITMENTS AND OFF-BALANCE SHEET ITEMS (CONTINUED)
Since many commitments to make loans expire without being used, the amount
does not necessarily represent future cash commitments. Collateral obtained
upon exercise of the commitment is determined using management's credit
evaluation of the borrower, and may include accounts receivable, inventory,
property, land and other items. the approximate duration of these commitments
is generally one year or less. The interest rates associated with these
commitments are generally variable rate.
During 1995, the Company self-insured employee health benefits for all
affiliates. Stop loss insurance covers losses exceeding $35 per covered
individual and approximately $296 in the aggregate . Management's policy is to
establish a reserve for claims not submitted by a charge to earnings based on
prior experience. The charge to earnings for 1995 was $269. During 1994, the
Company self-insured the benefits for all affiliates except First State Bank.
Prior to 1994, only German American Bank self- insured the health benefits.
The charges to earnings were $230 for 1994 and $187 for 1993.
At December 31, 1995, the affiliate banks were required to have $1,950 on
deposit with the Federal Reserve or as cash on hand. These reserves do not earn
interest.
NOTE 14 - NON-CASH INVESTING ACTIVITIES
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Loans Transferred
to Other Real Estate $149 $122 $97
Securities Transferred
to Available-for-Sale $35,943 $32,732 ---
</TABLE>
The data above should be read in conjunction with the Consolidated Statements
of Cash Flows. Securities were transferred to Available-for-Sale in 1994 upon
adoption of FAS 115 (Note 1). During December 1995, Securities were transferred
from Held-to-Maturity to Available-for-Sale in accordance with the Financial
Accounting Standards Board Special Report on implementation of FAS 115.
NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS
The condensed financial statements of German American Bancorp as of December
31, 1995 and 1994, and for each of the three years ended December 31, 1995,
1994, and 1993 are as follows:
GERMAN AMERICAN BANCORP
BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash $409 $340
Investment in Subsidiary
Banks and Bank Holding
Company 35,833 32,174
Investment in GAB
Mortgage Corp 274 269
Furniture and Equipment 313 16
Other Assets 204 130
TOTAL ASSETS $37,033 $32,929
LIABILITIES $77 $4
SHAREHOLDERS' EQUITY
Common Stock 18,250 17,400
Additional Paid-in
Capital 5,449 3,542
Retained Earnings 12,398 12,641
Unrealized Appreciation/
(Depreciation) on Securities
Available-for-Sale 859 (658)
TOTAL SHAREHOLDERS'
EQUITY 36,956 32,925
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $37,033 $32,929
</TABLE>
NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
GERMAN AMERICAN BANCORP STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME
Dividends from
Subsidiary Banks $2,511 $4,754 $4,531
Interest Income 18 44 29
Fee Income 178 --- ---
Total Income 2,707 4,798 4,560
EXPENSES
Salaries and Benefits 922 533 26
Professional Fees 95 157 187
Occupancy and
Equipment Expense 130 2 ---
Other Expenses 104 24 33
Total Expenses 1,251 716 246
INCOME BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED INCOME
OF SUBSIDIARIES 1,456 4,082 4,314
Income Tax Benefit 415 286 16
INCOME BEFORE EQUITY
IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES 1,871 4,368 4,330
Equity in Undistributed
Income of Subsidiaries 2,147 (894) (1,398)
NET INCOME $4,018 $3,474 $2,932
</TABLE>
GERMAN AMERICAN BANCORP STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income $4,018 $3,474 $2,932
Adjustments to Reconcile Net
Income to Net Cash from Operations
Depreciation 65 2 ---
Change in Other Assets (74) (110) 90
Change in Other Liabilities 73 (66) (45)
Equity in Undistributed
Income of Subsidiaries (2,147) 894 1,398
Total Adjustments (2,083) 720 1,443
