UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
I X I Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1996
Or
I I Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Transition Period From to
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Commission File Number 0-11244
German American Bancorp
(Exact name of registrant as specified in its charter)
INDIANA 35-1547518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 Main Street, Jasper, Indiana 47546
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code:(812) 482-1314
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 10, 1996
Common Stock, 1,829,034
$10.00 par value
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- June 30, 1996 and
December 31, 1995
Consolidated Statements of Income -- Three Months
Ended June 30, 1996 and 1995
Consolidated Statements of Income -- Six Months Ended
June 30, 1996 and 1995
Consolidated Statements of Cash Flows -- Six Months
Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements --
June 30, 1996
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART 1.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEET
(dollar references in thousands except share data)
(unaudited)
June 30, December 31,
1996 1995
ASSETS
Cash and Due from Banks $14,947 $15,421
Federal Funds Sold 4,425 12,550
Cash and Cash Equivalents 19,372 27,971
Interest-bearing Balances with Banks 699 897
Other Short-term Investments 492 5,929
Securities Available-for-Sale,
at Market (Note 3) 86,033 78,908
Securities Held-to-Maturity, at cost
(Market Value of $11,560 and $11,237
on June 30, 1996 and December 31,
1995, respectively) (Note 3) 11,270 10,607
Loans (Note 4) 244,352 231,127
Less: Unearned Income (425) (537)
Allowance for Loan Losses
(Note 5) (6,057) (5,933)
Loans, Net 237,870 224,657
Premises, Furniture and
Equipment, Net 9,680 9,624
Other Real Estate 262 286
Intangible Assets 1,881 1,990
Accrued Interest Receivable and
Other Assets 7,036 6,894
TOTAL ASSETS $374,595 $367,763
LIABILITIES
Noninterest-bearing Deposits $37,085 $40,855
Interest-bearing Deposits 294,414 286,724
Total Deposits 331,499 327,579
Short-term Borrowings 2,217 ---
Accrued Interest Payable and
Other Liabilities 3,427 3,228
TOTAL LIABILITIES 337,143 330,807
SHAREHOLDERS' EQUITY
Common Stock, $10 par value; 5,000,000
shares authorized, and 1,827,460 and
1,825,040 issued and outstanding
in 1996 and 1995, respectively 18,275 18,250
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued --- ---
Additional Paid-in Capital 5,508 5,449
Retained Earnings 13,719 12,398
Unrealized Appreciation / (Depreciation)
on Securities Available-for-Sale
(Net of tax of ($33) and $571 in 1996
and 1995, respectively) (50) 859
TOTAL SHAREHOLDERS' EQUITY 37,452 36,956
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $374,595 $367,763
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(dollar references in thousands except per share data)
(unaudited)
Three Months Ended
June 30,
1996 1995
INTEREST INCOME
Interest and Fees on Loans $5,432 $5,304
Interest on Federal Funds Sold 125 213
Interest on Short-term Investments 38 198
Interest and Dividends on Securities 1,424 1,104
TOTAL INTEREST INCOME 7,019 6,819
INTEREST EXPENSE
Interest on Deposits 3,337 3,195
Interest on Short-term Borrowings 11 58
TOTAL INTEREST EXPENSE 3,348 3,253
NET INTEREST INCOME 3,671 3,566
Provision for Loan Losses 68 114
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,603 3,452
NONINTEREST INCOME
Income from Fiduciary Activities 48 44
Service Charges on Deposit Accounts 182 149
Investment Services Income 119 52
Other Charges, Commissions, and Fees 118 96
Gains on Sales of Loans and Other
Real Estate 0 13
Gains on Sales of Securities 0 0
TOTAL NONINTEREST INCOME 467 354
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,424 1,339
Occupancy Expense 203 198
Furniture and Equipment Expense 173 176
FDIC Premiums 19 174
Computer Processing Fees 101 99
Professional Fees 87 37
Other Operating Expenses 537 486
TOTAL NONINTEREST EXPENSE 2,544 2,509
Income before Income Taxes 1,526 1,297
Income Tax Expense 469 392
