German American Bancorp, Inc.
Annual Report 2019

Plain-text annual report

Yesterday. Today. Tomorrow. 1910 - 2020 2019 Summary Annual Report Numbers Numbers $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 $600 $500 $400 $300 $200 $100 $0 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 Net Income & Earnings Per Share (dollars in thousands, except per share amounts) Earnings Per Share* 1 0 Ye a r E P S C A G R 1 2 . 1 % $24,055 $25,413 $20,249 $13,405 $0.81 $1.27 $1.07 $1.32 $1.43 $59,222 $46,529 $40,676 $35,184 $2.29 $28,344 $30,064 $1.51 $1.57 $1.99 $1.77 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 *Earnings Per Share adjusted for 3-for-2 stock split completed in 2017. Total Shareholders’ Equity (dollars in millions) Return on Average Equity 1 0 Ye a r C A G R 1 7. 6 % $574 $459 $365 $330 $185 $200 $168 $252 $229 $122 11.18% 12.67% 13.57% 13.40% 13.21% 12.47% 10.94% 11.59% 12.07% 11.41% 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 Total Assets (dollars in millions) Return on Average Assets 1 0 Ye a r C A G R 1 3 . 5 % $4,398 $3,929 $2,956 $3,144 $2,006 $2,164 $1,874 $2,237 $2,374 1.24% 1.25% 1.31% 1.33% 1.24% 1.35% 1.38% 1.43% 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 $1,500 $1,376 $1,000 $500 1.01% $0 1.11% 7th consecutive year of increased dividends 10th consecutive year German American has achieved record earnings 15th consecutive fiscal year of double-digit return on equity Letter from Letter from Mark A. Schroeder Mark A. Schroeder Chairman and CEO Dear Shareholders: Dear Shareholders: The theme of this year’s Summary Annual Report, Yesterday-Today-Tomorrow, denotes our rich community banking history, our exceptionally strong financial and market position today, and our vision for continued growth and success in the coming years. From our start as a community bank in 1910, with two employees, fifty- seven shareholders and $40,000 in capital stock, German American has grown to $4.4 billion in total assets, over 800 employees, approximately 3,700 shareholders and $574 million in total shareholders’ equity. The one constant over these past 110 years has been our commitment to our customers and to the communities we serve. Our steadfast focus on doing well while doing good has served our shareholders and all our stakeholders very well. 1 continued... continued... In 2019, we continued our pattern of disciplined, steady double-digit returns on their shareholders’ equity. The growth through our second merger transaction in the credit for this impressive level of performance certainly Commonwealth of Kentucky. In July, we finalized our goes to our team of local, financial professionals merger with Citizens First Corporation and its banking serving their customers and communities throughout subsidiary, Citizens First Bank, Inc. Headquartered our footprint, but it also is due to the loyalty of our in Bowling Green, Kentucky, Citizens First operated clients, the economic strength of our markets, and the eight retail banking offices in Barren, Hart, Simpson commitment of you, our shareholders. and Warren Counties in Kentucky. As of the closing of this transaction, Citizens First had total assets of As I write this letter, we are dealing with the COVID-19 approximately $456 million, total loans of approximately $365 million, and total deposits of approximately pandemic and the associated economic disruption throughout our nation and within our own market $371 million. When combined with the acquisition in areas. Clearly, the health of our customers, employees October 2018 of First Security, Inc., based in Owensboro, and their families is our utmost concern, while we also Kentucky, German American has acquired nearly recognize this crisis will likely have a significant impact $1 billion in banking assets within the Commonwealth. on the economic well-being of our clients, our market We continue to anticipate significant future growth area, our nation, and our Company. As shareholders, within the Commonwealth of Kentucky, both through you can take comfort in knowing that German American acquisitions and organic growth, in the coming years. has weathered many difficult times over the course of the past 110 years, yet we have always come out of We’re extremely pleased to report that we continued those challenges stronger. So, while it’s not possible, our history of exceptional financial performance in 2019. at this juncture, to fully anticipate the challenges our Your