Confident. Capable. Committed.
SUMMARY ANNUAL REPORT 2012
the
Numbers
Total Assets
(dollars in millions)
$2,006
$1,874
$1,376
$1,191
$1,243
Total Loans, Net of Unearned Income
(dollars in millions)
Commercial and Agriculture Loans as % of Total Loans
$1,205
$1,121
81%
83%
$890
75%
$878
77%
$917
79%
$1,300
$1,200
$1,100
$1,000
$900
$800
$700
$600
$500
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
Total Deposits
(dollars in millions)
Non-Maturity Deposit Accounts as % of Total Deposits
$1,641
$1,556
$942
62%
$970
$1,087
66%
67%
76%
80%
Total Shareholders’ Equity
(dollars in millions)
Annualized Return of Equity
$185
$168
13.57%
12.67%
$105
12.84%
$122
$114
11.12%
11.18%
$200
$190
$180
$170
$160
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
Net Interest Income (Tax-Equivalent)
(dollars in thousands)
Net Interest Margin
$65,202
$67,819
$45,323
$49,481
3.95%
3.98%
$41,525
3.82%
3.84%
3.74%
Net Income & Diluted Earnings
Per Share
(dollars in thousands)
$24,055
$20,249
$12,803
$12,218
$13,405
$1.90
$1.61
$1.16
$1.10
$1.21
$25,000
$22,500
$20,000
$17,500
$15,000
$12,500
$10,000
$7,500
$5,00
$2,500
$0
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
$2,100
$2,000
$1,900
$1,800
$1,700
$1,600
$1,500
$1,400
$1,300
$1,200
$1,100
$1,000
$900
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
$75,000
$70,000
$65,000
$60,000
$55,000
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Dear Shareholders:
A LETTER TO OUR
Shareholders
Mark A. Schroeder
Chairman and CEO
Confident. Capable. Committed. Those three words describe
where German American, your company, stands today as we look
to the future and the opportunities before us. We are confident
in our ability to meet all the financial needs of our clients with
sophisticated products and services backed by the strength and
stability of our Company, upon which our reputation has been
built over the course of a century of service to the southern
Indiana market area. Our financial professionals have spent their
careers serving these markets. It is this level of local market
knowledge and understanding which makes German American
uniquely capable of assisting our clients in achieving their
financial goals. We take pride in the capabilities of our financial
professionals and in their ability to serve as trusted advisors
to our many clients located throughout southern Indiana. We
are committed to our clients and the communities we serve
throughout our footprint. With our sole focus on southern
Indiana, we recognize that our past, present, and future success
as an organization is explicitly linked to the financial well-being of
our clients and to the prosperity of the communities in which we
do business.
We are extremely pleased and proud to report that your Company
has once again reported record earnings, with annual net income
of $24.1 million, or $1.90 per fully diluted share, for the year ended
on December 31, 2012. This level of earnings was an 18% increase
on a per share basis over the prior year’s record performance.
The continued level of strong financial performance in 2012 follows
upon a period of exceptional performance during the past five
years. The period of 2008-2012 represents the best five years in our
Company’s history in terms of reported annual earnings. Our return
on average shareholder equity of 13.57% in 2012 also was a record
and represents the 8th consecutive year that German American
has delivered double-digit returns on shareholders’ equity.
During this past year, we also successfully continued our plan
of disciplined growth by means of our initial presence in the
Columbus, Indiana market with the opening of a commercial
banking office in April. As we have in each of our new market
entries in the past several years, we started in Columbus by
partnering with a team of seasoned financial professionals
who have served that market for a number of years and who
are extremely well connected and well positioned within the
community. This combination of local market knowledge, local
market focus, and exceptional financial strength and stability
has proven to be a winning combination for German American in
the Evansville and Bloomington, Indiana markets, just as it has
been for over a century in each of the other southern Indiana
markets we serve. We are confident we will see a similar level of
acceptance and success in the Columbus market.
We also enjoyed in 2012 a continuation of the strong balance
sheet growth we have experienced in recent years, as evidenced
by the fact that our total assets, as of year-end 2012, eclipsed the
$2 billion mark for the first time in our history. With the continued
strengthening of the economic environment, our level of
organic loan growth reached levels not seen since the economic
downturn. Total loans outstanding increased $84.4 million,
or 8%, during 2012, with approximately $33.5 million of this
growth generated from our expansion into the Columbus market.
