UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1999
Or
[ ] Transition Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Transition Period from _______________
to ___________________
Commission File Number 0-11244
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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 August 10, 1999
Common Stock, No par value 8,785,889
1
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GERMAN AMERICAN BANCORP
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<CAPTION>
INDEX
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PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets - June 30, 1999 and
December 31, 1998 3
Consolidated Statements of Income and Comprehensive Income --
Three Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Income and Comprehensive Income --
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements --
June 30, 1999 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 18
PART II. OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds 19
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
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2
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEET
(unaudited, dollars in thousands except per share data)
<S> <C> <C>
June 30, December 31,
1999 1998
----------- ------------
ASSETS
Cash and Due from Banks $ 22,816 $ 18,097
----------- ------------
Interest-bearing Deposits with Banks 10,087 31,316
Federal Funds Sold --- 175
----------- ------------
Cash and Cash Equivalents 32,903 49,588
Interest-bearing Balances with Banks 799 1,299
Securities Available-for-Sale, at Market 180,496 151,527
Securities Held-to-Maturity, at Cost 31,137 48,346
Loans Held for Sale 1,041 2,449
Total Loans 638,975 598,936
Less: Unearned Income (397) (848)
Allowance for Loan Losses (8,489) (8,323)
----------- ------------
Loans, Net 630,089 589,765
Stock in FHLB of Indianapolis, at cost 8,485 7,853
Premises, Furniture and Equipment, Net 18,797 17,796
Other Real Estate 2,491 1,156
Intangible Assets 2,307 1,841
Accrued Interest Receivable and Other Assets 22,804 25,305
----------- ------------
TOTAL ASSETS $ 931,349 $ 896,925
=========== ============
LIABILITIES
Noninterest-bearing Deposits $66,914 $67,218
Interest-bearing Deposits 615,190 597,895
----------- ------------
Total Deposits 682,104 665,113
Short-term Borrowings 34,343 7,028
FHLB Advances and Other Long-term Debt 114,238 124,381
Accrued Interest Payable and Other Liabilities 9,119 9,127
----------- ------------
TOTAL LIABILITIES 839,804 805,649
SHAREHOLDERS' EQUITY
Common Stock, no par value, $1 stated value;
20,000,000 shares authorized 8,794 8,705
Preferred Stock, $10 par value; 500,000
shares authorized, none issued --- ---
Additional Paid-in Capital 48,966 47,844
Retained Earnings 35,938 33,916
Accumulated Other Comprehensive Income (2,153) 811
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 91,545 91,276
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 931,349 $ 896,925
=========== ============
Common Shares issued and outstanding at end of period 8,793,889 8,704,592
=========== ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
3
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<TABLE>
<CAPTION>
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)
<S> <C> <C>
Three Months Ended
June 30,
1999 1998
-----------------------------
INTEREST INCOME
Interest and Fees on Loans $13,038 $12,927
Interest on Federal Funds Sold 10 277
Interest on Short-term Investments 290 122
Interest and Dividends on Securities 3,239 2,825
-------- -------
TOTAL INTEREST INCOME 16,577 16,151
-------- -------
INTEREST EXPENSE
Interest on Deposits 6,841 7,164
Interest on Short-term Borrowings 240 68
Interest on Long-term Debt 1,510 1,321
-------- -------
TOTAL INTEREST EXPENSE 8,591 8,553
-------- -------
NET INTEREST INCOME 7,986 7,598
Provision for Loan Losses 272 145
-------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,714 7,453
NONINTEREST INCOME
Income from Fiduciary Activities 67 92
Service Charges on Deposit Accounts 440 438
Investment Services Income 161 140
Insurance Premiums and Commissions 505 160
Other Charges, Commissions and Fees 321 263
Gain on Sales of Loans and Other Real Estate 82 113
Net Gain/(Loss) on Sales of Securities (1) 21
-------- -------
TOTAL NONINTEREST INCOME 1,575 1,227
-------- -------
NONINTEREST EXPENSE
Salaries and Employee Benefits 3,299 3,072
Occupancy Expense 437 404
Furniture and Equipment Expense 423 315
Computer Processing Fees 243 218
Professional Fees 300 190
Advertising and Promotions 165 159
Supplies 195 153
Other Operating Expenses 998 970
-------- -------
TOTAL NONINTEREST EXPENSE 6,060 5,481
-------- -------
Income before Income Taxes 3,229 3,119
Income Tax Expense 946 967
-------- -------
Net Income $ 2,283 $ 2,232
======== =======
Earnings Per Share and Diluted
Earnings Per Share $ 0.26 $ 0.26
Dividends Paid per Share $ 0.13 $ 0.12
Comprehensive Income $ 82 $ 2,397
======== =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
4
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<TABLE>
<CAPTION>
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)
<S> <C> <C>
Six Months Ended
June 30,
1999 1998
----------------------------
INTEREST INCOME
Interest and Fees on Loans $26,046 $25,629
Interest on Federal Funds Sold 37 568
Interest on Short-term Investments 701 460
Interest and Dividends on Securities 6,135 5,718
-------- -------
TOTAL INTEREST INCOME 32,919 32,375
-------- -------
INTEREST EXPENSE
Interest on Deposits 13,677 14,286
Interest on Short-term Borrowings 411 119
Interest on Long-term Debt 2,970 2,754
-------- -------
TOTAL INTEREST EXPENSE 17,058 17,159
-------- -------
NET INTEREST INCOME 15,861 15,216
Provision for Loan Losses 641 299
-------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 15,220 14,917
NONINTEREST INCOME
Income from Fiduciary Activities 136 174
Service Charges on Deposit Accounts 828 841
Investment Services Income 267 274
Insurance Premiums and Commissions 839 302
Other Charges, Commissions and Fees 713 528
