UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
I X I Quarterly Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1997
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 May 10, 1997
Common Stock, $10.00 par value 2,541,552
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- March 31, 1997 and
December 31, 1996
Consolidated Statements of Income -- Three Months
Ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows -- Three Months
Ended March 31, 1997 and 1996.
Notes to Consolidated Financial Statements --
March 31, 1997
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3 Restated Articles of Incorporation
10.1 Form of Incentive Stock Option Agreement
executed January 28, 1997 between the
Registrant and George W. Astrike (2,284
shares).
10.2 Schedule of Incentive Stock Option Agreements
between the Registrant and its executive
officers.
27 Financial Data Schedule
b) 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)
March 31, December 31,
1997 1996
ASSETS
Cash and Due from Banks $16,848 $17,134
Federal Funds Sold 950 20,600
Cash and Cash Equivalents 17,798 37,734
Interest-bearing Balances with Banks 788 597
Other Short-term Investments 996 979
Securities Available-for-Sale,at market 103,734 98,557
Securities Held-to-Maturity, at cost 23,014 22,832
Loans 318,280 313,734
Less: Unearned Income (399) (452)
Allowance for Loan Losses (6,386) (6,528)
Loans, Net 311,495 306,754
Premises, Furniture and Equipment, Net 11,691 11,585
Other Real Estate 202 203
Intangible Assets 1,723 1,774
Accrued Interest Receivable and
Other Assets 8,335 8,428
TOTAL ASSETS $479,776 $489,443
LIABILITIES
Noninterest-bearing Deposits $47,050 $52,674
Interest-bearing Deposits 372,385 370,232
Total Deposits 419,435 422,906
Short-term Borrowings 7,109 12,527
FHLB Borrowings --- 1,000
Accrued Interest Payable and
Other Liabilities 4,049 4,217
TOTAL LIABILITIES 430,593 440,650
SHAREHOLDERS' EQUITY
Common Stock, $10 par value; 5,000,000
shares authorized, and 2,541,552 and
2,539,059 issued and outstanding
in 1997 and 1996, respectively 25,416 25,390
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued --- ---
Additional Paid-in Capital 3,839 3,649
Retained Earnings 19,910 19,259
Unrealized Appreciation on Securities
Available-for-Sale, net of tax 18 495
TOTAL SHAREHOLDERS' EQUITY 49,183 48,793
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $479,776 $489,443
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
March 31,
1997 1996
INTEREST INCOME
Interest and Fees on Loans $7,036 $6,785
Interest on Federal Funds Sold 101 180
Interest on Short-term Investments 27 85
Interest and Dividends on Securities 1,925 1,600
TOTAL INTEREST INCOME 9,089 8,650
INTEREST EXPENSE
Interest on Deposits 4,162 3,921
Interest on Short-term Borrowings 99 133
TOTAL INTEREST EXPENSE 4,261 4,054
NET INTEREST INCOME 4,828 4,596
Provision for Loan Losses 139 23
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 4,689 4,573
NONINTEREST INCOME
Income from Fiduciary Activities 66 51
Service Charges on Deposit Accounts 280 206
Investment Services Income 106 102
Other Charges, Commissions, and Fees 95 101
Gains on Sales of Loans and
Other Real Estate --- 2
Gains on Sales of Securities --- ---
TOTAL NONINTEREST INCOME 547 462
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,826 1,763
Occupancy Expense 279 241
Furniture and Equipment Expense 226 258
Computer Processing Fees 125 107
Professional Fees 212 79
Other Operating Expenses 651 641
TOTAL NONINTEREST EXPENSE 3,319 3,089
Income before Income Taxes 1,917 1,946
Income Tax Expense 643 626
Net Income $1,274 $1,320
Earnings Per Share (Note 2) $.50 $.52
Dividends Paid Per Share (Note 2) $.21 $.19
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar references in thousands)
(unaudited)
Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,274 $1,320
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of Investments (36) (30)