Net Cash from Operating
Activities 1,935 4,194 4,375
CASH FLOWS FROM
INVESTING ACTIVITIES
Investment in Subsidiaries --- (3,818) (2,339)
Advances made to Subsidiaries --- (1,000) (3,400)
Repayment of Advances
by Subsidiaries --- 2,100 2,500
Property and Equipment
Expenditures (362) (18) ---
Net Cash from Investing
Activities (362) (2,736) (3,239)
CASH FLOWS FROM
FINANCING ACTIVITIES
Dividends Paid (1,392) (1,232) (1,049)
Exercise of Stock Options 22 2 ---
Purchase and Retire
Common Stock (110) --- ---
Purchase of Interest
in Fractional Shares (24) (2) (12)
Net Cash from
Financing Activities (1,504) (1,232) (1,061)
NET CHANGE IN CASH
AND CASH EQUIVALENTS 69 226 75
Cash and Cash Equivalents
at Beginning of Year 340 114 39
Cash and Cash Equivalents
at End of Year $409 $340 $114
</TABLE>
NOTE 16 - PENDING CHANGES IN ACCOUNTING POLICIES
As of January 1, 1996 the following new Statements of Financial
Accounting Standards (FAS) become applicable to the Company: FAS
121, `Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of'; FAS 122, ``Accounting for Mortgage
Servicing Rights'; and FAS 123, ``Accounting for Stock-Based
Compensation'. FAS 121 requires review of long-lived assets for
impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable. Management does not
expect the adoption of FAS 121 to have a material effect on the
consolidated financial statements. FAS 122 eliminates the d
istinction between purchased and originated mortgage servicing
rights and causes an asset to be recorded for newly originated
mortgage servicing rights. As the Company presently does not
purchase or retain originated mortgage servicing rights, FAS 122
will have no effect on the consolidated financial statements. FAS
123 encourages entities to use a `fair value based method'' to
account for stock-based compensation plans. If FAS 123 is not
adopted, entities must disclose the proforma effect on net income
and on earnings per share had the statement been adopted. The
Company does not plan to use a fair value method to account for
stock compensation plans, and, accordingly, the effect of FAS 123
will be limited to the additional disclosures of the required market
values.
NOTE 17 - DIVIDENDS AND CAPITAL REQUIREMENTS
German American Bancorp's primary source of funds with
which to pay dividends is its affiliate banks. The Banks and
the Company are each required to maintain minimum capital
amounts in accordance with regulatory requirements. Capital,
as defined, is generally required to be at least 3% to 5% of
total assets (leverage ratio), as defined, or at least 8% to 10%
of risk-based assets (total risk-based capital ratio), as defined.
At December 31, 1995 the Company's leverage and total
risk-based capital ratios were 9.29% and 15.89%, respectively,
which exceeded the minimum requirements by 6.29% and 7.89%,
respectively. Under these requirements, the Company estimates
as of December 31, 1995 that retained earnings available for
payment by affiliate Banks to the Company approximated $3,272
and that approximately $12,398 of Company retained earnings
are available for payment to shareholders.
NOTE 18 - BUSINESS COMBINATIONS
On April 1, 1994, the Company acquired all of the
outstanding shares of The Otwell State Bank of Otwell,
Indiana in exchange for 113,286 shares of German
American Bancorp common stock. The Otwell State
Bank was subsequently merged into Community Trust
Bank. Fractional interests were paid in cash of $2. The
transaction was accounted for as a pooling of interests.
On March 8, 1993, the Company acquired all of the
outstanding shares of Unibancorp and its wholly owned
subsidiary, The Union Bank of Loogootee, Indiana in
exchange for 320,283 shares of German American Bancorp
common stock (Unibancorp was subsequently merged into
German American Bancorp). Fractional interests were paid
in cash of $1. The transaction was accounted for as a
pooling of interests.