Gain on Sales of Loans and Other Real Estate 303 174
Net Gain/(Loss) on Sales of Securities (6) 29
-------- -------
TOTAL NONINTEREST INCOME 3,080 2,322
-------- -------
NONINTEREST EXPENSE
Salaries and Employee Benefits 6,525 6,005
Occupancy Expense 855 798
Furniture and Equipment Expense 838 663
Computer Processing Fees 516 452
Professional Fees 524 413
Advertising and Promotions 322 314
Supplies 370 299
Other Operating Expenses 2,005 1,867
-------- -------
TOTAL NONINTEREST EXPENSE 11,955 10,811
-------- -------
Income before Income Taxes 6,345 6,428
Income Tax Expense 1,839 1,992
-------- -------
Net Income $ 4,506 $ 4,436
======== =======
Earnings Per Share and Diluted
Earnings Per Share $ 0.51 $ 0.51
Dividends Paid per Share $ 0.25 $ 0.22
Comprehensive Income $ 1,542 $ 4,470
======== =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
5
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<TABLE>
<CAPTION>
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollar references in thousands)
<S> <C> <C>
Six Months Ended
June 30,
1999 1998
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,506 $ 4,436
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation and Amortization 957 983
Provision for Loan Losses 641 299
Net Gain on Sales of Securities 6 (29)
Gain of Sales of Loans and Other Real Estate (303) (174)
Net Change in Loans Held for Sale 8,647 (8,592)
Loss on Investment in Limited Partnership 62 57
Change in Assets and Liabilities:
Interest Receivable and Other Assets (1,464) 4,537
Interest Payable and Other Liabilities (828) (1,511)
--------- ---------
Total Adjustments 7,718 (4,430)
Net Cash from Operating Activities 12,224 6
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Certificates of Deposit 523 173
Proceeds from Maturities of Securities Available-for-Sale 23,535 54,776
Proceeds from Sales of Securities Available-for-Sales 953 25,490
Purchase of Securities Available-for-Sale (61,503) (77,944)
Proceeds from Maturities of Securities Held-to-Maturity 3,971 15,068
Proceeds from Sales of Securities Held-to-Maturity --- 388
Purchase of Securities Held-to-Maturity (2,998) (2,988)
Proceeds from Sales of Loans 850 255
Purchase of Loans (4,059) (264)
Loans Made to Customers, net of Payments Received (30,416) (24,023)
Acquire Affiliate (155) 3,715
Property and Equipment Expenditures (1,833) (390)
Proceeds from Sales of Other Real Estate 311 76
Other --- (365)
--------- ---------
Net Cash from Investing Activities (70,821) (6,033)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits 9,857 (8,475)
Change in Short-term Borrowings 27,315 (1,006)
Advances of Long-term Debt 7,000 27,991
Repayments of Long-term Debt (498) (31,881)
Dividends Paid (2,192) (1,458)
Exercise of Stock Options / Awards 305 ---
Purchase / Retire Stock --- (305)
Issue / (Repurchase ) of Common Stock 133 94
Purchase Fractional Shares (8) (5)
--------- ---------
Net Cash from Financing Activities 41,912 (15,045)
Net Change in Cash and Cash Equivalents (16,685) (21,072)
Cash and Cash Equivalents at Beginning of Year 49,588 60,684
--------- ---------
Cash and Cash Equivalents at End of Period $ 32,903 $ 39,612
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
6
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GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(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. Except for adjustments resulting from the merger
transactions described below, 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, 1998 Annual Report to Shareholders.
German American Bancorp (referred to herein as the "Company," the
"Corporation," or the "Registrant") is a multi-bank holding company organized in
Indiana in 1982. The Company's principal subsidiaries are The German American
Bank, Jasper, Indiana ("German American Bank"), First State Bank, Southwest
Indiana, Tell City, Indiana ("First State Bank"), First American Bank,
Vincennes, Indiana ("First American"), and German American Holdings Corporation
("GAHC"), an Indiana corporation that owns all of the outstanding capital stock
of both Citizens State Bank, Petersburg, Indiana ("Citizens State") and the
Peoples National Bank, Washington, Indiana ("Peoples"). The Company, through its
five bank subsidiaries, operates 25 banking offices and five full-service
insurance offices in eight contiguous counties in southwestern Indiana.
On June 1, 1998 the Company consummated mergers with the parent companies
of Citizens State and FSB Bank of Francisco, Indiana ("FSB Bank"). FSB Bank and
an existing affiliate, Community Trust Bank of Petersburg, Indiana were merged
into the Citizens State charter on that date. These mergers were accounted for
as poolings of interests. The reported operating results for periods prior to
June 1, 1998 have been retroactively adjusted to give the effect to the merger
with Citizens State. Prior period results do not include the effect of the
merger with FSB Bank, as restatement would not have resulted in a material
change in overall financial results.
In January 1999, the Company issued 2,039,665 shares of common stock for
all the outstanding shares of 1ST BANCORP of Vincennes, Indiana and 62,000
shares of common stock for all the outstanding shares of The Doty Agency, Inc.
(Doty) of Petersburg, Indiana. These mergers were accounted for as poolings of
interest. The reported operating results for periods prior to the 1999 merger
date have been retroactively adjusted to give effect to the merger with 1ST
BANCORP. Prior period results do not include the effect of the merger with Doty,
as restatement would not have resulted in a material change in overall financial
results. 1ST BANCORP's subsidiaries included First Federal Bank, First Financial
Insurance Agency, Inc., and First Title Insurance Company, Inc. First Federal
Bank, now known as First American Bank, is headquartered in Vincennes, Indiana.
First Financial Insurance Agency has offices in Vincennes and Princeton,
Indiana. Doty is a general multi-line, full-service insurance agency with
offices in Pike and Knox counties in Indiana.
