BUILDING
BEST
on
the
2018 Summary Annual Report
BUILDING ON THE BEST
Strength in Numbers
Net Income & Earnings Per Share
(dollars in thousands, except per share amounts)
Earnings Per Share
$500,00
$45,000
$40,000
$35,000
$30,000
$28,344
$30,064
$46,529
$40,676
$35,184
$1.43
(1)
$1.51
(1)
$1.57
(1)
$1.77
$1.99
Total Shareholders’ Equity
(dollars in millions)
Return on Average Equity
$459
1 8 %
C A G R
5 Y e a r
$365
$330
$252
$229
13.21%
12.47%
10.94%
11.59%
12.07%
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
(1)Earnings Per Share adjusted for 3-for-2 stock split completed in 2017.
Total Loans, Net of Unearned Income
(dollars in millions)
Commercial and Agriculture Loans as % of Total Loans
$2,728
1 5 %
5 Y e a r C A G R
$1,448
$1,564
$2,142
$1,990
81%
82%
81%
81%
78%
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Total Assets
(dollars in millions)
Return on Average Assets
$3,929
1 3 %
5 Y e a r C A G R
$2,956
$3,144
$2,237
$2,374
1.31%
1.33%
1.24%
1.35%
1.38%
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$3,000
$2,750
$2,500
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500
$250
$0
9th
consecutive year
German American
has achieved
record earnings
14th
(cid:70)(cid:82)(cid:81)(cid:86)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:564)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)
year of double-digit
return on equity
15%
increase in
quarterly cash
dividend
Letter from
Mark A. Schroeder
Chairman and CEO
Dear Shareholders:
In keeping with the theme of this year’s
Summary Annual Report, Building on the Best,
2018 was a year of continued growth and expansion for
German American. In May, we completed the acquisition
of a five-branch office network in the Columbus, Indiana
market area, consisting of approximately $116 million
in loans and a $176 million in deposits. The opportunity
to combine this branch network with our existing
branch network in the greater Columbus area greatly
strengthened our market position and enhanced our
ability to drive future organic growth in this important
segment of our total market area.
continued...
1
continued...
Following upon the completion of this branch acquisition,
we also moved forward with our initial expansion
into the Commonwealth of Kentucky. In October, we
finalized the merger transaction with First Security, Inc.,
based in Owensboro, Kentucky, which operated eight
retail banking offices in Owensboro, Bowling Green,
Franklin and Lexington, Kentucky, and three offices in
Evansville and Newburgh, Indiana. As of the closing
of the transaction, First Security held total assets of
approximately $553 million, total loans of approximately
$390 million, and total deposits of approximately $424
million. Through this acquisition, German American’s
unique brand of community banking is now offered in
three of the largest, most economically vibrant markets
in the Commonwealth. We anticipate significant future
growth opportunities within the Commonwealth of
Kentucky, both through acquisitions and organic
growth, in the coming years.
We were pleased to report, for the ninth consecutive
year, your Company achieved record earnings. On an
operating basis, in 2018, we achieved $46.5 million,
or $1.99 per share, representing an increase of 12.4%,
on a per share basis, above the level of 2017 record
earnings. This level of annual earnings performance
resulted in a double-digit return on shareholders’ equity
in 2018, marking the 14th consecutive fiscal year in
which the Company has delivered double-digit returns on
shareholders’ equity. Inclusive of the two aforementioned
acquisitions and approximately 5% organic growth
within the Company’s existing Indiana operations,
German American’s 2018 year-end total assets grew to
$3.9 billion, total loans increased to $2.7 billion, and total
deposits reached $3.1 billion, representing approximately
25% overall 2018 combined acquisition and organic
growth.
2
Our theme of this year’s Summary Annual Report,
Building on the Best, signifies that while German
American is certainly interested in continued growth and
expansion, we will do so with a focus on delivering the
very best in banking, insurance, investment and wealth
advisory products and services for each customer and
in each community we serve. While appreciative of the
recognition German American has received as one of
the best community banking organizations in the nation,
we are focused on what we need to do going forward to
continue to deliver the very best, certainly in terms of
exceptional customer service and a commitment to the
communities we serve, but also by investing in the latest
technology-based delivery channels that enhance our
ability to serve clients when, where, and how they prefer,
always with a personalized, custom approach.
This combination of the traditional customer service
excellence from local financial professionals with a
focus on their local communities and leading edge
technologically-driven delivery channels will ensure
our ability to maintain our status as one of the nation’s
leading community banking organizations in the coming
years. In doing so, we will also continue Building on the
Best - the best clients, the best communities, the best
local financial professionals – to drive value for each of
these stakeholders and for you, our shareholders.
Sincerely,
Mark A. Schroeder
Chairman & CEO
3
BUILDING ON THE BEST
The Communities We Serve
As a community-minded financial services company, we exist to serve the financial needs of businesses,
individuals and families, while engaging and contributing for the greater good of all. Our local financial
professionals establish long term relationships within the communities we serve to actively help build the
best places to live, work and raise families. Our financial strength enables us to make the greatest impact
and demonstrates our commitment to corporate responsibility. We support education, social welfare and
human services efforts, the arts, economic development and community organizations. Additionally, our
employees commit to volunteering and teaching financial education in the local communities we serve.
