Item 2. 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. The Company’s Common Stock is traded on NASDAQ’s National Market System under the symbol GABC. The Company operates five affiliate community banks with 26 retail banking offices in the eight contiguous Southwestern Indiana counties of Daviess, Dubois, Gibson, Knox, Martin, Perry, Pike and Spencer and a business lending center in Evansville, Indiana. The Company also operates four independent insurance agencies throughout its market area. The banks’ wide range of personal and corporate financial services include making commercial and consumer loans; marketing, originating, and servicing mortgage loans; providing trust, investment advisory and brokerage services through the banks’ jointly owned subsidiary German American Financial Advisors & Trust Company; accepting deposits; and providing safe deposit facilities. The Company's insurance activities include offering a full range of title, property, casualty, life and credit insurance products.
This section presents an analysis of the consolidated financial condition of the Company as of September 30, 2002 and December 31, 2001 and the consolidated results of operations for the three-month and nine-month periods ended September 30, 2002 and 2001. 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, 2001 Annual Report on Form 10-K.
Net income declined $128,000 to $2,315,000 or $0.21 per share for the quarter ended September 30, 2002 compared to $2,443,000 or $0.22 per share for the third quarter of 2001. Net income declined $155,000 to $7,213,000 or $0.66 per share for the nine months ended September 30, 2002 compared to $7,368,000 or $0.67 per share for the nine months ended September 30, 2001. The decline in earnings in both the three- and nine-month periods ended September 30, 2002 is largely attributable to a decline in revenues and earnings generated by the Company’s mortgage banking operations. The declines in revenues and earnings from the mortgage banking operations were concentrated in the lower gains on sales of residential mortgage loans, impairment of its mortgage servicing rights asset, and a decline in net interest income. The Company’s core banking and insurance operations (exclusive of the mortgage banking operations) posted 4% and 12% earnings increases during the three and nine months ended September 30, 2002 compared with the same periods of 2001 driven in large part by increased net interest income.
Net interest income is the Company’s single largest source of earnings, and represents the difference between interest and fees realized on earning assets, less interest paid on deposits and borrowed funds. The following table summarizes German American Bancorp’s net interest income (on a tax-equivalent basis, at an effective tax rate of 34%) for each of the periods presented herein (dollars in thousands):
Net interest income increased $328,000 or 4.2% ($392,000 or 4.7% on a tax-equivalent basis) for the quarter ended September 30, 2002 compared with the second quarter of 2001. Net interest margin is tax-equivalent net interest income expressed as a percentage of average earning assets. For the third quarter of 2002, the net interest margin increased to 3.71% compared to 3.55% for the same period of 2001. The increase in the Company’s net interest income and net interest margin was primarily attributable to a decline in Company’s cost of funds. The lower cost of funds was a product of a decline in market interest rates and an increase in lower costing transaction and savings deposits. The increase in net interest margin allowed an increase in net interest income despite a modest decline in interest earnings assets.
Nine months Change from
Ended September 30, Prior Period
2002 2001 Amount Percent
-------- -------- --------- -------
Interest Income (T/E) $ 47,861 $ 56,248 $ (8,387) -14.9%
Interest Expense 21,749 30,536 (8,787) -28.8%
-------- -------- --------
Net Interest Income (T/E) $ 26,112 $ 25,712 $ 400 1.6%
======== ======== ========
Net interest income increased $159,000 or 0.7% (an increase of $400,000 or 1.6% on a tax-equivalent basis) for the nine-month period ended September 30, 2002 compared with the same period of 2001. For the nine months ended September 30, 2002, the net interest margin increased to 3.75% compared to 3.62% for the same period of 2001. The increase in the net interest margin was primarily attributable to a decline in Company’s cost of funds as discussed previously plus a lower level of jumbo deposits and borrowed funds. The increase in net interest margin allowed an increase in net interest income despite a decline in interest earnings assets. The decline in interest earning assets has primarily been the result of a reduced residential loan portfolio.