This 2012 loan growth was spread over many categories with
commercial and industrial loans increasing by 14%, commercial
real estate loans by 8%, agricultural loans by 7%, and residential
mortgage loans by 3%. Further, our historic level of strong asset
quality improved even further in 2012, as our ratio of net charge-
offs to average loans outstanding and our ratio of non-performing
loans to total loans at year-end were at pre-recessionary levels.
Additionally, year-end total deposits increased $84.7 million,
or 5%, and this growth was also spread over numerous deposit
categories, with non-interest bearing demand deposits increasing
by 24%, savings deposits growing by 17%, and money market
deposits and interest-bearing demand deposits expanding by 6%.
Core deposits, which are widely recognized as the most stable
funding source for community banking organizations, continue
to represent a significant source of funding for German American
with approximately 87% of average total funding sources derived
from core deposits during 2012. A further indication of the
strengthing economic environment and our expanding client
base was evidenced by the growth of our wealth management fee
revenue during 2012. During the year, our trust and investment
product fees increased by 24%, while our insurance revenue,
exclusive of contigency revenue, increased by 10%, primarily
driven by a 17% increase in commercial insurance revenues.
From a shareholder perspective, in recognition of the strength
of German American’s earnings and capital position, your
Board of Directors earlier this year announced an increase in
the level of your quarterly cash dividend to $0.15 per share,
representing approximately a 7% increase of the quarterly cash
dividend paid to shareholders. Additionally, we also announced
the redemption of all $19.25 million of the outstanding 8%
Redeemable Subordinated Debentures as of April 1, 2013. These
Debentures, which constituted supplemental regulatory capital
for the Company, were issued in April 2009 as a precautionary
measure in the face of the looming economic crisis. Given
the Company’s strong financial performance throughout the
economic downturn and the stabilization and strengthening of the
current economic environment, the Board of Directors determined
this supplemental regulatory capital was no longer needed, and
therefore, elected to invoke the early redemption feature of the
debenture issue.
Confident. Capable. Committed. This intersection of our
exceptional financial performance and strength, our outstanding
team of locally-focused, savvy financial professionals, and our
proven plan of disciplined market expansion and organic growth,
allows us to look to the future of German American. We are
confident in our ability to build upon our past success with the
knowledge that we are uniquely capable of assisting our clients
in achieving their financial goals, while honoring our pledge to
always be committed to our clients, the communities we serve,
and to you, our shareholders.
Sincerely,
Mark A. Schroeder
Chairman & CEO
1
Confident
The strength and stability
of our company enables us to
serve our customers with
CONFIDENCE.
Our Executive
Management Team
Clay W. Ewing
President, Commercial
and Retail Banking
Bradley M. Rust
Executive Vice President,
and Chief Financial Officer
Mark A. Schroeder
Chairman and
Chief Executive Officer
2
Tom Acton
Randy Braun
Founded in 1910 in the heart of a southern Indiana community rich in German
heritage, German American has grown to serve customers throughout
southern Indiana with premier financial products and services. Our
Laura Bogard
reputation for excellence is recognized within the financial services industry,
and we work diligently to continue to meet high standards in banking,
insurance, investments and trust.
The success of our customers is what drives us. Helping families buy and
build homes, send children to college, retire comfortably, transfer wealth
from one generation to another, and protect their hard-earned assets are the
reasons we exist.
Confidence is rooted in respect. To earn the respect of our customers and
stakeholders, we manage our company the same way we recommend our
customers manage their financial picture – with discipline and an eye on
opportunities. Every opportunity provides us with potential to expand
our customer base and work deeper into our vision of building a regional
2008, 2009, 2010,
presence offering a full array of financial products and services. We will
2011, and 2012 have
always be mindful of our community banking roots and the importance of
enhancing and growing the relationships we have with our shareholders,
been the best 5 years in our
customers, employees and communities.
company’s history.
3
Capable
Our financial professionals are
CAPABLE of serving the most
sophisticated clients with strong
financial solutions.