On April 1, 1993, the Company acquired all of the
outstanding stock of Winslow Bancorporation, Inc. and
its subsidiary, then known as Southwestern Indiana Bank,
of Winslow, Indiana, for total cash consideration of $2,023
plus direct expenses. The transaction was recorded under
the purchase method of accounting and resulted in goodwill
of $377 and core deposit intangible of $353. Winslow
Bancorporation's consolidated financial statements reflected,
on an unaudited basis, total assets of $17,692, total liabilities
of $16,161, and shareholders' equity of $1,531 at April 1, 1993,
and a net loss of $203 for the period January 1 through
April 1, 1993. The Company's consolidated financial statements
do not include the assets, liabilities, equity, revenue, and net
loss of Winslow Bancorporation, Inc. prior to the April 1, 1993
purchase date.
On October 28, 1994, the Company acquired three
Indiana branches of Regional Federal Savings Bank.
The Huntingburg branch site was subsequently combined
into an existing branch of the German American Bank in
Huntingburg, while the other two sites in Tell City and Rockport
comprise a newly-formed commercial bank known as First
State Bank, Southwest Indiana. The fair value of assets
acquired was $16,048, the fair value of liabilities assumed
was $24,982, and the Company received $8,934 of cash at
settlement. Goodwill associated with this purchase was
$1,353 while core deposit intangible was $317.
NOTE 19 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value:
CASH AND SHORT-TERM INVESTMENTS
For short-term instruments, the carrying amount is a
reasonable estimate of fair value.
SECURITIES
For securities, fair values are based on quoted market
prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted market
prices for similar instruments.
LOANS
The fair value of loans is estimated by discounting
future cash flows using the current rates at which
similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable
on demand at the reporting date. The fair value of fixed-
maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
SHORT-TERM BORROWINGS
For short-term borrowings, the carrying amount is
a reasonable estimate of fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY
LETTERS OF CREDIT
These instruments are generally short-term or variable
rate with minimal fees charged. Carrying value (which is
zero) is a reasonable estimation of fair value.
DECEMBER 31, 1995
CARRYING FAIR
VALUE VALUE
Financial Assets:
Cash and Short-term Investments $34,797 $34,797
Securities Available-for-Sale 78,908 78,908
Securities Held-to-Maturity 10,607 11,237
Loans, net 224,657 223,949
Financial Liabilities:
Deposits (327,579) (329,840)
Short-term Borrowings --- ---
Unrecognized Financial Instruments
Commitments to extend credit --- ---
Standby letters of credit --- ---
DECEMBER 31, 1994
CARRYING FAIR
VALUE VALUE
Financial Assets:
Cash and Short-term Investments $36,893 $36,893
Securities Available-for-Sale 22,043 22,043
Securities Held-to-Maturity 51,273 50,316
Loans, net 218,141 216,694
Financial Liabilities:
Deposits (302,290) (301,694)
Short-term Borrowings (9,169) (9,169)
Unrecognized Financial Instruments
Commitments to extend credit --- ---
Standby letters of credit --- ---
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
German American Bancorp
Jasper, Indiana
We have audited the accompanying consolidated balance sheets of German
American Bancorp as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated statements of income, changes in shareholders'
equity and cash flows for the year ended December 31, 1993 have been restated to
reflect the pooling of interests in 1994, as described in Note 18. We did not
audit the separate 1993 financial statements of the company acquired as
reflected in the pooling of interests, which statements reflect (in thousands)
net income of $104 for the year ended December 31, 1993. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for the other company for
the year ended December 31, 1993, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of German American Bancorp as of December 31, 1995 and
1994 and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the
Corporation changed its method of accounting for certain loans in 1995,
securities in 1994, and income taxes in 1993 to comply with new accounting
pronouncements.
Indianapolis, Indiana
February 1, 1996 Crowe, Chizek and Company LLP
MARKET AND DIVIDEND INFORMATION FOR GERMAN AMERICAN BANCORP COMMON STOCK
MARKET AND DIVIDEND INFORMATION
The following table sets forth (a) the high and low bid prices for the
Company's common stock as reported by NASDAQ by quarter for 1995 and 1994, and
(b) dividends declared per share on the Company's common stock (not
retroactively restated for pooling of interests transactions) by quarter during
1995 and 1994. Bid prices in the table reflect interdealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions. All per share information has been retroactively restated
for the Company's 5% stock dividend in December 1995.