The Company’s net interest margin has been negatively impacted by the Company’s mortgage banking segment. The mortgage banking segment’s net interest income declined $441,000 and $1,615,000 for the three and nine months ended September 30, 2002 compared with the same periods of 2001. This decline was the result of the sale of sub-prime residential real estate loans totaling nearly $70 million in February 2001 combined with prepayment of a significant amount the segment’s portfolio loans and the continued sale of a majority of the Company’s residential real estate production to the secondary market. Absent the mortgage banking segment, the Company’s net interest margin expanded to 4.24% and 4.26% for the three and nine months ended September 30, 2002 compared with 3.88% and 3.94% for the same periods of 2001.
The decline in loans in the mortgage banking segment has been replaced with shorter-term, lower yielding investments. The shorter-term investments are anticipated to be used to pay down long and medium term FHLB advances that were used to fund the mortgage banking segment’s portfolio in prior periods. In December 2002 and January 2003, $26.0 million of long-term FHLB advances mature. Short-term investment securities and federal funds positions have been matched with these maturing advances. This portion of the mortgage banking segment’s balance sheet is carrying an approximately 4% negative interest rate spread. Therefore, it is anticipated that the maturity and subsequent repayment of these advances will result in a positive impact on the mortgage banking segment’s net interest income in 2003.
Provision For Loan Losses:
The Company provides for loan losses through regular provisions to the allowance for loan losses, which totaled $247,000 and $165,000 for the quarters ended September 30, 2002 and 2001, respectively. Provision to the allowance for loan losses totaled $792,000 and $495,000 for the nine-month periods ended September 30, 2002 and 2001. These provisions are made at levels deemed necessary by management to absorb estimated, probable incurred losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management, the results of which are used to determine provisions for loan losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.
Net charge-offs were $360,000 or 0.22% annualized of average loans for the three months ended September 30, 2002 compared to $295,000 or 0.17% annualized of average loans for the third quarter of 2001. Net charge-offs were $967,000 or 0.20% annualized of average loans for the nine months ended September 30, 2002 compared to $1,067,000 or 0.20% annualized of average loans for the nine months ended September 30, 2001.
Non-performing loans represented 0.60% of total loans at September 30, 2002 compared to 0.72% at December 31, 2001. See discussion of “Financial Condition” for more information regarding nonperforming assets.
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Non-interest Income:
Non-interest income for the quarter ended September 30, 2002 decreased $210,000 or 9% compared with the third quarter of 2001. Non-interest income for the nine months ended September 30, 2002 decreased $602,000 or 8% compared with the same period of 2001. The decline in both the three- and nine-month periods ended September 30, 2002 primarily resulted from decreased Insurance Revenues and a decline in Net Gains on Sales of Loans and Related Assets.
Insurance Revenues declined $47,000 or 7% and $414,000 or 17% for the three- and nine-month periods ended September 30, 2002 compared with the same period during 2001. The decline in insurance revenues for the three months ended September 30, 2002 was isolated to the Company’s credit life and disability reinsurance operation. The decline during the nine months ended September 30, 2002 resulted primarily from a decline in contingency income from the Company’s property and casualty insurance operations and a decline in revenues generated by the Company’s credit reinsurance operations. Contingency income will fluctuate, as it represents amounts received from insurance companies based on claims experience. The decline in credit insurance and reinsurance revenues is largely attributable to a decline in consumer loan production.
Net Gains on Sales of Loans and Related Assets, and Provision for Market Losses on Loans Held for Sale decreased $64,000 or 16% in the quarter ended September 30, 2002 compared with 2001. Net Gains on Sales of Loans and Related Assets, and Provision for Market Losses on Loans Held for Sale decreased $164,000 or 15% during the nine months ended September 30, 2002 compared with 2001. The declines in the gain on sale resulted from a lower level of loan sales to the secondary markets. Loan sales totaled $29.0 million and $85.5 million during the three and nine months ended September 30, 2002 compared with $34.1 million and $93.1 million in the same periods of 2001.
