<PAGE> 1
As filed with the Securities and Exchange
Commission on January 16, 1997
File No. 333-16331
_________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
to
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
GERMAN AMERICAN BANCORP
(Exact name of Registrant as specified in its charter)
INDIANA
(State or other jurisdiction of
incorporation or organization)
6711
(Primary Standard Industrial
Classification Code Number)
35-1547518
(I.R.S. Employer Identification No.)
711 MAIN STREET, BOX 810
JASPER, INDIANA 47546-3042; (812) 482-1314
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal
executive offices)
GEORGE W. ASTRIKE, CHAIRMAN
GERMAN AMERICAN BANCORP
711 MAIN STREET, BOX 810
JASPER, INDIANA 47546-3042; (812) 482-1314
Telecopier (812) 482-0745
(Name, address, including Zip Code,
and telephone number, including
area code, of agent for service)
Copy to:
Mark B. Barnes, Esq. John W. Tanselle, Esq.
Leagre & Barnes Krieg, DeVault, Alexander
9100 Keystone Crossing & Capehart
Suite 800 One Indiana Square
P. O. Box 40609 Suite 2800
Indianapolis, IN 46240-0609 Indianapolis, IN 46204
Telephone (317) 843-1655 Telephone (317) 636-4341
Telecopier (317) 846-7900 Telecopier (317) 636-1507
<PAGE>
<PAGE> 2
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after the
effective date of this Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding
company and there is compliance with General Instruction G,
check the following box. [ ]
_______________________________________________________
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
_______________________________________________________<PAGE>
<PAGE> 3
PEOPLES BANCORP OF WASHINGTON
201 EAST MAIN STREET
WASHINGTON, INDIANA 47501-2912
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1997
Notice is hereby given that a Special Meeting of
Shareholders of Peoples Bancorp of Washington ("Peoples") will be
held at the principal office of The Peoples National Bank and
Trust Company, 201 East Main Street, Washington, Indiana 47501-
2912, on , , 1997, at .m. Washington time
(the "Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Reorganization dated
September 27, 1996, among Peoples; The Peoples National Bank
and Trust Company, a wholly owned subsidiary of Peoples
("Peoples Bank"); German American Bancorp ("German
American"); German American Holdings Corporation, a wholly
owned subsidiary of German American ("GAHC"); and The Union
Bank, a wholly owned subsidiary of German American (the
"Reorganization Agreement"), and a Merger Agreement between
Peoples and GAHC, and joined in by German American in the
form attached to the Reorganization Agreement as Appendix A,
and to approve the transactions contemplated thereby,
including the merger of Peoples with and into GAHC (the
"Merger").
2. To transact such other business as may properly
come before the Special Meeting or any adjournment or
adjournments thereof.
Holders of Peoples Common Stock of record at the close of
business on _________, 1997, are entitled to notice of and to
vote at the Special Meeting or any adjournment or adjournments
thereof.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON.
ALL SHAREHOLDERS, EVEN IF THEY PLAN TO ATTEND THE MEETING, ARE
REQUESTED TO COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Joseph A. Wellman, President
, 1997
Washington, Indiana<PAGE>
<PAGE> 4
GERMAN AMERICAN BANCORP
711 MAIN STREET
JASPER, INDIANA 47546
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1997
Notice is hereby given that a Special Meeting of
Shareholders of German American Bancorp ("German American") will
be held at the principal office of The German American Bank, 711
Main Street, Jasper, Indiana 47546, on , , 1997, at
.m. Jasper time (the "Special Meeting"), for the following
purposes:
1. To consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Reorganization dated
September 27, 1996, among Peoples Bancorp of Washington
("Peoples"); The Peoples National Bank and Trust Company, a
wholly owned subsidiary of Peoples ("Peoples Bank"); German
American; German American Holdings Corporation, a wholly
owned subsidiary of German American ("GAHC"); and The Union
Bank, a wholly owned subsidiary of German American (the
"Reorganization Agreement"), and a Merger Agreement between
Peoples and GAHC, and joined in by German American in the
form attached to the Reorganization Agreement as Appendix A,
and to approve the transactions contemplated thereby,
including the issuance of up to an additional 692,344 shares
of German American Common Stock in connection with the
merger of Peoples with and into GAHC.
2. To transact such other business as may properly
come before the Special Meeting or any adjournment or
adjournments thereof.
Holders of German American Common Stock of record at the
close of business on _________, 1997, are entitled to notice of
and to vote at the Special Meeting or any adjournment or
adjournments thereof.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON.
ALL SHAREHOLDERS, EVEN IF THEY PLAN TO ATTEND THE MEETING, ARE
REQUESTED TO COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
George W. Astrike, Chairman
, 1997
Jasper, Indiana<PAGE>
<PAGE> 5
GERMAN AMERICAN BANCORP
PROSPECTUS/PROXY STATEMENT
PEOPLES BANCORP OF WASHINGTON
PROXY STATEMENT
This Prospectus/Proxy Statement relates to the proposed
merger (the "Merger") of Peoples Bancorp of Washington,
Washington, Indiana ("Peoples"), into German American Holdings
Corporation ("GAHC"), a wholly owned subsidiary of German
American Bancorp, Jasper, Indiana ("German American"), pursuant
to and in accordance with an Agreement and Plan of
Reorganization, dated September 27, 1996 (the "Reorganization
Agreement"), among Peoples, German American, GAHC, The Peoples
National Bank and Trust Company ("Peoples Bank") and The Union
Bank ("Union"). Simultaneously with and as an integral part of
the Merger, Union will merge with and into Peoples Bank.
If the proposed Merger is consummated, German American will
issue not fewer than 1.0372 nor more than 1.1669 shares of German
American Common Stock for each of the 593,334 issued and
outstanding shares of Peoples Common Stock, as adjusted for the
five percent stock dividend declared by German American in
October 1996 and subject to further adjustment in the event of
any future stock dividends and the like. The exact number of
shares to be issued by German American in the Merger will be
determined by the average closing bid/asked quotations for German
American's Common Stock during a ten business day period ending
on the second business day preceding the closing date (the
"Valuation Period"). On ____________, 1997 (the date immediately
prior to the date of this Prospectus/Proxy Statement), the
average of the closing bid/asked quotations for German American
Common Stock was $_______ per share. Assuming that such average
value remains not less than $34.29 during the Valuation Period
(as to which there is no assurance), then the minimum number of
shares specified by the Reorganization Agreement (1.0372 shares
of German American for each Peoples common share and an aggregate
of 615,417 shares of German American Common Stock) will be issued
in the Merger. See "THE MERGER -- The Acquisition Agreements --
Terms of the Merger -- Conversion of Peoples Common Stock."
The Merger is subject to the approval of the holders of a
majority of the shares of the Peoples Common Stock eligible to
vote thereon and the satisfaction of certain other conditions,
including obtaining regulatory approval. The Merger is also
being submitted for approval of the shareholders of German
American in compliance with German American's agreement with the
NASDAQ Stock Market in order for German American Common Stock to
continue to be listed on the NASDAQ National Market System. For
a more complete description of the Merger, see "THE MERGER."
<PAGE>
<PAGE> 6
The Special Meeting of the shareholders of Peoples will be
held at the principal office of The Peoples National Bank and
Trust Company, 201 East Main Street, Washington, Indiana 47501-
2912, at .m., Washington time, on ___, 1997 to
(a) consider the Merger proposal, and (b) transact such other
business as may properly come before the meeting. The Special
Meeting of the shareholders of German American will be held at
the principal office of The German American Bank, 711 Main
Street, Jasper, Indiana, on , 1997, to (a) consider
the Merger proposal and (b) transact such other business as may
properly come before said meeting. This Prospectus/Proxy
Statement constitutes both a Prospectus of German American
covering the German American Common Stock to be issued by it
pursuant to the Merger and a Proxy Statement in connection with
the solicitation by the Boards of Directors of Peoples and German
American of proxies to be voted at their respective Special
Meetings.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is ,
1997.
<PAGE>
<PAGE> 7
AVAILABLE INFORMATION
German American is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "1934
Act"). Accordingly, German American files proxy statements,
annual and quarterly reports, and other information with the
Securities and Exchange Commission (the "Commission"). Those
proxy statements, reports, and other information may be inspected
and copied at prescribed rates, at the public reference
facilities maintained by the Commission at the addresses set
forth below.
German American has filed with the Commission a Registration
Statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the shares of German American Common Stock to be
issued in connection with the Merger. This Proxy Statement also
constitutes the Prospectus of German American filed as part of
that Registration Statement. This Proxy Statement does not
contain all of the information set forth in the Registration
Statement. The Registration Statement and the exhibits thereto
can be inspected and copied at prescribed rates at the
Commission's public reference room, Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, as well as the
Commission's regional offices located at: Seven World Trade
Center, Suite 1300, New York, New York 10048; and Suite 1400, 500
West Madison Street, Chicago, Illinois 60661-2511. Copies of
such materials may also be obtained at prescribed rates from the
Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other
information regarding registrants (including German American)
that file electronically with the SEC.
-------------------------------
SOURCES OF INFORMATION
The information in the above-described Registration
Statement, including this Prospectus/Proxy Statement, concerning
German American and its affiliates, on the one hand, and
concerning Peoples and its affiliates, on the other hand, has
been supplied by management of the respective companies.
-------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT IN CONNECTION WITH THE SOLICITATION OR OFFERING MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GERMAN
AMERICAN OR PEOPLES. THIS PROSPECTUS/PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
<PAGE>
<PAGE> 8
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
INFERENCE OR IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE AFFAIRS OF GERMAN AMERICAN OR PEOPLES SINCE THE DATE HEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
German American's 1995 Annual Report to Shareholders is
being delivered with this prospectus and German American's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996 is included as Appendix D to this Prospectus/Proxy
Statement. The following documents are incorporated by reference
into this Prospectus/Proxy Statement: (1) German American's
Annual Report on Form 10-K for the year ended December 31, 1995,
which was filed on April 1, 1996, as amended; (2) German
American's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, which was filed on May 14, 1996; (3) German
American's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, which was filed on August 14, 1996, as amended
August 20, 1996; (4) German American's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, which was filed
November 13, 1996; and (5) German American's Current Report on
Form 8-K, which was filed on July 17, 1996. Except as set forth
in this Prospectus/Proxy Statement, there have been no material
changes in the information set forth in such Reports.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in
any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as modified or superseded, to constitute a
part of this Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY REFERENCE
DOCUMENTS RELATING TO GERMAN AMERICAN WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (EXCLUDING
UNINCORPORATED EXHIBITS) ARE AVAILABLE WITHOUT CHARGE TO EACH
PERSON (INCLUDING ANY BENEFICIAL OWNER) TO WHOM THIS PROXY
STATEMENT IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO JOHN M.
GUTGSELL, GERMAN AMERICAN BANCORP, 711 MAIN STREET, BOX 810,
JASPER, INDIANA 47546-3042 (812) 482-1314. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
1997.
<PAGE>
<PAGE> 9
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 7
SOURCES OF INFORMATION . . . . . . . . . . . . . . . . . . . . 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . 8
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 13
SUMMARY OF PROSPECTUS/PROXY STATEMENT. . . . . . . . . . . . . 14
THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . 14
PEOPLES . . . . . . . . . . . . . . . . . . . . . . . . . 14
GERMAN AMERICAN . . . . . . . . . . . . . . . . . . . . . 15
PARTIES TO THE MERGER. . . . . . . . . . . . . . . . . . . . 15
GERMAN AMERICAN . . . . . . . . . . . . . . . . . . . . . 15
GAHC. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PEOPLES . . . . . . . . . . . . . . . . . . . . . . . . . 16
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 16
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 16
MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . 16
THE BANK MERGER . . . . . . . . . . . . . . . . . . . . . 17
OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . 17
RIGHTS OF DISSENTING SHAREHOLDERS . . . . . . . . . . . . 18
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER . . . . . . 18
REGULATORY APPROVAL . . . . . . . . . . . . . . . . . . . 19
VOTES REQUIRED FOR APPROVAL . . . . . . . . . . . . . . . 19
PER SHARE MARKET VALUES AND EQUIVALENT PER SHARE MARKET
VALUES. . . . . . . . . . . . . . . . . . . . . . . . . 20
SUMMARY SELECTED FINANCIAL INFORMATION. . . . . . . . . . 21
INFORMATION CONCERNING THE SPECIAL MEETING . . . . . . . . . . 28
THE PEOPLES SPECIAL MEETING. . . . . . . . . . . . . . . . . 28
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 28
VOTES REQUIRED. . . . . . . . . . . . . . . . . . . . . . 28
THE GERMAN AMERICAN SPECIAL MEETING. . . . . . . . . . . . . 29
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 29
VOTES REQUIRED. . . . . . . . . . . . . . . . . . . . . . 30
PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SOLICITATION OF PROXIES. . . . . . . . . . . . . . . . . . . 31
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 31
BACKGROUND AND REASONS FOR THE MERGER. . . . . . . . . . . . 31
PEOPLES . . . . . . . . . . . . . . . . . . . . . . . . . 31
GERMAN AMERICAN . . . . . . . . . . . . . . . . . . . . . 35
THE ACQUISITION AGREEMENTS . . . . . . . . . . . . . . . . . 37
EFFECT OF THE MERGER. . . . . . . . . . . . . . . . . . . 37
TERMS OF THE MERGER . . . . . . . . . . . . . . . . . . . 38
CONVERSION OF PEOPLES COMMON STOCK. . . . . . . . . . . 38
SURRENDER OF CERTIFICATES . . . . . . . . . . . . . . . 41
RIGHTS DETERMINED AT EFFECTIVE TIME . . . . . . . . . . 43
EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 43
CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 44
TERMINATION OF ACQUISITION AGREEMENTS . . . . . . . . . . 45
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ACCOUNTING TREATMENT . . . . . . . . . . . . . . . . . . . . 46
FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . 47
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . 48
TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 48
MANAGEMENT OF GERMAN AMERICAN AFTER THE MERGER . . . . . . . 49
REGULATORY MATTERS. . . . . . . . . . . . . . . . . . . . 49
RIGHTS OF DISSENTING SHAREHOLDERS. . . . . . . . . . . . . . 49
OPINION OF FINANCIAL ADVISOR TO PEOPLES. . . . . . . . . . . 51
PRELIMINARY APPRAISAL OF PEOPLES. . . . . . . . . . . . . 52
THE PROCESS FOR SOLICITING INDICATIONS OF INTEREST FROM
OTHER BANK HOLDING COMPANIES. . . . . . . . . . . . . . 52
COMPARATIVE PRICE ANALYSIS. . . . . . . . . . . . . . . . 53
CONTRIBUTION ANALYSIS . . . . . . . . . . . . . . . . . . 53
DILUTION ANALYSIS . . . . . . . . . . . . . . . . . . . . 54
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 54
PRO FORMA FINANCIAL STATEMENTS OF GERMAN AMERICAN AND PEOPLES. 56
INFORMATION ABOUT GERMAN AMERICAN. . . . . . . . . . . . . . . 63
INFORMATION ABOUT PEOPLES. . . . . . . . . . . . . . . . . . . 63
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . 64
REGULATION AND SUPERVISION . . . . . . . . . . . . . . . . . 64
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 64
MARKET PRICE AND DIVIDEND INFORMATION. . . . . . . . . . . . 65
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS . . 66
PEOPLES BANCORP OF WASHINGTON MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . 69
OVERVIEW OF OPERATIONS . . . . . . . . . . . . . . . . . . . 69
NET INTEREST INCOME & INTEREST RATE RISK . . . . . . . . . . 70
LOAN QUALITY AND PROVISION FOR LOAN LOSSES . . . . . . . . . 72
NON-INTEREST INCOME. . . . . . . . . . . . . . . . . . . . . 74
NON-INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . 74
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . . . . 75
CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
DESCRIPTION OF GERMAN AMERICAN CAPITAL STOCK . . . . . . . . . 88
AUTHORIZED BUT UNISSUED SHARES . . . . . . . . . . . . . . . 88
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . 88
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . 88
DIVIDEND RIGHTS . . . . . . . . . . . . . . . . . . . . . 89
LIQUIDATION . . . . . . . . . . . . . . . . . . . . . . . 90
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . 90
PREFERRED STOCK. . . . . . . . . . . . . . . . . . . . . . . 90
ANTI-TAKEOVER PROVISIONS . . . . . . . . . . . . . . . . . . 91
POSSIBLE ISSUANCE OF COMMON STOCK . . . . . . . . . . . . 91
POSSIBLE ISSUANCE OF PREFERRED STOCK. . . . . . . . . . . 92
SUPERMAJORITY VOTE AND MINIMUM PRICE REQUIRED FOR
BUSINESS COMBINATIONS . . . . . . . . . . . . . . . . . 92
CLASSIFIED BOARD. . . . . . . . . . . . . . . . . . . . . 93
REMOVAL OF DIRECTORS. . . . . . . . . . . . . . . . . . . 94
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES. . . . . 94
<PAGE>
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CONTROL SHARE RESTRICTIONS. . . . . . . . . . . . . . . . 94
POTENTIAL DISADVANTAGES TO SHAREHOLDERS . . . . . . . . . 94
COMPARISON OF PEOPLES COMMON STOCK AND GERMAN AMERICAN COMMON
STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 95
NUMBER OF SHARES AUTHORIZED BUT UNISSUED . . . . . . . . . . 95
PREFERRED STOCK. . . . . . . . . . . . . . . . . . . . . . . 96
DIVIDEND RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 96
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . 96
LIQUIDATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 97
ABSENCE OF PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . 97
ANTI-TAKEOVER PROVISIONS . . . . . . . . . . . . . . . . . . 97
POSSIBLE ISSUANCE OF COMMON STOCK . . . . . . . . . . . . 97
SUPERMAJORITY VOTE AND MINIMUM PRICE REQUIRED FOR
BUSINESS COMBINATIONS . . . . . . . . . . . . . . . . . 98
CLASSIFIED BOARD. . . . . . . . . . . . . . . . . . . . . 98
REMOVAL OF DIRECTORS. . . . . . . . . . . . . . . . . . . 98
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES. . . . . 98
CONTROL SHARE RESTRICTIONS. . . . . . . . . . . . . . . . 99
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 99
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . .100
INDEX TO PEOPLES BANCORP OF WASHINGTON FINANCIAL STATEMENTS. .101
<PAGE>
<PAGE> 12
APPENDICES:
APPENDIX A -- Agreement and Plan of Reorganization
APPENDIX B -- Provisions of Chapter 44 of the Indiana Business
Corporation Law Governing Dissenters' Rights
APPENDIX C -- Fairness Opinion of Austin Associates, Inc.
APPENDIX D -- German American Bancorp Quarterly Report on Form
10-Q for the Quarter ended September 30, 1996
MATERIALS DELIVERED WITH PROSPECTUS/PROXY STATEMENT:
German American Bancorp 1995 Annual Report to Shareholders
<PAGE>
<PAGE> 13
MERGER OF
PEOPLES BANCORP OF WASHINGTON
INTO
GERMAN AMERICAN HOLDINGS CORPORATION,
A SUBSIDIARY OF
GERMAN AMERICAN BANCORP
SPECIAL MEETINGS OF
SHAREHOLDERS OF
PEOPLES BANCORP OF WASHINGTON
AND OF GERMAN AMERICAN BANCORP
INTRODUCTION
This Prospectus/Proxy Statement is being furnished to
shareholders of Peoples Bancorp of Washington ("Peoples") and
German American Bancorp ("German American") in connection with
the separate solicitations of proxies by the Boards of Directors
of Peoples and of German American to be voted at Special Meetings
of their Shareholders. The purpose of each of the Special
Meetings is to consider and vote upon a proposal to merge Peoples
into German American Holdings Corporation ("GAHC"), a
wholly-owned subsidiary of German American Bancorp ("German
American") (which transaction is hereafter referred to as the
"Merger").
The Merger proposal is in accordance with the Agreement and
Plan of Reorganization, dated September 27, 1996, among Peoples,
German American, GAHC, The Peoples National Bank and Trust
Company ("Peoples Bank"), and The Union Bank ("Union") (the
"Reorganization Agreement"), and the Merger Agreement between
Peoples and GAHC, joined in by German American, in the form
attached to the Reorganization Agreement as Exhibit A
(collectively the "Acquisition Agreements").
If the enclosed proxy is executed and returned, it may
nevertheless be revoked at any time insofar as it has not been
exercised. The proxy may be revoked by (a) delivering to the
Secretary of the corporation holding the meeting (Peoples or
German American, as the case may be), (i) a written instrument
revoking the proxy or (ii) a subsequently dated proxy, or (b)
attending the Special Meeting and voting in person. Unless
revoked, the proxy will be voted at the meeting in accordance
with the instructions of the shareholder as indicated on the
proxy. If no instructions are given, the shares will be voted
FOR the Merger and on other matters that may come before the
meeting as recommended by the Directors.
<PAGE>
<PAGE> 14
Consummation of the Merger is subject to approval by the
vote of the holders of a majority of the outstanding shares of
the common stock of Peoples ("Peoples Common Stock"). The
continued listing of German American Common Stock on the NASDAQ
National Market System is subject to the approval of the issuance
of additional shares pursuant to the Acquisition Agreements by a
majority of the votes cast thereon at the German American Special
Meeting. THE BOARD OF DIRECTORS OF PEOPLES AND THE BOARD OF
DIRECTORS OF GERMAN AMERICAN EACH BELIEVE THAT THE MERGER IS IN
THE BEST INTEREST OF THEIR RESPECTIVE CORPORATIONS AND THEIR
RESPECTIVE SHAREHOLDERS AND UNANIMOUSLY RECOMMEND THAT THEIR
SHAREHOLDERS VOTE FOR APPROVAL OF THE ACQUISITION AGREEMENTS.
For information concerning the reasons for these recommendations,
see "THE MERGER."
SUMMARY OF PROSPECTUS/PROXY STATEMENT
The following is a brief summary of certain information
contained in this Prospectus/Proxy Statement. This summary is
not intended to be complete and is qualified in all respects by
the more detailed information appearing elsewhere in this
Prospectus/Proxy Statement. Shareholders are urged to review
carefully the entire Prospectus/Proxy Statement, including the
Appendices and other documents referred to herein.
THE SPECIAL MEETINGS
PEOPLES. . . . . . . The Special Meeting is scheduled to be
held on , , 1997, at the
principal office of Peoples Bank, 201
E. Main Street, Washington, Indiana, at
.m., to consider and vote upon
adoption of the Acquisition Agreements
and the Merger contemplated thereby.
Only shareholders of record at the
close of business on , 1997,
will be entitled to vote at the Special
Meeting. On such date, there were
593,334 shares of Peoples Common Stock
outstanding. Approval of the
Acquisition Agreements requires the
affirmative vote of the holders of a
majority of the outstanding shares of
Peoples Common Stock. See "INFORMATION
CONCERNING THE SPECIAL MEETING."
<PAGE>
<PAGE> 15
GERMAN AMERICAN. . . The German American Special Meeting is
scheduled to be held on ,
, 1997 at the principal office of
The German American Bank, 711 Main
Street, 711 Main Street, Jasper,
Indiana at .m., to consider and
vote upon the Acquisition Agreements
and the issuance of German American
Common Stock contemplated thereby.
Only shareholders of record at the
close of business on , 1997, will
be entitled to vote at the German
American Special Meeting. On such
date, there were _________ shares of
German American Common Stock
outstanding. Continued listing of
German American's Common Stock on the
NASDAQ National Market System requires
the approval of the issuance of the
additional German American Common Stock
pursuant to the Acquisition Agreements
by a majority of the votes cast thereon
at the German American Special Meeting.
See "INFORMATION CONCERNING THE SPECIAL
MEETINGS."
PARTIES TO THE MERGER
GERMAN AMERICAN. . . German American is a multibank holding
company incorporated under Indiana law
in 1982 that owns all the outstanding
capital stock of The German American
Bank, Jasper, Indiana; The Union Bank,
Loogootee, Indiana; First State Bank,
Southwest Indiana, Tell City, Indiana;
and GAHC and GAHC's subsidiary,
Community Trust Bank, Otwell, Indiana.
The mailing address and telephone
number of the principal executive
offices of German American are 711 Main
Street, Jasper, Indiana 47546-3042;
812/482-1314. See "INFORMATION ABOUT
GERMAN AMERICAN."
GAHC . . . . . . . . GAHC is an Indiana corporation and a
wholly owned subsidiary of German
American, which owns all of the
outstanding capital stock of Community
Trust Bank, Otwell, Indiana.
<PAGE>
<PAGE> 16
PEOPLES. . . . . . . Peoples is an Indiana corporation that
owns all of the issued and outstanding
shares of Peoples Bank, a national
banking association that was originally
chartered in 1888. Peoples was
incorporated in 1985. Peoples'
principal executive offices are located
at 201 East Main Street, Washington,
Indiana 47501-2912 and its telephone
number is 812/254-4630. See
"INFORMATION ABOUT PEOPLES".
THE MERGER
GENERAL. . . . . . . The Acquisition Agreements, which have
been approved unanimously by the Boards
of Directors of Peoples and German
American, provide that Peoples will be
merged into GAHC, with GAHC being the
surviving corporation. As a result of
the Merger, the separate corporate
existence of Peoples will cease. The
Acquisition Agreements also provide
that simultaneously with the Merger,
The Union Bank, Loogootee, Indiana, a
wholly owned banking subsidiary of
German American, will be merged into
Peoples Bank with Peoples Bank
surviving the Merger. As a consequence
of the Merger and the merger of Union
into Peoples Bank, Peoples Bank will
become a direct, wholly owned banking
subsidiary of GAHC. See "THE
MERGER--The Acquisition Agreements."
The Acquisition Agreements are hereby
incorporated into this Prospectus/Proxy
Statement by reference.
MERGER
CONSIDERATION. . . . On the effective date of the Merger
(the "Effective Time"), German American
will issue not fewer than 1.0372 nor
more than 1.1669 shares of German
American Common Stock for each of the
593,334 issued and outstanding shares
of Peoples Common Stock (as adjusted
for the five percent stock dividend
declared by German American in October
1996 and subject to further adjustment
in the event of any future stock
dividends and the like). The exact
<PAGE>
<PAGE> 17
number of shares to be issued by German
American in the Merger will be
determined by the average closing
bid/asked quotations for German
American Common Stock during the ten
business day period ending on the
second business day preceding the
closing date (the "Valuation Period").
On ______, 1997 (the date immediately
prior to the date of this
Prospectus/Proxy Statement), the
average of the closing bid/asked
quotations for German American Common
Stock was $_____ per share. Assuming
that such average value remains not
less than $34.29 during the Valuation
Period (as to which there is no
assurance), then the minimum number of
shares specified by the Reorganization
Agreement (1.0372 shares of German
American for each Peoples common share
and an aggregate of 615,417 shares of
German American Common Stock) will be
issued in the Merger. See "THE
MERGER--The Acquisition Agreements--
Terms of the Merger--Conversion of
Peoples Common Stock."
THE BANK MERGER. . . Simultaneously with the Merger, Union,
a wholly owned banking subsidiary of
German American, will be merged into
Peoples Bank (the "Bank Merger"). The
bank surviving the Bank Merger will
retain the name "The Peoples National
Bank and Trust Company" and will
operate as a nationally chartered bank
under the Articles of Association and
Bylaws of Peoples Bank that were in
effect immediately prior to the Bank
Merger. The main office of Union will
become a branch of Peoples Bank. As a
consequence of the Merger and the Bank
Merger, Peoples Bank will become a
wholly-owned subsidiary of GAHC, which
in turn is a wholly owned subsidiary of
German American.
OPINION OF FINANCIAL
ADVISOR. . . . . . . Peoples has received an opinion of
Austin Associates, Inc. that the
exchange ratio in the Merger is fair,
from a financial point of view, to the
<PAGE>
<PAGE> 18
holders of Peoples Common Stock. See
"THE MERGER--Opinion of Financial
Advisor to Peoples" and the opinion of
Austin Associates, Inc. attached hereto
as Appendix C.
RIGHTS OF DISSENTING
SHAREHOLDERS . . . . Subject to certain conditions, a
shareholder of Peoples who (a) before
the time the vote is taken on the
Merger at the Peoples Special Meeting,
delivers to Peoples a written demand
for payment of his or her shares of
Peoples Common Stock, and (b) does not
vote in favor of the Merger, will have
the right to receive in cash the fair
value of his or her shares of Peoples
Common Stock as determined pursuant to
Chapter 44 of the Indiana Business
Corporation Law ("IBCL"). See "THE
MERGER--Rights of Dissenting
Shareholders" and Appendix B to this
Prospectus/Proxy Statement.
Shareholders of German American do not
have any right to exercise dissenters
rights with respect to the Merger and
receive cash for their shares under the
IBCL.
FEDERAL INCOME TAX
CONSEQUENCES OF
THE MERGER . . . . . The Merger is intended to constitute a
tax-free reorganization to Peoples,
German American, and GAHC. Assuming
the merger qualifies as a tax-free
reorganization, (a) shareholders of
Peoples will recognize no gain or loss
upon the exchange of shares of Peoples
for shares of German American Common
Stock, (b) shareholders of Peoples who
receive cash in exchange for shares of
Peoples Common Stock either in lieu of
a fractional shares or because they
have perfected dissenters' rights under
the IBCL will recognize gain or loss
upon the receipt of cash for their
shares, and (c) cash received by
shareholders receiving cash in lieu of
fractional share interests and cash
received by shareholders perfecting
dissenters' rights will be treated as a
distribution in full payment of such
<PAGE>
<PAGE> 19
fractional share interests, or shares
surrendered in exercise of dissenters'
rights, resulting in capital gain or
loss or ordinary income or loss, as the
case may be, depending upon each
shareholder's particular situation. See
"THE MERGER -- Federal Income Tax
Consequences." Each Peoples shareholder
is urged to consult his or her own tax
advisors regarding the specific tax
consequences of the Merger to him or
her.
REGULATORY
APPROVAL . . . . . . The Merger will not be made effective
unless the Bank Merger occurs
simultaneously. The Bank Merger is
subject to the approval of the Office
of the Comptroller of the Currency (the
"OCC"), and the OCC approved the Bank
Merger in December, 1996.
VOTES REQUIRED
FOR APPROVAL . . . . The affirmative vote of the holders of
a majority of the outstanding shares of
Peoples Common Stock is required to
approve the Merger. All of the
Directors of Peoples have agreed to
vote the shares of Peoples Common Stock
owned of record by them in favor of
approval of the Acquisition Agreements.
At September 30, 1996, the 52,420
shares of Peoples Common Stock owned of
record by Directors of Peoples
represented approximately nine percent
of the shares entitled to vote at the
Peoples Special Meeting. The Directors
and executive officers of Peoples own
beneficially (including not only shares
owned of record but also shares owned
by spouses, minor children and other
close associates) an aggregate of
78,348 shares or approximately 13% of
the shares entitled to vote at the
Peoples Special Meeting. In addition,
the approval of the issuance of
additional shares pursuant to the
Merger by a majority of the votes cast
at the German American Special Meeting
is being solicited in accordance with
<PAGE>
<PAGE> 20
German American's listing agreement
with the NASDAQ Stock Market in order
to assure continued listing of German
American's Common Stock on the NASDAQ
National Market System. As of October
31, 1996, the Directors and executive
officers of German American (all of
whom are expected to vote in favor of
the proposal) owned beneficially
approximately 26% of the shares of
German American Common Stock entitled
to vote at the German American Special
Meeting. See "INFORMATION CONCERNING
THE SPECIAL MEETING."
PER SHARE MARKET
VALUES AND EQUIVALENT
PER SHARE MARKET
VALUES . . . . . . . The following table sets forth the
market value of German American Common
Stock (as determined by the average of
the closing bid and asked quotations as
reported by NASDAQ, and as
retroactively adjusted for German
American's five percent stock dividend
declared in October 1996) and of
Peoples Common Stock (as determined by
the price of the most recent trade
known to Peoples management) as of July
5, 1996, the date preceding the first
public announcement of the Merger, and
the equivalent per share market value
as of that date of the consideration to
be received per Peoples share in the
Merger calculated at the maximum, mid-
point and minimum exchange ratios
specified by the Reorganization
Agreement. If the Merger had closed on
______________, 1997, the date
immediately prior to the date of this
Prospectus/Proxy Statement, the
exchange ratio would have been the
minimum (1.0372), and (based on the
average of the closing bid and asked
prices of the German American Common
Stock as of that date, which was
$______________) the equivalent value
as of that date per Peoples Common
Share at the minimum exchange ratio
(calculated by multiplying $_________
by 1.0372) would have been $_________.
The use of these assumed exchange
ratios is for illustrative purposes
<PAGE>
<PAGE> 21
only and is not intended to predict the
actual number of shares to be issued in
the Merger.
Equivalent Values as of
Actual Market July 5, 1996 Per Peoples
Values as of Common Share at Selected
July 5, 1996 Exchange Ratios
1.1669 1.1021 1.0372
German American $32.86 N/A N/A N/A
Peoples $20.00 $38.34 $36.22 $34.08
SUMMARY SELECTED
FINANCIAL
INFORMATION. . . . . The following tables set forth (a) pro
forma consolidated selected financial
data for Peoples and German American
combined as of and for the years ended
December 31, 1995, 1994 and 1993, and
for the nine months ended September 30,
1996, (b) historical, pro forma and
equivalent pro forma net income, cash
dividends and book value of Peoples and
German American on a per share basis as
of such dates and for such periods, and
(c) selected consolidated financial
data for Peoples and German American as
of and for each of the five years ended
December 31, 1995 and for the nine
months ended September 30, 1996 and
1995. This information is derived from
and should be read in conjunction with
the historical financial statements of
German American and Peoples that appear
elsewhere in this Prospectus (or in the
German American Annual Report to
shareholders that accompanies this
Prospectus) and with the pro forma
condensed consolidated financial
statements of German American, which
give effect to the Merger and which
appear in this Prospectus under the
caption "PRO FORMA FINANCIAL
INFORMATION." The pro forma condensed
consolidated financial information has
been prepared based on the "pooling of
interest" method of accounting and on
the assumption that no Peoples
shareholder will exercise dissenters'
rights. The historical financial
information of German American and
Peoples has been combined for each<PAGE>
<PAGE> 22
period presented. The equivalent pro
forma per share information for Peoples
has been determined by multiplying the
German American pro forma per share
information by assumed exchange ratios
representing the maximum and minimum
exchange ratios specified by the
Reorganization Agreement, as well as a
mid-point between the maximum and
minimum exchange ratios. The maximum,
mid-point and minimum assumed exchange
ratios are 1.1669, 1.1021 and 1.0372,
respectively. If the Merger had closed
on _______, 1997, the date immediately
prior to the date of this
Prospectus/Proxy Statement, the
exchange ratio would have been the
minimum (1.0372). The use of these
assumed exchange ratios is for
illustrative purposes only and is not
intended to predict the actual number
of shares to be issued in the Merger.
<PAGE>
<PAGE> 23
GERMAN AMERICAN BANCORP AND
PEOPLES BANCORP OF WASHINGTON
PRO FORMA CONSOLIDATED SELECTED FINANCIAL DATA
(Dollar amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
09/30/96 12/31/95 12/31/94 12/31/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS (A)
Interest income $26,263 $33,816 $27,922 $27,371
Interest expense 12,385 15,948 12,019 12,450
------- ------- ------- -------
Net interest income 13,878 17,868 15,903 14,921
Provision for loan losses 183 49 687 797
------- ------- ------- -------
Net interest income after provision for
loan losses 13,695 17,819 15,216 14,124
Non-interest income 1,550 1,764 1,933 1,836
Non-interest expense 9,735 12,418 10,910 10,874
------- ------- ------- -------
Income before income tax 5,510 7,165 6,239 5,086
Income tax 1,770 2,323 1,958 1,642
------- ------- ------- -------
Income before change in accounting
principle $ 3,740 $ 4,842 $ 4,281 $ 3,444
======= ======= ======= =======
PERIOD END BALANCES (A)
Total assets $473,316 $458,605 $432,939 $412,203
Total loans, net 309,162 282,457 270,982 243,765
Total deposits 408,135 395,553 369,180 353,056
Long-term debt 1,500 1,000 1,000 1,000
Total shareholders' equity 47,956 45,788 40,779 38,880
Cash dividends declared (B) 1,133 1,392 1,232 1,026
Common shares outstanding (C) 2,537,840 2,532,000 2,533,131 2,532,013
PER SHARE DATA (A) (C)
Income before change in accounting
principle $1.48 $1.91 $1.69 $1.36
Cash dividends declared (B) 0.59 0.72 0.65 0.63
Shareholders' equity, end of year 18.90 18.08 16.10 15.36
Weighted average shares outstanding 2,535,216 2,532,602 2,532,020 2,532,014
</TABLE>
(A) Pro forma information includes German American Bancorp, and Peoples
Bancorp of Washington as if combined for all periods presented.
Assumes an Exchange Ratio of 1.0372 and issuance of 615,417 common
shares of German American Bancorp, which amounts are based on the
number of shares that would have been issued had the Merger been
effective September 30, 1996. The actual number of shares to be
issued is not yet known. The assumed number of shares issued is for
illustrative purposes only and is not an attempt to predict the actual
number of shares to be issued in the Merger.
(B) Based upon German American Bancorp cash dividends declared, without
restatement for poolings, because management believes acquisitions will have
no significant effect on German American Bancorp dividend policy.
(C) Retroactively restated for a 5% stock dividend in October, 1995 and a 5%
stock dividend in October, 1996.
<PAGE>
<PAGE> 24
GERMAN AMERICAN BANCORP AND PEOPLES BANCORP OF WASHINGTON
HISTORICAL AND PRO FORMA PER SHARE DATA
<TABLE>
<CAPTION> PEOPLES BANCORP
GAB GAB PEOPLES OF WASHINGTON
BANCORP BANCORP BANCORP EQUIVALENT
PRO FORMA OF WASHINGTON PRO FORMA
(C) (A) (D)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
09/30/96
- --------
Assuming 1.1669 Exchange Ratio (maximum)
Net income $ 1.57 $ 1.43 $ 1.24 $ 1.67
Cash dividends declared (B) 0.59 0.59 0.21 0.69
Shareholders' equity, end of period 20.05 18.34 15.86 21.40
Assuming 1.1021 Exchange Ratio (mid-point)
Net income 1.57 1.45 1.24 1.60
Cash dividends declared (B) 0.59 0.59 0.21 0.65
Shareholders' equity, end of period 20.05 18.61 15.86 20.51
Assuming 1.0372 Exchange Ratio (minimum)
Net income 1.57 1.48 1.24 1.54
Cash dividends declared (B) 0.59 0.59 0.21 0.61
Shareholders' equity, end of period 20.05 18.90 15.86 19.60
12/31/95
- --------
Assuming 1.1669 Exchange Ratio (maximum)
Net income 2.10 1.86 1.39 2.17
Cash dividends declared (B) 0.72 0.72 0.27 0.84
Assuming 1.1021 Exchange Ratio (mid-point)
Net income 2.10 1.88 1.39 2.07
Cash dividends declared (B) 0.72 0.72 0.27 0.79
Assuming 1.0372 Exchange Ratio (minimum)
Net income 2.10 1.91 1.39 1.98
Cash dividends declared (B) 0.72 0.72 0.27 0.75
12/31/94
- --------
Assuming 1.1669 Exchange Ratio (maximum)
Net income 1.81 1.64 1.36 1.91
Cash dividends declared (B) 0.65 0.65 0.23 0.76
Assuming 1.1021 Exchange Ratio (mid-point)
Net income 1.81 1.67 1.36 1.84
Cash dividends declared (B) 0.65 0.65 0.23 0.72
Assuming 1.0372 Exchange Ratio (minimum)
Net income 1.81 1.69 1.36 1.75
Cash dividends declared (B) 0.65 0.65 0.23 0.67
12/31/93
- --------
Assuming 1.1669 Exchange Ratio (maximum)
Income before change in accounting pr 1.53 1.32 1.23 1.54
Cash dividends declared (B) 0.63 0.63 0.21 0.74
Assuming 1.1021 Exchange Ratio (mid-point)
Net income 1.53 $1.34 1.23 1.48
Cash dividends declared (B) 0.63 0.63 0.21 0.69
Assuming 1.0372 Exchange Ratio (minimum)
Net income 1.53 $1.36 1.23 1.41
Cash dividends declared (B) 0.63 0.63 0.21 0.65
</TABLE>
(A) Pro forma information includes German American
Bancorp, and Peoples Bancorp of Washington as if
combined for all periods presented.
<PAGE>
<PAGE> 25
(B) Based upon German American Bancorp cash dividends
declared, without restatement for poolings, because
management believes acquisitions will have no
significant effect on German American Bancorp
dividend policy.
(C) Retroactively restated for a 5% stock dividend in
October, 1995 and a 5% stock dividend in October,
1996.
(D) Computed by multiplying German American Bancorp pro
forma per share information by the indicated
Exchange Ratio.
<PAGE>
<PAGE> 26
PEOPLES BANCORP OF WASHINGTON
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollar amounts in thousands, except share data)
The following selected data have been derived from and
should be read in conjunction with, the Peoples Bancorp
of Washington audited and unaudited financial
statements and Management's Discussion and Analysis.
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended December 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest Income $ 5,211 $ 4,799 $ 6,519 $ 5,852 $ 5,714 $ 6,241 $ 6,752
Interest Expense 2,276 2,304 3,131 2,492 2,556 3,117 4,038
Net interest income 2,935 2,495 3,388 3,360 3,158 3,124 2,714
Provision for loan losses 37 67 68 120 144 162 140
Non-interest income 230 269 304 244 267 297 199
Non-interest expense 1,946 1,834 2,340 2,301 2,285 2,279 2,135
Income before income taxes and
accounting change 1,181 862 1,284 1,183 996 979 638
Net income 735 561 824 807 730 615 364
PER COMMON SHARE (3)
Net income 1.24 0.95 1.39 1.36 1.23 1.04 0.61
Cash dividends 0.21 0.17 0.27 0.23 0.21 0.18 0.17
Divided payout ratio 16.94% 17.89% 19.42% 16.91% 17.07% 17.31% 27.87%
Weighted average Shares (000) 593 593 593 593 593 593 593
AT PERIOD-END
Loans $ 67,230 $ 56,057 $ 58,760 $ 53,774 $ 48,110 $ 44,565 $ 39,702
Earning assets 86,454 81,165 83,914 81,489 82,207 78,485 73,822
Total assets 91,488 87,586 90,842 86,413 88,924 83,320 82,305
Average total assets 89,451 86,552 87,497 85,394 83,124 82,813 80,740
Deposits 71,631 66,046 67,974 66,890 71,546 70,550 69,318
Long-term debt 1,500 2,000 1,000 1,000 1,000 - -
Common shareholders' equity 9,408 8,601 8,832 7,854 7,539 6,931 6,425
Total shareholders' equity 9,408 8,601 8,832 7,854 7,539 6,931 6,425
Average shareholders' equity 9,104 8,254 8,371 7,755 7,254 6,678 6,208
PERFORMANCE RATIOS
Return on average total assets 1.10% 0.86% 0.94% 0.95% 0.88% 0.74% 0.45%
Return on average common equity 10.76 9.06 9.84 10.42 10.06 9.21 5.86
Efficiency (1) 61.48 66.35 63.38 63.83 66.72 66.62 73.29
Overhead (2) 58.47 62.73 60.09 61.20 63.90 63.44 71.33
Net interest margin 4.61 4.05 4.08 4.16 4.05 3.98 3.68
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 10.36 9.91 9.76 9.09 8.48 8.32 7.81
Tier 1 risk-adjusted capital 14.45 14.88 14.64 13.74 14.39 14.67 14.96
Total risk-adjusted capital 15.70 16.13 15.89 14.99 15.63 15.92 16.21
ASSET QUALITY DATA
Nonperforming loans $ 411 $ 407 $ 418 $ 501 $ 45 $ 95 $ 385
Nonperforming assets 411 407 418 501 45 95 385
Allowance for loan losses 968 968 960 933 810 634 622
Nonperforming loans to period-end loans 0.61% 0.73% 0.71% 0.93% 0.09% 0.21% 0.97%
Non performing assets to period-end loans plus
OREO and other nonperforming assets 0.61% 0.73% 0.71% 0.93% 0.09% 0.21% 0.97%
Allowance for loan losses to nonperforming
loans 235.52% 237.84% 229.67% 186.23% 1800.00% 667.37% 161.56%
Allowance for loan losses to period-end loans 1.44% 1.73% 1.63% 1.74% 1.68% 1.42% 1.57%
Net loan charge-offs to average loans 5.00% 8.00% 7.00% -1.00% -7.00% 36.00% 35.00%
</TABLE>
(1) Calculated as noninterest expense divided by net
interest income plus noninterest income.
(2) Calculated as noninterest expense less noninterest
income divided by net interest income.
(3) Share data adjusted for 1995 stock split as
appropriate.
