UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
I X I Quarterly Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1997
Or
I I Transition Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Transition Period from to
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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, Jasper, Indiana 47546
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (812) 482-1314
Indicate by check 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 10, 1997
Common Stock, $10.00 par value 2,541,552
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- March 31, 1997 and
December 31, 1996
Consolidated Statements of Income -- Three Months
Ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows -- Three Months
Ended March 31, 1997 and 1996.
Notes to Consolidated Financial Statements --
March 31, 1997
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3 Restated Articles of Incorporation
10.1 Form of Incentive Stock Option Agreement
executed January 28, 1997 between the
Registrant and George W. Astrike (2,284
shares).
10.2 Schedule of Incentive Stock Option Agreements
between the Registrant and its executive
officers.
27 Financial Data Schedule
b) Reports on Form 8-K
SIGNATURES
PART 1.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEET
(dollar references in thousands except share data)
(unaudited)
March 31, December 31,
1997 1996
ASSETS
Cash and Due from Banks $16,848 $17,134
Federal Funds Sold 950 20,600
Cash and Cash Equivalents 17,798 37,734
Interest-bearing Balances with Banks 788 597
Other Short-term Investments 996 979
Securities Available-for-Sale,at market 103,734 98,557
Securities Held-to-Maturity, at cost 23,014 22,832
Loans 318,280 313,734
Less: Unearned Income (399) (452)
Allowance for Loan Losses (6,386) (6,528)
Loans, Net 311,495 306,754
Premises, Furniture and Equipment, Net 11,691 11,585
Other Real Estate 202 203
Intangible Assets 1,723 1,774
Accrued Interest Receivable and
Other Assets 8,335 8,428
TOTAL ASSETS $479,776 $489,443
LIABILITIES
Noninterest-bearing Deposits $47,050 $52,674
Interest-bearing Deposits 372,385 370,232
Total Deposits 419,435 422,906
Short-term Borrowings 7,109 12,527
FHLB Borrowings --- 1,000
Accrued Interest Payable and
Other Liabilities 4,049 4,217
TOTAL LIABILITIES 430,593 440,650
SHAREHOLDERS' EQUITY
Common Stock, $10 par value; 5,000,000
shares authorized, and 2,541,552 and
2,539,059 issued and outstanding
in 1997 and 1996, respectively 25,416 25,390
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued --- ---
Additional Paid-in Capital 3,839 3,649
Retained Earnings 19,910 19,259
Unrealized Appreciation on Securities
Available-for-Sale, net of tax 18 495
TOTAL SHAREHOLDERS' EQUITY 49,183 48,793
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $479,776 $489,443
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(dollar references in thousands except per share data)
(unaudited)
Three Months Ended
March 31,
1997 1996
INTEREST INCOME
Interest and Fees on Loans $7,036 $6,785
Interest on Federal Funds Sold 101 180
Interest on Short-term Investments 27 85
Interest and Dividends on Securities 1,925 1,600
TOTAL INTEREST INCOME 9,089 8,650
INTEREST EXPENSE
Interest on Deposits 4,162 3,921
Interest on Short-term Borrowings 99 133
TOTAL INTEREST EXPENSE 4,261 4,054
NET INTEREST INCOME 4,828 4,596
Provision for Loan Losses 139 23
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 4,689 4,573
NONINTEREST INCOME
Income from Fiduciary Activities 66 51
Service Charges on Deposit Accounts 280 206
Investment Services Income 106 102
Other Charges, Commissions, and Fees 95 101
Gains on Sales of Loans and
Other Real Estate --- 2
Gains on Sales of Securities --- ---
TOTAL NONINTEREST INCOME 547 462
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,826 1,763
Occupancy Expense 279 241
Furniture and Equipment Expense 226 258
Computer Processing Fees 125 107
Professional Fees 212 79
Other Operating Expenses 651 641
TOTAL NONINTEREST EXPENSE 3,319 3,089
Income before Income Taxes 1,917 1,946
Income Tax Expense 643 626
Net Income $1,274 $1,320
Earnings Per Share (Note 2) $.50 $.52
Dividends Paid Per Share (Note 2) $.21 $.19
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar references in thousands)
