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, 1998
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 __________
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
---------- ----------
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, 1998
Common Stock, No par value 5,350,161
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- March 31, 1998 and
December 31, 1997
Consolidated Statements of Income -- Three Months Ended
March 31, 1998 and 1997
Consolidated Statements of Cash Flows -- Three Months Ended
March 31, 1998 and 1997
Notes to Consolidated Financial Statements --
March 31, 1998
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
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
(unaudited, dollars in thousands except per share data)
March 31, December 31,
1998 1997
ASSETS
Cash and Due from Banks $13,023 $14,250
Federal Funds Sold 9,800 11,800
Cash and Cash Equivalents 22,823 26,050
Interest-bearing Balances with Banks 261 200
Securities Available-for-Sale, at market 93,320 99,639
Securities Held-to-Maturity, at cost 23,347 24,223
Total Loans 337,724 330,738
Less: Unearned Income (244) (269)
Allowance for Loan Losses (6,291) (6,255)
Loans, Net 331,189 324,214
Premises, Furniture and Equipment, Net 12,260 12,406
Other Real Estate 168 146
Intangible Assets 1,525 1,572
Accrued Interest Receivable
and Other Assets 10,341 10,381
TOTAL ASSETS $495,234 $498,831
LIABILITIES
Noninterest-bearing Deposits $46,332 $54,234
Interest-bearing Deposits 383,730 379,714
Total Deposits 430,062 433,948
Short-term Borrowings 4,219 4,933
FHLB Borrowings 1,000 ---
Accrued Interest Payable and
Other Liabilities 5,821 6,618
TOTAL LIABILITIES 441,102 445,499
SHAREHOLDERS' EQUITY
Common Stock, $10 par value, $1 stated value;
20,000,000 shares authorized, and 5,350,161
issued and outstanding in 1998 and 1997 5,350 5,350
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued --- ---
Additional Paid-in Capital 35,018 35,018
Retained Earnings 13,134 12,208
Unrealized Appreciation on Securities
Available-for-Sale, net of tax 630 756
TOTAL SHAREHOLDERS' EQUITY 54,132 53,332
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $495,234 $498,831
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)
Three Months Ended
March 31,
1998 1997
INTEREST INCOME
Interest and Fees on Loans $7,557 $7,036
Interest on Federal Funds Sold 163 101
Interest on Short-term Investments 4 27
Interest and Dividends on Securities 1,783 1,925
TOTAL INTEREST INCOME 9,507 9,089
INTEREST EXPENSE
Interest on Deposits 4,319 4,162
Interest on Borrowings 50 99
TOTAL INTEREST EXPENSE 4,369 4,261
NET INTEREST INCOME 5,138 4,828
Provision for Loan Losses 24 139
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,114 4,689
NONINTEREST INCOME
Income from Fiduciary Activities 80 66
Service Charges on Deposit Accounts 268 280
Investment Services Income 134 106
Other Noninterest Income 149 95
TOTAL NONINTEREST INCOME 631 547
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,971 1,826
Occupancy Expense 274 279
Furniture and Equipment Expense 260 226
Computer Processing Fees 131 125
Professional Fees 144 212
Other Operating Expenses 721 651
TOTAL NONINTEREST EXPENSE 3,501 3,319
Income before Income Taxes 2,244 1,917
Income Tax Expense 730 643
Net Income $1,514 $1,274
Earnings Per Share And Diluted
Earnings Per Share $0.28 $0.24
Dividends Paid Per Share $0.11 $0.10
Comprehensive Income (See Note 1) $1,388 $ 797
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollar references in thousands)
Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,514 $1,274
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of Investments (7) (36)
Depreciation and Amortization 299 282
Provision for Loan Losses 24 139
Change in Assets and Liabilities:
Unearned Income (25) (53)
Deferred Loan Fees 4 (26)
Other Assets 141 94
Deferred Taxes (101) 21
Other Liabilities (797) (168)
Total Adjustments (462) 253
Net Cash from Operating Activities 1,052 1,527
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Interest-bearing Balances with Banks (61) (191)
Proceeds from Maturities of
Securities Available-for-Sale 28,333 7,336
Purchase of Securities Available-for-Sale (22,147) (12,971)
Proceeds from Maturities of
Securities Held-to-Maturity 1,215 318
Purchase of Securities Held-to-Maturity (325) (500)
Proceeds from Sales of Loans 255 ---
Loans Made to Customers net of Payments Received (7,278) (4,822)
Property and Equipment Expenditures (106) (337)
Proceeds from Sales of Other Real Estate 23 ---
Net Cash from Investing Activities (91) (11,167)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits (3,886) (3,471)
Net Change in Short-term Borrowings (714) (5,418)
Advances of Long-term Debt 1,000 ---
Repayments of Long-term Debt --- (1,000)
Dividends Paid (588) (404)
Purchase of interests in Fractional Shares --- (5)
Exercise of Stock Options --- 2
Net Cash from Financing Activities (4,188) (10,296)
Net Change in Cash and Cash Equivalents (3,227) (19,936)
Cash and Cash Equivalents at Beginning of Year 26,050 37,734
Cash and Cash Equivalents at End of Period $22,823 $17,798
Cash Paid During the Year for:
Interest $4,337 $3,975
Income Taxes 188 171
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(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, 1997 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.