Other Operating income declined by $55,000 or 23% during the three months ended September 30, 2002 compared with 2001. Other operating income declined $149,000 or 15% during the nine months ended September 30, 2002 compared with the same period in 2001. The declines in the three and nine months ended September 30, 2002 compared to the prior year were primarily the result of increased impairment adjustments on the mortgage banking segment’s mortgage servicing rights portfolio. Impairment adjustments for the three and nine months ended September 30, 2002 totaled $232,000 and $380,000 compared with $157,000 and $290,000 during the same periods of the 2001.
Non-interest Expense:
Non-interest expenses increased $481,000 or 7% during the third quarter of 2002 compared with 2001. Non-interest expenses increased $325,000 or 2% during the nine months ended September 30, 2002 compared with 2001. These increases were primarily the result of increased Salaries and Employee Benefits Expense and Professional Fees Expense.
Salaries and Employee Benefits increased $395,000 or 10% during the quarter ended September 30, 2002 compared with the same period in 2001. Salaries and Employee Benefits comprised approximately 59% of total non-interest expense in the third quarter of 2002 and 58% in 2001. Salaries and Employee Benefits increased $966,000 or 8% during the nine months ended September 30, 2002 compared with the same period in 2001. Salaries and Benefits represented approximately 61% of total non-interest expense during 2002 compared with 57% in 2001. The increases as a percentage of non-interest expenses during the nine-month period ended September 30, 2002 are primarily the result of lower non-interest expenses exclusive of salaries and employee benefits. The overall increases in Salaries and Employee Benefits were driven by performance incentives for employees resulting from significant earnings improvement in the Company’s core banking segment, staffing additions, and salary adjustments occurring in the normal course of operations.
Professional Fees Expense increased $182,000 or 184% in the third quarter 2002 compared with 2001. Professional Fees Expense increased $278,000 or 50% during the nine months ended September 30, 2002 compared with 2001. A significant amount of the increased professional fees resulted from the formation in late 2001 and 2002 of investment subsidiaries domiciled in the state of Nevada at three of the Company’s subsidiary banks. The increased professional fee expense was for investment portfolio management services and subsidiary management services provided by third parties.
Advertising and Promotions Expense decreased $80,000 or 31% and $256,000 or 32% during the three and nine months ended September 30, 2002 compared with the prior year. This decline was attributable to the initiation of an image campaign by the Company in the first quarter of 2001 and generally a lower level of advertising and promotional spending during 2002. Other Operating Expenses declined $54,000 or 5% and $690,000 or 20% during the three and nine months ended 2002 compared with the same period of 2001. The significant declines during the nine months ended September 30, 2002, were primarily attributable to a lower level of operating losses from the Company’s affordable housing tax credit limited partnership investments, a lower level of allowance for insurance reserves required by the Company’s credit reinsurance subsidiary, a lower level of collection costs at the Company’s mortgage banking division, and a lower level of amortization expense for intangible assets.
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Income Taxes:
The Company’s effective income tax rate approximated 17% and 18% of pre-tax income during the three and nine months ended September 30, 2002 and 24% and 25% during the same periods of 2001. The effective tax rates in all periods is lower than the blended statutory rate of 39.6%. The lower effective rate in both 2002 and 2001 primarily resulted from the Company’s tax-exempt investment income on securities and loans, and from income tax credits generated from investments in affordable housing projects. Also contributing to the lower effective tax rate in 2002 compared to the prior year was state income tax savings resulting from the formation of investment subsidiaries in the state of Nevada by three of the Company’s banking subsidiaries.
FINANCIAL CONDITION
Total assets at September 30, 2002 decreased $11.3 million to $1.004 billion compared with $1.015 billion in total assets at December 31, 2001. Loans, net of unearned income and allowance for loan losses, decreased by $22.1 million during the nine months ended September 30, 2002. Residential real estate loans declined $46.6 million during the nine months ended September 30, 2002 while commercial and industrial loans increased $24.3 million. The decline in residential real estate loans was attributable to the sale of a majority of new loan production to the secondary markets combined with continued prepayments of existing portfolio residential real estate loans. Cash and Cash Equivalents declined $37.8 million while Investment Securities increased $56.5 million to $247.7 million at September 30, 2002 compared with $191.2 million at year-end.