(unaudited)
Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,274 $1,320
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of Investments (36) (30)
Depreciation and Amortization 282 289
Provision for Loan Losses 139 23
Gains on Sales of Securities 0 0
Gains on Sales of Loans and
Other Real Estate 0 (2)
Change in Assets and Liabilities:
Unearned Income (53) (81)
Deferred Loan Fees (26) (1)
Interest Receivable (834) 329
Other Assets 928 (386)
Deferred Taxes` 21 109
Interest Payable 469 143
Other Liabilities (637) (19)
Total Adjustments 253 374
Net Cash from Operating Activities 1,527 1,694
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing Balances
with Banks (191) 98
Proceeds from Maturities of Other
Short-term Investments 0 3,000
Purchase of Other Short-term Investments 0 (979)
Proceeds from Maturities of Securities
Available-for-Sale 7,336 8,973
Proceeds from Sales of Securities
Available-for-Sale 0 0
Purchase of Securities
Available-for-Sale (12,971) (9,126)
Proceeds from Maturities of Securities
Held-to-Maturity 318 1,726
Proceeds from Sales of Securities
Held-to-Maturity 0 0
Purchase of Securities Held-to-Maturity (500) (342)
Purchase of Loans 0 (24)
Loans Made to Customers net of
Payments Received (4,822) (4,795)
Property and Equipment Expenditures (337) (171)
Proceeds from Sales of Other Real Estate 0 15
Net Cash from Investing Activities (11,167) (1,625)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits (3,471) (402)
Change in Short-term Borrowings (5,418) (2,602)
Change in Long-term Borrowings (1,000) 2,000
Dividends Paid (404) (402)
Purchase of Fractional Shares (5) 0
Exercise of Stock Options 2 6
Purchase and Retire Common Stock 0 0
Net Cash from Financing Activities (10,296) (1,400)
Net Change in Cash and Cash Equivalents (19,936) (1,331)
Cash and Cash Equivalents at
Beginning of Year 37,734 32,601
Cash and Cash Equivalents at
End of Period $17,798 $31,270
Cash Paid During the Year for:
Interest $3,975 3,911
Income Taxes 171 188
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
Note 1 -- Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with Generally Accepted Accounting Principles
have been condensed or omitted. All adjustments made by management to these
unaudited statements were of a normal recurring nature. It is suggested that
these consolidated financial statements and notes be read in conjunction with
the financial statements and notes thereto in the German American Bancorp's
December 31, 1996 Annual Report to Shareholders.
German American Bancorp (referred to herein as the ``Company,'' the
`Corporation,'' 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''), First State Bank,
Southwest Indiana, Tell City, Indiana (`First State Bank''), and German
American Holdings Corporation (`GAHC''), an Indiana corporation that owns all
of the outstanding capital stock of both Community Trust Bank, Otwell, Indiana
(`Community Bank'') and The Peoples National Bank and Trust Company of
Washington, Washington, Indiana (`Peoples''). The Company, through its four
bank subsidiaries operates twenty banking offices in six contiguous counties in
southwestern Indiana.
Peoples, organized under the National Bank Act in 1888, was acquired by the
Company on March 4, 1997 pursuant to a merger of the parent corporation of
Peoples into GAHC. Simultaneously with and as an integral part of this merger,
The Union Bank of Loogootee, Indiana, a subsidiary of the Company, was merged
with and into Peoples. At December 31, 1996 Peoples had assets of $91,937,000
and equity of $9,452,000.
The Company's financial statements for all periods prior to the merger date
have been retroactively restated to include the accounts of Peoples because the
merger was recorded utilizing the pooling-of-interests method of accounting.
Note 2 -- Per Share Data
The weighted average number of shares used in calculating earnings and
dividends per share amounts were 2,541,137 and 2,533,373 for the first quarters
of 1997 and 1996, respectively. The weighted average number of shares have been
retroactively restated for stock dividends and poolings of interests. Dividends
paid per share amounts represent historical dividends declared without
retroactive restatement for pooling.