Prior to 1999, 1ST BANCORP's financial statements were prepared on a June
30 fiscal year. Accordingly, the Company's calendar period financial statements
for periods prior to 1999 have been restated to include 1ST BANCORP fiscal
period financial statements (i.e., the Company's previously reported December
31, 1998 balances were combined with 1ST BANCORP June 30, 1998 balances). 1ST
BANCORP is combined with the Company on a calendar period basis for all 1999
periods. As a result of 1ST BANCORP'S prior fiscal reporting, the 1999 statement
of cash flows and Note 5 include "acquired affiliate" amounts to adjust from
fiscal to calendar period reporting.
In May 1999, the Company issued 8,000 shares of common stock and
approximately $26,000 in cash for all the outstanding shares of Professional
Insurance Markets, Inc. (which did business as Smith & Bell) of Vincennes,
Indiana. This merger was accounted for as a purchase. Accordingly, reported
operating results for periods prior to the merger have not been restated. Smith
& Bell is a general multi-line, full-service insurance agency with offices in
Knox County, Indiana.
7
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Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized
appreciation on securities available-for-sale, net of tax.
Note 2 -- Per Share Data
The Board of Directors declared and paid a 5 percent common stock dividend
in December 1998. In lieu of issuing fractional shares, the company purchased
from shareholders their fractional interest. The Company issued 995,678 common
shares related to the mergers with the parent companies of Citizens State and
FSB Bank on June 1, 1998 and 2,101,665 common shares related to the mergers of
1ST BANCORP and Doty in January of 1999. Earnings per share amounts have been
retroactively computed as though these additionally issued shares had been
outstanding for all periods presented. Earnings per share amounts have not been
restated for the issuance of 8,000 common shares related to the purchase of
Smith & Bell in May 1999. The computation of Earnings per Share and Diluted
Earnings per Share are provided as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30,
1999 1998
---------------------------------
Earnings per Share:
Net Income $2,283,000 $2,232,000
Weighted Average Shares Outstanding 8,778,258 8,764,756
----------- -----------
Earnings per Share: $ 0.26 $ 0.26
=========== ===========
Diluted Earnings per Share:
Net Income $2,283,000 $2,232,000
Weighted Average Shares Outstanding 8,778,258 8,764,756
Stock Options 21,797 31,475
Assumed Shares Repurchased upon Exercise of Options (19,741) (16,203)
----------- -----------
Diluted Weighted Average Shares Outstanding 8,780,314 8,780,028
----------- -----------
Diluted Earnings per Share $ 0.26 $ 0.26
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
1999 1998
---------------------------------
Earnings per Share:
Net Income $4,506,000 $4,436,000
Weighted Average Shares Outstanding 8,772,457 8,764,301
----------- -----------
Earnings per Share: $ 0.51 $ 0.51
=========== ===========
Diluted Earnings per Share:
Net Income $4,506,000 $4,436,000
Weighted Average Shares Outstanding 8,772,457 8,764,301
Stock Options 21,797 31,475
Assumed Shares Repurchased upon Exercise of Options (19,741) (16,203)
----------- -----------
Diluted Weighted Average Shares Outstanding 8,774,513 8,779,573
----------- -----------
Diluted Earnings per Share $ 0.51 $ 0.51
=========== ===========
</TABLE>
8
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Note 3 - Securities
The amortized cost and estimated market values of Securities as of June 30, 1999
are as follows (dollars in thousands):
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Estimated
Amortized Market
Cost Value
----------- -----------
Securities Available-for-Sale:
U.S. Treasury Securities and Obligations of
U.S. Government Corporations and Agencies $ 87,962 $ 85,398
Obligations of State and Political Subdivisions 26,230 26,753
Asset-/Mortgage-backed Securities 69,871 68,345
----------- -----------
Total $ 184,063 $ 180,496
=========== ===========
Securities Held-to-Maturity:
Obligations of State and Political Subdivisions $ 29,840 $ 30,228
Asset-/Mortgage-backed Securities 1,297 1,301
----------- -----------
Total $ 31,137 $ 31,529
=========== ===========
</TABLE>
The amortized cost and estimated market values of Securities as of December 31,
1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Estimated
Amortized Market
Cost Value
----------- -----------
Securities Available-for-Sale:
U.S. Treasury Securities and Obligations of
U.S. Government Corporations and Agencies $ 68,201 $ 68,386
Obligations of State and Political Subdivisions 29,103 30,455
Asset-/Mortgage-backed Securities 52,881 52,686
----------- -----------
Total $ 150,185 $ 151,527
=========== ===========
Securities Held-to-Maturity:
U.S. Treasury Securities and Obligations of
U.S. Government Corporation and Agencies $ 46,849 $ 47,951
Asset-/Mortgage-backed Securities 1,497 1,511
----------- -----------
Total $ 48,346 $ 49,462
=========== ===========
</TABLE>
9
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At June 30, 1999 and December 31, 1998, U.S. Government Agency structured
notes with an amortized cost of $1,998,000 and $5,985,000 respectively, and fair
value of $1,845,000 and $5,985,000 respectively, are included in securities
available-for-sale.
These notes consist of single-index bonds.
Note 4 -- Loans
Total loans, as presented on the balance sheet, are comprised of the
following classifications (dollars in thousands):
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<CAPTION>
<S> <C> <C>
June 30, December 31,
1999 1998
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Real Estate Loans Secured by 1-4
Family Residential Properties $ 319,794 $ 303,047
Agricultural Loans 61,665 62,736
Commercial and Industrial Loans 147,297 136,649
Loans to Individuals for Household,
Family and Other Personal Expenditures 109,703 95,683
Lease Financing 516 821
---------- ----------
Total Loans $ 638,975 $ 598,936
========== ==========
<FN>
No unguaranteed concentration of credit in excess of 10 percent of total
assets exists within any single industry group.