Total Deposits at September 30, 2002 declined $6.1 million to $720.7 million compared with $726.9 in total deposits at December 31, 2001. The decline in total deposits was primarily attributable to modest declines in transaction and savings accounts and time deposits less than $100,000. FHLB Advances and Other Borrowings declined $10.3 million to $164.1 million at September 30, 2002, due to expected maturities and required payments.
Non-performing Assets:
The following is an analysis of the Company’s non-performing assets at September 30, 2002 and December 31, 2001 (dollars in thousands):
September 30, December 31,
2002 2001
------------- ------------
Non-accrual Loans $ 2,417 $ 3,452
Past Due Loans (90 days or more) 1,054 916
Restructured Loans 366 367
-------- --------
Total Non-performing Loans 3,837 4,735
-------- --------
Other Real Estate 1,765 1,612
-------- --------
Total Non-performing Assets $ 5,602 $ 6,347
======== ========
Allowance for Loan Loss to Non-performing Loans 214.05% 177.15%
Non-performing Loans to Total Loans 0.60% 0.72%
Capital Resources:
Shareholders’ equity totaled $104.1 million at September 30, 2002 or 10.4% of total assets, an increase of $1.9 million from December 31, 2001. 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 currently consists of the amount of the allowance for loan losses which does not exceed a defined maximum allowance limit of 1.25 percent of gross risk adjusted assets. Total capital is the sum of Tier 1 and Tier 2 capital.
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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 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 September 30, 2002 management is not under such a capital directive, nor is it aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have or are reasonably likely to have, a material effect on the Company’s liquidity, capital resources or operations.
The table below presents the Company’s consolidated capital ratios under regulatory guidelines:
To be Well
Capitalized
Under Prompt
Minimum for Corrective
Capital Action At At
Adequacy Provisions September 30, December 31,
Purposes (FDICIA) 2002 2001
-------- -------- ---- ----
Leverage Ratio 4.00% 5.00% 9.94% 9.80%
Tier 1 Capital to Risk-adjusted Assets 4.00% 6.00% 14.14% 13.69%
Total Capital to Risk-adjusted Assets 8.00% 10.00% 15.30% 14.86%
Liquidity:
The Consolidated Statement of Cash Flows details the elements of change in the Company’s cash and cash equivalents. During the nine months ended September 30, 2002, operating activities provided $22.0 million of available cash, which included net income of $7.2 million. Major cash outflows experienced during the nine months ended September 30, 2002 included $4.6 million in dividends paid to shareholders, $2.7 million from the purchase and retirement of common stock, a $6.1 million decrease in deposits and a $10.3 decline in FHLB advances and other borrowings.
The cash outflows from the purchase of securities exceeded the proceeds from the maturities and sales of securities by approximately $55.0 million. Total cash outflows for the period exceeded inflows by $37.8 million, leaving cash and cash equivalents of $61.3 million at September 30, 2002.
Forward-looking Statements:
The Company from time to time in its oral and written communications makes statements relating to its expectations regarding the future. These types of statements are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements can include statements about adequacy of allowance for loan losses and the quality of the Company’s loans and other assets; simulations of changes in interest rates; litigation results; dividend policy; estimated cost savings, plans and objectives for future operations; and expectations about the Company’s financial and business performance and other business matters as well as economic and market conditions and trends. They often can be identified by the use of words like "expect," "may," “will,” “would,” "could," “should,” "intend," "project," "estimate," "believe" or "anticipate," or similar expressions.
The Company may include forward-looking statements in filings with the Securities and Exchange Commission (“SEC”), such as this Form 10-Q, in other written materials, and in oral statements made by senior management to analysts, investors, representatives of the media, and others. It is intended that these forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the forward-looking statement is made.