Note 3 -- Securities
At March 31, 1997 and December 31, 1996, U.S. Government Agency structured
notes with an amortized cost of $6,000,000 and $6,000,000, respectively and fair
value of $5,927,000 and $5,901,000, respectively, are included in securities
available-for-sale, consisting primarily of step-up and single-index bonds.
Note 3 -- Securities (continued)
The amortized cost and estimated market values of Securities as of March 31,
1997 are as follows:
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $56,227 $55,577
Obligations of State and
Political Subdivisions 20,173 20,900
Corporate Securities 6,516 6,590
Mortgage-backed Securities 20,729 20,667
Total $103,645 $103,734
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporation and Agencies $2,514 $2,496
Obligations of State and Political
Subdivisions 18,117 18,514
Corporate Securities 40 32
Mortgage and Asset-backed Securities 948 927
Other Securities 1,395 1,395
Total $23,014 $23,364
The amortized cost and estimated market values of Securities as of December 31,
1996 are as follows:
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $47,181 $47,041
Obligations of State and Political
Subdivisions 19,560 20,186
Corporate Securities 7,221 7,245
Mortgage-backed Securities 23,783 24,078
Other Securities 1 7
Total $97,746 $98,557
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporation and Agencies $2,519 $2,498
Obligations of State and Political
Subdivisions 18,253 18,881
Corporate Securities 47 47
Mortgage and Asset-backed Securities 999 989
Other Securities 1,014 1,014
Total $22,832 $23,429
Note 4 -- Loans
Loans, as presented on the balance sheet, are comprised of the following
classifications:
March 31, December 31,
1997 1996
(dollar references in thousands)
Real Estate Loans Secured by 1-4
Family Residential Properties $96,712 $93,713
Agricultural Loans 53,853 57,073
Commercial and Industrial Loans 113,577 111,469
Loans to Individuals for Household,
Family and Other Personal
Expenditures 52,912 50,200
Lease Financing 1,226 1,279
Total Loans $318,280 $313,734
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows:
1997 1996
(dollar references in thousands)
Balance at January 1 $6,528 $6,893
Provision for Loan Losses 139 23
Recoveries of Prior Loan Losses 47 101
Loan Losses Charged to the Allowance (328) (70)
Balance at March 31 $6,386 $6,947
Note 6 -- Subsequent Event
During April 1997, the Company's Articles of Incorporation were amended to
increase the number of authorized common shares from 5,000,000 shares to
20,000,000 shares.
Note 7 -- Business Combinations
On March 4, 1997, the Company acquired all of the outstanding shares of
Peoples Bancorporation of Washington, Indiana (and its wholly owned subsidiary,
The Peoples National Bank and Trust Company of Washington) in exchange for
615,285 shares of German American Bancorp common stock. Fractional interests
were paid in cash of $5. The transaction was accounted for as a pooling of
interests.
The following is a reconciliation of the separate and combined net interest
income and net income of German American Bancorp and Peoples Bancorporation of
Washington for the periods prior to the acquisition:
GERMAN AMERICAN PEOPLES
BANCORP BANCORPORATION
(as previously reported)OF WASHINGTON COMBINED
For the period January 1, 1997 through
February 28, 1997
Net interest income $2,558 $696 $3,254
Net income $698 $218 $916
For the three months ended
March 31, 1996
Net interest income $3,654 $942 $4,596
Net income $1,091 $229 $1,320
ITEM 2.
GERMAN AMERICAN BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
German American Bancorp (``the Company'') is a multi-bank holding company
based in Jasper, Indiana. Its four affiliate banks conduct business in twenty
offices in Dubois, Daviess, Martin, Pike, Perry and Spencer Counties in
Southwest Indiana. The banks provide a wide range of financial services,
including accepting deposits; making commercial, mortgage and consumer 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.
This section presents an analysis of the consolidated financial condition of
the Company as of March 31, 1997 and December 31, 1996 and the consolidated
results of operations for the periods ended March 31, 1997 and 1996. This
review should be read in conjunction with the consolidated financial statements
and other financial data presented elsewhere herein and with the financial
statements and other financial data and the Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's
December 31, 1996 Annual Report to Shareholders.
Because of the Peoples National Bank acquisition on March 4, 1997 under the
pooling-of-interests method of accounting, all financial statements have been
retroactively restated for all periods. Also see Footnote 7 `Business
Combinations.''