<PAGE>
<PAGE> 27
GERMAN AMERICAN BANCORP
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollar References In Thousands Except Share Data)
The following selected data have been derived from, and
should be read in conjunction with, the consolidated financial
statements and related notes included in the German American
Annual Report to Shareholders delivered with this Prospectus/Proxy
Statement, and in German American's Quarterly Report on Form 10-Q
for the three months ended September 30, 1996 (attached to this
Prospectus/Proxy Statement as Appendix D). See Note 18 to the
consolidated financial statements included in the German American
Annual Report to Shareholders and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included therein for information regarding certain purchase
acquisitions during 1994 and 1993 which affect the comparability
of data.
<TABLE>
Nine Months
Ended
September 30, Year Ended December 31,
____________________ _______________________________________________
1996 1995 1995 1994 1993 1992 1991
____________________ _______________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest and Fees on Loans $ 16,343 $ 15,680 $ 21,210 $ 17,348 $ 16,312 $ 16,903 $ 17,739
Interest on Investments 4,709 4,468 6,087 4,722 5,345 6,018 7,956
Total Interest Income 21,052 20,148 27,297 22,070 21,657 22,921 25,695
Interest on Deposits 10,072 9,226 12,633 9,394 9,844 11,197 14,771
Interest on Short-term Borrowings 37 168 184 133 50 69 185
Interest on Long-term Debt -- -- -- -- -- 3 5
Total Interest Expense 10,109 9,394 12,817 9,527 9,894 11,269 14,961
Net Interest Income 10,943 10,754 14,480 12,543 11,763 11,652 10,734
Provision for Loan Losses 145 15 (19) 567 653 984 1,943
Net Interest Income after Provision
for Loan Losses 10,798 10,739 14,499 11,976 11,110 10,668 8,791
Service Charges on Deposit Accounts 555 456 620 567 520 439 466
Other Income 765 651 840 1,122 1,049 1,175 481
Total Non-Interest Income 1,320 1,107 1,460 1,689 1,569 1,614 947
Salaries and Benefits 4,278 3,963 5,349 4,517 4,338 4,096 3,716
Other Expenses 3,511 3,400 4,729 4,092 4,251 3,881 3,281
Total Non-Interest Expense 7,789 7,363 10,078 8,609 8,589 7,977 6,997
Income Before Income Taxes and
Accounting Change 4,329 4,483 5,881 5,056 4,090 4,305 2,741
Income Tax Expense 1,324 1,460 1,863 1,582 1,308 1,403 716
Income Before Accounting Change 3,005 3,023 4,018 3,474 2,782 2,902 2,025
Cumulative Effect of change in
Accounting for Income Taxes -- -- -- -- 150 -- --
Net Income 3,005 3,023 4,018 3,474 2,932 2,902 2,025
________________________________________________________________________________________________________________
PERIOD END BALANCES
Total Assets $381,828 $357,361 $367,763 $346,526 $323,279 $305,022 $291,625
Total Loans, Net 242,900 228,788 224,657 218,141 196,465 185,741 174,547
Total Long-term Debt -- -- -- -- -- -- 69
Total Deposits 336,504 314,997 327,579 302,290 281,510 270,952 258,133
Total Shareholders' Equity 38,548 35,430 36,956 32,925 31,341 29,470 27,446
________________________________________________________________________________________________________________
PER SHARE DATA(1)
Income Before Cumulative Effect of
Change in Accounting for Income
Taxes $ 1.57 $ 1.58 $ 2.10 $ 1.81 $ 1.45 $ 1.51 $ 1.06
Net Income 1.57 1.58 2.10 1.81 1.53 1.51 1.06
Cash Dividends(2) 0.59 0.54 .72 .65 .63 .54 .57
Shareholders' Equity, End of Period 20.05 18.49 19.29 17.17 16.34 15.37 14.31
</TABLE>
(1) Per share data has been retroactively adjusted to give
effect for stock dividends and stock splits, including the
five percent stock dividend declared in October, 1996.
(2) Cash dividends represent historical per share dividends
declared without retroactive restatement for pooling.<PAGE>
<PAGE> 28
INFORMATION CONCERNING THE SPECIAL MEETING
THE PEOPLES SPECIAL MEETING
GENERAL
Each copy of this Prospectus/Proxy Statement
mailed to a Peoples Shareholder is accompanied by a
proxy, which is solicited by the Board of Directors of
Peoples for use at the Special Meeting that will be
held at the principal office of Peoples Bank, 201 East
Main Street, Washington, Indiana, at .m.,
Peoples time, on , , 1997, and at any
adjournment or adjournments thereof. Shareholders of
Peoples who are the owners of Peoples Common Stock of
record at the close of business on , 1997, will
be entitled to vote at the Special Meeting. On such
date, there were 593,334 shares of Peoples Common Stock
outstanding and entitled to vote, with each such share
entitled to one vote.
VOTES REQUIRED
The presence at the Special Meeting, in person or
by proxy, of the holders of a majority of the
outstanding shares of Peoples Common Stock will
constitute a quorum. Each share of Peoples Common
Stock is entitled to one vote on any matter to come
before the Special Meeting.
The affirmative vote of the holders of a majority
of the outstanding shares of Peoples Common Stock
entitled to vote at the Special Meeting (at least
296,667 of the 593,334 shares of Peoples Common Stock
outstanding) is required for approval and adoption of
the Acquisition Agreements. Proxies marked as
abstentions and shares held in street name that are
designated by brokers on proxy cards as not voted will
not be counted as votes cast and, as a result, will
have the same effect as a vote against approval of the
Acquisition Agreements. Proxies marked as abstentions
or as broker non-votes, however, will be treated as
shares present for the purpose of determining whether a
quorum is present. All of the members of the Board of
Directors of Peoples have agreed to vote all shares
owned of record by them in favor of approval and
adoption of the Acquisition Agreements at the Special
Meeting. At September 30, 1996, the Directors of
Peoples owned of record 52,420 shares or approximately
nine percent of the outstanding shares thereof, and
owned beneficially (including not only shares owned by
<PAGE>
<PAGE> 29
record but also shares owned by spouses, minor
children, and other close associates) an aggregate of
78,348 shares, or approximately 13 percent.
Accordingly, the vote of an additional 218,319 shares
would be required to approve the Merger in addition to
the 78,348 shares beneficially owned by the Directors
of Peoples.
THE GERMAN AMERICAN SPECIAL MEETING
GENERAL
The vote of German American's stockholders with
respect to the Merger is not required by law or by the
terms of the Acquisition Agreements. German American's
listing agreement with the NASDAQ Stock Market (the
"NASDAQ Listing Agreement"), however, requires that
German American abide by certain NASDAQ policies in
order to continue to be listed on the National Market
System of NASDAQ. One of these policies requires that
issuance of additional German American Common Stock in
connection with an acquisition of stock or assets of
another business that equals or exceeds 20 percent of
the number of shares of German American Common Stock
outstanding prior to the issuance must be approved by a
majority of the votes cast by German American's
shareholders at a meeting held to consider such
acquisition. Accordingly, the Board of Directors of
German American has called a Special Meeting of
Shareholders of German American to consider the Merger
and the issuance of additional shares pursuant to the
Acquisition Agreements in order to assure continued
listing of German American Common stock on the NASDAQ
National Market System.
Each copy of this Prospectus/Proxy Statement
mailed to a German American Shareholder is accompanied
by a proxy, which is solicited by the Board of
Directors of German American for use at the Special
Meeting that will be held at the principal office of
German American Bank, 711 Main Street, Jasper, Indiana,
at .m., German American time, on ,
, 1997, and at any adjournment or adjournments
thereof. Shareholders of German American who are the
owners of German American Common Stock of record at the
close of business on , 1997, will be entitled to
vote at the Special Meeting. On such date, there were
_____________ shares of German American Common Stock
outstanding and entitled to vote, with each such share
entitled to one vote.
<PAGE>
<PAGE> 30
VOTES REQUIRED
The presence at the Special Meeting, in person or
by proxy, of the holders of a majority of the
outstanding shares of German American Common Stock will
constitute a quorum. Each share of German American
Common Stock is entitled to one vote on any matter to
come before the Special Meeting.
The affirmative vote of a majority of the votes
cast at the Special Meeting is required by the NASDAQ
Listing Agreement for approval of the proposed issuance
of additional shares pursuant to the Acquisition
Agreements. Proxies marked as abstentions and shares
held in street name that are designated by brokers on
proxy cards as not voted will not be counted as votes
cast and, as a result, will not have the effect of a
vote cast for or against approval of the Acquisition
Agreements. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present
for the purpose of determining whether a quorum is
present. All of the members of the Board of Directors
of German American are expected to vote all shares
owned by them in favor of approval and adoption of the
Acquisition Agreements at the Special Meeting. At
October 31, 1996, the Directors and executive officers
of German American owned beneficially approximately 26%
of the outstanding shares of German American Common
Stock.
PROXIES
If the enclosed proxy is executed and returned, it
may nevertheless be revoked at any time insofar as it
has not been exercised. The proxy may be revoked by
(a) giving written notice of revocation to the
Secretary of Peoples or German American (as the case
may be) at the principal executive offices of such
corporation set forth in the Summary, which written
revocation notice is actually received by the Secretary
prior to the proxy being exercised, (b) executing a
subsequently dated proxy, or (c) attending the Special
Meeting and voting in person. Unless revoked, the
proxy will be voted at the meeting in accordance with
the instructions of the shareholder as indicated on the
proxy. If no instructions are given, the shares will
be voted FOR the Merger and, on other matters that come
before the meeting, as recommended by the Directors;
provided, that, in no event will a proxy that has been
voted against the Merger be voted in favor of any
motion to adjourn the Special Meeting for the purpose
of soliciting additional votes in favor of the Merger.
<PAGE>
<PAGE> 31
SOLICITATION OF PROXIES
In addition to the use of the mails, Directors,
officers, and certain employees of Peoples, Peoples
Bank and German American may, without additional
compensation therefor, solicit proxies in person or by
telephone. Peoples and German American will bear the
cost of soliciting proxies from shareholders of Peoples
and the expense of preparing and printing this
Prospectus/Proxy Statement. See "THE MERGER--The
Acquisition Agreements--Terms of the Merger--Expenses."
Brokers and other custodians, nominees, and fiduciaries
are requested to forward proxies and proxy soliciting
materials to the beneficial owners of shares held of
record by such persons and will be reimbursed for their
reasonable expenses in so doing.
THE MERGER
BACKGROUND AND REASONS FOR THE MERGER
PEOPLES
During 1995, Peoples received several unsolicited
invitations to hold discussions concerning possible
affiliations between Peoples and other financial
institutions. Partly in response to these, Peoples'
Board of Directors decided to retain an investment
banker in order to assist it in its long-range
strategic planning process.
On January 31, 1996, Peoples retained Austin
Associates, Inc. ("AAI") to assist in a strategic
planning process. The purpose of the planning process
was to develop a three year financial plan to assist in
determining the impact of achieving alternative
planning goals on the value of Peoples. To do this,
the strategic planning process involved projecting (1)
the value of Peoples in a "sale of control" context;
(2) the level of performance Peoples would need to
achieve in order to provide shareholders with the value
projected in a "sale of control" context; and (3) the
ability of Peoples to redeem shares of its common stock
in order to provide liquidity to its shareholders. The
Board of Directors of Peoples met on March 13, 1996, to
review the results of the planning process and
determined that a sale or merger of the company would
likely provide greater shareholder value than remaining
independent. The Board of Peoples reached this
conclusion after analyzing the level of performance
Peoples would need to achieve in order to provide
shareholders with the value projected in a "sale of
control" context and the probable changes required in
Peoples methods of operations in order to achieve these<PAGE>
<PAGE> 32
results. In reaching this conclusion, the Board of
Peoples also acknowledged that even if Peoples obtained
these operating results, there was no guaranty that
Peoples' stock would increase in value.
On March 15, 1996, Peoples received a proposal
from another entity (the "Third Party") other than
German American. The proposal indicated a fixed price
of $18.5 million, payable in stock, cash or a
combination of stock and cash. The Board retained AAI
on March 19, 1996 to serve as financial advisor with
respect to a possible sale or merger of Peoples. AAI
prepared an overall assessment of the sale of control
value of Peoples, including a review of the Third Party
proposal.
<PAGE>
<PAGE> 33
On April 17, 1996, the Peoples Board met to review
the AAI report. AAI concluded that a reasonable sale
of control value range for the organization would be
between $15.4 and $16.6 million as of December 31,
1995. The Board instructed AAI to further negotiate
the financial terms with the Third Party.
On April 23, 1996, German American submitted an
unsolicited proposal to merge with Peoples in a stock
for stock transaction. The offer indicated a fixed
exchange of German American shares for all of Peoples
shares outstanding. The transaction would have been
valued at $20.5 million based on the April 22 average
of the closing bid and asked prices of German American.
Based on this development, the Board instructed
AAI to contact five additional organizations to
determine their potential interest in acquiring
Peoples. The five organizations were selected based on
asset size, geographic proximity, and financial
performance and condition. In addition, the common
stock of all five of the financial organizations was
publicly traded. After receiving positive responses,
AAI distributed confidential information packages to
German American, the Third Party and the five
companies. The 1996 Budget for Peoples, including
projected net income of $913,450 for the year ended
December 31, 1996, and projected total assets of
$91,514,000, projected total loans of $60,775,000, and
projected total deposits of $70,513,000 as of December
31, 1996, was included in the confidential information.
A bid deadline of May 17 was established.
On or before May 17, six proposals were received,
including revised proposals from both German American
and the Third Party. A special Board meeting of
Peoples was held May 30 to review the proposals. After
further negotiations and an exchange of additional
information between the parties, the Peoples Board
selected the German American proposal.
Because the German American and the Third Party
proposals were the two highest proposals from a
financial point of view, the Board of Directors
requested that AAI advise it as to AAI's ability to
opine as to the fairness, from a financial point of
view, of only the German American and Third Party
proposals. The Peoples Board was informed by AAI that
it would be able to render a fairness opinion with
respect to both the German American proposal and the
proposal from the Third Party. The Peoples Board chose<PAGE>
<PAGE> 34
the German American proposal over the proposal from the
Third Party due in part to the higher price of the
German American proposal based upon market conditions
at that time and the belief of the Peoples Board that
German American's philosophy and corporate culture with
respect to operations, customers and shareholders more
strategically matched that of Peoples. No one of the
above reasons was dominant but, instead, the decision
of the Board was the result of all considerations. The
importance of these factors relative to one another
cannot precisely be determined or stated here.
The final German American proposal, as described
in detail elsewhere in this Prospectus/Proxy Statement,
provides for a variable exchange of German American
shares for Peoples shares. The variable exchange ratio
formula is designed to assure Peoples shareholders that
the aggregate value of the German American Common Stock
to be issued in the Merger as calculated during the
pre-closing Valuation Period will be not less than
$21.1 million unless the Board of Directors of Peoples
waives that minimum valuation condition. Although
there can be no such assurance, the Board of Directors
of Peoples presently anticipates that it would not
waive the minimum condition without submitting the
merger to another vote by Peoples' stockholders and
resolicitation of their proxies. The average of the
German American closing bid and ask prices on
_________________, 1997 (the date immediately preceding
the date of this Prospectus/Proxy Statement), was
$______________. Assuming that the Merger had closed
on that date, the Exchange Ratio would have been fixed
at 1.0372 and the market value of German American stock
to be exchanged for each share of Peoples would have
been $______, or $_______ in the aggregate.
<PAGE>
<PAGE> 35
An Agreement between the parties fixing the
general terms of the transaction was entered into on
July 3, 1996. German American and Peoples entered into
the Agreement and Plan of Reorganization ("Agreement")
on September 27, 1996. German American and Peoples,
and their respective representatives, negotiated the
financial and other terms of the Agreement on an
arms's-length basis.
THE BOARD OF DIRECTORS OF PEOPLES HAS UNANIMOUSLY
APPROVED THE ACQUISITION AGREEMENTS AND UNANIMOUSLY
RECOMMENDS TO THE SHAREHOLDERS OF PEOPLES THAT THEY
VOTE TO APPROVE SUCH AGREEMENTS AND THE MERGER PROPOSAL
CONTEMPLATED THEREBY.
Pursuant to the Reorganization Agreement, the
Chairman of the Board of Peoples, David Graham, and
another member of the present Board of Directors of
Peoples (not yet designated), will be added to the
German American Board of Directors as soon as
practicable after the Effective Time.
GERMAN AMERICAN
German American's Board of Directors considered a
number of financial and non-financial factors in
connection with its approval of the Merger, including
its respect for the ability and integrity of the Board
of Directors, management, and staff of Peoples and
Peoples Bank and its belief that entering the Daviess
County banking market through the Merger offers
important long range strategic benefits to German
American.
In connection with German American's evaluation of
the financial terms of the Merger, German American's
management prepared estimates of the future earnings
and financial condition for German American and for
Peoples. These estimates were based on the 1996 Budget
of Peoples that had been supplied to German American as
part of the confidential information package delivered
to interested parties, and took into account cost
savings and efficiencies that German American's
management believed could reasonably be achieved in
future years. These estimates compared the estimated
earnings per share and estimated shareholders' equity
per share of German American's Common Stock to its
estimated earnings per share and shareholders' equity
per share on a prospective pro forma basis giving
effect to the Merger on the agreed terms. Based on
such analysis, the proposed Merger of Peoples was
expected to be materially dilutive, for at least German
American's fiscal years ending December 31, 1996, 1997<PAGE>
<PAGE> 36
1998, and 1999, to German American's earnings per share
and shareholders' equity per share compared to the
amounts that might be expected without the business
combination with Peoples. See "GERMAN AMERICAN BANCORP
AND PEOPLES BANCORP OF WASHINGTON HISTORICAL AND PRO
FORMA PER SHARE DATA" which illustrates the pro forma
dilutive impact of the Merger on German American's net
income per share and shareholders' equity per share for
the nine months ended September 30, 1996 and each of
the three years ended December 31, 1995, without taking
into account any cost savings or efficiencies. In
order for the Merger not to be dilutive to German
American's net income per share for the nine months
ended September 30, 1996, German American's management
believes that it would have had to have realized
revenue enhancements or efficiencies from the Merger of
approximately $500,000.
German American's Board of Directors attached
greater weight to the anticipated net income per share
dilution than to the anticipated shareholders equity
per share dilution when determining its offer of
merger. The basis for the Board's greater concern for
the dilutive impact of the Merger upon net income per
share than upon shareholders' equity per share was the
Board's belief, based on its discussions with investors
and broker-dealers active in bank stocks over the
years, that investors are significantly more concerned
with the dilutive impact of an acquisition transaction
upon earnings than upon shareholders' equity. German
American's management believes that the anticipated
dilution is acceptable given German American's belief
that entry into the Daviess County banking market
offers strategic advantages to German American.
The statements contained in the foregoing
paragraphs relating to the anticipated future dilutive
effect of the Merger on German American's net income
per share are forward looking statements. Readers are
cautioned that such statements are subject to various
factors that could cause the actual dilutive effect of
the Merger on earnings to differ materially from the
effect that is expected, or could cause the period of
such material dilutive effect to be longer or shorter
than anticipated, including factors such as (a) the
earnings of German American and of Peoples that are in
fact achieved during 1996 in future periods, compared
to the amounts that were assumed for German American
and Peoples in connection with the estimation process,
(b) the amount of expense reduction that German <PAGE>
<PAGE> 37
American is able to realize as the result of the Merger
compared to the amounts estimated, and (c) the pace of
realization of such expense reductions. Depending upon
such factors, the actual dilutive impact of the merger
upon German American earnings could be materially more,
or materially less, than estimated and could exist for
a longer, or shorter, period of time than is presently
forecast.
THE BOARD OF DIRECTORS OF GERMAN AMERICAN HAS
UNANIMOUSLY APPROVED THE ACQUISITION AGREEMENTS AND
UNANIMOUSLY RECOMMENDS TO THE SHAREHOLDERS OF GERMAN
AMERICAN THAT THEY VOTE TO APPROVE SUCH AGREEMENTS AND
THE ISSUANCE OF ADDITIONAL GERMAN AMERICAN COMMON STOCK
CONTEMPLATED THEREBY.
THE ACQUISITION AGREEMENTS
The following summary of the terms of the
Acquisition Agreements does not purport to be complete
and is qualified in its entirety by reference to the
Acquisition Agreements, which are incorporated herein
by reference and attached as Appendix A to this
Prospectus.
If approved by the shareholders of Peoples, and if
all other conditions to the consummation of the Merger
specified by the Acquisition Agreements are satisfied
or waived, and unless the Acquisition Agreements are
terminated as provided therein, the Merger will be
consummated and become effective upon the filing of the
Merger Agreement with the Office of the Indiana
Secretary of State (the "Effective Time"). Although no
assurances can be given, it is anticipated that the
Effective Time will occur on or before January 31,
1997. Simultaneously with the Merger, Union will be
merged into Peoples Bank. The resulting bank will
continue operation under the name "The Peoples National
Bank and Trust Company."
EFFECT OF THE MERGER
At the Effective Time of the Merger, the separate
corporate existence of Peoples will cease and Peoples
will be merged into and become a part of GAHC, which
will survive the Merger.
Following the Merger, shareholders of Peoples who
do not perfect their dissenters' rights under Chapter
44 of the IBCL (see "THE MERGER--Rights of Dissenting
Shareholders") will have the right, upon surrender of
the certificates for their shares of Peoples Common<PAGE>
<PAGE> 38
Stock or other evidence of ownership of such shares
acceptable to German American, to receive the Merger
Consideration as further discussed below.
TERMS OF THE MERGER
CONVERSION OF PEOPLES COMMON STOCK
Pursuant to the Merger, German American will
acquire all 593,334 issued and outstanding shares of
Peoples Common Stock in exchange for shares of German
American's Common Stock, $10 par value, at an exchange
ratio calculated as follows. German American Common
Stock will be valued solely for purposes of computing
the exchange ratio at the average of the lowest closing
asked prices and highest closing bid prices of German
American Common Stock as reported by the NASDAQ
National Market System for each of the ten consecutive
business days that end on the second business day
preceding the closing date (the "Valuation Period").
This valuation will be computed by averaging the asked
prices separately from the bid prices over the ten days
of the Valuation Period and then averaging the average
bid price figure and the average asked price figure.
Shareholders can obtain the daily closing bid/asked
information as reported by NASDAQ for German American
Common Stock by calling any member firm of the National
Association of Securities Dealers (NASD) or by
accessing NASDAQ's home page on the Internet
(http://www.nasdaq.com) and entering the NASDAQ
quotation symbol for German American Common Stock
(GABC). Shareholders can also obtain this information
by calling the German American Investor Relations
office at (812)482-1314.
The value of the German American Common Stock
during the Valuation Period (computed as indicated
above) shall then be divided into the sum of
$21,100,000 to establish (to the nearest whole share)
the aggregate number of shares of German American
Common Stock into which all of the then issued and
outstanding shares of Peoples Common Stock (which shall
be not more than 593,334 shares) shall be converted at
the Effective Time. This number of shares of German
American Common Stock shall then be divided by 593,334,
with the quotient therefrom (carried to the fourth
figure past the decimal point) being the number of
shares of German American Common Stock into which each
share of Peoples Common, except for shares as to which
dissenters rights under the Indiana Business
Corporation Law (the "IBCL") have been perfected, shall
be converted at the Effective Time.
<PAGE>
<PAGE> 39
Notwithstanding the above, in no event shall the
total number of shares of German American Common Stock
into which the 593,334 shares of Peoples Common Stock
shall be converted be more than 692,344 shares or fewer
than 615,417 shares; and provided further, that in no
event will the exchange ratio be more than 1.1669 or
less than 1.0372 shares of German American Common Stock
for each of the 593,334 shares of Peoples Common Stock.
The maximum and minimum exchange ratio, and the maximum
and minimum number of shares of German American Common
Stock for which the 593,334 shares of Peoples Common
Stock shall be exchanged, have been adjusted by five
percent from the figures set forth in the
Reorganization Agreement for the five percent stock
dividend declared by German American in October 1996,
subsequent to the date of the Reorganization Agreement.
The maximum and minimum exchange ratios, and the
maximum and minimum numbers of shares, will be further
adjusted in accordance with the anti-dilution
provisions of the Reorganization Agreement in
connection with any future stock dividends, stock
splits and the like that German American might declare.
Therefore, Peoples' shareholders are assured that their
interests under the Reorganization Agreement will not
be diluted on account of any such future stock
dividends, stock splits and the like. Further, German
American does not anticipate that it will declare or
effect any such future stock splits or dividends or the
like prior to the Effective Time. At times herein the
shares of German American Common Stock to be received
in exchange for the shares of Peoples Common Stock will
be referred to as the "Merger Consideration".
<PAGE>
<PAGE> 40
On __________________, 1997 (the date immediately
prior to the date of the Prospectus/Proxy Statement),
the average of the closing bid/asked quotations
("Bid/Asked Value") for German American Common Stock
was $__________ per share. Assuming that the Bid/Asked
Value remains not less than $34.29 per share during the
Valuation Period (as to which there is no assurance),
then the minimum number of shares specified by the
Reorganization Agreement (1.0372 shares of German
American for each Peoples common share and an aggregate
of 615,417 shares of German American Common Stock) will
be issued in the Merger.
If the Bid/Asked Value falls between $30.48 and
$34.28 per share during the Valuation Period, then
Peoples' shareholders will receive an aggregate number
of shares of German American Common Stock that had an
aggregate Bid/Asked Value as measured during the
Valuation Period of $21,100,000 (but not more than
692,344 shares in the aggregate or 1.1669 shares of
German American Common Stock for each Peoples common
share).
The Acquisition Agreements may be terminated by
Peoples if the Bid/Asked Value of the German American
Common Stock to be issued to the Peoples shareholders,
as calculated pursuant to the Acquisition Agreements,
would be less than $21,100,000. This termination right
will become operative only if the average of the
closing bid/asked quotations for German American Common
Stock during the Valuation Period is less than $30.48
per share, and the product obtained by multiplying the
maximum number of shares to be issued in the Merger
(692,344 shares) by such average value therefore is
less than $21,100,000. Although there can be no such
assurance, the Peoples Board of Directors presently
anticipates that it would not waive any right that
Peoples may have to terminate the Merger by reason of
the Bid/Asked Value of the German American Common Stock
dropping below $30.48 during the Valuation Period
unless it first submitted the Merger to the Peoples'
shareholders for reapproval and resolicited proxies.
If Peoples waives its right to terminate the Merger
(with or without shareholder reapproval) on account of
the Bid/Asked Value dropping below $30.48 during the
Valuation Period, then Peoples Shareholders would
receive the maximum number of shares specified by the
Acquisition Agreements, which maximum number of shares
would have a Bid/Asked Value as measured during the
Valuation Period of less than $21,100,000.
<PAGE>
<PAGE> 41
The following table illustrates a range of
possible values of the German American Common Stock to
be received by the Peoples shareholders in the Merger:
<TABLE>
<CAPTION>
Average
Aggregate Bid/Asked
Hypothetical Average Value During
Average Bid/Asked the
Bid/Asked Value During Shares Valuation
Value Aggregate The Valuation To Be Period of
During the Shares Period of Issued Per Shares To Be
Valuation To Be Shares To Be Peoples Issued Per
Period Issued* Issued Share* Peoples Share
<S> <C> <C> <C> <C>
$37.00 615,417 $22,770,429 1.0372 $38.38
$35.00 615,417 $21,539,595 1.0372 $36.30
$34.29 615,417 $21,102,649 1.0372 $35.57
$33.00 639,394 $21,100,000 1.0776 $35.56
$31.00 680,645 $21,100,000 1.1472 $35.56
$30.47 692,344 $21,095,722 1.1669 $35.56
$29.00 692,344 $20,077,686 1.1669 $33.84
</TABLE>
*Subject to possible adjustment on account of future stock dividends, stock
splits, or the like.
No fractional shares of German American Common
Stock will be issued and, in lieu thereof, holders of
shares of Peoples Common Stock who would otherwise be
entitled to a fractional share interest (after taking
into account all shares of Peoples Common Stock held by
such holder) shall be paid an amount in cash equal to
the product of such fractional share interest and the
average of the highest bid and the lowest asked price
of a share of German American Common as quoted on the
NASDAQ National Market System on the last day of the
Valuation Period.
Any Peoples shareholders who perfect their
dissenters' rights under the IBCL would receive cash
for their shares of Peoples Common Stock rather than
shares of German American's Common Stock.
SURRENDER OF CERTIFICATES
As soon as reasonably practicable after the
Effective Time, German American or its designated
exchange agent (the "Exchange Agent") shall mail to
each record holder of Peoples Common Stock a letter of
transmittal (which shall specify that delivery shall be
effected, and the risk of loss and title to the
<PAGE>
<PAGE> 42
certificates of Peoples Stock shall pass, only upon
proper delivery of the certificates to the Exchange
Agent and shall be in such form and have such other
provisions as German American shall reasonably specify)
(each such letter, the "Merger Letter of Transmittal")
and instructions for use in effecting the surrender of
each Peoples stock certificate (the "Certificate") in
exchange for the Merger Consideration. As soon as
reasonably practicable after surrender to the Exchange
Agent of a Certificate, together with a Merger Letter
of Transmittal duly executed and any other required
documents, the Exchange Agent shall transmit to the
holder of such Certificate the Merger Consideration.
No dividends that are otherwise payable on shares
of German American Common Stock constituting the Merger
Consideration shall be paid to persons entitled to
receive such shares of German American Common Stock
until such persons surrender their Certificates. Upon
such surrender, there shall be paid to the person in
whose name the shares of German American Common Stock
shall be issued any dividends which shall have become
payable with respect to such shares of German American
Common Stock (without interest and less the amount of
taxes, if any, which may have been imposed thereon)
between the Effective Time and the time of such
surrender.
If the Merger Consideration is to be issued to a
person other than a person in whose name a surrendered
Certificate is registered, it shall be a condition of
issuance that the surrendered Certificate shall be
properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance
shall pay to the Exchange Agent any required transfer
or other taxes or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not
applicable. German American reserves the right in all
cases to require that a surety bond on terms and in an
amount satisfactory to German American be provided to
German American at the expense of the Peoples
Shareholder in the event that such shareholder claims
loss of a Certificate for Peoples Common Stock and
requests that German American waive the requirement for
surrender of such Certificate.
<PAGE>
<PAGE> 43
RIGHTS DETERMINED AT EFFECTIVE TIME
Peoples will provide to German American a
certified list of the Peoples shareholders from
Peoples' stock records at the Effective Time. Persons
who are not identified as registered holders of Peoples
Common Stock on the records of Peoples as of the
Effective Time but who have acquired beneficial
interests in such shares of Peoples Common Stock and
desire to register the transfer of those rights after
the Effective Time will not be entitled to do so on the
books of Peoples. Instead, such persons must present
to German American appropriate instruments of transfer
signed by the registered holder of such shares as of
the Effective Time satisfactory to German American to
obtain registration in their name of the Merger
Consideration issuable by German American.
EXPENSES
All costs and expenses incurred in connection with
the transactions contemplated by the Acquisition
Agreements will be paid by the party incurring the
expenses. However, if the Acquisition Agreements are
terminated because one party has knowingly materially
breached any of that party's representations and
warranties made in the Acquisition Agreements and the
breach is not cured within thirty (30) days of a
written notice to cure the breach, then the non-
breaching party may recover appropriate damages from
the breaching party.
In the event that the Acquisition Agreements are
terminated (i) as a result of the willful failure of
Peoples or Peoples Bank to perform its obligations in
violation of the Acquisition Agreements or (ii) as the
result of the making by any other person or entity not
a party to the Acquisition Agreements of a proposal to
Peoples or Peoples Bank contemplating a merger,
consolidation, plan of stock exchange, sale of all or
substantially all assets, or other business combination
with Peoples or Peoples Bank, then, in addition to
whatever other legal rights or remedies to which German
American may be entitled, Peoples is obligated by
Section 7.02 of the Reorganization Agreement, upon
German American's demand, (x) pay to German American a
termination fee of $422,000 within two business days of
termination and (y) reimburse German American for all
its out-of-pocket costs and expenses in connection with
the Merger incurred from and after July 3, 1996,
including its legal, accounting, environmental and
<PAGE>
<PAGE> 44
other consulting fees and expenses. If German American
is entitled to collect the termination fee, Peoples
shall, in addition thereto, pay to German American all
costs, charges, expense (including without limitation
the fees and expenses of counsel) and other amounts
expended by German American in connection with or
arising out of the obligations of Peoples to pay all or
a portion of the fee.
German American is obligated by Section 7.05 of
the Reorganization Agreement to pay Peoples a
termination fee of $422,000 within 90 days of the
termination of the Acquisition Agreements if the
termination is solely a result of certain adverse
regulatory determinations.
CONDITIONS
Consummation of the Merger is subject to the
satisfaction, at or prior to the Closing, of each of
the following conditions precedent:
(a) The Merger shall have been approved by a
majority of the outstanding shares of Peoples and
by German American as the sole shareholder of
GAHC;
(b) All required regulatory approvals shall have
been obtained by the Merger and the Bank Merger;
(c) Peoples shall have received from Austin
Associates, Inc. an opinion dated the date of the
mailing of this Prospectus/Proxy Statement that
the terms of the Merger are fair to Peoples
stockholders from a financial point of view (the
opinion is attached as Appendix C hereto);
(d) German American and Peoples shall have each
received a letter, dated as of the Effective Time,
from their independent public accountants to the
effect that, in their opinion, the Merger
qualifies for "pooling of interests" accounting
treatment;
(e) German American and Peoples shall have
received an opinion from Leagre & Barnes, counsel
for German American, concerning the expected
federal income tax consequences of the Merger; and
<PAGE>
<PAGE> 45
(f) Other customary conditions and obligations of
the parties set forth in the Acquisition
Agreements shall have been satisfied.
Prior to the Effective Time, the conditions to the
consummation of the Acquisition Agreements may, to the
extent not prohibited by law, be waived in writing by
the party entitled to the benefits thereof.
TERMINATION OF ACQUISITION AGREEMENTS
The Acquisition Agreements may be terminated as
follows:
(a) By mutual agreement of all parties thereto;
(b) By German American or Peoples in the event of
a material breach by the other party of any of its
representations and warranties or covenants under
the Acquisitions Agreements and such breach is not
cured within thirty (30) days after notice to cure
such breach is given by the non-breaching party;
(c) By German American or Peoples, if the Merger
is not consummated by June 30, 1997;
(d) By German American or Peoples, if the
conditions to its obligations set forth in the
Acquisition Agreements are not satisfied or waived
on or prior to the Closing Date;
(e) By German American or Peoples, if the
Acquisition Agreements and consummation of the
Merger are not approved by the affirmative vote of
the holders of at least a majority of the
outstanding shares of Peoples Common Stock
entitled to vote at the Special Meeting; and
(f) By Peoples if the value of the German
American Common Stock to be issued to the Peoples
Shareholders, as calculated during the Valuation
Period solely for purposes of calculating the
exchange ratio pursuant to the Acquisition
Agreements, would be less than $21,100,000. See
"THE MERGER-- The Acquisition Agreements."
<PAGE>
<PAGE> 46
The Acquisition Agreements also provide that
German American may terminate the Acquisition
Agreements if the environmental inspection reports on
all real property owned or leased by Peoples provided
to German American by Peoples pursuant to the
Reorganization Agreement disclose any contamination or
presence of hazardous wastes, the estimated remedial
and corrective costs of which exceed $100,000, as
reasonably estimated by an environmental expert
retained for such purpose by German American and
reasonably acceptable to Peoples or if the cost of such
actions and measures cannot be so reasonably estimated
by such expert with any reasonable degree of certainty;
provided, however, that German American must exercise
such termination right within ten business days
following receipt of such estimate or indication that
the cost of such actions and measures cannot be so
reasonably estimated. The environmental inspection
reports have not disclosed any basis for terminating
the Acquisition Agreements pursuant to this
environmental termination provision.
In addition, if any regulatory application filed
in connection with the Merger is finally denied or
disapproved by the respective regulatory authority,
then either German American or Peoples may terminate
the Acquisition Agreements. German American may also
terminate the Merger in the event that any bank
regulatory agency takes action against Peoples or
Peoples Bank seeking to enforce banking laws or
regulations.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting
purposes. It is a condition of the Merger that German
American and Peoples shall have each received a letter
from their independent accountants to the effect that,
in their opinion, the Merger will qualify as a pooling
of interests transaction under generally accepted
accounting principles. Crowe, Chizek and Company, LLP,
are the independent accountants for both German
American and Peoples.
<PAGE>
<PAGE> 47
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify as a
reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended ("Code"). Except for
cash received by any shareholders perfecting their
dissenters' rights and cash received by shareholders in
lieu of a fractional share interest in German American
Common Stock, the holders of shares of Peoples Common
Stock will recognize no gain or loss on the receipt of
German American Common Stock in the Merger, their
aggregate basis in the shares of German American Common
Stock received in the Merger will be the same as their
aggregate basis in their shares of Peoples Common Stock
converted in the Merger, and, provided the shares
surrendered are held as a capital asset, the holding
period of the German American Common Stock received by
them will include the holding period of their shares of
Peoples Common Stock converted in the Merger. Cash
received by shareholders in lieu of fractional share
interests and cash received by shareholders exercising
their dissenters' rights under Chapter 44 of the IBCL
will be treated as a distribution in full payment of
such fractional share interests, or shares surrendered
in exercise of dissenters' rights, resulting in capital
gain or loss or ordinary income or loss, as the case
may be, depending upon each shareholder's particular
situation.
Leagre & Barnes, attorneys for German American,
has delivered an opinion dated November 18, 1996 to
German American upon which German American has relied
in preparing the above summary of the anticipated
federal income tax consequences of the Merger. The
Leagre & Barnes opinion, and Representation
Certificates of German American and Peoples upon which
Leagre & Barnes has relied as to certain factual
matters in rendering its opinion, are filed as an
exhibit to the Registration Statement. Although the
obligations of German American and Peoples to
consummate the Merger are conditioned upon the receipt
of the tax opinion of Leagre & Barnes regarding the
intended federal income tax consequences of the Merger,
that opinion is not binding upon the Internal Revenue
Service and no ruling has been sought from the Internal
Revenue Service regarding the tax-free nature of the
Merger. If the Merger is consummated, and it is later
determined that the Merger did not qualify as a tax-
free reorganization under the Code, Peoples
shareholders would recognize taxable gain or loss in
the Merger equal to the difference between the fair
market value of the German American Common Stock such
Peoples shareholder received and such Peoples
shareholder's basis in his or her Peoples Common Stock.
<PAGE>
<PAGE> 48
THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
AND DOES NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF
ANY PARTICULAR PEOPLES SHAREHOLDER'S SITUATION. EACH
PEOPLES SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC LEGAL AND TAX
CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS.
REGISTRATION STATEMENT
German American has filed a Registration Statement
on Form S-4 with the Securities and Exchange Commission
registering under the 1933 Act the shares of German
American Common Stock to be issued pursuant to the
Merger. German American intends to rely upon
exemptions from the statutory registration requirements
of the several states in which shareholders of Peoples
reside and has not taken any steps to register the
German American Common Stock under those statutes.
TRANSFER RESTRICTIONS
The German American Common Stock received by
Peoples shareholders in the Merger will be freely
transferable, except that "affiliates" of Peoples as of
the date of the Special Meeting, as that term is
defined in the rules and regulations under the
Securities Act, may sell any German American Common
Stock held by them during the three year period
following the Merger (two years provided German
American remains current in its reporting obligations
under the Securities Exchange Act of 1934) only (a) in
accordance with the provisions of Rule 145(d) under the
Securities Act, (b) pursuant to an effective
Registration Statement under the Securities Act, or (c)
in transactions otherwise exempt from registration
thereunder. In addition, Peoples shareholders who may
become "affiliates" of German American will be subject
to similar sale restrictions for so long as they remain
affiliates of German American. Affiliates of Peoples
also will be subject to prohibitions on sales until
financial results covering at least 30 days of post-
Merger combined operations have been published.
Generally, persons who are not officers, Directors, or
greater than ten percent shareholders of Peoples will
not be considered "affiliates" in the absence of other
factors indicating a control relationship.
<PAGE>
<PAGE> 49
MANAGEMENT OF GERMAN AMERICAN AFTER THE MERGER
The Reorganization Agreement provides that as soon
as practicable after the Merger has become effective,
two Directors of Peoples will be appointed to the
German American Board of Directors. The current
Chairman of Peoples, David B. Graham, will be appointed
as one such Director. Mr. Graham, who is 69 years old,
is retired. Mr. Graham beneficially owns no shares of
German American Common Stock, other than the shares
that he has the right to acquire under the Acquisition
Agreements with respect to the Peoples common shares
beneficially owned by him. One other Director of
Peoples, who has not yet been determined, will also be
appointed to German American's Board of Directors as
soon as practicable after the Merger in accordance with
the Acquisition Agreements.
REGULATORY MATTERS
The Merger will not be made effective unless the
Bank Merger occurs simultaneously. The Bank Merger is
subject to the approval of the Office of the
Comptroller of the Currency (the "OCC"). The OCC
approved the Bank Merger in December, 1996.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Chapter 44 of the IBCL, shareholders
of Peoples have dissenters' rights with respect to the
Merger. (Shareholders of German American do not have
such rights with respect to the Merger). Chapter 44 of
the IBCL provides that a shareholder of Peoples has the
right to demand payment in cash for the fair value of
his or her shares of Peoples Common Stock immediately
before the Effective Time, excluding any appreciation
or depreciation in value in anticipation of the Merger
unless a court determines that such exclusion would be
inequitable. To claim this right the shareholder
(a) must, before the vote is taken, deliver
to Peoples written notice of his intent to demand
payment for his or her shares if the Merger is
effectuated, and
(b) must not vote in favor of the Merger in
person or by proxy at the Special Meeting of the
shareholders.
<PAGE>
<PAGE> 50
If the Merger is approved by the shareholders,
Peoples will send a notice of dissenters' rights to
those shareholders satisfying the above conditions
within ten days after the shareholder approval. The
Peoples' notice will state the procedures the
dissenting shareholder thereafter must follow to
exercise his or her dissenters' rights in accordance
with Chapter 44 of the IBCL.
A SHAREHOLDER WHO DOES NOT DELIVER WRITTEN NOTICE
OF INTENT TO DEMAND PAYMENT AND EITHER VOTE AGAINST THE
MERGER OR REFRAIN FROM VOTING WILL BE CONSIDERED NOT TO
BE ENTITLED TO RIGHTS UNDER CHAPTER 44 OF THE IBCL.
Shareholders who execute and return the enclosed proxy
but do not specify a choice on the Merger proposal will
be deemed to have voted in favor of the Merger and
accordingly to have waived their dissenters' rights,
unless they revoke the proxy prior to its being voted.
Upon consummation of the Merger, Peoples will pay
each dissenting shareholder who has complied with all
requirements of Chapter 44 of the IBCL and of Peoples'
notice Peoples' estimate of the fair value of the
shares as of the time immediately prior to the Merger,
EXCLUDING ANY APPRECIATION IN VALUE IN ANTICIPATION OF
THE MERGER. The determination of the estimate of "fair
value" will be based on the financial condition of
Peoples, the trading history of Peoples Common Stock,
and other factors normally used to determine the value
of bank stock, and will likely involve the engagement
by Peoples of a professional appraiser to advise it on
these matters.
Dissenters can object to the fair value
established by Peoples by stating their estimate of the
fair value and demanding payment of the additional
amount claimed as fair value within 30 days after
Peoples makes or offers payments for the dissenters'
shares. Peoples can elect to agree to the dissenters'
fair value demand or can commence an action in the
Circuit or Superior Court of Daviess County, Indiana,
within 60 days after receiving the demand for payment
for a judicial determination of the fair value. The
Court can appoint appraisers to determine the fair
value. The costs of the proceeding, including
compensation and expenses of the appraisers, counsel
for the parties, and experts, will be assessed against
all parties to the action in such amounts as the Court
finds equitable. Each dissenter made a party to the
action will be entitled to receive the amount, if any,
by which the Court finds the fair value of the
dissenters' shares, plus interest, exceeds the amount
paid by Peoples.
<PAGE>
<PAGE> 51
See the full text of Chapter 44 set forth in Appendix B
to this Prospectus/Proxy Statement.
TO PERFECT RIGHTS OF DISSENT, A SHAREHOLDER MUST
NOT VOTE IN FAVOR OF THE MERGER AND MUST DELIVER A
WRITTEN DEMAND FOR PAYMENT IN ACCORDANCE WITH THE
REQUIREMENTS OF CHAPTER 44 OF THE IBCL.