INDIANA
DECATUR
MONROE
BARTHOLOMEW
Greensburg
Bloomington
LAWRENCE
Bedford
Columbus
Osgood
JACKSON
North Vernon
RIPLEY
JENNINGS
Seymour
Dupont
JEFFERSON
Madison
Hanover
CLARK
KNOX
DAVIESS MARTIN
Odon/Cannelburg
Loogootee
Vincennes
Washington
Petersburg Otwell
DUBOIS
Dubois
Sellersburg
FLOYD
Floyds
Knobs
Jeffersonville
New
Albany
FAYETTE
Lexington
Banking location
ATM
New offices coming
in 2019
Princeton
GIBSON
Fort Branch
Oakland
City
VANDERBURGH
PIKE
WARRICK
Evansville
Newburgh
Jasper
Huntingburg
Holland Ferdinand
SPENCER
PERRY
Tell City
Henderson
HENDERSON
Rockport
Owensboro
DAVIESS
KENTUCKY
WARREN
Bowling Green
SIMPSON
Franklin
4
BUILDING ON THE BEST
Our Brand Values
We are a community bank with community values.
In 1910, German American opened for business in
the heart of an Ohio River Valley community rich in
German-American heritage, Jasper, Indiana. We have
grown a lot since then and now serve culturally diverse
communities throughout the entire southern Indiana
area, as well as, Owensboro, Bowling Green, Franklin and
Lexington, Kentucky. Even as we have grown our brand
into serving new communities, we remain committed
to the traits rooted in our beginning including people
first, hard work, integrity and pride in any community’s
heritage. We believe these brand values set us apart in
1910 and continue to do so today.
Our Mission
Our Values
German American is dedicated to helping
individuals, families and businesses achieve
greater prosperity and quality of life.
Together, our financial team builds lasting
client relationships based on integrity,
responsive service, innovation, and shared
values. We support the communities we
serve and believe that when a community
thrives, its people prosper.
Integrity
Our reputation relies on integrity. We value honesty, open
communication, diverse perspectives, and high ethical principles.
People
People come first at German American. We invest in our
communities and support social and economic development.
We value respect and courtesy for every person and believe in
the power of positive attitudes.
Relationships
We develop relationships based on a strong foundation of
trust and mutual respect to help create loyal customers and a
loyal team. Our unified goal is serving individuals, families and
businesses to achieve financial success.
Performance
Performance is vital. German American employees must possess
the determination and drive to succeed. Our vast knowledge
base and expertise enables us to work efficiently while providing
customer service excellence to support strong performance.
5
BUILDING ON THE BEST
Our People
Our growth and success are the result of the hard work, expertise and
commitment of our people. They work tirelessly to deliver outstanding
results for our customers, our communities, our shareholders and
one another. We seek to attract, develop and retain local financial
professionals in every market we serve to fulfill our promise of local,
responsive decision making. We invest in our people with training and
educational opportunities, competitive employee benefit packages,
and tuition reimbursement programs. In 2018, we began a journey of
a continuous coaching for success culture, which we believe will have
a significant impact on the continued future success of our company.
Within our family-like team culture, celebrating birthdays, retirements,
anniversaries, and holidays are common occurrences which,
we believe, enhances the overall satisfaction of
employment with German American.
6
BUILDING ON THE BEST
Financial Services
From leading-edge banking, insurance, investment, and wealth advisory
technology that is continually enhanced to stay abreast of the latest
advancements, to local, responsive decision making by a talented team
of financial professionals, German American is the ideal choice for
financial services.
There is no finish line to building on the best. Today’s customers need
and want to do business differently, and German American is committed
to meeting that demand. With a laser focus on operational excellence,
superior customer service, and a keen eye on the future,
your German American team continues to
set higher standards in financial
services delivery.
7
Report of Independent Registered
Public Accounting Firm
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, 2018 and 2017, 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, 2018, appearing in the Annual
Report on Form 10-K, not appearing herein. In our report dated March 1, 2019, 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 LLP
Indianapolis, Indiana
March 1, 2019
8
Five Year Summary
The following selected data should be read in conjunction with the
Company’s Annual Report on Form 10-K for 2018.