Net Income $1,057 $905
Earnings Per Share (Note 2) $0.58 $0.50
Dividends Paid Per Share $0.21 $0.19
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(dollar references in thousands except per share data)
(unaudited)
Six Months Ended
June 30,
1996 1995
INTEREST INCOME
Interest and Fees on Loans $10,843 $10,257
Interest on Federal Funds Sold 306 376
Interest on Short-term Investments 122 429
Interest and Dividends on Securities 2,709 2,164
TOTAL INTEREST INCOME 13,980 13,226
INTEREST EXPENSE
Interest on Deposits 6,633 5,950
Interest on Short-term Borrowings 22 132
TOTAL INTEREST EXPENSE 6,655 6,082
NET INTEREST INCOME 7,325 7,144
Provision for Loan Losses 78 228
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,247 6,916
NONINTEREST INCOME
Income from Fiduciary Activities 98 104
Service Charges on Deposit Accounts 345 296
Investment Services Income 222 100
Other Charges, Commissions, and Fees 194 225
Gains on Sales of Loans and Other
Real Estate 2 29
Gains on Sales of Securities 0 0
TOTAL NONINTEREST INCOME 861 754
NONINTEREST EXPENSE
Salaries and Employee Benefits 2,826 2,613
Occupancy Expense 405 400
Furniture and Equipment Expense 358 353
FDIC Premiums 35 348
Computer Processing Fees 206 194
Professional Fees 145 77
Other Operating Expenses 1,020 960
TOTAL NONINTEREST EXPENSE 4,995 4,945
Income before Income Taxes 3,113 2,725
Income Tax Expense 965 862
Net Income $2,148 $1,863
Earnings Per Share (Note 2) $1.18 $1.02
Dividends Paid Per Share $0.41 $0.38
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar references in thousands)
(unaudited)
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $2,148 $1,863
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of
Investments (54) (404)
Depreciation and Amortization 459 476
Provision for Loan Losses 78 228
Gains on Sales of Securities --- ---
Gains on Sales of Loans and Other
Real Estate (2) (29)
Change in Assets and Liabilities:
Unearned Income (112) (155)
Interest Receivable (270) (143)
Other Assets 673 (641)
Interest Payable 37 183
Deferred Loan Fees (12) (4)
Deferred Taxes 12 (504)
Other Liabilities 162 931
Total Adjustments 971 (62)
Net Cash from Operating Activities 3,119 1,801
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing Balances
with Banks 198 398
Proceeds from Maturities of Other
Short-term Investments 7,000 32,000
Purchase of Other Short-term
Investments (1,466) (31,535)
Proceeds from Maturities of Securities
Available-for-Sale 13,591 1,748
Proceeds from Sales of Securities
Available-for-Sale --- ---
Purchase of Securities
Available-for-Sale (22,224) (7,749)
Proceeds from Maturities of Securities
Held-to-Maturity 154 6,108
Proceeds from Sales of Securities
Held-to-Maturity --- ---
Purchase of Securities Held-to-Maturity (818) (1,739)
Purchase of Loans (24) (259)
Loans Made to Customers net of
Payments Received (13,143) (5,630)
Proceeds from Sales of Loans --- 500
Property and Equipment Expenditures (406) (628)
Proceeds from Sales of Other
Real Estate 26 139
Net Cash from Investing Activities (17,112) (6,647)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits 3,920 6,016
Change in Short-term Borrowings 2,217 (3,062)
Dividends Paid (749) (696)
Exercise of Stock Options 6 ---
Purchase and Retire Common Stock --- (46)
Net Cash from Financing Activities 5,394 2,212
Net Change in Cash and Cash Equivalents (8,599) (2,634)
Cash and Cash Equivalents at
Beginning of Year 27,971 22,286
Cash and Cash Equivalents at
End of Year $19,372 $19,652
Cash Paid During the Year for:
Interest $6,618 $5,899
Income Taxes 868 971
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
Note 1 -- Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with Generally Accepted Accounting Principles
have been condensed or omitted. All adjustments made by management to these
unaudited statements were of a normal recurring nature. It is suggested that
these consolidated financial statements and notes be read in conjunction with
the financial statements and notes thereto in the German American Bancorp's
December 31, 1995 Annual Report to Shareholders.
