German American Bancorp, Inc.
Annual Report 2015

Plain-text annual report

2015 Summary Annual Report T h e N u m b e r s Net Income & Diluted Earnings Per Share (dollars in thousands, except per share amounts) $30,064 $28,344 $2.27 $2.14 $24,055 $25,413 $1.98 $1.90 $20,249 $1.61 Total Shareholders’ Equity (dollars in millions) Return on Equity $252 $229 $200 $185 $168 12.67% 13.57% 13.40% 13.21% 12.47% $300 $250 $200 $150 $100 $50 $0 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 Total Loans, Net of Unearned Income (dollars in millions) Commercial and Agriculture Loans as % of Total Loans $1,564 $1,448 $1,382 $1,205 $1,121 83% 81% 81% 81% 82% Total Assets (dollars in millions) Return on Assets $3,000 $2,500 $2,000 $1,874 $2,006 $2,164 $2,237 $2,374 1.24% 1.25% 1.31% 1.33% 1.11% $1,500 $1,000 $500 $0 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Dear Shareholders: I am extremely pleased to report to you, our shareholders, that your Company, in 2015, continued the trend of exceptional financial performance generated over the course of the past decade. Our 2015 reported net income of $30.1 million, or $2.27 per share, was an increase of approximately 6% over the prior year’s earnings of $28.3 million, or $2.14 per share. This level of performance in 2015 represented the 6th consecutive year in which your Company has posted record annual earnings and the 11th consecutive year of double-digit annual return on shareholders’ equity. Most importantly, from your perspective as a shareholder, this consistent pattern of strong earnings performance, which has grown at a compound annual growth rate of in excess of 13%, on a per share basis, over the course of the past 5 year period, has resulted in a similar level of superior performance in total return for our shareholders. On a total return basis, our share value has more than doubled over this same 5 year period and has significantly outperformed the index of publicly-traded Indiana banking companies, as well as the Russell Microcap Index and the Russell 2000 Index, both of which include German American in their broader market-based indices. During 2015, we remained focused, as always, on the realization that the ultimate driver of our performance lies in our clients’ continued acceptance of our array of offerings of financial products and services. We also fully recognize that our clients’ satisfaction with and loyalty to German American is dependent upon our ability to deliver those financial products and services in a manner that provides exceptional value to our clients, in terms of not only the product benefits, but also the counsel and advice of our team of financial professionals as they make good on our pledge of exceptional customer service. We believe our ability to successfully do so over the course of the past decade, as well as our ability to do so going forward, is directly linked to our business model and philosophy of developing and recruiting teams of the very best local financial professionals, who are fully committed to and exceedingly knowledgeable about their clients and their local communities. the past decade has proven this approach to doing business is valued by our clients and is a model that our competitors have not been able to replicate. I encourage you to take the time to review this year’s Summary Annual Report to learn more about German American’s “secret to success.” Over the past decade, we have remained committed to our Mission, Vision, and Core Values while pursuing our strategy of disciplined geographic growth into adjacent southern Indiana market areas. This disciplined growth strategy continued in 2015 with the October announcement of the pending merger transaction with River Valley Bancorp of Madison, Indiana. This transaction, which was completed in March 2016, positions your Company to enhance our previously stated objective of expanding our southern Indiana footprint into the vibrant southeast Indiana market area. River Valley has built a solid community banking franchise in three distinct market areas, which we believe will represent an excellent opportunity for growth as we take our successful approach to doing business to each of these markets. River Valley is headquartered in the Madison, Indiana market, which is very similar to our other heritage markets in southern Indiana. Much like German American’s experience within our heritage markets, River Valley has operated in Madison for over a century and is a