German American Bancorp, Inc.
Annual Report 2023

Plain-text annual report

2023 Summary Annual Report Achieving Our Purpose We have a long-standing commitment to providing financial support and stability in the communities we serve. Our Purpose German American helps individuals, families and businesses achieve their financial dreams to improve their quality of life and place. We support the communities we serve and believe that when a community thrives, its people prosper. Cautionary Note Regarding Forward-Looking Statements Statements made in this Summary Annual Report that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes any statements regarding management’s plans and objectives for future operations and expectations about the Company’s financial and business performance and economic and market conditions and trends. Such forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” “should,” “would,” “could,” “can,” “may,” “will,” “might” and similar expressions. Forward-looking statements are based on management’s current expectations and, by their nature, are subject to risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. Factors which may cause actual results to differ materially from those contained in such forward-looking statements include those identified in Item 1, “Business - Forward Looking Statements and Associated Risks,” and Item 1A, “Risk Factors,” in our accompanying Annual Report on Form 10-K and in other documents that we file with or furnish to the Securities and Exchange Commission. These forward-looking statements speak only as of February 27, 2024. We do not undertake, and expressly disclaim, any duty or obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law. 11th consecutive year of increased cash dividends Improved earnings performance in 13 of the past 14 years 19th consecutive fiscal year of double-digit return on equity Purpose Letter to Our Shareholders Dear Shareholders: 2023 was a volatile year for the banking industry, one marked by challenging economic conditions, continued rising interest rates, aggressive deposit competition, and high profile bank failures across our country. German American has a history of successfully navigating through such difficult times and remained steadfast in our commitment to our customers, employees, communities and shareholders. Throughout the year, German American remained financially strong, with solid liquidity, strong capital levels, and a diverse core deposit base, which continues to speak to the strength and resilience of our Company. We were pleased to report record net income for the year, combined with our 19th consecutive year of double digit return on equity and 11th consecutive year of increased dividends to our shareholders. We have completed a long-planned transition of the senior leadership team, designed to assure the Company will be led by an extremely qualified executive management team for years to come. We continue to advance and execute on our strategic plan as we adapt to the ever-changing economic and banking landscape. We continue to add digital/ technology talent, products and platforms to provide the best tools for improved high-tech experiences. We continue to invest in fraud detection, prevention and continued on page 2... 1 D. Neil Dauby Chairman and CEO Letter to Our SHAREHOLDERS continued... mitigation tools to protect our stakeholders’ assets and data. We continue to invest in top talent throughout our footprint to provide you the best local customer experience with high-touch advice and service. We continue to invest and partner with all of our communities to improve quality of life and place. We work hard every day in Achieving Our Purpose to be the best we can be to all our stakeholders. We are extremely pleased with our operating results in 2023 and proud to continue our decades-long trend of exceptional financial performance. Thanks to the dedicated efforts of our relationship focused team of professionals, we are confident that our strong community presence, healthy financial condition and disciplined approach to risk management and earnings growth will continue to drive future profitability while enhancing the future vitality and growth of our Indiana and Kentucky communities. Thank you for your continued investment in German American. Sincerely, D. Neil Dauby Chairman and CEO GABC Management Succession Keith A. Leinenbach Effective April 1, 2024, in conjunction with our Company’s executive management succession plan, W. Scott Powell will assume the position of Executive Vice President and Chief Credit Officer, succeeding Keith A. Leinenbach, who will retire from the Company on April 30, 2024. Keith will retire after 24 years with the organization. He served 11 of those years as a Regional Commercial Credit Officer and a Commercial Banking Officer before being named Executive Vice President and Chief Credit Officer of the Company in January of 2012. Scott joined German American Bank through the acquisition of First Security Bank in 2018, where he served as Chief Credit Officer. He has vast credit administration experience with nearly 30 years of commercial risk and banking experience with community and large national