Company, for the tenth consecutive year, achieved Company may face during the coming year as a result record earnings, as 2019 net income of $59.2 million, of this unique situation, we remain humbly and quietly or $2.29 per share, represented an increase of 15.1%, confident in our ability to work through whatever those on a per share basis, above the level of the prior year issues may be and look forward to continued growth and record 2018 earnings. We also achieved the milestone in 2019 of posting the 15th consecutive fiscal year of double-digit returns on shareholders’ equity. Very few banking organizations in the nation can match this level of financial performance: a decade of record net income prosperity in the years to come. Sincerely, and earnings per share, as well as a decade and a half of Mark A. Schroeder Chairman & CEO 2 1910 Original German American Bank Building - Jasper, IN Yesterday Business leaders in a small town rich in German-American heritage, Jasper, Indiana, organized and opened a bank in 1910. It was the community’s heritage that prompted the new bank’s name, German American Bank. Two employees. Fifty seven original shareholders. $40,000 in capital stock. The bank office occupied one-half of the first floor of a commercial building. In the 1940’s, the bank was ready to expand and purchased the office building it occupied. German American Bank’s headquarters remain on this property to this day. The history of German American Bank tells quite an extraordinary story. In our 110 years of history, our company has experienced and outlasted the effects of wars, boom times, political changes, fluctuations in local, state and federal economics, the rise of a global economy, and a plethora of changes in the banking landscape. Deep seated business values of relationships, trust, people and performance were the guiding principles and remain so today. Serving with the intention to help communities thrive so its people can prosper remains at the forefront of our purpose. In the 1980’s to mid 1990’s, German American Bank faced the same choice as many other small to mid sized banks: merge with a larger bank or choose an independent growth strategy. The Company chose the latter. Although many banks at the time were choosing a similar direction, German American Bank’s approach was significantly different. German American embarked upon a strategy to partner with other like-minded community banks. The goal was to afford the combined organization the efficiencies associated with size, while still keeping it small enough to stay focused on the communities it served. The commitment to community was key in German American Bank’s vision to build a community banking network. The Company chose to grow close to its home base, rather than moving into markets it wasn’t familiar with, which solidified its position as a local community bank. German American Bank also committed to retaining local leadership to more effectively serve the specific needs of customers and the community as a whole. 3 Today Today, German American Bank is the combination of numerous like-minded community banking, insurance, and wealth management organizations and teams joining together to serve local communities. Our footprint covers southern Indiana and Kentucky, and our history of strong financial performance is a reflection of the success of this unique business model. INDIANA DECATUR MONROE BARTHOLOMEW Greensburg Bloomington LAWRENCE Bedford Columbus Osgood JACKSON North Vernon RIPLEY Seymour JENNINGS JEFFERSON Madison Hanover CLARK Sellersburg FLOYD Floyds Knobs NewNew Albany Albany Jeffersonville Jeffersonville FAYETTE Lexington KNOX DAVIESS MARTIN Odon/Cannelburg Loogootee Vincennes Washington Petersburg Otwell DUBOIS Dubois Princeton GIBSON Fort Branch Oakland City VANDERBURGH VANDERBURGH Evansville PIKE WARRICK Newburgh Rockport Jasper Huntingburg Holland Ferdinand SPENCER PERRY Tell City Henderson HENDERSON Owensboro DAVIESS KENTUCKY HART Munfordville Horse Cave BARREN Glasgow Banking location ATM WARREN Bowling Green SIMPSON Franklin 4 We combine top-rated customer facing technology with a talented, customer-focused team to deliver service excellence. The foundation to find the best financial products to help our customers achieve their dreams and goals is based on strong relationships with our customers and a deep knowledge of the communities we serve. We attain that knowledge by employing local leaders with a servant mindset combined with a drive to succeed. 