German American Bancorp (the ``Company'') is a multi-bank holding company
based in Jasper, Indiana. Its four affiliate banks conduct business in fourteen
offices in Dubois, Martin, Pike, Perry and Spencer Counties, Indiana.
Note 2 -- Per Share Data
The weighted average number of shares used in calculating earnings and
dividends per share amounts were 1,827,354 and 1,826,097 for the second quarters
of 1996 and 1995, respectively. The weighted average number of shares for the
first six months of 1996 and 1995 were 1,827,460 and 1,826,023, respectively.
The 1992 weighted average amounts have been retroactively restated for the
effect of a 5% stock dividend declared in December 1995.
Note 3 -- Securities
At June 30, 1996 and December 31, 1995, U.S. Government Agency structured
notes with an amortized cost of $6,300 and $9,250, respectively and fair value
of $6,205 and $9,201, respectively, are included in securities available-for-
sale, consisting primarily of step-up and single-index bonds.
Information regarding collateralized mortgage obligations (CMO's) and real
estate mortgage investment conduits (REMIC's) is as follows:
June 30, December 31,
1996 1995
Amortized Cost $27,939 $29,429
Fair Value 28,150 29,474
Fixed Rate 26,720 28,041
Variable Rate 1,430 1,433
Note 4 -- Loans
Loans, as presented on the balance sheet, are comprised of the following
classifications:
June 30, December 31,
1996 1995
(dollar references in thousands)
Real Estate Loans Secured by 1-4
Family Residential Properties $70,808 $68,826
Loans to Finance Poultry Production
and other Related Operations 19,006 23,784
Loans to Finance Agricultural
Production and Other Loans
to Farmers 29,385 27,310
Commercial and Industrial Loans 86,535 74,612
Loans to Individuals for Household,
Family and Other Personal
Expenditures 37,205 34,685
Economic Development Commission Bonds 594 608
Lease Financing 819 1,302
Total Loans $244,352 $231,127
Information regarding impaired loans is as follows at June 30, 1996 and
December 31, 1995:
June 30, December 31,
1996 1995
Balance of impaired loans $5,580 $6,244
Less: Portion for which no
allowance for loan loss is
allocated 180 215
Portion of impaired loan balance for
which an allowance
for credit losses is allocated $5,400 $6,029
Portion of allowance for loan losses
allocated to the impaired loan balance $830 $898
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows:
1996 1995
(dollar references in thousands)
Balance at January 1 $5,933 $5,669
Provision for Loan Losses 78 228
Recoveries of Prior Loan Losses 153 77
Loan Losses Charged to the Allowance (107) (259)
Balance at June 30 $6,057 $5,715
Note 6 -- Stock Options
As of January 1, 1996 Statement of Financial Accounting Standards No. 123
(FAS123), `Accounting for Stock-Based Compensation'' is applicable to the
Company. FAS123 encourages, but does not require, the use of a `fair value
based method''to account for stock-based compensation plans. The Company has
elected not to change its accounting for stock options to a fair value based
method, and no compensation expense was recorded for stock options granted
during the six months ended June 30, 1996.
Note 7 -- Proposed Acquisition
The Company signed an agreement in July 1996 providing for the merger of
Peoples Bancorp of Washington (Washington, Indiana) (`Peoples Bancorp'') with
the Company. Peoples Bancorp owns all of the outstanding stock of Peoples
National Bank and Trust Company, Washington, Indiana (`Peoples Bank'').