1995
High Bid Low Bid Dividend
First Quarter $29.52 $29.05 $.19
Second Quarter $29.52 $28.57 $.19
Third Quarter $29.05 $28.10 $.19
Fourth Quarter $30.48 $28.10 $.19
$.76
1994
First Quarter $29.52 $27.62 $.17
Second Quarter $28.57 $27.62 $.17
Third Quarter $29.05 $28.10 $.17
Fourth Quarter $29.52 $28.57 $.17
$.68
The Common Stock was held of record by approximately 1,681 shareholders at
February 22, 1996.
Funds for payment by the Company of cash dividends are expected to be
obtained from dividends received by the Company from its subsidiaries. The
Company presently intends to follow its historical policy as to the amount,
timing and frequency of the payment of dividends. In addition, the Company's
Board of Directors presently intends to consider declaring and issuing a stock
dividend of 5% on an annual basis. The declaration and payment of future
dividends, however, will depend upon the earnings and financial condition of the
Company and its subsidiaries, general economic conditions, compliance with
regulatory requirements and other factors.
THE COMPANY WILL PROVIDE A COPY OF ITS ANNUAL REPORT (FORM 10-K, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION), WITHOUT EXHIBITS, FREE OF CHARGE, TO
ANY SHAREHOLDER, UPON WRITTEN REQUEST. SUCH WRITTEN REQUESTS SHOULD BE MADE TO
JOHN M. GUTGSELL, CONTROLLER, GERMAN AMERICAN BANCORP, 711 MAIN STREET, JASPER,
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME INCORPORATION
THE GERMAN AMERICAN BANK INDIANA
GAB MORTGAGE CORP INDIANA
THE UNION BANK INDIANA
WINSLOW BANCORPORATION, INC. INDIANA
COMMUNITY TRUST BANK INDIANA
FIRST STATE BANK, SOUTHWEST INDIANA INDIANA
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
German American Bancorp
Jasper, Indiana
We consent to the inclusion by reference in the Registration Statement of German
American Bancorp on Form S-3, which relates to the Dividend Reinvestment and
Stock Purchase Plan and which is included by reference as an Exhibit in the
December 31, 1995 Form 10-K, of our Independent Auditor's Report, dated January
27, 1995, on the consolidated financial statements of German American Bancorp as
of December 31, 1994 and 1993, and for each of the three years in the period
ended December 31, 1994. We also consent to the use of our name and the
statements with respect to us appearing under the heading `Experts'' in the
Registration Statement Form S-3.
By/s/Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
March 20, 1996
Indianapolis, Indiana
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 14,523
<INT-BEARING-DEPOSITS> 898
<FED-FUNDS-SOLD> 12,550
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,908
<INVESTMENTS-CARRYING> 10,607
<INVESTMENTS-MARKET> 11,237
<LOANS> 230,590
<ALLOWANCE> 5,933
<TOTAL-ASSETS> 367,763
<DEPOSITS> 327,579
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,228
<LONG-TERM> 0
<COMMON> 18,250
0
0
<OTHER-SE> 18,706
<TOTAL-LIABILITIES-AND-EQUITY> 367,763
<INTEREST-LOAN> 21,210
<INTEREST-INVEST> 4,621
<INTEREST-OTHER> 1,467
<INTEREST-TOTAL> 27,298
<INTEREST-DEPOSIT> 12,633
<INTEREST-EXPENSE> 184
<INTEREST-INCOME-NET> 12,817
<LOAN-LOSSES> (19)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,078
<INCOME-PRETAX> 5,881
<INCOME-PRE-EXTRAORDINARY> 5,881
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,018
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
<YIELD-ACTUAL> 4.35
<LOANS-NON> 803
<LOANS-PAST> 2,683
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,486
<ALLOWANCE-OPEN> 5,669
<CHARGE-OFFS> 339
<RECOVERIES> 622
<ALLOWANCE-CLOSE> 5,933
<ALLOWANCE-DOMESTIC> 5,933
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,677
</TABLE>