RESULTS OF OPERATIONS
Net Income:
The Company's earnings for the first quarter of 1997 were $1,274,000 or $.50
per share, a decrease of $46,000 (or 3.5%) from the Company's first quarter
earnings for 1996 of $1,320,000 or $.52 per share.
The comparison of first quarter 1997 earnings relative to those of the same
period of 1996 was materially impacted by an increase in net interest income and
Deposit Service Charges. These earnings improvements were offset by an increase
in the Provision for Loan Losses and an increase in Professional fees largely
related to the Company's merger and acquisition activities. Excluding the
merger related expenses recorded in connection with the completion of the March
4, 1997 merger with Peoples, 1997 earnings were $1,408,000 or $.55 per share, an
increase of $88,000 or 6.7% over 1996 earnings.
Return on average assets (ROA) was 1.05% and return on average equity was
10.46% for the first quarter of 1997 versus 1.16% and 11.41%, respectively for
the first three months of 1996.
Net Interest Income:
The following table summarizes German American Bancorp's net interest income
(on a tax-equivalent basis) for each of the periods presented herein. An
effective tax rate of 34 percent is used on each period presented.
Three Months Change from
Ended March 31, Prior Period
1997 1996 Amount Percent
(dollar references in thousands)
Interest Income $9,384 $8,900 $484 5.4%
Interest Expense 4,261 4,054 207 5.1%
Net Interest Income $5,123 $4,846 $277 5.7%
Net interest income is the difference between interest income (which
includes yield-related fees) and interest expense. Net interest income on a
tax-equivalent basis was $5,123,000 for this first quarter of 1997 compared with
$4,846,000 for the same period of 1996. The increase in net interest income for
the first quarter of 1997 compared to 1996 was primarily due to an increase in
average earning assets.
Net interest income on a tax-equivalent basis expressed as a percentage of
average earning assets is referred to as the net interest margin, which
represents the average net effective yield on earning assets. For the first
quarter of 1997, the net interest margin was 4.51 percent compared to 4.58
percent for the comparable period of 1996.
The decrease in the margin in 1997 compared with 1996 was primarily
attributable to the mix of funding sources. The Company continues to experience
a shift in deposit mix toward money market deposits and longer term certificates
of deposits. This movement is largely attributable to customer reaction to the
higher level of interest rates paid on these products relative to that paid on
savings and interest-bearing checking accounts.
Provision For Loan Losses:
The Company provides for 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 $139,000 and $23,000 for the
first quarters of 1997 and 1996, respectively. The lower level of provision
during 1996 resulted from a $57,000 negative provision for loan losses at the
former Union Bank (now merged into Peoples). The negative provision 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 of 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.
Net charge-offs were $281,000 or 0.08 percent of average loans for the first
three months of 1997. For the same period of 1996, net recoveries were $31,000.
Underperforming loans, as a percentage of total loans were 0.60% and 0.79% on
March 31, 1997 and December 31, 1996, respectively. See discussion headed
`Financial Condition'' for more information regarding underperforming assets.
Noninterest Income:
Noninterest income, exclusive of gains realized on the sales of loans, for
the first quarter of 1997 was $547,000. This was $85,000 or 18.4 percent
greater than the $460,000 recorded for the same three months of 1996.
Service charges on deposit accounts for 1997 rose $74,000 or 35.9 percent
over 1996. The Company made an upward revision to its pricing structure based on
a recent review.
The Company had no security sales during the first quarters of 1997 or 1996.
Noninterest Expense:
Total noninterest expense for the first three months of 1997 was $3,319,000
which translates to a $230,000 or 7.4% increase over the $3,089,000 posted for
the same period in 1996.
Salaries and Employee Benefits expense constituted just over 55% of total
noninterest expense. For the first three months of 1997 this amounted to
$1,826,000. This was $63,000 or 3.6 percent more than the $1,763,000 recorded
for the same period of the prior year. The Company's active full-time
equivalent (FTE) staff was 217 at March 31, 1997.