Peoples Bank operates four banking offices in Daviess County, Indiana.
Under the terms of the agreement, the Company will issue to the shareholders
of Peoples Bancorp between 586,111 and 659,375 shares of Company common stock
(subject to customary antidilution adjustments in the event of stock dividends,
splits and the like) depending upon the Company's average common stock price
during a period prior to the date of the merger closing. The transaction is
expected to be accounted for as a pooling of interests.
The proposed merger is subject to approval by the Boards of Directors of both
German American and Peoples Bancorp of a comprehensive agreement incorporating
the terms of the July 1996 agreement and other customary terms and conditions,
approval of that agreement by the shareholders of Peoples Bancorp, approvals of
bank regulatory agencies, and other conditions. The parties contemplate that
the merger will be effective at year end 1996 or early 1997.
As of December 31, 1995 and for the year ended, Peoples Bancorp reported
total assets of $90,841,580, shareholders equity of $8,832,441 and net income of
$823,972.
ITEM 2.
GERMAN AMERICAN BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
German American Bancorp (``the Company'') is a multi-bank holding company
based in Jasper, Indiana. Its four affiliate banks conduct business in fourteen
offices in Dubois, Martin, Pike, Perry and Spencer Counties, Indiana. The banks
provide a wide range of financial services, including accepting deposits; making
commercial, mortgage and consumer loans; issuing credit life, accident and
health insurance; providing trust services for personal and corporate customers;
providing safe deposit facilities; and providing investment advisory and
brokerage services.
This section presents an analysis of the consolidated financial condition of
the Company as of June 30, 1996 and December 31, 1995 and the consolidated
results of operations for the periods ended June 30, 1996 and 1995. This
review should be read in conjunction with the consolidated financial statements
and other financial data presented elsewhere herein and with the financial
statements and other financial data and the Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's
December 31, 1995 Annual Report to Shareholders.
RESULTS OF OPERATIONS
Net Income:
Earnings for the second quarter of 1996 were $1,057,000 or $.58 per share as
compared to $905,000 or $.50 per share for the same period a year earlier. Net
income for the first half of 1996 was $2,148,000 or $1.18 per share, which was
$285,000 or 15.3 percent greater than the $1,863,000 or $1.02 per share recorded
during the same period in 1995. Principal factors affecting the earnings
comparison were an increase in the net interest income, a lower provision for
loan losses and an increase in noninterest income.
Net Interest Income:
Net Interest Income is the Company's largest component of income and
represents the difference between interest and fees earned on loans and
investments and the interest paid on interest-bearing liabilities. In this
discussion net interest income is presented on a `tax-equivalent'' basis
whereby tax exempt income, such as interest on securities of state and political
subdivisions, has been increased to the amount that would have been earned on a
comparable taxable basis. This adjustment places taxable and non-taxable income
on a common basis and allows an accurate comparison of rates and yields.
The following table summarizes German American Bancorp's net interest income
(on a tax-equivalent basis) for each of the periods presented herein. An
effective tax rate of 34 percent is used on each period presented.
Six Months Change from
Ended June 30, Prior Period
1996 1995 Amount Percent
(dollar references in thousands)
Interest Income $14,424 $13,613 $811 6.0%
Interest Expense 6,655 6,082 573 9.4%
Net Interest Income $7,769 $7,531 $238 3.2%
Three Months Change from
Ended June 30, Prior Period
1996 1995 Amount Percent
(dollar references in thousands)
Interest Income $7,246 $7,014 $232 3.3%
Interest Expense 3,348 3,253 95 2.9%
Net Interest Income $3,898 $3,761 $137 3.6%
For the first half of 1996, the tax-equivalent net interest income of
$7,769,000 exceeded the 1995 amount by $238,000 or 3.2%. For the second
quarter of 1996, tax-equivalent net interest income of $3,898,000 increased by
$137,000 or 3.6% from the 1995 level. The net interest margin for the first
half of 1996 was 4.53% versus 4.64% for 1995. The increase in the level of
higher yielding assets, such as loans, which occurred during the period in 1996
resulted in a corresponding increase in net interest income. The decrease in
net interest margin reflects the effect of the decline in general interest rates
which occurred during the last half of 1995. This decrease occurred as a result
of the impact on the average yields on loans and short-term investments which
react more quickly to changes in general short-term interest rates than the
average yields on investment securities and the average rates paid on interest-
bearing deposits.
