German American Bancorp, Inc.
Annual Report 2008

Plain-text annual report

SHIELD of Strength 2008 SUMMARY ANNUAL REPORT DEAR Shareholders 2008 was truly a remarkable year for German American! In the face of what many economists are calling the most severe economic downturn since the Great Depression, your Company posted successive record quarterly earnings in each and every quarter of 2008, record annual earnings for the year, a record level of year-end total assets, a record level of year-end total loans, a record level of year-end total deposits, and, perhaps most importantly in this economic environment, a record level of year-end total shareholders’ equity! Our 2008 net income totaled $12,803,000, or $1.16 per share, an increase of 36% from the prior year’s earnings of $9,405,000, or $0.85 per share. As of December 31, 2008, total assets increased to approximately $1.2 billion with total loans accounting for $890 million of that amount. Year-end total deposits increased by over 7% to $942 million, and year-end total shareholders’ equity increased by over 8% to $105 million. Despite the significant challenges facing the economy, we enjoyed solid performance throughout our Company, underscoring the strength of our business model and the significant market share we enjoy in our southern Indiana markets, which have not been as affected by the current recessionary economic conditions as other regions of the country. Our financial achievements of 2008 certainly were impressive, but an equally as important achievement was our ability to maintain a strong and growing capital position. We have been and continue to be well-capitalized (as that term is defined by banking industry regulatory standards), but we do realize the importance of maintaining a strong capital base in these uncertain economic times. In that regard, earlier this month, we announced plans to further strengthen our regulatory capital by offering shareholders the opportunity to participate in a proposed new offering of up to $30 million principal amount of subordinated debt securities. While German American has no immediate need for additional capital given our achievement of record net income in 2008 and our Company’s continuation of being well-capitalized under all applicable banking agency regulatory standards, raising additional regulatory capital now will further strengthen our capital base, and serve as additional protection from any impact of the current economic downturn. Additionally, we believe our markets will present additional loan opportunities to us in the future, and that additional capital will provide us with the ability to make these additional loans while remaining a well-capitalized institution for bank regulatory purposes. We had also been approved to strengthen our capital position by participating in the U.S. Treasury Department’s Capital Purchase Program (CPP), which was designed to attract broad participation by healthy financial institutions, but we decided to decline the Treasury Department’s offer to purchase up to $25 million of the Company’s preferred stock. Although we were gratified to have been approved for the CPP, we believed that the proposed subordinated debt offering was a better option for our shareholders. Accordingly, we declined participation in the CPP, and in early March filed a registration statement with the Securities and Exchange Commission with respect to our proposed offer, under which our shareholders will have the opportunity to directly purchase from the Company the new issue of subordinated debt securities. The interest that will be payable on the subordinated debentures will be tax- deductible to the Company, resulting in an effective after-tax financing rate to us that is comparable to the initial, non-deductible dividend rate that would have been applicable if the Company had elected to sell preferred shares under the CPP. Under our proposed rights offering, it is our own shareholders who will have the opportunity to provide us with additional regulatory capital, not the federal government. Clearly, we are in the midst of historic times in the financial industry, but we are fortunate that your Company is able to deal with these challenges from a position of strength. Our ability to do so places German