THIS SUMMARY OF THE DISSENTERS' RIGHTS OF PEOPLES
SHAREHOLDERS DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY THE STATUTORY PROVISIONS
ATTACHED TO THIS PROSPECTUS AS APPENDIX B. ANY
INDIVIDUAL CONSIDERING EXERCISING RIGHTS OF DISSENT
SHOULD CAREFULLY READ AND CONSIDER THE INFORMATION
DISCLOSED IN APPENDIX B AND CONSULT WITH AN INDEPENDENT
INVESTMENT ADVISOR BEFORE EXERCISING RIGHTS OF DISSENT.
OPINION OF FINANCIAL ADVISOR TO PEOPLES
AAI has provided the following disclosures for
inclusion in this Prospectus/Proxy Statement:
AAI is a recognized investment banking firm
regularly engaged in the valuation of financial
institutions and other businesses and their securities
in connection with mergers and acquisitions and in
valuation for estate, corporate and other purposes.
Peoples selected AAI to act as Peoples' financial
adviser in connection with the Merger on the basis of
its reputation and qualifications in evaluating
financial institutions.
AAI has rendered a written opinion dated the date
of this Prospectus/Proxy Statement to the Board of
Directors of Peoples to the effect that the terms of
the Merger are fair from a financial point of view to
the shareholders of Peoples as of the date of the
opinion. A copy of AAI's fairness opinion is attached
as Appendix C to this Prospectus/Proxy Statement and
should be read in its entirety. AAI based its opinion
upon: (1) a comparison of the financial statements and
other financial information concerning Peoples and
German American set forth or incorporated by reference
in this Prospectus/Proxy Statement; (2) Peoples'
operating budgets and loan loss reserve adequacy
reports; (3) financial and share price data of Peoples,
German American and comparable banking organizations;
(4) the financial terms, to the extent publicly
available, of certain comparable transactions;
<PAGE>
<PAGE> 52
(5) the terms of certain other proposals received by
Peoples from other banking institutions; and (6)
discussions with the management of Peoples and German
American.
The terms of the Agreement were determined by
German American and Peoples, and their representatives,
after arm's-length negotiations between the parties.
AAI participated in the negotiations on behalf of
Peoples.
In connection with rendering its opinion, AAI
performed a variety of financial analyses, which are
summarized below. AAI believes its analyses must be
considered as a whole and that selecting portions of
such analyses and the factors considered therein,
without considering all factors and analyses, could
create an incomplete view of the analyses and the
process underlying the AAI opinion. The preparation of
a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible
to partial analyses or summary description. In its
analyses, AAI made numerous assumptions with respect to
industry performance, business and economic conditions,
and other matters, many of which are beyond Peoples' or
German American's control. Any estimates contained in
AAI's analyses are not necessarily indicative of future
results or values, which may be significantly more or
less favorable than the estimates.
PRELIMINARY APPRAISAL OF PEOPLES
AAI completed a preliminary appraisal of Peoples
as of December 31, 1995, which was presented to the
Board of Directors of Peoples in April of 1996. AAI
estimated that a reasonable sale of control value for
Peoples would range from $15.4 million to $16.6
million, or approximately $26 to $28 per share.
THE PROCESS FOR SOLICITING INDICATIONS OF INTEREST FROM
OTHER BANK HOLDING COMPANIES
After analysis and discussions between AAI and
Peoples, seven banking organizations were contacted to
determine their potential interest in acquiring
Peoples. Of the organizations contacted, seven
requested confidential information packages which
provided detailed information regarding the business
and operations of Peoples. Each organization provided
information was requested to submit a specific proposal
to acquire Peoples. AAI pursued discussions with each
organization that had requested the confidential
<PAGE>
<PAGE> 53
information. As a result of this process, six
organizations submitted proposals to acquire Peoples.
The Peoples Board selected the German American proposal
after extensive deliberation and negotiation.
COMPARATIVE PRICE ANALYSIS
AAI reviewed a comparison of prices paid in
selected sale of control transactions announced in
Indiana, Illinois and Kentucky between January 1, 1995
and September 30, 1996, for banks having assets of
between $50 million and $150 million. The 21
transactions reviewed had an average price to book
value ratio of 175 percent and a price to earnings
multiple of 17.2 times. The median multiples were 172
percent of book value and 16.4 times earnings. The
market value of the consideration to be received by
Peoples shareholders in the Merger is estimated at 224
percent of Peoples' book value at September 30, 1996,
based on an aggregate transaction value of $21.1
million. The market value of the consideration is
further estimated to equal 21.1 times Peoples'
consolidated earnings per share for the twelve months
ended September 30, 1996. The $21.1 million
transaction value and corresponding price to book value
and price to earnings multiples would be operative if
the average of the closing bid/asked quotations for
German American Common Stock during the Valuation
Period is between $30.48 and $34.29 per share. For
German American quotation values above $34.29 per
share, which would result in the minimum exchange
ratio, the transaction value would exceed $21.1
million. For German American quotation values below
$30.48 per share, which would result in the maximum
exchange ratio, the transaction value would fall below
$21.1 million. As of _____________, 1997, the average
of the closing bid/asked quotations for German American
Common Stock was $___________ per share.
CONTRIBUTION ANALYSIS
AAI compared the pro forma ownership interest in
German American that Peoples shareholders would
receive, in the aggregate, to the contribution by
Peoples to the total assets, equity and net income in
the combined organization. Assuming a September 30,
1996, closing date for the Merger and the minimum
exchange ratio, Peoples shareholders would own
approximately 24.2 percent of German American on a pro
forma basis. Peoples' contribution of total assets
would equal 19.3 percent, the contribution of total
equity would equal 19.6 percent, and the contribution
of net income for the twelve months ending September
30, 1996, would have equaled 20.0 percent.<PAGE>
<PAGE> 54
DILUTION ANALYSIS
AAI also reviewed the pro forma effect of the
Merger to Peoples' and German American's September 30,
1996 earnings per share and book value per share,
assuming the minimum exchange ratio. Peoples recorded
year to date earnings per share of $1.24 and a book
value of $15.86 per share as of September 30, 1996.
Giving effect to the Merger, the equivalent Peoples
earnings per share would have equaled $1.54, an
increase of 24.2 percent over actual results. Book
value per share would have increased to $19.60 per
share, an increase of 23.6 percent over actual book
value. Giving effect to the Merger, German American's
book value per share would have been diluted from
$20.05 to $18.90 or 5.7 percent, and earnings per share
would have been diluted from $1.57 to $1.48 or 5.7
percent.
DIVIDENDS
AAI reviewed the current cash dividends paid by
Peoples and German American. Based on the minimum
exchange ratio of 1.0372 German American shares for
each share of Peoples, equivalent dividends to Peoples
shareholders would have been $0.61 for the nine months
ended September 30, 1996, a 190 percent increase over
actual dividends received by Peoples shareholders of
$0.21 per share.
The summary set forth above does not purport to be
a complete description of the analyses performed by
AAI. Further, AAI did not conduct a physical
inspection of any of the properties or assets of
Peoples or German American. AAI has assumed and relied
upon the accuracy and completeness of the financial and
other information provided to it or publicly available,
has relied upon the representations and warranties of
Peoples and German American made pursuant to the
Agreement, and has not independently attempted to
verify any of such information. AAI has also assumed
that the conditions to the Merger as set forth in the
Agreement would be satisfied and that the Merger would
be consummated on a timely basis in the manner
contemplated by the Agreement. No limitations were
imposed by Peoples or German American on the scope of
AAI's investigation nor were any specific instructions
given to AAI in connection with its fairness opinion.
For AAI's services as financial advisor, Peoples
has paid AAI a fee of $27,500, plus has agreed to pay a
contingent amount equal to 1.00 percent of the
transaction value when the Merger is consummated. In<PAGE>
<PAGE> 55
addition, Peoples has agreed to reimburse AAI for
reasonable out-of-pocket expenses and indemnify AAI
against certain liabilities, including liabilities
under the securities laws.
<PAGE>
<PAGE> 56
PRO FORMA FINANCIAL STATEMENTS
OF GERMAN AMERICAN AND PEOPLES
The following unaudited pro forma condensed
consolidated balance sheet as of September 30, 1996,
and the unaudited pro forma condensed consolidated
statements of income for the period ended September 30,
1996 and for each of the years in the three-year period
ended December 31, 1995, give effect to the Merger
based on the historical consolidated financial
statements of German American and Peoples under the
assumptions and adjustments set forth below and in the
accompanying notes to the pro forma financial
statements. The Peoples Merger is expected to be
accounted for as a pooling of interests and, therefore,
is included in the pro forma condensed consolidated
balance sheet as of September 30, 1996, as if the
transaction had become effective on such date. The pro
forma condensed consolidated statements of income for
the period ended September 30, 1996 and for each of the
years in the three-year period ended December 31, 1995
also include the historical statements of income of
Peoples as if the transaction had become effective at
the beginning of the periods presented.
If the proposed Merger is consummated, German
American will issue not fewer than 1.0372 shares of
German American Common Stock for each of the 593,334
Peoples Common Shares (an aggregate of 615,417 German
American shares) or more than 1.1669 shares of German
American Common Stock for each of the 593,334 Peoples
common shares (an aggregate of 692,344 German American
shares). (All such numbers have been adjusted for the
five percent stock dividend declared by German American
in October, 1996 and are subject to further adjustment
in the event of any future stock dividends and the
like.) The exact number of shares to be issued in the
Merger will be determined within the above range by the
average of the closing bid/asked quotations for German
American Common Stock during a ten business day period
ending on the second business day preceding the closing
date of the Merger. The pro forma financial statements
have been prepared assuming the issuance of 615,417
shares of German American common stock, which is the
number of shares which would have been issued if the
closing date of the Merger was September 30, 1996 in
accordance with the formula included in the Acquisition
Agreements. The use of such number of shares is for
illustrative purposes only and does not attempt to
predict the actual number of shares to be issued in the
Merger.
<PAGE>
<PAGE> 57
The pro forma financial statements have been
prepared by the management of German American based
upon the historical consolidated financial statements
of German American and Peoples. These pro forma
statements may not be indicative of the results that
actually would have occurred if the Merger had been in
effect on the dates indicated or which may be obtained
in the future. The pro forma financial statements
should be read in conjunction with the historical
consolidated financial statements and notes thereto of
German American and Peoples presented elsewhere in this
Prospectus/Proxy Statement or that accompany this
Prospectus/Proxy Statement.
German American and Peoples expect to incur total
legal, accounting, professional and regulatory costs of
approximately $630,000 that are directly attributable
to the Merger, and some of these costs can reasonably
be expected to be included in the consolidated expenses
of German American during the next twelve months.
Approximately $185,000 of these costs have already been
paid and expensed or accrued and expensed by German
American and Peoples. Those costs not previously paid
or accrued were NOT considered in the preparation of
the Pro Forma Financial Statements.
<PAGE>
<PAGE> 58
GERMAN AMERICAN BANCORP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1996
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
German American Peoples Bancorp Pro Forma Pro Forma
ASSETS Bancorp of Washington Adjustments Consolidated
- ------------------------------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $22,488 $2,795 $25,283
Interest bearing deposits with banks 699 0 699
Other short-term investments 499 0 499
Investment in subsidiary 0 0 $9,408 (A) 0
(9,408)(B)
Securities available for sale 82,192 11,754 93,946
Securities held to maturity 14,079 7,370 21,449
Loans 248,930 67,230 316,160
Allowance for loan and lease losses (6,030) (968) (6,998)
Premises and equipment 10,025 1,592 11,617
Intangibles 1,827 (C) 0 1,827
Accrued interest receivable and other assets 7,119 1,715 8,834
-------- ------- ------ --------
Total assets $381,828 $91,488 $0 $473,316
======== ======= ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
Deposits $336,504 $71,631 $408,135
Short-term borrowings 3,196 8,392 11,588
FHLB advances 0 1,500 1,500
Other liabilities 3,580 557 4,137
-------- ------- --------
Total liabilities 343,280 82,080 425,360
-------- ------- --------
SHAREHOLDERS' EQUITY
Common stock 18,309 593 $6,154 (A) 24,463
(593)(B)
Surplus 5,587 1,110 (4,451)(A) 1,136
(1,110)(B)
Retained earnings 14,146 7,777 7,777 (A) 21,923
(7,777)(B)
Net unrealized gain/(loss) on securities
available for sale 506 (72) (72)(A) 434
72 (B)
-------- ------- ------ --------
Total shareholders' equity 38,548 9,408 0 47,956
-------- ------- ------ --------
Total liabilities and shareholders' equity $381,828 $91,488 $0 $473,316
======== ======= ====== ========
</TABLE>
ADJUSTMENTS:
- ------------
(A) Assumed issuance of 615,417 common shares of German American Bancorp in
exchange for all 593,334 shares of Peoples Bancorp of Washington. The
actual number of shares to be issued is not yet known. Assumed shares
issued are based on the number of shares that would have been issued had
the Merger been effective September 30, 1996. The assumed number of shares
issued is for illustrative purposes only and is not an attempt to predict
the actual number of shares to be issued in the Merger.
(B) To eliminate the investment in Peoples Bancorp of Washington.
(C) Includes goodwill of $1,470 being amortized over 15 years and core deposit
intangibles of $357 being amortized over 10 years.
(D) No adjustments to these pro forma financial statements were necessary to
conform to accounting methods as contemplated by APB Opinion 16.
<PAGE>
<PAGE> 59
GERMAN AMERICAN BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the nine months ended September 30, 1996
(Dollar amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
--------------------- 1996 -------------------
German American Peoples Bancorp Pro Forma
Bancorp of Washington Consolidated
--------------- --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $16,343 $4,334 $20,677
Interest on securities 4,157 861 5,018
Other interest income 552 16 568
--------------- --------------- ------------
Total interest income 21,052 5,211 26,263
--------------- --------------- ------------
INTEREST EXPENSE
Interest on deposits 10,072 1,946 12,018
Other interest expense 37 330 367
--------------- --------------- ------------
Total interest expense 10,109 2,276 12,385
--------------- --------------- ------------
NET INTEREST INCOME 10,943 2,935 13,878
Provision for loan losses 145 38 183
--------------- --------------- ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,798 2,897 13,695
NON-INTEREST INCOME 1,320 230 1,550
NON-INTEREST EXPENSE 7,789 1,946 9,735
--------------- --------------- ------------
INCOME BEFORE INCOME TAXES 4,329 1,181 5,510
Income taxes 1,324 446 1,770
--------------- --------------- ------------
NET INCOME $3,005 $735 $3,740
=============== =============== ============
EARNINGS PER SHARE
Net income per share $1.57 (A) $1.48 (B)
Weighted average number of
shares outstanding 1,919,799 (A) 2,535,216 (B)
</TABLE>
NOTES:
- ------
(A) Retroactively restated for a 5% stock dividend in October, 1996.
(B) Assumes issuance of 615,417 common shares of German American Bancorp in
exchange for all shares of Peoples Bancorp of Washington at the beginning
of the period. The actual number of shares to be issued is not yet known.
The assumed number of shares issued is for illustrative purposes only and
is not an attempt to predict the actual number of shares to be issued in
the Merger.
(C) No adjustments to these pro forma financial statements were necessary to
conform accounting methods as contemplated by APB Opinion 16.
<PAGE>
<PAGE> 60
GERMAN AMERICAN BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1995
(Dollar amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
--------------------- 1995 -------------------
German American Peoples Bancorp Pro Forma
Bancorp of Washington Consolidated
--------------- --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $21,210 $4,987 $26,197
Interest on securities 4,620 1,482 6,102
Other interest income 1,467 50 1,517
--------------- --------------- ------------
Total interest income 27,297 6,519 33,816
--------------- --------------- ------------
INTEREST EXPENSE
Interest on deposits 12,633 2,517 15,150
Other interest expense 184 614 798
--------------- --------------- ------------
Total interest expense 12,817 3,131 15,948
--------------- --------------- ------------
NET INTEREST INCOME 14,480 3,388 17,868
Provision for loan losses (19) 68 49
--------------- --------------- ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 14,499 3,320 17,819
NON-INTEREST INCOME 1,460 304 1,764
NON-INTEREST EXPENSE 10,078 2,340 12,418
--------------- --------------- ------------
INCOME BEFORE INCOME TAXES 5,881 1,284 7,165
Income taxes 1,863 460 2,323
--------------- --------------- ------------
NET INCOME $4,018 $824 $4,842
=============== =============== ============
EARNINGS PER SHARE
Net income per share $2.10 (A) $1.91 (B)
Weighted average number of
shares outstanding 1,917,185 (A) 2,532,602 (B)
</TABLE>
NOTES:
- ------
(A) Retroactively restated for a 5% stock dividend in October, 1995 and a 5%
stock dividend in October, 1996.
(B) Assumes issuance of 615,417 common shares of German American Bancorp in
exchange for all shares of Peoples Bancorp of Washington at the beginning
of the period. The actual number of shares to be issued is not yet known.
The assumed number of shares issued is for illustrative purposes only and
is not an attempt to predict the actual number of shares to be issued in
the Merger.
(C) No adjustments to these pro forma financial statements were necessary to
conform accounting methods as contemplated by APB Opinion 16.
<PAGE>
<PAGE> 61
GERMAN AMERICAN BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1994
(Dollar amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
--------------------- 1994 -------------------
German American Peoples Bancorp Pro Forma
Bancorp of Washington Consolidated
--------------- --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $17,348 $4,197 $21,545
Interest on securities 4,017 1,615 5,632
Other interest income 705 40 745
--------------- --------------- ------------
Total interest income 22,070 5,852 27,922
--------------- --------------- ------------
INTEREST EXPENSE
Interest on deposits 9,394 2,205 11,599
Other interest expense 133 287 420
--------------- --------------- ------------
Total interest expense 9,527 2,492 12,019
--------------- --------------- ------------
NET INTEREST INCOME 12,543 3,360 15,903
Provision for loan losses 567 120 687
--------------- --------------- ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,976 3,240 15,216
NON-INTEREST INCOME 1,689 244 1,933
NON-INTEREST EXPENSE 8,609 2,301 10,910
--------------- --------------- ------------
INCOME BEFORE INCOME TAXES 5,056 1,183 6,239
Income taxes 1,582 376 1,958
--------------- --------------- ------------
NET INCOME $3,474 $807 $4,281
=============== =============== ============
EARNINGS PER SHARE
Net income per share $1.81 (A) $1.69 (B)
Weighted average number of
shares outstanding 1,916,603 (A) 2,532,020 (B)
</TABLE>
NOTES:
- ------
(A) Retroactively restated for a 5% stock dividend in October, 1995 and a 5%
stock dividend in October, 1996.
(B) Assumes issuance of 615,417 common shares of German American Bancorp in
exchange for all shares of Peoples Bancorp of Washington at the beginning
of the period. The actual number of shares to be issued is not yet known.
The assumed number of shares issued is for illustrative purposes only and
is not an attempt to predict the actual number of shares to be issued in
the Merger.
(C) No adjustments to these pro forma financial statements were necessary to
conform accounting methods as contemplated by APB Opinion 16.
<PAGE>
<PAGE> 62
GERMAN AMERICAN BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1993
(Dollar amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
--------------------- 1993 -------------------
German American Peoples Bancorp Pro Forma
Bancorp of Washington Consolidated
--------------- --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $16,312 $3,926 $20,238
Interest on securities 4,723 1,706 6,429
Other interest income 622 82 704
--------------- --------------- ------------
Total interest income 21,657 5,714 27,371
--------------- --------------- ------------
INTEREST EXPENSE
Interest on deposits 9,844 2,434 12,278
Other interest expense 50 122 172
--------------- --------------- ------------
Total interest expense 9,894 2,556 12,450
--------------- --------------- ------------
NET INTEREST INCOME 11,763 3,158 14,921
Provision for loan losses 653 144 797
--------------- --------------- ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,110 3,014 14,124
NON-INTEREST INCOME 1,569 267 1,836
NON-INTEREST EXPENSE 8,589 2,285 10,874
--------------- --------------- ------------
INCOME BEFORE INCOME TAXES 4,090 996 5,086
Income taxes 1,308 334 1,642
--------------- --------------- ------------
INCOME BEFORE CHANGE IN
ACCOUNTING PRINCIPLE (A) $2,782 $662 $3,444
=============== =============== ============
EARNINGS PER SHARE
Income before change in accounting principle $1.45 (B) $1.36 (C)
Weighted average number of
shares outstanding 1,916,597 (B) 2,532,014 (C)
</TABLE>
NOTES:
- ------
(A) Increases to net income from the cumulative effect of change in accounting
for income taxes (adoption of FAS 109) is excluded from Income Before
Change in Accounting Principle in the amounts of $150 for German American
Bancorp and $68 for Peoples Bancorp of Washington.
(B) Retroactively restated for a 5% stock dividend in October, 1995 and a 5%
stock dividend in October, 1996.
(C) Assumes issuance of 615,417 common shares of German American Bancorp in
exchange for all shares of Peoples Bancorp of Washington at the beginning
of the period. The actual number of shares to be issued is not yet known.
The assumed number of shares issued is for illustrative purposes only and
is not an attempt to predict the actual number of shares to be issued in
the Merger.
(D) No adjustments to these pro forma financial statements were necessary to
conform accounting methods as contemplated by APB Opinion 16.<PAGE>
<PAGE> 63
INFORMATION ABOUT GERMAN AMERICAN
German American is a multi-bank holding company
organized in Indiana in 1982. German American's
principal subsidiaries are The German American Bank,
Jasper, Indiana; The Union Bank, Loogootee, Indiana
("Union"); First State Bank, Southwest Indiana, Tell
City, Indiana; and German American Holdings
Corporation, ("GAHC"), an Indiana corporation that owns
all of the outstanding capital stock of Community Trust
Bank, Otwell, Indiana. German American's principal
executive offices are located at 711 Main Street,
Jasper, Indiana 47546, and its telephone number is
(812) 482-1314.
This Prospectus/Proxy Statement is accompanied by
German American's Annual Report to Shareholders for the
year ended December 31, 1995, portions of which are
incorporated herein by reference. Additional
information concerning German American is contained in
the following documents, which are incorporated in this
Prospectus/Proxy Statement by reference: German
American's Annual Report on Form 10-K for the year
ended December 31, 1995, as amended; German American's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; German American's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996; German
American's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 (also attached as
Appendix D to this Prospectus/Proxy Statement); and
German American's Current Report on Form 8-K which was
filed on July 17, 1996. These documents are available
without charge upon oral or written request to John M.
Gutgsell, German American, 711 Main Street, Box 810,
Jasper, Indiana 47546-3042 (812) 482-1314. In order to
assure timely delivery of these documents, any requests
should be made by , 1996.
INFORMATION ABOUT PEOPLES
GENERAL
Peoples Bancorp of Washington, a bank holding
company formed in 1985 ("Peoples"), owns 100% of the
capital stock of Peoples National Bank and Trust
Company of Washington ("Peoples Bank"). Peoples
engages in the business of commercial banking and other
permissible activities closely related to banking.
Peoples relies primarily upon funds from Peoples Bank
to pay the expenses of its operations and, to the
extent applicable, any dividend on its outstanding
shares of stock. In addition, Peoples owns 2,625
shares of common stock of Old National Bancorp with an
approximate market value of $95,000.
<PAGE>
<PAGE> 64
Peoples Bank has operated as a traditional
community bank since its founding in 1888. The primary
source of its income is generated by its lending
activities. It offers a wide-range of personal and
business financial and trust services to individuals,
corporations, partnerships, municipalities and other
public and governmental entities. Peoples Bank's
lending focus has been strongly real estate oriented
but a significant portion of its loan portfolio is also
composed of other consumer, commercial and agricultural
loans. Peoples Bank offers a full line of deposit
products. A wholly-owned subsidiary of Peoples Bank,
Peoples Investment Center, Inc., began operating in
1995 and offers non-traditional, non-insured mutual
funds and annuities to retail customers.
COMPETITION
Peoples Bank is the second largest financial
institution domiciled in Daviess County, Indiana. The
banking business in the area served by Peoples Bank is
highly competitive. The bank competes for deposits
with other commercial banks, savings associations,
savings banks, and credit unions. For loan business,
Peoples Bank competes with other commercial banks,
savings associations, savings banks, federal farm
credit system, consumer finance companies, and credit
unions. Competition in both areas is affected by
interest rates, convenience of location, availability
of lendable funds, and general and local economic
conditions.
REGULATION AND SUPERVISION
Peoples, as a bank holding company, is subject to
supervision and regular examination by the Federal
Reserve Board. Peoples Bank has as its primary
regulator the Office of the Comptroller of the Currency
but is also subject to regulation by the Federal
Deposit Insurance Corporation. These regulations
specify the types of activities in which bank holding
companies and banks may engage and include regulations
governing the extension of credit, the quality of loans
and assets, maintenance of reserves against deposits,
minimum capital requirements, and restrictions on
dividends.
PROPERTIES
Peoples operations require minimal space and it
operates from Peoples Bank's main office. Peoples Bank
operates from several locations, all located in Daviess
<PAGE>
<PAGE> 65
County, Indiana. Its main office is located in
downtown Washington, Indiana. Additional branch
offices are located on the east side of Washington, in
Plainville, Indiana, and in a rural area on the
Odon/Cannelburg road, south of Odon, Indiana. All
branch offices except for the east side Washington
location are operated from properties owned by Peoples
Bank.
MARKET PRICE AND DIVIDEND INFORMATION
Peoples Common Stock is not traded on any
established market and information regarding
transactions is not published. However, shares are
traded directly between shareholders and through
broker-dealers (primarily locally) from time to time.
Management does not have knowledge of the prices paid
in all transactions and has not verified the accuracy
of those prices that have been reported. The range of
reported prices is primarily based upon information
provided by a local broker and by the parties to
privately-negotiated transactions.
The following table sets forth, for the periods
indicated, the number of shares traded, the number of
trades, and the high and low sales price per share of
Peoples as reported to Peoples Management, and the per
share dividends declared by Peoples on its stock. All
numbers are adjusted for splits.
<TABLE>
<CAPTION
No. of Shares No. of Dividends Declared
Traded Trades Prices (cents per share)
High Low
<S> <C> <C> <C>
1994
First Quarter 400 13 $ 14.67 $ 14.17 $ 0.05
Second Quarter 3,687 19 14.50 14.50 0.05
Third Quarter* 2,500 6 15.33 14.50 0.05
Fourth Quarter* 2,650 10 15.33 15.33 0.08
1995
First Quarter 750 5 16.00 15.42 0.05
Second Quarter 2,700 6 15.67 15.67 0.06
Third Quarter* 7,900 14 17.50 16.00 0.06
Fourth Quarter* 2,450 2 18.00 18.00 0.10
1996
First Quarter 1,300 3 20.00 20.00 0.07
Second Quarter* no sales 0.07
Third Quarter 344 1 33.00 33.00 0.07
Fourth Quarter _____ __ _____ _____ ____
(Through ____, 1996)
* 3rd Quarter, 1994 - 2,000 shares traded at unknown price.
4th Quarter, 1994 - 1,400 shares traded at unknown price.
3rd Quarter, 1995 - 7,200 shares traded at unknown price.
4th Quarter, 1995 - 450 shares traded at unknown price.
</TABLE>
<PAGE>
<PAGE> 66
The most recent trade on or before July 5, 1996 (the
last business day prior to the first public announcement of
the Merger on July 8, 1996) known to Peoples management
occurred during the first quarter of 1996 and involved 1,000
shares that were purchased and sold at $20.00 per share.
The Reorganization Agreement provides that Peoples may
declare a dividend in December 1996 of an additional $.07
per share (making a total of $.28 per share for all of 1996)
and of an additional $.07 per share in the third month of
each calendar quarter of 1997 if the Merger has not by then
become effective. If the Merger becomes effective on
January 31, 1997, as anticipated, Peoples' shareholders are
expected to receive a cash dividend of up to $.07 per share
during December 1996 (when and if declared by the Board of
Directors of Peoples) and will be entitled to receive
dividends from German American on their shares received in
the Merger that have a record date on or after January 31,
1997. It is anticipated that the first such German American
dividend will be considered by the Board of Directors of
German American during April, 1997.
Substantially all of Peoples' cash income is derived
from Peoples Bank. As a national bank, Peoples Bank is
subject to certain restrictions imposed by its primary
regulator, the Comptroller of the Currency, with respect to
the payment of dividends to Peoples.
Peoples Bank must obtain the prior approval of the
Comptroller of the Currency if the total of all dividends
declared in any calendar year would exceed net income for
the preceding two calendar years.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth the number of shares and
percentage of Peoples Common Stock beneficially owned at
September 30, 1996, by, and the effect of the Merger on such
ownership amounts and percentages of, each person known to
be the beneficial owner of more than five percent of the
outstanding Peoples Common Stock, each Director, and all
Directors and executive officers as a group.
<PAGE>
<PAGE> 67
<TABLE>
<CAPTION>
Name of Number of
Beneficial Owner Shares of
and Position Peoples Common
with Peoples Stock Beneficially Owned Percentage
<S> <C> <C>
Bryan Bullock, Director 8,454 (1) 1.4%
David Crane, Director 4,050 (2) *
David B. Graham, Director 39,468 (3) 6.7%
Ziba F. Graham, Jr., Director 5,433 (4) *
John J. Hoefling, Director 7,410 (5) 1.2%
Joel B. Smith, Sr. Vice President
and Director 2,100 (6) *
Randall Stoll, Director 180 *
C.L. Thompson, Director 5,721 (7) 1.0%
David Waller, Director 2,100 *
Joseph A. Wellman, President
and CEO and Director 3,432 (8) *
__________ _______
Directors and Executive Officers
as a Group (10 individuals) 78,348 13.2%
James D. Bullock, Shareholder 59,000 (9) 9.9%
John B. Graham, Vice President 28,747 (10) 4.8%
Robert C. Graham, Jr., Shareholder 53,919 (11) 9.1%
Thomas E. Graham, Shareholder 31,284 (12) 5.3%
Ziba F. Graham, Sr., Shareholder 41,064 (13) 6.9%
Peoples Bank Trust Department 33,600 (14) 5.7%
*Less than 1%
</TABLE>
(1) Includes 3,000 shares owned jointly with spouse
and 4,500 shares owned by three minor children.
(2) Includes 900 shares owned by spouse.
(3) Includes 7,404 shares owned by spouse.
(4) Includes 3,483 shares over which Mr. Graham can
exercise voting power held in the name of WINCO, a
partnership. Does not include 39,264 shares owned
by Ziba F. Graham, Sr., his father, or 1,800
shares owned by his mother over which Mr. Graham
can exercise voting power pursuant to Power of
Attorney.
(5) Includes 5,030 shares owned by spouse.
(6) Includes 1,335 shares owned jointly with spouse
and 540 shares owned by three minor children.
(7) Includes 900 shares owned by spouse, 2,280 shares
owned jointly with spouse and 2,361 shares held in
wife's self-directed Individual Retirement
Account.
<PAGE>
<PAGE> 68
(8) Includes 720 shares owned by spouse and 90 shares
owned by three minor children.
(9) All shares held jointly with spouse.
(10) Includes 1,800 shares owned by spouse, 1,657
shares held as custodian for three minor children
and 3,483 shares over which Mr. Graham can
exercise voting power held in the name of WINCO, a
partnership. Does not include 39,264 shares owned
by Ziba F. Graham, Sr., his father, or 1,800
shares owned by his mother over which Mr. Graham
can exercise voting power pursuant to Power of
Attorney.
(11) Includes 12,900 shares owned by spouse.
(12) Includes 900 shares owned by spouse.
(13) Includes 1,800 shares owned by spouse.
(14) Includes 15,600 shares held in trust and 18,600
shares pursuant to a Power of Attorney.
<PAGE>
<PAGE> 69
PEOPLES BANCORP OF WASHINGTON
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is presented to
facilitate the understanding of the financial position
and results of operations of Peoples Bancorp of
Washington and its subsidiary, Peoples National Bank
and Trust Company of Washington (referred to in this
discussion and analysis on a consolidated basis as
"Peoples"). It identifies trends and material changes
that occurred during the reported periods and should be
read in conjunction with the consolidated financial
statements and accompanying notes.
OVERVIEW OF OPERATIONS
The primary goal of management of Peoples over the
past few years has been to consistently improve
earnings, with improvement in net interest income as
the major component thereof. The emphasis has been to
redirect funds from the company's investment securities
portfolio into its loan portfolio. Consequently,
between December 31, 1994 and September 30, 1996
investment securities have declined by $8.5 million, or
31%. Loan growth has also partially been funded by a
more active use of borrowed funds by using the Bank's
membership in the Federal Reserve System and Federal
Home Loan Bank system, by deposit growth, and by use of
other non-deposit funding sources. From December 31,
1995 to September 30, 1996 total loans outstanding
increased by $8.5 million, or 14.4%. This followed a
$5.0 million, or 9.3%, increase during 1995.
Management has attained most of this loan growth
by increasing loan market share within its traditional
geographic market area. Some loan growth has been
accomplished by selectively making loans in other areas
of Indiana and Illinois. These loans have come from
the Bank's direct lending efforts and by loans acquired
as part of participations in large loans. Loans
outside the Bank's traditional market area are
generally secured by real estate, have conservative
loan-to-value advance ratios, are well documented, and
are considered to be good credits.
Participation in these out-of-market loans have
accomplished three goals for the Bank: (1) enabled Bank
management to increase loans outstanding at a faster
rate than was possible within the traditional market;
(2) enabled management to diversify the loan portfolio
in businesses not available within its traditional
market; and (3) has resulted in lending staff becoming
more knowledgeable about industries not participating
in the Daviess County market.<PAGE>
<PAGE> 70
The fact that these out-of-area loans have been
made on a sound basis is evidenced by the fact that
only one credit on the problem loan report is secured
by property outside Peoples' traditional lending area.
In this particular instance, this loan was outstanding
prior to management's recent loan growth strategy.
Within its traditional market area, Peoples has
attempted over the last several years to increase its
market presence. This has been accomplished through
several means. Two new branch offices were opened in
1989. Management instituted a Bank-wide officer
calling program that has resulted in personnel visiting
customers and prospects. Most employees are involved
in community-wide organizations outside the banking
industry and management has supported economic growth
organizations in the area.
These efforts have had the desired result. Net
income has increased from $662,000 (excluding the
benefit of an accounting change) for 1993 to $824,000
for 1995. Net income through September 30, 1996 is
$735,000, compared to $561,000 for the same period of
1995.
NET INTEREST INCOME & INTEREST RATE RISK
Net interest income is the most significant
component of Peoples' earnings. Net interest income is
the excess of interest income earned on assets over
interest paid for funds supporting those assets. Net
interest income is affected by the relative volume and
mix of interest earning assets and interest-bearing
liabilities and by the difference, or spread, between
the yields earned on interest- earning assets and rates
paid on interest-bearing liabilities. Table 1 shows
average balances and rates and Table 2 depicts the
dollar effect of volume and rate changes from 1993 to
1994, from 1994 to 1995 and from 1995 to 1996.
Variances which were not specifically attributable to
volume or rate were allocated proportionately between
these two areas using the relative values of each as a
basis for the allocation. As an absolute dollar value,
Peoples net interest income has steadily increased over
the period of this analysis. Net interest income for
the first 9 months of 1996 exceeded that for the same
period of 1995 by $440,000.
<PAGE>
<PAGE> 71
Net interest margin, another measure of the Bank's
core profitability, is monitored continually by
management. Net interest margin is the dollar amount
of net interest income divided by average earning
assets, on a tax equivalent basis. While this margin
temporarily declined in 1995 due to increases in the
Bank's funding costs, this margin, as shown in Table 1,
has increased over the period of this analysis
increasing from 4.22% in 1993 to 4.80% for the first
nine months of 1996.
The increase in net interest income and net
interest margin has been largely attributable to volume
and mix improvements by increasing total assets, and by
shifting interest-bearing assets into the
higher-yielding loan portfolio, as previously
discussed. The use of shorter-term deposit liabilities
and borrowed funds liabilities have enabled management
to increase net interest margin as funds are
successfully deployed in the loan portfolio.
The Bank manages exposure to changes in interest
rates through an active program of asset and liability
management and pricing strategies, using simulation
analysis. The process of interest rate risk management
is the responsibility of the Asset/Liability Committee
(ALCO). The simulation model is designed to provide
the impact of changes in interest rates to net interest
income in the future. The strategies adopted as a
result of this analysis are dependent on the quality of
the assumptions made in order to generate the analysis.
Management believes the assumptions used are reasonable
and produce a comprehensive risk management tool. Data
presented in Table 3 reflects the interest rate
exposure to the Bank over the next 12 months as of
9/30/96. Shown are the effects of both rising and
declining rates as compared to a base case, or steady
interest rate, simulation.
Traditional Gap measurements, as shown in Table 4,
indicate the Bank to be negatively gapped. This is due
in large part to 100% of demand and savings account
balances being placed in the 0 to 3 month time
category. In reality, these balances, for instance, may
not fully reprice immediately as rates change.
Management believes, consequently, that the simulation
analysis process is a better indication of the effect
of future interest rate changes on the Bank's net
interest income. The Bank's interest rate risk, as
depicted in Table 3, is within satisfactory parameters
as established by the Board of Directors.
<PAGE>
<PAGE> 72
LOAN QUALITY AND PROVISION FOR LOAN LOSSES
The loan growth generated has not resulted in a
material decline in loan quality. Underwriting and
documentation standards have not been compromised in
order to obtain this growth. Various measures of loan
quality make this evident. Non-performing loans are
defined as the total of loans contractually past due 90
days or more, non-accrual loans and loans whose terms
have been restructured. Non-performing loans presently
amount to 0.61% of total loans outstanding, down from
0.93% in 1994, as shown in Table 5. Loans past due 30
days or more continue to amount to 1% or less of
outstanding loans. The interest foregone on
non-accrual loans amounted to $21,000 for the 9 months
ended September 30, 1996 and $33,000 for the year ended
December 31, 1995.
The provision for loan losses, a direct charge to
expense, provides a reserve, the allowance for loan
losses, to which loan losses are charged as those
losses become evident. The level of provision is
determined in conjunction with management's quarterly
review of the loan portfolio which includes
consideration of current economic conditions, changes
in the character and size of the loan portfolio, prior
and estimated future charge offs and other factors.
The level of the provision has steadily declined
over the past several years from $144,000 in 1993 to
$68,000 for 1995. The $38,000 provision recorded
through the first nine months of 1996 continues to
reflect that trend. This reduction was implemented as
a result of the Bank's overall asset quality and
allowance position. As discussed above, during that
same period, management increased the size of the loan
portfolio, resulting in a decline in the allowance for
loan losses as a percent of total loans from 1.74% at
December 31, 1994 to 1.44% at September 30, 1996.
The activity in the allowance for loan losses is
shown in Table 6. Net charge-offs have remained at
modest levels, $41,000 for 1995 and $29,000 through
September 30, 1996. Loans are charged off when
considered uncollectible or of such little value that
their continued carrying as a Bank asset is not
warranted, even though further collection efforts may
be effected in the future. Loans are approved for
charge off by the board of directors at management's
recommendation.
The results of management's loan review process is
a determination of the dollar amounts of allowance
needed for each category of loan. This amount is a<PAGE>
<PAGE> 73
combination of specifically determined amounts needed
for individually evaluated loans and an amount
allocated to those loans not specifically reviewed that
is determined based upon historical loss experience and
management's expectations about the future. The
results of management's analysis is presented in Table
7 which shows the amount of reserves allocated to each
loan category. Regardless of the allocation process,
the entire allowance is available for the charge-off of
any loan deemed a loss.
The total of all loans rated substandard or less
on September 30, 1996 is 1.26% of loans outstanding and
8.27% of capital, down from 1.60% and 9.37%
respectively one year earlier. All problem and watch
loans are reviewed with loan officers and directors and
are monitored and/or strengthened as applicable. While
the reserve analysis is by its nature a judgmental
process, management believes the Allowance for Loan
Losses at September 30, 1996 is adequate to provide for
risks within its loan portfolio.
Effective January 1, 1995, Peoples adopted FAS
114. "Accounting by Creditors for Impairment of a
Loan." Loans are identified as impaired when
management concludes that it is probable that the
customer will not comply with the contractual terms of
the loan agreement. This evaluation is performed in
conjunction with the quarterly analysis described
above. Generally, all loans considered for specific
reserves are evaluated for impairment and generally no
consumer or 1-4 family residential real estate loans
are so considered. If a loan is deemed to be impaired,
management will evaluate the need for an impairment
reserve, an allocation of the allowance for loan
losses, on that credit. Generally, the value of the
underlying collateral is used to evaluate impairment.
The adoption of FAS 1114 did not significantly impact
Peoples. At December 31, 1995, $392,000 of loans were
deemed to be impaired and $142,000 of the allowance for
loan losses was allocated to those loans.
The Bank classifies its loan portfolio into the
four primary categories shown in Table 8.
Approximately 16% of Peoples loan portfolio is
dependent on the agriculture industry. Agricultural
production loans are included in the commercial loan
category and farm loans secured by real estate are
included in the real estate category. The majority of
these loans are secured by specific items of
collateral. The Bank has approximately $6.2 million in
<PAGE>
<PAGE> 74
loans secured by farm land and an additional $4.3
million in other loans to farmers. While the repayment
of these loans is dependent on the health of the
agricultural industry, management does not believe this
is an undue concentration since the various segments of
the agricultural industry are not necessarily dependent
upon each other.
Peoples has approximately $4.5 million in loans
outstanding to the lodging industry. This amounts to
approximately 7.4% of loans and 45% of capital. While
as a group this is a sizable portion of the Bank's loan
portfolio, these loans are diversified in types of
hotel lodging (full vs. limited service) and
geographically between Indiana, Illinois and Kentucky.
NON-INTEREST INCOME
Non-interest income consists of revenues generated
by the Bank other than interest charged on earning
assets. For the 9 month period ended September 30,
1996, service charges and fees (the largest component
of non-interest income) increased $48,000 over the same
period in 1995. Non-interest income includes
deposit-related service charges and fees, trust fees,
and net gains/losses on the sale of securities and
mortgage loans. Non-interest income declined $23,000,
or 8.6%, between 1993 and 1994, primarily as a result
of lower trust fees and lower gains on the sales of
securities available for sale and mortgage loans.
Peoples sells securities from time to time and sells
mortgage loans to the Federal Home Loan Mortgage
Corporation. These sources of income are nominal and
are not relied on by management to a significant
extent.
Non-interest income increased $60,000, 24.6%,
between 1994 and 1995, primarily as a result of a
non-recurring state tax refund. Exclusive of this
one-time credit, total non-interest income for the 9
months ended September 30, 1996, increased $16,000, or
7.5%, over the same period for the prior year.
NON-INTEREST EXPENSE
Non-interest expense, commonly called overhead,
consists of all expenses not related to interest paid
on liabilities. Salaries and employee benefits make up
the largest single component of non-interest expense.
Total non-interest expense increased only $55,000
between 1993 and 1995. Deposit insurance expense
declined substantially during the period. In 1995 it
<PAGE>
<PAGE> 75
was only $78,000 compared to $157,000 in 1994 and 1993.
This expense further declined to $2,000 for the nine
months ended September 30, 1996. This decline served
to offset modest increases in other categories of
non-interest expense.
Included in non-interest expense for the nine
months ended September 30, 1996, is approximately
$82,000 in merger-related expenses. Exclusive of this,
non-interest expense for the first nine months of 1996
increased $29,000, or 1.6%, over the same period in
1995.
INCOME TAX EXPENSE
Income tax expense is driven primarily by the
level of income before tax and, accordingly, has
steadily increased during all periods presented.
CAPITAL
Peoples is required by its primary regulator to
comply with various capital requirements. Those
requirements affect the ability of the company to pay
dividends and can affect operations. The capital
regulations require the maintenance of specified levels
of Tier I Capital and total capital to risk adjusted
assets (all as defined in those regulations). These
regulations also require the maintenance of leverage
ratio (Tier I Capital to average assets) of at least 3%
for the most sound entities and a total risk based
capital ratio of at least 8%. Further, regulations
promulgated by the Federal Deposit Insurance
Corporation defines specified levels of capitalization
which affects the amount that a financial institution
may be assessed for deposit insurance premiums.
Financial institutions which have leverage ratios in
excess of 5% and total risked based capital ratios in
excess of 10% are deemed to be well-capitalized, pay
the lowest deposit insurance assessment and are not
subject to operational restrictions. At September 30,
1996 total risk-based capital of Peoples is
substantially the same as that of Peoples Bancorp of
Washington and exceeded the levels required to be
deemed well-capitalized. Information regarding capital
ratios is provided in Table 9.
<PAGE>
<PAGE> 76
Peoples Bancorp of Washington
TABLE 1 -- RATE VOLUME ANALYSIS
The following table sets forth, for the periods indicated,
information regarding the average balances of interest-earning
assets and interest-bearing liabilities, the dollar amount of
interest income and interest expense and the resulting yields on
average interest earning assets and rate on average
interest-bearing liabilities. Average balances are also provided
for non-interest earning assets and non-interest-bearing
liabilities and shareholders' equity.