Depreciation and Amortization 282 289
Provision for Loan Losses 139 23
Gains on Sales of Securities 0 0
Gains on Sales of Loans and
Other Real Estate 0 (2)
Change in Assets and Liabilities:
Unearned Income (53) (81)
Deferred Loan Fees (26) (1)
Interest Receivable (834) 329
Other Assets 928 (386)
Deferred Taxes` 21 109
Interest Payable 469 143
Other Liabilities (637) (19)
Total Adjustments 253 374
Net Cash from Operating Activities 1,527 1,694
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing Balances
with Banks (191) 98
Proceeds from Maturities of Other
Short-term Investments 0 3,000
Purchase of Other Short-term Investments 0 (979)
Proceeds from Maturities of Securities
Available-for-Sale 7,336 8,973
Proceeds from Sales of Securities
Available-for-Sale 0 0
Purchase of Securities
Available-for-Sale (12,971) (9,126)
Proceeds from Maturities of Securities
Held-to-Maturity 318 1,726
Proceeds from Sales of Securities
Held-to-Maturity 0 0
Purchase of Securities Held-to-Maturity (500) (342)
Purchase of Loans 0 (24)
Loans Made to Customers net of
Payments Received (4,822) (4,795)
Property and Equipment Expenditures (337) (171)
Proceeds from Sales of Other Real Estate 0 15
Net Cash from Investing Activities (11,167) (1,625)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits (3,471) (402)
Change in Short-term Borrowings (5,418) (2,602)
Change in Long-term Borrowings (1,000) 2,000
Dividends Paid (404) (402)
Purchase of Fractional Shares (5) 0
Exercise of Stock Options 2 6
Purchase and Retire Common Stock 0 0
Net Cash from Financing Activities (10,296) (1,400)
Net Change in Cash and Cash Equivalents (19,936) (1,331)
Cash and Cash Equivalents at
Beginning of Year 37,734 32,601
Cash and Cash Equivalents at
End of Period $17,798 $31,270
Cash Paid During the Year for:
Interest $3,975 3,911
Income Taxes 171 188
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(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, 1996 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''), and German
American Holdings Corporation (`GAHC''), an Indiana corporation that owns all
of the outstanding capital stock of both Community Trust Bank, Otwell, Indiana
(`Community Bank'') and The Peoples National Bank and Trust Company of
Washington, Washington, Indiana (`Peoples''). The Company, through its four
bank subsidiaries operates twenty banking offices in six contiguous counties in
southwestern Indiana.
Peoples, organized under the National Bank Act in 1888, was acquired by the
Company on March 4, 1997 pursuant to a merger of the parent corporation of
Peoples into GAHC. Simultaneously with and as an integral part of this merger,
The Union Bank of Loogootee, Indiana, a subsidiary of the Company, was merged
with and into Peoples. At December 31, 1996 Peoples had assets of $91,937,000
and equity of $9,452,000.
The Company's financial statements for all periods prior to the merger date
have been retroactively restated to include the accounts of Peoples because the
merger was recorded utilizing the pooling-of-interests method of accounting.
Note 2 -- Per Share Data
The weighted average number of shares used in calculating earnings and
dividends per share amounts were 2,541,137 and 2,533,373 for the first quarters
of 1997 and 1996, respectively. The weighted average number of shares have been
retroactively restated for stock dividends and poolings of interests. Dividends
paid per share amounts represent historical dividends declared without
retroactive restatement for pooling.
Note 3 -- Securities
At March 31, 1997 and December 31, 1996, U.S. Government Agency structured
notes with an amortized cost of $6,000,000 and $6,000,000, respectively and fair
value of $5,927,000 and $5,901,000, respectively, are included in securities
available-for-sale, consisting primarily of step-up and single-index bonds.