banks. Scott currently serves as Regional Executive Vice President, Commercial Credit Officer with the Company. Scott holds a bachelor degree from McKendree College and his MBA from University of Southern Indiana. “We wish Keith the best in his well-deserved retirement years. He has played a critical role in strengthening and maintaining our high standards in credit quality. He has been instrumental in driving our Company to superior financial performance through both organic growth and acquisitions,” states Neil Dauby, Chairman and Chief Executive Officer. “We are also excited to expand Scott’s leadership role within our organization as part of the executive management succession plan. He consistently demonstrates the qualities that define German American’s culture with an unwavering commitment to maintaining credit quality combined with our commitment to our customers, employees, shareholders and communities.” W. Scott Powell 2 Our Values Integrity We trust each other in words and actions. We value honesty, transparency, and diverse perspectives for high ethical standards in all we do. Relationships We develop relationships based on integrity, trust and mutual respect to create positive outcomes and experiences for all. Excellence Because performance is vital, we are encouraged to take initiative, accept challenges, and be collaborative to achieve performance and operating excellence for our customers, shareholders, and communities. Service Service to our communities, customers, and each other is fun, rewarding and powerful. We develop valuable relationships by providing outstanding service to all. Inclusion We are committed to an inclusive workplace where diverse representation, perspectives and experiences foster an atmosphere of empowerment, collaboration and respect. Notable Awards Listed as a top community bank in Indiana and Kentucky with 5-star ratings in both state rankings. Earned the 5-Star Superior rating for the 34th consecutive quarter. 3 Michigan The Strength of Together INDIANA INDIANA Greenwood Greenwood Greensburg Greensburg Columbus Columbus North Vernon North Vernon Seymour Seymour Bloomington Bloomington CINCINNATI, OHIO Odon/Cannelburg Odon/Cannelburg Bedford Bedford Vincennes Vincennes Loogootee Loogootee Washington Washington Petersburg Petersburg Dubois Dubois Princeton Princeton Ireland Ireland Oakland Oakland City City Holland Holland Jasper Jasper Huntingburg Huntingburg Ferdinand Ferdinand Evansville Evansville Newburgh Newburgh Henderson Henderson Rockport Rockport Owensboro Owensboro Madison Madison Warsaw Warsaw Hanover Hanover Sellersburg Sellersburg LaGrange LaGrange Owenton Owenton Jeffersonville Jeffersonville Simpsonville Simpsonville New New Albany Albany Louisville Louisville Shelbyville Shelbyville Taylorsville Taylorsville Tell City Tell City Mt. Washington Mt. Washington KENTUCKY KENTUCKY Elizabethtown Elizabethtown Munfordville Munfordville Horse Cave Horse Cave Bowling Green Bowling Green Glasgow Glasgow Franklin Franklin NASHVILLE, TENNESSEE 4 5 Standing the Test of Time Achieving Our Purpose year after year is our steadfast commitment to our customers, communities, employees and shareholders. Since 1910, individuals, families and businesses have trusted German American Bank to manage and save their hard-earned money; purchase, build and remodel homes; open and grow businesses and farm operations; retire comfortably; and build wealth and pass it to future generations. Throughout our 114 years of operation, our strong model of community banking has played vital roles in addressing community needs and providing funding efforts to improve the quality of life in the communities we serve. Our local leaders are deeply involved in the communities where we live, work and do business. We’re focused on building long-lasting relationships which is consistent with Our Values of integrity, relationships, excellence, service and inclusion. Maintaining quality service, high ethical standards, and a safe, financially sound Company are fundamental, tried-and-true business practices we focus on daily. Even with continuing advancements in technology, we believe people want to do business with people. Our team prides itself on being available when our customers need us in the office, by phone, email or live chat. We strive to consistently surpass what is expected from us as not only a community bank, yet also from each other as friends, neighbors, community leaders, colleagues and financial professionals. Achieving Our Purpose based on Our Values helps us set higher standards in banking. 