American in very rare company among other financial institutions in our state and our nation. For this, I am grateful to the dedicated staff of German American. Without their efforts, the record performance of 2008 would not have been possible. I am also grateful to each of you, our shareholders, for your loyalty and support. Together, we will continue to move German American forward in the coming months and years. Sincerely, Mark A. Schroeder President & Chief Executive Officer March 2009 German American Bancorp, Inc., has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement (and any updates thereto) and other documents German American Bancorp, Inc., has filed with the SEC for more complete information about German American Bancorp, Inc., and this offering. You may get these documents for free by visiting EDGAR on the SEC’s web site at www.sec.gov. Alternatively, German American Bancorp, Inc., through Georgeson, the information agent for the rights offering, will arrange to send to you the prospectus if you request it by calling Georgeson toll-free (800) 733-6860. These documents are also available from Georgeson, 199 Water Street, 26th Floor, New York, NY, 10038. The subordinated debentures are not deposits at, or other obligations of, a bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Company (FDIC). 1 TOTAL ASSETS $1,132 TOTAL ASSETS $1,093 $1,191 $1,191 $1,132 $942 $946 $1,093 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $942 (Dollars in Millions) $946 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 TOTAL LOANS (Net of Unearned Income) COMMERCIAL & AGRICULTURAL LOANS AS % OF TOTAL LOANS $890 $868 TOTAL LOANS (Net of Unearned Income) $796 COMMERCIAL & AGRICULTURAL LOANS AS % OF TOTAL LOANS $890 $868 $652 $796 $630 75% 72% 69% 66% 64% 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 (Dollars in Millions) $652 $630 66% 64% 75% 72% 69% TOTAL SHAREHOLDER EQUITY $110,000 $105,174 $100,000 TOTAL SHAREHOLDER EQUITY $92,391 $97,116 $90,000 $110,000 $83,669 $82,255 $105,174 $97,116 $92,391 $83,669 $82,255 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 (Dollars in Thousands) $80,000 $100,000 $70,000 $90,000 $60,000 $80,000 $50,000 $70,000 $60,000 $50,000 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $930 $880 $830 $930 $780 $880 $730 $830 $680 $780 $630 $730 $580 $680 $630 $580 (Dollars in Millions) STRENGTH in Numbers (Dollars in Millions) (Dollars in Thousands) NET INTEREST INCOME (Tax-Equivalent) TOTAL NON-INTEREST INCOME (Excluding Securities Gains/Losses) NET INCOME & EARNINGS PER SHARE $41,525 $19,000 $18,000 $14,000 $18,116 $12,803 $39,205 NET INTEREST INCOME (Tax-Equivalent) $37,252 $41,525 $33,443 $39,205 $32,867 $37,252 $33,443 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $32,867 (Dollars in Thousands) 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $17,000 TOTAL NON-INTEREST INCOME (Excluding Securities Gains/Losses) $16,384 $15,042 $14,502 $18,116 $13,298 $16,384 $15,042 $14,502 $12,000 NET INCOME & EARNINGS PER SHARE $10,221 $10,000 $14,000 $8,000 $12,000 $6,000 $7,239 $10,000 $4,000 $0.66 $8,000 $2,000 $7,239 $9,721 $9,405 $0.89 $9,721 $0.93 $10,221 $0.85 $9,405 $1.16 $12,803 $1.16 $13,298 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $6,000 $0 $0.93 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $0.85 $0.89 (Dollars in Thousands) $4,000 $0.66 (Dollars in Thousands) 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $2,000 $0 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 $16,000 $19,000 $15,000 $18,000 $14,000 $17,000 $13,000 $16,000 $12,000 $15,000 $11,000 $14,000 $10,000 $13,000 $12,000 $11,000 $10,000 $1,200 $1,150 $1,100 $1,200 $1,050 $1,150 $1,000 $1,100 $950 $1,050 $900 $1,000 $850 $950 $900 $850 $42,000 $40,000 $38,000 $42,000 $36,000 $40,000 $34,000 $38,000 $32,000 $36,000 $30,000 $34,000 $28,000 $32,000 $30,000 $28,000 (Dollars in Thousands) (Dollars in Thousands) (Dollars in Thousands) $120,000 $100,000 $80,000 $120,000 $60,000 $100,000 $80,000 $20,000 $60,000 $0 $40,000 $20,000 $0 $105,174 $97,116 $92,391 $83,669 $82,255 $105,174 $97,116 $92,391 $40,000 $83,669 $82,255 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 (Dollars in Millions) 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 (Dollars in Millions) STRONG