Note 3 -- Securities (continued)
The amortized cost and estimated market values of Securities as of March 31,
1997 are as follows:
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $56,227 $55,577
Obligations of State and
Political Subdivisions 20,173 20,900
Corporate Securities 6,516 6,590
Mortgage-backed Securities 20,729 20,667
Total $103,645 $103,734
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporation and Agencies $2,514 $2,496
Obligations of State and Political
Subdivisions 18,117 18,514
Corporate Securities 40 32
Mortgage and Asset-backed Securities 948 927
Other Securities 1,395 1,395
Total $23,014 $23,364
The amortized cost and estimated market values of Securities as of December 31,
1996 are as follows:
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $47,181 $47,041
Obligations of State and Political
Subdivisions 19,560 20,186
Corporate Securities 7,221 7,245
Mortgage-backed Securities 23,783 24,078
Other Securities 1 7
Total $97,746 $98,557
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporation and Agencies $2,519 $2,498
Obligations of State and Political
Subdivisions 18,253 18,881
Corporate Securities 47 47
Mortgage and Asset-backed Securities 999 989
Other Securities 1,014 1,014
Total $22,832 $23,429
Note 4 -- Loans
Loans, as presented on the balance sheet, are comprised of the following
classifications:
March 31, December 31,
1997 1996
(dollar references in thousands)
Real Estate Loans Secured by 1-4
Family Residential Properties $96,712 $93,713
Agricultural Loans 53,853 57,073
Commercial and Industrial Loans 113,577 111,469
Loans to Individuals for Household,
Family and Other Personal
Expenditures 52,912 50,200
Lease Financing 1,226 1,279
Total Loans $318,280 $313,734
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows:
1997 1996
(dollar references in thousands)
Balance at January 1 $6,528 $6,893
Provision for Loan Losses 139 23
Recoveries of Prior Loan Losses 47 101
Loan Losses Charged to the Allowance (328) (70)
Balance at March 31 $6,386 $6,947
Note 6 -- Subsequent Event
During April 1997, the Company's Articles of Incorporation were amended to
increase the number of authorized common shares from 5,000,000 shares to
20,000,000 shares.
Note 7 -- Business Combinations
On March 4, 1997, the Company acquired all of the outstanding shares of
Peoples Bancorporation of Washington, Indiana (and its wholly owned subsidiary,
The Peoples National Bank and Trust Company of Washington) in exchange for
615,285 shares of German American Bancorp common stock. Fractional interests
were paid in cash of $5. The transaction was accounted for as a pooling of
interests.
The following is a reconciliation of the separate and combined net interest
income and net income of German American Bancorp and Peoples Bancorporation of
Washington for the periods prior to the acquisition:
GERMAN AMERICAN PEOPLES
BANCORP BANCORPORATION
(as previously reported)OF WASHINGTON COMBINED
For the period January 1, 1997 through
February 28, 1997
Net interest income $2,558 $696 $3,254
Net income $698 $218 $916
For the three months ended
March 31, 1996
Net interest income $3,654 $942 $4,596
Net income $1,091 $229 $1,320
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 twenty
offices in Dubois, Daviess, Martin, Pike, Perry and Spencer Counties in
Southwest 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 March 31, 1997 and December 31, 1996 and the consolidated
results of operations for the periods ended March 31, 1997 and 1996. 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, 1996 Annual Report to Shareholders.
Because of the Peoples National Bank acquisition on March 4, 1997 under the
pooling-of-interests method of accounting, all financial statements have been
retroactively restated for all periods. Also see Footnote 7 `Business
Combinations.''
RESULTS OF OPERATIONS
Net Income:
The Company's earnings for the first quarter of 1997 were $1,274,000 or $.50
per share, a decrease of $46,000 (or 3.5%) from the Company's first quarter
earnings for 1996 of $1,320,000 or $.52 per share.
The comparison of first quarter 1997 earnings relative to those of the same
period of 1996 was materially impacted by an increase in net interest income and
Deposit Service Charges. These earnings improvements were offset by an increase
in the Provision for Loan Losses and an increase in Professional fees largely
related to the Company's merger and acquisition activities. Excluding the
merger related expenses recorded in connection with the completion of the March
4, 1997 merger with Peoples, 1997 earnings were $1,408,000 or $.55 per share, an
increase of $88,000 or 6.7% over 1996 earnings.