<TABLE>
<CAPTION>
Nine months ended Sept. 30
---------------------------------------------------------------
1996 1995
Average Average Average Average
EARNING ASSETS Balance Interest Rate Balance Interest Rate
- -------------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest earning deposits $ 100 $ 5 6.06% $ 100 $ 5 6.03%
Federal Funds Sold 397 16 5.32% 313 14 5.92%
Investment Securities (taxable) 15,270 639 5.58% 20,829 896 5.74%
Investment Securities (tax-exempt) 6,025 217 4.81% 6,638 229 4.60%
Loans (net of unearned income)(1) 62,697 4,322 9.19% 54,268 3,652 8.97%
Tax-exempt loans 297 12 5.45% 73 3 5.47%
---------------------------------------------------------------
Total interest earning assets 84,786 5,211 8.19% 82,221 4,799 7.78%
Non-earning assets:
Cash and due from banks 2,955 2,970
Other nonearning assets 2,673 2,318
Allowance for loan losses (963) (957)
-------- --------
Total Assets $ 89,451 $ 86,552
======== ========
INT-BEARING LIABS
- -----------------
Transaction accounts $ 16,185 307 2.53% $ 16,511 306 2.47%
Savings deposits 13,696 385 3.75% 11,575 339 3.91%
Time deposits 31,916 1,254 5.24% 31,373 1,206 5.13%
Repurchase & Sweep Agreements 5,408 182 4.50% 6,609 259 5.23%
FHLB advance 2,134 85 5.29% 2,314 102 5.85%
Federal Funds Purchased and other 1,508 63 5.54% 2,016 92 6.07%
---------------------------------------------------------------
Total interest bearing liabilities 70,847 2,276 4.28% 70,398 2,304 4.36%
------- -------
Non-Interest-bearing liabilities
Demand deposits 9,030 7,480
Other liabilities 470 420
Shareholders' equity 9,104 8,254
-------- --------
Total Liabilities and
shareholders' equity $ 89,451 $ 86,552
======== ========
Net interest income $ 2,935 $ 2,495
======= =======
Net Interest/Spread 3.91% 3.42%
===== =====
Net interest margin 4.61% 4.05%
===== =====
Tax equivalent data:(2)
Tax equivalent adjustment 118 120
------- -------
Adjusted net interest income $ 3,053 $ 2,615
======= =======
Net Interest/Spread 4.10% 3.62%
Net interest margin 4.80% 4.24%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes loan
fee income on loans held in the portfolio.
(2) Tax-equivalent adjustment is computed using 34% statutory tax rate for all
periods presented.
<PAGE>
<PAGE> 77
Peoples Bancorp of Washington
TABLE 1a -- RATE VOLUME ANALYSIS
The following table sets forth, for the periods indicated,
information regarding the average balances of interest-earning
assets and interest-bearing liabilities, the dollar amount of
interest income and interest expense and the resulting yields on
average interest earning assets and rate on average
interest-bearing liabilities. Average balances are also provided
for non-interest earning assets and non-interest-bearing
liabilities and shareholders' equity.
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993
Average Average Average Average Average Average
EARNING ASSETS Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -------------- -------- -------- ------- -------- -------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest earning deposits $ 100 $ 6 6.00% $ 837 $ 34 4.06% $ 1,395 $ 56 4.01%
Federal Funds Sold 751 44 5.86% 169 6 3.55% 893 26 2.91%
Investment Securities
(taxable) 20,408 1,171 5.74% 23,124 1,286 5.56% 25,009 1,458 5.83%
Investment Securities
(tax-exempt) 6,691 310 4.63% 7,298 329 4.51% 5,462 248 4.54%
Loans (net of unearned
income)(1) 54,939 4,984 9.07% 49,207 4,192 8.52% 45,064 3,920 8.70%
Tax-exempt loans 72 4 5.56% 102 6 5.88% 100 6 6.00%
---------------------------------------------------------------------------------------
Total interest earning assets 82,961 6,519 7.86% 80,737 5,853 7.25% 77,923 5,714 7.33%
Non-earning assets:
Cash and due from banks 3,026 3,252 3,431
Other nonearning assets 2,469 2,273 2,501
Allowance for loan losses (959) (868) (731)
-------- -------- --------
Total Assets $ 87,497 $ 85,394 $ 83,124
======== ======== ========
INT-BEARING LIABS
- -----------------
Transaction accounts $ 16,526 410 2.48% $ 19,592 452 2.31% $ 20,418 524 2.57%
Savings deposits 11,766 461 3.92% 11,867 402 3.39% 10,613 346 3.26%
Time deposits 31,577 1,645 5.21% 30,396 1,351 4.44% 32,581 1,564 4.80%
Repurchase & Sweep Agreements 7,273 381 5.24% 4,960 162 3.27% 3,560 97 2.72%
FHLB advance 2,137 127 5.94% 1,000 54 5.40% 319 16 5.02%
Federal Funds Purchased
and other 1,717 107 6.23% 1,538 71 4.62% 309 9 2.91%
---------------------------------------------------------------------------------------
Total interest bearing
liabilities 70,996 3,131 4.41% 69,353 2,492 3.59% 67,800 2,556 3.77%
------ ------ ------
Non-Interest-bearing liabilities
Demand deposits 7,624 7,694 7,419
Other liabilities 506 592 651
Shareholders' equity 8,371 7,755 7,254
-------- -------- --------
Total Liabilities and
shareholders' equity $ 87,497 $ 85,394 $ 83,124
======== ======== ========
Net interest income $ 3,388 $ 3,361 $ 3,158
======== ======= =======
Net Interest/Spread 3.45% 3.66% 3.56%
===== ===== =====
Net interest margin 4.08% 4.16% 4.05%
===== ===== =====
Tax equivalent data:(2)
Tax equivalent adjustment 162 173 131
-------- ------- ------
Adjusted net interest income $ 3,550 $ 3,533 $ 3,289
======== ======= =======
Net Interest/Spread 3.64% 3.87% 3.73%
Net interest margin 4.28% 4.38% 4.22%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes loan
fee income on loans held in the loan portfolio.
(2) Tax-equivalent adjustment is computed using 34% statutory tax rate for all
periods presented.<PAGE>
<PAGE> 78
Peoples Bancorp of Washington
TABLE 2 -- RATE VOLUME ANALYSIS
The following table sets forth, for the periods
indicated, information regarding changes from year to
year for interest-earning-assets and
interest-bearing-liabilities due to volume and rate
variances.
<TABLE>
<CAPTION>
1996-1995
Change Change
Total Due To Due To
Change Volume Rate
------ ------ ------
<S> <C> <C> <C>
EARNING ASSETS
- --------------
Interest-earning assets:
Interest earning deposits $ 0 $ - $ 0
Federal Funds Sold 2 3 (1)
Investment Securities (taxable) (257) (233) (24)
Investment Securities (tax-exempt) (12) (22) 10
Loans (net of unearned income) 670 579 91
Tax-exempt loans 9 9 -
-----------------------
Total interest earning assets 412 336 76
-----------------------
INT-BEARING LIABS
- -----------------
Transaction accounts 1 (6) 7
Savings deposits 46 60 (14)
Time deposits 48 21 27
Repurchase & Sweep Agreements (77) (43) (34)
FHLB advance (17) (8) (9)
Federal Funds Purchased (29) (22) (7)
-----------------------
Total interest bearing liabilities (28) 2 (30)
-----------------------
Net interest income $ 440 $ 334 $ 106
=======================
</TABLE>
<PAGE>
<PAGE> 79
Peoples Bancorp of Washington
TABLE 2a -- RATE VOLUME ANALYSIS
The following table sets forth, for the periods
indicated, information regarding changes from year to
year for interest-earning-assets and
interest-bearing-liabilities due to volume and rate
variances.
<TABLE>
<CAPTION>
1995-1994 1994-1993
Change Change Change Change
Total Due To Due To Total Due To Due To
Change Volume Rate Change Volume Rate
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
- --------------
Interest-earning assets:
Interest earning deposits $ (28) $ (39) $ 11 $ (22) $ (23) $ 1
Federal Funds Sold 38 32 6 (20) (25) 5
Investment Securities (taxable) (115) (155) 40 (172) (107) (65)
Investment Securities (tax-exempt) (19) (28) 9 81 83 (2)
Loans (net of unearned income) 792 509 283 272 354 (82)
Tax-exempt loans (2) (2) (0) - - -
------------------------ ------------------------
Total interest earning assets 666 317 349 139 282 (143)
------------------------ ------------------------
INT-BEARING LIABS
- -----------------
Transaction accounts (42) (74) 32 (72) (21) (51)
Savings deposits 59 (3) 62 56 42 14
Time deposits 294 54 240 (213) (101) (112)
Repurchase & Sweep Agreements 219 95 124 65 43 22
FHLB advance 73 67 6 38 37 1
Federal Funds Purchased 36 9 27 62 54 8
------------------------ ------------------------
Total interest bearing liabilities 639 148 491 (64) 54 (118)
------------------------ ------------------------
Net interest income $ 27 $ 169 $ (142) $ 203 $ 228 $ (25)
======================== ========================
</TABLE>
<PAGE>
<PAGE> 80
Peoples Bancorp of Washington
TABLE 3 -- INTEREST RATE SENSITIVITY ANALYSIS
The following graphs result from the Peoples interest
rate simulation process and present management's
estimate of the effect that an immediate and sustained
200 basis point interest rate increase or decrease
would have on monthly interest income, interest expense
and net interest income, as compared to a "base case"
or flat interest rate environment. Interest rates on
assets and liabilities that are contractually tied to a
market rate or index are assumed to adjust at the
earliest repricing opportunity. The timing and
magnitude of assumed rate changes on those instruments
whose rates are not contractually tied to a market rate
or index are judgmental and are based on management's
past experience. While a useful simulation tool, these
results are not necessarily those that would occur if
interest rates were to increase or decrease by 200
basis points. (Dollars in thousands).
<TABLE>
MONTHLY CHANGE IN INTEREST INCOME
BASE CASE $7,242
<CAPTION>
FALLING RATES RISING RATES
------------- ------------
<S> <C> <C>
SEP $ -4 $ 4
OCT -10 10
NOV -16 16
DEC -29 30
JAN -44 47
FEB -59 65
MAR -85 94
APR -113 126
MAY -145 163
JUN -187 210
JUL -236 264
AUG -290 325
</TABLE>
<PAGE>
<PAGE> 81
TABLE 3 (Continued)
<TABLE>
MONTHLY CHANGE IN INTEREST EXPENSE
BASE CASE $3,255
<CAPTION>
FALLING RATES RISING RATES
------------- ------------
<S> <C> <C>
SEP $ -9 $ 4
OCT -19 18
NOV -30 28
DEC -52 48
JAN -77 71
FEB -100 93
MAR -137 130
APR -175 167
MAY -217 207
JUN -268 258
JUL -323 312
AUG -381 368
</TABLE>
<TABLE>
MONTHLY CHANGE IN NET INTEREST INCOME
BASE CASE $3,987
<CAPTION>
FALLING RATES RISING RATES
------------- ------------
<S> <C> <C>
SEP $ -4 $ 5
OCT -8 9
NOV -12 14
DEC -18 23
JAN -24 32
FEB -28 41
MAR -36 52
APR -41 63
MAY -45 72
JUN -48 81
JUL -48 87
AUG -43 90
</TABLE>
<PAGE>
<PAGE> 82
Peoples Bancorp of Washington
TABLE 4 -- GAP TABLE
The following table illustrates the repricing
opportunities, or rate sensitivity, of interest-earning
assets and interest-bearing liabilities as of September
30, 1996. The difference, or "gap", is indicated as a
percentage of total assets. The information reflects
the repricing opportunity for variable, or floating,
rate assets and liabilities and the maturities and/or
estimated cash flows for fixed rate assets and
liabilities.
<TABLE>
<CAPTION>
At September 30, 1996
Maturing or Repricing Within
---------------------------------------------------------------------------
6 Months
0 to 3 3 to 6 to 1 to 5 After 5
Months Months 1 year Years Years Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets: (in thousands)
Loans $ 17,374 $ 6,342 $ 12,097 $ 19,225 $ 12,192 $ 67,230
Securities 3,182 1,736 2,598 11,071 537 19,124
Federal funds sold - - - - - -
Interest-bearing balances
with financial institutions 100 100
---------------------------------------------------------------------------
Total interest-earning assets 20,656 8,078 14,695 30,296 12,729 86,454
---------------------------------------------------------------------------
Interest-bearing liabilities:
Demand and savings
accounts 24,189 - - - - 24,189
Time deposits 13,778 7,121 5,052 11,888 2 37,841
Borrowings 8,342 1,550 - - - 9,892
---------------------------------------------------------------------------
Total interest-bearing
liabilities 46,309 8,671 5,052 11,888 2 71,922
---------------------------------------------------------------------------
Asset (liability) gap $(25,653) $ (593) $ 9,643 $ 18,408 $ 12,727 $ 14,532
===========================================================================
Cumulative asset (liability) gap $(25,653) $(26,246) $(16,603) $ 1,805 $ 14,532
===========================================================================
Cumulative gap to total assets -28.04% -28.69% -18.15% 1.97% 15.88%
Total Assets 91,488
</TABLE>
<PAGE>
<PAGE> 83
Peoples Bancorp of Washington
TABLE 5 -- NON-PERFORMING LOANS (in thousands)
The following table sets forth the composition of non-performing loans
at the dates indicated:
<TABLE>
<CAPTION>
September 30 December 31
1996 1995 1994
------------ -------- --------
<S> <C> <C> <C>
Non-accrual loans $ 262 $ 290 $ 322
Troubled debt restructurings 110 122 141
Loans contractually past due 90 days
or more, and still accruing 39 6 38
-------- -------- --------
Total non-performing loans $ 411 $ 418 $ 501
======== ======== ========
Non-performing loans as a percent
of total loans 0.61% 0.71% 0.93%
Total Loans $ 67,230 $ 58,760 $ 53,774
</TABLE>
<PAGE>
<PAGE> 84
Peoples Bancorp of Washington
TABLE 6 -- ALLOWANCE FOR LOAN LOSSES
The following table presents activity in allowance for
loan losses for the periods indicated (in thousands):
<TABLE>
<CAPTION>
Nine Months
Ended Sept. 30 Years Ended December 31,
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Beginning Balance $ 960 $ 933 $ 810
Loans charged off:
Commercial loans - 32 -
Real estate loans - - -
Installment loans 18 7 6
Credit card loans 13 17 4
Lease financing - - -
-------------------------------------------
Total charge-offs 31 56 10
Recoveries on charged-off loans:
Commercial loans - 8 1
Real estate loans - - -
Installment loans 2 4 12
Credit card loans - 3 -
Lease financing - - -
-------------------------------------------
Total recoveries 2 15 13
Net charge-offs/recoveries 29 41 (3)
Provision charged to operations 37 68 120
-------------------------------------------
Ending balance $ 968 $ 960 $ 933
===========================================
Allowance as a percent
of total loans 1.44% 1.63% 1.74%
Allowance as a percent
of non-performing loans 235.52% 229.67% 186.23%
Total Loans $67,230 $58,760 $53,774
Non-performing loans 411 418 501
</TABLE>
<PAGE>
<PAGE> 85
Peoples Bancorp of Washington
TABLE 7 -- ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table sets forth the allocation of the
Company's allowance for loan losses to the various
categories of loans at the following dates (in
thousands):
<TABLE>
<CAPTION>
Sept. 30 December 31,
1996 % 1995 % 1994 %
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial loans $ 248 25.6% $ 160 16.7% $ 174 18.6%
Real estate loans 378 39.1% 319 33.2% 309 33.2%
Installment loans 124 12.8% 111 11.6% 72 7.7%
Leases 7 0.7% 9 0.9% 10 1.1%
Unallocated 211 21.8% 361 37.6% 368 39.4%
---------------------------------------------
Total Allowance for
Loan Losses $ 968 100% $ 960 100.0% $ 933 100%
=============================================
</TABLE>
<PAGE>
<PAGE> 86
Peoples Bancorp of Washington
TABLE 8 -- LOAN PORTFOLIO SUMMARY (in thousands)
The following table sets forth loans, by category, at
the dates indicated:
<TABLE>
<CAPTION>
September 30 December 31 December 31
1996 % 1995 % 1994 %
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans $ 16,631 24.7% $ 13,339 22.7% $ 12,141 22.6%
Real Estate Loans 41,472 61.7% 37,486 63.8% 34,974 65.0%
Installment Loans 8,538 12.7% 7,259 12.3% 5,876 10.9%
Lease Financing 589 0.9% 676 1.2% 783 1.5%
--------------------------------------------------------------------------------
$ 67,230 100.0% $ 58,760 100.0% $ 53,774 100.0%
================================================================================
</TABLE>
<PAGE>
<PAGE> 87
Peoples Bancorp of Washington
TABLE 9 -- Regulatory Capital
The following table provides information regarding
Peoples' capital ratios at the dates indicated:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
----------- ----------
(dollars in thousands)
<S> <C> <C>
Total Assets $ 91,488 $ 90,842
Risk-based Assets 65,558 60,569
Tier I Capital 9,480 8,869
Total Capital 10,300 9,626
Leverage Ratio 10.362% 9.763%
Tier I Risk-based Capital Ratio 14.454% 14.643%
Total Risk-based Capital Ratio 15.704% 15.893%
</TABLE>
<PAGE>
<PAGE> 88
DESCRIPTION OF GERMAN AMERICAN CAPITAL STOCK
AUTHORIZED BUT UNISSUED SHARES
German American's Articles of Incorporation
authorize the issuance of 5,000,000 shares of German
American Common Stock, of which 1,830,880 shares were
issued and outstanding as of October 30, 1996 (not
including the shares issuable December 6, 1996 pursuant
to the five percent stock dividend declared in October
1996), and 500,000 shares of Preferred Stock, $10.00
par value, of which no shares are issued and
outstanding. The Board of Directors has the power to
determine the relative rights of and restriction on any
series of Preferred Stock it may authorize in the
future and may provide terms upon which Preferred Stock
may be converted into shares of any other class of
stock.
All authorized but unissued shares may be issued
upon authorization of the Board of Directors without
prior shareholder approval. For information regarding
shares reserved for issuance under the Company's Stock
Option Plan, see Note 9 to German American's financial
statements included in its annual report to
shareholders, which accompanies this report. If
additional shares of German American Common Stock are
issued, the holders of shares prior to such issuance
may thereafter own a proportionately smaller equity
interest in German American.
COMMON STOCK
VOTING RIGHTS
Each share of German American Common Stock
entitles the holder thereof to one vote on all matters
on which the holders of shares of German American
Common Stock are entitled to vote. The affirmative
vote of the holders of the majority of the votes cast
at a meeting at which a quorum is present is sufficient
to approve matters submitted for shareholder approval,
except in the following circumstances: (a) pursuant to
the IBCL, Directors are elected by a plurality of the
votes cast; (b) German American's Articles of
Incorporation provide that Business Combinations (such
as mergers or sales or other transfers of a substantial
part of German American's assets) involving Related
Persons (such as an individual or entity that owns 10
percent or more of German American's Common Stock),
must be approved by 80 percent of the outstanding
<PAGE>
<PAGE> 89
voting stock (excluding shares held by the Related
Person) unless the Business Combination has been
approved by the vote of two-thirds of the members of
the Board of Directors who are not associated with the
Related Person; (c) German American's Articles of
Incorporation provide that any amendment, change or
repeal of the Articles relating to Business
Combinations with Related Persons must be approved by
at least 80 percent of the outstanding shares unless
such amendment, change or repeal has been approved by
two-thirds of the Board of Directors (excluding members
of the Board of Directors associated with the Related
Person if the amendment, change or repeal is proposed
by or on behalf of the Related Person); and (d) the
IBCL provides that holders of the outstanding shares of
a class are entitled to vote as a separate voting group
on a proposed amendment to the Articles of
Incorporation if the amendment would affect their
rights as a class, such as by increasing or decreasing
the number of authorized shares of the class, effecting
an exchange or reclassification of the class, or
changing the designation, rights, preferences or
limitations of all or part of the shares of the class.
For more information on Business Combinations,
including the definitions of "Business Combination" and
"Related Person," see "Description of German American
Capital Stock -- Supermajority Vote and Minimum Price
Required for Business Combinations" below.
Shareholders do not have cumulative voting rights for
the election of Directors. Directors may be removed,
with or without cause, only by the vote of 80 percent
of the shares entitled to vote at an election of
Directors.
DIVIDEND RIGHTS
Subject to any preferential dividend rights of any
series of shares of Preferred Stock that may in the
future be issued, the holders of German American Common
Stock are entitled to receive dividends as and when
declared by the Board of Directors from funds legally
available for their payment. A dividend may be paid by
German American only if, after paying such dividend,
(1) German American would be able to pay its debts as
they become due in the usual course of business, and
(2) German American's total assets would not be less
than the sum of its total liabilities (and without
regard to any amounts that would be needed, if German
American were to be dissolved at the time of the
dividend, to satisfy the preferential rights upon
dissolution of any shareholders whose preferential
rights are superior to those receiving the dividend,
unless the terms of the shares having such preferential
rights provide otherwise). <PAGE>
<PAGE> 90
Funds for the payment of dividends by German
American must come primarily from the earnings of its
bank subsidiaries. Restrictions on the amount of
dividends that such banks may pay also restrict the
amount of funds available for payment of dividends by
German American.
LIQUIDATION
Upon any liquidation, dissolution, or winding up
of the affairs of German American, the holders of
German American Common Stock are entitled to share
ratably in the assets legally available for
distribution to the holders of German American Common
Stock after satisfaction in full of any liquidation
preference to which holders of Preferred Stock, if any,
may then be entitled.
OTHER MATTERS
Holders of German American Common Stock do not
have preemptive or conversion rights with respect to
any securities of German American.
All outstanding shares of German American Common
Stock are, and the shares offered hereby will be, when
issued, fully paid and nonassessable. Such shares are
not redeemable at the option of German American or
holders thereof.
Fifth Third Bank, Cincinnati, Ohio, serves as the
transfer agent of German American Common Stock.
PREFERRED STOCK
German American's Articles of Incorporation
authorize the Board of Directors, without further
shareholder approval, to establish the relative rights,
designations, preferences, and limitations or
restrictions of the shares of Preferred Stock prior to
the issuance thereof, including without limitation,
dividend rights, conversion rights, voting rights,
liquidation preferences, redemption rights, division
into series, sinking fund provisions, and similar
matters. Thus, the Board of Directors may authorize
and issue Preferred Stock with rights and preferences
that are superior to those of German American Common
Stock, the issuance of which could affect the voting
power and other rights of the holders of German
American Common Stock.
<PAGE>
<PAGE> 91
The Board's authority to create and issue
Preferred Stock could be used by management to create
voting impediments (such as a required approval of
mergers or other extraordinary corporate transactions)
or to deter persons seeking to effect a merger or
otherwise to gain control of German American.
Preferred Stock may also be issued at some future time
in connection with an acquisition by German American of
additional financial institutions or other businesses
permitted to be acquired by German American. However,
no such future issuances are presently planned or
contemplated.
ANTI-TAKEOVER PROVISIONS
German American's Articles of Incorporation and
Bylaws contain certain anti-takeover provisions
described below. These provisions may discourage or
prevent tender or exchange offers by a corporation or
group that intends to use the acquisition of a
substantial number of shares of German American to
initiate a takeover culminating in a merger or other
business combination. In recent years a number of
other companies have adopted similar charter or bylaw
provisions for the same or similar reasons. These
provisions may also have the effect of making the
removal of current management more difficult.
POSSIBLE ISSUANCE OF COMMON STOCK
As of the date hereof, there were 5,000,000
authorized shares of German American Common Stock of
which 1,830,880 shares were outstanding as of October
30, 1996 (not including shares that are reserved for
issuance pursuant to the Merger, the October 1996 five
percent stock dividend, and German American's stock
option plan). The Board could use the authorized but
unissued and unreserved shares at its discretion to
resist the consummation of certain takeover attempts
by, for example, diluting the ownership interest of a
substantial shareholder or substantially increasing the
amount of consideration necessary for a shareholder to
obtain control.
<PAGE>
<PAGE> 92
POSSIBLE ISSUANCE OF PREFERRED STOCK
German American's Articles of Incorporation
authorize the Board of Directors to issue up to 500,000
shares of Preferred Stock in one or more series. The
Board will be authorized to fix the number of shares to
be included in the new series, the designation, powers,
preferences, and voting and other rights of each such
series, and the qualifications, limitations, or
restrictions thereof. The Board could use the
Preferred Stock at its discretion to resist the
consummation of certain takeover attempts.
SUPERMAJORITY VOTE AND MINIMUM PRICE REQUIRED FOR
BUSINESS COMBINATIONS
The Articles of Incorporation of German American
include a provision imposing certain supermajority vote
and minimum price requirements on any "Business
Combination" with a "Related Person" unless the
combination has been approved by the vote of two-thirds
of certain members of the Board of Directors of German
American who are not associated with the Related
Person. This provision defines "Business Combination"
very broadly to include, subject to certain conditions,
(i) any merger or consolidation of German American or
any of its subsidiaries into or with a Related Person,
its affiliates or associates; (ii) any sale, exchange,
lease, transfer or other disposition by German American
or any of its subsidiaries of all or any substantial
part of its or their assets or businesses to or with a
Related Person, its affiliates or associates; (iii) the
purchase, exchange, lease or acquisition by German
American or any of its subsidiaries of all or any
substantial part of the assets or business of a Related
Person, its affiliates or associates; (iv) any
reclassification of securities, recapitalization or
other transaction that has the effect of increasing the
proportionate amount of German American's Common Stock
(or other voting capital security) beneficially owned
by a Related Person; (v) any partial or complete
liquidation, spinoff or splitup of German American or
any of its subsidiaries; and (vi) the acquisition by a
Related Person of beneficial ownership upon issuance of
Common Stock (or other voting capital shares) of German
American or any of its subsidiaries or any securities
convertible into, or any rights, warrants or options to
acquire, any such shares. "Related Person" also is
defined broadly to mean any person (which includes any
individual, corporation or entity other than German
American or its subsidiaries) who (i) beneficially owns
ten percent or more of German American Common Stock (or
other voting capital security) (a "Ten Percent
Shareholder"); (ii) any person who within the preceding
<PAGE>
<PAGE> 93
two-year period has been a Ten Percent Shareholder and
who directly or indirectly controls, is controlled by,
or is under common control with German American; or
(iii) any person who has received, other than pursuant
to or in a series of transactions involving a public
offering within the meaning of the Securities Act of
1933, German American Common Stock (or other voting
capital security) that has been owned by a Related
Person within the preceding two-year period. In the
absence of approval by the German American Directors
who are not associated with the Related Person or, in
the alternative, the agreement by the Related Person to
pay all other stockholders a certain minimum price for
their shares, a Business Combination with a Related
Person would require the approval of 80 percent of the
outstanding voting stock plus the approval of a
majority of the outstanding shares that are not
controlled by the Related Person. In general terms,
the restrictions apply to mergers or consolidations of
German American or any subsidiary with any Related
Person, transfers or encumbrances of all or
substantially all of the assets of German American to a
Related Person, the adoption of any plan of liquidation
proposed by a Related Person or any transaction which
would have the effect, directly or indirectly, of
increasing the proportionate share of any class of
equity securities of German American or any stockholder
(including affiliates and associates) who is the
beneficial owner of more than 10 percent of the voting
power of the then outstanding shares entitled to vote
generally in the election of Directors of German
American. Absent the provision regulating Business
Combinations, mergers, consolidations, and sales of all
or substantially all assets would require only the
approval of a majority of the Board of Directors and
(subject to the rights of any Preferred Stock issued in
the future) the affirmative vote of a majority of the
total number of outstanding shares of German American
entitled to vote on the matter.
CLASSIFIED BOARD
The Bylaws of German American divide the Board of
Directors into two equal (or as nearly equal as
possible) classes of Directors serving staggered two-
year terms. As a result, approximately one-half of the
Board is elected each year. The Bylaws provide that
any vacancy shall be filled by a majority vote of the
remaining Directors. Any Director elected to fill such
vacancy shall hold office for an unexpired term of the
class of which he is a member.
<PAGE>
<PAGE> 94
REMOVAL OF DIRECTORS
The Articles provide that any Director may be
removed only by an 80 percent affirmative vote of the
outstanding voting power at a shareholders' meeting
called for that purpose, with or without good cause.
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES
The Articles provide that any amendment, change,
or repeal of certain of the articles of the Articles of
Incorporation described above would require the
approval of (a) at least 80 percent of the outstanding
voting power, and (b) in the case of an amendment,
change, or repeal of any of the above-stated provisions
proposed by or on behalf of a Related Person, the
approval by a majority of the shares not controlled by
the Related Person. However, in the event that an
amendment, change, or repeal of those provisions is
approved by two-thirds of the Board of Directors, and,
if the amendment is proposed by or on behalf of a
Related Person, by the favorable vote of two-thirds of
certain Directors who are not associated with the
Related Person, the affirmative vote of a majority of
the outstanding voting power would be sufficient to
approve any such amendment, change, or repeal.
CONTROL SHARE RESTRICTIONS
German American has elected to be governed by
Chapter 42 of the Indiana Business Corporation Law.
Chapter 42, which deals with Control Share
Acquisitions, provides that shares acquired by a person
or a group in excess of certain percentages of the
total outstanding shares (20%, 33-1/3%, and 50%) have
only such voting rights as are approved by certain
disinterested shareholders. In order to obtain
shareholder approval of voting rights for the excess
control shares, the acquiring person or group must give
written notice of the control share acquisition and
request a special shareholders' meeting.
POTENTIAL DISADVANTAGES TO SHAREHOLDERS
Although the purpose of these provisions is to
insure fair treatment of all shareholders in the event
of certain mergers, tender offers, or other attempts to
acquire control of German American (a "takeover"), the
provisions regarding Business Combinations (as well as
the voting requirements regarding the removal of
Directors) and the provisions of Chapter 42 may have
certain adverse effects in that they may make more
difficult the accomplishment of certain takeovers at<PAGE>
<PAGE> 95
prices or on terms that some shareholders may consider
beneficial, impede the assumption of control by
principal shareholders in some cases, or make more
difficult the removal of current management even if
favored by a majority of the shareholders.
COMPARISON OF PEOPLES COMMON STOCK
AND GERMAN AMERICAN COMMON STOCK
GENERAL
The Peoples Common Stock is similar in many
respects to the German American Common Stock to be
issued pursuant to the Merger. Certain differences
exist, however, because the Articles of Incorporation
of Peoples differ from the Articles of Incorporation
of German American. The following is a comparison of
Peoples Common Stock with German American Common Stock
and a description of certain material differences
between them.
NUMBER OF SHARES
AUTHORIZED BUT UNISSUED
The Articles of Incorporation Peoples authorize
the issuance of 1,200,000 shares of Peoples Common
Stock, $1.00 stated value per share. As of the date
hereof, all shares of which are issued and
outstanding. The Articles of Incorporation of German
American authorize the issuance of 5,000,000 shares of
Common Stock, $10.00 par value, of which, upon
consummation of the Merger, 2,446,297 shares of German
American Common Stock are expected to be issued and
outstanding (assuming no shareholders of Peoples
exercise dissenters' rights and the minimum number of
shares specified by the Reorganization Agreement is
issued in the Merger). The remaining shares of German
American Common Stock will remain authorized but
unissued and may be issued by the Board of Directors of
German American without further shareholder approval
for any proper corporate purpose, including possible
issuance in connection with future mergers and
acquisitions. Such shares could be issued either to
existing shareholders of German American or to persons
who are not then shareholders of German American. The
Board of Directors has no present plans to issue the
shares of German American Common Stock that will be
authorized but unissued after the Merger, other than
pursuant to the Company's established annual stock
dividend program.
<PAGE>
<PAGE> 96
PREFERRED STOCK
Unlike the Articles of Incorporation of Peoples,
which provide only for the issuance of common stock,
the Articles of Incorporation of German American
authorize the Board of Directors to issue 500,000
shares of Preferred Stock, $10.00 par value. The
Articles give the German American Board of Directors
the authority to establish the relative rights,
preferences, restrictions and limitations of rights of
the Preferred Stock. The German American Board of
Directors presently has no plans to issue any of the
authorized shares of Preferred Stock.
DIVIDEND RIGHTS
Holders of Peoples Common Stock and German
American Common Stock each have the right to receive,
pro rata, such dividends as are declared by the Board
of Directors out of funds legally available. Peoples'
and German American's ability to pay dividends is
dependent upon their receipt of dividends from their
respective bank subsidiaries. Legal and regulatory
restrictions limit the amount of dividends that may be
paid by banks to their shareholders in order to assure
that banks maintain adequate capital. Peoples' and
German American's ability to pay dividends is also
restricted by the IBCL, to which Peoples and German
American are subject. The IBCL prohibits the payment
of dividends if, after giving effect to the payment,
the corporation would not be able to pay its debts as
they come due in the usual course of business or the
corporation's total assets would be less than the sum
of its liabilities plus preferential rights of
shareholders payable upon dissolution.
VOTING RIGHTS
Each holder of Peoples Common Stock and German
American Common Stock is entitled to one vote per share
on most matters submitted to a vote of shareholders.
The shareholders of German American and Peoples do not
have cumulative voting rights on the election of
Directors, which means that the Directors standing for
election at a particular meeting can be elected by a
simple plurality of the votes cast.
The affirmative vote of the holders of a majority
of the shares entitled to vote is sufficient to approve
most matters submitted to a shareholder vote of either
corporation. Under the IBCL, a merger, consolidation,
or sale of substantially all of a corporation's assets
must be approved by the holders of a majority of the
outstanding shares of Peoples Common Stock.
<PAGE>
<PAGE> 97
The Articles of Incorporation of both German
American and Peoples in addition contain certain
anti-takeover provisions which require a supermajority
vote of shareholders in certain circumstances.
LIQUIDATION RIGHTS
In the event of liquidation of Peoples or German
American, the holders of common stock will be entitled
to receive, pro rata, all of the assets remaining for
distribution to shareholders.
ABSENCE OF PREEMPTIVE RIGHTS
Neither the holders of Peoples Common Stock nor
the holders of German American Common Stock have
preemptive rights to purchase their proportionate share
of any future offering of common stock by Peoples or
German American.
ANTI-TAKEOVER PROVISIONS
Like the Articles of Incorporation of German
American, the Articles of Incorporation of Peoples
contain provisions that might deter the takeover or
change-in-control of Peoples. See "DESCRIPTION OF
GERMAN AMERICAN CAPITAL STOCK--Anti-Takeover
Provisions" for a description of the anti-takeover
provisions in German American's Articles of
Incorporation. These provisions may discourage or
prevent tender or exchange offers by a corporation or
group that intends to use the acquisition of a
substantial number of shares of Peoples to initiate a
takeover culminating in a merger or other business
combination. In recent years a number of other
companies have adopted similar charter or bylaw
provisions for the same or similar reasons. These
provisions may also have the effect of making the
removal of current management more difficult.
POSSIBLE ISSUANCE OF COMMON STOCK
As of the date hereof, there were 1,200,000
authorized shares of Peoples Common Stock of which
593,334 shares were outstanding. The Board could use
the authorized but unissued shares at its discretion to
resist the consummation of certain takeover attempts
by, for example, diluting the ownership interest of a
substantial shareholder or substantially increasing the
amount of consideration necessary for a shareholder to
obtain control.
<PAGE>
<PAGE> 98
SUPERMAJORITY VOTE AND MINIMUM PRICE REQUIRED FOR
BUSINESS COMBINATIONS
The Articles of Incorporation of Peoples provide
that the affirmative vote of at least 80 percent of the
outstanding common stock is required to approve a
"business combination" that is (a) not recommended by
the vote of 70 percent of the Peoples Directors or (b)
is proposed by a person, whether an individual,
partnership, corporation, group or otherwise, who
separately or in association with one or more other
persons holds at the date of the proposal ten percent
or more of the then outstanding common stock of Peoples
and such proposal does not offer all shareholders of
Peoples consideration for their shares which is at
least equal to the highest percent over market value
paid by such person for the shares of Peoples held by
it at the date of the proposal.
CLASSIFIED BOARD
Like German American, Peoples has a classified
Board of Directors. The Articles of Incorporation of
Peoples divide the Board of Directors into three equal
(or as nearly equal as possible) classes of Directors
serving staggered three-year terms. As a result,
approximately one third of the Board is elected each
year. The Bylaws provide that any vacancy shall be
filled by a majority vote of the remaining Directors.
Any Director elected to fill such vacancy shall hold
office for an unexpired term of the class of which he
is a member.
REMOVAL OF DIRECTORS
Like German American, the Articles provide that
any Director may be removed without cause only by an 80
percent affirmative vote of the outstanding voting
power at a shareholders' meeting called for that
purpose.
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES
Like German American, the Articles provide that
any amendment, change, or repeal of certain of the
articles of the Articles of Incorporation described
above would require the approval of at least 80 percent
of the outstanding voting power.
<PAGE>
<PAGE> 99
CONTROL SHARE RESTRICTIONS
Like German American, Peoples has elected to be
governed by Chapter 42 of the Indiana Business
Corporation Law. Chapter 42, which deals with Control
Share Acquisitions, provides that shares acquired by a
person or a group equalling certain percentages of the
total outstanding shares (20%, 33-1/3%, and 50%) have
only such voting rights as are approved by certain
disinterested shareholders. In order to obtain
shareholder approval of voting rights for the excess
control shares, the acquiring person or group must give
written notice of the control share acquisition and
request a special shareholders' meeting.
LEGAL MATTERS
The due authorization and valid issuance of the
shares of German American Common Stock pursuant to the
Merger, and the intended federal income tax
consequences of the Merger, will be passed upon by
Leagre & Barnes.
EXPERTS
The consolidated balance sheets of Peoples as of
December 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholders' equity
and cash flows for the years ended December 31, 1995,
1994 and 1993 have been audited by Crowe, Chizek and
Company LLP, independent certified public accountants,
and their reports thereon, which appear elsewhere
herein, have been included therein and herein in
reliance upon their reports given upon their authority
as experts in accounting and auditing.
The consolidated balance sheets of German American
as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in
shareholders' equity and cash flows for the years ended
December 31, 1995, 1994, and 1993 have been audited by
Crowe, Chizek and Company LLP, independent certified
public accountants, and their reports thereon, which
appear elsewhere herein, have been included therein and
herein in reliance upon their reports given upon their
authority as experts in accounting and auditing.
The opinion of Austin Associates, Inc. ("AAI"),
and the information provided by AAI under "THE MERGER -
- - Opinion of Financial Adviser to Peoples," has been
included herein in reliance upon its authority as
experts in valuation of financial institutions and
their securities in connection with mergers and
acquisitions.
<PAGE>
<PAGE> 100
OTHER MATTERS
The Boards of Directors of Peoples and of German
American do not know of any other matters that may come
before the Special Meetings of Shareholders.
<PAGE>
<PAGE> 101
INDEX TO PEOPLES BANCORP OF
WASHINGTON FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors F-1
Consolidated Balance Sheets as of December
31, 1995 and 1994 F-2
Consolidated Statements of Income for the
Years Ended December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Changes in
Shareholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements F-6 -
F-23
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September
30, 1996 and December 31, 1995 F-24
Consolidated Statements of Income for the
Three Months and the Nine Months Ended
September 30, 1996, and 1995 F-25
Consolidated Statements of Changes in
Shareholders' Equity for the Nine Months
Ended September 30, 1996 and 1995 F-26
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and
1995 F-27
Notes to Financial Statements F-28
<PAGE>
<PAGE> F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Peoples Bancorp of Washington
Washington, Indiana
We have audited the accompanying consolidated balance
sheets of Peoples Bancorp of Washington 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 years in the three year
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.
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, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Peoples Bancorp of
Washington as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each
of the years in the three year period ended December
31, 1995 in conformity with generally accepted
accounting principles.
As disclosed in Note 1 to the financial statements, the
Corporation changed its method of accounting for
impaired loans in 1995.
/s/ Crowe, Chizek and Company LLP
__________________________________
Crowe, Chizek and Company LLP
Indianapolis, Indiana
January 11, 1996
<PAGE>
<PAGE> F-2
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 11) $ 4,629,741 $ 3,079,893
Interest-bearing deposits in other financial institutions 100,000 100,000
Securities available for sale (Note 2) 13,978,960 9,817,287
Securities held to maturity (fair value of
$10,989,141 and $17,051,578 in 1995 and 1994) (Note 2) 11,075,302 17,798,301
Loans (Note 3) 58,759,678 53,773,667
Less: Allowance for loan losses (Note 4) (959,510) (933,233)
--------------- ---------------
Loans, net 57,800,168 52,840,434
Non-marketable equity securities (at cost) 381,000 381,000
Premises, furniture and equipment (Note 5) 1,675,199 1,385,517
Accrued interest receivable 928,341 761,848
Other assets 272,869 249,088
--------------- ---------------
$ 90,841,580 $ 86,413,368
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 8,754,730 $ 8,443,750
Interest-bearing deposits (Note 6) 59,218,839 58,445,899
--------------- ---------------
Total deposits 67,973,569 66,889,649
Repurchase agreements (Note 7) 8,254,360 8,009,820
Short-term borrowings (Note 7) 4,150,000 2,200,000
Long-term debt (Note 8) 1,000,000 1,000,000
Accrued interest payable 237,103 192,652
Other liabilities 394,107 267,744
--------------- ---------------
Total liabilities 82,009,139 78,559,865
Commitments and contingent liabilities (Note 12)
Shareholders' equity
Common stock, $1.00 stated value, 1,200,000 shares
authorized, 593,334 shares issued and outstanding 593,334 197,778
Paid-in capital 1,109,599 1,109,599
Retained earnings (Note 10) 7,166,536 6,900,298
Net unrealized loss on securities available for sale,
net of tax benefit ($19,075 and $182,451) (37,028) (354,172)
--------------- ---------------
Total shareholders' equity 8,832,441 7,853,503
--------------- ---------------
$ 90,841,580 $ 86,413,368
=============== ===============
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
<PAGE> F-3
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Loans, including related fees $ 4,987,439 $ 4,196,979 $ 3,926,732
Securities
Taxable 1,171,246 1,286,276 1,458,369
Tax exempt 310,275 329,054 247,553
Other 50,051 40,282 81,827
----------- ----------- -----------
6,519,011 5,852,591 5,714,481
Interest expense
Deposits 2,516,864 2,205,226 2,434,252
Repurchase agreements and other short-term borrowings 487,412 232,607 105,866
Long-term debt 127,126 53,950 15,912
----------- ----------- -----------
3,131,402 2,491,783 2,556,030
----------- ----------- -----------
NET INTEREST INCOME 3,387,609 3,360,808 3,158,451
Provision for loan losses (Note 4) 67,500 120,000 144,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,320,109 3,240,808 3,014,451
Noninterest income
Trust department income 21,878 21,010 31,034
Service charges on deposit accounts 146,102 152,872 153,697
Net realized gain on sales of securities 19,336 9,543 4,036
Net realized gain on sales of loans 7,309 9,829 28,695
Other noninterest income 109,431 50,858 49,548
----------- ----------- -----------
304,056 244,112 267,010
Noninterest expense
Salaries and benefits (Note 10) 1,255,108 1,225,029 1,145,117
Occupancy expenses, net 228,193 204,173 238,851
Equipment expenses 207,089 222,978 223,191
Directors fees 72,000 72,000 68,300
Stationary and supplies 66,940 55,420 70,779
Deposit insurance expense 78,292 156,885 157,000
Other noninterest expenses 432,158 364,479 381,941
----------- ----------- -----------
2,339,780 2,300,964 2,285,179
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 1,284,385 1,183,956 996,282
Income taxes (Note 9) 460,413 376,390 334,397
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 823,972 807,566 661,885
Cumulative effect on prior years of changing to a
different method of accounting for income taxes - - 68,000
----------- ----------- -----------
NET INCOME $ 823,972 $ 807,566 $ 729,885
=========== =========== ===========
PER SHARE DATA:
Income before cumulative effect of accounting change $ 1.39 $ 1.36 $ 1.12
Cumulative effect of accounting change - - .11
----------- ----------- -----------
NET INCOME PER SHARE $ 1.39 $ 1.36 $ 1.23
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial
statements.<PAGE>
<PAGE> F-4
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Net
Unrealized
Loss on
Securities Total
Paid-in Retained Available Shareholders'
Common Stock Capital Earnings for Sale Equity
------------ ------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 197,778 $ 1,109,599 $ 5,623,914 $ - $ 6,931,291
Net income - - 729,885 - 729,885
Cash dividends ($.21
per share) - - (122,622) - (122,622)
------------ ------------ ------------- ------------- -------------
Balance, December 31, 1993 197,778 1,109,599 6,231,177 - 7,538,554
Net income - - 807,566 - 807,566
Cash dividends ($.23
per share) - - (138,445) - (138,445)
Net unrealized gain upon
adoption of FAS 115 on
January 1, 1994 16,256 16,256
Change in net unrealized
loss on securities available
for sale - - - (370,428) (370,428)
------------ ------------ ------------- ------------- -------------
Balance December 31, 1994 197,778 1,109,599 6,900,298 (354,172) 7,853,503
3-for-1 stock split (Note 14) 395,556 (395,556)
Net income 823,972 823,972
Cash dividends ($ .27
per share) (162,178) (162,178)
Change in net unrealized
loss on securities available
for sale - - - 317,144 317,144
------------ ------------ ------------- ------------- -------------
BALANCE, DECEMBER 31, 1995 $ 593,334 $ 1,109,599 $ 7,166,536 $ (37,028) $ 8,832,441
============ ============ ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
<PAGE> F-5
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 823,972 $ 807,566 $ 729,885
Adjustments to reconcile net income to net cash from operating activities
Cumulative effect of accounting change - - (68,000)
Depreciation 196,888 200,600 230,937
Provision for loan losses 67,500 120,000 144,000
Amortization and accretion on securities, net 31,573 71,754 79,259
Net realized gain on sales of securities (19,336) (9,543) (4,036)
Change in assets and liabilities
Accrued interest receivable (166,493) (17,004) 121
Other assets (187,158) 149,884 (109,121)
Accrued interest payable 44,451 (23,328) (54,057)
Other liabilities 126,363 (67,784) (110,597)
------------- ------------- -------------
Net cash from operating activities 917,760 1,232,145 838,391
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in interest-bearing deposits in other financial institutions - 1,798,000 497,000
Purchases of securities available for sale (2,824,397) (2,493,593) -
Proceeds from sales of securities available for sale 2,515,279 3,931,984 -
Proceeds from paydowns and maturities of securities available for sale 993,577 1,573,824 -
Purchases of securities held to maturity - (3,452,611) (19,693,712)
Proceeds from sales of securities held to maturity - - 3,829,757
Proceeds from paydowns and maturities of securities held to maturity 2,345,151 4,044,214 15,130,642
Loans made to customers, net of payments collected (5,027,234) (5,659,726) (3,513,642)
Purchases of premises and equipment (486,570) (251,686) (88,750)
------------- ------------- -------------
Net cash from investing activities (2,484,194) (509,594) (3,838,705)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts 1,083,920 (4,656,535) 996,176
Dividends paid (162,178) (138,445) (122,622)
Net change in short-term borrowings 1,950,000 1,300,000 250,000
Net change in repurchase agreements 244,540 621,634 2,915,439
Long-term debt - - 1,000,000
------------- ------------- -------------
Net cash from financing activities 3,116,282 (2,873,346) 5,038,993
------------- ------------- -------------
Net change in cash and cash equivalents 1,549,848 (2,150,795) 2,038,679
Cash and cash equivalents at beginning of year 3,079,893 5,230,688 3,192,009
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,629,741 $ 3,079,893 $ 5,230,688
============= ============= =============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 3,086,951 $ 2,515,111 $ 2,610,087
Income taxes 451,079 236,100 334,922
</TABLE>
See accompanying notes to consolidated financial
statements.<PAGE>
<PAGE> F-6
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The consolidated financial
statements include the accounts of Peoples Bancorp of
Washington ("Bancorp") and its wholly-owned subsidiary,
Peoples National Bank and Trust Company ("Bank"). Upon
consolidation, all significant intercompany accounts
and transactions have been eliminated. The Bancorp
operates primarily in the banking industry which
accounts for more than 90% of its revenues, operating
income and assets. The Bank is engaged in the business
of commercial and retail banking and trust services,
with operations conducted through its main office and 3
branches located in Daviess County, Indiana. The
majority of the Bank's income is derived from
commercial and retail business lending activities and
investments. Although the overall loan portfolio is
diversified, the repayment of existing borrower
obligations is highly dependent on the economy of
Daviess County and on the agricultural industry. The
majority of the Bank's loans are secured by specific
items of collateral including business assets, real
property and consumer assets.