Communities Strengthening the communities where we live and work is a deep-seated commitment throughout German American Bancorp. It’s more than a responsibility we share, it’s our passion. By providing loans to strengthen local businesses and to create employment opportunities, and by offering home ownership options for all types of families, we are helping our communities by supporting a healthy regional economy. We actively support the communities in which we live and work. From coaching youth sports teams to leading local Girl Scout troops, and planning community celebrations to helping out a neighbor in need, you’ll find that we employ talented, professional people who care. We work side-by-side with community leaders to ensure a strong foundation for future generations. Terri Eckerle Greg Cardinal Roberta Graber left to right: Kenneth L. Sendelweck, President Private Banking and Wealth Management Bradley M. Rust, Executive Vice President and Chief Financial Officer Clay W. Ewing, President Commercial and Retail Banking Mark A. Schroeder, President and CEO STRONG Leadership German American Bancorp, Inc.’s executive team is committed to an opportunistic, yet disciplined, approach to leading our organization. This steadfast, conservative commitment has been the guiding force in our record earnings, our gains in market share, and our expansion into new markets. Working together, this team funnels their grounded, disciplined approach to managing financial services throughout the organization. Our executive team focuses on sustainable, long-term growth strategies that support the communities we serve. One fundamental uniqueness of German American Bancorp’s leadership team is their philosophy of empowering employees to make decisions for our customers at the local level. We are committed to investing in our financial professionals with training and encouraging higher education in specialized fields. 2 3 BAnkInG Friendly bankers who live and work in the community, understand your banking needs and know you by name, that’s how business is still conducted at our 28 banking locations throughout southern Indiana. Our commercial bankers take special interest in developing relationships with businesses to ensure that cash flow needs are met and operating funds to sustain and grow a business are available. Individuals and families rely on us for home loans, checking and savings accounts they can access and manage multiple ways with online banking and BankLine 24, and credit cards and check cards that are serviced locally. We truly feel that we are partners with every customer we have and back all of our products and services with the Shield of Excellence, our Shield of Strength. InSurAnCe It’s exciting to see so many of German American Bancorp’s commercial and individual clients secure their businesses and personal assets with our full-service insurance offerings. In 2008, our drive was to improve operating efficiencies within this division to further enhance the service level you can expect from our insurance professionals. We’re covering customers in southern Indiana with a full range of personal and corporate property and casual, title, credit life, and accident and health insurance benefits. fInAnCIAl ADvISorS Retirement savings, college planning, and transferring wealth through estate planning, our financial advisor and trust company professionals excel at putting money to work for virtually any client. Our highly trained professionals are always mindful that the true measure of success is when clients meet their dreams and goals. Setting HIGHER standards in banking, insurance, and wealth management. By combining traditional retail and commercial banking, full service insurance, and brokerage and trust services, German American Bancorp creates a unique opportunity for customers to meet a variety of needs with a single relationship. 