</FN>
</TABLE>
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
----------- -----------
Balance at January 1 $ 8,323 $ 8,645
Allowance of Acquired Affiliate 356 ---
Provision for Loan Losses 641 299
Recoveries of Prior Loan Losses 305 164
Loan Losses Charged to the Allowance (1,136) (792)
----------- -----------
Balance at June 30 $ 8,489 $ 8,316
=========== ===========
</TABLE>
10
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Note 6 - Business Combinations
On June 1, 1998 the Company acquired by merger CSB Bancorp of Petersburg,
Indiana (and its wholly owned subsidiary, Citizens State Bank of Petersburg) in
exchange for 928,475 shares of German American Bancorp common stock. Fractional
interests were paid in cash of $3. The transaction was accounted for as a
pooling of interests.
Also on June 1, 1998 the Company acquired by merger FSB Financial
Corporation of Francisco, Indiana (and its wholly owned subsidiary, FSB Bank of
Francisco, Indiana) in exchange for 67,203 shares of German American Bancorp
common stock. Fractional interests for this transaction were paid in cash of $2.
The transaction was accounted for as a pooling of interests; however, results
for 1997 do not include the effect of this transaction, as restatement would not
have resulted in a material change in overall financial results. Total assets
and equity of FSB Bank at the date of merger were $15.5 million and $1.4
million, respectively.
Effective the first business day of January 1999, the Company issued
2,039,665 shares for all the outstanding shares of 1ST BANCORP of Vincennes,
Indiana and 62,000 shares for all the outstanding shares of The Doty Agency,
Inc. (Doty) of Petersburg, Indiana. These mergers were accounted for as poolings
of interests. The reported operating results for periods prior to the 1999
merger date have been retroactively adjusted to give effect to the merger with
1ST BANCORP. Prior period results do not include the effect of the merger with
Doty, as restatement would not have resulted in a material change in overall
financial results.
On May 10, 1999 the Company issued 8,000 shares of common stock and
approximately $26,000 in cash for all the outstanding shares of the corporate
owner of Smith & Bell of Vincennes, Indiana. This merger was accounted for as a
purchase, and resulted in the recording of approximately $250,000 in goodwill.
The fair value of Smith & Bell's assets and liabilities, respectively, at the
date of acquisition were approximately $160,000 and 250,000. Reported operating
results for periods prior to the merger have not been restated.
The following is a reconciliation of the separate and combined net interest
income and net income of German American Bancorp, 1ST BANCORP and Doty for the
period prior to the acquisition:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GERMAN AMERICAN
BANCORP 1ST
(as previously reported) BANCORP DOTY COMBINED
For the three months ended June 30, 1998
Net interest income $ 6,008 $1,590 $--- $ 7,598
Net income / (Loss) $ 1,795 $ 437 $--- $ 2,232
For the six months ended June 30, 1998
Net interest income $12,051 $3,165 $--- $15,216
Net income / (Loss) $ 3,544 $ 892 $--- $ 4,436
</TABLE>
Note 7 -- Subsequent Events
On July 29, 1999, German American Bancorp announced that its Board of
Directors has approved a stock repurchase program for up to 425,000 of the
outstanding Common Shares of the Company, representing nearly five percent of
its outstanding shares. Shares may be purchased from time to time in the open
market and in large block privately negotiated transactions. The Company
commenced bidding for shares on August 3, 1999 and will conclude bids and
purchases (even if not all shares authorized under the program have been
repurchased) by December 14,1999.
11
<PAGE>
ITEM 2.
GERMAN AMERICAN BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
German American Bancorp ("the Company") is a multi-bank holding company
based in Jasper, Indiana. Its five affiliate banks conduct business in 25
offices in Dubois, Daviess, Gibson, Knox, Martin, Pike, Perry and Spencer
Counties in Southwest Indiana. Its full-service insurance agencies operate
offices in Dubois, Gibson, Knox and Pike Counties. The banks provide a wide
range of financial services, including accepting deposits; making commercial,
mortgage and consumer loans; issuing property and casualty, 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 June 30, 1999 and December 31, 1998 and the consolidated
results of operations for the three and six month periods ended June 30, 1999
and 1998. This discussion 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, as well as the
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's December 31, 1998 Annual Report to
Shareholders.
On June 1, 1998 the Company consummated mergers with the parent companies
of Citizens State and FSB Bank of Francisco, Indiana ("FSB Bank"). FSB Bank and
an existing affiliate, Community Trust Bank of Otwell, Indiana were merged into
the Citizens State charter on that date. The reported operating results for
periods prior to June 1, 1998 have been retroactively adjusted to give the
effect to the merger with Citizens State. Prior year results do not include the
effect of the merger with FSB Bank, as restatement would not have resulted in a
material change in overall financial results.
In January 1999, the Company issued 2,039,665 shares for all the
outstanding shares of 1ST BANCORP of Vincennes, Indiana and 62,000 shares for
all the outstanding shares of The Doty Agency, Inc. (Doty) of Petersburg,
Indiana. These mergers were accounted for as poolings of interests. The reported
operating results for periods prior to the 1999 merger date have been
retroactively adjusted to give effect to the merger with 1ST BANCORP. Prior
period results do not include the effect of the merger with Doty, as restatement
would not have resulted in a material change in overall financial results.
In May 1999, the Company issued 8,000 shares of common stock and
approximately $26,000 in cash for all the outstanding shares of Professional
Insurance Markets, Inc. (which did business as Smith & Bell) of Vincennes,
Indiana. This merger was accounted for as a purchase. Accordingly, reported
operating results for periods prior to the merger have not been restated. Smith
& Bell is a general multi-line, full-service insurance agency with offices in
Knox County, Indiana.