Occupancy expense combined with Furniture and Equipment expense for the first
three months of 1997 equaled $505,000. This was only $6,000 or slightly more
than one percent greater than the $499,000 posted for the same quarter of the
prior year. These expenses are expected, however, to moderately increase
throughout the remainder of 1997 largely as a consequence of a planned upgrading
of computer systems. The Company has recently embarked upon a strategy to
implement state-of-the-art computer processing to provide the opportunities to,
over the long-term, better control the level of employee related expenses and
improve the quality of customer service provided throughout the affiliate bank
system. The upgrade of computer equipment at Peoples concurrent with the merger
represents the Company's first step in this process. Systems at all affiliate
banks will be upgraded on a systematic basis throughout 1997 and 1998.
Professional fees for the first three months of 1997 was $212,000. This was
$133,000 greater than the $79,000 recorded for the same period of 1996. The
bulk of this increase stems directly from the March 4, 1997 merger of Peoples.
FINANCIAL CONDITION
Total assets at March 31, 1997 stood at $479,776,000. This was a decline
from the December 31, 1996 total asset position despite an increase in 1997 in
total loans of $4,546,000 and securities of $5,359,000. The bulk of the asset
decline was in the holdings of Federal Funds Sold.
Deposits at March 31, 1997 stood at $419,435,000 which was a decline of less
than one percent from the total deposits held three months earlier. Short-term
and Long-term Borrowings at March 31, 1997 were $7,109,000. At December 31,
1996, these borrowings amounted to $13,527,000.
Interest-bearing Demand Notes issued to the U.S. Treasury at December 31,
1996 amounted to $2,127,000. German American Bank was the only affiliate with
this type of borrowing and by March 31, 1997 had effectively discontinued
participation in this arrangement due to operational considerations. All of the
Company's Banks are either currently members of the Federal Home Loan Bank
System (`FHLB'') or are in the process of obtaining membership. The banks'
membership in the FHLB provides a ready alternative for both long and short-term
borrowing needs.
Underperforming Assets:
The following analyzes German American Bancorp's underperforming assets at
March 31, 1997 and December 31, 1996.
March 31, 1997 December 31, 1996
(dollar references in thousands)
Nonaccrual Loans $1,071 $1,370
Loans which are contractually
past due 90 days or more 850 1,102
Renegotiated Loans --- ---
Total Underperforming Loans 1,921 2,472
Other Real Estate 202 203
Total Underperforming Assets $2,123 $2,675
Allowance for Loan Loss to
Underperforming Loans 332.43% 264.08%
Underperforming Loans to
Total Loans 0.60% 0.79%
Underperforming loans at March 31, 1997 were 22.3% less than the $2,472,000
of underperforming loans at December 31, 1996. Stated as a percentage of total
loans, underperforming loans were 0.60% and 0.79% for March 31, 1997 and
December 31, 1996, respectively. The allowance for loan loss stated as a
percentage of underperforming loans equaled 332.43% and 264.08% for the same two
dates respectively.
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 agricultural, 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 Company has historically been
involved in the financing of poultry production. However, total poultry loans
at March 31, 1997 of $14,276,000 represent only about 4.5 percent of total
loans. The drop in the amount of poultry loans reflects a continuing decline in
the financing demands in that industry.
Capital Resources:
Federal banking 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 generally at least a 4.0%
leverage ratio, which is Tier 1 capital divided by defined `total assets'',
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.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well-
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Under these regulations, a
`well-capitalized'' entity must achieve a Tier One Risk-based capital ratio of
at least 6.0%, a total capital ratio of at least 10.0% and a leverage ratio of
at least 5.0% and not be under a capital directive order.
At March 31, 1997, management is not under such a capital directive nor is it
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 liquidity, capital resources or operations.
The table below presents the Company's consolidated capital ratios under
regulatory guidelines.