4 5 Gene Mattingly, Gaven Oexmann, Rhonda Hopf, John Gunselman, Jay Baker About GABC Locations w w w . g e r m a n a m e r i c a n b a n c o r p . c o m German American Bancorp is headquartered in Jasper, Indiana, and our market area is comprised of the counties of Daviess, Dubois, Gibson, Knox, Lawrence, Martin, Monroe, Perry, Pike, and Spencer. With 28 banking locations, seven insurance locations, and eight financial advisory trust offices, German American Bancorp extends its financial services offerings throughout southern Indiana. With nearly $1.2 billion in assets supporting our organization, our financial professionals are confident in the backing of a solid, stable financial institution when serving their customers’ needs. We are large enough to serve the most sophisticated clients, and community service oriented to always ensure timely decisions are made at a local level with a personal touch. mISSIon Building relationships that are mutually beneficial to our clients and our shareholders. vISIon German American Bancorp, Inc. will build a regional presence offering a full array of integrated financial products and services. We will always be mindful of our community banking roots and the importance of enhancing and growing the relationships we have with our shareholders, customers, employees, and communities. GermAn AmerICAn BAnCorp 711 Main Street Jasper, IN 47546 812.482.1314 GermAn AmerICAn fInAnCIAl ADvISorS & TruST CompAny 711 Main Street Jasper, IN 47546 812.482.5808 GermAn AmerICAn InSurAnCe, InC. 246 3rd Avenue Jasper, IN 47546 812.482.2866 Serving Daviess County Peoples Bank German American Financial Advisors Stafford-Williams Insurance Serving lawrence County Stone City Bank German American Financial Advisors Keach & Grove Insurance Serving pike County Citizens State Bank German American Financial Advisors Doty Insurance Serving Dubois County German American Bank German American Financial Advisors German American Insurance, Inc. Serving Gibson County Citizens State Bank Serving knox County First American Bank German American Financial Advisors Knox County Insurance Smith & Bell Insurance Serving martin County Peoples Bank German American Financial Advisors Serving monroe County German American Bancorp German American Financial Advisors Serving perry County First State Bank German American Financial Advisors First State Insurance Serving Spencer County First State Bank monroe CounTy Bank Locations Insurance Locations Financial Advisors Locations DAvIeSS CounTy lAWrenCe CounTy knoX CounTy mArTIn CounTy GIBSon CounTy pIke CounTy DuBoIS CounTy perry CounTy SpenCer CounTy 6 7 German American Bancorp’s Board of Directors are very active, successful community leaders located throughout southern Indiana. Our directors take their role of corporate governance and oversight very seriously, and we feel that is a tremendous strength for our organization. The loyalty of our shareholders is frequently made apparent when we assist with shares that have been passed from generation to generation. This loyalty and allegiance to German American is greatly appreciated and recognized as something that must continually be earned. Our directors and management team take every step to ensure that we fully evaluate our opportunities to enhance shareholder value while maintaining a very prudent approach. Douglas A. Bawel Doug is the President and CEO of Jasper Engines and Transmissions of Jasper, Indiana, a position that he has held since 1987. Other business interests include Realty Inc. LLC, Win Win Services LLC, and Dubois County Flight Services. Doug is active in a variety of organizations including Patoka Valley Health Care Cooperative. He was named Indiana Business Leader of the Year in 2003 and received Indiana’s Entrepreneur of the Year Award for Manufacturing. Christina m. ernst Chris is the President and Chairman of the Board for Miller Construction Company, Inc., a third generation family business based in Vincennes, Indiana, specializing in the building and maintenance of high voltage power lines for utility companies located throughout the Midwest. Chris holds a Bachelor of Science Degree and a Master of Science Degree from Indiana University. She was a founding member of the Knox County Community Foundation and serves as Vice Chairman of the Vincennes University Foundation Board of Directors. Chris was recognized by the State of Indiana as the recipient of the Torchbearer Award, the highest award presented to women by the State, for inspiring women through her leadership and success in a non-traditional career. Our Board of Directors richard e. forbes Rich is President and CEO of Fortune Brands Home and Hardware, the $4.6 