Return on average assets (ROA) was 1.05% and return on average equity was
10.46% for the first quarter of 1997 versus 1.16% and 11.41%, respectively for
the first three months of 1996.
Net Interest Income:
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.
Three Months Change from
Ended March 31, Prior Period
1997 1996 Amount Percent
(dollar references in thousands)
Interest Income $9,384 $8,900 $484 5.4%
Interest Expense 4,261 4,054 207 5.1%
Net Interest Income $5,123 $4,846 $277 5.7%
Net interest income is the difference between interest income (which
includes yield-related fees) and interest expense. Net interest income on a
tax-equivalent basis was $5,123,000 for this first quarter of 1997 compared with
$4,846,000 for the same period of 1996. The increase in net interest income for
the first quarter of 1997 compared to 1996 was primarily due to an increase in
average earning assets.
Net interest income on a tax-equivalent basis expressed as a percentage of
average earning assets is referred to as the net interest margin, which
represents the average net effective yield on earning assets. For the first
quarter of 1997, the net interest margin was 4.51 percent compared to 4.58
percent for the comparable period of 1996.
The decrease in the margin in 1997 compared with 1996 was primarily
attributable to the mix of funding sources. The Company continues to experience
a shift in deposit mix toward money market deposits and longer term certificates
of deposits. This movement is largely attributable to customer reaction to the
higher level of interest rates paid on these products relative to that paid on
savings and interest-bearing checking accounts.
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 consolidated provision for loan losses was $139,000 and $23,000 for the
first quarters of 1997 and 1996, respectively. The lower level of provision
during 1996 resulted from a $57,000 negative provision for loan losses at the
former Union Bank (now merged into Peoples). The negative provision 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 charge-offs were $281,000 or 0.08 percent of average loans for the first
three months of 1997. For the same period of 1996, net recoveries were $31,000.
Underperforming loans, as a percentage of total loans were 0.60% and 0.79% on
March 31, 1997 and December 31, 1996, respectively. See discussion headed
`Financial Condition'' for more information regarding underperforming assets.
Noninterest Income:
Noninterest income, exclusive of gains realized on the sales of loans, for
the first quarter of 1997 was $547,000. This was $85,000 or 18.4 percent
greater than the $460,000 recorded for the same three months of 1996.
Service charges on deposit accounts for 1997 rose $74,000 or 35.9 percent
over 1996. The Company made an upward revision to its pricing structure based on
a recent review.
The Company had no security sales during the first quarters of 1997 or 1996.
Noninterest Expense:
Total noninterest expense for the first three months of 1997 was $3,319,000
which translates to a $230,000 or 7.4% increase over the $3,089,000 posted for
the same period in 1996.
Salaries and Employee Benefits expense constituted just over 55% of total
noninterest expense. For the first three months of 1997 this amounted to
$1,826,000. This was $63,000 or 3.6 percent more than the $1,763,000 recorded
for the same period of the prior year. The Company's active full-time
equivalent (FTE) staff was 217 at March 31, 1997.
Occupancy expense combined with Furniture and Equipment expense for the first
three months of 1997 equaled $505,000. This was only $6,000 or slightly more
than one percent greater than the $499,000 posted for the same quarter of the
prior year. These expenses are expected, however, to moderately increase
throughout the remainder of 1997 largely as a consequence of a planned upgrading
of computer systems. The Company has recently embarked upon a strategy to
implement state-of-the-art computer processing to provide the opportunities to,
over the long-term, better control the level of employee related expenses and
improve the quality of customer service provided throughout the affiliate bank
system. The upgrade of computer equipment at Peoples concurrent with the merger
represents the Company's first step in this process. Systems at all affiliate
banks will be upgraded on a systematic basis throughout 1997 and 1998.