RISK BASED CAPITAL STRUCTURE ($ in thousands)
March 31, December 31,
1997 1996
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $49,183 $48,793
Add / (Subtract): Unrealized
Depreciation / (Appreciation) on
Securities Available-for-Sale (18) (495)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (1,872) (1,924)
Total Tier 1 Capital 47,293 46,374
Tier 2 Capital:
Qualifying Allowance for Loan Loss 4,091 4,028
Total Capital $51,384 $50,402
Risk-adjusted Assets $325,020 $319,718
To be Well
Capitalized
Under Prompt
Minimum Corrective
for Capital Action
Adequacy Provisions
Purposes (FDICIA) March 31, Dec. 31,
1997 1996
Leverage Ratio 4.00% 5.00% 9.79% 9.70%
Tier 1 Capital to
Risk-adjusted Assets 4.00% 6.00% 14.55% 14.50%
Total Capital to
Risk-adjusted Assets 8.00% 10.00% 15.81% 15.76%
LIQUIDITY
The Consolidated Statement of Cash Flows details the elements of change in the
Company's cash and cash equivalents. During the first three months of 1997, the
net cash from operating activities, including net income of $1,274,000 provided
$1,527,000 of available cash. Major cash outflows experienced during this three
month period of 1997 included dividends of $404,000, property and equipment
purchases of $337,000 and the net funding outlay of loans in the amount of
$4,822,000. The purchase of securities and short-term investments (net of
proceeds from maturities) decreased cash by $5,817,000. Decreases occurring in
deposits and short-term as well as long-term borrowings reduced cash by an
additional $9,889,000. Total cash outflows for the period exceeded inflows by
$19,936,000 leaving a cash and cash equivalent balance of $17,798,000 at March
31, 1997.
PART II. -- OTHER INFORMATION
Item 2. Changes in Securities
(c) During the three months ended March 31, 1997, the Company issued and sold
an aggregate of 11,737 shares of common stock to executive officers of the
Company upon exercises by such executive officers of stock options for an
aggregate purchase price of $346,945.02 . These issuances and sales were not
registered under the Securities Act of 1933 in reliance upon the `private
offering''exemption provided by Section 4(2) of the Securities Act because the
offer of common shares under the Company's Stock Option Plan is made privately
only to executive officers of the Company who have access to the same kind of
information as registration would disclose and are able to fend for themselves
in making their investment decisions. The purchase price was paid
by the executive officers in the form of an aggregate of 10,285 shares of common
stock of the Company previously owned by such executive officers.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3 Restated Articles of Incorporation
of German American Bancorp (as amended
to increase authorized common shares
from 5,000,000 to 20,000,000.
10.1 Form of Incentive Stock Option Agreement
executed January 28, 1997 between the
Registrant and George W. Astrike (2,284 shares)
10.2 Schedule of Incentive Stock Option Agreements
between the Registrant and its executive Officers.
27 Financial Data Schedule for the period ended
March 31, 1997.
(b) Reports on Form 8-K
A report on Form 8-K dated March 6, 1997 was filed reporting under Item 2
the March 4, 1997 acquisition by merger of Peoples Bancorp of Washington.
A report on Form 8-K dated March 19, 1997 was filed under Item 2 and Item
7, which amended the March 6, 1997 filing to include the Financial Statements of
the acquired entity as of and for certain years ended December 31, 1996 and pro
forma financial information for the Company giving effect to the acquisition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GERMAN AMERICAN BANCORP
Date By/s/George W. Astrike
----------------- ---------------------------
George W. Astrike
Chairman
Date By/s/John M. Gutgsell
----------------- ---------------------------
John M. Gutgsell
Controller and Principal
Accounting Officer
RESTATED
ARTICLES OF INCORPORATION
OF GERMAN AMERICAN BANCORP
(as ammended April 25, 1997)
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
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 20,500,000 shares consisting of 20,000,000 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 interest 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
January 28, 1997
Mr. George W. Astrike
German American Bancorp
711 Main Street
P O Box 810
Jasper, IN 47547-0810
RE: Incentive Stock Option Agreement
Dear Mr. Astrike:
The Stock Option Committee of the Board of Directors of German American
Bancorp (the `Corporation''), pursuant to section 7 of the GAB Bancorp 1992
Stock Option Plan (the `Plan''), hereby grants to you, in replacement of a
portion of the shares covered by your option dated January 9, 1996, which has
been exercised in part as of this date, a replacement option (the `Option''),
which Option shall have the following terms and conditions, in addition to those
provided in the Plan:
1. Number of Shares: 2,284 shares, subject to adjustment as provided in the
Plan.