billion subsidiary of Fortune Brands, Inc. that includes MasterBrand Cabinets, Moen faucets, Therma-Tru doors, Simonton windows, Master Lock padlocks and Waterloo tool storage brands. He was named to this position January 1, 2007. Prior to his current role, Rich held positions of increasing responsibility at MasterBrand Cabinets for nearly 20 years, including being named President in 1999. Rich currently serves on the boards of the Dubois County Area Development Corp. and Memorial Hospital Foundation, and is active on the Finance Committee of the Dubois County Community Foundation. u. Butch klem Butch is president and CEO of U.B. Klem Furniture Company located southeast of Jasper, Indiana. Butch founded the company, which specializes in restaurant furniture manufacturing for a variety of national franchisors, in 1973. He was awarded the Indiana Entrepreneur of the Year Award for Manufacturing in 1995. J. David lett As a partner with Lett and Jones Attorneys at Law, Dave serves Loogootee and Martin County with his law practice and is actively involved in many community groups. He also serves as a part-time Deputy Prosecuting Attorney for Daviess County, Indiana. Dave received his Bachelor of Arts from Franklin College and his Juris Doctor degree from Thomas M. Cooley School of Law. Gene C. mehne Gene holds an Associates degree from Vincennes University and graduated with distinction with a Bachelor of Science Degree from Purdue University. Gene is President and Manager of Mehne Farms, Inc., which operates in northern Dubois County. Gene is involved in various farm organizations and serves as Treasurer of St. Paul’s Capital Stewardship Fund. mark A. Schroeder Mark Schroeder is the President and CEO of German American Bancorp, Inc. Mark earned an Associate of Science degree in Banking and Finance from Vincennes University, a Bachelor of Science Degree in Financial Management from University of Evansville, and holds a Certified Public Accounting license from the State of Indiana. Mark is also a graduate of the ABA Commercial Lending Graduate School and the ABA Stonier Graduate School of Banking. Mark is Vice Chairman of the Board of Directors of the Indiana Department of Financial Institutions and a member of the Board of Directors of the Indiana Bankers Association. Mark also serves on the Board of Directors of the Independent Community Bankers of America, the national trade association for community banking. larry S. Seger Larry holds his Bachelor of Science degree in Business Marketing from Indiana University. As the President of Wabash Valley Produce, Larry oversees sales exceeding $400 million with 950 employees in seven locations. Larry also serves as the U.S. Egg Marketers President and Chairman. michael J. voyles Mike was awarded the Petersburg Pride Good Neighbor Business Award in 2005 for his efforts in giving back to the Petersburg community. Mike is the President of M.J.V., Inc. He earned his Bachelor of Science in Electrical Engineering from Purdue University. 8 9 STRONG Connections At every touch point of an interaction between our customers and our bankers, insurance agents, or financial advisors, our entire German American Bancorp team takes responsibility for ensuring accuracy, timeliness, and service excellence. our operations and support team works diligently behind the scenes everyday to enhance our customers’ experience. Julie Lewis, Nancy Giesler, Dale Altstadt, Brett Warner, Andrew Krempp, Vicki Schuler our entire German American Bancorp team is dedicated to supporting our commitment to service excellence, as made evident by our sophisticated networked systems, technologies that offer our customers the latest way to access account information, and methodologies that ensure accuracy and timeliness. furthermore, our team members constantly impress with their willingness to lend a helping hand to and share areas of expertise with co-workers; a true testament to the caliber of individuals who make up German American Bancorp. Josh Stolz Dayleen Ragains, Jane Schneider Mike Hayes Floyd Alsman Tom Louviere, Tim Bell Josh Morrison 10 11 Report of Independent Registered Public Accounting Firm We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated balance sheets of German American