12
<PAGE>
RESULTS OF OPERATIONS
Net Income:
Net income was $2,283,000 or $0.26 per share for the quarter ended June 30,
1999 compared to $2,232,000 or $0.26 per share for the second quarter of 1998.
Net interest income increased $388,000, or 5.1 percent. Provision for Loan
Losses increased by $127,000. Noninterest income increased $348,000 or 28.4
percent over 1998. Noninterest expense increased $579,000 or 10.6 percent from
the prior year.
Net income for the six months ended was $4,506,000 or $0.51 per share
compared to $4,436,000 or $0.51 per share for the prior year to date. Net
interest income increased $645,000, or 4.2 percent. Provision for Loan Losses
increased by $342,000 or 114 percent. Noninterest income increased $758,000 or
32.6 percent over 1998. Noninterest expense increased $1.1 million or 10.6
percent from the prior year.
Net Interest Income:
The following table summarizes German American Bancorp's net interest
income (on a tax-equivalent basis, at an effective tax rate of 34 percent for
each period) for each of the periods presented herein (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Change from
Ended June 30, Prior Period
1999 1998 Amount Percent
------------------------ ---------------------
Interest Income (T/E) $17,010 $16,539 $471 2.8%
Interest Expense 8,591 8,553 38 0.4%
------- ------- ----
Net Interest Income (T/E) $ 8,419 $ 7,986 $433 5.4%
======= ======= ====
Six Months Change from
Ended June 30, Prior Period
1999 1998 Amount Percent
------------------------ ---------------------
Interest Income (T/E) $33,781 $33,152 $ 629 1.9%
Interest Expense 17,058 17,159 (101) (0.6%)
------- ------- ------
Net Interest Income (T/E) $16,723 $15,993 $ 730 4.6%
======= ======= ======
</TABLE>
The increase in net interest income for the three months ended June 30,
1999 compared to the prior year was due to a $111,000 increase in loan income, a
$315,000 increase in investment income and a $323,000 decrease in interest
expense on deposits, offset by a $361,000 increase in interest expense on
borrowings. The increase in net interest income for the year to date ended June
30, 1999 compared to 1998 was due to a $417,000 increase in loan income, a
$127,000 increase in investment income and a $609,000 decrease in interest
expense on deposits, offset by a $508,000 increase in interest expense on
borrowings.
Net interest margin, which represents the average net effective yield on
earning assets, is tax-equivalent net interest income expressed as a percentage
of average earning assets. For the second quarter of 1999, the net interest
margin was 3.92 percent compared to 3.98 percent for the comparable period of
1998. Net interest margin for the six months ended June 30, 1999 was 3.91
compared to 4.00 in the prior year. These declines were due to a more
competitive pricing environment for loans and the effect of capital leverage
strategies employed in the investment portfolio.
13
<PAGE>
Provision For Loan Losses:
The Company provides for future loan losses through regular provisions to
the allowance for loan losses. These provisions are made at a levels considered
necessary by management to absorb estimated losses in the loan portfolio. A
detailed evaluation of the adequacy of this loan loss reserve is completed
quarterly by management.
The consolidated provision for loan losses was $272,000 and $641,000 for
the three and six months ended June 30, 1999. This compares to $145,000 and
$299,000 for the same respective periods in 1998. This increase in provision was
primarily due to growth in non-conforming mortgage loans and recent charge-off
experience in residential real estate mortgage and consumer loans. The provision
for loan losses to be recorded in future periods will be adjusted based on the
results of on-going evaluations of the adequacy of the allowance for loan
losses.
Net charge-offs were $528,000 or 0.34 annualized percent of average loans
for the three months ended and $831,000 or 0.27 annualized percent of average
loans for the six months ended June 30, 1999. Net charge-offs for the second
quarter and year to date ended June 30, 1998 were $544,000 or 0.36 annualized
percent and $628,000 or 0.22 annualized percent of average loans, respectively.
The increase in net charge-offs occurred primarily in consumer loans,
residential real estate mortgages (related to growth in that segment of the
portfolio), and included a single large commercial loan.
Nonperforming loans as a percent of total loans at June 30, 1999 were 1.28
percent of total loans, which represents no change from March 31, 1999. This is
an increase from 1.16 percent at December 31, 1998. See discussion under
"Financial Condition" for more information regarding nonperforming assets.
Noninterest Income:
Noninterest income for the second quarter of 1999 increased $348,000 or
28.4 percent over the same period in 1998. Investment Services Income, which
fluctuates based on market conditions, increased $21,000. The increase in
Insurance Premiums and Commissions of $345,000 was primarily due to the Doty and
Smith & Bell acquisitions. Other Charges and Fees increased $58,000 or 22%,
primarily due to growth in the Company's title insurance business. Gains on the
Sale of Loans and Other Real Estate also fluctuates with market conditions, and
declined $31,000 from the prior year.
Year to date noninterest income increased $758,000 or 32.6 percent over
1998. Increases occurred in Insurance Premiums and Commissions ($537,000), Other
Charges and Fees ($185,000), and Gains on the Sale of Loans and Other Real
Estate ($129,000).
Noninterest Expense:
Noninterest expense for the second quarter of 1999 increased $579,000 or
10.6 percent from the prior year. Most of this increase occurred in Salaries and
Employee Benefits ($227,000), Furniture and Equipment Expense ($108,000) and
Professional Fees ($110,000). The increase in Professional Fees is due to
insurance acquisition expenses, mortgage banking consulting fees, and fees
associated with outsourcing the Company's internal audit function in 1999. The
Company's insurance operations accounted for $422,000 or 73 percent of the total
increase.