Provision For Loan Losses:
The Company provides for loan losses through regular provisions to the
allowance for loan losses. These provisions are made at a level which is
considered necessary by management to absorb estimated losses in the loan
portfolio. A detailed evaluation of the adequacy of this loan loss reserve is
completed quarterly by management.
The Provision for loan losses for the second quarter of 1996 was $68,000
while a $114,000 provision was recorded for the comparable period of 1995. The
provision for loan losses in the first half of 1996 was $78,000 versus $228,000
for the first six months of 1995. The decline in provision during 1996 resulted
from a negative provision for loan losses at Union Bank and a significant
decline in first half 1996 charge-offs. The negative provision at Union Bank
was due to collections of previous years' charged-off loans combined with
management's determination that an adequate level of loan loss reserve existed
prior to the loan recoveries. Because of the adequacy of the existing reserve,
the recoveries resulted in the recording of a negative provision.
The amount of future years' provision for loan loss will be subject to
adjustment based on the findings of future evaluations of the adequacy of the
loan loss reserve.
Net recoveries were $46,000 or 0.02 percent of average loans for the first
six months of 1996. For the same period of 1995, net charge-offs were $182,000.
Underperforming loans, as a percentage of total loans were 1.61 and 1.51 percent
on June 30, 1996 and December 31, 1995, respectively. See discussion headed
`Financial Condition'' for more information regarding underperforming assets.
Noninterest Income:
Operating noninterest income, exclusive of gains realized on the sales of
Loans and Other Real Estate, for the first half of 1996 was $859,000. This was
$134,000 or 18.5 percent greater than the $725,000 posted for the same period of
1995. Investment Services Income for 1996 increased by $122,000 from that
earned in 1995, as customers have again redirected their investable funds to
nontraditional Investment products.
Second quarter operating noninterest income, exclusive of gains realized on
the sales of Loans and Other Real Estate, increased by $126,000 in 1996
primarily as a result of the $67,000 increase in investment services income.
The Company had no security gains during 1996 or 1995.
Noninterest Expense:
Total noninterest expense for the first six months of 1996 was $4,995,000
which translates to a $50,000 or 1.01% increase over the $4,945,000 posted for
the same period in 1995. Total noninterest expense for the second quarter of
1996 was $2,544,000 which represents a $35,000 or 1.4% increase over the
$2,509,000 posted for the same period in 1995.
The largest single component of noninterest expense, Salaries and Employee
Benefits, represents 56.6% of total noninterest expenses for 1996. This expense
category was $2,826,000 during the first half of 1996, an increase of $213,000
or 8.2% from the 1995 level of $2,613,000. Salaries and employee benefits were
$1,424,000 during the second quarter of 1996, an increase of $85,000 or 6.3%
from the 1995 level of $1,339,000. A significant portion of this increase is
attributable to effects of changes in the Company's organizational structure
which occurred in mid 1995. Prior to July 1995, the Company's executive
officers and support functions served both the Company and its lead affiliate
bank, German American Bank. In recognition of the increased management and
administrative demands existing under a multi-bank holding company environment,
the management and administrative support functions of German American Bank and
the Company were segmented into distinct groups with additional staffing
implemented as deemed appropriate. Although this organizational change did
result in an increased level of Salaries & Benefits, Company management believes
the increased management focus at both the Bank and Bancorp level will result in
increased operating efficiency.