6 Test of Time Providing a positive work experience 900+ employees Volunteer hours served in local communities in 2023 5,300+ hours Helping individuals, families and businesses achieve their financial dreams to improve their quality of life and place achieve goals people focused Maintaining a culture characterized by people who work together to drive success $237+ million Invested in community support in 2023 to help urban and rural communities throughout Indiana and Kentucky thrive so their people can prosper $406,000+ to local schools Donated to local schools participating in our School Spirit Card program (2016 – 2023) 7 Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors 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, 2023 and 2022, and the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, appearing in the Annual Report on Form 10-K, not appearing herein. In our report dated February 27, 2024, 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 Louisville, Kentucky February 27, 2024 8 Five Year Summary The following selected data should be read in conjunction with the Company’s Annual Report on Form 10-K for 2023. Dollars in thousands, except share and per share data Summary of Operations: Interest Income Interest Expense Net Interest Income Provision for Credit Losses Net Interest Income after Provision for Credit Losses Non-interest Income Non-interest Expense Income before Income Taxes Income Tax Expense Net Income Year-end Balances: Total Assets 2023 2022 2021 2020 2019 $ 256,656 $ 218,926 $ 170,379 $ 174,369 $ 176,474 66,223 190,433 2,550 187,883 60,261 144,497 103,647 17,759 18,342 200,584 6,350 194,234 59,133 154,191 99,176 17,351 9,549 160,830 ( 6,500 ) 167,330 59,462 124,007 102,785 18,648 19,126 155,243 17,550 137,693 54,474 117,123 75,044 12,834 31,249 145,225 5,325 139,900 45,501 114,162 71,239 12,017 $ 85,888 $ 81,825 $ 84,137 $ 62,210 $ 59,222 $ 6,152,198 $ 6,155,991 $ 5,608,539 $ 4,977,577 $ 4,397,672 Total Loans, Net of Unearned Income 3,971,082 3,784,934 3,004,264 3,088,072 3,077,091 Total Deposits Total Long-term Debt Total Shareholders’ Equity Average Balances: Total Assets 5,252,963 5,350,051 4,744,316 4,106,530 3,430,021 127,969 663,558 102,645 558,393 83,855 668,459 141,624 624,709 181,950 573,820 $ 6,037,874 $ 6,514,030 $ 5,369,707 $ 4,729,006 $ 4,128,535 Total Loans, Net of Unearned Income 3,835,157 3,680,708 3,072,302 3,185,542 2,899,939 Total Deposits Total Shareholders’ Equity Per Share Data: Net Income Cash Dividends Book Value at Year-end Tangible Book Value Per Share(1) Other Data at Year-end: Number of Shareholders Number of Employees (Full-time Equivalent) 5,196,475 5,700,499 4,493,853 3,860,397 3,293,934 584,106 610,066 642,934 594,781 519,010 $ $ $ 2.91 1.00 22.43 16.12 3,065 838 2.78 0.92 18.93 12.50 3,163 854 3.17 0.84 25.17 20.37 3,109 724 $ 2.34 $ 0.76 23.57 18.63 3,218 776 2.29 0.68 21.51 16.49 3,672 821 Weighted Average Number of Shares 29,557,567 29,464,591 26,537,311 26,539,024 25,824,538 Selected Performance Ratios: Return on Assets Return on Equity Equity to Assets Dividend Payout Net Charge-offs (Recoveries) to Average Loans Allowance for Credit Losses to Loans Net Interest Margin 1.42 % 14.70 % 10.79 % 34.27 % 0.08 % 1.10 % 3.58 % 1.26 % 13.41 % 9.07 % 33.02 % 0.06 % 1.17 % 3.45 % 1.57 % 13.09 % 11.92 % 26.41 % 0.11 % 1.23 % 3.31 % 1.32 % 10.46 % 12.55 % 32.37 % 0.08 % 1.52 % 3.63 % 1.43 % 11.41 % 13.05 % 29.64 % 0.17 % 0.53 % 3.92 % 9 (1) 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 share and 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 (Amortized Cost $1,871,260 for December 31, 2023; Amortized Cost $2,094,826 for December 31, 2022; No Allowance for Credit Losses) Other Investments Loans Held-for-Sale, at Fair Value Loans Less: Unearned Income Allowance for Credit 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 December 31, 2023 2022 $ 78,805 36,525 115,330 $ 75,476 41,905 117,381 500 500 1,596,832 1,761,669 353 5,226 3,977,900 (6,818 ) (43,765 ) 3,927,317 14,687 106,776 - 180,357 6,307 85,840 112,673 353 8,600 3,788,645 (3,711 ) (44,168 ) 3,740,766 15,037 112,237 - 180,357 9,426 83,998 125,667 $ 6,152,198 $ 6,155,991 $ 1,493,160 $ 1,691,804 2,992,761 767,042 3,229,778 428,469 5,252,963 5,350,051 193,937 41,740 203,806 43,741 5,488,640 5,597,598 29,585 389,411 29,493 387,171 461,622 405,167 (217,060 ) (263,438 ) 663,558 558,393 $ 6,152,198 $ 6,155,991 29,584,709 29,493,193 See Annual Report on Form 10-K. 10 Consolidated Statements of Income Dollars in thousands, except per share data 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 Credit Losses NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES Non-Interest Income Wealth Management 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 $ $ $ 2023 Years Ended December 31, 2022 2021 212,517 1,677 20,614 21,848 256,656 56,916 9,307 66,223 190,433 2,550 187,883 11,711 11,538 9,596 1,731 17,452 5,830 2,363 40 60,261 83,244 10,887 3,580 2,829 11,112 5,575 4,857 2,840 19,573 144,497 103,647 17,759 85,888 2.91 2.91 $ 169,158 5,765 $ 20,453 23,550 218,926 13,514 4,828 18,342 200,584 6,350 194,234 10,076 11,457 10,020 2,264 15,820 5,116 3,818 562 59,133 84,145 11,223 3,698 1,860 15,406 6,295 4,416 3,711 23,437 154,191 99,176 17,351 81,825 2.78 2.78 $ $ $ $ $ $ 139,151 488 12,962 17,778 170,379 4,955 4,594 9,549 160,830 ( 6,500 ) 167,330 10,321 7,723 9,268 1,529 13,116 6,991 8,267 2,247 59,462 68,570 11,081 3,750 1,419 7,611 5,009 4,197 2,731 19,639 124,007 102,785 18,648 84,137 3.17 3.17 11 See Annual Report on Form 10-K. Directors 12 Board of Directors Zachary W. Bawel Angela Curry D. Neil Dauby Sue J. Ellspermann Marc D. Fine Jason M. Kelly Diane B. Medley M. Darren Root Christina M. Ryan Thomas W. Seger Jack W. Sheidler Tyson J. Wagler 13 004CTN3AD3 

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