Year to date noninterest expense increased $1.1 million or 10.6 percent
from the prior year. The bulk of this increase occurred in Salaries and Employee
Benefits ($520,000), Furniture and Equipment Expense ($175,000) and Supplies
($71,000). The Company's insurance operations accounted for $626,000 or 57
percent of the total increase.
Salaries and Employee Benefits totaled $3.3 million in the second quarter
of 1999 and $6.5 million year to date, or 54 percent of total noninterest
expense. Excluding increases due to the Company's acquired insurance operations,
these expenses increased approximately $58,000 year to date or 1.0 percent over
year to date 1998.
14
<PAGE>
Total occupancy, furniture and equipment expense for the three and six
months ended June 30, 1999 totaled $860,000 and 1.7 million, respectively. This
was approximately $141,000 and $232,000 greater than the same periods of the
prior year. These increases include depreciation on Citizens State Bank's new
main office Petersburg, and for a branch remodeling at another affiliate. Also
included are the costs of upgrading the Company's computer systems at its
existing and new affiliates. This strategy is expected, over the long-term, to
better control employee related expenses and to improve the quality of customer
service provided by all of its affiliate community banks.
Computer processing fees increased $25,000 and $64,000 in the second
quarter and year to date 1999 periods, respectively, compared to the same
periods in 1998. Increases were due in part to Year 2000 preparation, and also
to conversion related expenses at our newest affiliate. Advertising expenses
were relatively unchanged from the prior year. Supplies expenses for the second
quarter increased $42,000 over the prior year. This included expenses at our
newest affiliate, and normal increases due to volume.
Year to date Other Operating Expenses increased $138,000 over 1998. $62,000
of this increase related to a net loss on sale and write-downs in Other Real
Estate Owned and other miscellaneous assets. Other increases occurred in
education and training expenses ($48,000), telecommunication expenses, including
network charges ($73,000), and collection expenses ($75,000). Expenses were
reduced in examination fees ($24,000), Director/Committee Fees ($79,000), bank
service charges ($30,000) and blanket bond/ D& O insurance expenses ($30,000).
Income Taxes:
The Company's effective income tax rate approximates 30% of pre-tax income
in all periods, and is lower than the combined federal and state statutory rate
of 39.6%. This lower effective rate results from the Company's tax-exempt
investment income on municipal securities and loans, and from net operating loss
and other income tax credits generated from investments in affordable housing
projects.
FINANCIAL CONDITION
Total assets at June 30, 1999 were $931 million. This was an increase of
$34 million from the December 31, 1998 total asset position. In comparison to
year-end totals, loans increased $40 million or 6.7 percent, investments
increased $11 million or 5 percent, and cash equivalents decreased $17 million.
Deposits at June 30, 1999 increased $17 million or 2.6 percent, and borrowings
increased $17 million or 13.1 percent.
All of the Company's affiliate banks are members of the Federal Home Loan
Bank System ("FHLB"). The banks' membership in the FHLB provides an additional
source of liquidity for both Long-term and Short-term borrowing needs. The
Company had $114 million in Long-term FHLB borrowings outstanding at June 30,
1999 as compared to $124 million at December 31, 1998.
15
<PAGE>
Nonperforming Assets:
The following is an analysis of the Company's nonperforming assets at June
30, 1999 and December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, December 31,
1999 1998
-------- ------------
Nonaccrual Loans $5,313 $5,411
Loans contractually past due 90 days or more 2,896 1,522
Renegotiated Loans --- ---
------- ------
Total Nonperforming Loans 8,209 6,933
------- ------
Other Real Estate 2,491 1,156
------- ------
Total Nonperforming Assets $10,700 $8,089
======= ======
Allowance for Loan Loss to Nonperforming Loans 103.41% 120.05%
Nonperforming Loans to Total Loans 1.28% 1.16%
</TABLE>
The increase in past due loans occurred primarily in non-conforming real estate
loans. Most of the increase in Other Real Estate related to a group of
agricultural loans to a single borrower.
Capital Resources:
Shareholders' equity totaled $91.5 million at June 30, 1999 or 9.8 percent
of total assets, an increase of $269,000 from December 31, 1998.
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. The Company is required to maintain minimum levels
of capital 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 deferred tax assets defined by bank
regulations. Tier 2 capital is defined as the amount of the allowance for loan
losses which does not exceed 1.25 percent 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
percent leverage ratio, which is Tier 1 capital divided by defined "total
assets"; 4.0 percent Tier 1 capital to risk-adjusted assets; and, an 8.0 percent
total capital to risk-adjusted assets ratios. Under these guidelines, the
Company, on a consolidated basis, and each of its affiliate banks individually,
have capital ratios that substantially exceed the regulatory minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well
capitalized, adequately capitalized, under-capitalized, significantly
under-capitalized, and critically under-capitalized. Under these regulations, a
"well-capitalized" entity must achieve a Tier 1 Risk-based capital ratio of at
least 6.0 percent; a total capital ratio of at least 10.0 percent; and, a
leverage ratio of at least 5.0 percent, and not be under a capital directive
order.
At June 30, 1999 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.
16
<PAGE>
The table below presents the Company's consolidated risk-based capital
structure and capital ratios under regulatory guidelines (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, December 31,
1999 1998
-------- ------------
Tier 1 Capital:
Shareholders' Equity as presented
on the Balance Sheet $ 91,545 $ 91,276
Less: Unrealized Depreciation (Appreciation)
on Securities Available-for-Sale 2,153 (811)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (2,307) (1,497)
-------- --------
Total Tier 1 Capital 91,391 88,968
Tier 2 Capital:
Qualifying Allowance for Loan Loss 7,554 6,328
-------- --------
Total Capital $ 98,945 $ 95,296
======== ========
Risk-adjusted Assets $603,401 $583,500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To be Well
Capitalized
Under Prompt
Minimum for Corrective
Capital Action At At
Adequacy Provisions June 30, December 31,
Purposes (FDICIA) 1999 1998
Leverage Ratio 4.00% 5.00% 9.95% 10.28%
Tier 1 Capital to Risk-adjusted Assets 4.00% 6.00% 15.15% 15.25%
Total Capital to Risk-adjusted Assets 8.00% 10.00% 16.40% 16.33%
</TABLE>
The Company has commenced a stock repurchase program as discussed in greater
detail in Note 7 to the financial statements included in Part I of this report,
which Note is incorporated herein by reference.