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. Our Mission 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. German American Bank Headquarters - Jasper, IN 2020 5 5 Tomorrow The world of banking will continue to change which will continue to impact how we deliver financial services. German American Bank is committed to investing in secure, innovative technology while also making certain that our culture of local-people-helping-local-people succeed stays at the center of our principles. With a keen eye on opportunities, a mindset of continuous improvement and a commitment to financial performance and corporate responsibility, our German American Bank team faces tomorrow with confidence, agility, and optimism. 6 Our Shield Historical photos and records indicate a shield has been a graphic icon of German American Bank since our inception in 1910. Today 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, 2019 and 2018, 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, 2019, appearing in the Annual Report on Form 10-K, not appearing herein. In our report dated March 2, 2020, 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 2, 2020 8 Five Year Summary The following selected data should be read in conjunction with the Company’s Annual Report on Form 10-K for 2019. 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 2019 2018 2017 2016 2015 $ 176,474 $ 133,749 $ 111,030 $ 103,365 $ 81,620 31,249 145,225 5,325 139,900 45,501 114,162 71,239 12,017 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 $ 59,222 $ 46,529 $ 40,676 $ 35,184 $ 30,064 $ 4,397,672 $ 3,929,090 $ 3,144,360 $ 2,955,994 $ 2,373,701 Total Loans, Net of Unearned Income 3,077,091 2,728,059 2,141,638 1,989,955 1,564,347 Total Deposits Total Long-term Debt Total Shareholders’ Equity Average Balances: Total Assets 3,430,021 3,072,632 2,484,052 2,349,551 1,826,376 181,950 573,820 126,635 458,640 141,717 364,571 120,560 330,267 95,606 252,348 $ 4,128,535 $ 3,380,409 $ 3,002,695 $ 2,841,096 $ 2,267,555 Total Loans, Net of Unearned Income 2,899,939 2,339,089 2,036,717 1,904,779 1,483,752 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 3,293,934 2,716,712 2,395,146 2,249,892 1,825,913 519,010 385,476 350,913 321,520 241,018 $ $ $ 2.29 0.68 21.51 16.49 3,672 821 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 Weighted Average Number of Shares(1) 25,824,538 23,381,616 22,924,726 22,391,115 19,888,374 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 1.43 % 11.41 % 13.05 % 29.64 % 0.17 % 0.53 % 3.92 % 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) 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 Common Stock, no par value, $1 stated value; 45,000,000 shares authorized Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (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, 2019 2018 59,971 43,913 103,884 1,985 854,825 353 $ 64,549 32,001 96,550 250 812,611 353 17,713 4,263 3,081,973 2,731,741 (4,882 ) (16,278 ) (3,682 ) (15,823 ) 3,060,813 2,712,236 13,968 96,651 425 121,306 12,656 68,883 44,210 13,048 80,627 286 103,681 9,964 59,896 35,325 $ 4,397,672 $ 3,929,090 $ 832,985 $ 715,972 1,965,640 1,768,177 631,396 588,483 3,430,021 3,072,632 349,686 44,145 376,409 21,409 3,823,852 3,470,450 26,671 278,954 253,090 15,105 24,967 229,347 211,424 (7,098 ) 573,820 458,640 $ 4,397,672 $ 3,929,090 26,671,368 24,967,458 Consolidated Statements of Income Dollars in thousands, except per share data 2019 Years Ended December 31, 2018 2017 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. $ $ $ $ 11 152,481 522 13,910 9,561 176,474 23,805 7,444 31,249 145,225 5,325 139,900 7,278 8,718 8,940 2,005 9,450 3,229 4,633 1,248 $ 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 45,501 37,070 31,854 63,885 9,988 3,788 533 7,927 4,674 4,230 3,721 15,416 114,162 71,239 12,017 59,222 2.29 2.29 0.68 $ $ $ $ 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 Board of Directors Zachary W. Bawel Christina M. Ernst Marc D. Fine Jason M. Kelly U. Butch Klem J. David Lett Lee A. Mitchell Chris A. Ramsey M. Darren Root Christina M. Ryan Mark A. Schroeder Thomas W. Seger Jack W. Sheidler Raymond W. Snowden Tyson J. Wagler 12 Cautionary Note Regarding Forward-Looking Statements 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 2, 2020, and we do not promise anyone that it will be updated for changes or events after that date. 13 001CSN42CC 

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