leader in the market from both a business and civic perspective. Additionally, River Valley has a strong presence with five banking offices in the vibrant and rapidly growing market area of the Indiana side of the Louisville, Kentucky MSA, a market which German American entered in early 2015 with a commercial loan production office. They also have banking offices in the Seymour and North Vernon, Indiana markets, which match-up very well with our existing growing franchise in the adjacent Columbus, Indiana market. This opportunity to enhance our existing presence in two of German American’s newest markets, as well as allowing for a new market presence in Madison, Indiana, makes this merger a perfect fit for our Company. Mark A. Schroeder Chairman and CEO It is for this reason that in this year’s Summary Annual Report, we have chosen to highlight the Mission, Vision, and Core Values by which your Company is governed and to highlight several of those teams of talented local financial professionals, who make good, day-in and day-out, on our pledge of delivering exceptional value-added financial products and services to their clients throughout southern Indiana. While our business model and philosophy is not complicated, it does require an unwavering commitment to all of our clients and each of our local communities to successfully execute. Obviously, our success over the course of In closing, I would like to welcome the River Valley customers, employees, and shareholders to German American, and to thank all of you, as German American shareholders, for your continued investment and support. Sincerely, Mark A. Schroeder Chairman & CEO A L e t t e r t o O u r S h a r e h o l d e r s 1 A company rich in history and founded in 1910, German American is dedicated to helping individuals, families and businesses achieve (cid:72)(cid:83)(cid:70)(cid:66)(cid:85)(cid:70)(cid:83)(cid:1)(cid:81)(cid:83)(cid:80)(cid:84)(cid:81)(cid:70)(cid:83)(cid:74)(cid:85)(cid:90)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:82)(cid:86)(cid:66)(cid:77)(cid:74)(cid:85)(cid:90)(cid:1)(cid:80)(cid:71)(cid:1)(cid:77)(cid:74)(cid:71)(cid:70)(cid:15)(cid:1)(cid:53)(cid:80)(cid:72)(cid:70)(cid:85)(cid:73)(cid:70)(cid:83)(cid:13)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:395)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1) team builds lasting client relationships based on integrity, responsive service, innovation, and shared values. We support the communities we serve because we believe that when a community thrives, its people prosper. We are deeply rooted and engaged with the communities (cid:56)(cid:70)(cid:1)(cid:88)(cid:74)(cid:77)(cid:77)(cid:1)(cid:67)(cid:86)(cid:74)(cid:77)(cid:69)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:72)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:81)(cid:83)(cid:70)(cid:84)(cid:70)(cid:79)(cid:68)(cid:70)(cid:1)(cid:80)(cid:394)(cid:70)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:1)(cid:71)(cid:86)(cid:77)(cid:77)(cid:1)(cid:66)(cid:83)(cid:83)(cid:66)(cid:90)(cid:1)(cid:80)(cid:71)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:72)(cid:83)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1) we serve. The German American (cid:395)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:81)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:85)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:84)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:84)(cid:15)(cid:1)(cid:56)(cid:70)(cid:1)(cid:88)(cid:74)(cid:77)(cid:77)(cid:1)(cid:66)(cid:77)(cid:88)(cid:66)(cid:90)(cid:84)(cid:1)(cid:67)(cid:70)(cid:1)(cid:78)(cid:74)(cid:79)(cid:69)(cid:71)(cid:86)(cid:77)(cid:1)(cid:80)(cid:71)(cid:1) professionals build strong our community banking roots and the importance of enhancing relationships based on a winning and growing the relationships we have with our shareholders, combination of discipline and customers, employees and communities. conservative management with a keen eye for arising opportunities. M i s s i o n V i s i o n 2 6th consecutive year German American has achieved record earnings million per share increase of approximately 6% in reported net income in 2015 11th consecutive year of double digit return on equity December 2015 average unemployment rate of the 19 counties German American serves in the southern Indiana area *Indiana state average was 4.6%. **United States average was 5.0%. *number of German American team members inclusive of River