Liquidity:
The Consolidated Statement of Cash Flows details the elements of change in
the Company's cash and cash equivalents. During the first six months of 1999,
operating activities provided $12.2 million of available cash, which included
net income of $4.5 million. Deposits and borrowings provided $43.7 million of
cash during the period. Major cash outflows experienced during this six month
period of 1999 included $2.2 million in dividends, $1.8 million in property and
equipment purchases and net loan outlays in the amount of $33.6 million.
Purchases of securities and short-term investments required $36.0 million in
cash above the dollar amount of maturities and sales. Total cash outflows for
the period exceeded inflows by $16.7 million, leaving cash and cash equivalents
of $32.9 million at June 30, 1999.
17
<PAGE>
Year 2000:
All banks and financial institutions are faced with addressing a potentially
materially adverse event should their computer and operating systems fail to
accurately process their customers' deposit, loan and other business in the Year
2000. The Company, like any financial institution, would suffer an interruption
in its ability to transact business should its systems fail due to Year 2000
programming inaccuracy.
During the second quarter, the Company satisfactorily completed testing and
implementation procedures on all mission critical systems to address potential
Year 2000 issues. The Company's Year 2000 process is subject to banking agency
regulatory guidelines and examination. The Company believes itself to be in
compliance with all significant regulatory requirements.
The Company's service provider for all of its loan and deposit account
processing activity is Fiserv, a publicly listed company headquartered in
Milwaukee, Wisconsin. The Company designated Fiserv's systems as mission
critical for the Year 2000 issue, as that term is defined by bank regulatory
requirements. Fiserv is a national service provider for over 3,300 institutions.
While the Company has extensively tested Fiserv's systems for Year 2000
capabilities, it can obviously give no absolute assurance as to the actual
performance of Fiserv's systems in the Year 2000. However, based on this
testing, the Company is unaware of any issues that would cause any material
interruption in its ability to transact business. The Company has also completed
its assessment of the Year 2000 implications of systems other than its "mission
critical" data processing information systems (such as elevators, HVAC, copiers,
and the like).
The Company expended approximately $500,000 on Year 2000 related items,
including approximately $200,000 in cash outlays in 1999. These outlays exclude
the cost of implementing the Company's state-of-the-art platform and computer
systems upgrade, but include the Company's share of third party systems costs
and all other costs to address the Year 2000 issue. For financial statement
purposes, the depreciation and operating expenses associated with these outlays
will impact the income statement over a period of one to seven years.
The Year 2000 issue could also affect the ability of the Company's customers
to conduct operations in a timely and effective manner, and as such, could
adversely impact the quality of the Company's loan portfolio, its deposits, or
other sources of revenue and funding from customers. The Company has completed
an assessment of its commercial customers' potential exposure to the Year 2000
issue and their plans to minimize any such exposure. While that assessment can
offer no assurances on this matter, the Company is unaware of any specific
significant customer Year 2000 issues that are not expected to be resolved prior
to the end of the year.
The above summary of the Company's Year 2000 preparations includes forward
looking statements, concerning the Company's present expectation that its
operations will not be materially adversely affected by Year 2000 issues.
However, the Year 2000 issue is pervasive, complex and could potentially affect
any computer process, including any equipment utilizing embedded technology like
microprocessors. Although the Company believes it is taking all necessary steps
to address Year 2000 issues, no assurances can be given that some problems will
not occur or that the Company will not incur significant additional expenses in
future periods, any of which could have a material adverse impact on the
Company's results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committees and Boards of Directors of the holding company and
its affiliate banks. Primary market risks which impact the Company's operations
are liquidity risk and interest rate risk.
18
<PAGE>
The liquidity of the parent company is dependent upon the receipt of
dividends from its bank subsidiaries, which are subject to certain regulatory
limitations. The affiliate banks source of funding is predominately core
deposits, maturities of securities, repayments of loan principal and interest,
federal funds purchased, securities sold under agreements to repurchase and
long-term borrowings from the Federal Home Loan Bank.
The Company monitors interest rate risk by the use of computer simulation
modeling to estimate the potential impact on its net interest income under
various interest rate scenarios, and by estimating its static interest rate
sensitivity position. Another method by which the Company's interest rate risk
position can be estimated is by computing estimated changes in its net portfolio
value ("NPV"). This method estimates interest rate risk exposure from adverse
movements in interest rates by using interest rate sensitivity analysis to
determine the change in the NPV of the net present value of discounted cash
flows from assets and liabilities.
NPV represents the market value of portfolio equity and is equal to the
estimated market value of assets minus the estimated market value of
liabilities. Computations are based on a number of assumptions, including the
relative levels of market interest rates and prepayments in mortgage loans and
certain types of investments. These computations do not contemplate any actions
management may undertake in response to changes in interest rates, and should
not be relied upon as indicative of actual results. In addition, certain
shortcomings are inherent in the method of computing NPV. Should interest rates
remain or decrease below current levels, the proportion of adjustable rate loans
could decrease in future periods due to refinancing activity. In the event of an
interest rate change, prepayment levels would likely be different from those
assumed in the table. Lastly, the ability of many borrowers to repay their
adjustable rate debt may decline during a rising interest rate environment.