Under a new accounting standard, comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized
appreciation on securities available for sale, net of tax.
Note 2 -- Per Share Data
The Board of Directors declared and paid a 5 percent stock dividend in 1997.
In lieu of issuing fractional shares, the company purchased from shareholders
their fractional interest.
Additionally, the Board declared and paid a two-for-one stock split in 1997.
Earnings per share amounts have been retroactively computed as though these
additionally issued shares had been outstanding for all periods presented.
Dividends paid per share amounts represent historical dividends declared without
restatement for pooling.
The computation of Earnings per Share and Diluted Earnings per Share are
provided as follows:
March 31,
1998 1997
Earnings per Share:
Net Income $1,514,000 $1,274,000
Weighted Average Shares Outstanding 5,350,161 5,336,388
Earnings per Share: $ 0.28 $ 0.24
Diluted Earnings per Share
Net Income $1,514,000 $1,274,000
Weighted Average Shares Outstanding 5,350,161 5,336,388
Stock Options 32,519 36,692
Assumed Shares Repurchased upon
Exercise of Options (16,527) (29,054)
Diluted Weighted Average Shares Outstanding 5,366,153 5,344,026
Diluted Earnings per Share $ 0.28 $ 0.24
Note 3 _ Securities
The amortized cost and estimated market values of Securities as of March 31,
1998 are as follows (dollars in thousands):
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies $51,989 $52,006
Obligations of State and Political Subdivisions 20,175 21,304
Asset-/Mortgage-backed Securities 15,705 15,580
Corporate Securities 4,406 4,416
Other Securities 1 14
Total $92,276 $93,320
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and Obligations of U.S.
Government Corporation and Agencies $500 $500
Obligations of State and Political Subdivisions 20,314 21,227
Asset-/Mortgage-backed Securities 670 677
Corporate Securities 100 96
Other Securities 1,763 1,763
Total $23,347 $24,263
The amortized cost and estimated market values of Securities as of December 31,
1997 are as follows (dollars in thousands):
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S.
Government Corporations and Agencies $57,795 $57,815
Obligations of State and Political Subdivisions 20,398 21,620
Asset-/Mortgage-backed Securities 15,668 15,661
Corporate Securities 4,528 4,529
Other Securities 1 14
Total $98,390 $99,639
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S.
Government Corporation and Agencies $1,500 $1,499
Obligations of State and Political Subdivisions 20,154 21,187
Asset-/Mortgage-backed Securities 695 702
Corporate Securities 111 103
Other Securities 1,763 1,763
Total $24,223 $25,254
At March 31, 1998 and December 31, 1997, U.S. Government Agency structured
notes with an amortized cost of $2,000,000 and $5,000,000 respectively, and fair
value of $1,992,000 and $4,986,000 respectively, are included in securities
available-for-sale. These notes consist primarily of step-up and single-index
bonds.
Note 4 -- Loans
Total loans, as presented on the balance sheet, are comprised of the
following classifications (dollars in thousands):
March 31, December 31,
1998 1997
Real Estate Loans Secured by 1-4
Family Residential Properties $108,431 $107,943
Agricultural Loans 53,090 53,110
Commercial and Industrial Loans 115,670 107,343
Loans to Individuals for Household,
Family and Other Personal
Expenditures 59,539 61,297
Lease Financing 994 1,045
Total Loans $337,724 $330,738
The overall loan portfolio is diversified among a variety of borrowers;
however, a significant portion of the debtors' ability to honor their contracts
is dependent upon the agricultural, poultry and wood furniture manufacturing
industries. Although wood furniture manufacturers employ a significant number
of people in the market area, there is no concentration of credit to companies
engaged in that industry. No unguaranteed concentration of credit in excess of
10 percent of total assets exists within any single industry group.