Use of Estimates: 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.
Estimates that are more susceptible to change in the
near term include the allowance for loan losses and
fair values of certain securities.
Securities: The Bancorp classifies securities into
held to maturity and available for sale, categories.
Held to maturity securities are those which the Bancorp
has the positive intent and ability to hold to
maturity, and are reported at amortized cost.
Available for sale securities are those which the
Bancorp may decide to sell if needed for liquidity,
asset-liability management, or other reasons.
Available for sale securities are reported at fair
value, with unrealized gains or losses included as a
separate component of equity, net of tax.
<PAGE>
<PAGE> F-7
Realized gains or losses are determined based on the
amortized cost of the specific security sold. Interest
and dividend income, adjusted by amortization of
purchase premium or discount, is included in earnings.
Loans: Interest on real estate, commercial and
consumer loans is accrued over the term of the loans
based on the principal outstanding. The recognition of
interest income is discontinued when, in management's
judgment, the interest will not be collectible in the
normal course of business. The Bank defers loan fees
net of certain direct loan origination costs. The net
amount deferred is reported in the balance sheet as
part of loans and is recognized into interest income
over the term of the loan using the level yield method.
The balance in the allowance and the amount of the
annual provision charged to expense are judgmentally
determined based upon a number of factors. 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 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, including impaired
loans discussed below, the whole allowance is available
for any loan losses that occur. Increases to the
allowance are recorded by a provision for possible loan
losses charged to expense. A loan is charged off by
management as a loss when deemed uncollectible,
although collection efforts continue and future
recoveries may occur.
Effective January 1, 1995, the Bancorp adopted
Financial Accounting Standards No. 114 "Accounting by
Creditors for Impairment of Loan" (SFAS 114) and No.
118. Under these standards, loans are considered
impaired if full principal or interest payments are not
anticipated. Impaired loans are carried at the present
value of expected cash flows discounted at the loan's
effective interest rate or at the fair value of the
collateral if the loan is collateral dependent. A
portion of the allowance for loan losses is allocated
to impaired loans. The effect of adopting these
standards is included in the 1995 provision for loan
losses, and was not material.
<PAGE>
<PAGE> F-8
The carrying value of impaired loans is 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 and other cash payments are reported as reductions
in carrying value. Increases or decreases in carrying
value due to changes in estimates of future payments or
the passage of time are reported as reductions or
increases in the provision for loan losses. Management
evaluates all loans selected for specific review during
their analysis of the allowance for loan losses for
impairment. Generally, that analysis does not consider
small balance consumer credits or one to four family
residential real estate loans which are evaluated
collectively for impairment. In general, loans
classified as doubtful or loss are considered impaired
while loans classified as substandard are individually
evaluated for impairment. Depending on the relative
size of the credit relationship, late or insufficient
payments of 30 to 90 days will cause management to
reevaluate the credit under its normal evaluation
procedures.
Premises, Furniture and Equipment: Premises, furniture
and equipment are stated at cost less accumulated
depreciation. Depreciation is computed, principally,
using the straight line method for premises and the
declining-balance method for furniture and equipment
based on the estimated useful lives of the assets.
Maintenance and repairs are expensed and major
improvements are capitalized.
Other Real Estate: Real estate acquired through
foreclosure or acceptance of a deed in lieu of
foreclosure is recorded at the lower of cost (fair
value at date of foreclosure) or fair value less
estimated selling costs. Expenses incurred in carrying
other real estate are charged to operations as
incurred.
Income Taxes: Effective January 1, 1993, the Bancorp
adopted Financial Accounting Standard No. 109,
"Accounting For Income Taxes", which requires an asset
and liability approach to financial accounting and
reporting for income taxes. Deferred tax liabilities
and assets are determined at each balance sheet date.
They are measured by applying enacted tax laws to
future taxable income or expense resulting from
differences in the financial statement and tax basis of
<PAGE>
<PAGE> F-9
assets and liabilities. Valuation allowances are
established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income
tax expense is the tax payable or refundable for the
period plus or minus the change during the period on
deferred tax assets and liabilities.
Statement of Cash Flows: For purposes of this
statement, cash and cash equivalents is defined to
include cash on hand and amounts due from other banks.
The Bank reports net cash flows for customer loan
transactions, deposit transactions, deposits made with
other financial institutions and short-term borrowings.
Financial Statement Presentation: Certain items in the
1994 and 1993 financial statements have been
reclassified to correspond with the 1995 presentation.
<PAGE>
<PAGE> F-10
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 2 - SECURITIES
The amortized cost and fair value of securities are as
follows at December 31:
<TABLE>
<CAPTION>
1 9 9 5
-------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
- ------------------
U.S. Treasury and government
agency securities $ 7,990 $ - $ (58) $ 7,932
Obligations of states
and political subdivisions 2,171 1 - 2,172
Mortgage-backed securities 3,858 - (70) 3,788
Other securities 16 71 - 87
------------- ------------- -------------- -------------
$ 14,035 $ 72 $ (128) $ 13,979
============= ============= ============== =============
HELD TO MATURITY
- ----------------
U.S. Treasury and government
agency securities $ 5,037 $ - $ (86) $ 4,951
Obligations of states
and political subdivisions 4,603 14 - 4,617
Mortgage-backed securities 1,115 6 (21) 1,100
Collateralized mortgage
obligations and other
asset-backed securities 320 1 - 321
------------- ------------- -------------- -------------
$ 11,075 $ 21 $ (107) $ 10,989
============= ============= ============== =============
</TABLE>
<PAGE>
<PAGE> F-11
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION>
1 9 9 4
-------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
- ------------------
U.S. Treasury and government
agency securities $ 6,001 $ - $ (211) $ 5,790
Mortgage-backed securities 4,072 6 (332) 3,746
Other securities 281 - - 281
------------- ------------- -------------- -------------
$ 10,354 $ 6 $ (543) $ 9,817
============= ============= ============== =============
HELD TO MATURITY
- ----------------
U.S. Treasury and government
agency securities $ 9,075 $ - $ (494) $ 8,581
Obligations of states
and political subdivisions 6,773 10 (221) 6,562
Mortgage-backed securities 1,489 20 (64) 1,445
Other securities 461 3 - 464
------------- ------------- -------------- -------------
$ 17,798 $ 33 $ (779) $ 17,052
============= ============= ============== =============
</TABLE>
Gross gains of $21,952, $12,183 and $4,036 and gross
losses of $2,656, $2,640 and $0 were realized on sales
of securities during 1995 and 1994 and 1993.
During December 1995, securities with an amortized cost
of $4,336,047 and a net unrealized loss of $24,811 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.
<PAGE>
<PAGE> F-12
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 2 - SECURITIES (Continued)
The amortized cost and fair value of securities at
December 31, 1995, by contractual maturity, are shown
below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call
or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 2,270 $ 2,261 $ 1,383 $ 1,380
Due after one year through five years 7,056 7,006 7,850 7,779
Due after five years through ten years 835 837 407 409
Due after ten years - - - -
----------- ----------- ----------- -----------
Subtotal 10,161 10,104 9,640 9,568
Mortgage-backed securities 3,858 3,788 1,115 1,100
Other securities 16 87 320 321
----------- ----------- ----------- -----------
$ 14,035 $ 13,979 $ 11,075 $ 10,989
=========== =========== =========== ===========
</TABLE>
Securities with a carrying value of $9,261,442 and
$12,495,986 at December 31, 1995 and 1994 were pledged
to secure public deposits, Federal Home Loan Bank
advances and for other purposes required or permitted
by law.
NOTE 3 - LOANS
Loans as presented on the balance sheet are comprised
of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial loans $ 10,062 $ 8,567
Agricultural production 3,277 3,574
Real estate loans ($6,880 and $6,030 secured by farm land) 37,486 34,974
Consumer loans 7,259 5,876
Lease financing 676 783
----------- -----------
Total loans $ 58,760 $ 53,774
=========== ===========
/TABLE
<PAGE>
<PAGE> F-13
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 3 - LOANS (Continued)
Lease financing consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Minimum lease payments receivable $ 718 $ 883
Unguaranteed residual value 147 147
Less: Unearned lease income (189) (247)
------------ ------------
Total lease financing $ 676 $ 783
============ ============
</TABLE>
Minimum lease payments are receivable as follows at
December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 166
1997 113
1998 76
1999 76
2000 76
2001 and thereafter 211
----------
Total $ 718
==========
</TABLE>
Nonperforming loans at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Nonaccruing loans $ 290 $ 322
Accruing loans past due 90 days or more 6 38
Restructured loans other than nonaccrual 122 141
---------- ----------
Total $ 418 $ 501
========== ==========
</TABLE>
<PAGE>
<PAGE> F-14
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 3 - LOANS (Continued)
The Bank has entered into loan transactions with its
executive officers, certain directors and principal
shareholders. A schedule of aggregate activity in
those loans, when total customer borrowings exceed
$60,000, follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Balance, January 1, 1995 $ 1,249
Additions 1,499
Collected (1,608)
-----------
Balance, December 31, 1995 $ 1,140
==========
</TABLE>
Total loans serviced for the Federal Home Loan Mortgage
Corporation were $3,793,494 at December 31, 1995 and
$3,255,527 at December 31, 1994. These loans are not
reflected on the consolidated balance sheet.
<PAGE>
<PAGE> F-15
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, January 1 $ 933 $ 810 $ 634
Provision charged to operations 68 120 144
Loans charged off (56) (10) (16)
Recoveries on loans previously charged off 15 13 48
----------- ----------- -----------
Balance, December 31 $ 960 $ 933 $ 810
=========== =========== ===========
</TABLE>
The balance of impaired loans was $391,151 at December
31, 1995. Allowance for loan loss allocations related
to those impaired loans were $141,807.
The average balance of impaired loans for 1995 was
$409,667. Interest income recognized on impaired loans
during 1995 was $7,446, all of which was received in
cash. Nonaccrual loans at December 31, 1995 included
$282,577 in loans that were also considered impaired,
which amount is also included in the amount of impaired
loans disclosed above.
NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT
A summary of premises, furniture and equipment by major
category follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land and buildings $ 2,506 $ 2,112
Furniture and equipment 1,501 1,418
----------- -----------
4,007 3,530
Accumulated depreciation (2,332) (2,144)
----------- -----------
Premises, furniture and equipment, net $ 1,675 $ 1,386
=========== ===========
</TABLE>
NOTE 6 - INTEREST-BEARING DEPOSITS
Interest-bearing deposits issued in denominations of
$100,000 or greater totaled $5,876,741 and $4,335,925
at December 31, 1995 and 1994. Interest expense on such
deposits for 1995, 1994 and 1993 was $320, $204 and
$251.<PAGE>
<PAGE> F-16
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 7 - REPURCHASE AGREEMENTS AND SHORT-TERM
BORROWINGS
The Bank uses repurchase agreements and short-term
borrowings, primarily federal funds purchased, as
funding sources. Repurchase agreements are,
essentially, borrowings from customers secured by a
pledge of securities. Bancorp retains possession of
and control over such securities. Information
regarding repurchase agreements and short-term
borrowings at and for the years ended December 31, 1995
and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Average balance during the year
Repurchase agreements $ 7,273 $ 4,960
Short-term borrowings 1,717 1,538
Average rate paid during the year
Repurchase agreements 5.23% 3.26%
Short-term borrowings 6.21 4.60
Maximum month end balance
Repurchase agreements $ 10,353 $ 8,010
Short-term borrowings 4,600 4,800
Weighted average interest rate at year end
Repurchase agreements 4.56% 5.62%
Short-term borrowings 5.74 4.75
</TABLE>
NOTE 8 - LONG-TERM DEBT
Long-term debt outstanding consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal Home Loan Bank advances: interest payable monthly
at 4.51%; principal due at maturity on October 15, 1996;
secured by certain investment securities. $ 500 $ 500
Federal Home Loan Bank advances: interest payable monthly
at 6.28%; principal due at maturity on August 8, 2000;
secured by certain investment securities. 500 500
---------- ----------
Total long-term debt $ 1,000 $ 1,000
========== ==========
</TABLE>
<PAGE>
<PAGE> F-17
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 9 - INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C>
Current payable $ 468 $ 409 $ 358
Deferred income tax benefit (8) (33) (24)
------------ ------------ ------------
Total income taxes $ 460 $ 376 $ 334
============ ============ ============
</TABLE>
The following is a reconciliation of income taxes and the amount
computed by applying the statutory federal income tax rates of 34% to
income before income taxes:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C>
Statutory rate applied to income before income taxes $ 436 $ 402 $ 339
Add (deduct)
Tax exempt interest income (79) (86) (70)
State income tax, net 76 69 59
Effect of graduated rates and other 27 (9) 6
------------ ------------ ------------
Total income taxes $ 460 $ 376 $ 334
============ ============ ============
</TABLE>
The net deferred tax asset reflected in the consolidated balance sheet
is composed of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets from
Loan loss provision $ 267 $ 244
Pension expense 36 40
Unrealized loss on securities available for sale 19 182
Nonaccrual loan interest 14 -
Accrued expenses 25 16
Other 27 17
------------ ------------
388 499
Deferred tax liabilities for:
Depreciation expense (58) (44)
Leases (146) (118)
Other (9) (7)
------------ ------------
(213) (169)
Valuation allowance for deferred tax assets - -
------------ ------------
$ 175 $ 330
============ ============
/TABLE
<PAGE>
<PAGE> F-18
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Bank has a noncontributory defined benefit pension plan
covering substantially all employees. The Bank's funding policy
is to contribute the minimum amount required by applicable IRS
regulations. Plan assets consist primarily of U.S. Treasury
bonds, corporate bonds and other various marketable equity
securities.
The following sets forth the Plan's funded status and amount
recognized in the balance sheet at December 31 (amounts computed
as of November 30th for 1995 and 1994):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Actuarial present value of obligations:
Accumulated benefit obligation, including vested benefits
of $494 and $451 $ 496 $ 455
=========== ============
Plan assets at fair value $ 809 $ 644
Projected benefit obligation for
service rendered to date (749) (697)
Unrecognized loss 89 194
Prior service cost not yet recognized (14) (15)
Unrecognized transition asset (176) (198)
----------- ------------
Accrued pension liability $ (41) $ (72)
=========== ============
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net pension expense included the following:
Service cost-benefits earned $ 32 $ 45 $ 34
Interest cost on projected benefit obligation 57 51 48
Actual return on plan assets (135) 11 (50)
Net amortization and deferral 65 (62) 2
----------- ----------- -----------
Net pension expense $ 19 $ 45 $ 34
=========== =========== ===========
</TABLE>
The weighted-average discount rate used in determining the
actuarial present value of projected benefit obligation was 8.25%
in 1995 and 1994 and 7% in 1993. Additionally, the rate of
increase in future compensation assumed was 5% for each year. The
expected long-term rate of return on plan assets was 8.25% in 1995
and 1994 and 7.5% in 1993.
The Bank has a 401(k) defined contribution retirement plan in
which substantially all employees may participate. The Bank
matches employees' contributions at the rate of 50 percent on the
first 8 percent of participant's salary contributions. The Bank's
total 401(k) contributions were $20,168, $21,266 and $21,164 for
1995, 1994 and 1993.
<PAGE>
<PAGE> F-19
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 11 - CAPITAL RESTRICTIONS
The Bank and the Bancorp are subject to regulations which require
the maintenance of certain capital levels and, as a result, limit
the amount of dividends which may be paid by the companies. The
Bank is regulated by the Comptroller of the Currency, while the
Bancorp is regulated by the Federal Reserve Board. The most
restrictive of the regulations limits the amount of dividends the
Bank may pay to the Bancorp in a single year without approval by
the Comptroller of the Currency to the balance of retained net
profits of the most recent two years. Additionally, the Bank must
maintain a minimum leverage capital to asset ratio at a level
defined by banking regulators. These requirements pose no
practical restrictions on the Bancorp or Bank to pay dividends at
historical levels.
NOTE 12 COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, the Bank has loans,
commitments and contingent liabilities, such as guarantees and
commitments to extend credit, which are not reflected in the
consolidated balance sheets. The Bank's exposure to credit loss
in the event of nonperformance by the other party to the financial
instrument for commitments to make loans and standby letters of
credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policy to make such
commitments as it uses for on-balance sheet items.
At December 31, off-balance sheet financial instruments whose
contract amount represents credit risk are summarized as follows:
1995 1994
---- ----
Commitments to extend credit $ 8,435 $ 8,954
Standby letters of credit 268 465
The commitments to extend credit are predominantly available
balances on commercial and consumer lines of credit which are
mainly variable rate agreements. 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 Bank leases branch facilities and equipment under operating
leases expiring in various years through 1999. Lease rental
expense was $20,773, $19,132, and $18,641 for 1995, 1994 and 1993.
The cash balance required to be maintained on hand or on deposit
with the Federal Reserve was $474,000 and $490,000 at December 31,
1995 and 1994. These reserves do not earn interest.
<PAGE>
<PAGE> F-20
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 13- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Bancorp's
financial instruments as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
----- -----
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 4,730 $ 4,730
Securities 25,054 24,968
Loans, less allowance for loan losses 57,800 57,870
Accrued interest receivable 928 928
Financial liabilities:
Deposits 67,974 67,772
Short-term borrowings 12,404 12,404
Long-term debt 1,000 1,011
Accrued interest payable 237 237
</TABLE>
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 those short-term
instruments, the carrying amount is a reasonable estimate of fair
value.
SECURITIES: For securities, fair value equals quoted market price
or dealer quotes, if available. If a quoted market price is not
available, fair value is estimated using quoted market prices for
similar instruments.
LOANS: For commercial, real estate, consumer and other loans,
fair value 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.
DEPOSITS: 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, which are
generally over-night agreements, the carrying amount is a
reasonable estimate of fair value.
LONG-TERM DEBT: Rates currently available to the Bank for debt
with similar terms and remaining maturities are used to estimate
fair value of existing debt.
<PAGE>
<PAGE> F-21
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 13 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(Continued)
ACCRUED INTEREST: For these short-term assets/liabilities, the
carrying amount is a reasonable estimate of fair value.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND
FINANCIAL GUARANTEES WRITTEN: The estimated fair value for
off-balance sheet loan commitments approximates carrying value and
are not considered significant to this presentation.
While these estimates of fair value are based on management's
judgment of the most appropriate factors, there is no assurance
that were the Bancorp to have disposed of such items at December
31, 1995, the estimated fair values would necessarily have been
achieved at that date, since market values may differ depending on
various circumstances. The estimated fair values at December 31,
1995 should not necessarily be considered to apply at subsequent
dates.
In addition, other assets and liabilities of the Bancorp that are
not defined as financial instruments are not included in the above
disclosures, such as property and equipment. Also, non-financial
instruments typically not recognized in financial statements,
nevertheless may have value, but are not included in the above
disclosures. These include, among other items, the estimated
earnings power of core deposit accounts, the earnings potential of
the Bank's trust department, the trained work force, customer
goodwill, and similar items.
NOTE 14 - PER SHARE DATA
In June 1995, the shareholders approved an increase in authorized
common stock from 400,000 shares to 1,200,000 shares. Also, in
June 1995, the Board of Directors authorized a 3-for-1 stock split
effected in the form of a stock dividend. Earnings and dividend
per share amounts have been retroactively restated for the stock
split. The weighted-average number of shares used in calculating
earnings and dividends per share amounts was 593,334 for 1995,
1994 and 1993.
<PAGE>
<PAGE> F-22
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
(Table Dollar Amounts in Thousands)
NOTE 15- PARENT COMPANY FINANCIAL STATEMENTS
Presented below are the condensed balance sheets and
statements of income and cash flows for the parent
Company:
CONDENSED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash on deposit with subsidiary $ 61 $ 55
Securities available for sale 87 16
Investment in bank subsidiary 8,764 7,826
Other assets 4 6
--------------- ---------------
$ 8,916 $ 7,903
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities $ 84 $ 49
Shareholders' equity
Common stock 593 198
Additional paid-in capital 1,110 1,110
Retained earnings 7,166 6,900
Net unrealized loss on securities available-for-sale (37) (354)
--------------- ---------------
8,832 7,854
--------------- ---------------
$ 8,916 $ 7,903
=============== ===============
</TABLE>
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING INCOME
Dividend income $ 154 $ 115 $ 130
Other income 5 5 2
-------------- -------------- --------------
Total operating income 159 120 132
OPERATING EXPENSES
Other expenses 4 2 4
-------------- -------------- --------------
Total operating expenses 4 2 4
-------------- -------------- --------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 155 118 128
Equity of undistributed earnings of subsidiary 669 690 602
-------------- -------------- --------------
NET INCOME $ 824 $ 808 $ 730
============== ============== ==============
/TABLE
<PAGE>
<PAGE> F-23
PEOPLES BANCORP OF WASHINGTON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Table Dollar Amounts in Thousands)
NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS
(Continued)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 824 $ 808 $ 730
Adjustments to reconcile net income to
net cash from operating activities
Equity in undistributed earnings
of subsidiary (669) (690) (602)
Changes in:
Other assets 2 3 3
Other liabilities 11 9 (1)
----------- ----------- -----------
Net cash provided by operating
activity 168 130 130
Cash flows from financing activities
Dividends paid (162) (138) (123)
----------- ----------- -----------
Net change in cash and cash equivalents 6 (8) 7
Cash and cash equivalents at beginning
of year 55 63 56
----------- ----------- -----------
Cash and cash equivalents at end of year $ 61 $ 55 $ 63
=========== =========== ===========
</TABLE>
<PAGE>
<PAGE> F-24
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 2,794,489 $ 4,729,741
Securities available for sale 11,754,027 13,978,960
Securities held to maturity 7,370,271 11,075,302
Loans held for sale (net) 827,736 0.00
Total loans 66,402,439 58,759,678
Less: Allowance for loan losses (968,089) (959,510)
--------------- ---------------
Net loans 66,262,086 57,800,168
Non-marketable equity securities 380,700 381,000
Premises and equipment, net 1,592,404 1,675,199
Accrued interest receivable 1,126,272 928,341
Other assets 207,891 272,869
--------------- ---------------
Total assets $ 91,488,140 $ 90,841,580
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 71,631,384 $ 67,973,569
Repurchase agreements 7,391,561 8,254,360
Short-term borrowings 1,000,000 4,150,000
Long term debt 1,500,000 1,000,000
Accrued interest payable 299,458 237,103
Accrued expenses and other liabilities 257,809 394,107
--------------- ---------------
Total liabilities 82,080,212 82,009,139
SHAREHOLDERS' EQUITY
Common stock 593,334 593,334
Additional paid-in capital 1,109,599 1,109,599
Retained earnings 7,776,812 7,166,536
Net unrealized loss on securities
available for sale (71,817) (37,028)
--------------- ---------------
Total shareholders' equity 9,407,928 8,832,441
--------------- ---------------
Total liabilities and
shareholders' equity $ 91,488,140 $ 90,841,580
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> F-25
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including related fees $ 1,518,632 $ 1,274,153 $ 4,334,153 $ 3,654,956
Securities 272,757 357,445 860,836 1,129,754
Other 8,713 13,660 15,999 13,892
---------------------------------------------------------
Total interest income 1,800,102 1,645,258 5,210,988 4,798,602
INTEREST EXPENSE
Deposits 675,979 655,662 1,946,489 1,851,619
Borrowings 106,195 152,814 329,756 452,376
---------------------------------------------------------
Total interest expense 782,174 808,476 2,276,245 2,303,995
---------------------------------------------------------
NET INTEREST INCOME 1,017,928 836,782 2,934,743 2,494,607
Provision for loan losses (12,600) (22,375) (37,800) (67,375)
---------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,005,328 814,407 2,896,943 2,427,232
NONINTEREST INCOME
Service charges and fees 63,304 47,392 189,537 141,725
Gain/(loss) on securities 0 8,370 78 31,749
Other income 10,929 61,590 39,992 96,014
---------------------------------------------------------
Total noninterest income 74,233 117,352 229,607 269,488
Noninterest expense
Salaries and benefits 346,911 313,776 1,061,465 945,283
Occupancy and equipment, net 62,587 61,300 185,866 179,891
Equipment expense 57,751 60,033 145,759 179,600
Directors fees
Stationery and supplies
Other operating expenses 192,160 158,689 552,704 529,558
---------------------------------------------------------
Total noninterest expense 659,409 593,798 1,945,794 1,834,332
---------------------------------------------------------
Income before income taxes 420,152 337,961 1,180,756 862,388
Less: income taxes (159,605) (119,867) (445,880) (301,179)
---------------------------------------------------------
NET INCOME $ 260,547 $ 218,094 $ 734,876 $ 561,209
=========================================================
Earnings per share (Note 4) $ 0.44 $ 0.37 $ 1.24 $ 0.95
Average shares outstanding 593,334 593,334 593,334 593,334
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> F-26
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance January 1 $ 8,832,441 $ 7,853,503
Net income 734,876 561,209
Cash dividends ($.17 per share and
$.21 per share in 1995 and 1996) (124,600) (102,845)
Change in net unrealized
loss on securities available
for sale (34,789) 242,854
------------- -------------
Balance September 30 $ 9,407,928 $ 8,554,721
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> F-27
PEOPLES BANCORP OF WASHINGTON
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30: 1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 734,876 $ 561,209
Adjustments to reconcile net income to net
cash from operating activities 5,251 (90,345)
------------- -------------
Net cash from operating activities 740,127 470,864
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from paydowns and maturities
of securities held to maturity 3,687,515 1,015,221
Proceeds from paydowns and maturities
of securities available for sale 2,680,140 853,495
Purchases of securities held to maturity 0 0
Purchases of securities available for sale (1,497,031) (2,249,766)
Sales of securities held to maturity 0 66,479
Sales of securities available for sale 990,938 2,520,591
Loans made, net of payments collected (8,499,718) (2,101,162)
Property and equipment expenditures (57,639) (467,185)
------------- -------------
Net cash from investing activities (2,695,795) (362,327)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts 3,657,815 (843,395)
Dividends paid (124,600) (102,845)
Net change in federal funds purchased (3,150,000) (325,000)
Net change in repurchase agreements (862,799) 547,768
FHLB advances 2,000,000 1,500,000
Repayment of FHLB advances (1,500,000) (500,000)
------------- -------------
Net cash from financing activities 20,416 276,528
------------- -------------
Net change in cash and cash equivalents (1,935,252) 385,065
Cash and cash equivalents at
beginning of period 4,629,741 3,079,893
------------- -------------
Cash and cash equivalents at end of period $ 2,694,489 $ 3,464,958
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> F-28
PEOPLES BANCORP OF WASHINGTON
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
Note 1 - Basis of Presentation
The consolidated financial statements include the
accounts of the Peoples Bancorp of Washington and its
wholly owned subsidiary Peoples National Bank and Trust
Company. Upon consolidation, all significant
intercompany accounts and transactions have been
eliminated.
Note 2 - General
The financial statements were prepared in accordance
with the instructions for Form 10-QSB and, therefore,
do not include all of the disclosures necessary for a
complete presentation of financial position, results of
operations and cash flows in conformity with generally
accepted accounting principles. The September 30, 1995
and 1996 financial statements have been prepared on a
basis consistent with the annual financial statements
and include, in the opinion of management, all
adjustments which consist of only normal recurring
adjustments, necessary for a fair presentation of the
results of operations and financial position for and at
the end of such interim periods.
Note 3 - Proposed Acquisition of the Company
On September 27, 1996 the Company entered into a
definitive agreement to merge with German American
Bancorp. Pursuant to the agreement, each shareholder
of the Company's common stock would exchange their
stock in the Company for a specified number of shares
of German American Bancorp common stock. The exchange
ratio will be determined based upon the average price
of German American Bancorp's common stock during the
period prior to the effective date of the merger.
Consummation of the merger requires the approval of
Peoples Bancorp shareholders and various regulatory
agencies.
<PAGE>
<PAGE> A-1
APPENDIX A
_______________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
by and among
PEOPLES BANCORP OF WASHINGTON
an Indiana corporation,
THE PEOPLES NATIONAL BANK AND TRUST COMPANY
a national banking association,
GERMAN AMERICAN BANCORP,
an Indiana corporation,
GERMAN AMERICAN HOLDINGS CORPORATION,
an Indiana corporation,
and
THE UNION BANK
an Indiana banking corporation.
_______________________________________________________
Dated: September 27, 1996<PAGE>
<PAGE> A-2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made September 27, 1996, by and among
PEOPLES BANCORP OF WASHINGTON, an Indiana corporation
("Peoples"), THE PEOPLES NATIONAL BANK AND TRUST
COMPANY, a national banking association ("Peoples
Bank"), GERMAN AMERICAN HOLDINGS CORPORATION, an
Indiana corporation ("GAHC"), GERMAN AMERICAN BANCORP,
an Indiana corporation ("GERMAN AMERICAN"), and THE
UNION BANK, an Indiana banking corporation ("Union").
Recitals
A. Peoples is a corporation duly organized and
existing under the Indiana Business Corporation Law
("IBCL") that is duly registered with the Board of
Governors of the Federal Reserve System ("FRB") as a
bank holding company under the Bank Holding Company Act
of 1956, as amended ("BHC Act"). Peoples owns all of
the outstanding capital stock of Peoples Bank. The
principal place of business of Peoples is Washington,
Daviess County, Indiana.
B. Peoples Bank is a national banking
association duly organized and existing under the
National Bank Act, chartered by the Office of the
Comptroller of the Currency ("OCC"), with its principal
banking office located in Washington, Daviess County,
Indiana.
C. German American is a corporation duly
organized and existing under the IBCL and that is duly
registered as a bank holding company under the BHC Act.
German American owns all of the outstanding capital
stock of GAHC and Union. The principal place of
business of German American is Jasper, Dubois County,
Indiana.
D. GAHC is a corporation duly organized and
existing under the IBCL and that is duly registered as
a bank holding company under the BHC Act with its
principal place of business in Jasper, Dubois County,
Indiana. GAHC owns all of the outstanding stock of
Community Trust Bank, which is not a party hereto.
E. Union is a banking corporation duly organized
and existing under The Indiana Financial Institutional
Act ("IFIA"), chartered by the Indiana Department of
Financial Institutions ("DFI"), with its principal
banking office in Loogootee, Martin County, Indiana.
<PAGE>
<PAGE> A-3
F. The parties desire to effect a transaction
whereby Union will be merged with and into Peoples Bank
and simultaneously Peoples will be merged with and into
GAHC.
AGREEMENTS
In consideration of the premises and the mutual
terms and provisions set forth in this Agreement, the
parties agree as follows.
ARTICLE ONE
TERMS OF THE MERGERS & CLOSING
SECTION 1.01. THE HOLDING COMPANY MERGER.
Pursuant to the terms and provisions of this Agreement,
the IBCL and the Plan of Merger attached hereto as
Appendix A and incorporated herein by reference (the
"Holding Company Plan of Merger"), Peoples shall merge
with and into GAHC (the "Holding Company Merger")
simultaneously with the Bank Merger (as defined below).
Peoples shall be the "Merging Holding Company" in the
Holding Company Merger and its corporate identity and
existence, separate and apart from GAHC, shall cease on
consummation of the Holding Company Merger. GAHC shall
be the "Surviving Holding Company" in the Holding
Company Merger, and its name shall not be changed
pursuant to the Holding Company Merger.
SECTION 1.02. EFFECT OF THE HOLDING COMPANY
MERGER. The Holding Company Merger shall have all the
effects provided by the IBCL.
SECTION 1.03. THE HOLDING COMPANY MERGER -
CONVERSION OF SHARES.
(a) At the Effective Time (as defined below):
(i) Each of the not more than 593,334 shares
of common stock, $1.00 stated value, of Peoples
("Peoples Common") that are issued and outstanding
immediately prior to the Effective Time shall
thereupon and without further action be converted
into shares of common stock, $10 par value, of
German American ("German American Common") at the
Exchange Ratio which shall be calculated as set
forth in this Section 1.03(a)(i). Peoples's
shareholders of record at the time the Merger
shall become effective, for the shares of Peoples
Common then held by them, respectively, shall be
allocated and entitled to receive (upon surrender
<PAGE>
<PAGE> A-4
of certificates representing said shares for
cancellation) shares of German American Common,
which total number of shares of German American
Common shall have a value (as hereinafter
determined) of $21,100,000 subject, however, to
(A) the provisions of this Section 1.03(a) with
respect to the minimum and maximum exchange ratio
and number of shares to be exchanged, (B) the
anti-dilution provisions of Section 1.03(f) of
this Agreement, and (C) the provisions of this
Section 1.03(b) with respect to fractional shares.
The consideration payable to Peoples shareholders
hereunder is sometimes hereafter referred to as
the "Merger Consideration."
For purposes of establishing the number of
shares of German American Common into which each
share of Peoples Common shall be converted at the
Effective Time(the "Exchange Ratio"), each share
of German American Common shall be valued at the
average of the lowest closing asked prices and
highest closing bid prices of German American
Common as reported by the NASDAQ National Market
System for each of the ten consecutive business
days that end on the second business day preceding
the Closing Date (as defined by Section 1.09
hereof) (the "Valuation Period"). Such value
shall then be divided into the sum of $21,100,000
to establish (to the nearest whole share) the
aggregate number of shares of German American
Common into which all of the then issued and
outstanding shares of Peoples Common (which shall
be not more than 593,334 shares) shall be
converted at the Effective Time, which number of
shares of German American Common shall then be
divided by 593,334, with the quotient therefrom
(carried to the fourth figure past the decimal
point) being the number of shares of German
American Common into which each share of Peoples
Common shall be converted at the Effective Time;
provided, however, that in no event shall the
total number of shares of German American Common
into which the 593,334 shares of Peoples Common
shall be converted be more than 659,375 shares or
fewer than 586,111 shares; and provided further,
that in no event will the Exchange Ratio be more
than 1.1113 or less than 0.9878 shares of German
American Common for each of the 593,334 shares of
Peoples Common. The maximum and minimum Exchange
Ratio, and the maximum and minimum number of
<PAGE>
<PAGE> A-5
shares of German American Common for which the
593,334 shares of Peoples Common shall be
exchanged shall be subject to adjustment in
accordance with the anti-dilution provisions of
Section 1.03(f) of this Agreement.
(ii) The shares of German American Common
issued and outstanding immediately prior to the
Effective Time shall continue to be issued and
outstanding shares of German American.
(b) No fractional shares of German American
Common shall be issued and, in lieu thereof, holders of
shares of Peoples Common who would otherwise be
entitled to a fractional share interest (after taking
into account all shares of Peoples Common held by such
holder) shall be paid an amount in cash equal to the
product of such fractional share and the average of the
highest bid and the lowest asked price of a share of
German American Common as quoted on the NASDAQ National
Market System on the last day of the Valuation Period.
(c) At the Effective Time, all of the outstanding
shares of Peoples Common, by virtue of the Holding
Company Merger and without any action on the part of
the holders thereof, shall no longer be outstanding and
shall be canceled and retired and shall cease to exist,
and each holder of any certificate or certificates
which immediately prior to the Effective Time
represented outstanding shares of Peoples Common (the
"Certificates") shall thereafter cease to have any
rights with respect to such shares, except the right of
such holders to receive, without interest, the Merger
Consideration upon the surrender of such Certificate or
Certificates in accordance with Section 1.08.
(d) At the Effective Time, each share of Peoples
Common, if any, held in the treasury of Peoples or by
any direct or indirect subsidiary of Peoples (other
than shares held in trust accounts for the benefit of
others or in other fiduciary, nominee or similar
capacities) immediately prior to the Effective Time
shall be cancelled.
(e) At the Effective Time, the shares of common
stock of Peoples Bank outstanding immediately prior to
the Effective Time shall be unchanged by the Holding
Company Merger and shall be deemed owned by the
Surviving Holding Company.
<PAGE>
<PAGE> A-6
(f) If (i) German American shall declare a stock
dividend or other distribution of property or
securities (other than a cash dividend) upon its shares
of common stock or shall subdivide, split up,
reclassify or combine its shares of common stock, and
(ii) the record date for such transaction is prior to
the date on which the Effective Time occurs,
appropriate adjustment or adjustments will be made in
the maximum and minimum total number of shares of
German American Common for which the 593,334 shares of
Peoples Common are to be exchanged and in the maximum
and minimum ratio of shares of German American Common
to be exchanged for each share of Peoples Common.
(g) If any holders of Peoples Common dissent from
the Holding Company Merger and demand dissenters'
rights under the IBCL, any issued and outstanding
shares of Peoples Common held by such dissenting
holders shall not be converted as described in this
Section 1.03 but shall from and after the Effective
Time represent only the right to receive such
consideration as may be determined to be due to such
dissenting holders pursuant to the IBCL; provided,
however, that each share of Peoples Common outstanding
immediately prior to the Effective Time and held by a
dissenting holder who shall, after the Effective Time,
withdraw his demand for dissenters' rights or lose his
right to exercise dissenters' rights shall have only
such rights as provided under the IBCL.
SECTION 1.04. THE BANK MERGER. Pursuant to the
terms and provisions of this Agreement, the National
Bank Act, the IFIA, and the Plan of Merger attached
hereto as Appendix B and incorporated herein by
reference (the "Bank Plan of Merger"), and
simultaneously with the Holding Company Merger, Union
shall merge with and into Peoples Bank (the "Bank
Merger"). Union shall be the "Merging Bank" in the
Bank Merger and its corporate identity and existence,
separate and apart from Peoples Bank, shall cease on
consummation of the Bank Merger. Peoples Bank shall be
the "Surviving Bank" and shall continue its corporate
existence under its charter under the provisions of the
National Bank Act, and the name of Peoples Bank shall
not be changed.
SECTION 1.05. EFFECT OF THE BANK MERGER. The
Bank Merger shall have all of the effects provided by
the National Bank Act and the IFIA.
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<PAGE> A-7
SECTION 1.06. THE BANK MERGER - NO CONVERSION OF
SHARES. At the Effective Time (as defined below), the
shares of Peoples Bank that were issued and outstanding
immediately prior to the Bank Merger shall continue to
be issued and outstanding, and the shares of Union
shall be cancelled.
SECTION 1.07. THE CLOSING. The closing of the
Mergers (the "Closing") shall take place at the offices
of Leagre & Barnes (or at such other place as the
parties may agree) at 9:00 A.M. Eastern Standard Time
on the Closing Date described in Section 1.09 of this
Agreement.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF
CERTIFICATES.
(a) The German American Bank shall act as
Exchange Agent in the Holding Company Merger (the
"Exchange Agent").
(b) As soon as reasonably practicable but in no
event more than five days after the Effective Time, the
Exchange Agent shall mail to each record holder of any
Certificate or Certificates whose shares were converted
into the right to receive the Merger Consideration, a
letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as
German American may reasonably specify) (each such
letter the "Merger Letter of Transmittal") and
instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consolidation.
As soon as reasonably practical but in no event more
than five days after surrender to the Exchange Agent of
a Certificate, together with a Merger Letter of
Transmittal duly executed and any other required
documents, the Exchange Agent shall transmit to the
holder of such Certificate the Merger Consideration.
No interest on the Merger Consideration issuable upon
the surrender of the Certificates shall be paid or
accrued for the benefit of holders of Certificates. If
the Merger Consideration is to be issued to a person
other than a person in whose name a surrendered
Certificate is registered, it shall be a condition of
issuance that the surrendered Certificate shall be
properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance
shall pay to the Exchange Agent any required transfer
<PAGE>
<PAGE> A-8
or other taxes or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not
applicable. German American reserves the right in all
cases to require that a surety bond on terms and in an
amount satisfactory to German American be provided to
German American at the expense of the Peoples
shareholder in the event that such shareholder claims
loss of a Certificate and requests that German American
waive the requirement for surrender of such
Certificate.
(c) No dividends that are otherwise payable on
shares of German American Common constituting the
Merger Consideration shall be paid to persons entitled
to receive such shares of German American Common until
such persons surrender their Certificates. Upon such
surrender, there shall be paid to the person in whose
name the shares of German American Common shall be
issued any dividends which shall have become payable
with respect to such shares of German American Common
(without interest and less the amount of taxes, if any,
which may have been imposed thereon), between the
Effective Time and the time of such surrender.
SECTION 1.09. THE CLOSING DATE. The Closing
shall take place on January 31, 1997 or, if later, on
the last business day of the month during which each of
the conditions in Sections 6.01(d) and 6.02(d) is
satisfied or waived by the appropriate party, or on
such later or earlier date as Peoples and German
American may agree (the "Closing Date"). The Bank
Merger shall be effective upon the issuance of a
certificate of merger by the OCC under the National
Bank Act and the Holding Company Merger shall be
effective upon the filing of Articles of Merger with
the Secretary of State of the State of Indiana (the
"Effective Time"). The parties shall use their best
efforts to cause the Effective Time of both Mergers to
occur as soon as practicable after the Closing Date.
SECTION 1.10. ACTIONS AT CLOSING.
