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Business Combinations, Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2024
Business Combinations, Goodwill and Intangible Assets [Abstract]  
Business Combinations, Goodwill and Intangible Assets Business Combinations, Goodwill and Intangible Assets
Business Combinations

On January 1, 2022, the Company acquired Citizens Union Bancorp of Shelbyville, Inc. (“CUB”) through the merger of CUB with and into the Company. This was immediately followed by the merger of Citizens Union Bank of Shelbyville, Inc., a wholly-owned subsidiary of CUB, into the Company’s subsidiary bank, German American Bank. CUB, headquartered in Shelbyville, Kentucky, operated 15 retail banking offices located in Shelby, Jefferson, Spencer, Bullitt, Oldham, Owen, Gallatin and Hardin counties in Kentucky through Citizens Union Bank of Shelbyville, Inc.

As of the closing of the transaction, CUB had total assets of $1,108,546, total loans of $683,807, and total deposits of $930,533. The Company accounted for the transaction under the acquisition method of accounting which means these financial assets and liabilities were recorded at fair value at the day of acquisition. The fair value of the common shares issued as part of the consideration paid for CUB was based upon the closing price of the Company’s common shares on the acquisition date.

In accordance with ASC 805, the Company has expensed approximately $12,323 of direct acquisition costs and recorded $58,596 of goodwill and $7,572 of intangible assets. The goodwill of $58,596 arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies. This goodwill will be evaluated annually for impairment and is non-deductible for tax purposes. The intangible assets are related to core deposits and are being amortized over 8 years. The following table summarizes the fair value of the total consideration transferred as a part of the CUB acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.
Consideration 
Cash for Options and Fractional Shares$942 
Cash Consideration49,863 
Equity Instruments111,914 
 
Fair Value of Total Consideration Transferred$162,719 
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash$20,244 
Federal Funds Sold and Other Short-term Investments238,325 
Interest-bearing Time Deposits with Banks250 
Securities102,233 
Loans678,142 
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost10,078 
Premises, Furniture & Equipment19,805 
Other Real Estate40 
Intangible Assets7,572 
Company Owned Life Insurance12,881 
Accrued Interest Receivable and Other Assets18,309 
Deposits - Non-interest Bearing(237,472)
Deposits - Interest Bearing(696,750)
FHLB Advances and Other Borrowings(60,837)
Accrued Interest Payable and Other Liabilities(8,697)
Total Identifiable Net Assets$104,123 
Goodwill$58,596 

Under the terms of the merger agreement, each CUB common shareholder of record at the effective time of the merger became entitled to receive a cash payment of $13.44 and a 0.7739 share of common stock of the Company for each of their former shares of CUB common stock. As a result, in connection with the closing of the merger on January 1, 2022, the Company issued 2,870,975 shares of its common stock to the former shareholders of CUB and paid cash consideration in the aggregate amount of $50.8 million.

This acquisition is consistent with the Company’s strategy to build a regional presence in central and western Kentucky. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region.

The fair value of purchased financial assets with credit deterioration was $29,868 on the date of acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $34,453. The Company estimates, on the date of acquisition, that $3,117 of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2021 after giving effect to certain adjustments. The unaudited pro forma information for the year ended December 30, 2022 and 2021 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.
Unaudited Pro Forma
Year Ended 12/31/2022
Net Interest Income$200,584 
Non-interest Income59,133 
Total Revenue259,717 
Provision for Credit Losses50 
Non-interest Expense141,868 
Income Before Income Taxes117,799 
Income Tax Expense21,858 
Net Income$95,941 
Earnings Per Share and Diluted Earnings Per Share$3.26 
For the year ended December 31, 2022, the above pro forma financial information excludes non-recurring merger costs that totaled $12,323 on a pre-tax basis and Day 1 provision for credit losses under the CECL model of $6,300 on a pre-tax basis.

Goodwill
 
The changes in the carrying amount of goodwill for the periods ended December 31, 2024, 2023, and 2022, were classified as follows:
 202420232022
Beginning of Year$180,357 $180,357 $121,761 
Acquired Goodwill— — 58,596 
Divested Goodwill(1,332)— — 
Impairment— — — 
End of Year$179,025 $180,357 $180,357 

The carrying amount of goodwill totaling $179,025 at December 31, 2024 is allocated to the core banking segment. Of the $180,357 carrying amount of goodwill, $179,025 is allocated to the core banking segment, and $1,332 is allocated to the insurance segment for both periods ended December 31, 2023 and 2022. The decrease of $1,332 in 2024 is attributable to the sale of substantially all of the assets of German American Insurance, Inc. For additional information on the sale, see Note 2.

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At December 31, 2024, the Company’s reporting units had positive equity, and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting units exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment.
 
Acquired Intangible Assets

Acquired intangible assets were as follows as of year end:
2024
 Gross AmountAccumulated Amortization
Core Banking  
Core Deposit Intangible$33,247 $(29,843)
Branch Acquisition Intangible257 (257)
Insurance
Customer List— — 
Total$33,504 $(30,100)
2023
 Gross AmountAccumulated Amortization
Core Banking  
Core Deposit Intangible$33,247 $(27,811)
Branch Acquisition Intangible257 (257)
Insurance
Customer List5,408 (5,408)
Total$38,912 $(33,476)
Amortization Expense was $2,032, $2,840 and $3,711, for 2024, 2023 and 2022, respectively.

Estimated amortization expense for each of the next five years is as follows:
2025$1,394 
2026916 
2027593 
2028361 
2029138