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows
(dollars in thousands):
1998 1997
Balance at January 1 $6,255 $6,528
Provision for Loan Losses 24 139
Recoveries of Prior Loan Losses 87 47
Loan Losses Charged to the Allowance (75) (328)
Balance at March 31 $6,291 $6,386
Note 6 _ Subsequent Event
During April 1998, the Company's Shareholders approved an amendment of the
Articles of Incorporation to change the per share value of the Company's shares
from $10.00 to no par value.
Note 7 -- Proposed Acquisitions
In December 1997, the Company signed a definitive agreement providing for a
merger of a Company subsidiary with CSB Bancorp, ("CSB") parent company of the
Citizens State Bank of Petersburg, Indiana. Under terms of the agreement, the
Company will issue to CSB shareholders between 928,572 and 1,137,500 shares of
Company Common Stock. The number of shares to be issued is dependent upon the
Company's average common stock price during a period prior to the date of the
merger closing, and is also subject to further anti-dilution adjustments in the
event of any future stock dividends, splits and the like. The proposed merger
is subject to approval by the shareholders of CSB, bank regulatory agencies, and
other conditions. The transaction is expected to be accounted for as a pooling
of interests, and it is contemplated that the merger will be effective in the
second quarter of 1998. At March 31, 1998 CSB had total assets of approximately
$75.1 million and total shareholders' equity of approximately $9.0 million.
In January 1998, the Company also signed a definitive agreement providing for
a merger of a Company subsidiary with FSB Financial Corporation ("FSB") which
operates the FSB Bank in Princeton and Francisco, Indiana. Under terms of the
agreement, the Company will issue to shareholders of FSB shares of Company
Common Stock with market value equal to 150 percent of the sum of FSB's
shareholders' equity. The market value of the shares issued will be based upon
FSB shareholder equity as of the end of the month immediately preceding the
closing date, subject to certain adjustments described in the definitive
agreement. The proposed merger is subject to approval by the shareholders of
FSB, bank regulatory agencies, and other conditions. The transaction is
expected to be accounted for as a pooling of interests, and it is contemplated
that the merger will be effective in the second quarter of 1998. At March
31,1998 FSB had total assets of approximately $15.7 million and total
shareholders' equity of approximately $1.5 million.
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, 1998 and December 31, 1997 and the consolidated
results of operations for the three months ended March 31, 1998 and 1997. 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, as well as the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's December 31, 1997 Annual Report to Shareholders.
RESULTS OF OPERATIONS
Net Income:
The Company achieved a 19 percent increase in earnings for the first quarter
of 1998 over the first quarter of 1997. Net income for the three months ended
March 31, 1998 totaled $1,514,000 compared to $1,274,000 for the same period in
1997. Net income was $0.28 per share for the first quarter of 1998 versus $0.24
per share for the first quarter of 1997. Return on assets and return on equity,
respectively, were 1.22 percent and 11.28 percent for the 1998 reporting period,
compared to 1.06 percent and 10.37 percent for the same period in 1997.
The Company's 1998 first quarter results, in comparison to the first quarter
of 1997, reflect increases in net interest income, trust fees and brokerage
commissions, as well as a reduction in provision for loan loss. Operating
expenses increased by 5.5 percent over the same period in the prior year, in
part due to increases in the Company's base compensation levels. Despite the
increase in expenses, the Company's efficiency ratio improved to 57 percent, in
comparison to 58 percent in the first quarter of the previous year.
Net Interest Income:
The following table summarizes German American Bancorp's net interest income
(on a taxable-equivalent basis, at an effective tax rate of 34 percent for each
period) for each of the periods presented herein (dollars in thousands):
Three Months Change from
Ended March 31, Prior Period
1998 1997 Amount %
Interest Income $9,849 $9,384 $465 5.0%
Interest Expense 4,369 4,261 108 2.5%
Net Interest Income $5,480 $5,123 $357 7.0%
The increase in net interest income for the three months ended March 31, 1998
compared to the same period of 1997 was primarily due to an increase of loans
outstanding, in the mix of average earning assets and higher yields in both the
securities and loan portfolios. Net interest income for the first quarter of
1998 includes a recovery of interest on a previously charged-off loan of
approximately $68,000.
Net interest income on a taxable-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 1998, the net interest margin was 4.73 percent compared to 4.51
percent for the comparable period of 1997.