(a) At the Closing, Peoples shall deliver to
German American:
(i) a certified copy of the Articles of
Incorporation and Bylaws of Peoples, as amended,
and a certified copy of the Articles of
Association and Bylaws of Peoples Bank, as
amended;
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<PAGE> A-9
(ii) a certificate or certificates signed by
the chief executive officer of Peoples and Peoples
Bank stating, to the best of his knowledge and
belief, after due inquiry, that (A) each of the
representations and warranties contained in
Article Two hereof is true and correct in all
material respects at the time of the Closing with
the same force and effect as if such
representations and warranties had been made at
Closing, and (B) Peoples and Peoples Bank have
performed and complied in all material respects,
unless waived by German American, with all of
their obligations and agreements required to be
performed hereunder prior to the Closing Date;
(iii) certified copies of the resolutions of
Peoples's Board of Directors and shareholders,
approving and authorizing the execution of this
Agreement and the Plan of Merger and authorizing
the consummation of the Holding Company Merger;
(iv) a certified copy of the resolutions
Peoples Bank's Board of Directors and shareholder,
as required for valid approval of the execution of
the Agreement and the consummation of the Bank
Merger;
(vi) a certificate of the Indiana Secretary
of State, dated a recent date, stating that
Peoples is duly organized and exists under the
IBCL;
(vii) a certificate of the OCC, dated a
recent date, stating that Peoples Bank is duly
organized and exists under the laws of the United
States of America; and
(viii) the legal opinion of Krieg, DeVault,
Alexander & Capehart, counsel for Peoples, to the
effect set forth as Exhibit 1.10(a)(vii).
(b) At the Closing, German American shall deliver
to Peoples:
(i) a certificate signed by the Chief
Executive Officer of German American stating, to
the best of his knowledge and belief, after due
inquiry, that (A) each of the representations and
warranties contained in Article Three is true and
correct in all material respects at the time of
the Closing with the same force and effect as if
<PAGE>
<PAGE> A-10
such representations and warranties had been made
at Closing and (B) German American and Union have
performed and complied in all material respects,
unless waived by Peoples, with all of its
obligations and agreements required to be
performed hereunder prior to the Closing Date;
(ii) a certified copy of the resolutions of
German American's Board of Directors authorizing
the execution of this Agreement;
(iii) a certified copy of the resolutions of
GAHC's Board of Director's authorizing the
execution of this Agreement and the consummation
of the Holding Company Merger.
(iv) a certified copy of the resolutions of
Union's Board of Directors and shareholder, as
required for valid approval of the execution of
this Agreement and the consummation of the Bank
Merger;
(v) the legal opinion of Leagre & Barnes,
counsel for German American, in the form attached
hereto as Exhibit 1.10(b)(v); and
(vi) certificates of the Indiana Secretary of
State, dated a recent date, stating that German
American and GAHC exist under the IBCL and that
Union exists under the IFIA.
(c) At the Closing, the parties shall insert the
Exchange Ratio determined in accordance with Section
1.03 of this Agreement into the Plan of Merger, and
shall execute and/or deliver to one another such Plan
of Merger and such other documents and instruments and
take such other actions as shall be necessary or
appropriate to consummate the Mergers.
ARTICLE TWO
REPRESENTATIONS OF PEOPLES AND PEOPLES BANK
Peoples and Peoples Bank hereby severally make the
following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Peoples is a corporation duly organized and
validly existing under the IBCL and has the corporate
power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as
now being conducted.
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<PAGE> A-11
(b) Peoples Bank is a national banking
association duly organized and validly existing under
the laws of the United States of America and has the
corporate power to own all of its property and assets,
to incur all of its liabilities and to carry on its
business as now being conducted.
(c) Peoples has authorized capital stock of
1,200,000 shares of Peoples Common, of which 593,334
shares are issued and outstanding. All of the issued
and outstanding shares of Peoples Common are duly and
validly issued and outstanding, fully paid and non-
assessable. None of the outstanding shares of Peoples
Common has been issued in violation of any preemptive
rights of the current or past shareholders of Peoples
or in violation of any applicable federal or state
securities laws or regulations.
(d) Peoples Bank has authorized capital stock of
34,625 shares of common stock, $10.00 par value, all of
which are issued and outstanding ("Peoples Bank
Common"). All of the issued and outstanding shares of
Peoples Bank Common are duly and validly issued and
outstanding and are fully paid and nonassessable. None
of the outstanding shares of Peoples Bank Common has
been issued in violation of any preemptive rights of
the current or past shareholders of Peoples Bank or in
violation of any applicable federal or state securities
laws or regulations.
(e) There are no shares of capital stock or other
equity securities of Peoples or Peoples Bank
authorized, issued or outstanding (except as set forth
in this Section 2.01) and no outstanding options,
warrants, rights to subscribe for, calls, puts, or
commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable
for, shares of the capital stock of Peoples or Peoples
Bank, or contracts, commitments, understandings or
arrangements by which Peoples or Peoples Bank are or
may be obligated to issue additional shares of its
capital stock or options, warrants or rights to
purchase or acquire any additional shares of its
capital stock.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. The
Boards of Directors of Peoples and Peoples Bank have
each, by all appropriate action, approved this
Agreement, the applicable Plan of Merger and the Merger
contemplated thereby and have authorized the execution
of this Agreement and the applicable Plan of Merger on
their behalf by their duly authorized officers and the
<PAGE>
<PAGE> A-12
performance by Peoples and Peoples Bank of its
obligations hereunder. Nothing in the Articles of
Incorporation or Bylaws of Peoples, as amended, or the
Articles of Association or Bylaws of Peoples Bank, as
amended, or in any material agreement or instrument, or
any decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this
Agreement) by or to which Peoples or Peoples Bank is
bound or subject, would prohibit Peoples or Peoples
Bank from consummating, or would be violated or
breached by Peoples's or Peoples Bank's consummation
of, this Agreement and the Mergers and other
transactions contemplated herein on the terms and
conditions herein contained. This Agreement has been
duly and validly executed and delivered by Peoples and
Peoples Bank and constitutes a legal, valid and binding
obligation of Peoples and Peoples Bank, enforceable
against Peoples and Peoples Bank in accordance with its
terms. Neither Peoples nor Peoples Bank is, nor will
be by reason of the consummation of the transactions
contemplated herein, in material default under or in
material violation of any provision of, nor will the
consummation of the transactions contemplated herein
afford any party a right to accelerate any indebtedness
under, its articles of incorporation or bylaws, any
material promissory note, indenture or other evidence
of indebtedness or security therefor, or any material
lease, contract, or other commitment or agreement to
which it is a party or by which it or its property is
bound.
SECTION 2.03. SUBSIDIARIES. Except as otherwise
disclosed in a confidential writing delivered by
Peoples and Peoples Bank to German American and
executed by all the parties concurrently with the
execution of this Agreement (the "Disclosure Schedule")
and except for the ownership by Peoples of all the
capital stock of Peoples Bank and the ownership by
Peoples Bank of all the capital stock of Peoples
Investment Center, Inc. ("PIC"), neither Peoples nor
Peoples Bank has (or has had at any time in the last
ten years) any direct or indirect ownership interest in
any corporation, partnership, limited liability
company, joint venture or other business. Peoples Bank
and PIC shall be referred to jointly and severally (for
purposes of simplicity) as "Peoples Bank" for the
purposes of the remaining provisions of this Agreement,
unless the context otherwise requires.
<PAGE>
<PAGE> A-13
SECTION 2.04. FINANCIAL INFORMATION.
(a) Peoples has furnished to German American the
consolidated balance sheet of Peoples as of December
31, 1995 and the related consolidated statements of
income, changes in shareholders' equity and cash flows
for the year then ended. Such financial statements
were prepared in accordance with generally accepted
accounting principles applied on a consistent basis
(except as may be reflected in the notes thereto), and
fairly present the consolidated financial position and
the consolidated results of operations, changes in
shareholders' equity and cash flows of Peoples in all
material respects as of the date and for the period
indicated.
(b) Peoples Bank has furnished to German American
its Consolidated Reports of Condition and Income as
filed with the FFIEC for the quarters ended March 31,
1996 and June 30, 1996 (the "Call Reports"). The Call
Reports were prepared in accordance with the applicable
regulatory instructions on a consistent basis with
previous such reports, and fairly present the financial
position and results of operations of Peoples Bank in
all material respects as of the dates and for the
periods indicated, subject, however, to normal
recurring year-end adjustments, none of which will be
material.
(c) Neither Peoples nor Peoples Bank has any
material liability, fixed or contingent, except to the
extent set forth in the financial statements and the
Call Reports described in subsections (a) and (b) of
this Section 2.04 (collectively, the "Peoples Financial
Statements") or incurred in the ordinary course of
business since the date of the most recent balance
sheet of Peoples or Peoples Bank included in the
Peoples Financial Statements.
(d) Peoples does not engage in the lending
business (except by and through Peoples Bank) or any
other business or activity other than that which is
incident to its ownership of all the capital stock of
Peoples Bank, and does not own any investment
securities (except the capital stock of Peoples Bank).
<PAGE>
<PAGE> A-14
SECTION 2.05. ABSENCE OF CHANGES. Since December
31, 1995, and except to the extent reflected in the
Call Reports, there has not been any material adverse
change in the financial condition, the results of
operations or the business of Peoples or Peoples Bank,
taken as a whole.
SECTION 2.06. ABSENCE OF AGREEMENTS WITH BANKING
AUTHORITIES. Neither Peoples nor Peoples Bank is
subject to any order (other than orders applicable to
bank holding companies or banks generally) and neither
is a party to any agreement or memorandum of
understanding with any federal or state agency charged
with the supervision or regulation of banks or bank
holding companies, including without limitation the
OCC, the Federal Deposit Insurance Company (the
"FDIC"), the FRB, and the IDFI.
SECTION 2.07. TAX MATTERS. Peoples and Peoples
Bank have filed all federal, state and local tax
returns due in respect of any of its business, income
and properties in a timely fashion and has paid or made
provision for all amounts shown due on such returns.
All such returns fairly reflect the information
required to be presented therein in all material
respects. All provisions for accrued but unpaid taxes
contained in the Peoples Financial Statements were made
in accordance with generally accepted accounting
principles.
SECTION 2.08. ABSENCE OF LITIGATION. There is no
material litigation, claim or other proceeding pending
or, to the knowledge of Peoples, threatened, before any
judicial, administrative or regulatory agency or
tribunal, to which Peoples or Peoples Bank is a party
or to which any of their properties are subject.
SECTION 2.09. EMPLOYMENT MATTERS.
(a) Neither Peoples nor Peoples Bank is a party
to or bound by any material contract arrangement or
understanding (written or otherwise) for the
employment, retention or engagement of any past or
present officer, employee, agent, consultant or other
person or entity which, by its terms, is not terminable
by Peoples or Peoples Bank, respectively, on thirty
(30) days' written notice or less without the payment
of any amount by reason of such termination.
<PAGE>
<PAGE> A-15
(b) Neither Peoples nor Peoples Bank has entered
into any collective bargaining agreement with any labor
organizations with respect to any group of employees of
Peoples and Peoples Bank, and to the knowledge of
Peoples, there is no present effort or existing
proposal to attempt to unionize any group of employees
of Peoples or Peoples Bank.
(c) Peoples and Peoples Bank are and have been in
material compliance with all applicable laws respecting
employment and employment practices, terms and
conditions of employment and wages and hours,
including, without limitation, any such laws respecting
employment discrimination and occupational safety and
health requirements, and neither Peoples nor Peoples
Bank is engaged in any unfair labor practice;
(ii) there is no unfair labor practice complaint
against Peoples or Peoples Bank pending or, to the
knowledge of Peoples, threatened before the National
Labor Relations Board; (iii) there is no labor dispute,
strike, slowdown or stoppage actually pending or, to
the knowledge of Peoples, threatened against or
directly affecting Peoples or Peoples Bank; and (iv)
neither Peoples nor Peoples Bank has experienced any
material work stoppage or other material labor
difficulty during the past five years.
(d) Except as set forth in the Disclosure
Schedule, neither the execution nor the delivery of
this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in
any payment (including without limitation severance,
unemployment compensation or golden parachute payment)
becoming due to any director or employee of Peoples or
Peoples Bank from either of such entities, (ii)
increase any benefit otherwise payable under any of
their employee plans or (iii) result in the
acceleration of the time of payment of any such
benefit. No amounts paid or payable by Peoples or
Peoples Bank to or with respect to any employee or
former employee of Peoples of Peoples Bank will fail to
be deductible for federal income tax purposes by reason
of Section 280G of the Internal Revenue Code of 1986,
as amended ("Code") or otherwise.
SECTION 2.10. REPORTS. Since January 1, 1993
Peoples and Peoples Bank have filed all reports,
notices and other statements, together with any
amendments required to be made with respect thereto, if
any, that they were required to file with (i) the
Securities and Exchange Commission ("SEC"), (ii) the
<PAGE>
<PAGE> A-16
FRB, (iii) the FDIC, (iv) the OCC and (v) any other
governmental authority with jurisdiction over Peoples
or Peoples Bank. As of their respective dates, each of
such reports and documents, including the financial
statements, exhibits and schedules thereto, complied in
all material respects with the relevant statutes, rules
and regulations enforced or promulgated by the
regulatory authority with which they were filed.
SECTION 2.11. INVESTMENT PORTFOLIO. All United
States Treasury securities, obligations of other United
States Government agencies and corporations,
obligations of States and political subdivisions of the
United States and other investment securities held by
Peoples Bank, as reflected in the Call Reports, are
carried on the books of Peoples Bank in accordance with
generally accepted accounting principles, consistently
applied. Peoples Bank does not engage in activities
that would require that it establish a trading account
under applicable regulatory guidelines and
interpretations.
SECTION 2.12. LOAN PORTFOLIO. All loans and
discounts shown in the Call Reports, or which were
entered into after June 30, 1996, but before the
Closing Date, were and will be made in all material
respects for good, valuable and adequate consideration
in the ordinary course of the business of Peoples Bank,
in accordance in all material respects with Peoples
Bank's lending policies and practices unless otherwise
approved by Peoples Bank's Board of Directors, and are
not subject to any material defenses, set offs or
counterclaims, including without limitation any such as
are afforded by usury or truth in lending laws, except
as may be provided by bankruptcy, insolvency or similar
laws or by general principles of equity. The notes or
other evidences of indebtedness evidencing such loans
and all forms of pledges, mortgages and other
collateral documents and security agreements are and
will be, in all material respects, enforceable, valid,
true and genuine and what they purport to be. Peoples
Bank has complied and will through the Closing Date
continue to comply with all laws and regulations
relating to such loans, or to the extent there has not
been such compliance, such failure to comply will not
materially interfere with the collection of any such
loan. Peoples Bank has not sold, purchased or entered
into any loan participation arrangement except where
such participation is on a pro rata basis according to
the respective contributions of the participants to
such loan amount. Peoples has no knowledge that any
condition of property in which Peoples Bank has an
interest as collateral to secure a loan or that is held<PAGE>
<PAGE> A-17
as an asset of any trust violates the Environmental
Laws (defined in Section 2.15) in any material respect
or obligates Peoples, or Peoples Bank, or the owner or
operator of such property to remedy, stabilize,
neutralize or otherwise alter the environmental
condition of such property.
SECTION 2.13. ERISA.
(a) Except as disclosed in the Disclosure
Schedule, no person participates in any "employee
welfare benefit plan" or "employee pension benefit
plan" (as those terms are respectively defined in
Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")), nor may any
person reasonably expect to participate in any such
plan, in either case, on account of his or her past or
present employment with Peoples or Peoples Bank.
Peoples and Peoples Bank do not maintain any retirement
or deferred compensation plan, savings, incentive,
stock option or stock purchase plan, unemployment
compensation plan, vacation pay, severance pay, bonus
or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements
(referred to collectively hereinafter as "fringe
benefit arrangements") for any past or present
employee, consultant or agent of Peoples or Peoples
Bank, whether pursuant to contract, arrangement, custom
or informal understanding, which does not constitute an
"employee benefit plan" (as defined in Section 3(3) of
ERISA), except as listed in the Disclosure Schedule.
(b) During the past sixty months, Peoples has not
maintained any employee welfare benefit plans or
employee pension benefit plans except for plans listed
on the Disclosure Schedule. There have been no
amendments to any of the employee pension benefit
plans, employee welfare benefit plans or fringe benefit
arrangements listed on the Disclosure Schedule since
December 31, 1993.
(c) All employee pension benefit plans, employee
welfare benefit plans and fringe benefit arrangements
listed on the Disclosure Schedule comply in form and in
operation in all material respects with all applicable
requirements of law and regulation. All employee
pension benefit plans maintained by Peoples and Peoples
Bank comply in form and in operation with all
applicable requirements of Sections 401(a) and 401(k)
of the Code. Except as disclosed in the Disclosure
Schedule, neither Peoples nor Peoples Bank has (i)
<PAGE>
<PAGE> A-18
incurred any liability for tax under Section 4971 of
the Code on account of any accumulated funding
deficiency and no plan or arrangement listed in the
Disclosure Schedule has incurred any accumulated
funding deficiency within the meaning of Section 412 or
418(B) of the Code; (ii) applied for or obtained a
waiver by the IRS of any minimum funding requirement
under Section 412 of the Code; (iii) become subject to
any disallowance of deductions under Sections 419 or
419(A) of the Code; (iv) incurred any liability for
excise tax under Sections 4972, 4975, or 4976 of the
Code or any liability under Section 406 of ERISA; (v)
incurred any liability to the Pension Benefit Guaranty
Corporation; (vi) had a reportable event (within the
meaning of Section 4043 of ERISA); or (vii) breached
any of the duties or failed to perform any of the
obligations imposed upon the fiduciaries or plan
administrators under Title I or ERISA.
(d) A true and correct copy of each of the plans
and arrangements listed on the Disclosure Schedule as
in effect on the date hereof and each trust agreement
relating to each such plan and arrangement, has been
supplied to German American. A true and correct copy
of the annual report (as described in Section 103 of
ERISA) most recently filed for each plan listed in the
Disclosure Schedule has been supplied to German
American, and there have been no material changes in
the financial condition in the respective plans from
that stated in the annual reports supplied. In the
case of any plan or arrangement which is not in written
form, German American has been supplied with an
accurate description of such plan or arrangement.
Peoples and Peoples Bank have provided to German
American a description of any liability or contingent
liability which may be incurred by Peoples or Peoples
Bank if any plan or arrangement listed on the
Disclosure Schedule were terminated or if Peoples or
Peoples Bank was to cease its participation therein.
(e) In the case of each plan or arrangement
listed in the Disclosure Schedule which is a defined
benefit plan (within the meaning of Section 3(35) of
ERISA), the net fair market value of the assets held to
fund such plan or arrangement will equal or exceed the
present value of all accrued benefits thereunder, both
vested and nonvested, as determined in accordance with
an actuarial costs method acceptable under section
3(31) of ERISA.
<PAGE>
<PAGE> A-19
(f) On a timely basis, Peoples and Peoples Bank
have made all contributions or payments to or under
each plan or arrangement listed in the Disclosure
Schedule as required pursuant to each such plan or
arrangement, any collective bargaining agreements or
other provision for reserves to meet contributions and
payments under such plans or arrangements which have
not been made because they are not yet due.
(g) None of the plans or arrangements listed in
the Disclosure Schedule owns (or has owned within the
past 60 months) any Peoples Common or other securities
of Peoples, Peoples Bank or a related entity.
SECTION 2.14. TITLE TO PROPERTIES; INSURANCE.
Peoples and Peoples Bank have marketable title,
insurable at standard rates, free and clear of all
liens, charges and encumbrances (except taxes which are
a lien but not yet payable and liens, charges or
encumbrances reflected in the Peoples Financial
Statements and easements, rights-of-way, and other
restrictions which are not material and, in the case of
Other Real Estate Owned, as such real estate is
internally classified on the books of Peoples Bank,
rights of redemption under applicable law) to all real
properties reflected on the Peoples Financial
Statements as being owned by Peoples or Peoples Bank,
respectively. All material leasehold interests used by
Peoples and Peoples Bank in their respective operations
are held pursuant to lease agreements which are valid
and enforceable in accordance with their terms. All
such properties comply in all material respects with
all applicable private agreements, zoning requirements
and other governmental laws and regulations relating
thereto and there are no condemnation proceedings
pending or, to the knowledge of Peoples, threatened
with respect to such properties. Peoples and Peoples
Bank have valid title or other ownership or use rights
under licenses to all material intangible personal or
intellectual property used by Peoples and Peoples Bank
in their respective business free and clear of any
claim, defense or right of any other person or entity
which is material to such property, subject only to
rights of the licensor pursuant to applicable license
agreements, which rights do not materially adversely
interfere with the use or enjoyment of such property.
All insurable properties owned or held by Peoples or
Peoples Bank are insured in such amounts, and against
fire and other risks insured against by extended
coverage and public liability insurance, as is
customary with companies of the same size and in the
same business.
<PAGE>
<PAGE> A-20
SECTION 2.15. ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "Environmental
Laws" means all local, state and federal environmental,
health and safety laws and regulations in all
jurisdictions in which Peoples or Peoples Bank has done
business or owned property, including, without
limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental
Response, Compensation and Liability Act, the Federal
Clean Water Act, the Federal Clean Air Act, and the
Federal Occupational Safety and Health Act.
(b) Neither (i) the conduct by Peoples and
Peoples Bank of operations at any property, nor (ii)
any condition of any property owned by Peoples or
Peoples Bank within the past ten (10) years and used in
their business operations, nor (iii) to the knowledge
of Peoples the condition of any property owned by them
within the past ten (10) years but not used in their
business operations, nor (iv) to the knowledge of
Peoples the condition of any property held by them as a
trust asset within the past ten (10) years, violates or
violated Environmental Laws in any material respect,
and no condition or event has occurred with respect to
any such property that, with notice or the passage of
time, or both, would constitute a material violation of
Environmental Laws or obligate (or potentially
obligate) Peoples or Peoples Bank to remedy, stabilize,
neutralize or otherwise alter the environmental
condition of any such property. Neither Peoples nor
Peoples Bank has received any notice from any person or
entity that Peoples or Peoples Bank or the operation of
any facilities or any property owned by either of them,
or held as a trust asset, are or were in violation of
any Environmental Laws or that either of them is
responsible (or potentially responsible) for the
cleanup of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on or
beneath any such property.
SECTION 2.16. COMPLIANCE WITH LAW. Peoples and
Peoples Bank each have all material licenses,
franchises, permits and other governmental
authorizations that are legally required to enable it
to conduct their respective businesses as presently
conducted and are in compliance in all material
respects with all applicable laws and regulations, the
violation of which would be material.
<PAGE>
<PAGE> A-21
SECTION 2.17. BROKERAGE. Except as set forth in
the Disclosure Schedule, there are no claims,
agreements, arrangements, or understandings (written or
otherwise) for brokerage commissions, finders' fees or
similar compensation in connection with the Mergers
payable by Peoples or Peoples Bank.
SECTION 2.18. MATERIAL CONTRACTS. Except as set
forth in the Disclosure Schedule, neither Peoples nor
Peoples Bank is a party to or bound by any oral or
written (i) material agreement, contract or indenture
under which it has borrowed or will borrow money (not
including federal funds and money deposited, including
without limitation, checking and savings accounts and
certificates of deposit and borrowings from the FHLBB
and the FRB); (ii) material guaranty of any obligation
for the borrowing of money or otherwise, excluding
endorsements made for collection and guarantees made in
the ordinary course of business and letters of credit
issued in the ordinary course of business; (iii)
contract, arrangement or understanding with any present
or former officer, director or shareholder (except for
deposit or loan agreements entered into in the ordinary
course of business); (iv) material license, whether as
licensor or licensee; (v) contract or commitment for
the purchase of materials, supplies or other real or
personal property in an amount in excess of $10,000 or
for the performance of services over a period of more
than thirty days and involving an amount in excess of
$10,000; (vi) joint venture or partnership agreement or
arrangement; (vii) contract arrangement or
understanding with any present or former consultant,
advisor, investment banker, broker, attorney or
accountant; or (viii) contract, agreement or other
commitment not made in the ordinary course of business.
SECTION 2.19. COMPLIANCE WITH AMERICANS WITH
DISABILITIES ACT. (a) To the best of Peoples's
knowledge, Peoples and Peoples Bank and their
respective properties (including those held by either
of them in a fiduciary capacity) are in compliance with
all applicable provisions of the Americans with
Disabilities Act (the "ADA"), and (b) no action under
the ADA against Peoples, Peoples Bank or any of its
properties has been initiated nor, to the best of
Peoples's knowledge, has been threatened or
contemplated.
<PAGE>
<PAGE> A-22
SECTION 2.20. STATEMENTS TRUE AND CORRECT. None
of the information supplied or to be supplied by
Peoples or Peoples Bank for inclusion in any documents
to be filed with the FRB, the OCC, the SEC, the IDFI,
or any other regulatory authority in connection with
the Mergers will, at the respective times such
documents are filed, be false or misleading with
respect to any material fact or omit to state any
material fact necessary in order to make the statements
therein not misleading.
SECTION 2.21. PEOPLES'S KNOWLEDGE. With respect
to representations and warranties herein that are made
or qualified as being made "to the knowledge of
Peoples" or words of similar import, it is understood
and agreed that matters within the knowledge of the
directors and the officers of Peoples and Peoples Bank
shall be considered to be within the knowledge of
Peoples.
ARTICLE THREE
REPRESENTATIONS OF GERMAN AMERICAN, GAHC AND UNION
German American, GAHC and Union hereby severally
make the following representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) German American is a corporation duly
incorporated and validly existing under the IBCL and
has the corporate power to own all of its property and
assets, to incur all of its liabilities and to carry on
its business as now being conducted.
(b) GAHC is a corporation duly incorporated and
validly existing under the IBCL and has the corporate
power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as
now being conducted.
(c) Union is a corporation duly incorporated and
validly existing under the IFIA and has the corporate
power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as
now being conducted.
<PAGE>
<PAGE> A-23
(d) German American has authorized capital stock
of (i) 5,000,000 shares of German American Common, of
which, as of the date of this Agreement, 1,827,546
shares are issued and outstanding, and (ii) 500,000
shares of preferred stock, $10.00 par value per share,
of which no shares are issued and outstanding. All of
the issued and outstanding shares of German American
Common are duly and validly issued and outstanding,
fully paid and non-assessable.
(e) GAHC has authorized capital stock of 200,000
shares of common stock, $1 par value per share (the
"GAHC Common"), and 12,000 shares of preferred stock,
$1 par value. As of the date of this Agreement, 9,999
of the issued and outstanding shares of GAHC Common are
duly and validly issued and outstanding, fully paid and
non-assessable, and none of the shares of GAHC
preferred stock are issued or outstanding.
(f) Union has authorized capital stock of 4,800
shares of common stock, $100 par value per share (the
"Union Common"). As of the date of this Agreement, all
of the shares of Union Common are duly and validly
issued and outstanding, fully paid, and owned by
German American.
(g) The shares of German American Common that are
to be issued to the shareholders of Peoples pursuant to
the Holding Company Merger have been duly authorized
and, when issued in accordance with the terms of this
Agreement, will be validly issued and outstanding,
fully paid and non-assessable.
SECTION 3.02. AUTHORIZATION. The Boards of
Directors of German American, GAHC and Union have each,
by all appropriate action, approved this Agreement and
the Mergers and authorized the execution hereof on
their behalf by their duly authorized officers and the
performance by each such entity of its obligations
hereunder. Nothing in the Articles of Incorporation or
Bylaws of German American, GAHC or Union, as amended,
or any other agreement, instrument, decree, proceeding,
law or regulation (except as specifically referred to
in or contemplated by this Agreement) by or to which
either of them or any of their subsidiaries is bound or
subject would prohibit German American, GAHC or Union
from entering into and consummating this Agreement and
the Mergers on the terms and conditions herein
contained. This Agreement has been duly and validly
<PAGE>
<PAGE> A-24
executed and delivered by German American, GAHC and
Union and constitutes a legal, valid and binding
obligation of German American, GAHC and Union
enforceable against German American, GAHC and Union in
accordance with its terms and no other corporate acts
or proceedings are required to be taken by German
American, GAHC or Union to authorize the execution,
delivery and performance of this Agreement. Except for
any requisite approvals of the FRB, OCC and IDFI and
the filing of a registration statement with the SEC and
certain state securities regulatory agencies, no notice
to, filing with, authorization by, or consent or
approval of, any federal or state regulatory authority
is necessary for the execution and delivery of this
Agreement or the consummation of the Mergers by German
American, GAHC or Union.
SECTION 3.03. SUBSIDIARIES. Each of German
American's subsidiaries is duly organized and validly
existing under the laws of the jurisdiction of its
incorporation and has the corporate power to own its
respective properties and assets, to incur its
respective liabilities and to carry on its respective
business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The
consolidated balance sheet of German American and its
subsidiaries as of December 31, 1995 and related
consolidated statements of income, changes in
shareholders' equity and cash flows for the year then
ended together with the notes thereto, included in
German American's most recent Annual Report on Form 10-
K, as filed with the SEC (the "10-K"), and the
unaudited consolidated balance sheets of German
American and its subsidiaries as of March 31 and June
30, 1996, and the related unaudited consolidated
statements of income, changes in shareholders' equity
and cash flows for the periods then ended included in
German American's Quarterly Reports on Form 10-Q for
the quarters ended March 31 and June 30, 1996 as filed
with the SEC (the "10-Q Reports") (collectively the
financial statements and notes thereto included in the
10-Q Reports and the 10-K are sometimes referred to as
the "German American Financial Statements"), have been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis
(except as disclosed therein) and fairly present the
consolidated financial position and the consolidated
results of operations, changes in shareholders' equity
and cash flows of German American and its consolidated
subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial
statements, to normal recurring year-end adjustments,
none of which will be material).<PAGE>
<PAGE> A-25
SECTION 3.05. ABSENCE OF CHANGES. Since December
31, 1995 (and except to the extent reflected in the 10-
Q Reports), there has not been any material adverse
change in the consolidated financial condition or the
consolidated results of operations or the business of
German American and its subsidiaries, taken as a whole.
SECTION 3.06. REPORTS. Since January 1, 1993
(or, in the case of subsidiaries of German American,
the date of acquisition thereof by German American, if
later), German American and each of its subsidiaries
have filed all reports, notices and other statements,
together with any amendments required to be made with
respect thereto, that it was required to file with (i)
the SEC, (ii) the FRB, (iii) the FDIC, (iv) the IDFI,
(v) any applicable state securities or banking
authorities, and (vi) any other governmental authority
with jurisdiction over German American or any of its
subsidiaries. As of their respective dates, each of
such reports and documents, as amended, including the
financial statements, exhibits and schedules thereto,
complied in all material respects with the relevant
statutes, rules and regulations enforced or promulgated
by the regulatory authority with which they were filed.
None of the information included in such reports or
documents was, at their respective dates of filing,
false or misleading with respect to any material fact,
or omitted to state any material fact necessary in
order to make the statements therein not misleading, on
a consolidated basis, taking into account the
circumstances under which such reports or documents
were filed and considering the total mix of information
that was at the time publicly available concerning
German American and its subsidiaries.
SECTION 3.07. ABSENCE OF LITIGATION. There is no
material litigation, claim or other proceeding pending
or, to the knowledge of German American, threatened,
before any judicial, administrative or regulatory
agency or tribunal against German American or any of
its subsidiaries, or to which the property of German
American or any of its subsidiaries is subject, which
is required to be disclosed in SEC reports under Item
103 of Regulation S-K, and which has not been so
disclosed.
SECTION 3.08. ABSENCE OF AGREEMENTS WITH BANKING
AUTHORITIES. Neither German American nor any of its
subsidiaries is subject to any order (other than orders
applicable to bank holding companies or banks
generally) or is a party to any agreement or memorandum
<PAGE>
<PAGE> A-26
of understanding with any federal or state agency
charged with the supervision or regulation of banks or
bank holding companies, including without limitation
the FDIC, the DFI and the FRB.
SECTION 3.09. COMPLIANCE WITH LAW. German
American and its subsidiaries have all material
licenses, franchises, permits and other governmental
authorizations that are legally required to enable them
to conduct their respective businesses as presently
conducted and are in compliance in all material
respects with all applicable laws and regulations, the
violation of which would be material.
ARTICLE FOUR
COVENANTS OF PEOPLES AND PEOPLES BANK
SECTION 4.01. CONDUCT OF BUSINESS.
(a) Peoples and Peoples Bank shall continue to
carry on their respective businesses, and shall
discharge or incur obligations and liabilities, only in
the ordinary course of business as heretofore conducted
and, by way of amplification and not limitation with
respect to such obligation, neither Peoples nor Peoples
Bank will, without the prior written consent of German
American:
(i) declare or pay any dividend or make any
other distribution to shareholders, whether in
cash, stock or other property, except as provided
in Section 4.09 of this Agreement; or
(ii) issue (or agree to issue) any common or
other capital stock or any options, warrants or
other rights to subscribe for or purchase common
or any other capital stock or any securities
convertible into or exchangeable for any capital
stock; or
(iii) directly or indirectly redeem, purchase
or otherwise acquire (or agree to redeem, purchase
or acquire) (except for shares acquired in
satisfaction of a debt previously contracted) any
of their own common or any other capital stock; or
(iv) effect a split, reverse split,
reclassification, or other similar change in, or
of, any common or other capital stock or otherwise
reorganize or recapitalize; or
(v) change the Articles of Incorporation or
Bylaws of Peoples or the Articles of Association
or Bylaws of Peoples Bank; or
<PAGE>
<PAGE> A-27
(vi) pay or agree to pay, conditionally or
otherwise, any bonus (other than year end bonuses
up to a maximum of $120,000 in accordance with
existing plans and policies consistent with past
practice, provided that the income base used for
purposes of calculating bonuses shall exclude net
gain from the sale of investment securities, loans
and other assets even if past bonus practice would
not have excluded such net gain), additional
compensation (other than ordinary and normal
salary increases consistent with past practices)
or severance benefit or otherwise make any changes
out of the ordinary course of business with
respect to the fees or compensation payable or to
become payable to consultants, advisors,
investment bankers, brokers, attorneys,
accountants, directors, officers or employees or,
except as required by law, adopt or make any
change in any Employee Plan or other arrangement
or payment made to, for or with any of such
consultants, advisors, investment bankers,
brokers, attorneys, accountants, directors,
officers or employees; provided, however, that
Peoples and Peoples Bank may pay the fees,
expenses and other compensation of consultants,
advisors, investment bankers, brokers, attorneys
and accountants when, if, and as earned in
accordance with the terms of the contracts,
arrangements or understandings of Peoples or
Peoples Bank specifically disclosed on the
Disclosure Schedule;
(vii) borrow or agree to borrow any material
amount of funds except in the ordinary course of
business, or directly or indirectly guarantee or
agree to guarantee any material obligations of
others except in the ordinary course of business
or pursuant to outstanding letters of credit; or
(viii) make or commit to make any new loan or
issue or commit to issue any new letter of credit
or any new or additional discretionary advance
under any existing line of credit, or purchase or
agree to purchase any interest in a loan
participation, in aggregate principal amounts (A)
in excess of $250,000 to any one borrower (or
group of affiliated borrowers) or (B) that would
cause Peoples Bank's credit extensions or
commitments to any one borrower (or group of
affiliated borrowers) to exceed $750,000 (German
<PAGE>
<PAGE> A-28
American's consent to credit extensions in the
ordinary course of business will not be
unreasonably withheld); or
(ix) other than U.S. Treasury obligations or
asset-backed securities issued or guaranteed by
United States governmental agencies or financial
institution certificates of deposit insured by the
FDIC, in either case having an average remaining
life of five years or less (except that maturities
may extend to seven years on variable-rate
securities), purchase or otherwise acquire any
investment security for their own accounts, or
sell any investment security owned by either of
them which is designated as held-to-maturity, or
engage in any activity that would require the
establishment of a trading account for investment
securities; or
(x) increase or decrease the rate of interest
paid on time deposits, or on certificates of
deposit, except in a manner and pursuant to
policies consistent with past practices; or
(xi) enter into or amend any agreement,
contract or commitment out of the ordinary course
of business; or
(xii) except in the ordinary course of
business, place on any of their assets or
properties any mortgage, pledge, lien, charge, or
other encumbrance; or
(xiii) except in the ordinary course of
business, cancel, release, compromise or
accelerate any material indebtedness owing to
Peoples or Peoples Bank, or any claims which
either of them may possess, or voluntarily waive
any material rights with respect thereto; or
(xiv) sell or otherwise dispose of any real
property or any material amount of any personal
property other than properties acquired in
foreclosure or otherwise in the ordinary course of
collection of indebtedness to Peoples or Peoples
Bank; or
<PAGE>
<PAGE> A-29
(xv) foreclose upon or otherwise take title
to or possession or control of any real property
without first obtaining a phase one environmental
report thereon, prepared by a reliable and
qualified person or firm acceptable to German
American, which indicates that the property is
free of pollutants, contaminants or hazardous or
toxic waste materials; provided, however, that
neither Peoples nor Peoples Bank shall be required
to obtain such a report with respect to single
family, non-agricultural residential property of
one acre or less to be foreclosed upon unless it
has reason to believe that such property might
contain such materials or otherwise might be
contaminated; or
(xvi) commit any act or fail to do any act
which will cause a material breach of any material
agreement, contract or commitment; or
(xvii) violate any law, statute, rule,
governmental regulation or order, which violation
might have a material adverse effect on its
business, financial condition, or earnings; or
(xviii) purchase any real or personal
property or make any other capital expenditure
where the amount paid or committed therefor is in
excess of $50,000 other than purchases of property
made in the ordinary course of business in
connection with loan collection activities or
foreclosure sales in connection with any of
Peoples's or Peoples Bank's loans, or
(xix) issue certificate(s) for shares of
Peoples Common to any Peoples shareholder in
replacement of certificate(s) claimed to have been
lost or destroyed without first obtaining from
such shareholder(s), at the expense of such
shareholder(s), a surety bond from a recognized
insurance company in an amount that would
indemnify Peoples (and its successors) against
lost certificate(s) but not less than $50 per
share of Peoples Common, and obtaining a usual and
customary affidavit of loss and indemnity
agreement from such shareholder(s); provided,
however, that Peoples may waive the surety bond
requirement in connection with the issuance of
replacement certificates to any shareholder if the
<PAGE>
<PAGE> A-30
number of shares of Peoples Common so reissued
(together with the number of shares previously
reissued since July 3, 1996 to such shareholder
and all other shareholders who are affiliated or
associated with such shareholder) does not exceed
an aggregate of 300 shares.
(b) Neither Peoples nor Peoples Bank shall,
without the prior written consent of German American,
engage in any transaction or take any other action that
would render untrue in any material respect any of the
representations and warranties of Peoples or Peoples
Bank contained in Article Two hereof if such
representations and warranties were given as of the
date of such transaction or action.
(c) Peoples shall promptly notify German American
in writing of the occurrence of any matter or event
known to Peoples or Peoples Bank that is, or is likely
to become, materially adverse to the business,
operations, properties, assets or condition (financial
or otherwise) of Peoples or Peoples Bank taken as a
whole.
(d) Neither Peoples nor Peoples Bank shall (a)
directly or indirectly solicit, encourage or facilitate
(nor shall they permit any of their respective
officers, directors, employees or agents directly or
indirectly to solicit, encourage or facilitate),
including by way of furnishing information other than
the terms of this Agreement, any inquiries or proposals
from third parties for a merger, consolidation, share
exchange or similar transaction involving Peoples or
Peoples Bank or for the acquisition of the stock or
substantially all of the assets or business of peoples
or Peoples Bank, or (b) subject to the fiduciary duties
of the Directors of Peoples as advised by counsel in a
written opinion, discuss with or enter into
conversations with any person concerning any such
merger, consolidation, share exchange, acquisition or
other transaction. Peoples shall promptly notify
German American orally (to be confirmed in writing as
soon as practicable thereafter) of all of the relevant
details concerning any inquiries or proposals that it
may receive relating to any such matters, including
actions it intends to take with respect to such
matters.
<PAGE>
<PAGE> A-31
SECTION 4.02. BREACHES. Peoples shall, in the
event it has knowledge of the occurrence of any event
or condition which would cause or constitute a breach
(or would have caused or constituted a breach had such
event occurred or been known prior to the date of this
Agreement) of any of its or Peoples Bank's
representations or agreements contained or referred to
in this Agreement, give prompt notice thereof to German
American and use its best efforts to prevent or
promptly remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS.
Peoples shall cause to be duly called and held, on a
date mutually selected by German American and Peoples,
a special meeting of its shareholders (the "Peoples
Shareholders' Meeting") for submission of this
Agreement and the Holding Company Merger for approval
of Peoples shareholders as required by the IBCL. In
connection with the Peoples Shareholders' Meeting, (i)
Peoples shall cooperate with and assist German American
in preparing and filing a Proxy Statement/Prospectus
(the "Proxy Statement/Prospectus") with the SEC in
accordance with SEC requirements and Peoples shall mail
it to its shareholders, (ii) Peoples shall furnish
German American all information concerning itself that
German American may reasonably request in connection
with such Proxy Statement/Prospectus, and (iii) the
Board of Directors of Peoples shall (unless in the
written opinion of counsel for Peoples the fiduciary
duties of the Board of Directors prohibit such a
recommendation, in which event the individual members
of the Board of Directors shall nevertheless remain
personally obligated to support the Agreement and the
Holding Company Merger pursuant to their personal
undertakings on the signature page of this Agreement)
unanimously recommend to its shareholders the approval
of this Agreement and the Holding Company Merger
contemplated hereby and use its best efforts to obtain
such shareholder approval.
SECTION 4.04. FINANCIAL INFORMATION. Peoples
will, at its expense, commence preparation of financial
statements, Guide 3 statistical data, selected
financial data, and "Management's Discussion and
Analysis of Financial Condition and Results of
Operations" (Items 301, 302, 303 and 304(b) of SEC
Regulation S-K) ("MD&A") in compliance with SEC
requirements for inclusion in the Registration
Statement, including unaudited financial statements and
related Guide 3 and MD&A as of and for the appropriate
quarterly and year-to-date periods ending September 30,
<PAGE>
<PAGE> A-32
1996, and Peoples shall use its best efforts to provide
such financial statements and data and MD&A to German
American in EDGAR format as soon as practicable but in
no event later than October 21, 1996.
SECTION 4.05. CONSUMMATION OF AGREEMENT. Peoples
shall use its best efforts to perform and fulfill all
conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the
Mergers in accordance with the terms and provisions
hereof. Peoples shall furnish to German American in a
timely manner all information, data and documents in
the possession of Peoples or Peoples Bank requested by
German American as may be required to obtain any
necessary regulatory or other approvals of the Mergers
(including the application of Peoples Bank to the OCC
under the Bank Merger Act with respect to the Bank
Merger) or to file with the SEC a registration
statement on Form S-4 (the "Registration Statement")
relating to the shares of German American Common to be
issued to the shareholders of Peoples pursuant to the
Mergers and this Agreement, and shall otherwise
cooperate fully with German American to carry out the
purpose and intent of this Agreement.
SECTION 4.06. ENVIRONMENTAL REPORTS. Except as
German American shall otherwise consent with respect to
any residential real estate (which consent will not be
unreasonably withheld by German American), Peoples
shall, at German American's expense, cooperate with an
environmental consulting firm designated by German
American in connection with the conduct by such firm of
a phase one environmental investigation on all real
property owned or leased by Peoples or its subsidiaries
as of the date of this Agreement, and any real property
acquired or leased by Peoples or its subsidiaries after
the date of this Agreement, except as otherwise
provided in Section 4.01(a)(xv). If further
investigation procedures are required as to any
property by the report of the phase one investigation
in German American's reasonable opinion, Peoples shall
as soon as practicable, at Peoples's expense,
commission the taking of such further procedures and
provide a report of the results of such further
procedures to German American. German American shall
have fifteen (15) business days from the receipt of any
such investigation report to notify Peoples of any
objection to the contents of any such report. Should
the cost of taking all remedial and corrective actions
and measures (i) required by applicable law, or
(ii) recommended or suggested by such report or reports
<PAGE>
<PAGE> A-33
and prudent in light of the findings of such report, in
the aggregate, exceed the sum of $100,000, as
reasonably estimated by the environmental expert
retained for such purpose by German American and
reasonably acceptable to Peoples, or if the cost of
such actions and measures cannot be so reasonably
estimated by such expert with any reasonable degree of
certainty, then German American shall have the right
pursuant to Section 7.03 hereof, for a period of 10
business days following receipt of such estimate or
indication that the cost of such actions and measures
cannot be so reasonably estimated, to terminate this
Agreement without further obligation to Peoples, which
shall be German American's sole remedy in such event.
