UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2019

Commission File Number 001-15877

German American Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Indiana	35-1547518
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

711 Main Street, Jasper, Indiana 47546

(Address of Principal Executive Offices and Zip Code)

Registrant’s telephone number, including area code: (812) 482-1314

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x      No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   x      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company:

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): 

Yes   ☐      No x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	GABC	NASDAQ Global Select Market

As of August 1, 2019, the registrant had 26,660,878 outstanding shares of Common Stock, no par value.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Information included in or incorporated by reference in this Quarterly Report on Form 10-Q, our other filings with the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contains or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to the discussions of our forward-looking statements and associated risks in our Annual Report on Form 10-K for the year ended December 31, 2018, in Item 1, “Business – Forward-Looking Statements and Associated Risks” and our discussion of risk factors in Item 1A, “Risk Factors” of that Annual Report on Form 10-K, as updated from time to time in our subsequent SEC filings, including by Item 2 of Part I of this Report (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) at the conclusion of that Item 2 under the heading “Forward-Looking Statements and Associated Risks.”

2

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INDEX

PART I.            FINANCIAL INFORMATION		4
Item 1.	Unaudited Financial Statements	4
	Consolidated Balance Sheets – June 30, 2019 and December 31, 2018	4
	Consolidated Statements of Income – Three Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Income – Six Months Ended June 30, 2019 and 2018	6
	Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2019 and 2018	7
	Consolidated Statements of Changes in Shareholders' Equity - Three and Six Months Ended June 30, 2019 and 2018	8
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018	9
	Notes to Consolidated Financial Statements – June 30, 2019	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
PART II.           OTHER INFORMATION		56
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
SIGNATURES		59

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PART  I.         FINANCIAL INFORMATION

Item 1.           Financial Statements

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, dollars in thousands except share and per share data)

	June 30, 2019			December 31, 2018
ASSETS
Cash and Due from Banks	$	48,634		$	64,549
Federal Funds Sold and Other Short-term Investments	41,373			32,001
Cash and Cash Equivalents	90,007			96,550
Interest-bearing Time Deposits with Banks	250			250
Securities Available-for-Sale, at Fair Value	840,692			812,611
Other Investments	353			353
Loans Held-for-Sale, at Fair Value	14,184			4,263
Loans	2,720,674			2,731,741
Less: Unearned Income	(3,646		)	(3,682		)
Allowance for Loan Losses	(16,239		)	(15,823		)
Loans, Net	2,700,789			2,712,236
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost	13,048			13,048
Premises, Furniture and Equipment, Net	89,413			80,627
Other Real Estate	635			286
Goodwill	103,799			103,681
Intangible Assets	9,510			9,964
Company Owned Life Insurance	59,536			59,896
Accrued Interest Receivable and Other Assets	48,523			35,325
TOTAL ASSETS	$	3,970,739		$	3,929,090
LIABILITIES
Non-interest-bearing Demand Deposits	$	725,367		$	715,972
Interest-bearing Demand, Savings, and Money Market Accounts	1,805,694			1,768,177
Time Deposits	597,771			588,483
Total Deposits	3,128,832			3,072,632
FHLB Advances and Other Borrowings	305,940			376,409
Accrued Interest Payable and Other Liabilities	36,556			21,409
TOTAL LIABILITIES	3,471,328			3,470,450
SHAREHOLDERS’ EQUITY
Common Stock, no par value, $1 stated value; 45,000,000 shares authorized	24,992			24,967
Additional Paid-in Capital	229,943			229,347
Retained Earnings	233,269			211,424
Accumulated Other Comprehensive Income (Loss)	11,207			(7,098		)
TOTAL SHAREHOLDERS’ EQUITY	499,411			458,640
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,970,739		$	3,929,090
End of period shares issued and outstanding	24,992,238			24,967,458

See accompanying notes to consolidated financial statements.