Our financial professionals know the pulse of the communities and businesses in southern
Indiana. They respect the hard working individuals in our region and consider it an honor to
help the financial future of families, businesses, non-profits and municipalities. We believe in
investing in our people through training, higher education opportunities, health and wellness
benefits and opportunities to engage in the communities we serve.
Technology continues to create new tools and resources for our customers to do business with
us. We are investing in new technology that will give our customers enhanced capabilities and
services, including a robust business online banking system, mobile banking, and enhanced
personal online banking.
Mike Hayes
German American is recognized as one of the strongest and most financially sound financial
institutions and has been listed on the KBW Honor Roll in 2010 and 2011 and named as a
Sandler O’Neill Small Bank All Star in 2012. With our significant resources including strong
earnings, significant capital, and considerable
talent, we are well-positioned for growth.
We are confident and capable in serving the
financial needs of southern Indiana.
4
BANKING
German American has served the banking needs of southern Indiana
for 103 years. We have helped our customers weather depressions
and recessions and thrive in strong economic times. Our banking
professionals are proficient in offering our customers products and
services that fit the unique needs of individuals and businesses. Our
products and services include checking and savings accounts, check
cards, home loans, home equity loans, consumer loans, commercial
loans, personal and business online banking, treasury management
services, merchant services, credit cards, and health saving accounts.
Our customers enjoy the convenience of our 35 banking offices
and 37 ATMs located throughout southern Indiana and our banking
professionals stay true to our community banking roots by being highly
engaged in the communities we serve.
INSURANCE
Our insurance professionals realize that insuring you and your assets
is much more than merely replacing material items. It’s peace of mind
knowing that all of your hard work and dreams can continue even
in unfortunate circumstances. We represent a variety of excellent
insurance carriers, which helps our personal and commercial agents find
the best coverage for each particular client at the most affordable price.
Our insurance professionals are dedicated to our philosophy of careful
analysis, cost-effective protection, thorough risk management, and
personal service.
INVESTMENTS and TRUST
We believe that creating a sound wealth management strategy for
our clients is a process that takes a very comprehensive approach to
understanding their goals and objectives. Personal and business clients
appreciate our clear vision to help them develop effective financial
plans to achieve retiring comfortably, sending children to college,
transfering wealth from one generation to the next, and making sound
financial decisions.
5
Bev Herron
Jay Baker
Alvin Basham
Committed
DAVIESS
COUNTY
Odon/Cannelburg
Vincennes
Washington
KNOX COUNTY
Loogootee
MARTIN
COUNTY
Bloomington
MONROE
COUNTY
Bedford
LAWRENCE
COUNTY
Petersburg
Ireland
Princeton
GIBSON COUNTY
Oakland
City
VANDERBURGH
VANDERBURGH
COUNTY
COUNTY
Winslow
PIKE
COUNTY
WARRICK
COUNTY
Evansville
Newburgh
Rockport
Dubois
Jasper
DUBOIS
COUNTY
Huntingburg
Holland
Ferdinand
SPENCER
COUNTY
PERRY
COUNTY
Tell City
BARTHOLOMEW
COUNTY
Columbus
Banking
Investments
Insurance
Bedford
Ferdinand
Newburgh
Tell City
1502 I Street
2606 16th Street
1410 L Street
Bloomington
2614 E. 3rd Street
504 N. College Avenue
1020 Main Street
3933 Venetian Drive
Holland
Oakland City
405 N. Meridian
1100 W. Morton Street
Huntingburg
309 E. 13th Street
Odon/Cannelburg
7721 N. CR 900 E.
Columbus
Ireland
445 5th Street, Suite B
5138 W. State Road 56
Dubois
4541 N. 4th Street
Evansville
4424 Vogel Road
3150 Lynch Road
530 N. St. Joseph Avenue
515 Dixie Lane
961 S. Hebron Avenue
6
Jasper
711 Main Street
209 3rd Avenue
Highway 231 & 2nd Street
3585 Newton Street
Loogootee
100 Charles Street
Petersburg
305 E. Main Street
518 E. Main Street
Princeton
231 W. Broadway
Rockport
704 N. 5th Street
645 Main Street
1508 12th Street
208 E. Highway 66
Vincennes
101 N. 3rd Street
2814 N. 6th Street
1700 Willow Street
Washington
201 E. Main Street
205 E. Main Street
Cherry Tree Plaza
Winslow
300 Main Street
We have every confidence in the strength
of our company, the capabilities of our team
and our COMMITMENT to southern Indiana.