Provision For Loan Losses:
The Company provides for future loan losses through regular provisions to the
allowance for loan losses. These provisions are made at a 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 $24,000 and $139,000 for the
first three months of 1998 and 1997, respectively. The provision for loan
losses to be recorded in future periods will be subject to adjustment based on
the results of on-going evaluations of the adequacy of the allowance for loan
losses.
The Company experienced a net recovery of $12,000 in the first quarter of
1998. Net charge-offs for the first quarter of 1997 were $281,000 or 0.08
percent of total loans. Underperforming loans as a percentage of total loans
were 0.95 percent and 0.99 percent on March 31, 1998 and December 31, 1997,
respectively. See discussion under "Financial Condition" for more information
regarding underperforming assets.
Noninterest Income:
Noninterest income for the first three months of 1998 was $631,000. This was
$84,000 greater than the $547,000 recorded for the same three months of 1997.
This increase included a $44,000 dividend from an affiliate bank's participation
in a real estate limited partnership, and a $30,000 increase in brokerage
commissions.
Noninterest Expense:
Total noninterest expense for the first three months of 1998 was $3,501,000.
This was a $187,000 or 5.5 percent increase over the $3,319,000 posted for the
same period in 1997. Noninterest expense as an annualized percentage of average
total assets was 2.82 percent in 1998 versus 2.75 percent in the prior year.
Despite this increase, the Company's efficiency ratio improved to 57 percent for
the first quarter of 1998 from 58 percent for the first quarter of 1997.
Salaries and Employee Benefits constituted $1,971,000 or 56 percent of total
noninterest expense. This was $145,000 or 7.9 percent more than the $1,826,000
recorded for the same period of the prior year. This increase was due to
increases in base compensation and selected benefits, including the Company's
employee computer purchase program. The Company's active full-time equivalent
(FTE) staff was 213 at March 31, 1998 compared to 221 at March 31, 1997.
Occupancy expense, combined with Furniture and Equipment expense for the
first three months of 1998 totaled $534,000. This was $29,000 greater than the
$505,000 incurred for the same period of the prior year. These expenses are
expected to continue to be moderately higher in comparison to the prior year,
largely as a consequence of upgrading the Company's computer systems. The
Company is continuing its 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 by all of its affiliate community banks.
Other operating expenses increased from $651,000 in the first three months of
1997 to $721,000 in the quarter ended March 31, 1998. This increase of $70,000
was incurred due to the introduction of new banking products, timing of employee
related expenses and a refund of SAIF assessment fees received in the first
quarter of 1997.
Professional fees for the first three months of 1998 were $144,000. This was
a reduction of $68,000 from the $212,000 recorded for the same period of 1997,
primarily in merger related expenses.
FINANCIAL CONDITION
Total assets at March 31, 1998 stood at $495 million. This was a slight
decline of $4 million from the December 31, 1997 total asset position and was
due to a seasonal decline in deposits.
Deposits at March 31, 1998 were at $430 million which was a $4 million, or
less than one percent decrease from the total deposits held three months
earlier. Transaction deposits experienced a seasonal decline from year-end,
while interest-bearing deposits increased $4 million. Combined Short- and Long-
term Borrowings at March 31, 1998 were $5.2 million, representing little change
from the December 31, 1997 position of $4.9 million.
All of the Company's affiliate banks are members of the Federal Home Loan
Bank System ("FHLB"). The banks' membership in the FHLB provides an additional
source of liquidity for both long and short-term borrowing needs. The Company
had $1 million in FHLB borrowings outstanding at March 31, 1998.
Underperforming Assets:
The following presents an analysis of German American Bancorp's
underperforming assets at March 31, 1998 and December 31, 1997 (dollars in
thousands):
March 31, December 31,
1998 1997
Nonaccrual Loans $292 $562
Loans contractually past due 90 days or more 2,920 2,710
Renegotiated Loans --- ---
Total Underperforming Loans 3,212 3,272
Other Real Estate 168 146
Total Underperforming Assets $3,380 $3,418
Allowance for Loan Loss to Underperforming Loans 196% 191%
Underperforming Loans to Total Loans 0.95% 0.99%
Capital Resources:
Shareholders' equity totaled $54,132,000 at March 31, 1998 or 10.9 percent of
total assets, and $53,332,000 at December 31, 1997 or 10.7 percent of total
assets.
Federal banking regulations provide guidelines for determining the capital
adequacy of bank holding companies and banks. These guidelines provide for a
more narrow definition of core capital and assign a measure of risk to the
various categories of assets. The Company is required to maintain minimum
levels of capital in proportion to total risk-weighted assets and off-balance
sheet exposures such as loan commitments and standby letters of credit.