During 1995, the FDIC reduced the commercial bank deposit insurance premium
rates as a result of the Bank Insurance Fund (`BIF'') reaching full
capitalization of its congressionally mandated level. The full impact of this
rate reduction became evident in 1996, as the assessment for the second quarter
equaled $19,000 in 1996 as compared to $174,000 in 1995. For the first six
months of 1996, the assessment was $35,000 compared to $348,000 in the same
period of 1995. The deposits of First State Bank, the Company's newly-formed
affiliate, continues to be insured under the Savings Association Insurance
Fund (`SAIF'') which was not afforded the rate reduction.
Professional fees rose by $50,000 during the second quarter of 1996, largely
as a result of merger activities.
FINANCIAL CONDITION
As of June 30, 1996, total assets increased to $374,595,000 compared to
$367,763,000 at December 31, 1995. Deposits rose $3,920,000 in 1996 over that
of year-end 1995. Total loans rose by $13,337,000 or 5.8% from the year-end
mark of $230,590,000.
The following analyzes German American Bancorp's underperforming assets at
June 30, 1996 and December 31, 1995.
June 30, 1996 December 31, 1995
(dollar references in thousands)
Loans which are contractually
past due 90 days or more $2,777 $803
Nonaccrual Loans 1,164 2,683
Renegotiated Loans --- ---
Total Underperforming Loans 3,941 3,486
Other Real Estate 262 286
Total Underperforming Assets $4,203 $3,772
Allowance for Loan Loss to
Underperforming Loans 153.69% 170.20%
Underperforming Loans to
Total Loans 1.61% 1.51%
Underperforming loans at June 30, 1996 were 13.1% more than the $3,486,000 of
underperforming loans at December 31, 1995. Stated as a percentage of total
loans, underperforming loans were 1.61% and 1.51% for June 30, 1996 and December
31, 1995, respectively. The allowance for loan loss stated as a percentage of
underperforming loans equaled 153.69% and 170.20% for the same two dates
respectively.
Underperforming loans include $2,546 and $2,646 of impaired loans at June
30, 1996 and December 31, 1995 (See Note 4 to the consolidated financial
statements).
The overall loan portfolio is diversified among a variety of individual
borrowers, with a substantial portion of debtors' ability to honor their
contracts dependent on the agricultural, poultry and wood manufacturing
industries. Although wood manufacturers employ a significant number of people
in the Company's market area, the Company does not have a concentration of
credit to companies engaged in that industry.
Capital Resources:
Industry regulations provide guidelines for determining the capital adequacy
of bank holding companies and banks. These guidelines provide for a more narrow
definition of core capital and assign a measure of risk to the various
categories of assets. Minimum levels of capital are required to be maintained
in proportion to total risk-weighted assets and off-balance sheet exposures such
as loan commitments and standby letters of credit.
Tier 1, or core capital, consists of shareholders' equity less goodwill, core
deposit intangibles, and certain tax receivables defined by bank regulations.
Tier 2 capital is defined as the amount of the allowance for loan losses which
does not exceed 1.25% of gross risk adjusted assets. Total capital is the sum
of Tier 1 and Tier 2 capital.
The minimum requirements under these standards are a 3.0% leverage ratio,
which is Tier 1 capital divided by defined `total assets'', 4.0% Tier 1
capital to risk-adjusted assets and 8.0% total capital to risk-adjusted assets
ratios. Under these guidelines, the Company, on a consolidated basis, and each
of its affiliate banks individually, have capital ratios that substantially
exceed the regulatory minimums. The table below presents the Company's
consolidated capital ratios under the regulatory guidelines.
At June 30, 1996, management is not 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.