Professional fees for the first three months of 1997 was $212,000. This was
$133,000 greater than the $79,000 recorded for the same period of 1996. The
bulk of this increase stems directly from the March 4, 1997 merger of Peoples.
FINANCIAL CONDITION
Total assets at March 31, 1997 stood at $479,776,000. This was a decline
from the December 31, 1996 total asset position despite an increase in 1997 in
total loans of $4,546,000 and securities of $5,359,000. The bulk of the asset
decline was in the holdings of Federal Funds Sold.
Deposits at March 31, 1997 stood at $419,435,000 which was a decline of less
than one percent from the total deposits held three months earlier. Short-term
and Long-term Borrowings at March 31, 1997 were $7,109,000. At December 31,
1996, these borrowings amounted to $13,527,000.
Interest-bearing Demand Notes issued to the U.S. Treasury at December 31,
1996 amounted to $2,127,000. German American Bank was the only affiliate with
this type of borrowing and by March 31, 1997 had effectively discontinued
participation in this arrangement due to operational considerations. All of the
Company's Banks are either currently members of the Federal Home Loan Bank
System (`FHLB'') or are in the process of obtaining membership. The banks'
membership in the FHLB provides a ready alternative for both long and short-term
borrowing needs.
Underperforming Assets:
The following analyzes German American Bancorp's underperforming assets at
March 31, 1997 and December 31, 1996.
March 31, 1997 December 31, 1996
(dollar references in thousands)
Nonaccrual Loans $1,071 $1,370
Loans which are contractually
past due 90 days or more 850 1,102
Renegotiated Loans --- ---
Total Underperforming Loans 1,921 2,472
Other Real Estate 202 203
Total Underperforming Assets $2,123 $2,675
Allowance for Loan Loss to
Underperforming Loans 332.43% 264.08%
Underperforming Loans to
Total Loans 0.60% 0.79%
Underperforming loans at March 31, 1997 were 22.3% less than the $2,472,000
of underperforming loans at December 31, 1996. Stated as a percentage of total
loans, underperforming loans were 0.60% and 0.79% for March 31, 1997 and
December 31, 1996, respectively. The allowance for loan loss stated as a
percentage of underperforming loans equaled 332.43% and 264.08% for the same two
dates respectively.
The overall loan portfolio is diversified among a variety of individual
borrowers, with a substantial portion of debtors' ability to honor their
contracts dependent on the agricultural, poultry and wood manufacturing
industries. Although wood manufacturers employ a significant number of people
in the Company's market area, the Company does not have a concentration of
credit to companies engaged in that industry. The Company has historically been
involved in the financing of poultry production. However, total poultry loans
at March 31, 1997 of $14,276,000 represent only about 4.5 percent of total
loans. The drop in the amount of poultry loans reflects a continuing decline in
the financing demands in that industry.
Capital Resources:
Federal banking regulations provide guidelines for determining the capital
adequacy of bank holding companies and banks. These guidelines provide for a
more narrow definition of core capital and assign a measure of risk to the
various categories of assets. Minimum levels of capital are required to be
maintained in proportion to total risk-weighted assets and off-balance sheet
exposures such as loan commitments and standby letters of credit.
Tier 1, or core capital, consists of shareholders' equity less goodwill, core
deposit intangibles, and certain tax receivables defined by bank regulations.
Tier 2 capital is defined as the amount of the allowance for loan losses which
does not exceed 1.25% of gross risk adjusted assets. Total capital is the sum
of Tier 1 and Tier 2 capital.
The minimum requirements under these standards are generally at least a 4.0%
leverage ratio, which is Tier 1 capital divided by defined `total assets'',
4.0% Tier 1 capital to risk-adjusted assets and 8.0% total capital to risk-
adjusted assets ratios. Under these guidelines, the Company, on a consolidated
basis, and each of its affiliate banks individually, have capital ratios that
substantially exceed the regulatory minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well-
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Under these regulations, a
`well-capitalized'' entity must achieve a Tier One Risk-based capital ratio of
at least 6.0%, a total capital ratio of at least 10.0% and a leverage ratio of
at least 5.0% and not be under a capital directive order.