Engrained in our culture is a commitment to giving back to the communities we serve. You’ll
find our financial professionals leading financial literacy classes in community schools and
Rodney Russell
volunteering to enhance the arts, education, economic development and overall community
enrichment in our footprint. We have a long history of community involvement, from both a
contributory standpoint and a dedication to hands-on volunteer efforts.
We are committed to listening to our customers and accept challenges as
growth opportunities. We empower our team to discover
process improvements that help us work more efficiently.
As we expand in our current footprint and grow into
new markets, we are always mindful of our community
banking roots and our commitment that we are people
helping people throughout southern Indiana grow and
thrive.
7
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, 2012 and 2011, 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, 2012, appearing in the Annual Report on Form 10-K,
not appearing herein. In our report dated March 18, 2013, 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 consolidated balance sheets and
consolidated statements of income presented on pages 10 and 11 is fairly stated, in all
material respects, in relation to the consolidated financial statements from which they
have been derived.
Crowe Horwath LLP
Indianapolis, Indiana
March 18, 2013
8
five year
Summary
Dollars in thousands, except per share data
9
The following selected data should be read in conjunction with the Company’s Annual Report on Form 10-K for 2012.
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
2012
2011
2010
2009
2008
$
77,160
$
80,161
$
64,193
$
63,736
$
67,845
10,912
66,248
2,412
63,836
21,811
50,923
34,724
10,669
16,180
63,981
6,800
57,181
21,576
50,782
27,975
7,726
15,522
48,671
5,225
43,446
16,943
41,361
19,028
5,623
19,223
44,513
3,750
40,763
15,859
40,391
16,231
4,013
26,908
40,937
3,990
36,947
18,210
36,716
18,441
5,638
$
24,055
$
20,249
$
13,405
$
12,218
$
12,803
$ 2,006,300
$ 1,873,767
$ 1,375,888
$ 1,242,965
$ 1,190,828
Total Loans, Net of Unearned Income
1,204,866
1,120,993
917,236
1,640,931
1,556,198
1,087,286
89,472
185,026
90,974
167,610
81,016
121,534
877,822
969,643
113,320
113,549
890,436
941,750
105,608
105,174
Total Loans, Net of Unearned Income
1,147,891
1,114,181
906,127
$ 1,934,123
$ 1,823,703
$ 1,330,540
$ 1,230,596
$ 1,174,583
1,618,712
1,521,204
1,046,295
177,207
159,765
119,867
891,322
963,928
109,887
880,630
922,137
99,711
$
$
$
1.91
0.56
14.64
3,105
439
1.61
0.56
13.31
3,221
417
1.21
0.56
10.94
3,194
359
$
1.10
$
0.56
10.25
3,364
332
1.16
0.56
9.54
3,684
348
Weighted Average Number of Shares(1)
12,622,049
12,581,646
11,098,836
11,065,917
11,029,519
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
(1) Share and Per Share Data excludes the dilutive effect of stock options.
1.24 %
13.57 %
9.22 %
29.38 %
0.19 %
1.29 %
3.74 %
1.11 %
12.67 %
8.95 %
34.80 %
0.43 %
1.37 %
3.84 %
1.01 %
11.18 %
8.83 %
46.36 %
0.32 %
1.45 %
3.98 %
0.99 %
11.12 %
9.14 %
50.71 %
0.25 %
1.25 %
3.95 %
1.09 %
12.84 %
8.83 %
48.25 %
0.29 %
1.07 %
3.82 %
Total Deposits
Total Long-term Debt
Total Shareholders’ Equity
Average Balances:
Total Assets
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
10
consolidated
Balance Sheets
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
Interest-bearing Time Deposits with Banks
Securities Available-for-Sale, at Fair Value
Securities Held-to-Maturity, at Cost (Fair value of $351 and $697
on December 31, 2012 and 2011, respectively)
Loans Held-for-Sale, at Fair Value
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
TOTAL ASSETS
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, no par value; 500,000 shares authorized, no shares issued
Common Stock, no par value, $1 stated value; 30,000,000 shares authorized
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
End of period shares issued and outstanding
See Annual Report on Form 10-K.