RISK BASED CAPITAL STRUCTURE ($ in thousands)
June 30, December 31,
1996 1995
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $37,452 $36,956
Add / (Subtract): Unrealized
Depreciation / Appreciation on
Securities Available-for-Sale 50 (859)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (2,040) (2,140)
Total 35,462 33,957
Tier 2 Capital:
Qualifying Allowance for Loan Loss 3,115 2,943
Total Capital $38,577 $36,900
Risk-adjusted Assets $246,224 $232,272
Tier 1 Capital to Total Assets
(leverage ratio) 9.52% 9.29%
Tier 1 Capital to Risk-adjusted Assets 14.40% 14.62%
Total Capital to Risk-adjusted Assets 15.67% 15.89%
LIQUIDITY
The Consolidated Statement of Cash Flows presented in another section of this
report details the elements of change in the Company's cash and cash
equivalents. During the first half of 1996, the net cash from operating
activities, including net income of $2,148,000 provided $3,119,000 of available
cash. Increases in deposits and short-term borrowings made available an
additional $6,137,000. Major cash outflows experienced during this six month
period of 1996 include dividends of $749,000, property and equipment purchases
of $406,000 and the net funding outlay of loans in the amount of $13,167,000.
The purchase of securities and short-term investments (net of proceeds from
maturities) decreased cash by $3,565,000. Total cash outflows for the period
exceeded inflows by $8,599,000 leaving a cash and cash equivalent balance of
$19,372,000 at June 30, 1996.
PROPOSED PEOPLES BANCORP MERGER
During July 1996, the Company agreed to acquire Peoples Bancorp of Washington,
Washington, Indiana (`Peoples Bancorp'') on the terms set forth in Note 7 to
the financial statements included in this report. In evaluating the terms of
this acquisition, the Company prepared estimates of the future earnings and
financial condition for the Company and for Peoples Bancorp which took into
consideration cost savings and efficiencies that Company management believes
could be achieved in future years. These estimates compared the estimated
earnings per share of the Company's common stock and its estimated shareholders'
equity per share to the estimated earnings per share and shareholders' equity
per share on a prospective pro forma basis giving effect to the acquisition on
the agreed terms. Based on such analysis, the proposed acquisition of Peoples
Bancorp is expected to be materially dilutive to the Company's earnings per
share and shareholders equity per share compared to the amounts that might be
expected without the business combination with Peoples Bancorp. The Company
believes, however, that the anticipated dilution is acceptable given the
Company's belief that entry into the Daviess County banking market offers
strategic advantages to the Company.
PART II. -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on April 25, 1996. At
the Annual Meeting, the only matter voted upon was the election of Directors.
The shareholders elected as Directors for an additional two-year term the five
nominees proposed by the Board of Directors. The five nominees who were elected
were Gene C. Mehne, Robert L. Ruckriegel, Mark A. Schroeder, Larry J. Seger and
Joseph F. Steurer. The results of the proxy solicitation were as follows:
Votes Votes Broker
Nominee Cast For Withheld Non-Votes
Gene C. Mehne 1,507,460.28 7,405.58 312,680.14
Robert L. Ruckriegel1,506,940.28 7,925.58 312,680.14
Mark A. Schroeder 1,507,460.28 7,405.58 312,680.14
Larry J. Seger 1,507,040.28 7,825.58 312,680.14
Joseph F. Steurer 1,507,460.28 7,405.58 312,680.14
There were no abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
2 Offer of Merger dated July 3, 1996
from the Company to Peoples Bancorp
of Washington, as accepted by
Peoples Bancorp of Washington.
27 Financial Data Schedule for the
period ended June 30, 1996.
(b) Reports on Form 8-K
A report on Form 8-K dated July 8, 1996 was filed reporting under Item 5
the Company's entering into merger agreement with Peoples Bancorp of Washington,
Indiana providing for the merger of Peoples with German American Bancorp and
also under Item 7 a Press Release more fully describing the agreement.
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
As of August 14, 1996 By/s/Mark A. Schroeder
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Mark A. Schroeder
President
As of August 14, 1996 By/s/John M. Gutgsell
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John M. Gutgsell
Controller and Principal