4

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Three Months Ended  June 30,
	2019		2018
INTEREST INCOME
Interest and Fees on Loans	$	35,046	$	26,308
Interest on Federal Funds Sold and Other Short-term Investments	85		54
Interest and Dividends on Securities:
Taxable	3,555		2,962
Non-taxable	2,350		2,209
TOTAL INTEREST INCOME	41,036		31,533
INTEREST EXPENSE
Interest on Deposits	5,759		2,848
Interest on FHLB Advances and Other Borrowings	1,636		1,216
TOTAL INTEREST EXPENSE	7,395		4,064
NET INTEREST INCOME	33,641		27,469
Provision for Loan Losses	250		1,220
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	33,391		26,249
NON-INTEREST INCOME
Trust and Investment Product Fees	1,913		1,677
Service Charges on Deposit Accounts	2,024		1,643
Insurance Revenues	1,929		1,696
Company Owned Life Insurance	304		260
Interchange Fee Income	2,332		1,714
Other Operating Income	461		913
Net Gains on Sales of Loans	1,030		905
Net Gains on Securities	516		74
TOTAL NON-INTEREST INCOME	10,509		8,882
NON-INTEREST EXPENSE
Salaries and Employee Benefits	14,117		12,019
Occupancy Expense	2,279		1,811
Furniture and Equipment Expense	933		716
FDIC Premiums	245		238
Data Processing Fees	1,803		1,398
Professional Fees	1,174		1,361
Advertising and Promotion	936		857
Intangible Amortization	802		306
Other Operating Expenses	3,329		3,002
TOTAL NON-INTEREST EXPENSE	25,618		21,708
Income before Income Taxes	18,282		13,423
Income Tax Expense	3,011		2,326
NET INCOME	$	15,271	$	11,097
Basic Earnings per Share	$	0.61	$	0.48
Diluted Earnings per Share	$	0.61	$	0.48

See accompanying notes to consolidated financial statements.

5

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands except per share data)

	Six Months Ended June 30,
	2019		2018
INTEREST INCOME
Interest and Fees on Loans	$	70,165	$	50,258
Interest on Federal Funds Sold and Other Short-term Investments	226		110
Interest and Dividends on Securities:
Taxable	7,154		5,960
Non-taxable	4,680		4,350
TOTAL INTEREST INCOME	82,225		60,678
INTEREST EXPENSE
Interest on Deposits	11,175		5,131
Interest on FHLB Advances and Other Borrowings	3,818		2,468
TOTAL INTEREST EXPENSE	14,993		7,599
NET INTEREST INCOME	67,232		53,079
Provision for Loan Losses	925		1,570
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	66,307		51,509
NON-INTEREST INCOME
Trust and Investment Product Fees	3,480		3,450
Service Charges on Deposit Accounts	3,924		3,114
Insurance Revenues	5,134		4,626
Company Owned Life Insurance	1,188		572
Interchange Fee Income	4,427		3,196
Other Operating Income	1,332		1,517
Net Gains on Sales of Loans	2,011		1,555
Net Gains on Securities	671		344
TOTAL NON-INTEREST INCOME	22,167		18,374
NON-INTEREST EXPENSE
Salaries and Employee Benefits	29,161		24,145
Occupancy Expense	4,570		3,555
Furniture and Equipment Expense	1,861		1,381
FDIC Premiums	533		475
Data Processing Fees	3,386		2,525
Professional Fees	2,501		2,232
Advertising and Promotion	1,806		1,558
Intangible Amortization	1,645		512
Other Operating Expenses	6,914		5,780
TOTAL NON-INTEREST EXPENSE	52,377		42,163
Income before Income Taxes	36,097		27,720
Income Tax Expense	5,759		4,810
NET INCOME	$	30,338	$	22,910
Basic Earnings per Share	$	1.21	$	1.00
Diluted Earnings per Share	$	1.21	$	1.00

See accompanying notes to consolidated financial statements.