SECTION 4.07. RESTRICTION ON RESALES. Peoples
shall obtain and deliver to German American, at least
thirty (30) days prior to the Closing Date, signed
representations, in form reasonably acceptable to
German American, of each shareholder who may reasonably
be deemed an "affiliate" of Peoples as of the date of
the Shareholders' Meeting within the meaning of such
term as used in Rule 145 under the Securities Act of
1933, as amended (the "Securities Act"), regarding
their prospective compliance with the provisions of
such Rule 145. Peoples shall also obtain and deliver
to German American at least 30 days prior to the
Closing Date, the signed agreements of each shareholder
who may reasonably be deemed an "affiliate" (as such
term is described in the preceding sentence) of Peoples
as of the date of the Shareholders' Meeting agreeing
not to sell any shares of German American Common or
otherwise reduce his or her risk relative to such
shares, until such time as financial results covering
at least thirty (30) days of post-Merger combined
operations have been filed by German American with the
SEC in a quarterly report on Form 10-Q or in an annual
report on Form 10-K.
SECTION 4.08. ACCESS TO INFORMATION. Peoples
shall permit German American reasonable access, in a
manner which will avoid undue disruption or
interference with Peoples's normal operations, to its
and Peoples Bank's properties and shall disclose and
make available to German American all books, documents,
papers and records relating to its and Peoples Bank's
assets, stock, ownership, properties, operations,
obligations and liabilities, including, but not limited
to, all books of account (including general ledgers),
tax records, minute books of directors' and
shareholders' meetings, organizational documents,
<PAGE>
<PAGE> A-34
material contracts and agreements, loan files, filings
with any regulatory authority, accountants' workpapers,
litigation files, plans affecting employees, and any
other business activities or prospects in which German
American may have an interest in light of the
transactions contemplated by this Agreement. During the
period from the date of this Agreement to the Effective
Time, Peoples will cause one or more of it or Peoples
Bank's designated representatives to confer on a
regular basis with the President of German American, or
any other person designated in a written notice given
to Peoples by German American pursuant to this
Agreement, to report the general status of the ongoing
operations of Peoples and Peoples Bank. Peoples will
promptly notify German American of any material change
in the normal course of the operation of its business
or properties and of any regulatory complaints,
investigations or hearings (or communications
indicating that the same may be contemplated), or the
institution or the threat of litigation involving
Peoples or Peoples Bank, and will keep German American
fully informed of such events. German American will
hold any such information which is nonpublic in
confidence in accordance with the provisions of Section
8.01 hereof.
SECTION 4.09. DIVIDENDS. Notwithstanding Section
4.01(a) of this Agreement, Peoples may (in the absence
of any material adverse change in its consolidated
financial condition, results of operations, or business
other than the adverse change that is expected to
result from the expenses associated with the Mergers),
continue to declare and pay quarterly cash dividends
(during September and December 1996 for the respective
quarters ending September 30 and December 31, 1996 and
during the third month of each subsequent calendar
quarter with respect to that calendar quarter) to
Peoples shareholders in a quarterly amount not
exceeding $.07 per share of Peoples Common, or an
aggregate of not more than $.28 per share for 1996.
German American typically considers the
declaration of cash dividends on German American Common
at meetings of its Board of Directors held the first
month of each calendar quarter, and typically declares
any such dividends to be payable to holders of record
of German American Common as of a subsequent date that
is within the same calendar month as the month of
declaration. In order to assure that Peoples
shareholders will be entitled to receive, at the end of
<PAGE>
<PAGE> A-35
each calendar quarter, a dividend with respect to his
or her Peoples Common, or a dividend with respect to
the German American Common to be exchanged therefor
pursuant to the Holding Company Merger, but not both,
Peoples shall (commencing with its dividend for the
first quarter of 1997 expected to be considered at the
March 1997 meeting of the Peoples Board if the
Effective Time has for any reason not then occurred)
declare its quarterly dividends to be payable to its
shareholders of record as of a date that is after the
date in the following month that is established by
German American as the record date for the following
month's cash dividend with respect to German American
Common.
ARTICLE FIVE
COVENANTS OF GERMAN AMERICAN AND UNION
SECTION 5.01. REGULATORY APPROVALS AND
REGISTRATION STATEMENT.
(a) German American shall file (or cause GAHC and
Union to file or cooperate with Peoples and Peoples
Bank in filing) all regulatory applications required in
order to consummate the Mergers, including all
necessary applications for the prior approvals of the
FRB, the OCC, and the IDFI. German American shall use
its best efforts to cause such banking agency
regulatory applications to be filed on or before
September 16, 1996. German American shall keep Peoples
reasonably informed as to the status of such
applications and promptly send or deliver copies of
such applications, and of any supplementally filed
materials, to counsel for Peoples.
(b) German American shall file with the SEC the
Registration Statement relating to the shares of German
American Common to be issued to the shareholders of
Peoples pursuant to this Agreement, and shall use its
best efforts to file such Registration Statement by
November 7, 1996 and shall use its best efforts to
cause the Registration Statement to become effective as
soon as practicable. At the time the Registration
Statement becomes effective, the form of the
Registration Statement shall comply in all material
respects with the provisions of the Securities Act and
the published rules and regulations thereunder, and
shall not contain any untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not false or misleading. At the time of the
<PAGE>
<PAGE> A-36
mailing thereof to the shareholders of Peoples and
German American and at the time of the Peoples
Shareholders' Meeting, and the German American
Shareholder Meeting the Proxy Statement/Prospectus
included as part of the Registration Statement, as
amended or supplemented by any amendment or supplement,
shall not contain any untrue statement of a material
fact or omit to state any material fact regarding
German American or the Holding Company Merger necessary
to make the statements therein not false or misleading.
German American shall timely file all documents
required to obtain all necessary Blue Sky permits and
approvals, if any, required to carry out the Merger
shall pay all expenses incident thereto and shall use
its best efforts to obtain such permits and approvals
on a timely basis. German American shall promptly and
properly prepare and file any other filings required
under the Securities Exchange Act of 1934 (the
"Exchange Act") relating to the Mergers, or otherwise
required of it under the Exchange Act prior to the
Effective Time, and shall deliver copies thereof to
Peoples's counsel promptly upon the filing thereof with
the SEC.
SECTION 5.02. BREACHES. German American shall,
in the event it has knowledge of the occurrence of any
event or condition which would cause or constitute a
breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date
of this Agreement) of any of its representations or
agreements contained or referred to in this Agreement,
give prompt notice thereof to Peoples and use its best
efforts to prevent or promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. German
American shall use its best efforts to perform and
fulfill all conditions and obligations to be performed
or fulfilled under this Agreement and to effect the
Mergers in accordance with the terms and conditions of
this Agreement, and use its best efforts to cause the
Closing to occur on January 31, 1997 or as soon
thereafter as practicable.
SECTION 5.04. DIRECTORS' AND OFFICERS'
INDEMNIFICATION.
(a) Following the Effective Time, German American
will provide the directors and officers of Peoples and
Peoples Bank from time to time with the same directors'
and officers' liability insurance coverage that German
American provides to directors and officers of its
other banking subsidiaries.
<PAGE>
<PAGE> A-37
(b) For six (6) years after the Effective Time,
German American shall (and shall cause the Surviving
Bank to) indemnify, defend and hold harmless the
present and former officers and directors of Peoples
and Peoples Bank (each, an "Indemnified Party") against
all losses, expenses, claims, damages or liabilities
arising out of actions or omissions (arising from their
present or former status as officers or directors)
occurring on or prior to the Effective Time to the full
extent then permitted under the applicable provisions
of the IBCL and the National Bank Act and public
policy.
(c) If during the six (6) year period after the
Effective Time German American or the Surviving Bank or
any of its or their successors or assigns (i) shall
consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger
or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or
other entity, then and in each such case, proper
provision shall be made so that the successors and
assigns of German American and/or the Surviving Bank
shall assume the obligations set forth in this
Section 5.04.
SECTION 5.05. BOARD OF DIRECTORS REPRESENTATION.
German American shall cause the Chairman of the Board
of Peoples and one other mutually acceptable
representative of the Board of Peoples (as it is
constituted immediately prior to the Effective Time)
to be appointed to the Board of Directors of German
American promptly after the Effective Time.
SECTION 5.06. PRESERVATION OF BUSINESS. German
American shall: (a) conduct its business substantially
in the manner as is presently being conducted and in
the ordinary course of business and not amend its
articles of incorporation in any manner that requires
the approval of shareholders of German American under
the IBCL; (b) file, and cause its subsidiaries to file,
all required reports with applicable regulatory
authorities; (c) comply with all laws, statutes,
ordinances, rules or regulations applicable to it and
to the conduct of its business, the noncompliance with
which results or could result in a material adverse
effect on the financial condition, results of
operations, business, assets or capitalization of
German American on a consolidated basis; and (d) comply
in all material respects with each contract, agreement,
commitment, obligation, understanding, arrangement,
<PAGE>
<PAGE> A-38
lease or license to which it is a party by which it is
or may be subject or bound, the breach of which could
result in a material adverse effect on the financial
condition, results of operations, business, assets or
capitalization of German American on a consolidated
basis.
SECTION 5.07. SECURITIES AND EXCHANGE COMMISSION
FILINGS. German American will provide Peoples with
copies of all filings made by German American with the
SEC under the Securities Exchange Act of 1934 ("1934
Act"), and the Securities Act of 1933 ("1933 Act") and
the respective rules and regulations of the SEC
thereunder as soon as practicable after such filings
are made at any time prior to the Effective Time.
SECTION 5.08. RULE 144(C) INFORMATION. For not
less than the two-year period immediately following the
Effective Time, German American shall make available
adequate current public information about itself as
that terminology is used in and as required by Rule
144(c) of the SEC under the 1933 Act.
SECTION 5.09. AUTHORIZATION OF COMMON STOCK. On
the Effective Time and on such subsequent dates when
the former shareholders of Peoples surrender their
Peoples share certificates for cancellation, the shares
of German American Common to be exchanged with former
shareholders of Peoples shall have been duly authorized
and validly issued by German American and shall be
fully paid and non-assessable and subject to no pre-
emptive rights.
SECTION 5.10. PAST SERVICE CREDIT. Employees of
Peoples Bank shall receive full vesting and eligibility
credit under German American's defined contribution
retirement plans for their years of service to Peoples
Bank.
SECTION 5.11. COMMUNITY FOUNDATION. If Peoples
Bank determines following the Effective Time to form a
non-profit foundation, managed by its Board of
Directors for the benefit of the communities served by
Peoples Bank, German American will support the initial
year's funding by Peoples Bank of such foundation of at
least $28,000 and future years' fundings at levels not
less than Peoples Bank's past charitable contributions
practices.
<PAGE>
<PAGE> A-39
ARTICLE SIX
CONDITIONS PRECEDENT TO THE MERGERS
SECTION 6.01. CONDITIONS OF GERMAN AMERICAN'S AND
UNION'S OBLIGATIONS. German American's and Union's
obligations to effect the Mergers shall be subject to
the satisfaction (or waiver by German American, GAHC
and Union) prior to or on the Closing Date of the
following conditions:
(a) The representations and warranties made by
Peoples and Peoples Bank in this Agreement shall be
true in all material respects on and as of the Closing
Date with the same effect as though such
representations and warranties had been made or given
on and as of the Closing Date.
(b) Peoples and Peoples Bank shall have performed
and complied in all material respects with all of its
obligations and agreements required to be performed on
or prior to the Closing Date under this Agreement.
(c) No temporary restraining order, preliminary
or permanent injunction or other order issued by any
court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of
the Mergers shall be in effect, nor shall any
proceeding by any bank regulatory authority,
governmental agency or other person seeking any of the
foregoing be pending. There shall not be any action
taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the
Mergers which makes the consummation of the Mergers
illegal.
(d) All necessary regulatory approvals, consents,
authorizations and other approvals required by law for
consummation of the Mergers shall have been obtained
and all waiting periods required by law shall have
expired.
(e) German American shall have received the
environmental reports required by Sections 4.06 and
4.01(a)(xv) hereof and shall not have elected, pursuant
to Section 4.06 hereof, to terminate and cancel this
Agreement.
(f) German American shall have received all
documents required to be received from Peoples or
Peoples Bank on or prior to the Closing Date, all in
form and substance reasonably satisfactory to German
American.
<PAGE>
<PAGE> A-40
(g) German American shall have received a letter,
dated as of the Effective Time, from Crowe, Chizek &
Co., its independent public accountants, to the effect
that the Mergers will qualify for pooling of interests
accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance
with this Agreement.
(h) The Registration Statement shall be effective
under the Securities Act and no stop orders suspending
the effectiveness of the Registration Statement shall
be in effect or proceedings for such purpose pending
before or threatened by the SEC.
(i) German American shall have received from its
counsel, Leagre & Barnes, an opinion to the effect that
if the Mergers are consummated in accordance with the
terms set forth in this Agreement, (i) the Holding
Company Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; (ii) no gain
or loss will be recognized by the holders of shares of
Peoples Common upon receipt of the Merger consideration
(except for cash received in lieu of fractional
shares); (iii) the basis of shares of German American
Common received by the shareholders of Peoples will be
the same as the basis of shares of Peoples Common
exchanged therefor; and (iv) the holding period of the
shares of German American Common received by the
shareholders of Peoples will include the holding period
of the shares of Peoples Common exchanged therefor,
provided such shares were held as capital assets as of
the Effective Time.
SECTION 6.02. CONDITIONS OF PEOPLES'S AND PEOPLES
BANK'S OBLIGATIONS. Peoples's and Peoples Bank's
obligations to effect the Mergers shall be subject to
the satisfaction (or waiver by Peoples and Peoples
Bank) prior to or on the Closing Date of the following
conditions:
(a) The representations and warranties made by
German American, GAHC and Union in this Agreement shall
be true in all material respects on and as of the
Closing Date with the same effect as though such
representations and warranties had been made or given
on the Closing Date.
(b) German American, GAHC and Union shall each
have performed and complied in all material respects
with all of its obligations and agreements required to
be performed prior to the Closing Date under this
Agreement.
<PAGE>
<PAGE> A-41
(c) No temporary restraining order, preliminary
or permanent injunction or other order issued by any
court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of
the Mergers shall be in effect, nor shall any
proceeding by any bank regulatory authority, other
governmental agency or other person seeking any of the
foregoing be pending. There shall not be any action
taken, or any statute, rule, regulation or order
enacted, enforced or deemed applicable to the Mergers
which makes the consummation of the Mergers illegal.
(d) All necessary regulatory approvals, consents,
authorizations and other approvals required by law for
consummation of the Mergers, including the requisite
approval of the Mergers by the shareholders of Peoples,
shall have been obtained and all waiting periods
required by law shall have expired.
(e) Peoples shall have received all documents
required to be received from German American, GAHC and
Union on or prior to the Closing Date, all in form and
substance reasonably satisfactory to Peoples.
(f) The Registration Statement shall be effective
under the Securities Act and no stop orders suspending
the effectiveness of the Registration Statement shall
be in effect or proceedings for such purpose pending
before or threatened by the SEC.
(g) Peoples shall have received from counsel for
German American, Leagre & Barnes, an opinion reasonably
satisfactory to Peoples to the effect that if the
Mergers are consummated in accordance with the terms
set forth in this Agreement, (i) the Holding Company
Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; (ii) no gain or
loss will be recognized by the holders of shares of
Peoples Common upon receipt of the Merger Consideration
(except for cash received in lieu of fractional
shares); (iii) the basis of German American Common
received by the shareholders of Peoples will be the
same as the basis of Peoples Common exchanged therefor;
and (iv) the holding period of the shares of German
American Common received by the shareholders of Peoples
will include the holding period of the shares of
Peoples Common exchanged therefor, provided such shares
were held as capital assets as of the Effective Time.
(h) Peoples shall have received an opinion of
Austin Associates, Inc., or another qualified
investment banking firm or other qualified financial
expert, to the effect that, as of the date of the
<PAGE>
<PAGE> A-42
mailing of the Proxy Statement/Prospectus to the
shareholders of Peoples, the Holding Company Merger was
fair to the shareholders of Peoples from a financial
point of view.
(i) Peoples shall have received a letter, dated
as of the Effective Time, from Crowe, Chizek & Co., its
independent public accountants, to the effect that the
Mergers will qualify for pooling of interests
accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance
with this Agreement.
(j) The German American Common to be exchanged
for the Peoples Common pursuant to the Holding Company
Merger shall have an aggregate value (as measured by
the per share average value of the German American
Common during the Valuation Period that is utilized to
determine the Exchange Ratio pursuant to Section
1.03(a)) of at least $21,100,000.
ARTICLE SEVEN
TERMINATION OR ABANDONMENT
SECTION 7.01. MUTUAL AGREEMENT. This Agreement
may be terminated by the mutual written agreement of
the parties approved by their respective Boards of
Directors at any time prior to the Effective Time,
regardless of whether shareholder approval of this
Agreement and the Mergers by the shareholders of
Peoples shall have been previously obtained.
SECTION 7.02. BREACH OF REPRESENTATIONS,
WARRANTIES OR COVENANTS.
(a) In the event that there is a material breach
in any of the representations and warranties or
covenants of the parties, which breach is not cured
within thirty (30) days after notice to cure such
breach is given by the non-breaching party, then the
Board of Directors of the non-breaching party,
regardless of whether approval by the shareholders of
this Agreement and the Mergers shall have been
previously obtained, and in addition to any other
remedies to which the non-breaching party may be
entitled, may terminate and cancel this Agreement
effective immediately by providing written notice
thereof to the other party hereto.
<PAGE>
<PAGE> A-43
(b) In the event that this Agreement is
terminated (i) as a result of the wilful failure of
Peoples or Peoples Bank to perform its obligations in
violation of this Agreement or (ii) as the result of
the making by any other person or entity not a party to
this Agreement of a proposal to Peoples or Peoples Bank
contemplating a merger, consolidation, plan of stock
exchange, sale of all or substantially all assets, or
other business combination with Peoples or Peoples
Bank, then, in addition to whatever other legal rights
or remedies to which German American may be entitled,
Peoples shall, upon German American's demand, (x) pay
to German American a termination fee of $422,000 within
two business days of termination and (y) reimburse
German American for all its out-of-pocket costs and
expenses in connection with the Mergers incurred from
and after July 3, 1996, including its legal,
accounting, environmental and other consulting fees and
expenses. If German American is entitled to collect
the termination fee, Peoples shall, in addition
thereto, pay to German American all costs, charges,
expenses (including without limitation the fees and
expenses of counsel) and other amounts expended by
German American in connection with or arising out of
the obligations of Peoples to pay all or a portion of
the fee.
SECTION 7.03. ADVERSE ENVIRONMENTAL REPORTS.
German American may terminate this Agreement as
provided by Section 4.06 by giving written notice
thereof to Peoples.
SECTION 7.04. FAILURE OF CONDITIONS. In the
event any of the conditions to the obligations of
either party are not satisfied or waived on or prior to
the Closing Date, and if any applicable cure period
provided in Section 7.02 hereof has lapsed, then the
Board of Directors of such party may, regardless of
whether approval by its shareholders of this Agreement
and the Mergers shall have been previously obtained,
terminate and cancel this Agreement on the Closing Date
by delivery of written notice thereof to the other
party on such date.
SECTION 7.05. TERMINATION UPON ADVERSE REGULATORY
DETERMINATION.
In connection with the filings that the German
American, GAHC, Union, Peoples and/or Peoples Bank may
be required to make in connection with the Mergers with
banking, securities, and antitrust regulatory agencies
<PAGE>
<PAGE> A-44
("Agencies"), each party shall use their best efforts
to obtain all necessary approvals of, or clearances
from, the Agencies, and shall cause their respective
agents and advisors to cooperate and use their best
efforts in connection therewith. German American (or
its subsidiaries) shall be responsible for making the
required Merger filings (except to the limited extent
that the applicable law, regulations, or forms specify
that Peoples (or Peoples Bank) is the appropriate
filing party) with the Agencies, and for discussing
such filings with the Agencies and responding to
comments thereon. If any required filing is
disapproved by any of the Agencies, or any
determination is made by any of the Agencies that
either of the Mergers cannot be consummated except on
terms and conditions that are materially adverse from a
financial point of view to German American or to the
shareholders of Peoples (an "Adverse Determination"),
then German American shall promptly advise Peoples of
such Adverse Determination and German American's
intended course of action with respect thereto. In the
event that German American in its sole discretion
determines to seek a judicial or regulatory appeal or
review (formal or informal) of the Adverse
Determination, Peoples and Peoples Bank (and their
agents and advisors) shall continue to cooperate with
such appeal and review procedure and use its best
efforts to assist in connection with obtaining reversal
or modification of such Adverse Determination. In the
event that (a) German American in its sole discretion
elects not to seek an appeal or review of the Adverse
Determination or elects in its sole discretion at any
time after seeking such an appeal or review to
discontinue that effort, or (b) German American seeks
such an appeal or review but all avenues for such
appeal or review are exhausted without the Adverse
Determination having been vacated or overruled or
modified in such a manner that the Adverse
Determination is no longer materially adverse ("Relief
Determination"), or (c) German American seeks such an
appeal or review but such appeal or review remains
pending on June 30, 1997, without having resulted in a
Relief Determination, then either German American or
Peoples may terminate this Agreement without obligation
to the other on account of the Adverse Determination;
provided, however, that German American shall pay
Peoples a termination fee of $422,000 within 90 days of
any such termination if (x) the Agreement is terminated
<PAGE>
<PAGE> A-45
in accordance with this sentence solely as a result of
an Adverse Determination relating to German American's
eligibility to account for the Holding Company Merger
under the pooling-of-interests method of accounting for
reasons other than the exercise of statutory dissenters
rights by shareholders of Peoples who would otherwise
be entitled to receive ten percent or more of the
German American Common issuable in the Merger, and (y)
Peoples and Peoples Bank and their respective agents
and advisors have abided by their obligations of
cooperation and best efforts expressed in this Section
7.05.
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL. If
this Agreement and consummation of the Holding Company
Merger is not approved by the shareholders of Peoples
at the Shareholders' Meeting, then either party may
terminate this Agreement by giving written notice
thereof to the other party.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In
the event that Peoples or Peoples Bank shall become a
party or subject to any memorandum of understanding,
cease and desist order, or civil money penalties
imposed by any federal or state agency charged with the
supervision or regulation of banks or bank holding
companies after the date of this Agreement, then German
American may terminate this Agreement by giving written
notice thereof to Peoples.
SECTION 7.08. LAPSE OF TIME. If the Closing Date
does not occur on or prior to June 30, 1997, then this
Agreement may be terminated by the Board of Directors
of either Peoples or German American by giving written
notice thereof to the other party.
ARTICLE EIGHT
GENERAL PROVISIONS
SECTION 8.01. CONFIDENTIAL INFORMATION. The
parties acknowledge the confidential and proprietary
nature of "Information" (as hereinafter described)
which has heretofore been exchanged and which will be
received from each other hereunder and agree to hold
and keep the same confidential. Such Information will
include any and all financial, technical, commercial,
marketing, customer or other information concerning the
business, operations and affairs of a party that may be
provided to the other, irrespective of the form of the
communications, by such party's employees or agents. <PAGE>
<PAGE> A-46
Such Information shall not include information which is
or becomes generally available to the public other than
as a result of a disclosure by a party or its
representatives in violation of this Agreement. The
parties agree that the Information will be used solely
for the purposes contemplated by this Agreement and
that such Information will not be disclosed to any
person other than employees and agents of a party who
are directly involved in evaluating the transaction
contemplated herein. The Information shall not be used
in any way detrimental to a party, including use
directly or indirectly in the conduct of the party's
business or any business or enterprise in which such
party may have an interest, now or in the future, and
whether or not now in competition with such other
party.
SECTION 8.02. RETURN OF DOCUMENTS. Upon
termination of this Agreement without the Mergers
becoming effective, each party shall deliver to the
other originals and all copies of all Information made
available to such party and will not retain any copies,
extracts or other reproductions in whole or in part of
such Information.
SECTION 8.03. LIABILITIES. In the event that
this Agreement is terminated or the Mergers are
abandoned pursuant to the provisions of Article Seven
hereof, no party hereto shall have any liability to any
other party for costs, expenses, damages, termination
fees, or otherwise except to the extent specifically
set forth in Section 7.02(b) or the last proviso clause
of Section 7.05. Directors, officers and employees of
each party hereto shall have no personal liability
under this Agreement with respect to the
representations and warranties of their respective
parties except for fraud or for their personal
intentional and knowing participation in the making of
false or misleading statements in such representation
and warranties.
SECTION 8.04. NOTICES. Any notice or other
communication hereunder shall be in writing and shall
be deemed to have been given or made (a) on the date of
delivery, in the case of hand delivery, or (b) three
(3) business days after deposit in the United States
Registered or Certified Mail, with mailing receipt
postmarked by the Postal Service to show date of
mailing, postage prepaid, or (c) upon actual receipt if
transmitted during business hours by facsimile (but
only if receipt of a legible copy of such transmission
is confirmed by the recipient); addressed (in any case)
as follows:
<PAGE>
<PAGE> A-47
(a) If to German American, GAHC or Union:
German American Bancorp
711 Main Street
Box 810
Jasper, Indiana 47546
Attn: George W. Astrike,
Chairman of the Board
with a copy to:
Leagre & Barnes
9100 Keystone Crossing
Suite 800
P. O. Box 40609
Indianapolis, Indiana 46240-0609
Attn: Mark B. Barnes
and
(b) If to Peoples or Peoples Bank:
Peoples Bancorp of Washington
201 East Main Street
P.O. Box 560
Washington, IN 47501-0560
Attn: Joseph A. Wellman, President
with a copy to:
Krieg DeVault Alexander & Capehart
One Indiana Square
Suite 2800
Indianapolis, Indiana 46204-2017
Attn: John W. Tanselle
or to such other address as any party may from time to
time designate by notice to the other.
SECTION 8.05. NON-SURVIVAL OF REPRESENTATIONS AND
AGREEMENTS. No representation, warranty or covenant
contained in this Agreement shall survive (and no
claims for the breach or nonperformance thereof may be
brought after) the Effective Time except the covenants
of German American in Sections 5.04, 5.05, 5.08, 5.09,
5.10 and 5.11 which shall survive the Effective Time.
No representation, warranty or covenant contained in
this Agreement shall survive (and no claims for the
breach or nonperformance thereof may be brought after)
the termination of this Agreement pursuant to Article
Seven hereof except those matters addressed in Sections
8.01, 8.02 and 8.03 hereof. The obligations of the
parties hereto in accordance with the terms and
provisions hereof shall survive, and shall continue to
be enforceable after, the Effective Time.
<PAGE>
<PAGE> A-48
SECTION 8.06. ENTIRE AGREEMENT. This Agreement
constitutes the entire agreement between the parties
and supersedes and cancels any and all prior
discussions, negotiations, undertakings and agreements
between the parties relating to the subject matter
hereof, including, without limitation, the Offer of
Merger dated July 3, 1996 of German American accepted
by Peoples and the letter agreement dated May 2, 1996
between German American and Austin Associates, Inc., as
agent of Peoples.
SECTION 8.07. HEADINGS AND CAPTIONS. The
captions of Articles and Sections hereof are for
convenience only and shall not control or affect the
meaning or construction of any of the provisions of
this Agreement.
SECTION 8.08. WAIVER, AMENDMENT OR MODIFICATION.
The conditions of this Agreement which may be waived
may only be waived by written notice specifically
waiving such condition addressed to the party claiming
the benefit of the waiver. The failure of any party at
any time or times to require performance of any
provision hereof shall in no manner affect the right of
such party at a later time to enforce the same. This
Agreement may not be amended or modified except by a
written document duly executed by the parties hereto.
SECTION 8.09. RULES OF CONSTRUCTION. Unless the
context otherwise requires (a) a term used herein has
the meaning assigned to it, and (b) an accounting term
not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting
principles.
SECTION 8.10. COUNTERPARTS. This Agreement may
be executed in two or more counterparts, each of which
shall be deemed an original and all of which shall be
deemed one and the same instrument.
SECTION 8.11. SUCCESSORS. This Agreement shall
be binding upon and inure to the benefit of the parties
hereto and their respective successors. There shall be
no third party beneficiaries hereof.
SECTION 8.12. GOVERNING LAW; ASSIGNMENT. This
Agreement shall be governed by the laws of the State of
Indiana and, with respect to the Bank Merger, the
National Bank Act. This Agreement may not be assigned
by any of the parties hereto.
<PAGE>
<PAGE> A-49
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first
above written, with the unanimous approval of their
respective Boards of Directors.
GERMAN AMERICAN BANCORP
By /s/ George W. Astrike
--------------------------
George W. Astrike
Chairman of the Board and
Chief Executive Officer
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF GERMAN
AMERICAN BANCORP:
/s/ George W. Astrike DAVID G. BUEHLER*
- ------------------------- ---------------------------
George W. Astrike David G. Buehler
WILLIAM R. HOFFMAN* MICHAEL B. LETT*
- ------------------------- ---------------------------
William R. Hoffman Michael B. Lett
GENE C. MEHNE* SKIP PLACE*
- ------------------------- ---------------------------
Gene C. Mehne Skip Place
ROBERT L. RUCKRIEGEL* MARK A. SCHROEDER*
- ------------------------- ---------------------------
Robert L. Ruckriegel Mark A. Schroeder
LARRY J. SEGER* JOSEPH F. STEURER*
- ------------------------- ---------------------------
Larry J. Seger Joseph F. Steurer
*By /s/ George W. Astrike
------------------------
George W. Astrike,
as Attorney-In-Fact
<PAGE>
<PAGE> A-50
GERMAN AMERICAN HOLDINGS
CORPORATION
By /s/ George W. Astrike
---------------------------
George W. Astrike
Chief Executive Officer
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE GERMAN
AMERICAN HOLDINGS CORPORATION:
/s/ George W. Astrike MARK A. SCHROEDER*
- ------------------------- -----------------------------
George W. Astrike Mark A. Schroeder
*By /s/ George W. Astrike
--------------------------
George W. Astrike,
as Attorney-In-Fact
<PAGE>
<PAGE> A-51
THE UNION BANK
By /s/ David L. Brown
---------------------------
David L. Brown
President
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE UNION
BANK:
JANE ASDELL* /s/ George W. Astrike
- ------------------------ ---------------------------
Jane Asdell George W. Astrike
DAVID L. BROWN* DANNY J. GREGORY*
- ------------------------ ---------------------------
David L. Brown Danny J. Gregory
J. DAVID LETT* MICHAEL B. LETT*
- ------------------------ ---------------------------
J. David Lett Michael B. Lett
MARK A. SCHROEDER*
- ------------------------
Mark A. Schroeder
*By /s/ George W. Astrike
--------------------------
George W. Astrike,
as Attorney-In-Fact
PEOPLES BANCORP OF WASHINGTON
By /s/ Joseph A. Wellman
---------------------------
Its President
---------------------------
<PAGE>
<PAGE> A-52
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF PEOPLES
BANCORP OF WASHINGTON:
The undersigned Directors of Peoples Bancorp of Washington hereby
(a) evidence their approval of this Agreement and the Mergers
contemplated hereby and (b) agree to vote the shares of Peoples
Common that are registered in their personal names (and agree to
use their best efforts to cause all additional shares of Peoples
Common over which they have voting control or influence to be
voted) in favor of the Holding Company Merger at the Peoples
Shareholders Meeting.
/s/ David F. Crane /s/ Randall J. Stoll
- ----------------------------- ---------------------------
/s/ Ziba F. Graham, Jr. /s/ Joel B. Smith
- ----------------------------- ---------------------------
/s/ Chet L. Thompson /s/ Bryan S. Bullock
- ----------------------------- ---------------------------
/s/ David Waller /s/ Joseph A. Wellman
- ----------------------------- ----------------------------
/s/ David B. Graham /s/ John J. Hoefling
- ----------------------------- ----------------------------
THE PEOPLES NATIONAL BANK
AND TRUST COMPANY
By /s/ Joseph A. Wellman
--------------------------
Its President & C.E.O.
--------------------------
<PAGE>
<PAGE> A-53
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE PEOPLES
NATIONAL BANK AND TRUST COMPANY:
/s/ David F. Crane /s/ Randall J. Stoll
- ---------------------------- ------------------------------
/s/ Ziba F. Graham, Jr. /s/ Joel B. Smith
- ----------------------------- ------------------------------
/s/ Chet L. Thompson /s/ Bryan S. Bullock
- ----------------------------- ------------------------------
/s/ David Waller /S/ Joseph A. Wellman
- ----------------------------- ------------------------------
/s/ David B. Graham /s/ John J. Hoefling
- ----------------------------- -----------------------------
<PAGE>
<PAGE> A-54
APPENDIX A
________________________________________________
PLAN OF MERGER
among
PEOPLES BANCORP OF WASHINGTON
(an Indiana corporation)
and
GERMAN AMERICAN HOLDINGS CORPORATION
(an Indiana corporation)
and joined in by
GERMAN AMERICAN BANCORP
(an Indiana corporation)
________________________________________________
<PAGE>
<PAGE> A-55
THIS PLAN OF MERGER, made and entered into as of
___________, 199__, between Peoples Bancorp of Washington, an
Indiana corporation ("Peoples"), German American Holdings
Corporation, an Indiana corporation ("GAHC"), and joined by
German American Bancorp, an Indiana corporation ("German
American").
W I T N E S S E T H:
WHEREAS, GAHC is a wholly owned subsidiary of German
American; and
WHEREAS, Peoples, German American and GAHC deem it advisable
for Peoples to merge with and into GAHC pursuant to this Plan of
Merger in accordance with the IBCL (as defined in Section 1.01);
and
WHEREAS, the Boards of Directors of the parties hereto have
approved an Agreement and Plan of Reorganization that was
executed and delivered as of ______________, 1996 between them
(the "Agreement and Plan of Reorganization");
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE ONE
THE HOLDING COMPANY MERGER
SECTION 1.01. THE HOLDING COMPANY MERGER. Pursuant to the
terms and provisions of this Plan of Merger and the Indiana
Business Corporation Law ("IBCL"), Peoples shall merge with and
into GAHC (the "Holding Company Merger"). The Holding Company
Merger shall be effective upon the filing of this Plan of Merger
in the Office of the Indiana Secretary of State (the "Effective
Time").
SECTION 1.02. MERGING CORPORATION. Peoples shall be the
merging corporation under the Holding Company Merger and its
corporate identity and existence, separate and apart from GAHC,
shall cease on consummation of the Holding Company Merger.
SECTION 1.03. SURVIVING CORPORATION. GAHC shall be the
surviving corporation in the Holding Company Merger and the
Articles of Incorporation and Bylaws of GAHC in effect prior to
the Holding Company Merger shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation.
<PAGE>
<PAGE> A-56
ARTICLE TWO
TERMS OF THE HOLDING COMPANY MERGER
AND CONVERSION OF SHARES
SECTION 2.01. EFFECT OF THE HOLDING COMPANY MERGER. The
Holding Company Merger shall have all of the effects provided by
the IBCL.
SECTION 2.02. CONVERSION OF SHARES. At the Effective Time:
(a) Each of the not more than
593,334 shares of common stock, $1.00 stated value, of
Peoples ("Peoples Common") that are issued and outstanding
immediately prior to the Effective Time shall thereupon and
without further action be converted into the right to
receive X.XXXX [here insert Exchange Ratio to be determined
in accordance with Agreement and Plan of Reorganization]
shares of common stock, $10 par value, of German American
("German American Common") (the "Merger Consideration").
(b) The shares of German
American Common issued and outstanding immediately prior to
the Effective Time shall continue to be issued and
outstanding shares of German American.
(c)If any holders of Peoples
Common dissent from the Holding Company Merger and demand
dissenters' rights under the IBCL, any issued and
outstanding shares of Peoples Common held by such dissenting
holders shall not be converted as described in Section
2.02(a) but shall from and after the Effective Time
represent only the right to receive such consideration as
may be determined to be due to such dissenting holders
pursuant to the IBCL; provided, however, that each share of
Peoples Common outstanding immediately prior to the
Effective Time and held by a dissenting holder who shall,
after the Effective Time, withdraw his demand for
dissenters' rights or lose his right to exercise dissenters'
rights shall have only such rights as provided under the
IBCL.
<PAGE>
<PAGE> A-57
SECTION 2.03. FRACTIONAL SHARES. No fractional shares of
German American Common shall be issued and, in lieu thereof,
holders of shares of Peoples Common who would otherwise be
entitled to a fractional share interest (after taking into
account all shares of Peoples Common held by such holder) shall
be paid an amount in cash equal to the product of multiplying
such fractional share by $______________[here insert the average
of the highest bid and the lowest asked price of a share of
German American Common as quoted on the NASDAQ National Market
System on the last day of the Valuation Period.]
SECTION 2.04. EXCHANGE PROCEDURES; SURRENDER OF
CERTIFICATES.
(a)The German American Bank
shall act as Exchange Agent in the Holding Company Merger
(the "Exchange Agent").
(b)As soon as reasonably
practicable but in no event more than five days after the
Effective Time, the Exchange Agent shall mail to each record
holder of any Certificate or Certificates whose shares were
converted into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as German American may
reasonably specify) (each such letter the "Merger Letter of
Transmittal") and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger
Consolidation. As soon as reasonably practical but in no
event more than five days after surrender to the Exchange
Agent of a Certificate, together with a Merger Letter of
Transmittal duly executed and any other required documents,
the Exchange Agent shall transmit to the holder of such
Certificate the Merger Consideration. No interest on the
Merger Consideration issuable upon the surrender of the
Certificates shall be paid or accrued for the benefit of
holders of Certificates. If the Merger Consideration is to
be issued to a person other than a person in whose name a
surrendered Certificate is registered, it shall be a
<PAGE>
<PAGE> A-58
condition of issuance that the surrendered Certificate shall
be properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance shall
pay to the Exchange Agent any required transfer or other
taxes or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. German
American reserves the right in all cases to require that a
surety bond on terms and in an amount satisfactory to German
American be provided to German American at the expense of
the Peoples shareholder in the event that such shareholder
claims loss of a Certificate and requests that German
American waive the requirement for surrender of such
Certificate.
ARTICLE THREE
AMENDMENT; TERMINATION; ASSIGNMENT
SECTION 3.01. AMENDMENT. At any time prior to the
Effective Time, the parties to this Agreement by mutual written
agreement authorized by their respective Boards of Directors (and
whether before or after the shareholders of GAHC and Peoples have
approved and adopted this Agreement) may amend this Agreement;
provided, however, that if the shareholders of Peoples have
approved and adopted this Agreement, any such amendment shall not
have a material adverse effect on the shareholders of Peoples.
SECTION 3.02. TERMINATION. This Plan of Merger may be
terminated by the parties hereto prior to the Effective Time
under the circumstances provided in, and strictly in accordance
with, the provisions of the Agreement and Plan of Reorganization.
SECTION 3.03. SUCCESSORS AND ASSIGNS. This Plan of Merger
and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors but none of the provisions hereof shall inure to the
benefit of any other person, firm, or corporation whomsoever.
Neither this Plan of Merger nor any of the rights, interests, or
obligations hereunder shall be assigned by either of the parties
hereto.
<PAGE>
<PAGE> A-59
IN WITNESS WHEREOF, the parties hereto have executed this
Plan of Merger as of the day and year first above written.
PEOPLES BANCORP OF
WASHINGTON
By
Joseph A. Wellman,
President and Chief
Executive Officer
GERMAN AMERICAN HOLDINGS
CORPORATION
By
George W. Astrike,
Chairman of the Board
and Chief Executive
Officer
German American Bancorp hereby joins in the foregoing Plan
of Merger.
GERMAN AMERICAN BANCORP
By
George W. Astrike,
Chairman of the Board
and Chief Executive
Officer
<PAGE>
<PAGE> B-1
APPENDIX B
INDIANA CODE 23-1-44 DISSENTERS RIGHTS
Ind. Code 23-1-44-1. "Corporation" defined
As used in this chapter, "corporation" means the issuer of the
shares held by a dissenter before the corporate action, or the
surviving or acquiring corporation by merger or share exchange of
that issuer.
Ind. Code 23-1-44-2. "Dissenter" defined
As used in this chapter, "dissenter" means a shareholder who
is entitled to dissent from corporate action under section 8 [IC
23-1-44-8] of this chapter and who exercises that right when and
in the manner required by sections 10 through 18 [IC 23-1-44-10
through IC 23-1-44-18] of this chapter.
Ind. Code 23-1-44-3. "Fair value" defined
As used in this chapter, "fair value," with respect to a
dissenter's shares, means the value of the shares immediately
before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable.
Ind. Code 23-1-44-4. "Interest" defined
As used in this chapter, "interest" means interest from the
effective date of the corporate action until the date of payment,
at the average rate currently paid by the corporation on its
principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
Ind. Code 23-1-44-5. "Record shareholder" defined
As used in this chapter, "record shareholder" means the person
in whose name shares are registered in the records of a
corporation or the beneficial owner of shares to the extent that
treatment as a record shareholder is provided under a recognition
procedure or a disclosure procedure established under IC
23-1-30-4.
<PAGE>
<PAGE> B-2
Ind. Code 23-1-44-6. "Beneficial shareholder" defined
As used in this chapter, "beneficial shareholder" means the
person who is a beneficial owner of shares held by a nominee as
the record shareholder.
Ind. Code 23-1-44-7. "Shareholder" defined
As used in this chapter, "shareholder" means the record
shareholder or the beneficial shareholder.
Ind. Code 23-1-44-8. Shareholder dissent
(a) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholder's shares in the
event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party if:
(A) Shareholder approval is required for the merger by
IC 23-1-40-3 or the articles of incorporation; and
(B) The shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than
in the usual and regular course of business, if the shareholder
is entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or
a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one (1) year after the date of sale.
(4) The approval of a control share acquisition under IC
23-1-42.
(5) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
<PAGE>
<PAGE> B-3
(b) This section does not apply to the holders of shares of
any class or series if, on the date fixed to determine the
shareholders entitled to receive notice of and vote at the
meeting of shareholders at which the merger, plan of share
exchange, or sale or exchange of property is to be acted on, the
shares of
that class or series were:
(1) Registered on a United States securities exchange
registered under the Exchange Act (as defined in IC 23-1-43-9);
or
(2) Traded on the National Association of Securities
Dealers, Inc. Automated Quotations System Over-the-Counter
Markets ---- National Market Issues or a similar market.
(c) A shareholder:
(1) Who is entitled to dissent and obtain payment for the
shareholder's shares under this chapter; or
(2) Who would be so entitled to dissent and obtain payment
but for the provisions of subsection (b);
may not challenge the corporate action creating (or that, but for
the provisions of subsection (b), would have created) the
shareholder's entitlement.
Ind. Code 23-1-44-9. Beneficial shareholder dissent
(a) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in the shareholder's name
only if the shareholder dissents with respect to all shares
beneficially owned by any one (1) person and notifies the
corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are
determined as if the shares as to which the shareholder dissents
and the shareholder's other shares were registered in the names
of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as
to shares held on the shareholder's behalf only if:
(1) The beneficial shareholder submits to the corporation
the record shareholder's written consent to the dissent not later
than the time the beneficial shareholder asserts dissenters'
rights; and
<PAGE>
<PAGE> B-4
(2) The beneficial shareholder does so with respect to all
the beneficial shareholder's shares or those shares over which
the beneficial shareholder has power to direct the vote.
Ind. Code 23-1-44-10. Notice of dissenters' rights preceding
shareholder vote
(a) If proposed corporate action creating dissenters' rights
under section 8 [IC 23-1-44-8] of this chapter is submitted to a
vote at a shareholders' meeting, the meeting notice must state
that shareholders are or may be entitled to assert dissenters'
rights under this chapter.
(b) If corporate action creating dissenters' rights under
section 8 of this chapter is taken without a vote of
shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described
in section 12 [IC 23-1-44-12] of this chapter.
Ind. Code 23-1-44-11. Notice of intent to dissent
(a) If proposed corporate action creating dissenters' rights
under section 8 [IC 23-1-44-8] of this chapter is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation before the vote is
taken written notice of the shareholder's intent to demand
payment for the shareholder's shares if the proposed action is
effectuated; and
(2) Must not vote the shareholder's shares in favor of the
proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for the shareholder's
shares under this chapter.
Ind. Code 23-1-44-12. Notice of dissenters' rights following
action creating rights
(a) If proposed corporate action creating dissenters' rights
under section 8 [IC 23-1-44-8] of this chapter is authorized at a
shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the
requirements of section 11 [IC 23-1-44-11] of this chapter.
<PAGE>
<PAGE> B-5
(b) The dissenters' notice must be sent no later than ten (10)
days after approval by the shareholders, or if corporate action
is taken without approval by the shareholders, then ten (10) days
after the corporate action was taken. The dissenters' notice
must:
(1) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(3) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters' rights certify whether or not
the person acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty (30) nor
more than sixty (60) days after the date the subsection (a)
notice is delivered; and
(5) Be accompanied by a copy of this chapter.