The table below provides an assessment of the risk to NPV in the event of
sudden and sustained 1% and 2% increases and decreases in prevailing interest
rates. These estimates were restated from those presented in the Company's 1998
Annual Report for the effect of the January 1999 acquisition, on a pooling of
interests basis, of 1ST BANCORP. The Company's risk profile as of June 30, 1999
does not materially differ from these year-end estimates. The table indicates
that as of December 31, 1998 the Company's estimated NPV might be expected to
decrease in the event of an increase in prevailing interest rates, and that a
decrease in prevailing interest rates might have little or no impact on
estimated NPV.
Change in Estimated Net Portfolio Value
As of December 31, 1998
Net Portfolio Value
Changes in Rates In Thousands Dollar Change % Change
+2%....................$88,621.................$(22,784)..............(20%)
+1%.....................99,131..................(12,274)..............(11%)
Base....................111,405......................---................---
-1%....................112,695....................1,290.................1%
-2%....................111,844......................439................---
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The Company issued 8,000 shares of common stock to the former shareholders
of Professional Insurance Markets, Inc. ("PIMI") in May of 1999 in payment of
the purchase price for PIMI in reliance upon the private offering exemption
[Section 4(2)] from registration under the Securities Act of 1933.
19
<PAGE>
The Company also issued an aggregate of 2,470 common shares to executive
officers in May 1999 upon their exercises of stock options granted to them under
the Company's 1992 stock option plan, and an aggregate of 16,827 common shares
during June 1999 to members of the Board of Directors of the Company and its
affiliate banks in payment of a portion of their fees for service as such.
All of these issuances were made in reliance upon the Section 4(2) exemption.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on April 22, 1999. At
the Annual Meeting, the shareholders elected as Directors for an additional
two-year term the seven nominees proposed by the Board of Directors, and
approved the German American Bancorp 1999 Long-Term Equity Incentive Plan
("Incentive Plan") and the 1999 Employee Stock Purchase Plan ("Purchase Plan").
Votes Votes Broker
Nominee Cast for Withheld Non-Votes
George Astrike 6,320,066 335,033 0
David G. Buehler 6,318,146 336,953 0
David B. Graham 6,318,268 336,831 0
William R. Hoffman 6,327,349 327,750 0
Michael B. Lett 6,322,772 332,327 0
C. James McCormick 6,327,892 327,207 0
A.W. Place Jr. 6,327,349 327,750 0
The Incentive Plan was approved by a vote of 5,035,529 votes in favor and
674,420 votes opposed with 219,115 abstentions or broker non-votes. The Purchase
Plan was approved by a vote of 5,275,353 votes in favor and 472,266 votes
opposed with 181,445 abstentions or broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
Exhibit No. Description
3.1 Restated Articles of Incorporation of the Registrant
as amended April 23, 1998 are incorporated by
reference to Exhibit 3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
3.2 Restated Bylaws of the Registrant as amended August 14,
1990, are incorporated by reference to Exhibit 3.2 to
Registrant's Form 10-K for the year ended December 31, 1995.
4 No long-term debt instrument issued by the Registrant
exceeds 10% of consolidated total assets. In accordance
with paragraph 4 (iii) of Item 601(b) of Regulation S-K,
the Registrant will furnish the Securities and
Exchange Commission upon request copes of long-term
debt instruments and related agreements.
27 Financial Data Schedule for the periods ended June 30,
1999 and 1998.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 30,
1999.
20
<PAGE>
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 August 16, 1999 By/s/Mark A. Schroeder
--------------------------------- ------------------------------
Mark A. Schroeder
President and CEO
Date August 16, 1999 By/s/John M. Gutgsell
---------------------------------- ------------------------------
John M. Gutgsell
Chief Accounting Officer
21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 22,816 14,462
<INT-BEARING-DEPOSITS> 10,087 5,462
<FED-FUNDS-SOLD> 0 14,225
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 180,496 112,722
<INVESTMENTS-CARRYING> 31,137 69,237
<INVESTMENTS-MARKET> 31,529 70,276
<LOANS> 639,619 595,208
<ALLOWANCE> 8,489 8,316
<TOTAL-ASSETS> 931,349 850,088
<DEPOSITS> 682,104 651,070
<SHORT-TERM> 34,343 4,542
<LIABILITIES-OTHER> 9,119 9,391
<LONG-TERM> 114,238 96,406
0 0
0 0
<COMMON> 8,794 8,386
<OTHER-SE> 82,751 80,293
<TOTAL-LIABILITIES-AND-EQUITY> 931,349 850,088
<INTEREST-LOAN> 26,046 25,629
<INTEREST-INVEST> 6,836 6,178
<INTEREST-OTHER> 37 568
<INTEREST-TOTAL> 32,919 32,375
<INTEREST-DEPOSIT> 13,677 14,286
<INTEREST-EXPENSE> 17,058 17,159
<INTEREST-INCOME-NET> 15,861 15,216
<LOAN-LOSSES> 641 299
<SECURITIES-GAINS> (6) 29
<EXPENSE-OTHER> 11,955 10,811
<INCOME-PRETAX> 6,345 6,428
<INCOME-PRE-EXTRAORDINARY> 6,345 6,428
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,506 4,436
<EPS-BASIC> 0.51 0.51
<EPS-DILUTED> 0.51 0.51
<YIELD-ACTUAL> 3.73 3.81
<LOANS-NON> 5,313 3,134
<LOANS-PAST> 2,896 3,228
<LOANS-TROUBLED> 0 762
<LOANS-PROBLEM> 1,189 0
<ALLOWANCE-OPEN> 8,679 8,645
<CHARGE-OFFS> 1,136 792
<RECOVERIES> 305 164
<ALLOWANCE-CLOSE> 8,489 8,316
<ALLOWANCE-DOMESTIC> 8,489 8,316
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 2,292 2,624
</TABLE>
