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| JASPER, INDIANA | JULY 31, 2003 | GERMAN AMERICAN BANCORP ANNOUNCES
QUARTERLY CASH DIVIDEND AND EARNINGS |
German American Bancorp (NASDAQ: GABC) announced that its Board of Directors has declared the Company’s regular cash dividend for the second quarter. The dividend of $0.14 per share will be payable on or before August 20, 2003 to shareholders of record as of August 10, 2003. This level of cash dividend equates to an approximate annualized dividend yield of 3.05% based on the closing price of the Company’s stock on NASDAQ on July 30, 2003.
The Company’s 2003 earnings per share for the three months ended June 30, 2003 were $0.20, a modest decrease of one cent per share from the $0.21 per share reported for the same period in the prior year. On a year-to-date basis, 2003 earnings per share were $0.41 per share, compared to reported earnings of $0.43 per share in 2002. The earnings per share in 2003 include the effect of the Company’s repurchase of over 1 million of its common shares pursuant to its self-tender offer which was completed late in the first quarter of 2003. These levels of per share earnings equate to net income of $2,043,000 and $4,481,000, respectively, for the second quarter and first half of 2003 compared to $2,380,000 and $4,898,000 for the same periods last year.
The earnings comparisons, on both a quarterly and year-to-date basis, were significantly impacted by the effects of historically low interest rates. The Company’s net interest income has declined by $1,144,000 year-to-date in 2003 relative to the levels of 2002 with $895,000 of this decline occurring during the second quarter. These net interest income declines were due both to decreased net interest margins in 2003 and to reduced average balances in the Company’s residential mortgage portfolio, offset in large part by increased average balances in the Company’s commercial loan portfolio. The reduction in the Company’s residential mortgage loan portfolio was the result of the continued refinance activity during the first half of 2003 (fueled by the historically low interest rates), coupled with the Company’s decision to sell the majority of its production of long-term fixed rate mortgage loans to the secondary market.
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The continued decline in the level of interest rates throughout 2003 has also resulted in increased prepayment speeds within the Company’s mortgage-backed investment securities and mortgage servicing portfolios and reduced net mortgage servicing revenue. Due to the low level of interest rates, the Company is unable to reinvest the proceeds of the mortgage-backed securities at comparable yields. While management believes the Company’s current asset sensitive interest rate risk position will allow the Company to reap long-term benefits from sustained future increases in interest rates, further reductions of the Company’s levels of net interest income and net interest margin are likely in the near future if market interest rates remain at current levels or decline.
The impact of reduced net interest income during the second quarter and first half of 2003 was partially offset by double-digit percentage increases in nearly every category of non-interest income. Additionally, the Company’s focus on maximizing operating efficiency showed continued progress as evidenced by virtually no dollar increase in the level of salaries & employee benefits, the Company’s largest non-interest-related operating expense category, during the first half of the year.
Commenting on the 2003 operating results, Company President & CEO, Mark A. Schroeder, stated, “The challenges of operating within the financial services industry during this period of fifty-year lows in interest rates were clearly evident in our second quarter results. While the continuation of these low levels of interest rates has resulted in contraction of our margins, as it has in many other financial institutions throughout the country, we’re pleased that the steps we have taken in recent years to strengthen other areas of our operations significantly mitigated the impact of these reduced margins. Our efforts to develop and grow sources of fee income that are not tied to net interest income, such as insurance, investment, and trust revenues, paid dividends during the quarter as we experienced considerable growth within each of these areas.”
Schroeder continued, “Additionally, our investment in recent years in the personnel, products, and services within our business banking group continues to generate solid returns in terms of impressive commercial loan growth. Furthermore, we have successfully generated this level of commercial loan growth without sacrificing quality as demonstrated by our relatively low ratio of non-performing loans to total loans. Area businesses, in increasing numbers, are turning to their local German American affiliated community bank for all their financial needs. We’re very pleased that the combination of our highly qualified banking professionals, local decision making, and customer-focused products and services has found a receptive audience within the local business communities.”