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GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in thousands)

	Three Months Ended June 30,
	2019			2018
NET INCOME	$	15,271		$	11,097
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gain (Loss) Arising During the Period	11,838			(1,840		)
Reclassification Adjustment for Gains Included in Net Income	(516		)	(74		)
Tax Effect	(2,431		)	413
Net of Tax	8,891			(1,501		)
Total Other Comprehensive Income (Loss)	8,891			(1,501		)
COMPREHENSIVE INCOME	$	24,162		$	9,596

	Six Months Ended June 30,
	2019			2018
NET INCOME	$	30,338		$	22,910
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gain (Loss) Arising During the Period	24,039			(13,292		)
Reclassification Adjustment for Gains Included in Net Income	(671		)	(344		)
Tax Effect	(5,063		)	2,917
Net of Tax	18,305			(10,719		)
Total Other Comprehensive Income (Loss)	18,305			(10,719		)
COMPREHENSIVE INCOME	$	48,643		$	12,191

See accompanying notes to consolidated financial statements.

7

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited, dollars in thousands)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balances, December 31, 2018	24,967,458	$	24,967	$	229,347	$	211,424		$	(7,098	)	$	458,640
Net Income						15,067						15,067
Other Comprehensive Income (Loss)									9,414			9,414
Cash Dividends ($0.17 per share)						(4,245		)				(4,245		)
Issuance of Common Stock for:
Restricted Share Grants	24,780	25		286								311
Balances, March 31, 2019	24,992,238	$	24,992	$	229,633	$	222,246		$	2,316		$	479,187
Net Income						15,271						15,271
Other Comprehensive Income (Loss)									8,891			8,891
Cash Dividends ($0.17 per share)						(4,248		)				(4,248		)
Issuance of Common Stock for:
Restricted Share Grants				310								310
Balances, June 30, 2019	24,992,238	$	24,992	$	229,943	$	233,269		$	11,207		$	499,411

	Common Stock
	Shares		Amount			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balances, December 31, 2017	22,934,403		$	22,934		$	165,288	$	178,969		$	(2,620	)	$	364,571
Net Income								11,813						11,813
Other Comprehensive Income (Loss)											(9,218		)	(9,218		)
Cash Dividends ($0.15 per share)								(3,440		)				(3,440		)
Issuance of Common Stock for:
Restricted Share Grants	34,410		35			244								279
Balances, March 31, 2018	22,968,813		$	22,969		$	165,532	$	187,342		$	(11,838	)	$	364,005
Net Income								11,097						11,097
Other Comprehensive Income (Loss)											(1,501		)	(1,501		)
Cash Dividends ($0.15 per share)								(3,445		)				(3,445		)
Issuance of Common Stock for:
Restricted Share Grants	(915	)	(1		)	385								384
Balances, June 30, 2018	22,967,898		$	22,968		$	165,917	$	194,994		$	(13,339	)	$	370,540

See accompanying notes to consolidated financial statements.

8

GERMAN AMERICAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)

	Six Months Ended  June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	30,338		$	22,910
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities	1,784			1,793
Depreciation and Amortization	4,073			2,601
Loans Originated for Sale	(78,128		)	(65,071		)
Proceeds from Sales of Loans Held-for-Sale	70,003			63,710
Provision for Loan Losses	925			1,570
Gain on Sale of Loans, net	(2,011		)	(1,555		)
Gain on Securities, net	(671		)	(344		)
Gain on Sales of Other Real Estate and Repossessed Assets	—			(13		)
Loss (Gain) on Disposition and Donation of Premises and Equipment	—			(36		)
Gain on Disposition of Land	(262		)	—
Increase in Cash Surrender Value of Company Owned Life Insurance	(659		)	(521		)
Equity Based Compensation	621			663
Change in Assets and Liabilities:
Interest Receivable and Other Assets	(14,718		)	2,924
Interest Payable and Other Liabilities	1,584			90
Net Cash from Operating Activities	12,879			28,721
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Securities Available-for-Sale	45,980			37,481
Proceeds from Sales of Securities Available-for-Sale	22,274			17,515
Purchase of Securities Available-for-Sale	(74,078		)	(68,923		)
Purchase of Loans	(521		)	—
Proceeds from Sales of Loans	—			6,000
Loans Made to Customers, net of Payments Received	10,335			(66,922		)
Proceeds from Sales of Other Real Estate	359			54
Property and Equipment Expenditures	(3,172		)	(8,862		)
Proceeds from Sales of Property and Equipment	—			40
Proceeds from Sale of Land	722			—
Proceeds from Life Insurance