Ind. Code 23-1-44-13. Demand for payment by dissenter
(a) A shareholder sent a dissenters' notice described in IC
23-1-42-11 or in section 12 [IC 23-1-44-12] of this chapter must
demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to be
set forth in the dissenter's notice under section 12(b)(3) [IC
23-1-44-12(b)(3)] of this chapter, and deposit the shareholder's
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the
shareholder's shares under subsection (a) retains all other
rights of a shareholder until these rights are cancelled or
modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date
set in the dissenters' notice, is not entitled to payment for the
shareholder's shares under this chapter and is considered, for
purposes of this article, to have voted the shareholder's shares
in favor of the proposed corporate action.
<PAGE>
<PAGE> B-6
Ind. Code 23-1-44-14. Transfer of shares restricted after demand
for payment
(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the
restrictions released under section 16 [IC 23-1-44-16] of this
chapter.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the
proposed corporate action.
Ind. Code 23-1-44-15. Payment to dissenter
(a) Except as provided in section 17 [IC 23-1-44-17] of this
chapter, as soon as the proposed corporate action is taken, or,
if the transaction did not need shareholder approval and has been
completed, upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with section 13 [IC
23-1-44-13] of this chapter the amount the corporation estimates
to be the fair value of the dissenter's shares.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen (16) months before the
date of payment, an income statement for that year, a statement
of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares; and
(3) A statement of the dissenter's right to demand payment
under section 18 [IC 23-1-44-18] of this chapter.
Ind. Code 23-1-44-16. Return of shares and release of
restrictions
(a) If the corporation does not take the proposed action
within sixty (60) days after the date set for demanding payment
and depositing share certificates, the corporation shall return
the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
<PAGE>
<PAGE> B-7
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action,
it must send a new dissenters' notice under section 12 [IC
23-1-44-12] of this chapter and repeat the payment demand
procedure.
Ind. Code 23-1-44-17. Offer of fair value for shares obtained
after first announcement
(a) A corporation may elect to withhold payment required by
section 15 [IC 23-1-44-15] of this chapter from a dissenter
unless the dissenter was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date
of the first announcement to news media or to shareholders of the
terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment
under subsection (a), after taking the proposed corporate action,
it shall estimate the fair value of the shares and shall pay this
amount to each dissenter who agrees to accept it in full
satisfaction of the dissenter's demand. The corporation shall
send with its offer a statement of its estimate of the fair value
of the shares and a statement of the dissenter's right to demand
payment under section 18 [IC 23-1-44-18] of this chapter.
Ind. Code 23-1-44-18. Dissenter demand for fair value under
certain conditions
(a) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's
shares and demand payment of the dissenter's estimate (less any
payment under section 15 [IC 23-1-44-15] of this chapter), or
reject the corporation's offer under section 17 [IC 23-1-44-17]
of
this chapter and demand payment of the fair value of the
dissenter's shares, if:
(1) The dissenter believes that the amount paid under
section 15 of this chapter or offered under section 17 of this
chapter is less than the fair value of the dissenter's shares;
(2) The corporation fails to make payment under section 15
of this chapter within sixty (60) days after the date set for
demanding payment; or
(3) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty (60) days after the date set for demanding payment.
<PAGE>
<PAGE> B-8
(b) A dissenter waives the right to demand payment under this
section unless the dissenter notifies the corporation of the
dissenter's demand in writing under subsection (a) within thirty
(30) days after the corporation made or offered payment for the
dissenter's shares.
Ind. Code 23-1-44-19. Effect of failure to pay demand --
Commencement of judicial appraisal proceeding
(a) If a demand for payment under IC 23-1-42-11 or under
section 18 [IC 23-1-44-18] of this chapter remains unsettled, the
corporation shall commence a proceeding within sixty (60) days
after receiving the payment demand and petition the court to
determine the fair value of the shares. If the corporation does
not commence the proceeding within the sixty (60) day period, it
shall pay each dissenter whose demand remains unsettled the
amount demanded.
(b) The corporation shall commence the proceeding in the
circuit or superior court of the county where a corporation's
principal office (or, if none in Indiana, its registered office)
is located. If the corporation is a foreign corporation without a
registered office in Indiana, it shall commence the proceeding in
the county in Indiana where the registered office of the domestic
corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties
to the proceeding as in an action against their shares and all
parties must be served with a copy of the petition. Nonresidents
may be served by registered or certified mail or by publication
as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The
court may appoint one (1) or more persons as appraisers to
receive evidence and recommend decision on the question of fair
value. The appraisers have the powers described in the order
appointing them or in any amendment to it. The dissenters are
entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled
to judgment:
(1) For the amount, if any, by which the court finds the
fair value of the dissenter's shares, plus interest, exceeds the
amount paid by the corporation; or
<PAGE>
<PAGE> B-9
(2) For the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation
elected to withhold payment under section 17 [IC 23-1-44-17] of
this chapter.
Ind. Code 23-1-44-20. Judicial determination and assessment of
costs
(a) The court in an appraisal proceeding commenced under
section 19 [IC 23-1-44-19] of this chapter shall determine all
costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court. The court
shall assess the costs against such parties and in such amounts
as the court finds equitable.
(b) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court
finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 10 through
18 [IC 23-1-44-10 through IC 23-1-44-18] of this chapter; or
(2) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the
dissenters who were benefited.
<PAGE>
<PAGE> C-1
APPENDIX C
________________, 1996
Board of Directors
Peoples Bancorp of Washington
201 East Main Street
Washington, IN 47501
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to Peoples Bancorp of Washington
("Peoples") and its shareholders of the terms of the Agreement
and Plan of Reorganization dated September 27, 1996 ("Agreement")
by and among Peoples, The Peoples National Bank and Trust Company
("Peoples Bank"), German American Bancorp, Jasper, Indiana
("German American"), German American Holdings Corporation
("GAHC"), and The Union Bank ("Union") Peoples owns all of the
stock of Peoples Bank, and German American owns all of the stock
of GAHC and Union. The terms of the Agreement provide for the
merger of Union with and into Peoples Bank and simultaneously
Peoples will be merged with and into GAHC, with the result that
Peoples Bank will become a wholly-owned subsidiary of German
American.
The terms of the Agreement provide for all of the
outstanding shares of Peoples to be converted into shares of
German American at an exchange ratio that will float between a
minimum of 1.0372 and a maximum of 1.1669 shares of German
American for each of the 593,334 shares of Peoples Common Stock
outstanding, depending upon the market value of German American
Common Stock during a pre-closing Valuation Period. This range
has been adjusted for the five percent stock dividend declared by
German American in October, 1996.
If the German American Common Stock is valued between $30.48
and $34.29 per share during the Valuation Period, then the
Exchange Ratio will be determined within the above range by
dividing $21,100,000 by the per share market value of German
American to determine the total number of German American shares
to be issued in the transaction. The total number of shares will
then be divided by 593,334 to determine the Exchange Ratio. If
the German American stock value is equal to or less than $30.48
during the Valuation Period, the exchange ratio shall be 1.1669,
provided, however, that Peoples may at its option terminate the
Agreement in that event. If the stock value is equal to or
greater than $34.29 during the Valuation Period, the exchange
ratio shall be 1.0372. German American will pay cash for
fractional shares.
<PAGE>
<PAGE> C-2
In carrying out our engagement, we have reviewed and
analyzed material bearing upon the financial and operating
condition of Peoples and German American, including but not
limited to the following: (i) the Prospectus/Proxy Statement;
(ii) the financial statements of Peoples and German American for
the period 1992 through September, 1996; (iii) certain other
publicly available information regarding Peoples and German
American; (iv) publicly available information regarding the
performance of certain other companies whose business activities
were believed by Austin Associates to be generally comparable to
those of Peoples and German American; (v) the financial terms, to
the extent publicly available, of certain comparable
transactions; and (vi) such other analysis and information as we
deemed relevant.
In our review and analysis, we relied upon and assumed the
accuracy and completeness of the financial and other information
provided to us or publicly available, and have not attempted to
verify the same. We have made no independent verification as to
the status of individual loans made by Peoples or German
American, and have instead relied upon representations and
information concerning loans of Peoples and German American in
the aggregate. In rendering our opinion, we have assumed that
the transaction will be a tax-free reorganization with no
material adverse tax consequences to Peoples or German American,
or to Peoples shareholders receiving German American stock. In
addition, we have assumed in the course of obtaining the
necessary regulatory approvals for the transaction, no condition
will be imposed that will have a material adverse effect on the
contemplated benefits of the transaction to Peoples and its
shareholders.
Based upon our analysis and subject to the qualifications
described herein, we believe that as of the date of this letter,
the terms of the Agreement are fair, from a financial point of
view, to Peoples and its shareholders.
For our services in rendering this opinion, Peoples will pay
us a fee and indemnify us against certain liabilities.
Austin Associates, Inc.<PAGE>
<PAGE> D-1
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 September 30, 1996
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
----------
- -----------
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
---------- ----------
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
October 30, 1996
Common Stock, $10.00 par value 1,830,880
<PAGE>
<PAGE> D-2
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- September 30, 1996 and
December 31, 1995
Consolidated Statements of Income -- Three Months
Ended September 30, 1996 and 1995
Consolidated Statements of Income -- Nine Months Ended
September 30, 1996 and 1995
Consolidated Statements of Cash Flows -- Nine Months
Ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements --
September 30, 1996
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<PAGE> D-3
PART 1.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEET
(dollar references in thousands except share data)
(unaudited)
September 30, December 31,
1996 1995
ASSETS
Cash and Due from Banks $12,963 $15,421
Federal Funds Sold 9,525 12,550
Cash and Cash Equivalents 22,488 27,971
Interest-bearing Balances with Banks 699 897
Other Short-term Investments 499 5,929
Securities Available-for-Sale,
at market (Note 3) 82,192 78,908
Securities Held-to-Maturity, at cost
(Market Value of $14,461 and $11,237
on September 30, 1996 and December 31,
1995, respectively) (Note 3) 14,079 10,607
Loans (Note 4) 249,285 231,127
Less: Unearned Income (355) (537)
Allowance for Loan Losses (Note 5) (6,030) (5,933)
Loans, Net 242,900 224,657
Premises, Furniture and Equipment, Net 10,025 9,624
Other Real Estate 262 286
Intangible Assets 1,827 1,990
Accrued Interest Receivable
and Other Assets 6,857 6,894
TOTAL ASSETS $381,828 $367,763
LIABILITIES
Noninterest-bearing Deposits $34,929 $40,855
Interest-bearing Deposits 301,575 286,724
Total Deposits 336,504 327,579
Short-term Borrowings 3,196 ---
Accrued Interest Payable and
Other Liabilities 3,580 3,228
TOTAL LIABILITIES 343,280 330,807
<PAGE>
<PAGE> D-4
SHAREHOLDERS' EQUITY
Common Stock, $10 par value; 5,000,000
shares authorized, and 1,830,880 and
1,825,040 issued and outstanding
in 1996 and 1995, respectively
(Note 6) 18,309 18,250
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued --- ---
Additional Paid-in Capital 5,587 5,449
Retained Earnings 14,146 12,398
Unrealized Appreciation on Securities
Available-for-Sale (Net of tax of $332
and $571 in 1996 and 1995,
respectively) 506 859
TOTAL SHAREHOLDERS' EQUITY 38,548 36,956
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $381,828 $367,763
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> D-5
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(dollar references in thousands except per share data)
(unaudited)
Three Months Ended
September 30,
1996 1995
INTEREST INCOME
Interest and Fees on Loans $5,500 $5,424
Interest on Federal Funds Sold 105 159
Interest on Short-term Investments 19 181
Interest and Dividends on Securities 1,448 1,159
TOTAL INTEREST INCOME 7,072 6,923
INTEREST EXPENSE
Interest on Deposits 3,439 3,277
Interest on Short-term Borrowings 15 36
TOTAL INTEREST EXPENSE 3,454 3,313
NET INTEREST INCOME 3,618 3,610
Provision for Loan Losses 67 (213)
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,551 3,823
NONINTEREST INCOME
Income from Fiduciary Activities 48 37
Service Charges on Deposit Accounts 210 161
Investment Services Income 107 55
Other Charges, Commissions, and Fees 94 100
Gains on Sales of Loans and
Other Real Estate 0 0
Gains on Sales of Securities 0 0
TOTAL NONINTEREST INCOME 459 353
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,452 1,350
Occupancy Expense 204 207
Furniture and Equipment Expense 188 187
FDIC Premiums 175 3
Computer Processing Fees 107 103
Professional Fees 122 44
Other Operating Expenses 546 524
TOTAL NONINTEREST EXPENSE 2,794 2,418
Income before Income Taxes 1,216 1,758
Income Tax Expense 359 598
Net Income $857 $1,160
Earnings Per Share (Note 2) $0.45 $0.61
Dividends Paid Per Share (Note 2) $0.20 $0.18
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> D-6
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(dollar references in thousands except per share data)
(unaudited)
Nine Months Ended
September 30,
1996 1995
INTEREST INCOME
Interest and Fees on Loans $16,343 $15,680
Interest on Federal Funds Sold 411 535
Interest on Short-term Investments 141 610
Interest and Dividends on Securities 4,157 3,323
TOTAL INTEREST INCOME 21,052 20,148
INTEREST EXPENSE
Interest on Deposits 10,072 9,226
Interest on Short-term Borrowings 37 168
TOTAL INTEREST EXPENSE 10,109 9,394
NET INTEREST INCOME 10,943 10,754
Provision for Loan Losses (Note 5) 145 15
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,798 10,739
NONINTEREST INCOME
Income from Fiduciary Activities 146 142
Service Charges on Deposit Accounts 555 456
Investment Services Income 329 155
Other Charges, Commissions, and Fees 288 333
Gains on Sales of Loans and
Other Real Estate 2 21
Gains on Sales of Securities 0 0
TOTAL NONINTEREST INCOME 1,320 1,107
NONINTEREST EXPENSE
Salaries and Employee Benefits 4,278 3,963
Occupancy Expense 609 606
Furniture and Equipment Expense 546 541
FDIC Premiums 210 351
Computer Processing Fees 313 297
Professional Fees 267 121
Other Operating Expenses 1,566 1,484
TOTAL NONINTEREST EXPENSE 7,789 7,363
Income before Income Taxes 4,329 4,483
Income Tax Expense 1,324 1,460
Net Income $3,005 $3,023
Earnings Per Share (Note 2) $1.57 $1.58
Dividends Paid Per Share (Note 2) $0.59 $0.54
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> D-7
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar references in thousands)
(unaudited)
Nine Months Ended
September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $3,005 $3,023
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of Investments (41) (567)
Depreciation and Amortization 695 707
Provision for Loan Losses 145 15
Gains on Sales of Securities --- ---
Gains on Sales of Loans and
Other Real Estate (2) (21)
Change in Assets and Liabilities:
Unearned Income (182) (224)
Interest Receivable (295) (377)
Other Assets 540 (248)
Interest Payable 77 362
Deferred Loan Fees (18) 64
Deferred Taxes 31 (489)
Other Liabilities 275 926
Total Adjustments 1,225 148
Net Cash from Operating Activities 4,230 3,171
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing Balances
with Banks 198 696
Proceeds from Maturities of Other
Short-term Investments 7,000 46,632
Purchase of Other Short-term
Investments (1,466) (40,549)
Proceeds from Maturities of Securities
Available-for-Sale 23,605 3,553
Proceeds from Sales of Securities
Available-for-Sale --- ---
Purchase of Securities
Available-for-Sale (27,541) (15,044)
Proceeds from Maturities of Securities
Held-to-Maturity 204 6,975
Proceeds from Sales of Securities
Held-to-Maturity --- ---
Purchase of Securities Held-to-Maturity (3,679) (2,737)
Purchase of Loans (977) (3,509)
Loans Made to Customers net of
Payments Received (17,211) (7,620)
Proceeds from Sales of Loans --- 500
Property and Equipment Expenditures (933) (796)
Proceeds from Sales of Other Real Estate 26 147
Net Cash from Investing Activities (20,774) (11,752)
<PAGE>
<PAGE> D-8
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits 8,925 12,707
Change in Short-term Borrowings 3,196 (5,665)
Dividends Paid (1,133) (1,044)
Exercise of Stock Options 8 22
Issuance of Shares under Dividend
Reinvestment Plan 65 ---
Purchase and Retire Common Stock --- (110)
Net Cash from Financing Activities 11,061 5,910
Net Change in Cash and Cash Equivalents (5,483) (2,671)
Cash and Cash Equivalents at
Beginning of Year 27,971 22,286
Cash and Cash Equivalents at
End of Period $22,488 $19,615
Cash Paid During the Year for:
Interest $10,032 $9,032
Income Taxes 1,396 1,371
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> D-9
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(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,
1995 Annual Report to Shareholders.
German American Bancorp (the ``Company'') is a
multi-bank holding company based in Jasper, Indiana.
Its four affiliate banks conduct business in sixteen
offices in Dubois, Martin, Pike, Perry and Spencer
Counties, Indiana.
Note 2 -- Per Share Data
The weighted average number of shares used in
calculating earnings and dividends per share amounts
were 1,921,583 and 1,916,890 for the third quarters of
1996 and 1995, respectively. The weighted average
number of shares for the first nine months of 1996 and
1995 were 1,919,799 and 1,917,388, respectively. The
weighted average amounts have been retroactively
restated for the effect of 5% stock dividends declared
in October 1996 and October 1995.
Note 3 -- Securities
At September 30, 1996 and December 31, 1995, U.S.
Government Agency structured notes with an amortized
cost of $3,000,000 and $9,250,000, respectively and
fair value of $2,916,000 and $9,201,000, respectively,
are included in securities available-for-sale,
consisting primarily of step-up and single-index bonds.
<PAGE>
<PAGE> D-10
Information regarding collateralized mortgage
obligations (CMO's) and real estate mortgage investment
conduits (REMIC's) is as follows:
September 30, December 31,
1996 1995
(dollar references in thousands)
Amortized Cost $24,466 $29,429
Fair Value 24,648 29,474
Fixed Rate 23,229 28,041
Variable Rate 1,419 1,433
Note 3 -- Securities (continued)
The amortized cost and estimated market values of Securities as
of September 30, 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 $32,382 $32,117
Obligations of State and Political
Subdivisions 16,735 17,536
Corporate Securities 7,771 7,891
Mortgage-backed Securities 24,466 24,648
Total $81,354 $82,192
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
Obligations of State and Political
Subdivisions $13,065 $13,447
Other Securities 1,014 1,014
Total $14,079 $14,461
<PAGE>
<PAGE> D-11
The amortized cost and estimated market values of Securities as
of December 31, 1995 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 $23,727 $23,787
Obligations of State and Political
Subdivisions 14,232 15,386
Corporate Securities 6,375 6,463
Mortgage-backed Securities 33,144 33,272
Total $77,478 $78,908
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
Obligations of State and Political
Subdivisions $9,869 $10,499
Other Securities 738 738
Total $10,607 $11,237
Note 4 -- Loans
Loans, as presented on the balance sheet, are comprised of the
following classifications:
September 30, December 31,
1996 1995
(dollar references in thousands)
Real Estate Loans Secured by 1-4
Family Residential Properties $73,428 $68,826
Loans to Finance Poultry Production
and other Related Operations 16,421 23,784
Loans to Finance Agricultural
Production and Other Loans
to Farmers 31,147 27,310
Commercial and Industrial Loans 87,301 74,612
Loans to Individuals for Household,
Family and Other Personal
Expenditures 39,683 34,685
Economic Development Commission Bonds 588 608
Lease Financing 717 1,302
Total Loans $249,285 $231,127
<PAGE>
<PAGE> D-12
Information regarding impaired loans is as follows at September
30, 1996 and December 31, 1995:
September 30, December 31,
1996 1995
(dollar references in thousands)
Balance of impaired loans $4,132 $6,244
Less: Portion for which no
allowance for loan loss is
allocated 237 215
Portion of impaired loan balance for
which an allowance
for credit losses is allocated $3,895 $6,029
Portion of allowance for loan losses
allocated to the impaired loan balance $996 $898
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is
as follows:
1996 1995
(dollar references in thousands)
Balance at January 1 $5,933 $5,669
Provision for Loan Losses 145 15
Recoveries of Prior Loan Losses 203 430
Loan Losses Charged to the Allowance (251) (280)
Balance at September 30 $6,030 $5,834
Note 6 -- Stock Dividend
The Company's Board of Directors declared a five percent stock
dividend on the Company's Common Stock in October 1996, payable
December 6, 1996 to holders of record November 8, 1996. These
additional shares will be recorded during the fourth quarter of
1996; however, the stock dividend has been given retroactive
effect for purposes of computing per share data in the
consolidated financial statements. See Note 2.
Note 7 -- Stock Options
As of January 1, 1996 Statement of Financial Accounting
Standards No. 123 (FAS123), `Accounting for Stock-Based
Compensation'' is applicable to the Company. FAS123 encourages,
but does not require, the use of a `fair value based method'' to
account for stock-based compensation plans. The Company has
<PAGE>
<PAGE> D-13
elected not to change its accounting for stock options to a fair
value based method, and no compensation expense was recorded for
stock options granted during the nine months ended September 30,
1996.
Note 8 -- Proposed Acquisition
The Company signed a definitive agreement in September 1996
providing for the merger of Peoples Bancorp of Washington
(Washington, Indiana) (`Peoples Bancorp') with a subsidiary of
the Company. Peoples Bancorp owns all of the outstanding stock
of Peoples National Bank and Trust Company, Washington, Indiana
(`Peoples Bank''). Peoples Bank operates four banking offices in
Daviess County, Indiana.
Under the terms of the agreement, the Company will issue to the
shareholders of Peoples Bancorp between 615,417 and 692,344
shares of Company Common Stock as adjusted for the Company's five
percent stock dividend declared in October 1996 (subject to
further antidilution adjustments in the event of any future stock
dividends, splits and the like), depending upon the Company's
average common stock price during a period prior to the date of
the merger closing. Based on the reported bid / asked quotations
for the Company's Common Stock during the period preceding
September 30, 1996, the Company would have issued the minimum
number of shares had the merger closed on September 30, 1996.
The transaction is expected to be accounted for as a pooling of
interests.
The proposed merger is subject to approval by the shareholders
of Peoples Bancorp, approvals of bank regulatory agencies, and
other conditions. The parties contemplate that the merger will
be effective in late 1996 or early 1997. As of December 31,
1995 and for the year then ended, Peoples Bancorp reported total
assets of $90,841,580, shareholders' equity of $8,832,441 and net
income of $823,972.
ITEM 2.
<PAGE>
<PAGE> D-14
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 sixteen offices in Dubois, Martin,
Pike, Perry and Spencer Counties, 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 September 30, 1996 and December
31, 1995 and the consolidated results of operations for the
periods ended September 30, 1996 and 1995. 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, 1995
Annual Report to Shareholders.
RESULTS OF OPERATIONS
Net Income:
The Company's earnings for the third quarter of 1996 were
$857,000 or $.45 per share, a decrease of $303,000 (or 26%) from
the Company's third quarter earnings for 1995 of $1,160,000 or
$.61 per share. The Company's net income for the nine months
ended September 30, 1996, were $3,005,000 or $1.57 per share,
down slightly from net income for the comparable 1995 period of
$3,023,000 or $1.58 per share.
The earnings comparisons for both the three month period and
the nine month period were materially impacted by three factors.
First, the FDIC made a $157,000 special assessment against the
Company's Savings Association Insurance Fund (SAIF) deposits in
the third quarter of 1996 compared to a $166,000 FDIC premium
refund recorded by the Company in the third quarter of 1995.
Second, the Company's third quarter 1995 operating results were
positively impacted by a significantly reduced level of provision
for loan loss resulting from the 1995 recovery by one of its
affiliate banks of a previously charged-off loan totaling
$327,000. Third, 1996 earnings have been affected by expenses
<PAGE>
<PAGE> D-15
associated with the Company's pending acquisition of Peoples
Bancorp of Washington, Indiana. The Company's after-tax expenses
for these three items increased by $339,000 ($.18 per share)
during the three month period, and by $77,000 ($.04 per share)
during the nine month period ended September 30, 1996, as
compared to the prior year periods.
Net Interest Income:
Net Interest Income is the Company's largest component of
income and represents the difference between interest and fees
earned on loans and investments and the interest paid on
interest-bearing liabilities. In this discussion net interest
income is presented on a `tax-equivalent'' basis whereby tax
exempt income, such as interest on securities of state and
political subdivisions, has been increased to the amount that
would have been earned on a comparable taxable basis. This
adjustment places taxable and non-taxable income on a common
basis and allows an accurate comparison of rates and yields.
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.
Nine Months Change from
Ended September 30, Prior Period
1996 1995 Amount Percent
(dollar references in thousands)
Interest Income $21,742 $20,739 $1,003 4.8%
Interest Expense 10,109 9,394 715 7.6%
Net Interest Income $11,633 $11,345 $288 2.5%
<PAGE>
<PAGE> D-16
Three Months Change from
Ended September 30, Prior Period
1996 1995 Amount Percent
(dollar references in thousands)
Interest Income $7,318 $7,126 $192 2.7%
Interest Expense 3,454 3,313 141 4.3%
Net Interest Income $3,864 $3,813 $51 1.3%
<PAGE>
<PAGE> D-17
For the first three quarters of 1996, the tax-equivalent net
interest income of $11,633,000 exceeded the 1995 amount by
$288,000 or 2.5%. For the third quarter of 1996, tax-equivalent
net interest income of $3,864,000 increased by $51,000 or 1.3%
from the 1995 level. The net interest margin for the first nine
months of 1996 was 4.48% versus 4.61% for 1995. The increase in
the level of higher yielding assets, such as loans, which
occurred during the period in 1996 resulted in a corresponding
increase in net interest income. The decrease in net interest
margin reflects the effect of the decline in general interest
rates which occurred during the last half of 1995 and the
majority of 1996. This decrease in the net interest margin
occurred as a result of the impact on the average yields on loans
and short-term investments which react more quickly to changes in
general short-term interest rates than the average yields on
investment securities and the average rates paid on
interest-bearing deposits.
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.
During the third quarter of 1995, it became evident that a
single loan which was previously charged against the allowance
for loan losses in the amount of $327,000 had returned to
performing status. The full amount of the loan was recognized
during the third quarter of 1995 as a recovery of prior loan
losses. As a result of this recovery and based on Management's
evaluation of the adequacy of the allowance for loan losses, a
negative charge to the provision for loan losses was taken during
the third quarter of 1995. Accordingly, the provision for loan
losses for the third quarter of 1995 was a negative $213,000 and
for the first nine months of 1995 was only $15,000. The
comparable provision increased by $280,000 (to $67,000) for the
third quarter of 1996 and by $130,000 (to $145,000) for the nine
months ended September 30, 1996.
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
$48,000 or 0.02 percent of average loans for the first nine
months of 1996. For the same period of 1995, net recoveries were
$150,000. Underperforming loans, as a percentage of total loans
were 1.24 and 1.51 percent on September 30, 1996 and December 31,
1995, respectively. See discussion headed `Financial Condition''
for more information regarding underperforming assets.
<PAGE>
<PAGE> D-18
Noninterest Income:
Noninterest income, exclusive of gains realized on the sales of
Loans and Other Real Estate, for the first three quarters of 1996
was $1,318,000. This was $232,000 or 21.4 percent greater than
the $1,086,000 posted for the same period of 1995. Investment
Services Income for 1996 increased by $174,000 from that earned
in 1995.
Third quarter noninterest income, exclusive of gains realized
on the sales of Loans and Other Real Estate, increased by
$106,000 in 1996 primarily as a result of the $52,000 increase in
Investment Services Income.
The Company had no security sales during 1996 or 1995.
Noninterest Expense:
Total noninterest expense for the first nine months of 1996 was
$7,789,000 which translates to a $426,000 or 5.8% increase over
the $7,363,000 posted for the same period in 1995. Total
noninterest expense for the third quarter of 1996 was $2,794,000
which represents a $376,000 or 15.6% increase over the $2,418,000
posted for the same period in 1995.
The largest single component of noninterest expense, Salaries
and Employee Benefits, represents 54.9% of total noninterest
expenses for 1996. This expense category was $4,278,000 during
the first nine months of 1996, an increase of $315,000 or 7.9%
from the 1995 level of $3,963,000. Salaries and employee benefits
were $1,452,000 during the third quarter of 1996, an increase of
$102,000 or 7.6% from the 1995 level of $1,350,000. 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.
<PAGE>
<PAGE> D-19
Deposits held at the Company's affiliate banks are insured by
the FDIC within two different funds - Bank Insurance Fund (BIF)
and Savings Association Insurance Fund (SAIF). All of the
deposits of First State Bank are covered under SAIF whereas
nearly all the deposits of the other three affiliate banks are
within BIF. During the third quarter of 1995, the FDIC refunded
$166,000 to BIF insured banks as a result of this particular fund
having surpassed a congressionally mandated level. The result of
this refund was to reduce FDIC Premium expense to a mere $3,000
for the third quarter of 1995. However, on September 30, 1996,
the Deposit Insurance Funds Act of 1996 was enacted into law.
This legislation imposed a one-time special assessment on SAIF -
assessable deposits for the purpose of boosting the capital of
the Savings Association Insurance Fund. This special assessment
to the Company was $157,000 which increased the third quarter
1996 FDIC expense to $175,000, an increase of $172,000 from the
prior year's third quarter. This Act also will require the
Company's BIF- insured subsidiary banks to assume a portion of
the obligations (FICO bonds) previously assessed only to SAIF
institutions, commencing January 1997. Beginning in 1997 and
until December 31, 1999 the estimated assessment rate on these
obligations will be 1.3 basis points per $100 of insured deposit
base for BIF as opposed to 6.4 basis points for SAIF deposits.
The Company's annualized premium expense for 1997 would be
approximately $57,000 based on September 30, 1996 deposit
holdings. From the year 2000 until 2019, the estimated
assessment rate for the obligations is expected to be under 2.5
basis points for all deposits.
The Company's anticipated deposit insurance premium expense for
1997 and anticipated assessment rates included in the preceding
paragraph are forward- looking statements that are based solely
on current levels of deposits (which might change significantly
due to acquisitions by the Company of other financial
institutions or branches) and FDIC estimates of assessment rates.
These assessment rates represent the rates the FDIC presently
feels are sufficient to generate the funds required to retire
obligations known as FICO bonds which mature in the year 2019.
These assessment rates could rise in future years above the
levels illustrated here in the event certain actions (such as an
increased level of bank or thrift failures) deplete the fund(s)
below certain reserve levels thereby prompting a need to bolster
the fund balance via higher premium rates. Accordingly, actual
future deposit insurance expense for 1997 and future years could
vary materially from the amounts presently anticipated.
<PAGE>
<PAGE> D-20
Professional Fees for the first nine months of 1996 were
$267,000 or $146,000 higher than the $121,000 posted for the same
three quarters of 1995. This particular category rose primarily
because of the Company's pending acquisition of Peoples Bancorp
of Washington, Indiana and certain other general acquisition-
related expenditures.
Professional Fees for the third quarter of 1996 were $122,000
versus $44,000 for the same three months of the prior year.
Again merger activity accounted for this increased expenditure
level.
FINANCIAL CONDITION
As of September 30, 1996, total assets increased to
$381,828,000 compared to $367,763,000 at December 31, 1995.
Deposits rose $8,925,000 in 1996 over that of year-end 1995.
Loans, net of unearned income rose by $18,340,000 or 8.0% from
the year-end mark of $230,590,000.
Underperforming Assets:
The following analyzes German American Bancorp's
underperforming assets at
September 30, 1996 and December 31, 1995.
September 30, 1996 December 31, 1995
(dollar references in thousands)
Loans which are contractually
past due 90 days or more $1,529 $2,683
Nonaccrual Loans 1,567 803
Renegotiated Loans --- ---
Total Underperforming Loans 3,096 3,486
Other Real Estate 262 286
Total Underperforming Assets $3,358 $3,772
Allowance for Loan Loss to
Underperforming Loans 194.77% 170.20%
Underperforming Loans to
Total Loans 1.24% 1.51%
Underperforming loans at September 30, 1996 were 11.2% less
than the $3,486,000 of underperforming loans at December 31,
1995. Stated as a percentage of total loans, underperforming
loans were 1.24% and 1.51% for September 30, 1996 and December
31, 1995, respectively. The allowance for loan loss stated as a
percentage of underperforming loans equaled 194.77% and 170.20%
for the same two dates respectively.
<PAGE>
<PAGE> D-21
Underperforming loans include $1,906,000 and $2,646,000 of
impaired loans at September 30, 1996 and December 31, 1995 (See
Note 4 to the consolidated financial statements).
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. As a means of controlling risk from concentrations
of credit within this industry, the Company has, during recent
years, utilized guaranties from the Small Business Administration
(SBA) and the Farmers Home Administration (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. No unguaranteed concentration of
credit in excess of 10% of total assets exists within any single
industry group.
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.
<PAGE>
<PAGE> D-22
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 September 30, 1996, 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.
<PAGE>
<PAGE> D-23
The table below presents the Company's consolidated capital
ratios under regulatory guidelines.
RISK BASED CAPITAL STRUCTURE ($ in thousands)
September 30,December 31,
1996 1995
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $38,548 $36,956
Add / (Subtract): Unrealized
Depreciation / Appreciation on
Securities Available-for-Sale (506) (859)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (1,986) (2,140)
Total Tier 1 Capital 36,056 33,957
Tier 2 Capital:
Qualifying Allowance for Loan Loss 3,195 2,943
Total Capital $39,251 $36,900
Risk-adjusted Assets $252,743 $232,272
To be Well
Capitalized
Under Prompt
Minimum for Corrective
Capital Action
Adequacy Provisions Sept.30, Dec. 31,
Purposes (FDICIA) 1996 1995
Leverage Ratio 4.00% 5.00% 9.60% 9.29%
Tier 1 Capital to
Risk-adjusted Assets 4.00% 6.00% 14.27% 14.62%
Total Capital to
Risk-adjusted Assets 8.00% 10.00% 15.53% 15.89%
LIQUIDITY
The Consolidated Statement of Cash Flows details the elements of
change in the Company's cash and cash equivalents. During the
first nine months of 1996, the net cash from operating
activities, including net income of $3,005,000 provided
$4,230,000 of available cash. Increases in deposits and
short-term borrowings made available an additional $12,121,000.
Major cash outflows experienced during this nine month period of
1996 included dividends of $1,133,000, property and equipment
purchases of $933,000 and the net funding outlay of loans in the
amount of $18,188,000. The purchase of securities and short-term
investments (net of proceeds from maturities) decreased cash by
$1,679,000. Total cash outflows for the period exceeded inflows
by $5,483,000 leaving a cash and cash equivalent balance of
$22,488,000 at September 30, 1996.
<PAGE>
<PAGE> D-24
PROPOSED PEOPLES BANCORP MERGER
The Company has agreed to acquire Peoples Bancorp of Washington,
Washington, Indiana (`Peoples Bancorp'') on the terms set forth
in Note 8 to the financial statements included in this report.
In evaluating the terms of this acquisition, the Company prepared
estimates of the future earnings and financial condition for the
Company and for Peoples Bancorp which took into consideration
cost savings and efficiencies that Company management believes
could be achieved in future years. These estimates compared the
estimated earnings per share of the Company's common stock and
its estimated shareholders' equity per share to the estimated
earnings per share and shareholders' equity per share on a
prospective pro forma basis giving effect to the acquisition on
the agreed terms. Based on such analysis, the proposed
acquisition of Peoples Bancorp is expected to be materially
dilutive, in the early years, to the Company's earnings per share
and shareholders' equity per share compared to the amounts that
might be expected without the business combination with Peoples
Bancorp. The Company believes, however, that the anticipated
dilution is acceptable given the Company's belief that entry into
the Daviess County banking market offers strategic advantages to
the Company.
<PAGE>
<PAGE> D-25
PART II. -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
2 Agreement and Plan of Reorganization
by and among Peoples Bancorp of
Washington, the Registrant, and certain
affiliates dated September 27, 1996.
27 Financial Data Schedule for the period
ended September 30, 1996.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three
months ended September 30, 1996, except a report filed July 17,
1996 reporting under Item 5 the Registrant's execution of an
agreement to acquire Peoples Bancorp of Washington, Washington,
Indiana.
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 11/13/96 By/s/George W. Astrike
------------------ ----------------------------
George W. Astrike
Chairman
Date 11/13/96 By/s/John M. Gutgsell
------------------- -----------------------------
John M. Gutgsell
Controller and Principal
Accounting Officer
<PAGE>
<PAGE> II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Under the Indiana Business Corporation Law and
Article IV of German American's Restated Bylaws, German
American's officers, Directors, and employees are
entitled to indemnification against all liability and
expense with respect to any civil or criminal claim,
action, suit or proceeding in which they are wholly
successful. If they are not wholly successful and even
if they are adjudged liable or guilty, they are
entitled to indemnification if it is determined, with
respect to a civil action, by disinterested Directors,
a special legal counsel, or a majority vote of the
shares of German American's voting stock held by
disinterested shareholders, that they acted in good
faith in what they reasonably believed to be the best
interests of German American. With respect to any
criminal action, it must also be determined that they
had no reasonable cause to believe their conduct
unlawful.
Under the Indiana Business Corporation Law, a
Director of German American cannot be held liable for
actions that do not constitute wilful misconduct or
recklessness. The Articles of Incorporation of German
American provide that Directors of German American
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 Indiana Business Corporation Law from
time to time in effect and by general principles of
corporate law. In addition, a Director of German
American against whom a shareholders' derivative suit
has been filed cannot be held liable if a committee of
disinterested Directors of German American, after a
good faith investigation, determines either that the
shareholder has no right or remedy or that pursuit of
that right or remedy will not serve the best interests
of German American.
At present, there are no claims, actions, suits or
proceedings pending where indemnification would be
required under the above, and German American does not
know of any threatened claims, actions, suits or
proceedings which may result in a request for such
indemnification.
<PAGE>
<PAGE> II-2
In addition, officers and Directors of German
American are entitled to indemnification under an
insurance policy of German American for expenditures
incurred by them in connection with certain acts in
their capacities as such, and providing reimbursement
to German American for expenditures in indemnifying
such Directors and officers for such acts. The maximum
aggregate coverage for German American and insured
individuals is $2,000,000 for claims made during each
policy year, with the policies subject to
self-retention and deductible provisions.
Item 21. Exhibits and Financial Statement.
The exhibits described in the Exhibit List
immediately following the "Signatures" page of this
Registration Statement (which Exhibit List is
incorporated by reference) are hereby filed as part of
this Registration Statement.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that
prior to any public reoffering of the securities
registered hereunder through use of a prospectus which
is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information
called for by the applicable registration form with
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for
by the other Items of the applicable form.
The registrant undertakes that every prospectus
(i) that is filed pursuant to the paragraph immediately
proceeding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used
in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until
such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of
1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be the
initial bona fide offering thereof.
<PAGE>
<PAGE> II-3
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
Directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant
of expenses incurred or paid by a Director, officer, or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted
by such Director, officer, or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all
information concerning a transaction, and the company
being acquired involved therein, that was not the
subject of and included in the Registration Statement
when it became effective.
The undersigned registrant hereby undertakes to
respond to requests for information that is
incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, 13 or 18 of this form within one
business day of receipt of such request, and to send
the incorporated documents by first class mail or other
equally prompt means. This includes information
contained in documents filed subsequent to the
effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
<PAGE>
<PAGE> II-4
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in
the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement; and
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Pre-Effective
Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Jasper, State of Indiana, on January 15, 1997.
GERMAN AMERICAN BANCORP
By /s/ George W. Astrike
George W. Astrike,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this Pre-Effective Amendment No. 2 to Registration
Statement has been signed on January 15, 1997 by the
following persons in the capacities indicated.
Principal Executive Officer:
/s/ George W. Astrike Chairman of
George W. Astrike the Board
and Chief
Executive
Officer
Principal Financial Officer:
/s/ Mark A. Schroeder
Mark A. Schroeder President
and Chief
Financial
Officer
Principal Accounting Officer:
/s/ John M. Gutgsell
John M. Gutgsell Vice President and
Controller
/s/ George W. Astrike Director
George W. Astrike
DAVID G. BUEHLER* Director
David G. Buehler
WILLIAM R. HOFFMAN* Director
William R. Hoffman
MICHAEL B. LETT* Director
Michael B. Lett
GENE C. MEHNE* Director
Gene C. Mehne
A. WAYNE ("SKIP") PLACE, JR.* Director
A. Wayne ("Skip") Place, Jr.
ROBERT L. RUCKRIEGEL* Director
Robert L. Ruckriegel
/s/ Mark A. Schroeder Director
Mark A. Schroeder
LARRY J. SEGER* Director
Larry J. Seger
JOSEPH F. STEURER* Director
Joseph F. Steurer
*By /s/ George W. Astrike
George W. Astrike,
as Attorney-In-Fact<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2 Agreement and Plan of Reorganization between German
American and Peoples (included as Appendix A to the
Prospectus/Proxy Statement).
3.1 Restated Articles of Incorporation of German
American Bancorp, as amended April 24, 1995. The
copy of this exhibit filed as Exhibit 3.1 to German
American's Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by
reference.
3.2 Restated Bylaws of German American Bancorp, as
amended August 14, 1990. The copy of this exhibit
filed as Exhibit 3.2 to German American's Report on
Form 10-K for the year ended December 31, 1995, is
incorporated herein by reference.
5* Opinion of Leagre & Barnes regarding legality of
securities being offered, including consent.
8* Opinion of Leagre & Barnes regarding federal income
tax consequences, including consent.
10.1 German American Bancorp 1992 Stock Option Plan.
The copy of this exhibit filed as Exhibit 10.1 to
Amendment No. 1 to German American's Registration
Statement on Form S-4 filed January 21, 1993 (No.
33-55170) is incorporated herein by reference.
10.2 Executive Deferred Compensation Agreement dated
December 1, 1992 between The German American Bank
and George W. Astrike. The copy of this exhibit
filed as Exhibit 10.3 to Amendment No. 1 to German
American's Registration Statement on Form S-4 filed
January 21, 1993 (No. 33-55170) and is incorporated
herein by reference.
10.3 Director Deferred Compensation Agreement between
The German American Bank and all but one of its
Directors. The documents filed as Exhibit 10.4 to
Amendment No. 1 to German American's Registration
Statement on Form S-4 filed January 21, 1993 (No.
33-55170) are incorporated herein by reference.
(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
<PAGE>
<PAGE>
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.
10.4 Sublease entered by and between Buehler Foods, Inc.
and The German American Bank, dated January 2, 1987
(Huntingburg Banking Center Branch). The copy of
this exhibit filed as Exhibit 10.5 to the
Registrant's Registration Statement on Form S-4
filed February 28, 1994 (No. 33-75762) (the "Otwell
S-4") is incorporated herein by reference.
10.5* Sublease entered by and between Buehler Foods, Inc.
and The German American Bank dated August 1, 1990
(The Crossing Shopping Center Branch).
10.6 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. The copy
of this exhibit filed as Exhibit 10.4 of the
Registrant's Report on Form 10-K for the year ended
December 31, 1994 is incorporated herein by
reference.
10.7 Incentive stock option agreement between German
American and George W. Astrike dated April 20,
1993. The copy of this exhibit filed as Exhibit
10.6 to the Otwell S-4 is incorporated herein by
reference.
10.8 Form of Incentive Stock Option Agreement. The copy
of this exhibit filed as Exhibit 10.7 to the Otwell
S-4 is incorporated herein by reference. The
Incentive Stock Option Agreement between German
American Bancorp and Mark A. Schroeder dated
April 20, 1993, is substantially identical to the
Form of Incentive Stock Option Agreements entered
into by German American and the following other
executive officers of German American, all on
April 20, 1993: James E. Essany (1,500 shares);
Urban R. Giesler (1,500 shares); Stan J. Ruhe
(3,000 shares) (all numbers and prices unadjusted
for subsequent stock splits).
<PAGE>
<PAGE>
13 Annual Report to Shareholders for the year ended
December 31, 1995. The copy of this exhibit filed
as Exhibit 13 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995 (the
"1995 10-K") is incorporated herein by reference.
This exhibit, except to the extent specifically
incorporated by reference into the 1995 10-K, is
furnished for the information of the Commission
only and is not to be deemed "filed" as a part of
the 1995 10-K or this Registration Statement.
21* Subsidiaries of German American.
23.1** Consent of Crowe, Chizek and Company, LLP.
23.2** Consent of Crowe, Chizek and Company, LLP.
23.3 Consents of counsel are filed as part of Exhibits 5
and 8 to this Registration Statement.
23.4* Consent of Austin Associates, Inc.
23.5* Consent of David B. Graham (a person named herein
as about to become a Director of the registrant)
23.6** Consent of Paul E. Nonte, Certified Public
Accountant
24* Power of Attorney, included on signature page.
99.1** Form of Proxy (Peoples).
99.2** Form of Proxy (German American).
99.3* Cover Letter to Shareholders (Peoples).
99.4* Cover Letter to Shareholders (German American).
*Filed as part of original Registration Statement on
November 19, 1996.
**Filed (or refiled) with Pre-Effective Amendment No. 1