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Readers are cautioned that, by their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Actual results may differ materially from the expectations of the Company that are expressed or implied by any forward-looking statement. The discussion in Part I Item 2 of this Form 10-Q, "Management's Discussion and Analysis of Financial Condition and Results of Operations," lists some of the factors that could cause the Company's actual results to vary materially from those expressed or implied by any forward-looking statements. Other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include the effects of changes in competitive conditions; acquisitions of other businesses by the Company and costs of integrations of such acquired businesses; the introduction, withdrawal, success and timing of business initiatives and strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in interest rates and financial and capital markets; changes in general economic conditions, either nationally or regionally, resulting in, among other things, credit quality deterioration; the impact, extent and timing of technological changes; capital management activities; actions of the Federal Reserve Board and legislative and regulatory actions and reforms; and the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends. Investors should consider these risks, uncertainties, and other factors in addition to those mentioned by the Company in its other SEC filings from time to time when considering any forward-looking statement.
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.
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 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 movements in interest rates by using interest rate sensitivity analysis to determine the change in the NPV 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 2% increase and decrease in prevailing interest rates (dollars in thousands).
Interest Rate Sensitivity as of September 30, 2002
Net Portfolio Value
Net Portfolio as a % of Present Value
Value of Assets
------------- -----------------------
Changes
In rates $ Amount % Change NPV Ratio Change
-------- -------- -------- --------- ------
+2% $151,000 2.0% 15.29% 51 b.p.
Base 148,025 --- 14.78 ---
-2% 123,766 (16.4) 11.88 (290) b.p.
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Item 3 includes forward-looking statements. See “Forward-looking Statements” included in Part I Item 2 of this Report for a discussion of certain factors that could cause the Company’s actual exposure to market risk to vary materially from that expressed or implied above. These factors include possible changes in economic conditions; interest rate fluctuations, competitive product and pricing pressures within the Company’s markets; and equity and fixed income market fluctuations. Actual experience may also vary materially to the extent that the Company’s assumptions described above prove to be inaccurate.
Item 4. Controls and Procedures.
Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic reports filed with the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
In addition, the Company reviewed its internal controls, and there have been no significant changes in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of its last evaluation of such controls.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
| 3.1 | Restatement of Articles of Incorporation of the Registrant is incorporated by reference to Exhibit 3.01 to the Registrant’s Current Report on Form 8-K filed May 5, 2000. |
| 3.2 | Restated Bylaws of the Registrant, as amended April 26, 2001, is incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. |
| 4.1 | Rights Agreement dated April 27, 2000 is incorporated by reference to Exhibit 4.01 to Registrant’s Current Report on Form 8-K filed May 5, 2000. |
| 4.2 | 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 copies of long-term debt instruments and related agreements upon requests. |
| 4.3 | Terms of Common Shares and Preferred Shares of German American Bancorp found in Restatement of Articles of Incorporation are incorporated by reference to Exhibit 3.01 to Registrant’s Current Report on From 8-K filed May 5, 2000. |
| 99.1 | Certification of Chief Executive Officer |
| 99.2 | Certification of Principal Financial Officer |
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period ended September 30, 2002.
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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: November 12, 2002 | By: /s/ Mark A. Schroeder
Mark A. Schroeder
President and CEO
|
| Date: November 12, 2002 | By: /s/ Bradley M. Rust
Bradley M. Rust
Senior Vice President and
Principal Accounting Officer |
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CERTIFICATION
(Principal Executive Officer)
I, Mark A. Schroeder, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of German American Bancorp; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and |
| 6. | The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
November 12, 2002
Date
By: /s/ Mark A. Schroeder
Mark A. Schroeder
President and CEO |
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CERTIFICATION
(Principal Financial Officer)
I, Kenneth L. Sendelweck, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of German American Bancorp; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| b) | evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and |
| 6. | The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
November 12, 2002
Date
By: /s/ Kenneth L. Sendelweck
Kenneth L. Sendelweck
Principal Financial Officer |
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