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German American Bancorp is a financial services 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 affiliated community banks with 26 retail banking offices in the eight contiguous Southwestern Indiana counties of Daviess, Dubois, Gibson, Knox, Martin, Perry, Pike, Spencer and a business lending center in Evansville, Indiana. The Company also operates German American Financial Advisors and Trust Company, a trust, brokerage and financial planning subsidiary operating from the banking offices of the bank subsidiaries and The Doty Agency, Inc., a full-line property and casualty insurance subsidiary with four independent insurance offices throughout its market area. The Company’s lines of business include retail and commercial banking, mortgage banking, comprehensive wealth management, full service brokerage and trust administration, title insurance, and a full range of personal and corporate insurance products.
Forward-Looking Statements
The Company’s statements in this press release regarding its expectation of changes in its net interest income and net interest margin are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that, by their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Changes in the Company’s future net interest income and net interest margin may vary materially from those that are presently expected, due to such factors as changes in interest rates; the effects of changes in competitive conditions; the introduction, withdrawal, success and timing of asset/liability management strategies or of business initiatives and business strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in financial and capital markets; changes in general economic conditions, either nationally or regionally; capital management activities; actions of the Federal Reserve Board; and legislative and regulatory actions and reforms. These forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to update any such forward-looking statement to reflect events or circumstances that occur after the date hereof.
GERMAN AMERICAN BANCORP
(unaudited, dollars in thousands except per share data)
Consolidated Balance Sheets
| June 30, |
|---|
| 2003 | 2002 |
| ASSETS | | | | | | | | |
| Cash and Due from Banks | | | $ | 28,275 | | $ | 26,584 | |
| Short-term Investments | | | | 21,349 | | | 28,245 | |
| Investment Securities | | | | 235,109 | | | 251,595 | |
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| Loans Held-for-Sale | | | | 3,618 | | | 4,869 | |
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| Loans, Net of Unearned Income | | | | 608,789 | | | 642,504 | |
| Allowance for Loan Losses | | | | (8,538 | ) | | (8,326 | ) |
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| Net Loans | | | | 600,251 | | | 634,178 | |
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| Premises and Equipment | | | | 22,049 | | | 20,944 | |
| Other Assets | | | | 25,587 | | | 26,379 | |
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| TOTAL ASSETS | | | $ | 936,238 | | $ | 992,794 | |
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| LIABILITIES | | |
| Non-interest-bearing Demand Deposits | | | $ | 103,718 | | $ | 91,027 | |
| Interest-bearing Demand, Savings, and | | |
| Money Market Accounts | | | | 247,862 | | | 242,088 | |
| Time Deposits < $100,000 | | | | 298,428 | | | 319,442 | |
| Time Deposits $100,000 or more and | | |
| Brokered Deposits | | | | 57,487 | | | 58,885 | |
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| Total Deposits | | | | 707,495 | | | 711,442 | |
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| Borrowings | | | | 132,184 | | | 165,596 | |
| Other Liabilities | | | | 12,978 | | | 11,848 | |
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| TOTAL LIABILITIES | | | | 852,657 | | | 888,886 | |
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| SHAREHOLDERS' EQUITY | | |
| Common Stock and Surplus | | | | 69,716 | | | 81,882 | |
| Retained Earnings | | | | 13,174 | | | 19,689 | |
| Accumulated Other Comprehensive Income (Loss) | | | | 691 | | | 2,337 | |
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| TOTAL SHAREHOLDERS' EQUITY | | | | 83,581 | | | 103,908 | |
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| TOTAL LIABILITIES AND | | |
| SHAREHOLDERS' EQUITY | | | $ | 936,238 | | $ | 992,794 | |
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| BOOK VALUE PER SHARE | | | $ | 8.01 | | $ | 9.05 | (1) |
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| END OF PERIOD SHARES OUTSTANDING | | | | 10,433,035 | | | 10,939,982 | (2) |
(1) Restated for December 2002 stock dividend.