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
2018
2017
2016
2015
2014
$ 133,749
$ 111,030
$ 103,365
$
81,620
$
80,386
19,139
114,610
2,070
112,540
37,070
93,553
56,057
9,528
11,121
99,909
1,750
98,159
31,854
77,803
52,210
11,534
8,461
94,904
1,200
93,704
32,013
76,587
49,130
13,946
6,068
75,552
-
75,552
27,444
61,326
41,670
11,606
6,047
74,339
150
74,189
23,937
57,713
40,413
12,069
$
46,529
$
40,676
$
35,184
$
30,064
$
28,344
$ 3,929,090
$ 3,144,360
$ 2,955,994
$ 2,373,701
$ 2,237,099
Total Loans, Net of Unearned Income
2,728,059
2,141,638
1,989,955
1,564,347
1,447,982
Total Deposits
Total Long-term Debt
Total Shareholders’ Equity
Average Balances:
Total Assets
3,072,632
2,484,052
2,349,551
1,826,376
1,779,761
126,635
458,640
141,717
364,571
120,560
330,267
95,606
252,348
64,591
228,824
$ 3,380,409
$ 3,002,695
$ 2,841,096
$ 2,267,555
$ 2,170,761
Total Loans, Net of Unearned Income
2,339,089
2,036,717
1,904,779
1,483,752
1,406,000
Total Deposits
Total Shareholders’ Equity
Per Share Data:
Net Income(1)
Cash Dividends
Book Value at Year-end
Tangible Book Value Per Share(2)
Other Data at Year-end:
Number of Shareholders
Number of Employees
2,716,712
2,395,146
2,249,892
1,825,913
1,783,348
385,476
350,913
321,520
241,018
214,496
$
$
$
1.99
0.60
18.37
13.81
3,705
747
1.77
0.52
15.90
13.45
3,459
621
1.57
0.48
14.42
11.94
3,513
605
$
1.51
$
0.45
12.67
11.57
3,343
479
1.43
0.43
11.54
10.40
3,398
473
Weighted Average Number of Shares(1)
23,381,616
22,924,726
22,391,115
19,888,374
19,834,766
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
1.38 %
12.07 %
11.67 %
30.25 %
0.08 %
0.58 %
3.75 %
1.35 %
11.59 %
11.59 %
29.11 %
0.04 %
0.73 %
3.76 %
1.24 %
10.94 %
11.17 %
30.21 %
0.04 %
0.74 %
3.75 %
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) Share and Per Share Data includes the dilutive effect of stock options.
9
(2) Tangible Book Value per Share is defined as Total Shareholders’ Equity less Goodwill
and Other Intangible Assets divided by End of Period Shares Outstanding.
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
Other Investments
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; 45,000,000 shares authorized
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
End of period shares issued and outstanding
See Annual Report on Form 10-K.
10
$
December 31,
2018
2017
64,549
32,001
96,550
250
812,611
353
$
47,266
23,093
70,359
-
740,641
353
4,263
6,719
2,731,741
2,145,019
(3,682 )
(15,823 )
(3,381 )
(15,694 )
2,712,236
2,125,944
13,048
80,627
286
103,681
9,964
59,896
35,325
13,048
54,246
54
54,058
2,102
46,385
30,451
$
3,929,090
$ 3,144,360
$
715,972
$
606,134
1,768,177
1,490,033
588,483
387,885
3,072,632
2,484,052
376,409
21,409
275,216
20,521
3,470,450
2,779,789
-
24,967
229,347
211,424
(7,098 )
-
22,934
165,288
178,969
(2,620 )
458,640
364,571
$
3,929,090
$ 3,144,360
24,967,458
22,934,403
Consolidated Statements of Income
Dollars in thousands, except per share data
2018
Years Ended December 31,
2017
2016
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
Dividends per Share
See Annual Report on Form 10-K.
$
$
$
$
11
112,084
308
12,398
8,959
133,749
13,625
5,514
19,139
114,610
2,070
112,540
6,680
7,044
8,330
1,243
7,278
2,785
3,004
706
$
91,745
134
$
10,898
8,253
111,030
7,094
4,027
11,121
99,909
1,750
98,159
5,272
6,178
7,979
1,341
4,567
2,641
3,280
596
86,202
74
9,638
7,451
103,365
5,187
3,274
8,461
94,904
1,200
93,704
4,644
5,973
7,741
987
3,627
3,703
3,359
1,979
37,070
31,854
32,013
51,306
7,735
3,142
1,033
6,942
5,362
3,492
1,752
12,789
93,553
56,057
9,528
46,529
1.99
1.99
0.60
$
$
$
$
46,642
6,609
2,621
954
4,276
2,817
3,543
942
9,399
77,803
52,210
11,534
40,676
1.77
1.77
0.52
$
$
$
$
43,961
6,297
2,261
1,151
5,686
3,672
2,657
1,062
9,840
76,587
49,130
13,946
35,184
1.57
1.57
0.48
Board of Directors
Zachary W. Bawel
Lonnie D. Collins
Christina M. Ernst
Marc D. Fine
Jason M. Kelly
U. Butch Klem
J. David Lett
Lee A. Mitchell
Chris A. Ramsey
M. Darren Root
Mark A. Schroeder
Thomas W. Seger
Raymond W. Snowden
12
Cautionary Note Regarding
Forward-Looking Statements
This Summary Annual Report, including our CEO’s letter to our Shareholders beginning
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 prosperity, and other matters. Readers are
cautioned that actual results and performance may differ materially from those
expectations 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 1, 2019, and we do not promise anyone that it will be
updated for changes or events after that date.
13
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