Bancorp, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008, appearing in the Annual Report on Form 10-K, not appearing herein. In our report dated February 28, 2009, also appearing in the Annual Report on Form 10-K, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the condensed consolidated balance sheets and statements of income presented on pages 14 and 15 is fairly stated, in all material respects, in relation to the consolidated financial statements from which they have been derived. Crowe Horwath LLP Louisville, Kentucky February 28, 2009 Five Year Summary The following selected data should be read in conjunction with the Company’s Annual Report on Form 10-K for 2008. Dollars in thousands, except per share data. Summary of operationS: interest income interest expense net interest income provision for Loan Losses net interest income after provision for Loan Losses non-interest income non-interest expense income before income taxes income tax expense net income year-end BaLanceS: total assets total Loans, net of unearned income total deposits total Long-term debt total Shareholders’ equity average BaLanceS: total assets total Loans, net of unearned income total deposits total Shareholders’ equity per Share data(1): net income cash dividends Book value at year-end other data at year-end: number of Shareholders number of employees Weighted average number of Shares(1) SeLected performance ratioS: return on assets return on equity equity to assets dividend payout net charge-offs to average Loans allowance for Loan Losses to Loans net interest margin 2008 2007 2006 2005 2004 $ $ 67,845 26,908 40,937 3,990 36,947 18,210 36,716 18,441 5,638 12,803 $ 1,190,828 890,436 941,750 105,608 105,174 $ 1,174,583 880,630 922,137 99,711 $ 1.16 0.56 9.54 $ $ $ $ $ 72,261 33,646 38,615 3,591 35,024 15,704 37,221 13,507 4,102 9,405 1,131,710 867,721 877,421 86,786 97,116 1,114,140 840,849 889,736 93,677 0.85 0.56 8.81 $ $ $ $ $ $ $ $ $ $ 63,594 27,398 36,196 925 35,271 15,993 37,059 14,205 3,984 10,221 1,093,424 796,259 867,618 68,333 92,391 1,029,838 715,260 814,440 88,451 0.93 0.56 8.39 50,197 17,984 32,213 1,903 30,310 14,502 31,756 13,056 3,335 9,721 946,467 651,956 746,821 66,606 82,255 925,851 634,526 730,220 84,479 0.89 0.56 7.73 $ $ $ $ $ 47,710 16,471 31,239 2,015 29,224 9,620 30,609 8,235 996 7,239 942,094 629,793 750,383 69,941 83,669 927,528 622,240 731,467 82,558 0.66 0.56 7.68 3,684 348 11,029,519 3,647 371 11,009,536 3,438 397 10,994,739 3,494 367 10,890,987 3,219 372 10,914,622 1.09% 12.84% 8.83% 48.25% 0.29% 1.07% 3.82% 0.84% 10.04% 8.58% 65.65% 0.32% 0.93% 3.83% 0.99% 11.56% 8.45% 60.29% 0.50% 0.90% 3.96% 1.05% 11.51% 8.69% 62.83% 0.26% 1.42% 3.92% 0.78% 8.77% 8.88% 84.46% 0.24% 1.40% 3.86% 12 (1) Share and per data excludes the dilutive effect of stock options. year to year financial information comparability is affected by the purchase accounting treatment for mergers and acquisitions. 13 Consolidated Balance Sheets Dollars in thousands, except per share data Consolidated Statements of Income Dollars in thousands, except per share data ASSETS cash and due from Banks federal funds Sold and other Short-term investments cash and cash equivalents Securities available-for-Sale, at fair value Securities held-to-maturity, at cost (fair value of $3,358 and $4,496 on december 31, 2008 and 2007, respectively) $ Loans held-for-Sale Loans Less: unearned income allowance for Loan Losses Loans, net Stock in fhLB of indianapolis and other restricted Stock, at cost premises, furniture and equipment, net other real estate goodwill intangible assets company owned Life insurance accrued interest receivable and other assets decemBer 31, 2008 2007 $ 17,201 27,791 44,992 175,840 3,326 3,166 892,511 (2,075) (9,522) 880,914 10,621 22,330 1,818 9,655 3,141 23,338 11,687 25,283 2,631 27,914 148,300 4,464 5,697 870,643 (2,922) (8,044) 859,677 10,621 22,783 1,517 9,655 4,030 22,533 14,519 totaL aSSetS $ 1,190,828 $ 1,131,710 LIABILITIES non-interest-bearing demand deposits interest-bearing demand, Savings, and money market accounts time deposits total deposits fhLB advances and other Borrowings accrued interest payable and other Liabilities totaL LiaBiLitieS SHAREHOLDERS’ EQUITY preferred Stock, $10 par value; 500,000 shares authorized, no shares issued common Stock, no par