Tier 1, or core capital, consists of shareholders' equity less goodwill, core
deposit intangibles, and certain deferred tax assets defined by bank
regulations. Tier 2 capital is defined as the amount of the allowance for loan
losses which does not exceed 1.25 percent of gross risk adjusted assets. Total
capital is the sum of Tier 1 and Tier 2 capital.
The minimum requirements under these standards are generally at least a 4.0
percent leverage ratio, which is Tier 1 capital divided by defined "total
assets"; 4.0 percent Tier 1 capital to risk-adjusted assets; and, an 8.0 percent
total capital to risk-adjusted assets ratios. Under these guidelines, the
Company, on a consolidated basis, and each of its affiliate banks individually,
have capital ratios that substantially exceed the regulatory minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well-
capitalized, adequately capitalized, under-capitalized, significantly under-
capitalized, and critically under-capitalized. Under these regulations, a
"well-capitalized" entity must achieve a Tier 1 Risk-based capital ratio of at
least 6.0 percent; a total capital ratio of at least 10.0 percent; and, a
leverage ratio of at least 5.0 percent, and not be under a capital directive
order.
At March 31, 1998 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 risk-based capital
structure and capital ratios under regulatory guidelines (dollars in thousands):
March 31, December 31,
1998 1997
Tier 1 Capital:
Shareholders' Equity as presented
on the Balance Sheet $54,132 $53,332
Less: Unrealized Appreciation on
Securities Available-for-Sale (630) (756)
Less: Intangible Assets and
Ineligible Deferred Tax Assets (1,613) (1,702)
Total Tier 1 Capital 51,889 50,874
Tier 2 Capital:
Qualifying Allowance for Loan Loss 4,150 4,219
Total Capital $56,039 $55,093
Risk-adjusted Assets $328,263 $333,796
To be Well
Capitalized
Under Prompt
Minimum for Corrective
Capital Action
Adequacy Provisions March 31, December 31,
Purposes (FDICIA) 1998 1997
Leverage Ratio 4.00% 5.00% 10.47% 10.48%
Tier 1 Capital to
Risk-adjusted Assets 4.00% 6.00% 15.81% 15.24%
Total Capital to
Risk-adjusted Assets 8.00% 10.00% 17.07% 16.51%
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 1998, the
net cash from operating activities provided $1,052,000 of available cash, which
included net income of $1,514,000. Maturities of securities and short-term
investments brought in $7,076,000 in cash above the dollar amount of purchases.
Major cash outflows experienced during this three month period of 1998 included
$588,000 of dividends, property and equipment purchases (primarily related to
computer upgrading) of $106,000, and the net funding outlay of loans in the
amount of $7,278,000. Decreases experienced in deposits and short-term
borrowings, net of an advance on long-term borrowings, reduced cash by
$3,600,000. Total cash outflows for the period exceeded inflows by $3,227,000
leaving a cash and cash equivalents balance of $22,823,000 at March 31, 1998.
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 Committee and the Boards of Directors of the holding company and
its affiliate banks. There have been no material changes in the quantitative
and qualitative disclosures about market risks as of March 31, 1998 from the
analysis and disclosures provided in the Company's Form 10-K for the year ended
December 31, 1997.
PART II. -- OTHER INFORMATION
Item 5. Other Information.
On April 23, 1998, the shareholders of German American re-elected as
directors for terms of two additional years Gene C. Mehne, Robert L. Ruckriegel,
Mark A. Schroeder, Larry J. Seger, Joseph F. Steurer and C.L. Thompson, and the
shareholders approved an amendment of German American's Articles of
Incorporation to change the par value of its capital stock from $10.00 per share
to no par value per share.
On April 23, 1998, the Board of Directors of German American formalized
management succession plans. Mark A. Schroeder, currently the President and
Chief Operating Officer of German American, was designated to succeed George W.
Astrike as Chief Executive Officer in January 1999. Schroeder, who has 25 years
banking experience in Southwest Indiana markets served by German American,
served as President/Chief Financial Officer of German American Bank before
assuming his position in 1995 with German American. Astrike will continue as
Chairman of the Board of both German American and German American Bank following
relinquishment of the chief executive officer title in 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule for the period ended
March 31,1998.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 31, 1998, except for an optional report filed February 24, 1998 to provide
certain financial statements.
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 May 14, 1998 By/s/Mark A. Schroeder
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Mark A. Schroeder
President and
Chief Operating Officer
Date May 14, 1998 By/s/John M. Gutgsell
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John M. Gutgsell
Controller and Principal
Accounting Officer