Valley *Includes full and part time employees Rates listed are non-seasonally adjusted. *Source: DWD, Local Area Unemployment Statistics **Source: Bureau of Labor Statistics F a s t F a c t s 3 A strong internal culture prepares our team to provide responsive conservative values based on a keen eye for opportunities, which service with integrity and confidence. Our financial professionals anchors our success. We promote and encourage this management commit to being accessible and accountable to one another as we style to our clients, whether they are running a business or managing focus on growing the client relationship. Our team meetings have their individual or family finances. From helping clients protect assets, representation from all divisions and areas of expertise within our plan and grow a financial portfolio, company, which helps us gain a deeper understanding of our clients’ and expand businesses, to needs. Structuring financial strategies based on teamwork, smart managing everyday financial solutions and a desire to achieve has proven successful for our transactions, the German clients, our company, and our shareholders. American team rises above the competition. At German American, it’s not about selling a product or service; it’s about helping people succeed. Our company is managed with John Lamb, Regional President Alvin Basham, Lindsay Botsch, Tracy Helmer, Diana Wilderman, Rob Bingham and Dave Mitchell 4 Everett Southern, Julie Donham, Chris Flynn and Jerry Towle Mason Seay Jim McDonald Ag Services A strong commitment to local, responsive service puts our Agricultural financial experts in the driver’s seat of German American Ag Services trucks. Southern Indiana is a leader in crop and animal farming. German American has been serving farmers since our company was organized in 1910. We listen. We research. We study. Then, we serve the Ag community with financial products and services to help achieve present and long-term strategies. Many financial services companies state they are community focused. At German American, we live it. Our employees and our clients live, work, raise families, coach youth teams, teach financial literacy, volunteer for nonprofits, celebrate community festivals, and help each other in time of need. Quite simply, besides being the right thing to do, being a strong community partner is a good business decision for us. Creating healthy communities that thrive and attract talent and employment is vital to our success and the success of our clients. Mark Franklin, Regional President 5 W e A r e W h e r e Y o u A r e 6 local...responsive... committed “We are in a ‘people’ business, and we affect the lives of thousands upon thousands of customers and the many communities we serve. Staffing our (cid:67)(cid:66)(cid:79)(cid:76)(cid:84)(cid:1) (cid:66)(cid:79)(cid:69)(cid:1) (cid:395)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1) Mark Schroeder Chairman and CEO services companies with local people who are helping (cid:77)(cid:80)(cid:68)(cid:66)(cid:77)(cid:1)(cid:81)(cid:70)(cid:80)(cid:81)(cid:77)(cid:70)(cid:1)(cid:84)(cid:86)(cid:68)(cid:68)(cid:70)(cid:70)(cid:69)(cid:1)(cid:395)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:77)(cid:90)(cid:1) in each of our markets is a key ingredient of our success.” Vinc KNOX CO Princeton GIBSON COUNTY Oa C VANDERBURGH VANDERBURGH COUNTY COUNTY Evansville N Bloomington MONROE COUNTY Bedford LAWRENCE COUNTY BARTHOLOMEW COUNTY Columbus JACKSON COUNTY Seymour Osgood RIPLEY COUNTY JENNINGS COUNTY North Vernon Dupont JEFFERSON COUNTY Madison Hanover Carrollton CARROLL COUNTY, KENTUCKY DAVIESS COUNTY Odon/Cannelburg Washington Loogootee MARTIN COUNTY cennes OUNTY Petersburg Ireland Dubois Jasper DUBOIS COUNTY Huntingburg Holland Ferdinand SPENCER COUNTY PERRY COUNTY Tell City akland City Winslow PIKE COUNTY WARRICK COUNTY Newburgh Rockport CLARK COUNTY Charlestown Sellersburg Sellersburg Jeffersonville Jeffersonville New Albany New Albany FLOYD COUNTY Floyds Knobs Banking Investments Insurance Ag Services 7 P u b l i c A c c o u n t i n g F i r m R e p o r t o f I n d e p e n d e n t R e g i s t e r e d 8 Board of Directors and Shareholders German American Bancorp, Inc. Jasper, Indiana 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, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015, appearing in the Annual Report on Form 10-K, not appearing herein. In our report dated March 9, 2016, 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 9, 2016 The following selected data should be read in conjunction with the Company’s Annual Report on Form 10-K for 2015. 