At March 31, 1997, 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.
RISK BASED CAPITAL STRUCTURE ($ in thousands)
March 31, December 31,
1997 1996
Tier 1 Capital:
Shareholders' Equity as presented
on Balance Sheet $49,183 $48,793
Add / (Subtract): Unrealized
Depreciation / (Appreciation) on
Securities Available-for-Sale (18) (495)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (1,872) (1,924)
Total Tier 1 Capital 47,293 46,374
Tier 2 Capital:
Qualifying Allowance for Loan Loss 4,091 4,028
Total Capital $51,384 $50,402
Risk-adjusted Assets $325,020 $319,718
To be Well
Capitalized
Under Prompt
Minimum Corrective
for Capital Action
Adequacy Provisions
Purposes (FDICIA) March 31, Dec. 31,
1997 1996
Leverage Ratio 4.00% 5.00% 9.79% 9.70%
Tier 1 Capital to
Risk-adjusted Assets 4.00% 6.00% 14.55% 14.50%
Total Capital to
Risk-adjusted Assets 8.00% 10.00% 15.81% 15.76%
LIQUIDITY
The Consolidated Statement of Cash Flows details the elements of change in the
Company's cash and cash equivalents. During the first three months of 1997, the
net cash from operating activities, including net income of $1,274,000 provided
$1,527,000 of available cash. Major cash outflows experienced during this three
month period of 1997 included dividends of $404,000, property and equipment
purchases of $337,000 and the net funding outlay of loans in the amount of
$4,822,000. The purchase of securities and short-term investments (net of
proceeds from maturities) decreased cash by $5,817,000. Decreases occurring in
deposits and short-term as well as long-term borrowings reduced cash by an
additional $9,889,000. Total cash outflows for the period exceeded inflows by
$19,936,000 leaving a cash and cash equivalent balance of $17,798,000 at March
31, 1997.
PART II. -- OTHER INFORMATION
Item 2. Changes in Securities
(c) During the three months ended March 31, 1997, the Company issued and sold
an aggregate of 11,737 shares of common stock to executive officers of the
Company upon exercises by such executive officers of stock options for an
aggregate purchase price of $346,945.02 . These issuances and sales were not
registered under the Securities Act of 1933 in reliance upon the `private
offering''exemption provided by Section 4(2) of the Securities Act because the
offer of common shares under the Company's Stock Option Plan is made privately
only to executive officers of the Company who have access to the same kind of
information as registration would disclose and are able to fend for themselves
in making their investment decisions. The purchase price was paid
by the executive officers in the form of an aggregate of 10,285 shares of common
stock of the Company previously owned by such executive officers.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3 Restated Articles of Incorporation
of German American Bancorp (as amended
to increase authorized common shares
from 5,000,000 to 20,000,000.
10.1 Form of Incentive Stock Option Agreement
executed January 28, 1997 between the
Registrant and George W. Astrike (2,284 shares)
10.2 Schedule of Incentive Stock Option Agreements
between the Registrant and its executive Officers.
27 Financial Data Schedule for the period ended
March 31, 1997.
(b) Reports on Form 8-K
A report on Form 8-K dated March 6, 1997 was filed reporting under Item 2
the March 4, 1997 acquisition by merger of Peoples Bancorp of Washington.
A report on Form 8-K dated March 19, 1997 was filed under Item 2 and Item
7, which amended the March 6, 1997 filing to include the Financial Statements of
the acquired entity as of and for certain years ended December 31, 1996 and pro
forma financial information for the Company giving effect to the acquisition.
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 By/s/George W. Astrike
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George W. Astrike
Chairman
Date By/s/John M. Gutgsell
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John M. Gutgsell
Controller and Principal
Accounting Officer