(2) End of period shares outstanding were not restated for the effect of stock dividends.
GERMAN AMERICAN BANCORP
(unaudited, dollars in thousands except per share data)
Consolidated Statements of Income
| Three Months Ended
June 30, | Six Months Ended
June 30, |
|---|
| 2003 | 2002 | 2003 | 2002 |
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| INTEREST INCOME | | | | | | | | | | | | | | |
| Interest and Fees on Loans | | | $ | 10,641 | | $ | 12,277 | | $ | 21,529 | | $ | 24,861 | |
| Interest on Short-term Investments | | | | 82 | | | 135 | | | 138 | | | 438 | |
| Interest on Investment Securities | | | | 2,134 | | | 3,017 | | | 4,639 | | | 5,591 | |
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| TOTAL INTEREST INCOME | | | | 12,857 | | | 15,429 | | | 26,306 | | | 30,890 | |
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| INTEREST EXPENSE | | |
| Interest on Deposits | | | | 3,606 | | | 4,721 | | | 7,370 | | | 9,687 | |
| Interest on Borrowings | | | | 1,916 | | | 2,478 | | | 3,816 | | | 4,939 | |
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| TOTAL INTEREST EXPENSE | | | | 5,522 | | | 7,199 | | | 11,186 | | | 14,626 | |
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| Net Interest Income | | | | 7,335 | | | 8,230 | | | 15,120 | | | 16,264 | |
| Provision for Loan Losses | | | | 265 | | | 297 | | | 229 | | | 545 | |
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| Net Interest Income after | | |
| Provision for Loan Losses | | | | 7,070 | | | 7,933 | | | 14,891 | | | 15,719 | |
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| NON-INTEREST INCOME | | |
| Other Operating Income | | | | 2,055 | | | 1,973 | | | 4,028 | | | 4,033 | |
| Net Gain on Sales of Loans and Related Assets | | | | 769 | | | 242 | | | 1,306 | | | 623 | |
| Net Gain on Sales of Securities | | | | --- | | | --- | | | 23 | | | --- | |
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| TOTAL NON-INTEREST INCOME | | | | 2,824 | | | 2,215 | | | 5,357 | | | 4,656 | |
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| NON-INTEREST EXPENSE | | |
| Salaries and Benefits | | | | 4,419 | | | 4,373 | | | 8,841 | | | 8,818 | |
| Other Operating Expenses | | | | 3,096 | | | 2,864 | | | 5,997 | | | 5,517 | |
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| TOTAL NON-INTEREST EXPENSE | | | | 7,515 | | | 7,237 | | | 14,838 | | | 14,335 | |
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| Income before Income Taxes | | | | 2,379 | | | 2,911 | | | 5,410 | | | 6,040 | |
| Income Tax Expense | | | | 336 | | | 531 | | | 929 | | | 1,142 | |
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| NET INCOME | | | $ | 2,043 | | $ | 2,380 | | $ | 4,481 | | $ | 4,898 | |
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| EARNINGS PER SHARE | | | $ | 0.20 | | $ | 0.21 | (1) | $ | 0.41 | | $ | 0.43 | (1) |
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| DILUTED EARNINGS PER SHARE | | | $ | 0.20 | | $ | 0.21 | (1) | $ | 0.41 | | $ | 0.42 | (1) |
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| WEIGHTED AVERAGE SHARES OUTSTANDING: | | |
| Basic | | | | 10,422,182 | | | 11,488,190 | (1) | | 10,883,270 | | | 11,513,845 | (1) |
| Diluted | | | | 10,463,790 | | | 11,521,142 | (1) | | 10,925,130 | | | 11,541,848 | (1) |
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(1) Restated for December 2002 stock dividend.