December 31,
2012
2011
$
41,624
7,463
49,087
2,707
587,602
$
28,366
32,737
61,103
5,986
516,844
346
690
16,641
21,485
1,207,901
1,123,549
(3,035 )
(15,520 )
(2,556 )
(15,312 )
1,189,346
1,105,681
8,340
36,554
1,645
18,865
2,692
30,223
62,252
8,340
37,706
2,343
18,865
4,346
29,263
61,115
$
2,006,300
$ 1,873,767
$
349,174
962,574
329,183
$
282,335
899,584
374,279
1,640,931
1,556,198
161,006
19,337
130,993
18,966
1,821,274
1,706,157
-
12,637
95,617
66,421
10,351
-
12,594
95,039
49,434
10,543
185,026
167,610
$
2,006,300
$ 1,873,767
12,636,656
12,594,258
consolidated
Statements of Income
Dollars in thousands, except per share data
11
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
Company Owned Life Insurance
Interchange Fee Income
Other Operating Income
Net Gains on Sales of Loans
Net Gain on Securities
TOTAL NON-INTEREST INCOME
Non-Interest Expense
Salaries and Employee Benefits
Occupancy Expense
Furniture and Equipment Expense
FDIC Premiums
Data Processing Fees
Professional Fees
Advertising and Promotion
Intangible Amortization
Other Operating Expenses
TOTAL NON-INTEREST EXPENSE
Income before Income Taxes
Income Tax Expense
Net Income
Basic Earnings per Share
Diluted Earnings per Share
See Annual Report on Form 10-K.
2012
Years Ended December 31,
2011
2010
$
61,691
91
12,946
2,432
77,160
6,958
3,954
10,912
66,248
2,412
63,836
2,657
4,076
5,524
974
1,724
1,955
3,234
1,667
$
64,445
216
13,677
1,823
80,161
11,986
4,194
16,180
63,981
6,800
57,181
2,145
4,154
5,819
1,100
1,501
1,452
2,381
3,024
53,266
76
9,812
1,039
64,193
10,561
4,961
15,522
48,671
5,225
43,446
1,582
4,065
5,347
806
1,243
1,740
2,160
-
21,811
21,576
16,943
29,086
4,277
2,787
1,116
1,071
2,247
1,714
1,655
6,970
50,923
34,724
10,669
24,055
1.91
1.90
$
$
$
27,992
4,264
2,934
1,473
2,092
2,056
1,525
1,956
6,490
50,782
27,975
7,726
20,249
1.61
1.61
$
$
$
22,070
3,492
2,591
1,455
1,411
2,285
1,255
898
5,904
41,361
19,028
5,623
13,405
1.21
1.21
$
$
$
board of
Directors
Douglas A. Bawel
Thomas W. Seger
M. Darren Root
Mark A. Schroeder
J. David Lett
Chris A. Ramsey
U. Butch Klem
Christina M. Ernst
Marc D. Fine
Michael J. Voyles
Richard E. Forbes
Gene C. Mehne
12
CAUTIONARY NOTE REGARDING
Forward-Looking Statements
This Summary Annual Report, including our CEO’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
our expectations concerning our opportunities for
future growth and expansion, financial performance,
and other matters. 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 German American 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. You may review that
document (and our other SEC filings) via the internet
through the Investor Relations section of our website,
www.germanamerican.com. This report speaks only
as of March 18, 2013, and we do not promise anyone
that it will be updated for changes or events after
that date.
13
Back to Front, Left to Right: Keith Leinenbach, Sarah Chinn, Chris LeBeau, Chad Deckard, Gene Mattingly, Joe Dedman,
Doug Lee, Vicki Schuler, Dave Mitchell, David Pleiss, Joel Smith, Gene Thewes, Dawn Andrews, David Henson, Sherri Alley,
Zach Sibrel, Neil Dauby, Jane Thoma, Jeremy Foster, John Lamb