2. Exercise Price: $37.25 per share, subject to adjustment as provided in the
Plan.
3. Expiration Date: The Option, to the extent unexercised, shall expire at
12:00 noon, Jasper time, on April 19, 2003.
4. Exercisability: The Option shall become exercisable in full on the first
day following the expiration of twelve months following the date of this
Option, and shall be canceled, as specified pursuant to Section 7 of the Plan,
if you sell shares of common stock of the Company during such twelve-month
period, subject to the exceptions expressed in such Section 7.
The Option, which is intended to qualify as an `incentive stock option''
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, shall be in all respects limited and conditioned as provided in the
Plan. A copy of the Plan is enclosed with this letter. During your lifetime,
the Option will be exercisable only by you. Neither the Option nor any right
thereunder may be transferred other than by will or the laws of descent and
distribution. Exercise of the Option shall be subject to your making the
representations set forth below and any representations to such other matters as
the Committee, in its discretion, may determine to be necessary or advisable to
evidence compliance with requirements under the Securities Act of 1933, as
amended, or state securities laws for registering or exempting from registration
any offer of sale of the Corporation's securities pursuant to the Plan.
EXHIBIT 10.1
This letter, upon your delivery of an executed copy to the Corporation,
shall constitute a binding incentive stock option agreement between you and the
Corporation.
Very truly yours,
GERMAN AMERICAN BANCORP
BY THE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
BY:
By/s/Joseph F. Steurer
----------------------------
Chairman of the Stock Option
Committee
ACKNOWLEDGMENT AND AGREEMENT
I hereby acknowledge receipt of this letter granting me the above Option as
well as receipt of a copy of the Plan, and I acknowledge and agree to be bound
by the following:
1. I have received a copy of the Plan and agree to be bound by the terms and
conditions set forth therein.
2. The Common Shares subject to the Option are being offered pursuant to the
`private offering'' exemption provided by Section 4(2) of the Securities Act of
1933, as amended (the `1933 Act''). In that connection, I agree that I will
acquire Common Shares pursuant to this Option for investment purposes for my own
account without any view to redistribute them to others. Further, I agree not to
sell, pledge, hypothecate, or otherwise transfer Common Shares acquired pursuant
to the Option except upon delivery to the Corporation of an opinion of counsel
or such other evidence as may be satisfactory to the Corporation that such
transfer is exempt from registration under the 1933 Act, as amended, applicable
state securities laws, or any rule or regulation promulgated thereunder.
3. The certificates evidencing the Common Shares, including both originally
and subsequently issued certificates, will bear a restrictive legend
substantially as follows:
The Common Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state and have been acquired in a private offering. Sales, pledges,
hypothecations, and other transfers of the Common may be made only upon delivery
to the Corporation of an opinion of counsel or other evidence satisfactory to
the Corporation that such transfer is exempt from registration under the
Securities Act of 1933, as amended, applicable state securities laws, or any
rule or regulation promulgated thereunder.
4. The Corporation will issue instructions to its transfer agent, Fifth Third
Bank, not to honor request for transfer of Common Shares issued subject to the
Option, whether or not evidenced by originally or subsequently issued
certificates, unless the conditions set forth in the preceding legend have been
satisfied.
EXECUTED the 28th day of January, 1997.
By/s/George W. Astrike
- ----------------------------
German American Bancorp
Schedule of Incentive Stock Option Agreements between the Registrant and
its executive officers during the first quarter of 1997.
Number of Exercise Price
Executive Officer Date Shares Granted Per Share
Mark A. Schroeder January 16, 1997 1,669 $37.35
George W. Astrike January 16, 1997 2,677 $37.35
January 28, 1997 2,284 $37.25
Stan Ruhe January 16, 1997 1,129 $37.35
Urban Giesler January 16, 1997 770 $37.35
James E. Essany January 16, 1997 715 $37.35
Total 9,244
The above options were granted on the same form of agreement as the
agreement with Mr. Astrike filed as Exhibit 10.1 to the Registrant's report on
Form 10-Q for the quarterly period ended March 31, 1997.
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<PERIOD-END> MAR-31-1997
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