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: Net Income(1) 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 (Recoveries) to Average Loans Allowance for Loan Losses to Loans Net Interest Margin 2015 2014 2013 2012 2011 $ $ 81,620 6,068 75,552 - 75,552 27,444 61,326 41,670 11,606 30,064 $ $ 80,386 6,047 74,339 150 74,189 23,937 57,713 40,413 12,069 28,344 $ $ 75,672 7,155 68,517 350 68,167 23,615 54,905 36,877 11,464 25,413 $ $ 77,160 10,912 66,248 2,412 63,836 21,811 50,923 34,724 10,669 24,055 $ $ 80,161 16,180 63,981 6,800 57,181 21,576 50,782 27,975 7,726 20,249 $ 2,373,701 1,564,347 1,826,376 95,606 252,348 $ 2,237,099 1,447,982 1,779,761 64,591 228,824 $ 2,163,827 1,382,382 1,812,156 87,237 200,097 $ 2,006,300 1,204,866 1,640,931 89,472 185,026 $ 1,873,767 1,120,993 1,556,198 90,974 167,610 $ 2,267,555 1,483,752 1,825,913 241,017 $ 2,170,761 1,406,000 1,783,348 214,496 $ 2,037,236 1,272,055 1,695,796 189,689 $ 1,934,123 1,147,891 1,618,712 177,207 $ 1,823,703 1,114,181 1,521,204 159,765 $ $ 2.27 0.68 19.00 2.14 0.64 17.31 $ $ 1.98 0.60 15.19 $ 1.90 0.56 14.64 1.61 0.56 13.31 3,343 479 13,258,916 3,398 473 13,223,178 3,444 478 12,807,678 3,105 439 12,637,743 3,221 417 12,587,748 1.33 % 12.47 % 10.63 % 29.97 % 0.03 % 0.92 % 3.70 % 1.31 % 13.21 % 10.23 % 29.81 % (0.01) % 1.03 % 3.76 % 1.25 % 13.40 % 9.25 % 30.18 % 0.10 % 1.05 % 3.67 % 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 % i F v e Y e a r S u m m a r y D o l l a r s i n t h o u s a n d s , e x c e p t p e r s h a r e d a t a (1) Share and Per Share Data includes the dilutive effect of stock options. 9 D o l l a r s i n t h o u s a n d s , e x c e p t p e r s h a r e d a t a C o n s o l i d a t e d B a l a n c e S h e e t s 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 $95 and $186 on December 31, 2015 and 2014, 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 $ December 31, 2015 2014 36,062 15,947 52,009 - 637,840 95 10,762 1,568,075 (3,728 ) (14,438 ) 1,549,909 8,571 37,817 169 20,536 1,283 32,732 21,978 $ 33,481 8,965 42,446 100 630,995 184 6,311 1,451,990 (4,008 ) (14,929 ) 1,433,053 7,040 39,930 356 20,536 2,074 32,043 22,031 TOTAL ASSETS $ 2,373,701 $ 2,237,099 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 $ 465,357 1,054,983 306,036 428,016 $ 1,018,320 333,425 1,826,376 1,779,761 273,323 21,654 206,064 22,450 2,121,353 2,008,275 - 13,279 110,145 125,112 3,812 252,348 - 13,216 108,660 104,058 2,890 228,824 $ 2,373,701 $ 2,237,099 13,278,824 13,215,800 10 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 Company Owned Life Insurance Interchange Fee Income Other Operating Income Net Gains on Sales of Loans Net Gains 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 2015 Years Ended December 31, 2014 2013 $ 66,740 13 9,017 5,850 81,620 3,976 2,092 6,068 75,552 - 75,552 3,957 4,826 7,489 846 2,127 4,515 2,959 725 $ 65,597 12 10,409 4,368 80,386 4,128 1,919 6,047 74,339 150 74,189 3,675 4,829 7,255 826 1,961 2,018 1,892 1,481 61,632 30 11,091 2,919 75,672 4,697 2,458 7,155 68,517 350 68,167 3,358 4,144 6,217 965 1,854 2,003 2,645 2,429 D o l l a r s i n t h o u s a n d s , e x c e p t p e r s h a r e d a t a C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e 27,444 23,937 23,615 35,042 4,939 1,873 1,144 3,541 2,661 3,669 790 7,667 61,326 41,670 11,606 30,064 2.27 2.27 $ $ $ 32,710 5,094 1,953 1,113 3,675 2,294 1,977 1,254 7,643 57,713 40,413 12,069 28,344 2.15 2.14 $ $ $ 31,482 4,545 1,898 1,050 3,133 2,577 1,863 1,416 6,941 54,905 36,877 11,464 25,413 1.99 1.98 $ $ $ See Annual Report on Form 10-K. 11 B o a r d o f D i r e c t o r s 12 Douglas A. Bawel Lonnie D. Collins Christina M. Ernst Marc D. Fine U. Butch Klem J. David Lett Chris A. Ramsey M. Darren Root Mark A. Schroeder Thomas W. Seger Raymond W. Snowden Michael J. Voyles 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 for future growth and other matters. Readers are cautioned that actual results and performance may differ materially from 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 9, 2016, and we do not promise anyone that it will be updated for changes or events after that date. C a u t i o n a r y N o t e R e g a r d n g i i F o r w a r d - L o o k n g S t a t e m e n t s 13 A co m pany rich in history and founded in 1910, 

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