value, $1 stated value; 20,000,000 shares authorized additional paid-in capital retained earnings accumulated other comprehensive income totaL SharehoLderS’ eQuity $ $ 147,977 439,305 354,468 941,750 131,664 12,240 136,212 353,643 387,566 877,421 144,170 13,003 1,085,654 1,034,594 – 11,030 68,371 23,019 2,754 105,174 – 11,029 68,408 16,681 998 97,116 totaL LiaBiLitieS and SharehoLderS’ eQuity $ 1,190,828 $ 1,131,710 end of period shares issued and outstanding 11,030,288 11,029,484 See annual report on form 10-K. INTEREST INCOME interest and fees on Loans interest on federal funds Sold and other Short-term investments interest and dividends on Securities: taxable non-taxable totaL intereSt income INTEREST EXPENSE interest on deposits interest on fhLB advances and other Borrowings totaL intereSt eXpenSe NET INTEREST INCOME provision for Loan Losses NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NON-INTEREST INCOME trust and investment product fees Service charges on deposit accounts insurance revenues other operating income net gains on Sales of Loans and related assets net gain (Loss) on Securities totaL non-intereSt income NON-INTEREST EXPENSE Salaries and employee Benefits occupancy expense furniture and equipment expense data processing fees professional fees advertising and promotion Supplies intangible amortization other operating expenses totaL non-intereSt eXpenSe income before income taxes income tax expense NET INCOME earnings per Share diluted earnings per Share See annual report on form 10-K. yearS ended decemBer 31, 2008 2007 2006 $ 58,477 593 $ 8,007 768 67,845 21,212 5,696 26,908 40,937 3,990 36,947 2,288 4,920 6,306 3,203 1,399 94 $ 63,852 478 6,992 939 72,261 27,289 6,357 33,646 38,615 3,591 35,024 2,590 4,361 5,794 2,817 822 (680) 53,490 545 7,763 1,796 63,594 21,329 6,069 27,398 36,196 925 35,271 2,210 3,901 5,094 2,920 917 951 18,210 15,704 15,993 20,786 3,249 2,428 1,493 1,670 1,078 570 889 4,553 36,716 18,441 5,638 12,803 1.16 1.16 $ $ $ 21,671 3,144 2,235 1,370 1,418 957 625 894 4,907 37,221 13,507 4,102 9,405 0.85 0.85 $ $ $ 21,491 2,797 2,191 1,646 1,786 940 619 698 4,891 37,059 14,205 3,984 10,221 0.93 0.93 $ $ $ 14 15 enabling customers to make sound financial decisions is the main objective of German American. Gaining a clear understanding of customer needs by truly listening to the customer, results in solutions that work. Strong ties to customers begin with open, two-way communication, made possible by our local presence and commitment to exceeding customer expectations. STRONG Ties, STRONG Solutions. Ken Frye Tom Acton Eric Kehl 16 Cautionary Note re: Forward-Looking Statements This Summary Annual Report, including our President’s letter to our Shareholders on page 1, includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, relating to such matters as our anticipated future financial and stock market performance, our Bloomington market, our credit quality, and our Effectiveness Plan. Readers are cautioned that actual results and performance may differ materially from any of our present expectations that are expressed or implied by any forward-looking statement due to the inherent uncertainties in predicting the future, and risks affecting the Company and its stock, including those that are described in Item 1, “Business - Forward Looking Statements and Associated Risks” and in Item 1A, “Risk Factors,” in our accompanying Annual Report on Form 10-K for 2008. If you did not receive a copy of the Form 10-K Annual Report with this Summary Annual Report, you may review that document (and our other SEC filings) via the Internet through the Shareholder Information section of our website, www.germanamericanbancorp.com. This report speaks only as of March 1, 2009, and we do not promise anyone that it will be updated for changes or events after that date. This legend identifies employees featured on the cover of this report. Michael Kern Alex Knepp Gretchen Lain Joel Smith Laura Bogard Keith Leinenbach SHIELD of Strength 2008 SUMMARY ANNUAL REPORT Charles Fleck Beth McManaway Jane Thoma David Henson Neil Dauby Rita Denson Jay Burch Bonita Fields J.M. Vieck 711 Main Street • Jasper, IN 47547-0810 • 812.482.1314 • www.germanamericanbancorp.com 

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